FEDERAL COURT OF AUSTRALIA

One Key Workforce Pty Ltd v Construction, Forestry, Mining and Energy Union [2018] FCAFC 77

ORDERS

THE COURT ORDERS THAT:

1.    Within 28 days the parties file submissions (not exceeding five pages) on the question of what orders should be made in the light of these reasons.

2.    Unless otherwise ordered, the question be determined on the papers.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

1    This appeal is concerned with the approach taken to the approval of an enterprise agreement by both the Fair Work Commission and the Court on review. It raises two important questions. Both relate to the extent of the Court’s powers of review. One is whether the Court has the power to determine for itself whether a pre-approval obligation imposed on employers has been discharged or whether it may only consider whether the Commission’s satisfaction that the obligation had been discharged was affected by jurisdictional error. The other is whether, if the Commission erred, its error or errors are properly to be characterised as jurisdictional.

The enterprise agreement

2    The enterprise agreement in question is the RECS (QLD) Pty Ltd Enterprise Agreement 2015 (RECS Agreement or Agreement). It came into force on 6 November 2015, having been approved by the Commission on 30 October 2015: RECS (QLD) Pty Ltd Enterprise Agreement 2015 [2015] FWCA 7516. The appellant, One Key Workforce Pty Ltd (OKW), was previously known as RECS (Qld) Pty Ltd. For convenience, RECS will be referred to throughout as OKW. The company was incorporated in March 2015. By the time the Agreement was made in August 2015, it had three employees, hired at different times over the preceding months.

3    The Agreement was made with those three employees. Two of the employees worked in the coal mining industry, one in the construction industry. But for the Agreement their employment would have been covered by the Black Coal Mining Industry Award 2010 (BCMIA) and the Building and Construction General On-Site Award 2010 respectively. There is no reason to think they had any interest in the effect of the Agreement on employees working outside their respective industries. The parties to the Agreement, however, and the employees the Agreement was intended to cover were employees of OKW (employed to work anywhere in Australia) whose employment would, but for its operation, be covered by any of the following 11 awards:

    Building and Construction General On-Site Award 2010;

    Mining Industry Award 2010;

    Black Coal Mining Industry Award 2010;

    Manufacturing and Associated Industries and Occupations Award 2010;

    Road Transport (Long Distance Operations) Award 2010;

    Road Transport and Distribution Award 2010;

    Hydrocarbons Industry (Upstream) Award 2010;

    Clerks – Private Sector Award 2010;

    Hospitality Industry (General) Award 2010;

    Oil Refining and Manufacturing Award 2010; or

    Maritime Offshore Oil and Gas Award 2010.

4    Two of the three employees who voted on the Agreement were employed as casuals.

5    There was no union bargaining representative for the Agreement (presumably because none of the three employees was a member of a registered employee organisation — see s 176(1) of the Fair Work Act 2009 (Cth)). Indeed, there was no bargaining. The Commissioner who dealt with the approval application said that there was no negotiation over the terms of the Agreement. The Construction, Forestry, Mining and Energy Union (CFMEU), an organisation of employees registered under the Fair Work (Registered Organisations) Act 2009 (Cth), and the applicant before the primary judge, was unaware of the Agreement until after the Commission’s decision.

The relevant legislative provisions

6    To understand the Commissioner’s decision and the primary judge’s reasons it is necessary to understand the legislative context.

7    Enterprise agreements are dealt with in Part 2–4 of the Fair Work Act.

8    The term “enterprise agreement” is defined in s 172(1) as an agreement about one or more of the following four matters: matters pertaining to the relationship between an employer that will be covered by the agreement and that employer’s employees who will be covered by the agreement; matters pertaining to the relationship between the employer or employers, and the employee organisation or employee organisations, that will be covered by the agreement; deductions from wages for any purpose authorised by an employee who will be covered by the agreement; and the manner in which the agreement will operate.

9    Save in certain circumstances, which are not presently relevant, an enterprise agreement “covers” an employer or employee if the agreement is expressed to cover the employer or employee: s 53(1). An enterprise agreement “applies” to an employer or employee if the agreement is in operation, the agreement covers that employer or employee, and there is nothing in the Act which excludes it or has that effect. At any time that an enterprise agreement applies to an employee in relation to particular employment, the modern award that would otherwise apply to the employee does not apply: s 57.

10    The Act provides for both single-enterprise and multi-enterprise agreements. “Enterprise” is defined in s 12 to mean “a business, activity, project or undertaking”.

Making an enterprise agreement

11    Agreements may be made for both existing and new enterprises. Different rules apply, however, to the making of agreements involving “genuinely new” enterprises.

12    The RECS Agreement is a single-enterprise agreement. A single-enterprise agreement may be made by an employer with those employees “who are employed at the time the agreement is made and who will be covered by the agreement”: s 172(2)(a). Where, however, the agreement relates to “a genuine new enterprise the employer or employers are establishing or proposing to establish” and none of the people necessary for the normal conduct of that enterprise who will be covered by the agreement have yet been employed, a single-enterprise agreement may only be made with “one or more relevant employee organisations”: s 172(2)(b). Similar provisions for the making of agreements apply to multi-enterprise agreements: s 172(3). Agreements relating to genuinely new enterprises where no employees have been engaged are called “greenfields” agreements: s 172(4).

13    An agreement may not be made with a single employee: s 172(6).

14    The agreement-making process is described in some detail in Division 3 (ss 173–178B).

15    The employer is required to take “all reasonable steps” to give notice of the right to be represented by a bargaining representative to each person in its employ at the notification time for the agreement who will be covered by the agreement: s 173(1). For relevant purposes the notification time (defined in s 173(2)) is the time the employer initiated bargaining for the agreement.

16    The remaining provisions of Division 3 deal with bargaining representatives. Since there was no bargaining in the present case, the only relevance of these provisions is their inter-relationship with the approval process. For that purpose it is sufficient to note that an employer that will be covered by the agreement is a bargaining representative for the agreement: s 176(1).

Approval of an enterprise agreement

17    Division 4 (ss 179–201) deals with approval of agreements. The questions with which this case is concerned turn on the operation and effect of some of those sections, principally ss 180(5), 186, 187, and 188. None of the provisions in the remaining divisions of Part 2–4 is relevant, apart from s 171, which sets out the objects of Part 2–4.

18    Two types of approval are required. First, in the case of non-greenfields agreements, there must be a vote by the employees who are employed at the time and who will be covered by the agreement. This vote must be held only after the eligible voters have been provided with certain information. Second, the agreement must receive the approval of the Commission. An enterprise agreement does not operate until the passage of seven days from the approval of the agreement or such later date as may be specified in the agreement: s 54(1).

The approval of the employees who are employed at the time and who will be covered by the agreement

19    An employer that will be covered by a proposed enterprise agreement may request those employees who are employed at the time and who will be covered by the agreement to approve the agreement by voting for it: s 181(1). But before it may make such a request the employer must comply with the requirements of s 180. Those requirements, set out in s 180(2), (3) and (5), are to take all reasonable steps to:

(1)    ensure that during the access period for the agreement (the seven-day period ending immediately before the start of the voting process referred to in s 181(1)), “the relevant employees” (those who are employed at the time and who will be covered by the agreement) are given a copy of the text of the agreement and any other material incorporated by reference in the agreement or that they have access throughout the access period to a copy of those materials (s 180(2));

(2)    notify the relevant employees before the access period begins of the time and place at which the vote will take place and the method of voting that will be used (s 180(3)); and

(3)    ensure that:

(a)    the terms of the agreement, and the effect of those terms, are explained to the relevant employees; and

(b)    the explanation is provided in an appropriate manner taking into account the particular circumstances and needs of the relevant employees (s 180(5)).

20    The last requirement, set out in s 180(5), loomed large in the court below. It must be read with s 180(6), which provides some guidance to employers on the form and content of the requisite explanation. Section 180(6) states:

Without limiting paragraph (5)(b), the following are examples of the kinds of employees whose circumstances and needs are to be taken into account for the purposes of complying with that paragraph:

(a)    employees from culturally and linguistically diverse backgrounds;

(b)    young employees;

(c)    employees who did not have a bargaining representative for the agreement.

21    An employer must not request its employees to vote on an agreement until at least 21 days after the day on which the last notice under s 173(1) was given: s 181(2). Voting may take place “by an electronic method”: s 181(3).

22    A single-enterprise agreement that is not a greenfields agreement is made when a majority of those employees who cast a valid vote approve the agreement: s 182(1). An agreement is only effective, however, if and when it is approved by the Commission. As the plurality explained in ALDI Foods Pty Ltd v Shop, Distributive and Allied Employees Association [2017] HCA 53; (2017) 350 ALR 381; 92 ALJR 33; 270 IR 459 at [34]:

An enterprise agreement comes into operation in the sense of creating rights and obligations between an employer and employees in relation to the work performed under it only after it has been approved by the Commission. After that time the agreement applies to the employers and employees who are covered by it. But before that time, as will be seen, by virtue of s 182(1) of the Act, a non-greenfields enterprise agreement is “made” when a majority of those employees who will be covered by the agreement cast a valid vote to approve the agreement. As will be seen, once the agreement is made in accordance with s 182(1), the agreement is treated by the Act as covering the employers and employees to whom it refers.

The approval of the Commission

23    The next step in the process, then, is the making of an application to the Commission for the approval of the agreement. The application must be made by a bargaining representative: s 185(1).

24    The Act requires the Commission to approve an agreement in certain circumstances but gives the Commission a discretion to do so in certain other circumstances.

25    The Commission must approve an agreement if it is satisfied that each of the requirements set out in ss 186 and 187 is met: s 186(1). If the Commission has a concern that the agreement does not meet those requirements, in the exercise of its discretion it may still approve the agreement, provided that it is satisfied that an undertaking it accepts meets the particular concern: s 190(1)–(2). The Commission may only accept an undertaking if it is satisfied that the effect of doing so is not likely to cause financial detriment to any employee covered by the agreement or to result in substantial changes to the agreement: s 190(3).

26    The requirements in s 186 relevantly include the following matters:

(1)    that the agreement has been genuinely agreed to by the employees covered by the agreement: s 186(2)(a);

(2)    that the group of employees covered by the agreement was fairly chosen: s 186(3); and

(3)    that the agreement passes the “better off overall test” (BOOT): s 186(2)(d).

27    Subsections 186(2)(a) and 186(3) both refer to “employees covered by the agreement”. It will be recalled that (by s 53(1)) an enterprise agreement “covers” an employee if the agreement is expressed to cover the employee. Nevertheless, the High Court held in ALDI that the phrase “the employees covered by the agreement” in s 186(2)(a) refers only to “those persons currently employed who fall within the whole class of employees to whom the agreement might in future apply”: ALDI at [83]. “The group of employees covered by the agreement” in s 186(3), however, includes the whole class of employees to whom the agreement might in future apply, extending to “any person who will, in the future, be engaged as an employee to whom the agreement will apply”: ALDI at [83]; see also Construction, Forestry, Mining and Energy Union v John Holland Pty Ltd (2015) 228 FCR 297 at [2] (Besanko J); [34]–[41] (Buchanan J); [87] (Barker J). These two expressions have different meanings because of the difference in the scope of the two provisions — s 186(2), unlike s 186(3), exclusively concerns agreements which are not greenfields agreements: ALDI at [83]; John Holland at [39] (Buchanan J).

28    An enterprise agreement that is not a greenfields agreement passes the BOOT if the Commission is satisfied that, as at the time the application for approval of the agreement is made under s 185, each award-covered employee and each prospective award-covered employee would be better off overall if the agreement applied to the employee than if the relevant modern award applied to the employee: s 193(1).

29    The question of genuine agreement in s 186(2)(a) is defined by s 188, which reads as follows:

An enterprise agreement has been genuinely agreed to by the employees covered by the agreement if the [Fair Work Commission] is satisfied that:

(a)    the employer, or each of the employers, covered by the agreement complied with the following provisions in relation to the agreement:

(i)    subsections 180(2), (3) and (5) (which deal with pre approval steps);

(ii)    subsection 181(2) (which requires that employees not be requested to approve an enterprise agreement until 21 days after the last notice of employee representational rights is given); and

(b)    the agreement was made in accordance with whichever of subsection 182(1) or (2) applies (those subsections deal with the making of different kinds of enterprise agreements by employee vote); and

(c)    there are no other reasonable grounds for believing that the agreement has not been genuinely agreed to by the employees.

Other relevant duties of the Commission

30    In performing any of its functions or exercising any of its powers under any part of the Act, the Commission must take into account the objects of the Act and any objects of the part of the Act: s 578(a).

31    The object of the Act is set out in s 3:

The object of this Act is to provide a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians by:

(a)    providing workplace relations laws that are fair to working Australians, are flexible for businesses, promote productivity and economic growth for Australia’s future economic prosperity and take into account Australia’s international labour obligations; and

(b)    ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through the National Employment Standards, modern awards and national minimum wage orders; and

(c)    ensuring that the guaranteed safety net of fair, relevant and enforceable minimum wages and conditions can no longer be undermined by the making of statutory individual employment agreements of any kind given that such agreements can never be part of a fair workplace relations system; and

(d)    assisting employees to balance their work and family responsibilities by providing for flexible working arrangements; and

(e)    enabling fairness and representation at work and the prevention of discrimination by recognising the right to freedom of association and the right to be represented, protecting against unfair treatment and discrimination, providing accessible and effective procedures to resolve grievances and disputes and providing effective compliance mechanisms; and

(f)    achieving productivity and fairness through an emphasis on enterprise-level collective bargaining underpinned by simple good faith bargaining obligations and clear rules governing industrial action; and

(g)    acknowledging the special circumstances of small and medium-sized businesses.

32    The objects of Part 2–4 (set out in s 171) are twofold:

(a)    to provide a simple, flexible and fair framework that enables collective bargaining in good faith, particularly at the enterprise level, for enterprise agreements that deliver productivity benefits; and

(b)    to enable the [Fair Work Commission] to facilitate good faith bargaining and the making of enterprise agreements, including through:

(i)    making bargaining orders; and

(ii)    dealing with disputes where the bargaining representatives request assistance; and

(iii)    ensuring that applications to the [Commission] for approval of enterprise agreements are dealt with without delay.

33    “Good faith bargaining” is defined by the considerations in s 228.

The facts

34    OKW is one of a number of related companies which together operate as a business known as One Key Resources Group. The business of One Key Resources includes the provision of contract labour to other businesses (clients) in a range of industries. By August 2015 One Key Resources supplied more than 300 full-time employees to operators of coal mines in New South Wales and Queensland. That work was covered by the BCMIA.

