[2010] FWA 7217

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FAIR WORK AUSTRALIA

DECISION

Fair Work Act 2009
s.185 - Application for approval of a single-enterprise agreement

Glen Eden Thoroughbreds Pty Ltd T/A Ray White Shailer Park
(AG2010/10075)

Real estate industry

COMMISSIONER ASBURY

BRISBANE, 16 SEPTEMBER 2010

Ray White Shailer Park Enterprise Agreement 2009 - approval of enterprise agreement - terms pertaining to relationship between employer and employees - explanation of effect of terms - effect of inclusion of common law duties and obligations in enterprise agreement - whether group of employees covered by agreement fairly chosen - better off overall test.

OVERVIEW

[1] This is an application under s.185 of the Fair Work Act 2009 (the Act) for approval of the Ray White Shailer Park Enterprise Agreement 2010 (the Agreement). The applicant is Glen Eden Thoroughbreds Pty Ltd T/A Ray White Shailer Park (the Employer). The application is opposed by the Property Sales Association of Queensland, Union of Employees (the PSAQ) - a bargaining representative for the purposes of negotiating the Agreement - on the following grounds:

[2] In support of the application for approval of the Agreement, it is submitted that all provisions of the Agreement are matters pertaining to the employment relationship; the employer did explain the terms of the Agreement; the group of employees was fairly chosen; and the Agreement passes the better off overall test when compared to the terms of the Real Estate Industry Award 2010 (the Award).

EVIDENCE

[3] Evidence in support of the approval of the Agreement was given by Mr Nicholson, the Director and owner of the Employer and the Principal of Ray White Shailer Park. In addition to the matters set out in the F17 Declaration in support of the approval of the Agreement, Mr Nicholson said that the Employer currently employs 17 employees in the capacity of property salespersons, property managers and administrative staff. Mr Nicholson sought to have one enterprise agreement to:

[4] On 4 May 2010 when the notice of representational rights was handed out, employees were told that they would receive a copy of the proposed agreement and should read it and feel at liberty to discuss any issue relating to the proposed agreement. The Notice of representational rights was appended to the Form F17 and indicates that the Employer proposed that the Agreement cover all employees. Employees were also informed of meetings at which the terms of the proposed agreement would be explained. Mr Nicholson held a meeting with employees on 13 May 2010 and handed out copies of the proposed agreement, explained its provisions and answered questions from employees. A further meeting was conducted by the Employer’s industrial relations consultant on 24 May 2010, at which the terms of the proposed agreement and specifically clauses relating to the modern award were explained to employees. Questions from employees were invited during that meeting.

[5] The majority of questions from employees related to clauses dealing with intellectual property rights and there were also lengthy discussions about the clause in the proposed agreement dealing with restraint of trade. Mr Nicholson said that after listening to the concerns of employees a clause in relation to intellectual property rights was deleted. A vote was taken on two options for the restraint of trade provisions and the clause with the most support was included in the version of the proposed agreement that was voted on. Voting took place on 26 May 2010 with 10 employees in favour of the Agreement and 7 voting against it.

[6] Under cross-examination Mr Nicholson agreed that the majority of employees covered by the Agreement are property salespersons, and that property salespersons and the PSAQ had opposed the approval of the Agreement. Mr Nicholson was taken to his response to question 2.6 in the form F17 Employer declaration in support of the approval of the Agreement, and said that the statement: “Agreement discussed with each employee in detail regarding each aspect/clause thereof” was not correct and was different to the statement in these proceedings that he explained the purpose of the Agreement to each employee. Mr Nicholson also agreed that his statement in these proceedings did not indicate that each clause of the Agreement was addressed in the meetings with employees, but maintained that this is what occurred.

[7] Mr Nicholson was unable to provide detail about what was said in the explanations about a number of clauses in the Agreement, but maintained that employees had read the Agreement and the explanation went to matters about which they had questions. Mr Nicholson also said that rather than explaining each individual clause, employees had been given an opportunity to ask questions, and each clause that they were concerned about was explained. Mr Nicholson agreed that the process by which the Agreement was explained placed the onus on employees to ask questions.

[8] It was put to Mr Nicholson that there was a “vote within a vote” in relation to the restraint of trade provisions. In response to the proposition that only property salespersons had voted on this provision because they were the only employees affected, Mr Nicholson said that the provision would also affect property managers, who may leave the business and take a rent roll to their next employer. Property managers had not been concerned about the proposed clause. Mr Nicholson agreed that a number of clauses in the Agreement were directed only at salespersons.

[9] In response to a question from the Tribunal, Mr Nicholson said that he did not recall employees being told that there were penalties in the Act for employees who breached the terms of an enterprise agreement.

SUBMISSIONS

Matters pertaining to the relationship between the employer and employees

[10] It is contended by the PSAQ that the following clauses do not pertain to the relationship between the employer and employees as required by s.172(1) of the Act:

[11] In support of the proposition that these clauses of the Agreement do not pertain to the employment relationship, reference was made to the series of High Court cases where this term has been considered.1 It was submitted that it has been held in all cases that the term “pertaining to the employment relationship” means the relationship between employers acting as such and employees acting as such. Further, it was submitted that a real distinction had been drawn between the relationship between an employer and an employee, and the relationship between an employer and a former employee. Seen in this context, clauses 9.1, 10.4 and 31.3(b) purport to operate after the employment relationship has ceased, and to impose obligations on former employees.

