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[2013] FWC 5033
Fair Work Commission
2013-08-07
Deputy President Richards, President Richards, Senior DP Richards
Original judgment source is linked above.
s.185 - Application for approval of a single-enterprise Agreement
Construction, Forestry, Mining and Energy Union
(AG2013/2021; AG2013/2058; AG2013/1935; AG2013/2002; AG2013/1973; AG2013/1978; AG2013/1938; AG2013/1934; AG2013/1932; AG2013/7655)
Section 185 application for approval - permitted content - supplementary labour provisions - industry template agreement - limitation on use of contractors - s.172(1) - s.253.
[1] In the course of the approval process for the various Agreements cited below, ("the Agreements") for which the CFMEU had sought approval, sub clause 35.3 of each of the Agreements (which arises from an industry template agreement) was identified as being a term that required some further consideration in each case.
[2] Sub clause 35.3 of the Agreements provides as follows:
Where there is a need for supplementary labour to meet temporary/peak work requirements, such labour may be accessed from bona fide businesses, including sub-contractors and labour hire companies, following consultation with the Company Consultative Committee and/or union(s) party to this agreement. The company shall ensure that any workers engaged by such businesses and performing work described in the classifications of this agreement shall receive wages, allowances and conditions not less than those contained in this agreement.
Supplementary labour is defined as temporary "top-up" labour designed to meet short situations such as absences due to sick leave, annual leave, and short time work peaks. The company undertakes not to use supplementary labour in any position on site for a period of more than four weeks. Any departure from this maximum period shall require the consent of the Union.
[3] The second paragraph of the sub clause appears to me to restrict or qualify the employer's right to use individual contractors or to utilise contracted labour.
[4] Section 172(1) of the Fair Work Act 2009 ("the Act") relevantly provides as follows:
Enterprise Agreement may be made about permitted matters
(1) An Agreement (an enterprise Agreement) that is about one or more of the following matters (the permitted matters) may be made in accordance with this Part:
(a) matters pertaining to the relationship between an employer that will be covered by the Agreement and that employer's employees who will be covered by the Agreement;
(b) matters pertaining to the relationship between the employer or employers, and the employee organisation or employee organisations, that will be covered by the Agreement;
[5] A provision of an enterprise agreement that restricted or placed a limitation the employer's right to use individual contractors or to utilise contracted labour might not be a matter that pertains to the requisite relationship, and therefore might not comprise the content about which an enterprise agreement could be made.
[6] Given this observation, the following correspondence was directed to the parties to the Agreements:
Re: Various pending CFMEU Agreement applications - listed below
Senior Deputy President Richards wishes to bring the following sub clause to your attention and inquire as to whether you wish to make any submission as to whether the sub clause constitutes "permitted matter" for purposes of s.172(1)(b) of the Fair Work Act 2009 ("the Act").
Sub clause 35.3 of the Agreement provides as follows
Where there is a need for supplementary labour to meet temporary/peak work requirements, such labour may be accessed from bona fide businesses, including subcontractors and labour hire companies, following consultation with the Company Consultative Committee and/or union(s) party to this Agreement. The Company shall ensure that any workers engaged by such businesses and performing work described in the classifications of this Agreement shall receive wages, allowances and conditions not less than those contained in this Agreement.
Supplementary labour is defined as temporary "top-up" labour designed to meet short situations such as absences due to sick leave, annual leave, and short term work peaks. The Company undertakes not to use supplementary labour in any position on site for a period of more than four weeks. Any departure from this maximum period shall require the consent of the Union.
The second paragraph of the sub clause appears to me to restrict or prohibit the employer's right to use individual sub contractors or to utilise contracted labour. As such, it appears the sub clause may not constitute permitted content, for the Act's purposes (see s.172(1)(b) of the Act).
It would be helpful in clarifying the operative scope of the Agreement for the purposes of any approval decision if the parties could provide submissions on this point. Please provide submissions by COB on Friday 2 August 2013.
At this stage, the [sub] clause is included in a number of Agreements [as] (listed below). To avoid repetition and unnecessary delays, the submissions made in relation to the occurrences of the [sub] clause as notified would be taken as applicable to all future occurrences.
Applications lodged by the CFMEU - Qld Constructions Workers Divisional Branch
Application lodged by the CFMEU - Builders Labourers Branch
[7] The Employers did not respond to the above correspondence.
[8] The CFMEU submitted in response that there was no requirement upon the Commission to identify non-permitted content as part of the approval process and the Agreements should be approved. The CFMEU also did not concede that the sub clause comprised non-permitted content, though it gave no reason for its position in this regard.
[9] The sub clauses included in the Agreements - which arise from a template industry agreement - give rise to prospective compliance and enforceability issues, as well as limiting the operation of the Agreements. Some comment is warranted in the circumstances by the Commission at the point of approval.
[10] In my view, properly characterised, the second paragraph of sub clause 35.3 of the Agreements, because it imposes limitations on persons who may be sub contractors or the employees of labour hire contractors, may be a matter that does not pertain to the employment relationship. That is, it may not be a matter contemplated at s.172(1) of the Act, and as a consequence may not comprise permitted matter in an enterprise agreement.