35    Between March 2015, when OKW was first registered, and August 2015, when the vote on the Agreement took place, OKW hired three employees: Kevan O’Brien, Reuben Raymond and Vernon Marfell. Notwithstanding the scope of the Agreement, these three men were the only employees of the company before the Commission approved the Agreement.

36    Mr O’Brien began working for OKW in June 2015. He was employed on a permanent basis, working in the coal mining industry as a specialised machine operator/trainer assessor and placed with HSE Mining to work on the pre-stripping contract with BHP Billiton Mitsubishi Alliance at the Peak Downs black coal mine in Queensland. Mr Raymond began working for OKW in late May 2015. He was employed as a casual labourer. At first he was placed with BMD Constructions on a construction project in Darwin. Soon afterwards he was placed with BMD Urban to work on another construction project also in Darwin. Mr Marfell began working for OKW in late April 2015, also on a casual basis. He was employed as a site trainer/assessor and placed with Whitehaven Coal at Maules Creek in New South Wales. By 3 March 2017 Mr O’Brien was the only one of the three employees still employed by OKW. Mr Marfell’s employment ended on 29 February 2016, four months after the Commission approved the Agreement, and Mr Raymond’s on 16 September 2015, six weeks before the Commission approved the Agreement and almost two months before it came into force.

37    At the hearing before the primary judge, without objection the CFMEU read parts of affidavits filed by OKW in this Court. Petrina Ind, an employee of One Key Resources (but not of OKW) was the deponent of one of those affidavits. The CFMEU also questioned Ms Ind.

38    On 24 July 2015 Ms Ind sent an email to the three employees attaching a notice of employee representational rights in accordance with s 173 of the Fair Work Act. Ms Ind and OKW described this as the commencement of bargaining for the agreement. The notice stated that the agreement was to cover employees covered by the 11 awards and identified those awards. It also contained a brief explanation of an enterprise agreement, informed the employees of their right to appoint a bargaining representative, and told them what to do if they had any questions.

39    On 7 August 2015 Ms Ind emailed the employees a copy of the proposed agreement. The email attached copies of the 11 modern awards.

40    Ten days later, on 17 August 2015, Ms Ind advised the employees by email that voting on the agreement would occur between 9am and 5pm on 25 August 2015. Ms Ind then telephoned each of the employees to confirm that he had received the email. According to evidence adduced before the primary judge but not before the Commission, in the telephone calls she explained the voting process, went through the terms of the Agreement, reading out certain clauses but did not “go through” the awards or explain how the terms of the Agreement would interact with the awards. She told the Court that she had not undertaken a comparison of the 11 awards with the Agreement. She also told the Court that (at all relevant times) she was unaware that the BCMIA did not permit casual employment for engineering and production employees.

41    In accordance with the indication given on 17 August 2015, voting for the agreement commenced on 25 August. Between 2.53pm and 2.55pm that day Ms Ind sent an email to the three employees, drafted by a solicitor, which she described in her evidence to the Court as “a comprehensive email that explained the terms of the Agreement and the effect of those terms on the Employees”. The email did not answer that description. The relevant text was set out at [62] of the primary judge’s reasons. With the exception of a statement in the second paragraph, which was at best misleading, the email paraphrased cl 3.2 of the Agreement and merely restated a select few of its other terms.

42    The statement in the second paragraph read:

If the vote is successful and the Agreement commences operation, your current terms and conditions of employment will not change, however they will be underpinned by the Agreement.

43    On 25 August 2015 Ms Ind also spoke with each employee by telephone. She said that she asked each employee if he had read the email that she had sent that afternoon, if he had understood the email, and if he had any questions. Ms Ind did not suggest that she interrogated the employees to make sure that they understood the terms or their effect. In any case, as she had not undertaken a comparison of the Agreement and the 11 awards, she could not have explained the effect of the Agreement to them.

44    Apart from the fact that none of the employees had any questions, in her affidavit and in oral evidence Ms Ind professed to have no recollection of what was said in these conversations, except that each employee had informed her that he had received her email and that he understood the terms of the Agreement. (That evidence, we stress, was not before the Commission.) If any notes were taken, none were produced.

45    At 3.05pm a further email was sent to the employees telling them they could now vote on the Agreement. The email indicated that they could vote by replying either yes or no to the email. Each employee voted yes. Mr Marfell was the first to do so at 3.09pm. Mr Raymond was next at 3.32pm. Mr O’Brien replied at 4.06pm.

46    On 4 September 2015 OKW applied to the Commission for approval of the Agreement. The application was accompanied by a statutory declaration (Form F17), signed by Ms Ind. The form included a number of questions inviting the applicant’s responses. The following questions and answers are of significance. The answers appear in italics.

Agreement genuinely approved

2.4    What steps were taken by the employer and on what date were they taken to ensure that the relevant employees were either:

a.    given a copy of the written text of the agreement and any other material incorporated by reference into the agreement (must be provided during the 7 days before the start of the voting process), or

b.    had access to the above materials (must have access throughout the whole 7 day period)?

All relevant employees were emailed a copy of the proposed RECS Pty Ltd Enterprise Agreement. 7 August 2015.

…

2.6    What steps were taken by the employer to explain the terms of the agreement, and the effect of those terms, to the relevant employees?

The terms of the Agreement and the effect of the terms were explained to the relevant employees during telephone conversations on 17th August. During these telephone conversations the employees were given an opportunity to ask any questions that they had about the Agreement.

The terms of the Agreement were also explained to the relevant employees by email on 25 August 2015 prior to them being asked to vote on the Agreement.

Following the email on 25 August 2015, Petrina Ind spoke with each relevant employee and asked them whether they had any questions about the email or the terms of the Agreement. None of them had any questions.

2.7    When you explained the terms of the agreement to the employees, what did you do to take into account the particular circumstances and needs of the relevant employees?

There are no employees from non-English speaking backgrounds, nor any employees under 21 years of age.

To ensure that the employees fully understood the terms and conditions of the Agreement it was reiterated throughout the process that the employees should contact if they required additional clarification/ explanation about the Agreement.

47    The substance of the explanation purportedly given was not included in the statutory declaration. The response to question 2.7 wrongly assumed that only the particular circumstances and needs of employees under 21 and those from non-English speaking backgrounds had to be taken into account.

48    Part 3 of the form dealt with the BOOT. Ms Ind answered “yes” to the question at [3.4]:

Does the agreement contain any terms or conditions of employment that are more beneficial than equivalent terms and conditions in the reference instrument(s) [the 11 awards] and/or does the agreement confer any entitlements that are not conferred by those reference instruments?

(Emphasis in original.)

49    Ms Ind proceeded to state that the following terms were more beneficial than the equivalent terms and conditions in the awards or as entitlements not conferred by them:

Under clause 3.2 of the Agreement, the Agreement incorporates the terms of the relevant Award (listed at question 3.1 above) that would otherwise apply to the employee's particular role.

To ensure that the employees are better off overall than [under] the relevant Award, in addition to the (scil.) base hourly rate of pay in the relevant Award, employees will receive a BOOT Allowance, which is 0.1% of the hourly base rate of pay in the relevant Award. This applies to all employees.

In addition, under clause 12 of the Agreement, while the Agreement incorporates the employees’ hours of work from their relevant Award, the agreement also provides a guarantee that the maximum ordinary hours of work are 12 per day (or shift). This applies to all employees.

Under Clause 11 of the Agreement employees are entitled to an additional casual loading of 1% of the hourly base rate of pay in the relevant Award. This applies to employees whose relevant Award includes a provision that requires or allows the conversion of casual employees to permanent employees.

50    Ms Ind answered “no” to the question at [3.5]:

Does the agreement contain any terms that are less beneficial than equivalent terms and conditions in the reference instrument(s) … and/or does the agreement confer any entitlements that are not conferred by those reference instruments.

51    When asked in evidence how she could have been satisfied that there were no inconsistencies between the awards and the Agreement which might lead to detriments for employees without having undertaken a comparison of the 11 awards with the Agreement, Ms Ind offered the following, somewhat bizarre, response:

I read the agreement many, many times myself. I knew it incorporated the awards. I – obviously the awards are fair. They’re from Fair Work Commission. Like, I felt comfortable with that in myself.

52    She declared that she thought the agreement passed the BOOT.

53    Initially, the Commissioner was not satisfied that the agreement was genuinely agreed to or that it passed the BOOT. On 18 September 2015 he communicated his position to OKW by email (through a member of the Commission’s staff). On the first matter, the staffer wrote:

The Agreement nominates several Awards, and given that the Agreement only covers 3 employees, the Commissioner is concerned that scope of the Agreement is too broad and could not have been genuinely agreed to by the 3 employees.

Additionally, for the Agreement to have been genuinely agreed to, the Commissioner needs to be satisfied all employees received copies of or had access to all of the Modern Awards listed in the Agreement, and that they had the ability to understand such.

54    On the second matter the Commissioner was concerned that the rates of pay were not high enough to adequately compensate employees given the onerous obligations imposed by the agreement on the employees, singling out as an example the occupational health and safety requirements in cl 8.

55    The email closed with an invitation to OKW to consider providing additional information “as to how employees satisfy the better off overall test, or provide an undertaking to satisfy the Commissioner’s concern”.

56    On 30 September 2015 OKW responded through its lawyers. First, it cavilled with the Commissioner’s observation about the pay rates and the employees’ obligations. Then it signalled its willingness to provide a limited undertaking and asked to be heard on the remuneration question. These matters went to the Commissioner’s lack of satisfaction as to whether the Agreement passed the BOOT. It then turned to the Commissioner’s concerns about the scope of the Agreement, which went to the question of whether the Agreement had been genuinely agreed to. OKW responded that it was settled law that an agreement can be made with a small number of employees yet cover “classifications” other than those in which those employees are employed, referring to a number of decisions of the Full Bench of the Commission and the Full Court’s judgment in John Holland. OKW contended that these authorities supported its position that the Agreement should not be rejected because it was “voted by three employees but has a potentially broader application”. It submitted that the three employees were its only “blue collar employees”, that the scope of the Agreement represented the proposed scope of employees it would employ, and that the Agreement would apply to its entire “‘blue collar’ workforce”. Finally, OKW confirmed that each of the three employees had received copies of the modern awards listed in the Agreement and attached to its response copies of the relevant emails.

57    The Commissioner’s concerns were not apparently allayed by this response, at least in relation to satisfaction of the BOOT, for on 13 October 2015 the Commission wrote again to OKW referring to a number of additional clauses of the Agreement which “could be potentially disadvantageous to (scil.) employees, noting that the agreement incorporates the Awards listed in clause 2.1(b) [the 11 awards listed above]”. The substance of the email is extracted in full in the primary judge’s decision at [72].

58    OKW replied to the Commission on 16 October 2015, taking issue with almost all the points that were raised. OKW then offered certain undertakings.

59    The application for approval of the Agreement was heard on 26 October 2015. Michael Moy, OKW’s lawyer, appeared by leave. There was no contradictor.

60    The next day Ms Ind wrote to the Commission offering more extensive undertakings on behalf of OKW. Those undertakings were that:

(1)    it would not apply cll 8.2, 8.3, 9.4, 11, and 12.3 “as terms of the Agreement”;

(4)    nothing in cll 9.2 and 12.5 is intended to override any rights an employee may have under the National Employment Standards (NES) (contained in the Fair Work Act) or in respect of unfair dismissal; and

(5)    client policies and protocols do not form part of the agreement.

61    Three days later, on 30 October 2015, the Commissioner approved the Agreement with the undertakings, publishing reasons at the same time.

The Commissioner’s decision

62    Given the scope of the primary judge’s decision and the issues on the appeal, it is unnecessary to refer to the entire decision. Two matters are presently relevant.

63    On whether he was satisfied that s 180(5) had been complied with, the Commissioner said:

5    The Applicant says that the terms of the Agreement were explained to the employees. There were no bargaining representatives and there was no negotiation. The employer drafted a proposed agreement and provided it to employees by email. Employees were provided with a link that directed them to the relevant Awards.

…

9    Section 180(5) of the Act requires that all reasonable steps must be taken by the employer to explain the terms of the agreement and the effect of those terms. It is quite common for the Fair Work Commission to identify terms which it believes may disadvantage employees in circumstances where the employer has failed to identify these matter in the F17 Statutory Declaration and in the information provided to employees. In this case the employer failed to identify a number of matters which disadvantage employees. Where these matters are minor it does not necessarily mean that Section 180(5) has not been complied with. The requirement is about “reasonable steps”. Where the matters are more significant the Fair Work Commission might not be satisfied that Section 180(5) has been met and as a consequence the requirement for genuine agreement in Section 188 may not be met and this will prevent the Agreement being approved. In the circumstances of this case I am satisfied, on a fine balance, that reasonable steps were taken to explain the terms of the agreement and the effect of those terms.

64    The Commissioner proceeded to identify some of the matters in the Agreement which put employees at a disadvantage compared to their position under the awards (or some of them). He did so, however, not to explain why he reached the conclusion that all reasonable steps had been taken to explain the terms and effect of the Agreement, but in the context of his discussion of whether the Agreement met the BOOT. On that question, the Commissioner was only satisfied in the light of OKW’s undertakings. The undertakings did not address the concern earlier expressed that the Agreement had not been genuinely agreed to by the employees covered by the Agreement and nothing in the Commissioner’s reasons specifically addressed that question. Nevertheless, he said that he was satisfied as to each of the requirements of ss 186, 187 and 188 of the Act as was relevant to the application.

The application before the primary judge

65    No application was made to the Full Bench for permission to appeal. Rather, the CFMEU applied to the Court under s 39B(1A)(c) of the Judiciary Act 1903 (Cth), ss 21, 22 and 23 of the Federal Court of Australia Act 1976 (Cth) and ss 562 and 563 of the Fair Work Act for a declaration that the approval of the RECS Agreement was “void and of no effect”. In the alternative it sought a writ of certiorari to quash the approval and an order that a writ of mandamus be issued to the Commission requiring it to hear and lawfully determine the application to approve the Agreement.

66    The application was made in November 2016, some 13 months after the Commissioner’s decision was published. It appears from the reasons of the primary judge that the CFMEU did not become aware of the decision until about two and a half months had passed and did not become aware that some of its members were covered by the Agreement until late May or early June 2016. Having regard to the delay, OKW argued (unsuccessfully) that relief should be refused in the exercise of the Court’s discretion.

67    The grounds upon which the application was made were initially set out in an affidavit sworn by the CFMEU’s solicitor on 28 November 2016. But the following January the CFMEU filed a statement of claim. In substance, the union’s case was that there was no agreement capable of approval by the Commission and so the purported approval was of no effect. Alternatively, it contended that the Commissioner’s decision to approve the agreement should be quashed because it was affected by a number of jurisdictional errors.