[12] In respect to clause 18.2 of the Agreement, the clause is said to seek to remove liability from the employer for injury to any person arising out of the use of the employee’s motor vehicle, including persons outside of the employment relationship.

[13] It was also submitted that clause 31.4 is a post employment covenant and would not pass the common law test of reasonableness. If the Agreement was approved, the employer would be able to have a majority of employees impose the terms of the restrictive covenant on the minority and it would apply to employees who were only employed for one day. The dramatic consequence would be that a restrictive covenant that could never succeed at common law would become binding on the basis that it was included in an enterprise agreement approved by FWA.

[14] There are also a number of terms of the Agreement providing for deductions to be made from the wages of employees. Clause 6.2 of the Agreement provides for employees to reimburse the employer for the policy excess provided by an insurer in the event that conduct of the employee results in a claim against the employer’s professional indemnity policy. Clause 24.13 provides for costs and expenses incurred by the employer in respect of a claim for commission to be shared by the employer and the employee. Clause 16.2 of the Agreement provides for salespersons to forego amounts otherwise due and payable to them each month, including commissions, salary or (if applicable) termination payments, equivalent to the salespersons contribution to “consumables”. That term is defined in clause 2.4 as property advertising and Salesperson promotion and any other items as set out in the employer’s policy and manuals, which may be amended from time to time.

[15] It is submitted that these matters do not pertain to the relationship between the employer and employees, on the basis that they provide for deductions from the wages of employees, which do not comply with the requirements of s.326 and Regulation 2.12 of the Fair Work Regulations 2009 (the Regulations).

[16] It was contended for the Employer that each of the impugned clauses pertain to, or are within the sphere of, the relationship between the employer as employer with an employee as employee. It was also submitted that FWA has approved other agreements which contain these clauses or clauses in similar terms.

Explanation of the terms of the Agreement

[17] It was submitted for the PSAQ that the evidence of Mr Nicholson, and his responses to questions under cross-examination, would cause FWA to have grave reservations about what was said to employees at meetings to explain the terms of the Agreement. For the employer to give the Agreement to employees and wait to see if they raise questions, does not constitute an explanation of the effect of its the terms, for the purposes of s.180(5) of the Act.

[18] The PSAQ also submitted that if the Agreement contains provisions which do not pertain to the relationship between the employer and employees, then those provisions are of no effect. Where a proposed agreement includes a term that has no effect because it is not about a permitted matter, the employer is required to explain that the term has no effect in order to meet the requirements of s.180(5) of the Act. A failure on the part of the employer to do so was said to result in a failure to meet a mandatory term, and a proposed agreement that is not capable of being put to employees for approval. This was said to be the case notwithstanding that s.253 of the Act makes it clear that an agreement is not prevented from being an enterprise agreement by virtue of the inclusion of a term that is not permitted. Accordingly it was submitted that the Agreement in the present case could not be approved because of the failure of the employer to comply with the mandatory requirements of s.180(5).

Group of employees covered

[19] In relation to the group of employees covered by the Agreement, it was submitted for the PSAQ that it is a mandatory requirement of the Act that FWA be satisfied that the group of employees covered by a proposed agreement is fairly chosen. The group in the present case consists of clerical employees, property management and property salespersons. There are clauses in the Agreement applicable only to property salespersons and to no other part of the workforce that will be covered by the Agreement. To permit an employer to choose a group made up of disparate sections of a workforce and include terms in an agreement that can have no application to anyone else other than a particular section of the workforce, but rely upon the favourable voting of those employees who have no interest in the terms is manifestly unfair. It is unfair because that section of the workforce touched by those terms, who may in a majority in opposition, will be outvoted by the other employees. This is what has occurred in the present case.

[20] It was also submitted that the reading of s.186(3) and s.186(3A) of the Act contended for by the applicant is an incorrect interpretation because it would require that the term “the group” in s.186(3) to mean a group that is less than all of the employees.

[21] The Employer submitted that when regard is had to s.186(3) and s.186(3A) of the Act, it is only where all employees of an enterprise are not included in the agreement that FWA must, in deciding whether a group of employees was fairly chosen, take into account whether the group is geographically, operationally or organisationally distinct. In the present case the group of employees was fairly chosen because they are all employees of a small enterprise employed in the one location, and no mandatory enquiry of FWA arises. In relation to this submission reference was made to the evidence of Mr Nicholson that his main reasons for having one agreement was that it would promote unity among all employees; simplify administrative management; make the engagement of new employees easier.

[22] Counsel for the Employer informed the Tribunal in the course of submissions, that he had received instructions after Mr Nicholson gave his evidence, that there are two other employees of Glen Eden Thoroughbreds Pty Ltd who are employed on a farm, and have nothing to do with the real estate agency. It was submitted that this did not make any difference as the group of employees covered by the Agreement are employed in a real estate agency, which is geographically, operationally and organisationally distinct from the farm where the two other employees are employed. Further, the F17 Employer declaration in support of the approval of the Agreement was executed on the basis that it applied to Glen Eden Thoroughbreds Pty Ltd T/A Ray White Shailer Park.

The better off overall test

[23] It was submitted for the PSAQ that the following provisions cause the Agreement to fail the better off overall test provided in s.190 of the Act.