[11] The sub clause may be inconsistent, therefore, with the decision of (then) Justice French in Wesfarmers Premier Coal Limited v the Automotive Food Metals Engineering, Printing and Kindred Industries Union (No 2) [2004] FCA 1737. It may also be inconsistent with the seminal authority in The Judges of the Commonwealth Industrial Court and Others; Ex parte Cocks and Others (1968) 121 CLR 31. In that judgement, the High Court found the clause before it:
"[...] extends to forbidding an employer bound by the award from entering into a contract, not being a contract of service, with another person for the execution of work outside the employer's workshop or factory."
[12] The clause was held to be impermissible by the High Court for reason that it imposed a prohibition or a limitation on the use of contractors.
[13] I add that the circumstances before me do not concern a term of an agreement that seeks to regulate the wages and conditions to be afforded to contractors (support for which as a permitted term arguably is provided by the judgment of the High Court in R v Moore and Others; Ex parte Federated Miscellaneous Workers' Union of Australia [1978] HCA 51; (1978) 140 CLR 470). They are matters elsewhere addressed in the Agreements before me, and they are uncontroversial on the prevailing authorities.
[14] Neither is the sub clause an ancillary clause. Nor does it otherwise perform some kind of machinery function within the Agreements. It is a discrete clause in its own right.
[15] The sub clause before me, however, is more akin to the circumstances which were considered by the Full Bench in PR962259 ("Re: NUW"). In that decision, the Full Bench considered various clauses regulating the use of employees engaged by contractors by the employer. The Full Bench unanimously found as follows:
[26] We turn first to clause 15.3.2(e) of the Agreement applying to Addamo Fresh Pty Ltd. It provides as follows:
"15.3.2(e) That none of the work covered by this Agreement will be contracted to be performed or organised by any third party."
[27] This term constitutes a direct prohibition on the engagement of contractors. For that reason the decision in Cocks is relevant and binding. A prohibition of that kind does not pertain to the relationship. It follows that the Agreement is not one in respect of which application can be made pursuant to s.170LI.
[28] Similar considerations apply to a term which appears in the Agreement applying to Caprice Australia Pty Ltd and Melbourne Logistics Pty Ltd. The term reads:
"The role of casuals is to cater for peaks in demand for labour. Casual employment will not be used to replace full-time or part-time permanent employment. Accordingly casuals will not be employed for extended periods."
[29] The relevant provisions are set out in full in Schedule A. When the term we have just set out is read in context it is clear that the reference to casuals includes not just casuals engaged by the employer bound by the Agreement but also casuals engaged by contractors to the employer. So interpreted, the term purports to prohibit the employer bound by the Agreement from allowing a contractor to engage casual employees to replace permanent employees, subject to the further limitation that casuals should not be engaged for an extended period. This raises a difficult question of characterization. It seems to us that when properly considered the term constitutes a prohibition on the engagement of contractors' employees which, although only partial, is nevertheless sufficient to take it outside the relationship between the employer bound by the Agreement and the employees covered by the Agreement. It follows that the Agreement are not ones in respect of which application might be made pursuant to s.170LI.
[16] It appears to me that the unanimous finding of the Full Bench in Re: NUW, particularly in respect of paragraphs 28-29 above, is relevant to the circumstances before me (in respect of the second paragraph of sub clause 35.3 of the Agreements). It appears to me that when properly characterised the sub clause in the Agreements "constitute [...] a prohibition on the engagement of contractors' employees which, although only partial, is nevertheless sufficient to take it outside the relationship between the employer bound by the Agreement and the employees covered by the Agreement."
[17] Indeed, the sub clause before me travels further than that before the Full Bench. It requires the consent of the CFMEU before such time as supplementary labour may be sourced beyond a specified limitation.
[18] Consequently, sub clause 35.3 of the Agreements appears not to be content about which an agreement could be made for the purposes of s.172(1) of the Act, at various levels.
[19] Be that as it may, the Act does not require that the Commission must not approve an agreement which contains a term which is not about permitted content (unlike the statutory effect of s.170LI of the Workplace Relations Act 1996). The term may be non-enforceable, be of no effect, and be incapable of generating a dispute under the Agreements, but it does not cause the Agreements themselves to cease to be agreements for that reason. Section 253 of the Act relevantly provides as follows:
253 Terms of an enterprise Agreement that are of no effect
(1) A term of an enterprise Agreement has no effect to the extent that:
(2) However, if an enterprise agreement includes a term that has no effect because of subsection (1), or section 56 or 326, the inclusion of the term does not prevent the Agreement from being an enterprise agreement.
[20] The Full Court of the Federal Court (in its judgment in Australian Industry Group v Fair Work Australia [2012] FCAFC 108 (14 August 2012) at [44]) put it this way:
Section 253(1) and s.356 of the FW Act have the effect of preserving the overall bargain reached and approved by the employees. Insofar as the two may have both lawful and a potentially unlawful operation, those provisions limit the operation of the term only to that which is lawful.
[21] In light of these observations, and noting that the Agreements can only operate to the extent they are lawful, the Agreements will be approved (conditional on some further steps relating to undertakings and clarifications being met) in the ordinary course.
Printed by authority of the Commonwealth Government Printer
(1968) 121 CLR 31
(1978) 140 CLR 470