68    The grounds relied upon for declaratory and prerogative relief covered the same issues. Those issues were:

    whether the Agreement could not satisfy the BOOT as employees were not better off overall under it than under the relevant modern award;

    whether OKW had failed to comply with s 180(5) of the Act because it had not taken “all reasonable steps” to explain to the employees the terms of the proposed agreement and their effect;

    whether there had been a “genuine agreement” within the meaning of ss 186(2)(a) and 188(c) and/or whether the agreement put forward for approval was a “sham”;

    whether the Agreement impermissibly incorporated unknown terms by reference to policies and procedures;

    whether the requirements for the signing of the Agreement, imposed by s 185(2)(a) of the Act, had been met; and

    whether the Commissioner wrongly identified the employees “covered by” the Agreement.

69    The challenge to the Commissioner’s satisfaction was made on the basis that it was affected by jurisdictional error either because relevant considerations had not been taken into account or because it was legally unreasonable.

The decision of the primary judge

70    The primary judge made the declaration sought by the CFMEU that the approval was void and of no effect, accepting its principal argument that there was no agreement within the meaning of Part 2–4 on which the purported approval could operate.

71    His Honour explained that he came to this conclusion for “either of two principal but separate reasons”. They were first, that OKW had failed to comply with the requirements in s 180(5), in other words, that it had failed to take all reasonable steps to ensure that the terms of the Agreement and their effect had been explained to the relevant employees; and secondly, that there never was an agreement genuinely agreed to by the employees covered by the Agreement (s 186(2)(a)).

72    The primary judge acknowledged that it is the Commission, and not the Court, that must be “satisfied” under ss 188(a)(i) and 186(2)(a) of the employer’s compliance with s 180(5) and as to whether the agreement was genuinely agreed to. But his Honour went on to say that the power of approval conferred by s 186 is conditioned on there being in fact and in law an “agreement” which satisfies the meaning of that term as employed in Part 2–4 of the Act.

73    His Honour also concluded, however, that the Commissioner’s satisfaction, both under s 188(a)(i) (that OKW had complied with s 180(5)) and under s 186(2)(a) (that the Agreement was genuinely agreed to), was affected by jurisdictional error.

74    The jurisdictional error in respect of s 180(5), his Honour held, occurred because the Commissioner failed to consider the steps that OKW had taken to comply with the requirements, focussing instead on the advice it had given to the Commission, and/or because a pre-condition for the exercise of the Commission’s power to approve the agreement had not been satisfied (namely, that OKW had not complied with s 180(5)).

75    His Honour found that, on the evidence before him, OKW did little more than read to the employees parts of the Agreement and certainly did not explain the effect of its terms. Accordingly, he held that all reasonable steps had not been taken and that there had been a “manifest failure” on the part of the employer to comply with s 180(5). He noted in particular that no guidance was given to any of the three employees as to the manner in which the Agreement affected their personal interests. At [109] his Honour said:

Such reasons as were provided by the Commissioner at para [9] of his reasons for decision expose jurisdictional error. Little, if any, consideration was given to what were the “steps” in fact taken by the employer or the adequacy of those steps. Such consideration as was given was more directed to the subject-matter of the information communicated rather than to the content of the information communicated or the effectiveness of the communication of that information or (for that matter) what was not communicated.

76    As to the second basis, his Honour said at [97]:

Section 180(5) is not a section which is expressed in terms of whether the Commission is “satisfied” that “all reasonable steps” have been taken. That subsection is expressed as a statement of objective fact as to that which must occur before approval is sought. If “all reasonable steps” have not in fact been taken, the Commission lacks power to “approve” the agreement. A statement of “satisfaction” on the part of the Commission as to compliance with s 180(5) cannot conceal from scrutiny by this Court the adequacy of the steps in fact taken.

77    The finding of jurisdictional error affecting the Commission’s satisfaction that there had been a genuine agreement within the meaning of ss 186(2)(a) and 188 was based on the failure to take into account relevant considerations and the absence of reasonable grounds for forming the requisite state of satisfaction.

78    His Honour concluded (at [123]) that the Commissioner had failed to give any or any adequate or proper consideration to a number of relevant matters, the effect of which was to vitiate the decision. Those matters included, his Honour said at [122], “such [matters] as”:

•    the ability or appropriateness of Messrs O'Brien, Raymond and Marfell (with their particular employment backgrounds) being called upon to agree to terms and conditions covering employees in such other diverse areas of employment as road transport, clerking or the hospitality industry [being areas covered by the various other awards]; or

•    such factual differences as may have existed (and presumably did exist) between the areas of employment represented by Messrs O'Brien, Raymond and Marfell and those pertaining to road transport, clerking or the hospitality industry and whether such factual differences precluded the Agreement being agreed to by only three employees with their limited employment background.

79    Neither of these matters was addressed in the Commissioner’s reasons.

80    The primary judge held that OKW secured consent to the Agreement with the intention that it would thereafter cover other employees. That much would have been uncontroversial. The effect, his Honour noted, was to “preclude a genuine bargaining process or any ‘industrial action’ throughout the duration of the Agreement”. Amongst the matters to which his Honour referred in this context was the absence of any explanation as to why Messrs O’Brien, Raymond and Marfell were the only workers hired by the company before the Commission approved the Agreement on 30 October 2015.

81    His Honour said it was unnecessary to decide whether the Agreement was one which would subvert the legislative regime or was a “sham”, as the CFMEU argued, holding instead that “it was sufficient to conclude that it was not one which was susceptible of approval”.

82    As to the other alleged errors, the primary judge pointed to difficulties he considered the CFMEU faced in demonstrating that those errors were jurisdictional, but came to no final conclusions on any of them.

The appeal

83    The notice of appeal was not well drafted. Nine grounds were pleaded. The first is conclusory only and identifies no specific error. Several of the remaining grounds identify alleged errors but only with respect to steps in the primary judge’s reasoning process. As Branson J observed in Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd (2002) 234 FCR 549 at [4], alleged errors with respect to steps in a process of legal reasoning leading to an ultimate conclusion of law may be relied upon to support a ground of appeal, but they do not themselves constitute a ground of appeal.

The issues

84    OKW argued that the appeal raised five issues:

(1)    Does s 180(5) impose an independent jurisdictional constraint on decisions of the Commission (as the primary judge held) or (as OKW contended) is the relevant jurisdictional fact the satisfaction of the Commission under s 188(a)(i)? In other words, on an application for judicial review, is compliance with s 180(5) only relevant as a matter about which the Commission must be satisfied?

(2)    If the relevant jurisdictional fact is the Commission’s satisfaction under s 188(a)(i), can the Court substitute its own opinion for that of the Commission (as the primary judge did)?

(3)    If so, is there a relevant distinction between the extent to which the employer had advised the Commission as to the steps it had taken to comply with s 180(5) on the one hand and the steps in fact taken by the employer to comply with s 180(5) on the other?

(4)    Even if the primary judge’s construction of the relevant sections was correct, did OKW nevertheless take all reasonable steps to comply with s 180(5)?

(5)    Did the class of employees who were the “relevant employees” for the purposes of s 180(5) include prospective employees or was it limited to those who were employed at the time the pre-approval steps were taken?

85    OKW’s analysis, however, obscures two of the primary judge’s critical findings. The CFMEU, spotting the omission, submitted that, even if all five of the issues OKW had identified were resolved in its favour, they would not provide a basis for the relief sought because they would not dispose of all the Court’s findings. In other words, there was an independent basis for the Court’s orders. The CFMEU is right.

86    As we have already observed (at [74]–[76] above), his Honour decided the question of compliance with s 180(5) on two separate bases.

87    The first basis was that the Commissioner’s reasons at [9] were affected by jurisdictional error because he failed to give proper consideration to the steps in fact taken by the employer or the adequacy of those steps, and because his consideration of this issue was “directed to the subject-matter of the information communicated” rather than to the content of the information communicated, the effectiveness of the communication or to what was not communicated at all.

88    By “subject-matter” we take his Honour to have been referring to the subject of whether an explanation had been provided and the means by which it was communicated. As we read his Honour’s reasons, he found jurisdictional error on the basis that the Commissioner did not consider what information OKW provided the relevant employees or whether it was effective in conveying to them the terms of the Agreement and their effect. In other words, the Commissioner misconstrued the statutory inquiry he was required to undertake.

89    OKW recognised as much in its notice of appeal, ground 3 of which reads:

The primary judge erred in holding (at [97]-[109]) that the [Commission] had committed jurisdictional error in reaching a state of satisfaction as stipulated by s 188 of the Act by reason of “focussing its attention upon the extent to which the employer had advised the Commission as to the steps it had taken to comply with s 180(5) and in failing to give any consideration to the steps in fact taken by the employer to comply”.

90    OKW’s characterisation of the issues also fails to deal with the primary judge’s finding at [123] that there was no material before the Commissioner which could support a conclusion that the agreement had been “genuinely agreed to by the employees covered by the agreement” as required by ss 186(2)(a) and 188, and further that the Commissioner had failed to give any or any adequate consideration to various matters affecting the genuineness of the agreement. Yet, this was the subject of ground 9 of the notice of appeal.

91    Neither ground 3 nor ground 9 was abandoned and both were the subject of written and oral submissions.

92    The CFMEU asserted that the primary judge had dealt with the question of genuine agreement in two alternative ways, just as he had done with the question of compliance with s 180(5), first by determining that there was no genuine agreement capable of approval and secondly, by holding in the alternative that the Commissioner’s satisfaction was infected by jurisdictional error

93    OKW disagreed with the CFMEU’s analysis of the primary judge’s reasons on this point, arguing that the structure of the primary judge’s reasons at [112]–[125] (where his Honour discussed the genuine agreement issue) “makes clear that those paragraphs together constitute a chain of reasoning leading to the conclusion that there was ‘jurisdictional error’ because there has never been an ‘agreement ... genuinely agreed to by the employees covered by the agreement’”.

94    In our opinion OKW’s construction is the correct one. Although at various points in his reasons, the primary judge declared that there was never an agreement capable of being approved by the Commission, he did not say that the genuine agreement of the employees was a precondition or jurisdictional fact, as opposed to the Commission’s satisfaction under s 186(2)(a). His Honour acknowledged as much at [117] of his reasons, observing that his own concern about the agreement not being genuinely agreed to “confronts the difficulty of this being a matter entrusted to the Commission to reach a state of ‘satisfaction’”. His Honour then went on to characterise the jurisdictional error in the Commission’s satisfaction under s 186(2)(a) – see [123].

95    The real questions raised by the appeal, then, are:

(1)    Was actual compliance with s 180(5) a precondition for the exercise of the Commission’s power to approve the Agreement or was the relevant jurisdictional fact the Commission’s satisfaction that the subsection had been complied with?

(2)    If the latter, did the primary judge err in concluding that there was jurisdictional error affecting the Commission’s satisfaction under s 188(a)(i) that OKW had complied with s 180(5)?

(3)    If the former, was the primary judge wrong to find that OKW did not take all reasonable steps to comply with s 180(5)?

(4)    Regardless, did the primary judge err in holding that there was jurisdictional error affecting the Commission’s satisfaction that the Agreement had been “genuinely agreed to” having regard to para 188(c)?

96    For the reasons given below, the answers to these questions are:

(1)    Compliance with s 180(5) was not a precondition for the exercise of the Commission’s power to approve the Agreement. The relevant jurisdictional fact is the Commissioner’s satisfaction that the subsection had been complied with.

(2)    No.

(3)    Unnecessary to decide.

(4)    No.

Was compliance with s 180(5) a jurisdictional fact?

97    The primary judge held (at [91]) that, on the evidence before the Court, OKW had not complied with s 180(5) and that consequently there was no agreement capable of approval. As OKW argued, in substance or effect this was a finding that the discharge of the obligation imposed on it by s 180(5) was a jurisdictional fact.

98    A jurisdictional fact is a condition precedent to the exercise of jurisdiction or a criterion the satisfaction of which enlivens a statutory power or discretion; unless the condition is fulfilled or the criterion satisfied, a decision purportedly made in the exercise of the jurisdiction or the power or discretion conferred by the relevant statute will have been made without authority: R v Connell; Ex parte Hetton Bellbird Collieries Ltd (1944) 69 CLR 407 at 429–30; Gedeon v Commissioner of the New South Wales Crime Commission (2008) 236 CLR 120 at [43]. A decision will be tainted by jurisdictional error if the Court finds that there was no such fact at the time the decision was made: Timbarra Protection Coalition Inc v Ross Mining NL (1999) 46 NSWLR 55 at [37].

99    If the exercise of power is expressly conditioned on the formation of an opinion or belief by the decision-maker, however, the existence of the requisite opinion or belief is a jurisdictional fact: Plaintiff M70/2011 v Minister for Immigration and Citizenship (2011) 244 CLR 144 at [57] (French CJ). This principle is not restricted to the exercise of powers as distinct from duties. Section 65(1) of the Migration Act 1958 (Cth), for example, imposes an obligation on the responsible Minister to grant a visa the subject of a valid application if he or she is satisfied of a number of matters, and an obligation to refuse to grant it if not so satisfied. The satisfaction of the Minister is a condition precedent to the discharge of the obligation and a jurisdictional fact, reviewable under s 75(v) of the Constitution: Minister for Immigration and Multicultural Affairs v Eshetu (1999) 197 CLR 611 at [131] (Gummow J); Minister for Immigration and Multicultural and Indigenous Affairs v SGLB [2004] HCA 32; (2004) 207 ALR 12; 78 ALD 224; 78 ALJR 992.

100    Not all conditions precedent or criteria for the exercise of a statutory power or discretion are jurisdictional facts. That depends on whether, as a matter of statutory construction, Parliament intended that the question of satisfaction of the conditions or criteria be left to the administrative decision-maker or, in the final instance, to a court on judicial review: Public Service Association and Professional Officers’ Association Amalgamated Union of New South Wales v State of New South Wales [2014] NSWCA 116; (2014) 242 IR 338 at [75] (Basten JA); Australian Commercial Catering Pty Ltd v Fair Work Commission (2015) 235 FCR 441 (ACC v FWC) (Tracey, Barker and Katzmann JJ) at [42].

101    Where the exercise of statutory construction leads to the conclusion that Parliament intended that the relevant criterion can only be met if the relevant fact or facts objectively exist, “the rule of law requires a court with a judicial review jurisdiction to give effect to that intention by inquiry into the existence of the fact or facts”: Timbarra at [40] (Spigelman CJ, Mason P and Meagher JA agreeing at [123] and [124] respectively).