[24] It is submitted by the PSAQ that Clause 6.2 requires the employee to reimburse the employer for any excess under the employer’s professional indemnity insurance policy, and such reimbursement would have the effect of diminishing the amount paid by the employer to the employee. Clause 16 would allow for an unquantifiable amount for “consumables” to be deducted from amounts due to an employee under the Agreement, and that could result in the employee receiving less than the minimum commission rate and being worse off overall than the employee would have been under the Award.

[25] Clause 19 of the Agreement purports to exclude all salespersons from receiving a motor vehicle allowance in contrast with the Award which does not contain such an exclusion. Clause 22.1.1 of the Agreement sets a lower test than that in clauses 16.2 and 16.3 of the Award. Clause 22.1.4 of the Agreement permits payment in advance or arrears, whereas clause 17.5(a) of the Award requires payments to be in advance. Clause 22.1.5 of the Agreement provides that commission may be paid in advance or arrears on the basis of a completed sales transaction. The Award provides for payment of commission on the basis of a legally enforceable contract. Further, the Award requires written agreement in relation to these matters while the Agreement does not. This removes an important safeguard for employees.

[26] Clause 22.1.11 permits deductions not authorised by s.324 of the Act. Clause 22.1.12 is inconsistent with the terms of the Award, which does not contain a 30 day grace period for the payment of commissions. Clause 24.7 refers to unconditional exchange status with respect to contracts, while clause 17.3 of the Award refers to a legally enforceable contract. Clauses 24.8 and 24.9 of the Agreement are more restrictive than clause 17 of the Award with respect to detailing when commission will be paid. In clause 24.3 of the Agreement there is a requirement that the employee share costs and expenses incurred by the employer in respect of a claim for commission. This is an imposition which is not found in the Award with respect to the claim for commission, and potentially diminishes commission which might be payable.

[27] It is submitted for the Employer that considered collectively or individually, the impugned clauses do not have the effect of defeating the better off overall test as set out in s.193 of the Act. This is because when comparing the advantages and disadvantages of the impugned clauses in the Agreement compared to the Award, those clauses concern matters:

LEGISLATIVE PROVISIONS AND RELEVANT CASE LAW

Permitted Matters

[28] Section 172(1) of the Act provides that an enterprise agreement may be made about one or more of the following permitted matters:

Deductions from wages

[29] In relation to deductions from wages, the following sections of the Act are relevant:

[30] Regulation 2.12 of the Fair Work Regulations in relation to deductions from wages, relevantly provides:

(2) For subsection 326 (2) of the Act, a circumstance in which a deduction mentioned in subsection 326 (1) of the Act is reasonable is that the deduction is for the purpose of recovering costs directly incurred by the employer as a result of the voluntary private use of particular property of the employer by an employee (whether authorised or not).

Matters pertaining to the employment relationship

[31] In respect of matters pertaining to the relationship between the employer and the employee, s.253 of the Act provides that a term of an enterprise agreement has no effect to the extent that it is not about a permitted matter, but that the inclusion of such a term does not prevent the agreement from being an enterprise agreement. The Explanatory Memorandum to the Fair Work Bill 2008 in summary states that:

[32] The following principles can be drawn from the jurisprudence referred to in the Explanatory Memorandum in respect of the formulation “matters pertaining to the employment relationship”.

Terms operating after the employment relationship ceases

[33] There is a body of case law dealing with the question of whether claims for terms to be included in industrial instruments which bring rights into existence after the period of operation of the instrument or after the cessation of employment, are matters pertaining to the employment relationship. Those cases have dealt with claims for pensions10, superannuation11, income protection insurance12 and the dismissal of employees13.

[34] In Re Manufacturing Grocers’ Employees Federation of Australia; Ex Parte Australian Chamber of Manufacturers (the Superannuation Case)14 the High Court was considering whether the Conciliation and Arbitration Commission should be prohibited from hearing proceedings to the extent they involved a claim for superannuation benefits for employees. The claims were variously framed as a claim for a wage increase to be offset by a contribution by the employer into a superannuation fund for the benefit of the employee or payments directly into superannuation funds.

[35] It was contended in that case that the Commission did not have jurisdiction to deal with the claims because inter alia they did not comprise disputes as to an industrial matter, then defined as: “all matters pertaining to the relations of employers and employees.” The High Court in the Superannuation Case analysed the earlier case of R v Hamilton Knight; Ex parte Commonwealth Steamship Owners Association15, which dealt with a number of claims including a claim for pensions, and held that this case did not decide that superannuation benefits are not matters which might validly be the subject of an award. The High Court in the Superannuation Case went on to hold that:

[36] It was also noted in the Superannuation Case that three members of the Court in Hamilton Knight accepted that a dispute over pensions was a dispute relating to an industrial matter, notwithstanding that it was a claim for benefits to be paid after an employment relationship had ended.17 The Full Court of the Federal Court in Australian Maritime Officers Union v Sydney Ferries Corporation18 analysed the judgements in Hamilton Knight as follows:

[37] In Australian Maritime Officers Union v Sydney Ferries Corporation20 the Full Court of the Federal Court was dealing with a case where a workplace agreement providing for income protection insurance for employees suffering long term illness or injury, was not honoured by the employer, on the basis of the contention that the clause it had agreed to was void and unenforceable. This contention was based on legislative provisions to the effect that a term of a workplace agreement was not enforceable to the extent that it dealt with a matter that did not pertain to the employment relationship.

