FEDERAL COURT OF AUSTRALIA Teys Australia Beenleigh Pty Ltd v Australasian Meat Industry Employees' Union [2016] FCAFC 122 Appeal from: Teys Australia Beenleigh Pty Ltd v Australasian Meat Industry Employees Union (No 2) [2016] FCA 2 File number: QUD 67 of 2016 Judges: JESSUP, TRACEY AND BARKER JJ Date of judgment: 9 September 2016 Catchwords: INDUSTRIAL LAW – enterprise agreement – provision permitting "parties" to agree on terms and conditions for remuneration of employees different from those set out in agreement – employer and relevant union did so agree – whether enterprise agreement effectively varied thereby. Legislation: Acts Interpretation Act 1901 (Cth) s 46AA Fair Work Act 2009 (Cth) ss 49, 172, 180, 181, 182, 185, 186, 187, 189, 190, 192, 207, 208, 209, 210, 211, 216, 257, 570 Cases cited: Toyota Motor Corporation Australia Ltd v Marmara (2014) 222 FCR 152 Date of hearing: 3 August 2016 Registry: Queensland Division: Fair Work Division National Practice Area: Employment & Industrial Relations Category: Catchwords Number of paragraphs: 31 Counsel for the Appellant: Mr D Williams with Mr P Zielinski of Minter Ellison Solicitor for the Appellant: Minter Ellison Counsel for the First Respondent: Mr T Bradley QC with Ms A Coulthard Solicitor for the First Respondent: E Dalgleish of the Australasian Meat Industry Employees' Union Counsel for the Second Respondent: The second respondent filed a submitting notice ORDERS QUD 67 of 2016 BETWEEN: TEYS AUSTRALIA BEENLEIGH PTY LTD Appellant AND: AUSTRALASIAN MEAT INDUSTRY EMPLOYEES' UNION First Respondent FAIR WORK COMMISSION Second Respondent JUDGES: JESSUP, TRACEY AND BARKER JJ DATE OF ORDER: 9 SEPTEMBER 2016 THE COURT ORDERS THAT: 1. The appeal be allowed in part. 2. Order 1 made by the primary Judge on 5 January 2016 be set aside. THE COURT DECLARES THAT: 3. The Teys Bros (Beenleigh) Pty Ltd Enterprise Agreement 2010 Remuneration Document October 2009 does not form part of, and does not vary, the Teys Bros (Beenleigh) Pty Ltd/AMIEU Production Department Enterprise Agreement 2010. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT THE COURT: 1 This is an appeal from an order made by a single Judge of the court on 5 January 2016, whereby the application of the appellant, Teys Australia Beenleigh Pty Ltd, for a declaration that the Teys Bros (Beenleigh) Pty Ltd Enterprise Agreement 2010 Remuneration Document October 2009 ("the Remuneration Document") did not form part of, and did not vary, the Teys Bros (Beenleigh) Pty Ltd/AMIEU Production Departments Enterprise Agreement 2010 ("the 2010 Agreement") was dismissed. The respondents at first instance, and the respondents on appeal, were and are the Australasian Meat Industry Employees' Union ("the Union") and the Fair Work Commission ("the Commission"). In the proceeding before the primary Judge, the Commission filed a submitting appearance, and has likewise taken no part in the appeal. 2 The 2010 Agreement was made, and approved by the Commission, under the provisions of Pt 2-4 of the Fair Work Act 2009 (Cth) ("the FW Act"). It was "made" within the meaning of s 182(1) of the FW Act on 9 November 2009 and approved under s 186 on 22 December 2009. It commenced to operate on 1 January 2010. It remains in operation. 3 The issue which lay at the core of the controversy which came before the primary Judge was whether certain incentive rates of pay in the Remuneration Document had been validly incorporated into, and constituted terms of, the 2010 Agreement. The question had practical importance because rates of pay in the 2010 Agreement were specified by the hour. A boner, for example, was on a rate of pay of $21.68 per hour on and after 1 January 2010. By contrast, while the Remuneration Document did specify rates which mirrored those of the 2010 Agreement – expressed as "minimum rates" – it also contained what were described as "incentive rates of pay", the prescription in the case of the boner, to use that classification again as the exemplar, being in the following terms: Payment for boners and slicers will be per kg as measured on cold weight input into the boning room and payment will be calculated on a whole room rather than separate chain basis, as follows …. There followed a table in which it was specified, inter alia, that a boner was entitled to be paid at the rate of 3.753 cents per kilogram with effect from 4 October 2009. 