102    In ACC v FWC the Full Court addressed the exercise of statutory construction at [43]–[44]:

43    To properly construe the statute, it is necessary to examine both the language in which the relevant provision is cast and “the total context of the legislative scheme in which the power is conferred, including the scope and nature of the jurisdiction and of the fact said to be jurisdictional”: Woolworths Ltd v Pallas Newco Pty Ltd (2004) 61 NSWLR 707 at [6] (Spigelman CJ) …

44    His Honour also observed (at [89]) that where the criterion is a matter upon which reasonable minds may differ it is less likely that Parliament intended the criterion to be an objective fact. Similarly, in Plaintiff M70/2011 v Minister for Immigration and Citizenship (2011) 244 CLR 144 at [57] French CJ said that “[w]hen a criterion conditioning the exercise of statutory power involves assessment and value judgments on the part of the decision-maker, it is difficult to characterise the criterion as a jurisdictional fact, the existence or non-existence of which may be reviewed by a court”.

103    The matters identified in s 180(5) were matters to which the employer was required to attend. On a proper construction of the statute, however, they were not jurisdictional facts. The jurisdiction the Commission exercised or purported to exercise was the jurisdiction to approve an enterprise agreement under s 186. A condition precedent to the exercise by the Commission of its jurisdiction under s 186 is its satisfaction that the employer has complied, among other things, with s 180(5): see s 186(2)(a) read with s 188(a)(i). Alternatively, as s 190 provides, the Commission may approve an agreement under s 186 despite having a concern that the agreement does not meet the requirements set out in ss 186 and 187 provided that it is satisfied that an undertaking of the kind described in s 190(3) meets that concern. The mere fact that the Act entitles the Commission to approve an agreement even if it is concerned that the employer has not complied with s 180(5) tells against the conclusion that compliance with s 180(5) is a fact, the objective existence of which is a precondition to the Commission’s power to approve the agreement. While not determinative, so too does the language of satisfaction. As Basten JA observed in D’Amore v Independent Commission against Corruption [2013] NSWCA 187; (2013) 303 ALR 242 at [241]:

The language of “satisfaction” or “opinion” is a statutory device to ensure that the matters identified as preconditions to the exercise of power are indeed not jurisdictional facts, but facts which need only be established to the satisfaction of the decision-maker.

104    In Australian Industry Group v Fair Work Australia (2012) 205 FCR 339 at [43] North, McKerracher and Reeves JJ came to the same conclusion about the approval of an enterprise agreement containing an unlawful term where s 186(4) of the Fair Work Act provides that the Commission must be satisfied that the agreement does not include any unlawful term.

105    Furthermore, like many of the pre-approval requirements, satisfaction as to whether s 180(5) has been complied with involves an evaluative judgment, including because an assessment is to be made as to whether “reasonable steps” were taken by the employer. As Bromberg J said in Teys Australia Beenleigh Pty Ltd v Australasian Meat Industry Employees Union (No 2) [2016] FCA 2; (2016) 259 IR 164 at [75], in a passage cited by the primary judge at [119]:

These are difficult questions, upon which reasonable minds might sometimes (perhaps often) differ. The legislature’s intent was evidently that they be dealt with — for the benefit of employees and employers both — by independent specialists and experts, through the process of Commission scrutiny. …

106    Besides, it should not be supposed that Parliament intended that the validity of an enterprise agreement should be open to collateral attack on the basis that the objective existence of the facts required by s 180(5) cannot be established. Parliament should be presumed not to have intended public inconvenience of the kind that would arise if the existence of the pre-approval requirements the subject of the satisfaction that the Commission is required to form in order to approve an agreement was a jurisdictional fact amenable to authoritative determination by a court: see Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [97].

107    For completeness, we would add that, if we are wrong about the proper construction of the primary judge’s reasons (see [93]–[95] above), and the primary judge did indeed make a finding that, independent of the question of compliance with s 180(5), the objective existence of a genuine agreement was a jurisdictional fact, then, for the same reasons, this finding would also have been erroneous.

Did the primary judge err in concluding that there was jurisdictional error affecting the Commission’s satisfaction under s 188(a)(i) that OKW had complied with s 180(5)?

108    Still, the Commissioner’s decision was not immune from review.

109    Where, as here, a statute vests a power in, or imposes a duty on, an administrative decision-maker to do something upon reaching a state of satisfaction and matters the statute requires the decision-maker to take into account are not considered, as a matter of law the requisite state of satisfaction is not reached and the Court may grant relief: Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353 at 360 (Dixon J); Buck v Bavone (1976) 135 CLR 110 at 118–119 (Gibbs J) (approved by Brennan CJ, Toohey, McHugh and Gummow JJ in Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 at 275); Saeed v Minister for Immigration and Citizenship (2010) 241 CLR 252 at [54]. Perhaps the clearest exposition of the point was given by Latham CJ in R v Connell at 430–432:

[W]here the existence of a particular opinion is made a condition of the exercise of power, legislation conferring the power is treated as referring to an opinion which is such that it can be formed by a reasonable man who correctly understands the meaning of the law under which he acts. If it is shown that the opinion actually formed is not an opinion of this character, then the necessary opinion does not exist.

…

It should be emphasised that the application of the principle now under discussion does not mean that the court substitutes its opinion for the opinion of the person or authority in question. What the court does do is to inquire whether the opinion required by the relevant legislative provision has really been formed. If the opinion which was in fact formed was reached by taking into account irrelevant considerations or by otherwise misconstruing the terms of the relevant legislation, then it must be held that the opinion required has not been formed. In that event the basis for the exercise of power is absent, just as if it were shown that the opinion was arbitrary, capricious, irrational, or not bona fide.

110    Equally, a misconception as to what the exercise of the statutory power entails is a jurisdictional error: Graham v Minister for Immigration and Border Protection [2017] HCA 33; (2017) 91 ALJR 890; 347 ALR 350 at [68].

111    The only material before the Commission on compliance with s 180(5) was contained in Ms Ind’s statutory declaration. Although the statutory declaration was silent as to the content of the explanation or, indeed, as to the substance of the communications, OKW submitted that the declaration itself was some evidence upon which the Commission could form the requisite state of satisfaction. That may be so, but it was by no means enough to enable the Commission to lawfully reach that state.

112    It is common ground that the Commission was never told what was said to the relevant employees. It was simply told that they had been given an explanation of the terms of the Agreement and the effect of those terms. In effect, this amounted to little more than a self-serving statement that the employer had complied with its obligation under the Act. OKW contended that the fact that it made such a statement in a statutory declaration was significant. It is not. As the CFMEU argued, whether all reasonable steps were taken to ensure that the effect of the terms of the Agreement was explained in an appropriate manner is a question of substance, not form. The recital of a conclusion on the very question the Commission was required (through an evaluative process) to determine is not, without more, a sufficient basis for the satisfaction of the statutory test. In other words, a bare statement by an employer that an explanation has been given is an inadequate foundation upon which to reach a state of satisfaction. OKW submitted that if the Commission had erred in this respect, it was an error in fact finding or an error in process, which would be an error within its jurisdiction. We reject this submission. In order to reach the requisite state of satisfaction that s 180(5) had been complied with, the Commission was required to consider the content of the explanation and the terms in which it was conveyed, having regard to all the circumstances and needs of the employees and the nature of the changes made by the Agreement. It is true that the Act does not expressly say that. But the question of whether an administrative decision-maker is required to consider a matter is not determined only by the express words of the Act; it may also be determined by implication from the subject-matter, scope and purpose of the Act: Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 39–44 (Mason J).

113    A consideration of the subject-matter, scope and purpose of the relevant provisions of the Fair Work Act indicates that the content of the explanation and the terms in which it was conveyed were relevant considerations to which the Commission was bound to have regard. The absence of that information meant that the Commission was not in a position to form the requisite state of satisfaction. Put differently, without knowing the content of the explanation, it was not open to the Commission to be satisfied that all reasonable steps had been taken to ensure that the terms and their effect had been explained to the employees who voted on the Agreement or that they had genuinely agreed to the Agreement.

114    The following considerations point inexorably to that conclusion.

115    The Commission was required to be satisfied that OKW had taken “all reasonable steps to ensure” that both the terms and the effect of the terms had been explained to the relevant employees as an element in the inquiry as to whether “genuine” agreement had been obtained from them. The agreed purpose of the obligation imposed on employers by s 180(5) is to enable the relevant employees to cast an informed vote: to know what it is they are being asked to agree to and to enable them to understand how wages and working conditions might be affected by voting in favour of the agreement.

116    In order for the employer to comply with the obligation it must take into account the particular circumstances and needs of those employees, including their cultural and linguistic backgrounds, their youth, and the absence of a bargaining representative. That is made explicit in s 180(6). How could the Commission decide whether the steps the employer had taken were “all reasonable steps” unless it knew what the employees had been told before they cast their votes? Without knowing the terms in which the explanation had been conveyed how could the Commission form an opinion on the sufficiency of the explanation, particularly having regard to the considerations mentioned in s 180(6)? Ultimately, how could the Commission decide that a genuine agreement had been reached without having evidence upon which it could answer both these questions?

117    As there was no evidence of these matters before the Commission, it necessarily follows that the Commission purported to be satisfied that OKW’s obligations under s 180(5) had been discharged without taking those matters into account. That was a jurisdictional error because the Commission did not have authority to make the decision unless its satisfaction had been informed by them. As is often the case, there are several ways of describing the error. It could be characterised as a misconception as to what the exercise of the statutory power entails or an error “as to an important attribute of the decision to be made”: Graham at [68]. Equally it could be seen as a misunderstanding on the part of the Commission of the nature of the opinion it was required to form: Coal and Allied Operations Pty Limited v Australian Industrial Relations Commission (2000) 203 CLR 194 at [31] (Gleeson CJ, Gaudron and Hayne JJ). Had the Commissioner applied his mind to the question of what the putative explanation entailed, he would inevitably have inquired into its content and terms.

118    Alternatively, as the CFMEU submitted, the Commissioner’s error might be regarded as an error of the kind referred to by the High Court in R v Australian Stevedoring Industry Board; Ex parte Melbourne Stevedoring Co Pty Ltd (1953) 88 CLR 100 at 120. In that case, where an order was made for prohibition under s 75(v) of the Constitution, the Court observed that the inadequacy of the material before the tribunal was not itself a ground for prohibition but “a circumstance which may support the inference” that the tribunal applied the wrong test, was not really satisfied of the requisite matters, or misconceived the purpose of the function committed to it. In circumstances such as these, the Court said, “it is but a short step to the conclusion that in truth the power has not arisen because the conditions for its exercise do not exist in law and in fact”.

119    In his reasons at [9], the Commissioner noted that OKW had failed to identify in its statutory declaration a number of matters in the Agreement which disadvantage employees. He remarked that in the case of minor matters that does not necessarily mean that s 180(5) has not been complied with. In the absence of evidence of the contents of the explanation, this observation tends to indicate, as the primary judge found, that the Commissioner was focussed on the advice to the Commission rather than the terms of the explanation.

120    It was of course open to the Commissioner to ask OKW what it actually told the relevant employees. The Commission had raised other matters with the company in its 18 September email in which it said, at that point, that the Commissioner was not satisfied that the Agreement was genuinely agreed to (see [53] above). It may well be the case, as the CFMEU argued, that the failure to inquire about the content of the explanation was also a jurisdictional error. The inquiry was an obvious one to make. For the reasons given earlier, the content of the explanation was a critical matter. The information was easily ascertainable. In the context of decisions made under the Migration Act where the Refugee Review Tribunal had a duty to review the Minister’s decision, in Minister for Immigration and Citizenship v SZIAI [2009] HCA 39; (2009) 83 ALJR 1123; 259 ALR 429; 111 ALD 15 the High Court said:

It may be that a failure to make an obvious inquiry about a critical fact, the existence of which is easily ascertained, could, in some circumstances, supply a sufficient link to the outcome to constitute a failure to review. If so, such a failure could give rise to jurisdictional error by constructive failure to exercise jurisdiction. It may be that failure to make such an inquiry results in a decision being affected in some other way that manifests itself as jurisdictional error.

121    In SZIAI the point was not developed any further because the Court found that on the available material any further inquiry would have been futile. In contrast to the position in SZIAI, however, an inquiry in the present case would not have been futile. Indeed, the evidence before the primary judge revealed that an inquiry would have been extremely useful. It would have disclosed that, contrary to the assertion in the statutory declaration, no explanation was given to the relevant employees. In those circumstances, it is inconceivable that the Commissioner would have approved the Agreement. Had he done so, he would have fallen into jurisdictional error. It is unnecessary, however, in view of our other conclusions, to decide whether the failure to make the inquiry amounts to a jurisdictional error.

Did the primary judge err in holding that there was jurisdictional error affecting the Commission’s satisfaction that the Agreement had been “genuinely agreed to” having regard to para 188(c)?

122    The substance of the primary judge’s reasons for concluding that the Commissioner’s decision on this question was affected by jurisdictional error appears at [122]–[123]. The primary judge held that the Commissioner could not lawfully have been satisfied that the Agreement had been genuinely agreed to by the employees covered by the Agreement because:

(1)    he had failed to give any or “any adequate or proper” consideration to:

(a)    the differences in the work performed by the three employees with whom the Agreement was made and the work covered by the other awards; and

(a)    having regard to those differences, whether it was appropriate to seek their agreement and whether they were capable of giving it; and

(2)    there was no evidence that the Agreement had been genuinely agreed to by the employees covered by the Agreement, which the primary judge took to include the prospective employees who would otherwise have been covered by the various other modern awards.

123    The basis for the first reason included a concern earlier expressed (at [116]) that three employees “with a very confined employment experience” and covered by only two of the 11 awards could approve an agreement that would cover employees covered by the diverse range of awards which the Agreement was to replace. Such an agreement, his Honour held, would “lack ‘authenticity’ and ‘moral authority’”, picking up on expressions used in Construction, Forestry, Mining and Energy Union v Australian Industrial Relations Commission (1999) 93 FCR 317 (CFMEU v AIRC) at [126]–[127].

124    In relation to the second reason, the primary judge distinguished s 186(2)(a), which provides that the Commission “must be satisfied that the agreement has been genuinely agreed to by the employees covered by the agreement”, and s 180(2), which sets out a pre-voting obligation to provide materials to “relevant employees”, who are defined as “the employees … employed at the time who will be covered by the agreement”. He said that the phrase in s 186(2)(a) (“employees covered by the agreement”) was “deliberately wider in ambit” than the definition in s 180(2).