[38] Finding that the term did pertain to the employment relationship, the Full Court of the Federal Court said:

[39] In R v Portus; Ex parte City of Perth and Others22 the High Court considered a log of claims demanding that employees who were dismissed should have a right of appeal to the Conciliation and Arbitration Commission, which should have power to determine whether the dismissal was harsh, unjust or unreasonable and to make such a settlement as it deemed just. Although the case principally dealt with constitutional questions, in relation to whether the dispute pertained to the relations of employers and employees as required by the definition of “industrial matter”. Justice Stephen, with whom Justice Menzies agreed, held:

[40] This view was endorsed in The Queen v Stanton and Others; Ex parte Associated Airlines Pty Ltd24 and in Re Boyne Smelters Ltd; Ex parte Federation of Industrial Manufacturing and Engineering Employees of Australia25 a majority of the High Court stated that where a dispute as to reinstatement arises after dismissal, the question arises as to whether it pertains to the relationship between employers and employees or merely to the relationship between the employer and the individual former employee or employees concerned.26 The majority went on to state:

[41] It was crucial in all of the cases that the matter pertaining to the employment relationship was a right or benefit for employees that arose during the employment relationship, notwithstanding that it took effect after the employment relationship ceased. In no case was an obligation or restriction imposed on employees after the employment relationship had ceased. Further, the right or benefit to be enjoyed by an employee after the employment ceased, was in a real sense the fruit of employment.28 It could be enjoyed by a former employee automatically by virtue of the employment and did not require a further action or election on the part of the employee. None of the rights or benefits found to pertain to the employment relationship were contingent on some future action of a former employee. Further, notwithstanding that the right or benefit may be enjoyed by a former employee, there were current employees who had an interest in the same right or benefit, and would expect to share in it at a later point. This was critical because it created a nexus or link with an ongoing employment relationship notwithstanding that a former employee is no longer party to such a relationship. It was also significant that what gave rise to the right or benefit, is the employment itself, and not the dismissal of the employee.

Explanation of the effect of the terms of the agreement

[42] Section 180(1) of the Act requires that before an employer requests employees to approve an enterprise agreement by voting for it, the employer must comply with requirements including the requirement at s.180(5) that:

[43] By virtue of s.186(2)(a) before approving an agreement, FWA must be satisfied that the agreement has been genuinely agreed to by the employees covered. Section 188 provides that an agreement has been genuinely agreed to by the employees covered by the agreement if FWA is satisfied that the employer has complied with requirements set out in that section, including those in s.180(5).

[44] In McDonalds Australia Pty Ltd29 a Full Bench of FWA held, in relation to s.180(5) that the test is not an absolute requirement to ensure that particular outcomes are achieved, and that the section requires only that the employer take reasonable steps to ensure the terms and conditions are explained to employees. The Full Bench further noted that there is no requirement in s.180(5) for there to be a full explanation of the terms of an agreement prior to the employer requesting employees to vote on an agreement. The requirement is that the employer take reasonable steps to ensure that explanations are provided. While the employer must comply with this requirement before requesting employees to approve the agreement, the section does not preclude employers providing explanations during the access period and subsequent explanations can be provided. Further, the Full Bench in that case held that there was no impediment to an employer collaborating with bargaining representatives to provide relevant information.30

[45] The term “reasonable” has often been declared to mean “reasonable in all of the circumstances of the case”, and the real question is to determine what circumstances are relevant. 31 In the context of provisions with the object of providing a simple, flexible and fair framework that enables collective bargaining at the enterprise level, this meaning is appropriate for the purposes of s.180(5)(a). The reasonableness of the steps taken should, in my view, be considered in the context of the size of the enterprise, the demographics of the employees to whom the explanation is provided, the type of work performed by employees and whether the proposed terms of the Agreement are new or unusual in the context of the enterprise concerned and the particular employment relationship.

The requirement for the group of employees covered by an agreement to be fairly chosen

[46] Section 186(3) and s.186(3A) of the Act are in the following terms:

[47] In relation to s.186(3) the Explanatory Memorandum states:

[48] In ANZ Stadium Casual Employees Enterprise Agreement 2009 33 Vice President Lawler traced the development of s.186(3) and noted that the provision as it originally appeared in the Fair Work Bill 2009 was amended by the Senate. As originally introduced, s.186(3) meant that the requirement that FWA be satisfied that the group of employees covered by an agreement was fairly chosen did not arise if the agreement covered all employees of the employer. The Senate amendment meant that this was no longer the case.34 Vice President Lawler concluded that:

[49] In that case, His Honour also said that consideration of the requirement in s.186(3) should be directed at the time the group was chosen. 36

[50] His Honour went on the find that:

[51] His Honour also noted that under s.238(1) a scope order is only available in relation to a “proposed agreement” and not in relation to an agreement that has been made, ie the day on which the voting process by which employees approved the agreement concludes. 38

Better off overall test

[52] Section 193(1) of the Act deals with passing the better off overall test, and is in the following terms:

[53] This Agreement raises a novel issue with respect to the application of the better off overall test, because it contains provisions that are usually found in common law contracts of employment or are implied into contracts by the common law. These provisions deal with matters such as restraint of trade, confidential information and intellectual property. Such provisions are not found in the Award nominated for the purposes of establishing whether the Agreement in this case passes the better off overall test. It is true to say that such provisions are not found in awards generally.

