Rejected: agreement not explained to workers


Rejected: agreement not explained to workers

An employer did not take all reasonable steps to explains the contents of an agreement to workers, a full bench has ruled. It also found the agreement failed the Better Off Overall Test.


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A Fair Work Commission full bench has upheld an appeal by a union against approval of an enterprise agreement covering electricians. The full bench found that the employer did not take all reasonable steps to explain the contents of the agreement to employees. Further, it was approved before undertakings required by the employer were actually provided, therefore failing the Better Off Overall Test (BOOT).

Facts of case

The employer initiated bargaining for a proposed agreement by providing employees with a copy of the proposed agreement, a “How and When For Approval” notice (that covered voting procedure) and a Notice of Representational Rights. It then held a meeting with employees that included notification of some changes to the agreement. Employees subsequently voted in favour of the amended agreement.
A union claimed that it was a bargaining representative for the agreement. It opposed the agreement on various grounds and gave notice that it did not want to be covered by it. The Fair Work Commission approved the agreement without conducting a hearing, but stated that it did cover the union. The union then appealed against approval of the agreement.
The union’s grounds of appeal were as follows:
  • Employees had not genuinely agreed to the agreement. The employer did not take all reasonable steps to explain the agreement to employees in a manner that took their circumstances into account. Therefore, the employer had not bargained in good faith.
  • The agreement did not pass the BOOT.
  • The agreement was passed subject to written undertakings provided by the employer, but the employer did not provide them before it was approved.
The FWC had found that most employees would be better off under the agreement because wages would be higher, with the exception of first-year apprentice electricians. It sought an undertaking that the employer would increase the wages of the latter employees. 

The union argued that the employer did not take all reasonable steps because it did not explain the variations from the award to employees and required them to vote only 45 minutes later. The FWC had accepted the employer’s statement claim that it fully explained the agreement without investigating further. The employer disputed those claims and claimed that the agreement was based on a union agreement that had operated for 15 years.

The full bench found that the relevant test in this case was to compare the employees’ existing agreement (dated 2012) with the proposed new one. A comparison with the award was not required because less than 10 clauses were different.  It found that the employer had provided insufficient detail of the differences.

The employer had claimed that every employee would be no worse off because their current wage rates would either remain or increase. However, the full bench found that first-year apprentice electricians would be worse off (paid less than award rates), and a “productivity allowance” clause was not fully explained (payment of it was compulsory under the previous agreement but not the new one).
The union had made submissions to the FWC that the agreement did not pass the BOOT and claimed that those submissions were not properly considered. The employer claimed that the FWC had made an overall assessment and comparison with the award, as required by the Fair Work Act 2009 and concluded that the benefits exceeded the losses.

The full bench analysed the differences between the agreement and the award. It took into account the likely infrequency that situations potentially unfavourable to employees would arise on the job. 


The full bench upheld the appeal, quashed the agreement and remitted it for reconsideration. It found as follows:
  • Because of the omissions noted above, the employer did not take all reasonable steps to explain the new agreement to employees.
  • In relation to the BOOT, many of the concerns raised by the union were either trivial or inconsequential. The dominant factor in the agreement was the higher wages for most employees. 
  • Had the employer given a written undertaking in respect of the apprentice electricians’ pay rates, the DP would not have erred in respect of the BOOT. However, such an undertaking did not exist at the time of approving the agreement, therefore it did not pass the BOOT in respect of those employees. Nor was the union consulted before any undertaking was accepted. The employer provided undertakings later on.
The bottom line: The FWC has the power to require employers to lodge written undertakings that address concerns raised by it about terms of an agreement (eg an undertaking to increase wage rates for some employees, or one to clarify the meaning of ambiguous terms). However, if it does so, the FWC cannot approve an agreement until after it has received the undertakings in written and signed form. 
The FWC is also required to seek the views of all bargaining representatives before accepting any employer undertakings.

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