125    According to the CFMEU, this aspect of the primary judge’s reasons went to para (c) of s 188: the Commission’s satisfaction that there were “no other reasonable grounds for believing that the agreement had not been genuinely agreed to by the employees”. OKW disagreed, pointing to the absence in the reasons of any reference to para (c) and suggested instead that the primary judge was concerned with s 186(2)(a) alone, treating it as if it were framed in the same general terms as the question of genuine agreement under s 170LT(6) of the Workplace Relations Act 1996 (Cth) (the subject of the discussion in CFMEU v AIRC).

126    We accept the CFMEU’s submission. The absence of a specific mention of para 188(c) in this context is neither here nor there. There can be no doubt that his Honour was alive to the terms of para (c). His Honour had set out the entirety of s 188 at [29] of his reasons. He also referred (at [46]) to the discussion of para 188(c) by the Full Bench of the Commission in Maritime Union of Australia v MMA Offshore Logistics Pty Ltd [2017] FWCFB 660 at [76]; (2017) 263 IR 81 at 112. At [80] he pointed out that one of the CFMEU’s contentions was that the Commissioner’s assessment of whether the employees had genuinely agreed to the Agreement “within [the] meaning of [ss] 186(2)(a) and 188(c)” was vitiated by jurisdictional error. Moreover, it should not be assumed that a judge is in error when an alternative construction of his reasons is open.

127    OKW submitted that the “central defect” in the primary judge’s reasoning was his reliance on the difference in the language of ss 180(2) and 186(2)(a). A similar distinction was drawn by the majority of the Full Court in Shop, Distributive and Allied Employees Association v ALDI Foods Pty Ltd (2016) 245 FCR 155. In substance, OKW argued that his Honour misunderstood the reason for the difference, which it attributed to the different stages of the approval process to which the different provisions applied.

128    With respect, the distinction the primary judge drew between the language of s 186(2)(a) and s 180(2) was wrong. The High Court so held in ALDI. The “employees covered by the agreement” (s 186(2)(a)) are the same employees as those “employed at the time who will be covered by the agreement” (“the relevant employees”) (s 180(2)). The description of the employees in s 180(2) is the same as that used in s 172. As the plurality explained in ALDI at [77]:

At the stage of considering whether an enterprise agreement is available to be made under s 172 of the Act, ie when no agreement has as yet been made, it is a natural and ordinary use of language to speak of the employees whose jobs are within the scope of the proposed agreement as employees who “will be covered” by the agreement. At the stage of considering whether an enterprise agreement, which has been made (by virtue of s 182(1)), should be approved pursuant to s 186(2)(a), it is a natural and ordinary use of language to speak of the employees, whose jobs are described by the terms of the agreement which has been made, as employees who “are covered” by the agreement.

129    It follows that the second reason given by the primary judge (that there was no evidence that the employees who would otherwise have been covered by the various other modern awards had genuinely agreed to the Agreement) was erroneous; it was based on a misinterpretation of the Act.

130    In the terms in which it was expressed, the first reason is also problematic. Contrary to the submissions of OKW, however, his Honour’s concerns were not misplaced and his conclusion that the Commissioner fell into jurisdictional error was correct.

131    OKW argued that his Honour was distracted by an “extraneous notion of ‘authenticity’ or ‘fairness’ or ‘moral authority’”. It emphasised that an enterprise agreement was “a creature of statute” and not an agreement in the ordinary or common law sense. It submitted that the concept of genuine agreement as it appears in the Act is a defined term under s 188 and “no further gloss” can be placed on it. If the primary judge is to be taken to have been considering the question of agreement in the context of s 188(c), OKW submitted the CFMEU had to prove “that the Commission could not reasonably have formed its state of satisfaction that there were no other reasonable grounds for believing that the Agreement had not been genuinely agreed to”.

132    While an enterprise agreement is, indeed, a creature of statute and the concept of genuine agreement is a defined term, OKW’s arguments must be rejected.

133    As we mentioned earlier, his Honour’s references to “authenticity” and “moral authority” are taken from CFMEU v AIRC.

134    CFMEU v AIRC related to an agreement entered into between a mining company (Mine Management) and its 22 employees, none of whom was involved in the operation of the mine at the time he or she was called upon to approve, and did approve, the agreement. Mine Management applied to the Commission for the agreement to be certified under s 170LT of the Workplace Relations Act.

135    Section 170LT of the Workplace Relations Act was introduced in 1996 in a new Part VIB (the predecessor to Part 2–4 of the Fair Work Act), which was concerned with the certification of certain agreements, particularly at the level of a single business or part thereof: see s 170L. Section 170LT set out the matters of which the Commission had to be satisfied in order to certify an agreement. Sub-section (6) required that a “valid majority of persons employed at the time whose employment would be subject to the agreement must have genuinely made the agreement”.

136    After referring to s 170LT(6), Wilcox and Madgwick JJ made the following remark at [126]:

This plainly betokens a concern with the authenticity and, as it were, the moral authority of the agreement. It is perfectly understandable – indeed, one might reasonably think, plainly necessary – this be so.

137    This observation was based on what their Honours regarded as the lack of understanding the parties to the agreement must have had because of their lack of “actual experience of the work and its place of performance” (at [126]).

138    The legislative source upon which their Honours drew for the concept of “the moral authority of the agreement” was the principal object of the Workplace Relations Act (the provision of a framework for cooperative workplace relations) and the means by which this was to be achieved (both set out in s 3 of the Act). Their Honours emphasised the reference in para (e) of s 3 to “fair and effective” agreement-making. Their Honours then stated (at [126]–[127]):

There can hardly be fair agreement-making between employer and employees about wages and employment conditions in a workplace (a mine is a good example) before both sets of parties have actual experience of the work and its place of performance. Without that, cooperative workplace relations are unlikely to be achieved. An agreement prematurely made is unlikely to be effective; measuring effectiveness in this context by such matters as durability, aptness and comprehensiveness. Established “safety net” standards are less likely to be respected and maintained, because the range of conditions in relation to which such standards exist may not have been fully comprehended.

In short, the Act clearly indicates a concern for fairness and efficacy in agreement-making, as well as flexibility. The subject matter of the Act makes it understandable Parliament had such concerns. A consideration of those concerns supports the interpretation we consider preferable on more narrow grounds.

139    In this appeal, OKW submitted that authenticity and moral authority have nothing to do with para (c) of s 188. It sought to distinguish CFMEU v AIRC on the basis that, unlike the Fair Work Act (through s 188), the Workplace Relations Act did not define the circumstances in which an agreement has been genuinely made. OKW argued that the sole focus of para 188(c) is upon the nature and quality of the agreement of the relevant employees (in this case the three men who were employed at the time of the vote). OKW rejected the notion that the Act was concerned to try and ensure that the will of the employees who vote is sufficiently representative of those employees who will be covered by the agreement. OKW submitted that the Act does not contemplate that existing employees who vote on the agreement are statutory proxies for the innominate group of prospective or subsequent employees. It argued that para (c) was only addressing matters that vitiate the nature and quality of the agreement such as fraud, duress, and coercion.

140    In construing the meaning of the phrase “genuinely agreed”, orthodox principles of statutory construction are to be applied. The starting point must always be the text of the statute, a point the High Court has emphasised in many cases including Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at [47] (Hayne, Heydon, Crennan and Kiefel JJ). In interpreting any statutory provision, however, context (including legislative purpose and history) is to be considered from the outset, not just in the case of perceived ambiguity: CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408; SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; (2017) ALR 405; 91 ALJR 936 at [14] (Kiefel CJ, Nettle and Gordon JJ). In SZTAL their Honours went on to say:

This is not to deny the importance of the natural and ordinary meaning of a word, namely how it is ordinarily understood in discourse, to the process of construction. Considerations of context and purpose simply recognise that, understood in its statutory, historical or other context, some other meaning of a word may be suggested, and so too, if its ordinary meaning is not consistent with the statutory purpose, that meaning must be rejected.

If the words of the provision are capable of more than one interpretation, a construction that would promote the purpose or object of the Act, whether or not expressly stated, is to be preferred to every other interpretation: Acts Interpretation Act 1901 (Cth), s 15AA.

141    Turning then to the language utilised in ss 186(2)(a) and 188(c), the word “genuinely” in the phrase “genuinely agreed”, indicates that mere agreement will not suffice and that consent of a higher quality is required. We reject OKW’s contention that the phrase is only directed at requiring an absence of fraud, coercion or duress in the process of employees providing their agreement. The word “agreed” on its own, suffices to achieve those ends. The word “genuinely” must be given some additional work to do. A court construing a statutory provision must strive to give meaning to every word of it: Project Blue Sky at [71]. The limits OKW seeks to put on para 188(c) are too narrow. The requirement for genuine agreement in the Fair Work Act prescribes some, but not all, factors that must be taken into account. In this respect, in contrast to its predecessor, s 170LT(6) of the Workplace Relations Act, paras 188(a) and (b) direct the Commission’s attention to a number of discrete matters. Paragraph 188(c), however, it is not at all prescriptive.

142    Paragraph 188(c) is cast in very broad terms. It is intended to pick up anything not caught by paras (a) and (b). Thus, any circumstance which could logically bear on the question of whether the agreement of the relevant employees was genuine would be relevant. One obvious example is the provision of misleading information or an absence of full disclosure (see, for example, Re Toys “R” Us (Australia) Pty Limited Enterprise Flexibility Agreement 1994 (1995) 37 AILR 3-068 (Print L9066) (C No 23663 of 1994)). Another is the likelihood that the relevant employees understood the operation of the various awards that would be affected by the agreement and the extent to which the wages and working conditions for employees under each of those awards would change, for better or worse, under the terms of the agreement. Thus, if we be wrong to conclude that the Commission is bound by s 180(5) to consider the content of the employer’s explanation of the terms of the Agreement and their effect, in order to be satisfied that the Agreement was “genuinely agreed to” having regard to s 188(a)(i), then for similar reasons we would hold that this was a matter which was not only relevant to the question raised by para 188(c), but was a mandatory consideration.

143    Furthermore, contrary to OKW’s submission, authenticity is not irrelevant to para 188(c). To the contrary, it goes to the heart of the matter. Recourse to a standard dictionary of the English language tells us that “authentic” is a synonym for “genuine”. The editor of the Oxford English Dictionary online notes that “[t]he distinction which the 18th [century] apologists attempted to establish between genuine and authentic … does not agree well with the etymology of the latter word, and is not now recognised”.

144    The significance of the word “genuinely” as used in ss 186(2)(a) and 188(c) is best understood by referring to some matters of context.

145    Enterprise agreements are an important feature of the Fair Work Act. Together with the NES and modern awards, enterprise agreements constitute the sources of the main terms and conditions of employment provided by the Fair Work Act: see s 5(2).

146    Enterprise agreements provide employees with a means of improving their terms and conditions of employment beyond the floor of minimum terms and conditions of employment provided for by the NES and modern awards. For employers, the making of enterprise agreements can provide greater flexibility and enhanced productivity. Subject to compliance with the BOOT, many of the terms and conditions of employment required by modern awards may be supplanted by terms and conditions more suited to the employer’s enterprise. Section 3 of the Fair Work Act states that the object of the Act is “to provide a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians” by a number of means. One, specified in para (f) is:

achieving productivity and fairness through an emphasis on enterprise-level collective bargaining underpinned by simple good faith bargaining obligations and clear rules governing industrial action;

147    Three aspects of that paragraph should be noted. First, the ultimate goal of agreement-making is achieving productivity and fairness. What is meant by fairness is not defined but may be presumed to contemplate, at least as a goal, that the legitimate expectations of both employers and employees are embodied in the enterprise agreements made between them. Second, emphasis is given to “enterprise-level” agreement making. Third, the means by which agreements of that nature are to be made is “collective bargaining”.

148    Each of these three characteristics is reflected in the objects of Part 2–4 in which ss 186(2) and 188 are found. Section 171(a) states that an object of Part 2–4 is:

to provide a simple, flexible and fair framework that enables collective bargaining in good faith, particularly at the enterprise level, for enterprise agreements that deliver productivity benefits[.]

149    Collective bargaining is a well-known process for resolving industrial disputes. It is recognised and promoted by conventions of the International Labour Organisation, principally the Right to Organise and Collective Bargaining Convention (No 98) (1949) (entered into force 18 July 1951), which Australia ratified on 28 February 1973. Collective bargaining, as a formal process for resolving industrial disputes, was introduced into federal industrial legislation by amendments made to the Industrial Relations Act 1988 (Cth) in 1994 by the Industrial Relations Reform Act 1993 (Cth). Simply put, collective bargaining is a process in which employees bargain with their employer as a collective, rather than as individuals. It is a process which is designed to overcome the power imbalance between an employer and an employee bargaining alone.

150    In relation to the setting of terms and conditions of employment, the Fair Work Act expresses a preference for collective bargaining and disapproval of individual bargaining. Individual bargaining for statutory employment agreements available under the Workplace Relations Act through the making of what were called “Australian Workplace Agreements” was not continued by the Fair Work Act. The legislative distaste for individual bargaining and individual agreement making is expressed in strong language in s 3(c) of the Fair Work Act, which states that individual employment agreements “can never be part of a fair workplace relations system”. The strong preference of the Fair Work Act for collective bargaining must logically be anchored in an acceptance of the proposition that collective bargaining has characteristics more likely to facilitate a fair workplace relations system than does individual bargaining.

151    An enterprise agreement made early in the life of an enterprise with two or three employees and before the employment of the much larger workforce necessary to operate the business of the enterprise is, in terms of the process by which it was made, far more likely to reflect characteristics akin to individual bargaining than collective bargaining. As the facts of this case demonstrate, there will be no bargaining with the collective of employees because, in substance, the collective is yet to be formed. In the absence of any real opportunity for employees to form an effective collective, the power imbalance will reflect that of individual bargaining. As the Full Court said in a similar context in Construction, Forestry, Mining and Energy Union v Pilbara Iron Company (2011) 194 FCR 269 at [38]:

If it were possible for an employer to choose any employees it wishes, and to designate them as the employees in part of its single business with whom it wishes to make a collective agreement, the underlying purpose of promoting collective negotiation might be subverted.

152    Still, it is abundantly clear that an enterprise agreement may be made with two or three employees and, in relation to a new enterprise, may be made as a non-greenfields agreement where some employees of the enterprise are already employed (see ALDI at [76]). That that should be so is not really surprising. Enterprises come in all shapes and sizes. Nor, as the High Court observed at [84] in ALDI, is it implausible for the legislature to have intended that a small group of employees should be able to fix the terms and conditions of employment of a larger group of employees who are later employed and covered by the enterprise agreement.