4 The primary Judge was not concerned with the question what effect the Remuneration Document had, or might have had, other than as terms of the 2010 Agreement. Rather, to use the boner again as the exemplar, the question was whether the appellant was obliged to remunerate him or her at the incentive rates set out in the Remuneration Document as terms of the 2010 Agreement. His Honour held that it was. 5 Clause 3.10.1 of the 2010 Agreement provided as follows: The parties may agree on terms and conditions to remunerate an Employee or group of Employees under an incentive payment system (as an alternative to the time work payment system provided in this Agreement) and any such terms and conditions and/or associated or incidental terms and conditions entered into and signed by the Union and/or the Joint Consultative Committee and Teys Bros, shall be • binding on both parties, and • implemented in lieu of the time work payment system under this Agreement for the affected Employees, provided that the minimum level of remuneration that must be paid to Employees who are engaged under such incentive payment system must be at a rate which is no less than the relevant rate contained in paragraph 3.1.1 of this Agreement, and • all wages and other entitlements payable under such a system will constitute terms of this Agreement. The primary Judge expressed the view, seemingly uncontroversially, that the "parties" referred to here were the appellant and the Union. 6 It was, and is, common ground that the Remuneration Document was an agreement of the kind contemplated by cl 3.10.1 and that, subject to the appellant's case in this proceeding, cl 3.10.1 had the effect that the incentive rates of pay in the Remuneration Document constituted terms of the 2010 Agreement. The appellant's case, however, was and is that, to the extent that it purported to constitute a variation of the 2010 Agreement, the Remuneration Document was of no effect. 7 Before turning to the specifics of that case, something should be said about the facts which led to the approval of the 2010 Agreement by the Commission, and about the legislative provisions which governed the process leading to that approval. 8 Two presently material things happened on 23 November 2009. First, the Remuneration Document was signed on behalf of the appellant and the Union. Secondly, an application to the Commission (then called "Fair Work Australia", or "FWA") for the approval of the 2010 Agreement under Div 4 of Pt 2-4 of the FW Act was lodged. That application was accompanied by declarations made on behalf of the appellant and the Union, the former of which was the more substantial and the latter of which stated the declarant's agreement with the matters set out in the former. One of the matters covered in the appellant's declaration related to the steps taken to satisfy s 180(2) of the FW Act, which required the employer to have taken all reasonable steps to ensure that the employees had been given a copy of, or had had access to a copy of, the written text of the agreement and "any other material incorporated by reference in the agreement". It was stated that, on 22 October 2009, a "memorandum to all employees covered by the proposed agreement was posted on several conspicuous noticeboards at the site". At the same time, a "plain English" summary of the agreement was distributed at the site, as were about 500 copies of the agreement itself. 9 Of these events, the primary Judge said: [A] document purporting to summarise the terms of the proposed 2010 EA … was made available to the relevant employees from on or about 22 October 2009. The parties were agreed that the 22 October summary set out all of the terms of the incentive payment system other than one, and in relation to that one term I have found below that the 22 October summary set out the essence or substance of the term that ultimately appeared in the Remuneration Document. The 22 October summary represented to the relevant employees that the proposed 2010 EA included each of those terms. At the same time a draft of the proposed 2010 EA was made available to employees. That draft did not include the terms of the incentive payment system but did include cl 3.10.1. Prudent employees may well have surmised that the only way in which the terms of the incentive payment system would form part of the 2010 EA was via the facility of cl 3.10.1, as in fact the negotiators of the 2010 EA must have intended. 10 What his Honour said about what prudent employees may well have surmised must, of course, be accepted. But, with respect, they equally may not have, and less than prudent employees may have contented themselves with reading the summary, by reference to which they would have assumed that the agreement itself provided directly for an incentive payment system. Had it done so, the employees would have had a direct statutory entitlement to their volume-based rates of pay. The present litigation could never have been contemplated. Instead, the appellant and the Union, for reasons best known to themselves, opted for what might be called the indirect route, and left open the opportunity for the appellant to advance the argument which was unsuccessful before the primary Judge, and which is now renewed on appeal. 11 Turning to the appellant's case on appeal, there are certain chronological mileposts which, although partly covered in what has already been said, may be set out here in point form as an aid to understanding what follows: 9 November 2009 – making of agreement within the meaning of s 182. 23 November 2009 – signing of the Remuneration Document; execution of s 185 application for approval and of supporting declarations. 24 November 2009 – lodgement of s 185 application for approval. 22 December 2009 – approval by the Commission. 