[54] As a result, but for the Agreement, the relevant employees would be covered by an Award which does not contain provisions of the kind referred to above, and would be subject to such provisions only if they were contained in a contract of employment, or were implied into that contract at common law. If obligations and restrictions such as those contained in the provisions of the Agreement dealing with restraint of trade, confidential information and intellectual property were contained in a contract of employment, a prospective employee to whom the contract was offered would have a choice as to whether or not to accept it, or an option to obtain advice as to the effect of those terms before the contract was accepted. If the Employer sought to implement such terms with respect to existing employees, it could do so by way of policy or by seeking the agreement of employees to an alteration to their contracts of employment. By including such terms in an enterprise agreement they are binding on current and future employees, including employees who may not have approved the terms of the Agreement.

[55] Such terms, whether they were contained in an employment contract, a workplace policy, or implied at common law, would be subject to common law principles of reasonableness in the event that they were required to be enforced. The terms would also be enforced in a court with equitable jurisdiction. This can be contrasted with the enforcement of the terms of an enterprise agreement. The Act prescribes civil penalties for breach of the terms of an enterprise agreement. By including such terms in an enterprise agreement, employees may be liable not only for common law actions for any breach, but to civil penalties under the Act. 39 Issues of reasonableness would not be relevant.

[56] In my view, consideration of whether an enterprise agreement passes the better off overall test, can be directed to circumstances where an enterprise agreement contains terms such as those dealing with restraint of trade, confidential information and intellectual property, that are not found in a relevant award. In such cases, FWA can give consideration to the question of whether by including such terms in an enterprise agreement, employees are disadvantaged on the basis that the terms of the agreement impose an obligation or restriction on them which is not imposed under a relevant award, and is not able to be imposed under any relevant common law principles which operate in conjunction with the award.

[57] This is consistent with the observations of Commissioner Gooley in considering an agreement containing obligations in relation to confidentiality, intellectual property and non-solicitation. Commissioner Gooley concluded that:

[58] I agree with these comments and share the view that the exposure of employees to civil penalties for breach of the Agreement in respect of such provisions is a matter which is relevant to considering whether the Agreement passes the better off overall test.

CONCLUSIONS

Is the Agreement about permitted matters?

Are any terms of the Agreement about matters that do not pertain to the employment relationship?

[59] I have concluded that the following clauses are not permitted matters because they are not about matters pertaining to the relationship between the Employer and the employees who will be covered by the Agreement: clauses 2.12, 6.2, 9.1, 10.4, 18.2, 24.13, 31.1(b), and 31.4. My reasons for reaching this conclusion are set out below.

[60] The terms of the Agreement intended to operate after employment has ceased, do not provide a right or benefit for employees. Rather, those clauses impose obligations and restrictions on former employees with respect to confidentiality, intellectual property and carrying on a business in competition with the former employer. The obligations and restrictions sought to be imposed relate to employment in a way that is indirect. It is not every employee covered by the Agreement who will access confidential information; generate work product that gives rise to intellectual property considerations; or be in a position to engage in business in competition with the former employer. Further, to the extent that the obligations are intended to continue after employment ceases, they are not triggered by termination of employment, but by some conduct on the part of the former employee - for example starting a business in competition with the former employer. The connection with the employment relationship is therefore consequential and not direct.

[61] I am also of the view that the obligations protect the employer in the capacity of real estate agent and not the capacity of employer. Thus the provisions do not pertain to the relationship of the employer and employees who will be covered by the Agreement, in their respective capacity as such. Clause 24.13 suffers from the same defect, in that it relates to the employer in the capacity of litigant and gives the employer rights which can be exercised independently of the view or agreement of the employee. For these reasons, clauses 9.1, 10.4, 24.13, 31.1(b) and clause 31.4 are not permitted matters in that those provisions do not pertain to the relationship between the Employer and employees who will be covered by the Agreement.

[62] I accept that the nature of the employment relationship involving real estate salespersons is that terms dealing with matters such as intellectual property, restraint of trade and confidentiality pertain to that relationship in the required way. This will not be the case with all employment relationships. Thus, other than provisions purporting to operate after the cessation of employment identified above, s.172(1)(a) is not a barrier to such provisions being included in the Agreement.

[63] I have also concluded that clause 18.2 of the Agreement, is not a matter pertaining to the employment relationship insofar as it purports to operate with respect to persons not covered by the Agreement. That clause purports to indemnify the employer from liability injury, loss or damage incurred by persons who are not party to the Agreement. It is the case that the Explanatory Memorandum indicates that a clause that would prevent an employer from seeking an indemnity or contribution from an employee in respect of personal injuries or losses suffered by a person where such injuries or losses were caused by the employee in the course of their employment is intended to be within the scope of permitted matters.41 However a provision of the kind set out in the Explanatory Memorandum deals with the employer providing an indemnity to the employee. Clause 18.2 of the Agreement does not obligate either the employer or the employee to do anything, but rather seeks to alter the rights of third parties against the employer.

Are the Agreement clauses providing for deductions from wages about permitted matters?