153    But it does not follow from the fact that agreement-making of that kind has not been prohibited by the Fair Work Act that the Act is unconcerned with agreement-making that may undermine or subvert its preference for collective bargaining. That concern, as the High Court observed in ALDI at [84] and [87], is addressed not by prohibition but by the Fair Work Act’s “protective provisions”.

154    Section 186(3) (the “fairly chosen” requirement) is one example of such a “protective provision”. A primary purpose of this provision is to avoid the workforce of an enterprise being broken up into artificial employee groupings with the consequence that the workforce of the enterprise is unable to bargain as a single collective: see Aerocare Flight Support Pty Ltd v Transport Workers’ Union of Australia [2018] FCAFC 74 at [19] (Jagot, Bromberg and Rangiah JJ). Another example of a protective provision referred to by the High Court in ALDI is the BOOT. Each of those provisions is an element of the approval process specified by Sub-division B of Part 2–4. Like those provisions, other provisions of that sub-division, including ss 186(2) and 188, have a protective purpose. That s 188 harbours a concern directed at agreements made by a small number of employees in circumstances where the agreement covers a wider range of employee classifications is confirmed by [824] of the Explanatory Memorandum which provides:

Note that where an agreement covers a large number of classifications of employees in which no employees are actually engaged there may be a question as to whether the agreement has been genuinely agreed – see clause 188.

155    Where employees working in few occupational classifications consent to an agreement which covers numerous other occupations or other occupations in many industries beyond their own, an explanation of the terms of the agreement and their effect may fall short of providing an adequate basis for the formation of genuine consent. The employees who voted may be indifferent to the impact of an agreement on other employees or prospective employees in occupational classifications outside their own training or experience. As Buchanan J observed in John Holland (Besanko and Barker JJ agreeing), in those circumstances the employees will presumably act out of self-interest (at [33]) with the possible result that “it may not be fair for an enterprise agreement made with three existing employees to cover a wide range of other classifications and jobs in which they may have no conceivable interest” (at [83]).

156    Therein lies the concern. The legislative objective of achieving “fairness through an emphasis on enterprise-level collective bargaining” could be undermined if the employees who vote on the agreement have no basis for appreciating its nature and terms. What is required by s 186(2)(a) is genuine agreement. To construe that requirement as mandating an informed and genuine understanding of what is being approved is consistent with the text of the provision (as defined) and accords with its underlying purpose.

157    Ordinarily, non-greenfields agreements are made with the participation of the employees who are representative of the range of employee classifications covered by the enterprise agreement. The capacity to provide consent based upon a true understanding of the consequences of the proposed agreement across the breadth of classifications covered is likely to be adequate, including because representatives of each classification or classificational grouping will be involved. While it is correct to say, as OKW submitted, that the group of employees who vote are not required by the Fair Work Act to be representatives for, or agents of, the wider group of employees who may ultimately be covered by the agreement, the fact that the group does not broadly reflect the occupational scope of the proposed agreement restricts the terms and conditions in the agreement for which the group can genuinely speak.

158    Support for this construction is found in the approach taken by the Fair Work Act in relation to greenfields agreements. There is no provision in the Fair Work Act which expressly requires that a greenfields agreement be genuinely approved. In the case of greenfields agreements, a representational connection is utilised to condition and ensure the quality of the approval.

159    The corresponding requirement to s 186(2)(a) for greenfields agreements is s 187(5). Section 187(5) provides:

If the agreement is a greenfields agreement, the Commission must be satisfied that:

(a)     the relevant employee organisations that will be covered by the agreement are (taken as a group) entitled to represent the industrial interests of a majority of the employees who will be covered by the agreement, in relation to work to be performed under the agreement; and

(b)     it is in the public interest to approve the agreement.

160    It is only employee organisations (taken as a group) that are “entitled to represent the industrial interests of the majority of employees who will be covered by the agreement” that may approve a greenfields agreement. That capacity is not given to any union but the union or unions who, by reason of their representational interests, may be expected to have a stake in, and a real or true understanding of, whether the terms and conditions offered by the proposed enterprise agreement are fair and reasonable. Although the circumstances in which greenfields agreements are made require a different mechanism for approval, it should not be thought that, in relation to the making of non-greenfields agreements, where employees may well be more vulnerable, Parliament intended a lower threshold of protection. In each case, a concern with the substantive validity or qualitative legitimacy of the approval given is apparent.

161    OKW also submitted that the primary judge’s construction was erroneous because it was influenced by a concern that there is something inherently wrong, and therefore impermissible, in the idea that a small number of employees may be able to fix the terms and conditions that will be available to a larger number of future employees. OKW contended that the concern was misplaced and the High Court confirmed as much in ALDI.

162    This submission must also be rejected. Although the primary judge did not have the benefit of the High Court’s judgment in ALDI, he did not consider that there was “something inherently wrong” or “impermissible” in the idea of a small number of employees fixing the terms and conditions of a much larger number of future employees. Indeed, his Honour said at [115] (referring to John Holland) that there was “no difficulty” with a small number of employees entering such an agreement. But his Honour also recognised, correctly in our view, that an agreement of that sort may raise, and in this case did raise, a question about the genuineness of that approval.

163    After the Commissioner’s decision, in very similar circumstances, a Full Bench of the Commission held that an enterprise agreement was “incapable of approval” because there were “reasonable grounds for believing” that it had not been genuinely agreed to by the employees of the company: Re KCL Industries Pty Ltd [2016] FWCFB 3048; (2016) 257 IR 266 at [29]–[36]. In that case, the Full Bench said at [31]:

In this matter there is an obvious disjunction between the content of the Agreement and the characteristics of those who entered into it. The Agreement describes itself as applicable to all employees of KCL, whether full-time, part-time, casual or temporary. It sets out classifications and pay rates for private sector clerical employees, manufacturing employees, and production and staff employees in the black coal mining industry (with the last category including classifications for surveyors, safety officers, deputies, forepersons, open cut overseers, geologists, chemists, production supervisors and undermanagers) …

164    The statutory declaration supporting KCL’s application for approval of the Agreement indicated that three employees, two of whom were casuals, would be covered by the Agreement. All three were tradespersons working under the Manufacturing and Associated Industries and Occupations Award. The Full Bench noted at [36], however, that the Agreement covered a wide range of classifications (most of which were irrelevant to the work performed by KCL’s three employees), encompassed industries in which KCL did not then operate, and contained rates of pay which, even in respect of classifications relevant to the current three employees, were not to apply to them. The Full Bench then said:

In those circumstances we do not consider that any authenticity could attach to the agreement of the two employees to the rates and conditions in the Agreement. The employees had no “stake” in the Agreement’s rates of pay, since they were assured that their existing, higher rates of pay would remain in place (subject to “operational needs and satisfactory performance”), and they could not have given informed consent in relation to occupations and industries in which they did not work and presumably had no experience.

(Footnotes omitted, emphasis added.)

165    It will be apparent that the approach taken by the Full Bench in KCL is consistent with our opinion on the proper construction of the phrase “genuinely agreed to” in ss 186(2)(a) and 188(c).

166    The primary judge (at [120]) considered that the Commissioner had initially been alive to the concern that the proposed agreement was too broad for the three employees concerned to have genuinely agreed to it. The Commission had emailed OKW on 18 September 2015 expressing the view that, for that reason, the Commissioner was not then “satisfied that the Agreement was genuinely agreed to”: see [53] above. A response was provided on behalf of OKW on 30 September 2015: see [56] above. The primary judge observed (at [122]) that OKW’s letter canvassed in considerable detail the authorities, such as John Holland, in support of the proposition that three employees may be asked to make an agreement even though the agreement may potentially apply to a much larger number of employees once approved. The primary judge noted, however, that the letter did not address the ability or appropriateness of the three employees with their limited employment backgrounds being called upon to agree to terms and conditions covering a vast range of employees in diverse areas of employment. His Honour inferred that, in that context, the Commissioner had ultimately failed to give “any – or any adequate or proper” consideration to those matters and that that failure exposed jurisdictional error.

167    At the hearing on 26 October 2015, the Commissioner, in opening remarks, referred to the concerns that he had raised in correspondence with OKW and said this:

And we did express some concerns about whether employees had genuinely agreed and had access to the relevant material. We’re satisfied, from the information provided, that the employees did have access to the relevant awards and so I think that that issue has been sorted out.

In terms of the scope of the agreement, of course there’s no, in principle, problem with an agreement with three employees having a broader future scope. That’s obviously not an issue but, of course, it is possible when there is an agreement of this sort that it raises questions as to whether or not there has been a genuine agreement. But, at this stage, there’s nothing that is of particular concern in respect of that.

168    It is not readily apparent why the Commissioner was no longer troubled by his initial concern (raised in his email of 18 September 2015) about whether the agreement had been “genuinely agreed” to. It is clear, however, that the Commissioner did not believe he needed to consider whether, in the light of the small number of employees and the large number of awards, he could be satisfied that the three employees had understood the Agreement and its effect before casting their votes. On the face of the material before the Commission there was a vast disparity of occupational classifications as between those held by the three individuals who voted and the classifications covered by the Agreement. How it was that the three employees might be regarded as having had a sufficient appreciation of the appropriateness of the terms and conditions proposed for the disparate occupational classifications covered, including in industries foreign to their own, was not identified by the Commissioner as a factor relevant to the genuineness of the approval and was not the subject of his consideration. Whether the three employees had appreciated the terms and conditions provided for by the Agreement, beyond those of direct interest and relevance to them, and thereby “genuinely agreed” to its terms (not just those that directly affected them) should have been considered. As the primary judge held, the Commissioner’s failure to do that evinced jurisdictional error.

169    In our view the nature of the Commissioner’s error is best described as a failure to perform the statutory task required of him. This form of jurisdictional error was described by Gaudron J in Re Patterson; Ex parte Taylor (2001) 207 CLR 391 at [82]:

A decision-maker falls into jurisdictional error if he or she misunderstands the nature of the jurisdiction to be exercised, misconceives his or her duty, fails to apply himself or herself to the question to be decided or misunderstands the nature of the opinion which he or she is to form. By failing to appreciate that it was necessary for there to be something in the nature or seriousness of Mr Taylor’s criminal convictions or in the circumstances in which his crimes were committed before she could be satisfied that it was in the national interest to cancel his visa, the Parliamentary Secretary misconceived her duty, failed to apply herself to the question to be decided and misunderstood the nature of the opinion she was to form.

170    Here, in arriving at the opinion required by s 186(2)(a), the Commissioner made a similar error. He failed to appreciate that his statutory task required a consideration of whether the three employees who approved the Agreement were likely to have understood the terms of the Agreement and its effect and whether by reason of that factor, there were reasonable grounds for believing that the Agreement had not been “genuinely agreed” to. In the result, he misconceived his duty, failed to apply himself to the question raised by para 188(c) and misunderstood the nature of the opinion he was to form.

Conclusion

171    The primary judge incorrectly treated the obligation imposed on the employer by s 180(5) of the Fair Work Act as a jurisdictional fact when the relevant jurisdictional fact was the Commission’s satisfaction that the employer had complied with the obligation.

172    Nevertheless, the primary judge was correct to find that the Commissioner fell into jurisdictional error by failing to have regard to the content and terms of the explanation OKW purportedly provided the employees before they cast their votes. In addition the Commissioner’s decision was affected by jurisdictional error because he failed to appreciate that, in determining whether the relevant employees had genuinely agreed to the Agreement he needed to consider whether they were likely to have understood its terms and effect.

173    For either or both of these reasons the requisite state of satisfaction that the Agreement had been genuinely agreed to by the employees covered by it was not reached and the basis for the exercise of the power conferred on the Commission to approve the Agreement was therefore absent.

174    Consequently, the appeal should be dismissed.

The notice of contention

175    The CFMEU filed a notice of contention, the effect of which was to raise two alternative bases upon which the judgment could be defended. Neither of them related to the question of genuine agreement. Both were concerned with the Commissioner’s statement that he was satisfied that the Agreement passed the BOOT (in accordance with ss 186(2)(d) and 193 of the Act). The first was that the Commission’s decision was affected by jurisdictional error in that there was no reasonable basis upon which it could have been satisfied that the Agreement passed the BOOT. The second was that, for the purpose of applying the BOOT, the Commissioner failed to take into account a number of relevant considerations, they being detriments in the Agreement which would apply to employees and prospective employees covered by the Agreement.

176    In view of our conclusions on the appeal, it is strictly unnecessary to deal with the notice of contention but in deference to the argument we propose to do so.

177    Having regard to the way the argument proceeded, it is convenient to deal with the second ground of the notice of contention first.

In deciding whether the Agreement passed the BOOT, did the Commissioner fail to take into account a number of relevant considerations and thereby fall into jurisdictional error?

178    It will be recalled that s 186 imposed a duty on the Commission to approve the Agreement if, amongst other things, it was satisfied that the Agreement passed the BOOT. It will also be recalled that an agreement only passes the BOOT if the Commission is satisfied (at the time of the application for approval) that each award-covered employee and each award-covered prospective employee would be better off overall under the agreement than under the relevant modern award.

179    The primary judge suggested (at [139]) that the only mandatory consideration was the BOOT itself and “[a]n aspect of that test or particular evidence, such as the manner in which cll 9 and 11 operated in fact, may have fallen short of a mandatory relevant consideration”. With respect, this overlooks the statutory duty to compare the terms of an agreement with those of the relevant awards. Unless the benefits and detriments of the Agreement were compared with each of the awards, the duty imposed by s 186(2)(d) would not have been discharged. In ALDI at [99] the High Court described the assessment the Commission is required to undertake as an “evaluative” exercise. But the evaluation only takes place after the comparison is made. Before the comparison is made, it is necessary to identify the advantages and disadvantages of each.

The CFMEU’s argument

180    The CFMEU challenged the Commission’s decision by reference to the position of employees covered by the BCMIA.

181    The CFMEU claimed that the only benefit conferred by the Agreement over the BCMIA was the provision (in cl 13.5) for employees to receive a so-called “BOOT Allowance” of 0.1% of the hourly base rate of pay for ordinary work “to ensure that they are always better off than they would be under the Award”. But the benefit, the CFMEU contended, was negligible, amounting at the test time to approximately $0.80 to $1.00 gross per week above the minimum award rate.