1 January 2010 – commencement of operation of agreement within the meaning of s 54(1)(b). It will be seen that the Remuneration Document was signed – a circumstance which the primary Judge held to be necessary for the operation of cl 3.10.1 of the 2010 Agreement and as to which there was no Notice of Contention – after the 2010 Agreement was made but before it was approved by the Commission and before it commenced to operate. This timing of things came to occupy an important place in the submissions made by the Union on appeal in defence of the judgment below. 12 The primary focus of the appellant's case at first instance, at least until diverted in ways to which we shall refer, was Subdiv A of Div 7 of Pt 2-4 of the FW Act: "Variation of enterprise agreements by employers and employees". Reduced to its bare essentials, the subdivision provided as follows. Section 207 set out by whom such a variation could be made. Section 208 provided that the employer might request its employees to approve a proposed variation. Section 209 specified when a variation was "made". Section 210 provided for an application to be made to the Commission to approve the variation. And s 211 governed the process of approval by the Commission. Mutatis mutandis, these provisions broadly mirrored ss 172(2), 181, 182, 185 and 186 respectively. The remaining provisions of Subdiv A are not presently material, although it may be noted that s 216 provided that a variation operated on a day specified by the Commission at the point of approval. 13 Of particular relevance was s 207, subss (1) and (3) of which provided as follows: (1) The following may jointly make a variation of an enterprise agreement: (a) if the agreement covers a single employer—the employer and: (i) the employees employed at the time who are covered by the agreement; and (ii) the employees employed at the time who will be covered by the agreement if the variation is approved by the FWC; (b) if the agreement covers 2 or more employers—all of those employers and: (i) the employees employed at the time who are covered by the agreement; and (ii) the employees employed at the time who will be covered by the agreement if the variation is approved by the FWC. … (3) A variation of an enterprise agreement has no effect unless it is approved by the FWC under section 211. [notes omitted] On one view, s 207(3) ought to have produced a successful result for the appellant in this case: the Remuneration Document was ostensibly a variation to the 2010 Agreement, and it had not been approved by the Commission under s 211. But the Union's case below was that a result of the kind seemingly rendered ineffective by s 207(3) was permitted by s 257 of the FW Act. From the primary Judge's reasons, it seems that this argument about the effect of s 257 then became the appellant's primary case, which led to his Honour giving substantial consideration to, and ultimately to resolving, what was, on one view, a "tension" between that section and the provisions of Divs 4 and 7 of Pt 2-4. That was the diversion to which we referred in the previous paragraph, and we shall return to it. But, in the light of the way the Union's case was prosecuted on appeal, we propose to commence by considering the impact of s 207(3) in the specific context of Divs 4 and 7 of Pt 2-4. 14 It was submitted on behalf of the Union that – s 207(3) applied only to a variation of an agreement done under Subdiv A of Div 7, that is to say, one which had been done by the employer and its employees according to the scheme for which that subdivision provided; and the "agreement" to which s 207(3) referred was an agreement which had been approved by the Commission under s 186, such that the subsection had no application to a variation done before the original enterprise agreement had been approved. 15 To the extent that the first of these submissions would have it that s 207(3) had no application to a variation done under Subdiv B of Div 7 – "Variation of enterprise agreements where there is ambiguity, uncertainty or discrimination" – it may be accepted. Of its nature, no such variation would be "approved" under s 211. To the extent, however, that it is suggested that the relevant employer and a union having a sufficient interest could vary a previously-approved enterprise agreement without recourse to Subdiv A and that such a "variation" would be effective, the submission must be rejected. An enterprise agreement is a "statutory artefact" (Toyota Motor Corporation Australia Ltd v Marmara (2014) 222 FCR 152, 180 [90]) which takes its form from the instrument approved by the Commission under s 186. It cannot be varied by means for which the FW Act does not provide. Subject to the matter of timing, Div 7 is a comprehensive code with respect to the variation of an enterprise agreement. 