[64] Clause 6.2 of the Agreement requires the employee to reimburse the employer for any excess applied by an insurer in the event of a claim against the employer’s professional indemnity insurance policy because of conduct for which the employee is responsible. In my view this clause does not pertain to the employment relationship, because it relates to the employer in the capacity of insured and is dependent on the terms of an insurance policy held by the employer with an insurer, to which the employee is not a party.

[65] Further, to require the employee to reimburse an amount for excess applied by an insurer is tantamount to requiring the employee to spend part of an amount payable to the employee. By virtue of s.325 of the Act such a requirement must not be unreasonable in the circumstances. Regulation 2.12 stipulates deductions that are taken to be reasonable, and the deduction permitted by clause 6.2 of the Agreement is not for any of the purposes set out in the Regulation. Accordingly, by virtue of s.326, clause 6.2 has no effect. Similarly, the deductions in clauses 16.2 and 24.13 of the Agreement do not answer the description of reasonableness in Regulation 2.12, and by virtue of s.326, have no effect.

Does the Agreement pass the better off overall test?

[66] I do not accept the submission for the employer that because the impugned clauses do not directly and negatively affect wages, hours and leave conditions under the Award, they do not defeat the better off overall test. The test requires consideration by FWA of whether each award covered employee and prospective award covered employee would be better off overall if the agreement applied to the employee than if the relevant award applied. The test encompasses all of the terms of the Award and not just those prescribing wages, hours and leave conditions. I also do not accept that the fact that Agreement clauses involve contingent matters or discretion on the part of the employer that may or may not be exercised, should result in such clauses being viewed differently for the purposes of the better off overall test. It must be assumed that contingent or discretionary clauses in agreements will be applied and they must be assessed against the terms of a relevant award on the same basis as other provisions of the agreement which do not involve any contingency or discretion.

[67] In relation to the provisions of the Agreement said by the PSAQ to cause it to fail the better off overall test, my conclusions are as follows. The exclusion of salespersons from the payment of motor vehicle allowance in clause 19 of the Agreement, is consistent with the exclusion in clause 18.4(b)(ii) of the Award and would not cause the Agreement to fail the better off overall test.

[68] Clauses 16.2 and 16.3 of the Award establish criteria an employee engaged in a property sales classification must meet before that employee can be paid on a commission-only basis. Clause 22.1 of the Agreement sets out the test in different terms in that it does not require an agreement in writing for a sales person to be paid on a commission-only basis, and reduces the level of experience which is required under the Award before such an agreement can be entered into. Further the Award provisions in clause 16.3 in relation to minimum income threshold are not set out in the Agreement. This removes a protection under the Award and could cause the Agreement to fail the better off overall test. The Agreement also purports at clause 22.1.13 to place the onus on the employee to guarantee that the employee meets the criteria necessary to be engaged on a commission-only basis. This can be contrasted with the terms of 16.3(b) of the Award, which places some onus on the employer to verify data provided by the employee.

[69] It was submitted that the Employer did not intend that the effect of the Agreement would be to remove the requirement for written agreements with respect to the terms and conditions of employment for commission-only salespersons. The terms of the Agreement suggest otherwise and in particular I refer to clauses 1 and 41 of the Agreement. The Award contains detailed provisions, including some transitional provisions for Queensland employees, in relation to requirements to enter into written agreements with property salespersons who are to be paid on a commission-only basis. In my view this is an important protection for employees and the removal of such requirements could result in the Agreement failing the better off overall test.

[70] I do not accept the submissions of the PSAQ that clause 17.5 of the Award requires that commission entitlements allowing for annual leave and personal carer’s leave entitlements or any entitlements under the National Employment Standards (NES) must be paid in advance. The Award provides that a commission only agreement may allow for such entitlements and that they may be paid in advance. Accordingly, clause 22.1.4 of the Agreement is not less beneficial than the terms of the Award in that it provides for payment in advance or arrears.

[71] I do not accept the submission of the PSAQ that the Award generally provides for payment of commission on an existing legally enforceable contract. Clause 17.3 referred to by the PSAQ in support of this argument, deals with entitlements to commission payments after employment ends, and makes such payments contingent on an existing legally enforceable contract. While a commission-only sales person remains in employment, commission is payable for each sales arrangement for which the employee was responsible. There is nothing to require that commission is payable before a sale is completed, while the employee remains in employment.

[72] Clause 24.7 of the Agreement lacks clarity when compared with clause 17.3 of the Award, with respect to the circumstances in which commission is payable after the employee has ceased employment. In such circumstances the Award requires only a legally enforceable contract before the employee ceased employment or within the notice period, while the Agreement requires settlement or unconditional exchange status before commission is payable to a former employee. This could result in the Agreement failing the better off overall test.

[73] I do not accept that clause 22.1.12 of the Agreement is inconsistent with clause 17.3 of the Award. Clause 17.3 applies in circumstances where an employee is entitled to commission after employment ends, and does not require that such amounts be paid to the employee within any specified period other than after there is a legally enforceable contract and commission payment is cleared into the employer’s bank account. This matter has been addressed in the comments set out above in relation to clause 24.7 of the Agreement compared to clause 17.3 of the Award.

[74] I am concerned that clauses dealing with obligations normally found in common law contracts of employment rather than collective agreements, may cause the Agreement to fail the better off overall test.

[75] Thus the fact that the Agreement includes terms dealing with confidentiality, intellectual property and restraint of trade that:

will likely result in a situation where award covered employees, both current and prospective, will not be better off overall if the Agreement applies.