182    The CFMEU contended that the Commission had overlooked some of the detriments of the Agreement compared to the BCMIA. According to the CFMEU, cll 7, 9.1, 9.3, 9.6, 12.1 and 12.4 all contained significant detriments to which neither the Commissioner nor OKW referred at any stage of the approval process. It was the CFMEU’s submission that the fact that the Commissioner did not mention them meant that he did not have regard to them and that the omission was indicative of jurisdictional error. This submission gave rise to an anterior question. That question was whether the Commissioner was bound to give reasons and, if not, whether it can be inferred from his failure to mention a matter that he did in fact fail to consider it. It is, however, unnecessary to resolve the question. That is because, regardless of whether written reasons were required by the Act, in the present case the Commissioner provided written reasons. In Taulahi v Minister for Immigration and Border Protection (2016) 246 FCR 146 at [72] a Full Court (Kenny, Flick and Griffiths JJ) held that:

The fact that a statement of reasons for a decision is provided voluntarily, rather than pursuant to an obligation, cannot prevent a Court drawing inferences about what the Minister considered material to his decision and what he did not consider at all: Assistant Treasurer v Cathay Pacific Airways Limited [2009] FCAFC 105; 179 FCR 323 at [51]. The nature of the statement of reasons may, of course, affect the confidence with which an inference can be drawn.

183    This passage was cited with approval by a bench of five (North, Tracey, Flick, Jagot and Bromberg JJ) in Shop, Distributive and Allied Employees Association v The Australian Industry Group [2017] FCAFC 161; (2017) 350 ALR 592; 272 IR 88 at [99].

Clause 7: obligation upon employees to follow “all lawful directions”

184    Clause 7 is in the following terms:

7.1    Employees must follow all lawful directions given by the Employee's Leading Hand/Supervisor, or any other person nominated by the Company or Client. Should an Employee not be able to perform the assigned task for any reason whatsoever, it is an Employee's duty to inform their Leading Hand/Supervisor or other appropriate person immediately.

7.2.    Refusal to comply with any lawful direction may result in disciplinary action, which may include the termination of an Employee's employment.

185    The Commissioner addressed this clause in his reasons. He said:

Clause 7 requires the employees to follow lawful and reasonable directions from both the employer and also from the client and failure to do this may result in disciplinary action including termination of employment. This clause makes what may be a common law requirement an enforceable agreement term with possible penalties for non-compliance. Generally the consequence of non-compliance is disciplinary not enforcement. For this reason the clause is not a significant disadvantage but it is not immaterial.

186    The CFMEU accepted that the Commissioner did in fact identify a detriment in cl 7 but submitted that he had mistakenly read the clause as requiring employees to follow directions which are not just lawful but both lawful and reasonable, in conformity with the position at common law. The Commissioner considered the detriment was not immaterial but equally not significantly disadvantageous. The CFMEU argued that when the mistake is taken into account the disadvantage is more significant, having regard to the fact that the breach of a term of an enterprise agreement may attract the imposition of a civil penalty (see Fair Work Act, s 50 and the table to s 539).

187    We are not convinced that the Commissioner did misread cl 7. In all likelihood his reference to “lawful and reasonable directions” reflected his construction of the clause. It is doubtful whether a different construction would be given by any other member of the Commission. That is because the duty of the employee at common law is to obey lawful orders. The “standard or test” by which the common law determines whether the order is lawful is one of reasonableness: R v Darling Island Stevedoring & Lighterage Co Ltd; Ex parte Halliday and Sullivan (1938) 60 CLR 601 at 621. Dixon J explained at 621–2:

If a command relates to the subject matter of the employment and involves no illegality, the obligation of the servant to obey it depends at common law upon its being reasonable. In other words, the lawful commands of an employer which an employee must obey are those which fall within the scope of the contract of service and are reasonable.

188    As Finn J observed in McManus v Scott-Charlton (1996) 70 FCR 16 at 21:

The need for some such limitation is patent: employment does not entail the total subordination of an employee’s autonomy to the commands of the employer. As was said by the President in Australian Tramway Employees’ Association v Brisbane Tramways Co Ltd (1912) 6 CAR 35 at 42:

‘A servant has to obey lawful commands, not all commands. The servant does not commit a breach of duty if he refuse[s] to attend a particular church, or to wear a certain maker’s singlets. The common law right of an employee is a right to wear what he chooses, to act as he chooses, in matters not affecting his work.’

There are obvious, and powerful, considerations of civil rights and liberties and of due process which inform this. These need not be laboured here although they are of no little significance in the resolution of this case.

189    The principles governing the interpretation of enterprise agreements are the same as those governing the interpretation of awards: see Amcor Ltd v Construction, Forestry, Mining and Energy Union (2005) 222 CLR 241 at [96] (Kirby J) and [129] (Callinan J); Australasian Meat Industry Employees Union v Coles Supermarkets Australia Pty Ltd [1998] FCA 166; (1998) 80 IR 208 at 212 (Northrop J); Energy Australia Yallourn Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union [2017] FCA 1245 at [74] (Bromberg J).

190    In the oft-cited words of Madgwick J in Kucks v CSR Ltd (1996) 66 IR 182 at 184:

It is trite that narrow or pedantic approaches to the interpretation of an award are misplaced. The search is for the meaning intended by the framer(s) of the document, bearing in mind that such framer(s) were likely of a practical bent of mind: they may well have been more concerned with expressing an intention in ways likely to have been understood in the context of the relevant industry and industrial relations environment than with legal niceties or jargon. Thus, for example, it is justifiable to read the award to give effect to its evident purposes, having regard to such context, despite mere inconsistencies or infelicities of expression which might tend to some other reading. And meanings which avoid inconvenience or injustice may reasonably be strained for. For reasons such as these, expressions which have been held in the case of other instruments to have been used to mean particular things may sensibly and properly be held to mean something else in the document at hand.

(Emphasis added.)

191    Similarly, words in an industrial agreement must not be interpreted “in a vacuum divorced from industrial realities”: City of Wanneroo v Australian Municipal, Administrative, Clerical and Services Union [2006] FCA 813; (2006) 153 IR 426 at [57]. Regard must be had to the nature of the document, the manner of its expression, the context in which it operates, and the industrial purpose it serves: Amcor at [96] per Kirby J. Another relevant factor is the intention of the parties: Shop Distributive and Allied Employees’ Association v Woolworths SA Pty Ltd [2011] FCAFC 67 at [14]; Kucks at 184. Here, one of the contextual considerations is that the employer is a labour hire firm which supplies employees to its clients. The evident purpose of cl 7 of the Agreement is not to extend the common law duty to unreasonable orders. Rather, its evident purpose is to extend the common law duty to require obedience to orders issued by the employer’s clients.

192    In the absence of clear words to the contrary, cl 7 should be read as subject to the limits of the common law obligation.

193    Be that as it may, OKW did not contradict the CFMEU’s contention that the Commissioner had misread the clause or that the effect was to increase the disadvantage. It was prepared to assume the correctness of these submissions. OKW’s riposte was that this was a non-jurisdictional error, not amenable to judicial review. In this respect, OKW is right. Assuming in the CFMEU’s favour that the Commissioner did misread the clause and there was in truth a greater disadvantage than he believed, his error was within jurisdiction.

194    It is often said that there is no bright line between jurisdictional error and error in the exercise of jurisdiction but the distinction is a real one. Hayne J explained in Re Refugee Review Tribunal; Ex parte Aala (2000) 204 CLR 82 at [163], approved by the plurality in Kirk v Industrial Court of New South Wales (2010) 239 CLR 531 at [66]:

There is a jurisdictional error if the decision maker makes a decision outside the limits of the functions and powers conferred on him or her, or does something which he or she lacks power to do. By contrast, incorrectly deciding something which the decision maker is authorised to decide is an error within jurisdiction. (This is sometimes described as authority to go wrong, that is, to decide matters within jurisdiction incorrectly.) The former kind of error concerns departures from limits upon the exercise of power. The latter does not.

195    Here, as OKW submitted, the Commissioner was required to satisfy himself that the BOOT had been passed. The determination of that question depended in part on the resolution of anterior questions about the construction of the relevant terms of the Agreement. Accordingly, it is implicit in the jurisdiction conferred on the Commission to approve enterprise agreements that it also has jurisdiction to resolve for itself the anterior questions of construction, as a step in the process of answering the statutory question or attending to its statutory task.

196    As Gray and Moore JJ said in Re Australian Workers’ Union; Ex parte Construction, Forestry, Mining and Energy Union (2002) 120 FCR 527 at [52] of mistakes of construction of eligibility rules, it is probable that the Commission has been given by Parliament some latitude in exercising its statutory power (here under s 186(2)(d) to determine whether the agreement passes the BOOT) to take a mistaken view about the meaning of an agreement. The Full Court reached a similar conclusion in relation to the construction of a union collective agreement (albeit in a different context) in Construction, Forestry, Mining and Energy Union v Wagstaff Piling Pty Ltd (2012) 203 FCR 371 at [40].

197    Furthermore, the Commissioner was alert to the possibility of a civil penalty. It was for that very reason that he described the detriment as “not immaterial”.

Clauses 9.1 and 9.3: casual employment

198    These clauses provide:

9.1    Employees shall be engaged on an Assignment as full time, part time or casual.

…

9 .3    A casual employee is one who is engaged and paid as such.

199    The CFMEU pointed out that the BCMIA does not permit engagement of production and engineering employees on a casual basis. Clause 10.1 of the award states:

An employer may employ an employee in any classification included in this award in any of the following types of employment:

(a)    full-time;

(b)    part-time; or

(c)    in the case of classifications in Schedule B—Staff Employees, casual.

Production and engineering employees fall within the classifications listed in Schedule A and so are not captured by cl 10.1(c).

200    For this reason the CFMEU submitted that unlike all the other modern awards, the BCMIA does not permit casual employment. It argued that, in contrast to employment under the BCMIA, an employee engaged as a casual under the Agreement would have no guaranteed shifts, no guaranteed income, and no access to a range of financial and other benefits (such as sick leave, annual leave, long service leave, and superannuation). Furthermore, the CFMEU submitted that an employee could be engaged on “zero hour contracts”, for example, in the event of a breakdown or unplanned shutdown, (s)he could be stood down indefinitely without income. None of these submissions was contradicted.

201    The Commissioner did not refer in his reasons to the introduction of casual employment for production and engineering employees performing work covered by the BCMIA. OKW submitted that the proper inference was that he did not consider that it gave rise to any disadvantage worth mentioning. That submission cannot be accepted. The fact that the Commissioner was conscious of the availability of casual employment under the Agreement, as OKW argued, does not mean that he was alive to the fact that for some award-covered employees or prospective employees this was a novelty. Rather, it is abundantly clear that he did not, for the Commissioner proceeded as though all 11 awards permitted casual employment for all employees.

202    The Commissioner referred to casual employment at two points in his reasons. Both references concerned the effect of cl 11 of the Agreement. Clause 11 (entitled “Casual Conversion”) removed award rights of casual employees to convert to permanent employment and provided for an additional 1% loading on the base hourly rate under the awards. At [14]–[15] the Commissioner said:

14    I am not satisfied that the additional 1% is sufficient compensation for the removal of the right to casual conversion in Awards. I accept the submission of the employer that there have been a number of agreements approved by the Fair Work Commission which contain this provision. The substitution of non-monetary entitlements for monetary entitlements is often a difficult matter to judge. Casual conversion offers employees the opportunity for job security and access to paid leave. Employees may value these matters differently. There will be differential issues for employees. For example, those with a disability or with particular family circumstances will be likely to gain greater benefit from increased job security and access to paid leave. For the purpose of the BOOT it may not be appropriate to see all casual employees as a single class in this particular circumstance. I note that the F17 Statutory Declaration reveals that two of the three current employees who will be covered by the Agreement are casuals. One of the employees is an Aboriginal or Torres Strait Islander. Job security is likely to be a particularly valuable consideration for employees of indigenous background.

15    The employer submitted that the Fair Work Act 2009 provides regular casual employees with protection from unfair dismissal and this reduces the importance of the casual conversion clause. I am satisfied that casual employees in the labour hire industry are not guaranteed any particular number of hours of work and therefore their income is precarious. Casual conversion offers those employees the opportunity for guaranteed 38 hours of work and pay per week if full time or regular guaranteed hours if part time. This is a major potential advantage to some casual employees.

(Emphasis added.)

203    Since the Commissioner considered that an additional 1% was insufficient compensation for the removal of the right to casual conversion, that he was of the opinion that the income of casual employees in the labour hire industry was “precarious”, and that he only approved the Agreement having received an undertaking from the employer that it would not apply the exclusion of the casual conversion provisions in the awards, it is reasonable to infer that he failed to have regard to the effect of the introduction of casual employment for prospective production and engineering employees covered by the BCMIA. Production and engineering employees covered by the BCMIA had no rights to casual conversion, as they could not be employed as casuals. It follows that the effect of the Agreement for such employees or prospective employees was that they could lose the job security guaranteed by the award as well as the additional benefits of permanent employment. In the light of the Commissioner’s concern that the BOOT allowance was insufficient compensation for the loss of the right to casual conversion, it is inconceivable that, had the Commissioner appreciated that the Agreement introduced casual employment for this class of employee, he would not have adverted to it in his reasons.

204    It is an error of law to fail to have regard to relevant material in a way that affects the exercise of power. An administrative decision-maker who makes such an error exceeds his or her authority and acts without jurisdiction. See Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323 at [82] (McHugh, Gummow and Hayne JJ).

205    The CFMEU submitted that, having regard to the value the Commissioner placed on the right to seek casual conversion, “it cannot be doubted that, had he been aware of these facts, [he] would properly have given the introduction of casual employment significant weight as a relevant detriment under the BOOT, and would not have found that the BOOT was met”. The CFMEU pointed to the same Commissioner’s reasons in a later case, Re Site Fleet Services Pty Ltd [2017] FWC 2163, which concerned an application by another labour hire company for approval of an agreement. In that case, where the CFMEU asked for and was given permission to be heard on the application, the Commissioner noted (at [30]) that the BCMIA did not provide for casual employment and treated the introduction of casual employment by the relevant agreement as a detriment not sufficiently compensated by the provision of a 25% loading. He acknowledged that “there [was] nothing to stop an Agreement meeting the BOOT which includes casual employment in this industry” but considered that the rates or other benefits would need to be “greater than 25% compensation”.

206    OKW quarrelled with the CFMEU’s description of the introduction of casual employment as a detriment, submitting that it would have been open to the Commissioner to conclude that the availability of casual employment is an advantage in that it offers flexibility, which might be attractive to some employees, and access to a substantial loading. We interpolate that casuals under the BCMIA are entitled to a 25% loading in lieu of leave entitlements with a minimum four hours payment on each engagement. This was a bold submission. Even if one were to ignore what the Commissioner said in Site Fleet Services, given what he said in this case (at [15] of his reasons) about the uncertainty of available work and the insecurity of income for casual employees in the labour hire industry, it is unlikely that he would have considered the prospect of casual employment for production and engineering employees to be an advantage to them in comparison to the benefits to which they would have been entitled under the Award.

