The Federal Court decision in John Holland Pty Ltd v Construction, Forestry, Mining and Energy Union and Fair Work Commission  FCA 286 (27 March 2104) confirms that an employer can enter into an enterprise agreement with a limited number of employees, but with the capacity to apply over time to a wider range of employees.
John Holland Pty Ltd (John Holland) was awarded the contract to build the $1.2 billion Perth Children’s Hospital. John Holland employed three employees to perform building and construction work, and only expected to employ a total of 25 direct employees at the hospital site (the bulk of the work to be carried out by subcontractors).
On 12 January 2012, John Holland held a meeting with the three employees. In this meeting, the employees each appointed themselves as bargaining representatives for purposes of negotiating an enterprise agreement (Agreement) with John Holland under the Fair Work Act 2009 (Cth) (FW Act). On 13 February 2012, the three employees voted in favour of the Agreement and were the only employees covered by the Agreement when it was made.
At the time of making the Agreement, John Holland was tendering as head contractor for other major government projects in Western Australia and also some private projects. In this context, it was relevant that:
On 13 February 2012, John Holland lodged an application with Fair Work Australia (FWA) (as it then was) under section 185 of the FW Act for approval of the Agreement. The application was opposed by the Construction, Forestry, Mining and Energy Union (CFMEU).
The Agreement was approved on 22 May 2012 by Deputy President McCarthy. A central issue was whether the three employees covered by the Agreement had been “fairly chosen” pursuant to section 186(3) and (3A) of the FW Act. This involved taking into account whether this group of employees was “geographically, operationally or organisationally distinct.”
McCarthy DP held that the group of employees had been fairly chosen, finding that the three employees were geographically and operationally distinct, but not organisationally distinct.
The CFMEU appealed against the decision, and a Full Bench of FWA upheld the appeal and quashed the original decision by Deputy President McCarthy.
The Full Bench’s reasoning included findings that:
John Holland applied for judicial review of the decision of the Full Bench. The main ground of the appeal was that the Full Bench had erred in asking itself about the possible future size and composition of the group of employees to be covered by the Agreement, rather than identifying the chosen group from a proper construction of the Agreement.
FWC does not have to be satisfied as to the number of potential employees to be covered by an agreement
In allowing the appeal, Justice Siopis of the Federal Court noted that the power to make an agreement under the FW Act resides in the parties to the agreement, and that an agreement is made when the majority of employees covered by the agreement vote in favour of it.
Justice Siopis found it was significant that section 186(3), which states that the Fair Work Commission (FWC) must be satisfied that the group of employees covered by an agreement “was fairly chosen”, employs the past tense (“was”). This meant that the conduct of those people who made the Agreement must be examined (i.e. had they acted fairly in choosing the employees to be covered?); and future employees who would potentially be covered by the agreement should not be considered.
Although section 186(3A) requires the FWC to consider whether the group chosen was geographically, operationally or organisationally distinct, Justice Siopis held that these considerations constituted legitimate business characteristics; and exist to preclude the exclusion of employees from agreement coverage based on extraneous characteristics (e.g. membership of a political party or place of birth).
There was nothing in the language of section 186(3) or section 186(3A) which “conditions the exercise by [the FWC] of the power under s 186(3) to approve an agreement, upon [the FWC] being satisfied as to the number of employees who will, or may, during the term of the agreement, be covered by the agreement.”
Justice Siopis held that the Full Bench had therefore erred, in stating that it could not assess whether the group of employees was fairly chosen because it was unable to determine how many employees would be covered by the Agreement.
No requirement to consider whether collective bargaining was undermined
Justice Siopis considered section 578(a) of the FW Act, which requires the FWC to take into account the objects of the legislation when exercising its powers. However, Justice Siopis found that that requirement did not “imbue the words of the statute with concepts which are not to be found in those words when properly construed.”
Applying that approach, Justice Siopis held that there was nothing in the wording of section 186(3) and (3A) which required that the term “fairly chosen” should be construed “in a manner which would not undermine collective bargaining.” Furthermore, there are specific provisions in Part 2-4 of the FW Act which give the FWC power to withhold approval of an agreement on grounds of inconsistency with the objects of that Part (e.g. section 187(2)). Justice Siopis found it was significant that there was no similar provision permitting the FWC “to withhold approval on the grounds that it is of the view that the approval of the agreement would undermine collective bargaining.”
Construction, Forestry, Mining and Energy Union v John Holland Pty Ltd  FWAFB 7866 (13 September 2012). See our earlier In Brief here.
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