Did the Employer take reasonable steps to explain the terms of the Agreement?

[76] I am generally satisfied that the employer took reasonable steps to explain the terms of the Agreement to employees. The Employer’s declaration in support of the approval of the Agreement indicates in response to question 4.1 that there are 12 women covered by the Agreement and there is no indication that any of them are in other demographic groups such as persons from a non-English speaking background, who may have required special consideration, or an explanation of the terms of the Agreement that differed from that generally provided.

[77] In the circumstances there is nothing unreasonable about the employer providing employees with a copy of the Agreement and then inviting them to ask questions about its terms at a series of meetings. I can see no basis for requiring an employer to provide an explanation that specifically addresses each and every term of an Agreement. What is required is that the employer takes all reasonable steps to provide an explanation. In circumstances where there are no employees in demographic groups who may require more, it was reasonable for an explanation to be provided about major terms of the Agreement and for employees to be invited to discuss those terms and to raise any questions they might have in relation to them.

[78] It is also the case that the employees subject of these proceedings are real estate salespersons, accustomed to working on commission only arrangements, and who are likely to be familiar with a significant proportion of the terms of the Agreement.

[79] I am of the view that the explanation to employees of the terms of the Agreement was deficient in respect of the failure to explain to employees that breach of provisions generally found in common law contracts, such as those dealing with duty of confidentiality, professional indemnity insurance and intellectual property rights, could expose employees to civil penalties for breach of the Agreement in addition to any common law action by the employer for damages or injunctive relief. It was clear from Mr Nicholson’s evidence that the explanation of the terms of the Agreement did not go to this matter. However, I am also of the view, that this failure was not unreasonable in that it was inadvertent rather than deliberate, and that the employer did take reasonable steps to explain the terms of the Agreement as required by s.180(5) of the Act.

[80] I do not accept the argument advanced for the PSAQ, that an explanation of the terms of an Agreement must include advice to employees that identifies terms which are not permitted and informs employees that these terms have no effect. The inclusion in an enterprise agreement of terms that are not permitted may be inadvertent. As the Federal Court observed in the Australian Maritime Officers Union Case, there are few hard and fast rules about what does and does not pertain to an employment relationship. 42 Matters pertaining to an employment relationship are shaped by the particular relationship and the context in which it operates, and it is likely that the subject matter will evolve. Where an employer does not know that a term is not permitted, it is not reasonable to require the employer to provide an explanation to that effect to employees.

[81] It would be a strange result if s.253 of the Act validated an enterprise agreement which contains terms that are not permitted, while the failure to explain to employees that such terms have no effect before employees approve an agreement, invalidated that same agreement before it was made, and rendered it incapable of being put to employees for approval. If agreements containing non-pertaining terms are rendered incapable of being put to employees for approval because the ineffectiveness of such terms was not explained to employees, s.253 of the Act would have little if any work to do.

Was the group of employees covered by the Agreement fairly chosen?

[82] I do not accept the argument advanced on behalf of the Employer that s.186(3) applies only where all employees of an enterprise are included in an agreement. This interpretation is at odds with the terms of the Explanatory Memorandum. 43 The better view is that s.186(3) applies in all cases, and that it is a requirement that FWA be satisfied that any group of employees covered by an agreement was fairly chosen.

[83] I also do not accept the argument advanced for the PSAQ that in the present case, the group of employees covered by the Agreement was not fairly chosen. The Act provides for flexibility in the making of enterprise agreements with respect to the groups of employees who may be covered. There is nothing inherently unfair about an agreement covering all employees in an enterprise. It will typically be the case that small sub-groups of employees within a group of employees covered by an agreement will be outnumbered. This is also not inherently unfair. Further, it is not inherently unfair that an agreement contains terms that apply to some and not all employees covered. This is a feature of virtually all industrial instruments. It is also the case that the Act makes provision for such sub-groups to take steps to protect their interests during the bargaining process.

[84] In the present case, the Employer proposed the Agreement on 4 May 2010 by issuing a Notice of Employee Representational Rights pursuant to s.174(6). That notice indicated that the agreement was proposed to cover all employees of Ray White Shailer Park.

[85] There is no evidence of actual unfairness from any employee who will be covered by the proposed Agreement. The only evidence is of the numbers of employees in each classification or category who will be covered by the Agreement. There is no evidence of any irregularity in the voting process. Some of the persons who are employed as real estate sale persons may have voted to approve the Agreement and some did not. In my view, something more than an assertion of unfairness on the basis of being outnumbered in respect of the group to be covered by an agreement, is required, before FWA will find that a group of employees proposed to be covered by an enterprise agreement was not fairly chosen, after the Agreement has been made. There is no basis in the present case for making such a finding and I decline to do so.

FWA may approve agreement with undertakings

[86] As required by s.190(1) an application for approval of an enterprise agreement has been made under s.185 of the Act, and I have concerns that the Agreement does not meet the requirements set out in s.186 and s.187 in relation to passing the better off overall test. Pursuant to s.190(2) of the Act, the agreement may be approved if the concerns I have raised are addressed by the acceptance of an undertaking. I invite the Employer to consider the matters raised in this decision and whether undertakings will be provided to address the concerns outlined above. If the Employer chooses to provide undertakings in relation to the matters set out above, these undertakings will be considered, and if the requirements of the Act are met with respect to the undertakings and they address the concerns identified above, the Agreement will be approved. Undertakings should be provided in writing within 21 days of the date of release of this decision.