207    The CFMEU’s submission takes the matter too far. Still, the failure of the Commissioner in the present case to recognise that the BCMIA did not permit casual employment for production and engineering workers was a significant omission.

208    Section 186(2)(d) read with s 193(1) required the Commissioner to compare the positions under the relevant award and the Agreement of each employee and each prospective employee. As OKW argued, whether the introduction of casual employment should be seen as a benefit or a detriment was a matter for the Commissioner. Either way, however, the Commissioner was obliged to consider its potential effects in evaluating whether all the relevant employees were better off overall under the Agreement, as he did in Site Fleet Services.

209    The introduction of casual employment for production and engineering employees covered by the BCMIA (whether actual or prospective) was a relevant consideration that the Commissioner was bound to take into account; it was a step in the process of applying the BOOT. In failing to take it into account, the Commissioner erred in law in a way that affected the exercise of his power. It indicates that he failed to conduct the requisite comparison and so failed to apply himself to the question prescribed by ss 186(2)(d) and 193(1), at least in relation to those employees (as in United Voice v MSS Security Pty Ltd [2016] FCAFC 124; (2016) 153 ALD 200) or, at least, failed to complete his statutory task (as in Htun v Minister for Immigration and Multicultural Affairs (2001) 233 FCR 136 at [42], [44] per Allsop J, with whom Spender and Merkel JJ agreed). Whichever way it is characterised, the error is jurisdictional.

210    Accordingly, in this respect the notice of contention should be upheld.

Clause 9.6: restraint on accepting offers of employment

211    Clause 9.6 reads:

If an Employee is offered employment by a Client the Employee must refer the Client to the Company.

212    The CFMEU submitted that this clause creates a “non-monetary detriment” and that there is no comparable clause in the BCMIA. It contended that this is a material detriment, the significance of which is greater than it might otherwise have been because of the introduction of casual employment. Its effect, the CFMEU argued, was that employees with no guaranteed hours of work or security of employment would be required to disclose to OKW any offer of employment from the client for whom they are performing the work.

213    The Commissioner did not mention the clause in his reasons for the decision. Nor did he raise it in his correspondence with OKW. And it was not mentioned at the hearing. OKW submitted that the only available inference is that the Commissioner did not consider the clause to be materially disadvantageous, and therefore attached no weight to it. OKW also submitted that the CFMEU was wrong to assume that the clause could reasonably be viewed as detrimental when considered together with the introduction of casual employment because this would require the erroneous assumption that casual employment is inherently disadvantageous to employees.

214    A labour hirer who provides its employees to its clients on short-term engagements faces the risk that the employee provided may also be self-employed and may take for him or herself the benefit of future engagements or, alternatively, may directly engage with the client as an employee and, in either case, deny to the labour hirer the opportunity of future engagements with the client. Although cl 9.6 is not well expressed, its evident purpose is to impose a requirement upon an employee of OKW to inform OKW of any offer of direct engagement made to the employee by a client of OKW. In circumstances where the employee and OKW are potential competitors for future work, the requirement imposed by cl 9.6 is potentially detrimental to the employee because it requires that OKW be given an opportunity to advance its interests with the client to the potential disadvantage of the employee.

215    Be that as it may, the clause does not prevent an employee from accepting an offer of employment made by the client. Nor does it say that the employee must refer the client to OKW before accepting any offer. Although there may be some detriment to the employee, the Commissioner may have regarded it as insufficiently material to warrant mention in his reasons. As we have already observed, the question of what is or is not detrimental is a matter for the Commission. In these circumstances, we are not persuaded that the Commissioner overlooked a relevant consideration or that he did so in a way that would amount to a jurisdictional error

Clauses 12.1 and 12.4: hours of work

216    These clauses are in the following terms:

12.1    As the Company is a labour hire business, Employees will work within start and finish times consistent with the Client’s site requirements. Generally, whatever hours of work and associated rostering arrangements apply at the Client's site, these will also apply to an Employee’s Assignment unless otherwise advised by the Company.

…

12.4.    While on an Assignment an Employee may be required to work in accordance with any shift pattern or roster cycle nominated by the Company.

217    The CFMEU argued that cll 12.1 and 12.4 remove a range of protections contained in cll 22, 23 and 24 of the BCMIA and give OKW a greatly increased discretion in the determination of shift and rostering arrangements than it would have had if the BCMIA continued to apply. The CFMEU went on to submit that:

    the definitions in cl 22.1 of the BCMIA (of “afternoon shift”, “night shift” and “permanent night shift employee”) are inconsistent with cl 12.1 of the Agreement which, it contended, entitles the employer to determine shift times and spans at its discretion, depending on the local arrangements, and thereby reduce penalty rates; and

    cl 12.1 removes the guarantee in cl 24 of the BCMIA that employees will not be required to work more than five hours without a meal break or, that if such arrangements apply, the meal break will be a paid break.

218    The CFMEU’s submission should be rejected. There is no “clear inconsistency” between cll 12.1 and 12.4 and the particular terms of the BCMIA to which it referred.

219    Clause 22.1 of the BCMIA defines “afternoon shift” to mean “any shift, the ordinary hours of which finish after 6.00pm and at or before midnight”, “night shift” as “any shift, the ordinary hours of which finish after midnight and at or before 8.00 am” and “permanent night shift employee” as an employee who works night shift only, stays on night shift longer than four consecutive weeks, or works on a roster that does not give at least one-third of his or her working time off night shift in each roster cycle.

220    But as OKW submitted, cl 12.1 of the Agreement is expressed in general terms and does not redefine these shifts. Indeed, it says nothing at all about shifts. It is only concerned with working hours. OKW acknowledged that the definitions in cl 22.1 of the BCMIA will continue to apply. Moreover, as OKW also submitted, cl 12.1 is silent, too, about meal breaks. For each five hours worked during rostered hours determined by reference to the client’s required start and finish times, employees will continue to be entitled to a meal break in accordance with cl 24.1 of the BCMIA.

221    Clause 23 of the BCMIA relevantly provides:

23.    Rostering

[Varied by PR994553, PR531393; 22 renumbered as 23 by PR545966 ppc 01Jan14]

23.1    Rostering of hours and length of shifts

(a)    The employer can determine the type of rosters to be worked.

(b)    The employer can determine the shift length to be worked as long as the ordinary hours do not exceed 10. Shifts of more than 10 ordinary hours can only be implemented by agreement between the employer and the majority of employees affected or, in the case of a dispute, as resolved in accordance with clause 9—Dispute resolution.

23.2    Shift starting and finishing times

The start and finish times of shifts up to 10 ordinary hours may be determined by the employer. Shifts in excess of 10 ordinary hours will be worked between the starting and finishing times that are agreed between the employer and the majority of employees affected or, in the case of a dispute, as resolved in accordance with the dispute resolution procedure.

23.3    Number and spread of shifts

The number and spread of ordinary shifts may be varied by the employer and, in the case of dispute, the dispute resolution procedure applies.

23.4    Starting and finishing places

(a)    The starting and finishing place of a shift are to be agreed between the employer and the majority of affected employees or, in the absence of agreement, as determined in accordance with the dispute resolution procedure.

(b)    At underground mines, the designated starting and finishing place will be on the surface.

23.5    Roster changes

An employee’s place on a roster will not be changed, except where:

(i)    one week’s notice of any change is given to the employee; or

(ii)    where less than one week’s notice is given, the employee is paid at overtime rates for all work from the time of change of shift until the week’s notice would have expired.

222    The Agreement must be read with the Award. Clause 3.2 of the Agreement reads:

This Agreement shall, in respect of each individual Employee, be read and interpreted as incorporating the terms of the Award, provided that where there is any inconsistency between this Agreement and the Award, this Agreement shall take precedence to the extent of the inconsistency.

223    We accept OKW’s submission that cl 12.1 is silent about meal breaks. The entitlement to meal breaks, conferred by cl 24 of the BCMIA, is unaffected by the Agreement. The reference to “shift pattern” in cl 12.4 of the Agreement is not entirely clear. No submissions were made on this point. But we are not persuaded that in the relevant respects the Agreement and the BCMIA are inconsistent. It seems to us that cll 12.1 and 12.4 of the Agreement can be read harmoniously with cl 22 of the BCMIA. The rates of pay specified by cl 22.2 for shifts falling within the various time periods specified in cl 22.1 will have application to the rostering arrangements referred to in cl 12.1 of the Agreement. Accordingly, employees are not detrimentally affected. It follows that the Commissioner’s failure to advert to these matters does not evince a failure to have regard to a relevant consideration or relevant material, let alone jurisdictional error.

224    In its written submissions the CFMEU also complained about cl 12.5 of the Agreement. Clause 12.5 states that:

If, while on Assignment, the nominated shift pattern or roster cycle is changed by the Client, the Employee's Assignment will be taken to have ended effective from the date of that change in cycle.

225    The CFMEU argued that this term of the Agreement removes the right conferred by cll 22.3 and 23.5 of the BCMIA to reasonable notice or monetary compensation where shift arrangements are changed because under cl 12.5 “each such change is deemed to give rise to a new ‘assignment’”.

226    The notice of contention did not refer to cl 12.5 and no application was made to amend it. In the circumstances, it is not necessary to deal with the CFMEU’s argument. Nevertheless, it should be noted that OKW informed the Court that the notice and payment in lieu requirements remain in place under the Agreement.

Was there no reasonable basis upon which the Commissioner could have been satisfied that the Agreement passed the BOOT?

227    It is uncontentious that, where a statute requires an administrative decision-maker to reach a state of satisfaction about a matter, the opinion as to the state of satisfaction must be reached by a rational, reasonable and logical process.

228    The CFMEU submitted that:

[W]hen all relevant detriments are properly considered, the opinion that the Agreement passed the BOOT test could not have been formed by a reasonable person. An employee or prospective employee could not reasonably be thought better off overall under the Agreement by receiving an additional 80c gross per week but suffering the detriments referred to above.

229    Expressed in this way, the CFMEU’s submission picks up a passage from the joint judgment of Crennan and Bell JJ in Minister for Immigration and Citizenship v SZMDS (2010) 240 CLR 611 at [130]. Their Honours, speaking of the state of satisfaction required of the Refugee Review Tribunal under s 65 of the Migration Act when deciding whether to refuse to grant a visa, said:

“[I]llogicality” or “irrationality” sufficient to give rise to jurisdictional error must mean the decision to which the Tribunal came, in relation to the state of satisfaction required under s 65, is one at which no rational or logical decision maker could arrive on the same evidence. In other words, accepting, for the sake of argument, that an allegation of illogicality or irrationality provides some distinct basis for seeking judicial review of a decision as to a jurisdictional fact, it is nevertheless an allegation of the same order as a complaint that a decision is “clearly unjust” or “arbitrary” or “capricious” or “unreasonable” in the sense that the state of satisfaction mandated by the statute imports a requirement that the opinion as to the state of satisfaction must be one that could be formed by a reasonable person. The same applies in the case of an opinion that a mandated state of satisfaction has not been reached. Not every lapse in logic will give rise to jurisdictional error. A court should be slow, although not unwilling, to interfere in an appropriate case.

(Emphasis added.)

230    The part emphasised in the above extract is the part emphasised by the CFMEU. The CFMEU overlooked, however, both the counsel for caution in [130] and the test posited by their Honours in the following paragraph ([131]):

[T]he test for illogicality or irrationality must be to ask whether logical or rational or reasonable minds might adopt different reasoning or might differ in any decision or finding to be made on evidence upon which the decision is based. If probative evidence can give rise to different processes of reasoning and if logical or rational or reasonable minds might differ in respect of the conclusions to be drawn from that evidence, a decision cannot be said by a reviewing court to be illogical or irrational or unreasonable, simply because one conclusion has been preferred to another possible conclusion.

231    Their Honours went on to observe at [135] that “a decision might be said to be illogical or irrational if only one conclusion is open on the evidence, and the decision maker does not come to that conclusion … or if there is no logical connection between the evidence and the inferences or conclusions drawn”, or where the reasons given are unintelligible. After all, as Gleeson CJ observed in Re Minister for Immigration and Multicultural Affairs; Ex parte Applicant S20/2002 [2003] HCA 30; (2003) 198 ALR 59; 77 ALJR 1165 at [5], to describe reasoning as unreasonable may be no more than an emphatic way of disagreeing with it. This is an apt description of the CFMEU’s argument. In effect, the CFMEU was inviting the Court to substitute its own opinion for that of the Commission.

232    The Full Court rejected a similar argument in United Voice at [15]ff for the following reasons. First, questions of construction of the agreement, the awards, and the industrial circumstances of the employees and prospective employees involved questions of fact and degree. Secondly, even if the agreement does not pass the BOOT, s 189(2) allows the Commission to approve it in exceptional circumstances if approval would not be contrary to the public interest. The Commission is also given a discretion by s 190 to approve an agreement where it has a concern that the agreement does not pass the BOOT. As the Full Court said in United Voice at [17], “the existence of the discretionary power of the Commission to approve an agreement demonstrates that it is not possible for this Court to determine, as the union sought, that the Full Bench could not have approved the agreement in the exercise of its powers under the Act”.

233    Ground 1 of the notice of contention must be dismissed.

Conclusion

234    The appeal should be dismissed. In short, although he made some errors, the primary judge was correct to find that the Commissioner fell into jurisdictional error by failing to have regard to the content and terms of the explanation OKW purportedly gave the three employees when reaching his satisfaction that s 180(5) had been complied with. The primary judge was also correct to find that the Commissioner had not reached the requisite state of satisfaction that the Agreement had been genuinely agreed to by the employees covered by it. Consequently, the basis for the exercise of the power conferred on the Commission to approve the Agreement was absent.

235    Ground 2 of the notice of contention should be upheld. The Commissioner also fell into jurisdictional error by failing to consider the effect of cll 9.1 and 9.3 of the Agreement for production and engineering employees covered by the BCMIA.

236    In all other respects the notice of contention should be dismissed.

Orders

237    On 21 December 2017, the primary judge made orders by consent suspending the operation of the final orders made on 23 November 2017. The orders made on 21 December 2017 are expressed so that this stay will operate until the determination of this appeal, or further order.

238    At the conclusion of the hearing, OKW asked to be heard on the question of the stay before the Court makes final orders determining the appeal. The day before judgment was due to be delivered, however, the parties jointly requested that the Court not make any orders. Instead, they requested that the Court adjourn the matter for 28 days to allow them to consider the reasons for judgment. We have decided to accede to the request but also to require that within that period of time the parties file submissions as to the appropriate form of orders. If agreement can be reached, so much the better. If not, the question will be determined on the papers.

Associate:

Dated:    25 May 2018