Undertakings

See Fair Work Act 2009 ss.190–191

Where the Fair Work Commission has a concern that an enterprise agreement does not meet the requirements of ss.186 and 187 of the Fair Work Act (which include the better off overall test), the Commission may accept a written undertaking that meets this concern and approve the agreement.

Before accepting an undertaking, the Commission must:

• seek the views of each known bargaining representative for the agreement
• be satisfied the effect of accepting the undertaking is not likely to cause financial detriment to any employee covered by the agreement, or result in substantial changes to the agreement.

An undertaking relating to an enterprise agreement must be signed by each employer who gives the undertaking.[1]

A residual discretion remains to be exercised even if the undertaking that has been accepted meets the identified concern.[2]

If an undertaking is accepted, the terms of the undertaking are taken to be a term of the agreement.[3]

An undertaking that is expressed as varying a particular provision in an enterprise agreement should be taken to be a promise by the employer that the provision will not be applied and the term as set out in the undertaking will be.[4]

An undertaking can only be accepted where there is a concern under ss.186 and 187; not to address other deficiencies.[5]

'Section 190(3) does not permit undertakings that result in the wholesale reshaping of the agreement, such that it bears no resemblance to the pre-undertaking agreement that was approved by employees.'[6]

Related information

• Model flexibility term – Schedule 2.2
• Model consultation term – Schedule 2.3

The process for offering and accepting undertakings, assessing whether an accepted undertaking meets the requisite concern, and considering whether to approve an enterprise agreement may be summarised as follows:

1. There must be made an application for approval of an enterprise agreement.
2. The Commission must have a concern that the agreement does not meet one or more of the requirements set out in ss.186 and 187 of the Fair Work Act. It should go without saying that the relevant concern needs to be identified by the Commission and communicated to the applicant for the approval of the agreement, and where the applicant is a bargaining representative for the agreement which is not the employer, also communicated to the employer or employers covered by the agreement. Only an employer or employers covered by an agreement can give an undertaking.
3. There must be a written undertaking from one or more of the employers covered by the agreement and that undertaking must meet the signing requirements.
4. The Commission must assess and be satisfied that the effect of accepting the undertaking is not likely to cause financial detriment to any employee covered by the agreement or result in substantial changes to the agreement.
5. Before accepting an undertaking the Commission must seek the views of known bargaining representatives for the agreement.
6. If the undertaking is accepted the Commission must be satisfied that the accepted undertaking meets its concern before it may approve the agreement.
7. There is a residual discretion to be exercised whether to approve the agreement with the undertaking that has been accepted and that meets the identified concern.[8]

Views of bargaining representatives NOT sought

Australian Workers' Union v Roadworx Surfacing Pty Ltd

Australian Workers' Union v Roadworx Surfacing Pty Ltd [2011] FWAFB 1759 (Harrison SDP, Richards SDP, Williams C, 10 May 2011), [(2011) 207 IR 362].

All employees covered by an agreement had appointed themselves bargaining representatives. Prior to the vote for the agreement, a number of the employees revoked their own appointments, resulting in the AWU becoming a default bargaining representative. The enterprise agreement was ultimately made and an application for its approval was made to the Commission. There were concerns as to whether the agreement could be approved, but ultimately it was approved with undertakings.

The AWU appealed the decision to approve the agreement, arguing that, among other issues, bargaining representatives were not shown a copy of the undertakings or asked for their views. The Full Bench found that the legislation required that all bargaining representatives, including the AWU and the employees who had appointed themselves, should have been provided with a copy of the undertakings and their views should have been sought.

Accordingly, the decision to approve the agreement was quashed.

An undertaking that reduces or removes an employee entitlement in an agreement and consequently be likely to cause financial detriment cannot be accepted by the Commission. This would change the nature of the agreement and may have affected the way the employees chose to vote on it.

Undertakings – NO financial detriment

Re Bupa Care Services Pty Ltd

Re Bupa Care Services Pty Ltd [2010] FWAFB 2762 (Acton SDP, Sams DP, Williams C, 15 April 2010), [(2010) 196 IR 1].

An appeal was made against decisions of the Commission to refuse the approval of ten agreements which contained preferred hours clauses. The clauses provided that where an employee requested to work additional hours, those additional hours would be paid at their ordinary hourly rate and would not attract overtime payments.

The appeals were dealt with concurrently due to the similarity in the clauses in the agreements that lead the Commission to refuse approval.

The Full Bench found that the Commission erred in not providing the employers with an opportunity to provide a written undertaking to meet the concerns about the preferred hours clauses.

The Full Bench was satisfied that, in relation to each of the ten agreements, the relevant detriment to employees as a result of the clause was financial and that the detriment could be removed by an undertaking.

The decisions not to approve the agreements were quashed, and each application referred back to the Commission for consideration.