COMMISSIONER

Appearances:

Mr J. Merrell of Counsel and Mr J. Franken on behalf of Glen Eden Thoroughbreds Pty Ltd t/a Ray White Shailer Park.

Mr K. Watson of Counsel and Mr T. French on behalf of Property Sales Association of Queensland, Union of Employees.

Hearing details:

2010.

Brisbane:

August 30.

1 Electrolux Home Products Pty Limited v The Australian Workers’ Union and Others (2004) 221 CLR 209; Re Boyne Smelters Limited; Ex parte Federation of Industrial Manufacturing and Engineering Employees of Australia (1992-1993); The Queen v Stanton and Others; Ex parte Associated Airlines Pty Ltd (1977-1978) 141 CLR 281; The Queen v Portus and Others Ex parte City of Perth and Others (1973) 129 CLR 312.

2 Fair Work Bill 2008 Explanatory Memorandum items 669 - 661.

3 Re Manufacturing Grocers’ Employees Federation of Australia; Ex Parte Australian Chamber of Manufacturers (1986) 160 CLR 341 at 353.

4 Electrolux Home Products Pty Limited v The Australian Workers’ Union and Others (2004) 221 CLR 309 at 325 per Gleeson CJ.

5 Re Cram; Ex parte NSW Colliery Proprietors’ Association Ltd (1986) 160 CLR 341 at 353.

6 Electrolux op. cit. at 345-346 per McHugh J, citing with approval the decision of a Full Bench of the Australian Industrial Relations Commission in Atlas Steels Metals Distribution Certified Agreement 2001-2203 (2002) 114 IR 62 at 66 per Guidice J, McIntyre VP and Whelan C.

7 ibid at 346.

8 Electrolux op. cit. per McHugh J at 338 and Callinan J at 396 citing: Australian Tramway Employees Association v Prahran and Malvern Tramway Trust (Union Badge Case) (1913) 17 CLR 680 at 705 per Higgins J, 718 per Powers J; R v Portus Ex parte ANZ Banking Group Ltd (1972) 127 CLR 353 at 371 per Stephen J; R v Coldham; Ex parte Fitzsimons (1976) 137 CLR 153 at 163-164 per Stephen J.

9 The Federated Clerks’ Union of Australia and Another v The Victorian Employers’ Federation and Others (1984) 154 CLR 472 at per Mason J at 491, per Murphy J at 493, Wilson J at 501 - 502 and Deane J at 503.

10 R v Hamilton Knight; Ex parte Commonwealth Steamship Owners Association (1952) 86 CLR 283.

11 Re Manufacturing Grocers’ op. cit.; Re Finance Sector Union of Australia; Ex Parte Financial Clinic (Vic) Pty Ltd and Others (1992-93) 178 CLR 352;

12 Australian Maritime Officers Union v Sydney Ferries Corporation [2009] FCAFC 145; (2009) 190 IR 193.

13 The Queen v Portus and Others; Ex parte City of Perth and Others (1973) 129 CLR 3123; The Queen v Stanton and Others; Ex parte Associated Airlines Pty Ltd (1977-1978) 141 CLR 281; Re Boyne Smelters Limited; Ex parte Federation of Industrial Manufacturing and Engineering Employees of Australia (1992-1993) 177 CLR 446

14 (1986) 160 CLR 341.

15 (1952) 86 CLR 283.

16 (1986) 160 CLR 341 at 351.

17 ibid 350-351.

18 [2009] FCAFC; (2009) 190 IR 193.

19 ibid at 199.

20 [2009] FACFC 145; (2009) 190 IR 193

21 ibid at 200 - 201

22 (1973) 129 CLR 312.

23 The Queen v Portus and Others Ex parte City of Perth and Others (1973) 129 CLR 312 at 329-320.

24 (1977-1978) 141 CLR 281 at 290 per Barwick CJ, with whom Mason J and Aicken J agreed.

25 (1992-1993) 177 CLR 446.

26 ibid at 455 per Brennan, Deane, Toohey and Gaudron JJ citing Re Ranger Uranium Mines Pty Ltd.; Ex parte Federated Miscellaneous Workers’ Union o f Australia (1987) 163 CLR at 660 - 661.

27 ibid at 455-456.

28 The Queen v Portus and Others; Ex parte The City of Perth op. cit. At 329.

29 [2010] FWAFB 4602.

30 ibid at [29] - [31].

 31   Opera House Investment Proprietary Limited v Devon Buildings Pty Ltd (1936) 55 CLR 111 at 116.

 32   Fair Work Bill 2008 Explanatory Memorandum items 776 - 778.

 33   [2010] FWAA 3758

 34   ibid at [24]

 35   ibid at [27]

 36   ibid at [28]

 37   ibid at [30], [35]

 38   ibid at [36]

 39   See the discussion in Smith & Nephew Pty Ltd [2010] FWA 2465 per Gooley C.

 40   Smith & Nephew Pty Ltd [2010] FWA 2465 at [40] - [43]

41 Fair Work Bill 2008 Explanatory Memorandum paragraphs 672.

 42   op. cit. at 200

 43   Fair Work Bill 2008 Explanatory Memorandum items 776 - 778.




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