16 It is the matter of timing with which the second of the submissions referred to above is concerned. The Union accepts that s 207(3) operates in the context of an enterprise agreement which has been approved under s 186, but submits, as we understand it, that amendments are permissible, and would be effective, if made before approval by the Commission. This submission requires some brief consideration of the provisions of Div 4 of Pt 2-4 of the FW Act. 17 By s 182(1), a single-enterprise, non-greenfields, enterprise agreement was "made" when a majority of the employees who would be covered by it and who had been asked to approve it under s 181(1) cast a valid vote to approve the agreement. By s 185(1), a bargaining representative was thereupon required to apply to the Commission for approval of the agreement. By s 186(1), the Commission was obliged to approve the agreement if the requirements of that section, and of s 187, were met. In ss 189 and 190, there were specific circumstances in which the Commission might approve an agreement notwithstanding that particular requirements were not, or may not have been, met. Finally, by s 192, the Commission was empowered to refuse certification if it considered that compliance with the agreement might result in a person committing an offence under, or becoming liable to pay a penalty for a contravention of, a law of the Commonwealth. 18 Upon a proper reading of the provisions referred to, the agreement which the Commission was required to approve under s 186 was the agreement made the subject of the bargaining representative's application under s 185; and that agreement, in turn, was the agreement approved by the valid majority of employees under s 182. There was no scope for the agreement to be varied along the way. To the extent that it might be found that the agreement as lodged with the Commission fell short of the requirements of ss 186 and 187, the solution, to the extent permitted by the legislation, was not to amend the agreement: it was as prescribed in ss 189 and 190. 19 It follows from this, and from the circumstance that the agreement was a statutory artefact which was not the property, as it were, of particular "parties", that the only way that an enterprise agreement might be varied was in compliance with the specific provisions of the legislation which permitted, and regulated, a variation, that is to say, the provisions of Div 7 of Pt 2-4 of the FW Act. Whether those provisions would have been available after the lodging of an agreement under s 185 but before the giving of approval under s 186 is a nice question, but it does not have to be answered in the present case, since resort was not had to Div 7 to seek approval for any variation of the 2010 Agreement. On the facts of the present case, and commencing with the premise that the Remuneration Document did purport to operate (in relation to incentive rates of pay) as a variation of the 2010 Agreement, then, subject to the Union's case in reliance on s 257 of the FW Act, it must be held that such a variation was ineffective. 20 That brings us to the Union's s 257 point which, as mentioned above, came to occupy centre stage before the primary Judge. The point involved consideration of two statutory provisions. The first was s 46AA of the Acts Interpretation Act 1901 (Cth) ("the AI Act"), which provided as follows: (1) If legislation authorises or requires provision to be made in relation to any matter in an instrument that is neither a legislative instrument for the purposes of the Legislative Instruments Act 2003 nor a rule of court, that instrument may, unless the contrary intention appears, make provision in relation to that matter: (a) by applying, adopting or incorporating, with or without modification, the provisions of any Act, or of any disallowable legislative instrument for the purposes of the Legislative Instruments Act 2003, as in force at a particular time or as in force from time to time; or (b) subject to subsection (2), by applying, adopting or incorporating, with or without modification, any matter contained in any other instrument or writing as in force or existing at the time when the first mentioned instrument takes effect. (2) Unless the contrary intention appears, the instrument may not make provision in relation to that matter by applying, adopting or incorporating any matter contained in an instrument or other writing as in force or existing from time to time. 21 The second provision was s 257 itself, which provided as follows: Despite section 46AA of the Acts Interpretation Act 1901, an enterprise agreement may incorporate material contained in an instrument or other writing: (a) as in force at a particular time; or (b) as in force from time to time. In his reasons, the primary Judge referred to s 46AA and s 257, together, as "the incorporation provisions". 22 His Honour perceived there to be a conflict between the provisions of Div 7 of Pt 2-4 of the FW Act and s 257 of that Act. The former laid down detailed conditions which had to be satisfied before an enterprise agreement could be varied. The latter contemplated variation by incorporation, unrestrained by those conditions. In the resolution of this conflict, his Honour gave consideration to some decided cases of very high authority on the subject of statutory interpretation and the circumstances in which a court may be entitled to read words into, or out of, the grammatical text. Fundamental to his Honour's analysis was the proposition, which his Honour regarded as self-evident, that s 257(b) of the FW Act, in its terms, permitted an enterprise agreement to provide for its own variation by the incorporation of material at any time subsequent to its making. 