The Commission cannot accept an undertaking unless the effect of accepting it is not likely to result in substantial changes to the agreement. This suggests that minor changes to an agreement resulting from an undertaking are permissible.[10]

To view proposed undertakings as a variation to an agreement rather than an undertaking merely because of the expression used in the undertakings is 'to adopt an unnecessarily technical approach to the giving undertakings and is not one that is warranted'.[11]

In the decision Re Hyatt Ground Engineering Pty Ltd [12] the Commission said:

Undertakings – NO substantial change

Re Australian Industry Group

Re Australian Industry Group [2010] FWAFB 4337 (Giudice J, Watson SDP, Blair C, 11 June 2010).

An application was made for approval of the Newlands Coal Dunlop Foams (NSW) Collective Agreement 2009. At first instance, the Commission approved the agreement.

The Australian Industry Group appealed the decision on the basis that the agreement contained an unlawful term, dealing with right of entry.

The Full Bench concluded that the term was an unlawful term, and that the agreement should not have been approved in that form. However, the Commission would accept an undertaking from the employer that the any exercise of a power under the unlawful term would be in accordance with the provisions of the Fair Work Act, subject to agreement to the undertaking by the bargaining representatives.

Undertakings – substantial change

Australian institute of Marine and Power Engineers v Inco Ships Pty Ltd

Australian institute of Marine and Power Engineers v Inco Ships Pty Ltd [2011] FWAFB 1537 (Watson SDP, McCarthy DP, Deegan C, 10 March 2011), [(2011) 204 IR 66].

The AIMPE sought permission to appeal a decision at first instance approving the Inco Ships Pty Ltd Officer Collective Agreement 2010 MV CSL Melbourne. Under the terms of the agreement, employees were provided with increased salary in lieu of entitlements to long service leave and redundancy pay. In this case, the relevant long service leave entitlements were sourced in an award which allowed entitlements to be cashed out in advance.

The agreement provided for the incorporation into salary of an amount in respect of long service leave and extinguished any entitlement to long service leave and payment for long service leave upon termination. The agreement did not include terms that had the same (or substantially the same) effect as provisions of the NES in respect of long service leave.

The Full Bench concluded that the contraventions of the NES within the agreement could not be remedied by an undertaking because such an undertaking would result in substantial changes to the agreement. In addition, any undertaking would cause financial detriment to an employee covered by the agreement.

The Full Bench granted permission to appeal and upheld the appeal. The decision of the Commission approving the agreement was quashed.

Re Kore Construction Pty Ltd

Re Kore Construction Pty Ltd [2014] FWC 1955 (Gostencnik DP, 24 March 2014).

Kore Construction lodged an application for the approval of the Kore Construction Enterprise Agreement 2013. The Commission found that the agreement as lodged for approval did not pass the BOOT.

Kore Construction proposed a series of undertakings to address the concerns of the Commission. The CFMEU submitted that the proposed undertakings would result in a substantial change to the agreement and should not be accepted.

The Commission found that it was clear from the nature of the proposed undertakings that each sought to address any financial disadvantage under the agreement when compared to the modern award. However, when the undertakings were examined in their entirety, it was clear that they resulted in substantial changes to the agreement. The undertakings involved changes to the wage rates attached to classifications in the agreement, the inclusion of substantive new provisions into the agreement, and the inclusion of substantive allowances not previously provided for in the agreement.

The proposed undertakings were not accepted and the Commission declined to approve the agreement.

Construction, Forestry, Maritime, Mining and Energy Union v Lightning Brick Pavers t/a Lightning Brick Pavers

Construction, Forestry, Maritime, Mining and Energy Union v Lightning Brick Pavers t/a Lightning Brick Pavers [2018] FWCFB 3825 (Hatcher VP, Catanzariti VP, Gostencnik DP, Lee C, Harper-Greenwell C, 28 June 2018).

At first instance the Commission approved the Lightning Brick Pavers Enterprise Agreement 2017-2021 with undertakings. The CFMMEU contended that the Commission erred in approving the Agreement because the approval was based on the acceptance of undertakings which resulted in substantial changes to the Agreement contrary to s.190(3) of the Fair Work Act.

The Full Bench found that the undertakings, which ran to almost 5 pages of text, were extensive in scope and altered a range of conditions in the Agreement in an extensive way. Whilst some of the undertakings were relatively minor and were entirely beneficial to employees, others were much more significant.

First, the remuneration structure was reshaped entirely. The Agreement contains a loaded rate structure, that was changed to a different structure which involved significantly lower ordinary rates of remuneration, a restoration of some of the Award allowances and a higher rate of overtime. Second, the scale of redundancy payments was changed in a way which reduced them for employees with from one to about 2½ years' service. This constituted a straight out reduction in the redundancy entitlement.

The Full Bench held that the acceptance of the undertakings was critical to the Commission's determination to approve the Agreement. The Full Bench found that in the circumstances the Commission erred in approving the Agreement, as the undertakings could not have been accepted because they were incapable of satisfying the condition in s.190(3)(b). Permission to appeal was granted and, because of the extent to which the undertakings altered the terms of the Agreement, the appeal was upheld and the decision quashed.