Determining Which Employees Will Be Covered By An Enterprise Agreement

Published 01 March 2016

The Full Bench of the Fair Work Commission (FWC) decision in Transport Workers’ Union of Australia & Anor v ALDI Foods Pty Limited as General Partner of ALDI Stores (A Limited Partnership) [2016] FWCFB 91 issued on 22 February 2016 provides clarification of which employees may be covered by a single enterprise agreement made under the Fair Work Act 2009 (Cth) (FW Act).

ISSUE

In September 2015, the FWC issued a decision to approve the ALDI Regency Park Agreement 2015. The Transport Workers’ Union of Australia (TWU) and the Shop, Distributive and Allied Employees Association(SDA) lodged an appeal against that decision, asserting that the enterprise agreement should not have been approved. The scope of the agreement covered employees of ALDI in ALDI’s Regency Park Region in South Australia (and parts of NSW and Victoria). The unions had not been involved in the negotiation, or approval, of the enterprise agreement and the enterprise agreement had been made and approved as a single enterprise agreement, not as a “greenfields agreement”.

The enterprise agreement was expressed to apply to existing ALDI stores as listed and any new stores which opened in a specified area. There were 16 employee signatories to the enterprise agreement and at the time the agreement was voted on, the new distribution centre was still under construction and no stores in the region had commenced trading. The employees who voted for the enterprise agreement were employed by ALDI at other locations. The operations of ALDI throughout Australia are organised on a regional basis.

There were three main grounds of appeal against the FWC’s decision to approve the enterprise agreement, as follows:

  • First, the enterprise agreement should have been made as a “greenfields agreement” because ALDI was establishing a new enterprise and had not employed any of the persons who would be necessary for the normal conduct of the enterprise. (A greenfields agreement can be made between an employer and one or more employee organisations (which includes unions) if the agreement relates to a “genuine new enterprise” and no persons have yet been employed who will be covered by the agreement.)
  • Secondly, the employees who were selected to approve the agreement were not “fairly chosen”. (To approve an enterprise agreement, the FWC must be satisfied that the group of employees covered by the enterprise agreement was fairly chosen and if the agreement does not cover all employees, the FWC must take in to account whether the group is “geographically, operationally or organisationally distinct”.)
  • Thirdly, the enterprise agreement did not pass the better off overall test (BOOT). (When an enterprise agreement applies, it displaces any modern award that would otherwise apply to the relevant employee. The BOOT requires the FWC to be satisfied that employees would be better off overall if the enterprise agreement applied to the employee than if the relevant modern award applied to them.)

OUTCOME

Single enterprise agreement or greenfields agreement?

In relation to first issue, ALDI submitted that conducting its traditional operations in a new geographical area was not a genuine new business.

The Full Bench noted that “the critical question is whether the criterion for a single enterprise employee agreement is satisfied – not whether an agreement could have been made as a greenfields agreement with an employee organisation” [at para 33].

The Full Bench also said that “the essential requirements are whether the employees who voted to approve the agreement are employees who are employed at the time the agreement is made and who will be covered by the agreement and whether the employees who voted were employees of the employer… that will be covered by the agreement [at para 33].

The Full Bench found that the two concepts are identical: the employees must be employed at the time the agreement is made and they must be covered by the agreement. The Full Bench found that “it was legitimate and necessary for [the employees] to be included in the group of employees asked to approve the agreement” and that the agreement was validly made as a non-greenfields agreement [at para 42] and rejected the first ground of the unions’ appeal.

Fairly chosen issue

In relation to the second issue of whether or not the employees selected to vote for the enterprise agreement had been fairly chosen, the Full Bench found that the SDA’s submissions on this point were misconceived, noting that the requirements in the FW Act about whether the group of employees had been “fairly chosen” requires “consideration of the employees covered by the agreement – not the employees who vote for the agreement at the time it is made” [at para 55].

The Full Bench rejected this second ground of the unions’ appeal.

BOOT

In relation to the third issue, the SDA submitted that the BOOT had not been properly applied because details of typical roster arrangements provided by ALDI were only indicative because the relevant operations had not actually commenced.

However, the enterprise agreement included a clause for ensuring the BOOT and the Full Bench also dismissed the third ground of the union’s appeal.

IMPACT

Depending on compliance with a range of other matters, employers can continue to make enterprise agreements directly with employees (without utilising the “greenfields agreement” provisions contained within the FW Act) when only some employees are employed in a particular part of the business but the employer expects to employ significantly more employees who will become covered by that same agreement. The coverage clauses of these agreements should be carefully considered and particular attention given to the issue of whether the group of employees to be covered by the agreement is fairly chosen.

 

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