23 The problem, as his Honour saw it, was that – … the incorporation of a variable term, could … convert a complying term into a prohibited term (e.g., a non-discriminatory term into a discriminatory term, a term that is not inconsistent with Part 3-3 into one that is, a non-objectionable term into an objectionable term, and so on). Furthermore, an alteration of a variable term could result in the enterprise agreement no longer being BOOT [ie "better off overall test"] compliant. The extent of the alteration and the manner by which it was made may also impact upon whether, despite the initial approval by employees of the original form of the term, the altered term has genuine employee approval. And that – … there is tension with the Div 4 and Div 7 provisions if incorporation may be effectuated by a clause (like cl 3.10.1) that facilitates the incorporation of terms after the agreement is made and approved (post-approval terms). The incorporation of post-approval terms can also arise where terms are incorporated "as in force at a particular time" (s 257(a)) where the nominated time post-dates the approval time. The same position attends the incorporation of terms "as in force or existing at the time when the [enterprise agreement] takes effect" (s 46AA(1)(b) of the AI Act). If terms are incorporated through either of the processes just mentioned, they will not have been directly subjected to Div 4 scrutiny, either at all or in their form upon incorporation. Nevertheless, if valid, they will have had the effect of varying the enterprise agreement in the absence of Div 7 scrutiny. 24 His Honour did, however, find a way of reconciling the incorporation provisions with the requirements of Divs 4 and 7 of Pt 2-4. He said: 95 However, to my mind, the potential for tension is reconcilable. It is reconciled in the realisation that, just as the incorporation of fixed terms is subject to the full rigour of the Div 4 provisions, so too is the incorporation of variable or post-approval terms. It is the Commission, through its Div 4 and Div 7 scrutiny, that, in my view, is given the function of ensuring that the inclusion of variable terms or post-approval terms does not and will not undermine the genuine approval, BOOT, or content requirements of the FW Act for an enterprise agreement whilst in operation. 96 As I have sought to explain, the functions given to the Commission by Divs 4 and 7 require the Commission to be satisfied that the genuine approval, BOOT, and content requirements will be maintained throughout the operative life of an enterprise agreement. The potential for variable terms or post-approval terms to materially compromise those objectives will need to be avoided if the Commission is to properly perform its Divs 4 and 7 functions. That may involve a refusal to approve an enterprise agreement or a Div 7 variation to an enterprise agreement which contains those terms or provides a facility for their later incorporation. It should involve such a refusal where the potential for variable terms or post-approval terms to materially compromise the genuine agreement, BOOT, or content objectives is not conditioned by sufficient safeguards. 97 The nature of the material which is or may be incorporated may of itself provide a sufficient safeguard. It is common for enterprise agreements to incorporate terms from other enterprise agreements or from modern awards, as in force from time to time. By their nature, instruments of that kind require Commission approval including when varied. That, in itself, may provide a sufficient safeguard. 98 The scope of a clause (such as cl 3.10.1) to facilitate the post-employee approval or post-Commission approval incorporation of what I have called post-approval terms could be confined by textual limitations or restrictions, in the clause, sufficient to satisfy the Commission that each of the genuine agreement, BOOT, and content requirements will be maintained without being materially compromised. Those restrictions could impose subject matter restrictions, limit the extent of any permissible alteration, impose boundaries of various kinds, and specify fall-back entitlements to ensure that there is no overall disadvantage to the employees covered by the enterprise agreement. The nature and extent of any necessary limitation or restrictions will depend upon the subject and extent of any potential for alteration. The potential for the FW Act's objectives to be compromised may also be negatived by the Commission accepting appropriate undertakings pursuant to s 190 of the FW Act. 25 It was, in our respectful view, an error for the primary Judge to have read s 257 as permitting what was impermissible under the specific provisions of Divs 4 and 7 of Pt 2-4 of the FW Act, thereby creating a "tension" which could be resolved in the way proposed by his Honour. Indeed counsel for the Union on appeal, quite correctly in our view, conceded that, if a variation were rendered ineffective by the terms of s 207(3), that situation was not reversed, as it were, by s 257. We would extend that proposition to any purported variation, whether before or after the Commission's approval under s 186, which made the agreement something different from that which had been approved under s 182. 