FWA gives green light to contracting clauses

Ai Group (supported by the Australian Mines and Metals Association (AMMA)) appealed against the approval of the ADJ Contracting Pty Ltd Enterprise Agreement 2010-2014, which was said to be the first of a series of ‘template’ agreements for the Victorian electrical contracting industry, on the basis that it contained a number of objectionable terms. A majority of the full bench dismissed each ground of the appeal, with Richards SDP dissenting in relation to the right of entry term in the agreement (discussed below).

Job security clause

The agreement contained a term generally limiting the engagement of contractors by the employer to those whose wages and conditions were no less favourable than those in the agreement. Ai Group and AMMA argued that this clause ‘requires, or permits’ a breach of the general protections, because it required the employer to refuse to engage or use contractors with an enterprise agreement or other workplace instrument containing less generous terms and conditions of employment than those in the agreement. At first instance, Acton SDP found that the term only dealt with the level of wages and conditions to be applied by contractors, not whether the contractor was covered by an enterprise agreement or other workplace instrument. The full bench agreed with this approach, which it found was consistent with the decision in Asurco Contracting Pty Ltd v Construction, Forestry, Mining and Energy Union.

Ai Group argued that employers had a ‘workplace right’ to employ its employees at the rate prescribed in the relevant workplace instrument. Noting that there is no authority on this question, the full bench proceeded on the assumption that such a right could exist, but went on to find that the job security clause only dealt with the wages and conditions to be applied by the contractor and there was nothing in the clause that required the employer to act in a certain way ‘because’ of the existence of the contractor’s workplace right.

Breach of the Competition and Consumer Act 2010 (Cth) (‘CCA’)
Ai Group also argued that the job security clause should have meant that the agreement was refused approval by FWA under section 192 of the Fair Work Act, because compliance with the clause could result in a person committing an offence under the trade practices provisions of the CCA. The full bench found that there was no evidence in this case that there was the requisite ‘meeting of the minds and a consensus as to what is to be done’ so as to constitute an arrangement or understanding between the employer and the union – noting also that the agreement was made under the Act with employees, not the union. While the full bench did not go so far as to say an enterprise agreement could never be an ‘arrangement or understanding’ for the purposes of the CCA, it dismissed the argument on the evidence in this case. The full bench also refused to deal with additional grounds of appeal not raised in the proceedings at first instance, including an argument by AMMA that the job security clause could result in the commission of an offence under the Building and Construction Industry Improvement Act 2008.

The full bench also commented that:

  • Even if the clause did result in a contravention of the CCA, FWA has discretion as to whether to refuse approval of an agreement on this ground;
  • To the extent that an agreement term is unlawful, it has no effect, so FWA would have had to consider the interaction between the agreement approval provisions and the operation of unlawful terms;
  • It would be surprising if a permitted matter was also an unlawful term (referring to the Explanatory Memorandum to the Fair Work Bill, which says that job security clauses are permitted matters); and
  • As the employer did not participate in the appeal, there was no evidence about the nature of its business or the likelihood of any of the scenarios put by Ai Group and AMMA arising and FWA was not prepared to ‘use its imagination’.

Right of entry other than in accordance with Part 3-4

Ai Group argued that the right of entry clause in the ADJ agreement was unlawful, because it provided for a right of entry inconsistent with Part 3-4 of the Act. The Full Bench referred to Construction, Forestry, Mining and Energy Union v Moyle Bendale Timber Pty Ltd, agreeing with the CFMEU’s submissions in that case that:

  • Part 3-4 of the Act is not an exclusive code governing right of entry;
  • Enterprise agreements can include additional rights of entry as long as they are not for the purposes of investigating a suspected breach or holding discussions with employees
  • A term is not unlawful if it provides for right of entry for a different purpose to that for which right of entry is provided under the Act.

The majority found that the particular right of entry clause allowed for representation of employees in disputes (and not for any other purpose) and was not unlawful. Richards SDP dissented, finding that the broad scope of the dispute settlement term (which included dealing with disputes over statutory entitlements) meant that right of entry under the agreement term to represent employees in disputes could be for the same purpose as that of holding discussions with employees or investigating suspected breaches, and as such was unlawful because it provided for a right of entry for that purpose other than in accordance with Part 3-4 of the Act.

Richards SDP commented that because the Act does not seek to regulate the purpose of unions holding discussions with employees, the broad right entry for discussion purposes arises from the representative role of the union. He went on to find that where an agreement term provides for right of entry for the purposes of representing employees (including in relation to investigating a suspected contravention of the Act or in any other relevant dispute or context which may extend to holding discussions with employees) it can only provide for right of entry in accordance with Part 3-4 of the Act.

‘Inducement’ of union membership action

Ai Group argued that a clause of the ADJ agreement was unlawful because it required the employer to promote union membership, contrary to section 350 of the Act, which prohibits the inducement of membership action. The full bench agreed with the earlier decision of Acton SDP, in which she found that ‘induce’ does not mean ‘promote or encourage’. The full bench also noted that there was no evidence before it in relation to any alleged ‘inducement’ and that in any event, if a scenario arose where it was said that ADJ had induced a person to take union membership action, proceedings could be brought against it under section 350 at that time.