Grass looks greener for ALDI enterprise agreement

The High Court has held that an employer can make an enterprise agreement with existing employees covering work at a new site, but there is still a BOOT challenge to come.

What you need to know

• The High Court has partly overturned the decision of the Full Court of the Federal Court (Shop, Distributive & Allied Employees Association v ALDI Foods Pty Ltd [2016] FCAFC 161). In the Federal Court decision, the Full Court overturned the decisions of the Fair Work Commission to approve an enterprise agreement for a new business site of ALDI (see our previous alert on the decision here).
• The High Court overturned the Full Court's decision in respect of coverage. It held that employees can be covered by an agreement when they are employed at the time of voting but they have not yet started working in the roles specified in the enterprise agreement.
• In relation to the BOOT, the High Court upheld the Full Court's finding that the Fair Work Commission fell into jurisdictional error by not determining whether the agreement satisfied the BOOT after new evidence was submitted. The Court has directed the Fair Work Commission to re-determine whether the agreement meets the BOOT.

What you need to do

• Employers setting up a new enterprise should consider whether it is preferable to make an agreement with existing employees, rather than making a greenfields agreement.

The appeal to the High Court considered two key issues:

• whether the agreement was made with employees that would be "covered by" the agreement and therefore, whether the agreement was validly made; and 
• whether the Full Bench of the Fair Work Commission made a jurisdictional error when it only considered whether the Commissioner had made an appealable error and failed to determine whether, on the basis of new evidence, the BOOT test was met.

Coverage of employees not yet performing work

ALDI was in the process of establishing a new "region" in Regency Park in South Australia. It offered employment in that region to a number of existing employees who were working for ALDI in other regions. Each employment offer noted that the employee was being offered ongoing employment in the Regency Park region, commencing when the new region opened – anticipated to occur around October 2015. The offers were accepted by 17 employees.

ALDI commenced bargaining with these employees for an enterprise agreement to cover the new region without the involvement of a union. The agreement was voted up by the employees at a time when the distribution centre in the region was still under construction and trading had not commenced. At the time the agreement was made the employees were still working in their existing roles.

The Shop, Distributive and Allied Employees Association (SDA) argued that the enterprise agreement had not been validly made on the basis that the employees were not yet working in the roles listed in the agreement and therefore were not yet "employed". Essentially, the SDA argued that the agreement should have been made as a greenfields agreement because it related to a new enterprise and there were no employees employed by the enterprise. If accepted, this argument would have mandated a role for the SDA in bargaining.

The SDA also submitted that employees could not be "covered" by an agreement where they had not started doing the work under the agreement and that therefore, the agreement had not been genuinely agreed to by employees covered by it.

The High Court unanimously dismissed the appeal with respect to the coverage issue. The Court held that employees can be covered by an agreement when they are employed at the time of voting notwithstanding that they had not yet started working in the roles specified in the enterprise agreement.

The High Court did not accept the SDA's submission that the agreement was a greenfields agreement. The Court held that there is no requirement that an enterprise agreement relating to a new enterprise be made as a greenfields agreement.

The Court considered that under the SDA's approach – that employees are only covered by an agreement when they are doing the work under that agreement – the distinct concepts of coverage and application would become synonymous.

The Court noted the difference in tense used throughout the Act when reference was made to employees who were "covered by" or who "will be covered by" an agreement. It said that this simply reflects the fact that until an agreement is made, it is natural to refer to employees who will be covered and to employees who are so covered once the agreement is made.

Any difference in terminology in the Act – ie, "covered by" and "will be covered by" – was said by the plurality to be attributable to the fact that an agreement cannot cover employees until it is made and should not be given any greater significance.

The plurality said that the question for the Fair Work Commission to determine when considering whether an agreement has been genuinely agreed by employees is not whether employees who voted were employed under the agreement, but whether it covers all employees who may in future have the terms and conditions for their jobs regulated by it.

Application of the BOOT

Before the Full Bench, the SDA adduced additional evidence which it said supported its submission that the agreement did not meet the BOOT. The Full Bench dealt with this by concluding that the Commissioner had not made an appealable error.

The High Court upheld the Full Federal Court's finding that the Full Bench fell into jurisdictional error by failing to determine factual issues raised by the new evidence SDA adduced. The appeal to the Full Bench is an appeal by way of rehearing. Once the new evidence was admitted, the Full Bench was required to determine whether, on the basis of all of the evidence, the BOOT was satisfied.

Authors: Jon Lovell, Partner; Geoff Giudice, Consultant; and Olivia McIntosh, Lawyer.