26 But s 257 did have important work to do. Absent s 257, the effect of s 46AA(2) of the AI Act would have been that an enterprise agreement could not make provision in relation to a matter by applying, adopting or incorporating any matter contained in an instrument or other writing as in force or existing from time to time. That would constitute a very severe restriction upon the terms which employers and their employees might choose to include in an enterprise agreement in circumstances where no variation, or possible future variation, was involved. It was to qualify – although not completely to exclude – the operation of that rule that s 257 of the FW Act was enacted. 27 In a passage to which the primary Judge adverted, the Explanatory Memorandum for s 257 gave an example: This clause … enables an agreement to incorporate material as in force from time to time so that if, for example, an agreement incorporates the terms of a modern award that is amended six months after the agreement commences operation the agreement will incorporate the amended award terms. In such an example, there could be no suggestion that the enterprise agreement itself would be varied. Rather, according to its unvaried terms, it would pick up the terms of a reference award as they existed from time to time. 28 Section 257 had this limited, targeted, operation. It was not intended to make effective a provision in an enterprise agreement that purported to provide for the future variation of the agreement otherwise than by recourse to the procedure for which Div 7 provided. Its function was only to qualify the impact of s 46AA of the AI Act. If, otherwise than under that section, the incorporation of a provision was rendered ineffective – such as was the case under s 207(3) – s 257 had nothing to say on the subject. 29 There may have been a question whether cl 3.10.1 of the 2010 Agreement was a true incorporation term of the kind contemplated in the Explanatory Memorandum for s 257 as set out above, ie, a term which operated otherwise than as bringing about a variation of the 2010 Agreement in defined events. In the present case, any such question would have to be resolved adversely to the Union, for two reasons. First, the primary Judge held that, under cl 3.10.1, the Remuneration Document did bring about a variation of the 2010 Agreement, and there has been no Notice of Contention in relation to that holding. Secondly, we consider that his Honour was correct in that holding. It is quite clear that cl 3.10.1 of the 2010 Agreement went beyond merely incorporating the terms of a reference document as they existed from time to time: it provided for that agreement to be varied upon the making of a new free-standing agreement containing a basis of remuneration which was inconsistent with that contained in the wages clause of the 2010 agreement itself. 30 It will be apparent to the parties to this appeal that we would decide it without reference to one of the arguments upon which the appellant principally relied, namely, that the "instrument" referred to in s 257 of the FW Act had to be "in force" at the time when the enterprise agreement was "made" (ie, in the present case, 9 November 2009). The facts do not require us to resolve a number of potentially difficult issues as to the relationship between the operation of s 257 and the timing of the making, and approval, of an enterprise agreement under Div 4 of Pt 2-4. For example, this would not be the case to decide that material contained in a modern award made on 15 June in a year, but operative from 1 July pursuant to s 49(1)(a) of the FW Act, could not be incorporated in an enterprise agreement "made" under s 182 on 20 June in the same year. In short, it would be inappropriate for the present case, with its very particular facts, to be the vehicle for a categorical determination of the kind sought by the appellant. 31 For the reasons earlier given, however, the appeal should be allowed in part. There should be a declaration that the incentive payment provisions of the Remuneration Document did not have effect as a variation of, and did not become terms of, the 2010 Agreement. Although the appeal was against both of two orders made by the primary Judge on 5 January 2016, no challenge was advanced to the second of those orders, which provided only that there be no order as to costs. Given the terms of s 570 of the FW Act, that order should stand. I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Jessup, Tracey and Barker. Associate: Dated: 9 September 2016