The Case

One Key Workforce (One Key), a labour hire business that provides contract labour, sought to have an enterprise agreement – RECS (Qld) Pty Ltd Agreement 2015 (Agreement) – approved by the Fair Work Commission (FWC). One Key recruited three employees covered by the Agreement who voted to approve it.

Before the three employees voted, One Key management telephoned and emailed each of the employees to explain the terms and effect of the Agreement. This was aimed to meet the requirements of section 180(5) of the Fair Work Act 2009 (Cth) (FW Act).

Section 180(5) requires that an employer take all reasonable steps to ensure that:

(a) the terms of the agreement, and the effect of those terms, are explained to the relevant employees; and

(b) the explanation is provided in an appropriate manner taking into account the particular circumstances and needs of the relevant employees.

The Agreement was drafted to cover employees under 11 modern awards. However, given at the time of the vote, One Key only had three employees, there were no employees employed under many of the modern awards to which the Agreement would apply.

One Key then applied to the FWC to have the Agreement approved.

The Verdict

The FWC approved the Agreement, finding that:

• the employees selected to vote on the Agreement were fairly chosen; and
• One Key had taken all reasonable steps to explain the terms and effect of the Agreement.

When the Construction, Forestry, Mining and Energy Union (CFMEU) became aware of the Agreement, it applied to the Federal Court of Australia (FCA) to overturn the approval made by the FWC.

The FCA found the FWC did not have jurisdiction to approve the Agreement, as One Key had not followed the mandatory pre-approval steps. Namely:

• The three employees who voted in favour of the Agreement could not be used to evidence genuine agreement to the terms of an Agreement that covered 11 different modern awards. While Justice Flick did not need to decide if the Agreement was a sham, he said the fact One Key had employed more than 1,000 employees within 6 months of the Agreement being made indicated the process One Key engaged in was intended to prevent a genuine bargaining process and industrial action that may be bought in support of bargaining claims by a larger group of employees.
• One Key had failed to take all reasonable steps to explain the terms and effect of the Agreement. Justice Flick held that the telephone call and email made by One Key management only recited the clauses of the Agreement and did not actually provide an explanation to the employees.

Lessons for You

While this decision still enables employers to enter into enterprise agreements with a small cohort of employees:

• there should be genuine business reasons for doing so, to avoid an argument that the process is a sham or designed to prevent a genuine bargaining process;
• the group of employees who vote must be representative of the group of employees who will be covered by the enterprise agreement when it is fully operational; and
• the terms and effect of the enterprise agreement need to be fully explained to employees. It is not sufficient to simply recite the clauses of the Agreement.

Please note: Case law is reported as correct and current at time of publishing. Be aware that cases in lower courts may be appealed and decisions subsequently overturned.