The High Court has partly allowed an appeal against a decision of the Full Federal Court on the regional coverage of enterprise agreements and the operation of the ‘better off overall test’. ALDI offered seventeen employees currently working in ALDI stores around Australia positions in a new ‘region’ of operations in South Australia. A majority of these employees voted to approve an enterprise agreement with ALDI. The appellant unions, who were not involved in the making of this agreement, challenged it before the Fair Work Commission on the basis that it should have been a ‘greenfields agreement’ under pt 2-4 of the Fair Work Act 2009 (Cth), and that it did not pass the ‘better off overall test’ (‘BOOT’). The Fair Work Commission disagreed, ruling that the agreement was valid, and this ruling was upheld by the Full Bench. A majority of the FCAFC allowed an appeal against the Full Bench’s decision, holding that the agreement was not valid because it did not meet the requirement in s 186 that it be ‘genuinely agreed to’ because at the time of the vote the region had no employees at the time. The FCAFC also held that the FWCFB erred in applying the BOOT test.

The Court (Kiefel CJ, Bell, Keane, Nettle, Gordon and Edelman JJ, Gageler J agreeing) partly allowed the appeal, holding that the FCAFC erred in its holding on the coverage issue, but was correct in its view of the BOOT issue (at [4]). (Consequently, it was not necessary to determine the issues relating to jurisdictional error or the applicability of certiorari: at [4], and see [1] and [2].) The joint judges noted that the FWCFB and FCAFC took different approaches to construing the provisions on coverage — whereas the FWCFB focused on s 172, the FCAFC focused on s 186 (at [15]) — and emphasised that the Act’s provisions must be understood ‘as parts of a coherent whole’ (at [16]).

After reviewing the legislative provisions on greenfields agreements in s 172 (at [20]ff), the general provisions of s 52 and 53 on when an agreement ‘applies’ to an employee (at [26]ff), representation rights (at [35]ff), the making of enterprise agreements (at [39]ff) and the BOOT (at [54]ff), the joint judges summarised the main points of the reasoning of the FWCFB (at [56]ff) and the FCAFC (at [63]ff). Dealing first with the coverage issue, the joint judges held that the FCAFC’s conclusion, and the respondent union’s argument that the agreement was not a greenfields agreement because the present employees were not relevantly ’employed’ as required by s 172(2)(a) because the work that the agreement related to had not yet actually begun, fails to accommodate the distinction between coverage and application made by ss 52 and 53 of the Act (at [73]–[75]). The joint judges earlier emphasised that ss 52 and 53 ‘expressly indicate that an enterprise agreement may cover and employee when it is not in operation, but it can only apply to an employee when it is in operation’ (at [26], emphasis in original). Secondly, the respondent’s contention and the FCAFC’s reasoning went against the plain and ordinary meaning of s 172: those provisions do not contemplate making non-greenfields agreements with people already employed, and while s 186 assumes there are employees covered by an agreement when the approval application is made, it does not necessarily apply to them and their work actually performed at that time (at [76]). The joint judges then turned to coverage (at [77], [78]):

The question of coverage that arises when the Commission asks whether the agreement has been genuinely agreed to for the purposes of s 186(2)(a) is not whether the employees voting for the agreement are actually employed under its terms, but rather whether the agreement covers all employees who may in future have the terms and conditions of their jobs regulated by it. At the stage of considering whether an enterprise agreement is available to be made under s 172 of the Act, ie when no agreement has as yet been made, it is a natural and ordinary use of language to speak of the employees whose jobs are within the scope of the proposed agreement as employees who ‘will be covered’ by the agreement. At the stage of considering whether an enterprise agreement, which has been made (by virtue of s 182(1)), should be approved pursuant to s 186(2)(a), it is a natural and ordinary use of language to speak of the employees, whose jobs are described by the terms of the agreement which has been made, as employees who ‘are covered’ by the agreement.

The Full Court erred in acceding to the SDA’s invitation to give the change in tense between ss 172 to 181 and ss 186 and 188 an effect which overrides the distinctions drawn by s 172 and ss 52 and 53 of the Act. The change in tense is of no greater significance than to recognise that an agreement is not capable of covering an employee in any meaningful sense until it has been made. A coverage clause in an enterprise agreement may expressly provide that it covers every job description that may, at some time, be necessary to the work regulated by it, but the agreement is not available as a charter of the terms and obligations apt to effect that regulation until it has been made. That this is so should hardly be surprising. An enterprise agreement when made has the same effect, so far as coverage is concerned, as a modern award, which, when made, affords those who thereafter accept employment under its terms a charter of their rights and duties in that employment.

This reading of the tense changes is reflected in the Act’s provisions on varying an enterprise agreement (see [79]–[81]). And the conclusion that a non-greenfields agreement can be made with two or more employees, provided they are the only employees at the time of the vote who will be covered by the agreement, is consistent with the FCAFC’s earlier ruling in CFMEU v John Holland Pty Ltd [2015] FCAFC 16 (see [83]ff). The joint judges concluded that nothing in s 172 prevented the votes of a few original employees from binding the wider group that grows with the enterprise itself, and the FCAFC erred in treating that possibility as unacceptable (at [86]ff).

Turning to the BOOT issue, the joint judges held that the FCAFC was correct in ruling that the FWCFB fell into jurisdictional error in its assessment of the BOOT. The BOOT requires a comparison between the terms and conditions under the proposed agreement, and those under the modern award to see whether, overall, an employee would be better off (at [92]). The FWCFB’s reasons did not contain anything to suggest that, regardless of the comparison clause, that it found the employees would be better off under the Agreement, and thus could not conclude that it had passed the BOOT: it simply summarised ALDI’s submission on the comparison clause and accepted that that showed the Agreement passed the BOOT (at [94]ff).

Consequently, the High Court made orders quashing the FWCFB’s original decision by writ of certiorari, and issued a writ of mandamus directing the FWCFB to determine the BOOT issue according to law (at [102]ff).

Gageler J agreed with the orders and reasoning of the joint judges, adding one observation on the issue of coverage, emphasising that the words ’employees’ and ’employer’ in ss 172 and 186 are without temporal significance (at [107], [108]), and that the employees referred to in s 186(2) cannot extend to the totality of employees to be covered in the future (at [109]ff).