Australian Maritime Officers Union v Sydney Ferries Corporation

Background to the appeal 1 In a workplace agreement ("the Agreement") made under the Workplace Relations Act 1996 (Cth) ("the Act") on 7 August 2006 the respondent ("SFC") agreed: …to insure its Maritime Officers for income protection insurance for long term illness and injury equivalent to 75% of his/her salary after a three month qualifying period commencing as soon as practicable after the lodgement of the Agreement. 2 SFC did not honour the agreement which it made. The appellant ("AMOU") commenced proceedings against SFC in this Court alleging breach of the Agreement and asking that penalties be imposed on SFC. SFC defended itself by claiming that the clause it had agreed to was void and unenforceable. The contention was based upon the operation of s 358 of the Act which rendered a workplace agreement void to the extent that it contained "prohibited content". Prohibited content was to be identified by regulation (s 356(1)(f) of the Act). 3 Shorn of exceptions which are not relevant to the present proceedings and of additional definitions, the regulations provided that a term of a workplace agreement was prohibited content "to the extent that it deals with a matter that does not pertain to the employment relationship" (reg 8.7 of the Workplace Relations Regulations 2006 (Cth)). Defining prohibited content in that way engaged some complex jurisprudence in the area of industrial law. The concept of matters pertaining to an employment relationship has long been used in statutory formulations identifying matters within the province of industrial tribunals, or about which there might be industrial regulation. In R v Kelly; Ex parte The State of Victoria (1950) 81 CLR 64, one of the seminal cases on that question, the High Court said (at 84): The words 'pertaining to' mean 'belonging to' or 'within the sphere of,' and the expression 'the relations of employers and employees' must refer to the relation of an employer as employer with an employee as employee. (Emphasis added.) 4 The primary judge recorded the essence of the appellant's argument about whether the agreed term contained prohibited content, as presented at first instance, in the following way: [10] The union acknowledges that the income protection insurance proposed by the clause would operate to provide benefits to an employee whether the event giving rise to the disability arose from service as an employee or from an event unrelated to the employment. The union also acknowledges that the proposed insurance benefits would not operate until the happening of the disability or illness and that the insurance benefits can continue after the employment has ceased. [11] The union submits however that the benefits payable pursuant to the clause constitute part of the relationship of the employer and employee since income protection relates to an incident of employment. [12] The union further submits that the fact that the income protection benefit might become payable to employees arising from circumstances unrelated to the employment relationship does not lead to the conclusion that those payments cannot pertain to the relations of an employer with his employee and that it is of no significance that no immediate benefit is derived by the employee from payments made by the employer. … [15] Further, the union submits that the payments made by the employer to the insurer for income protection insurance should simply be seen as a reward for services, in the same way that a salary is a reward for services… 5 The primary judge then undertook a careful review of the relevant authorities, the more important of which we discuss shortly. He reached the following conclusions about the claim which the appellant was seeking to enforce: [39] … It is not sufficiently connected to the employment relationship and consequently cannot be said to pertain to the relationship between [the] corporation in its capacity as an employer, and the Maritime Officers in their capacity as employees. The scope of the clause has the consequence that insurance benefits could be payable arising out of circumstances having no direct connection to the employee's relationship with the employer. For this reason, the clause cannot be justified even on the more abstract level that the preservation of a disabled employee's salary is a matter that pertains to employment. and: [42] … In the absence of … evidence that the payments of insurance premiums by the employer were a reward for services and in view of the Court's finding that the benefits do not pertain to the relationship between employee and employer, the claim that such payments are merely a reward for services cannot be sustained. Contextual Limitations 6 In the proceedings at first instance SFC defended itself against the accusation that it had breached the agreed term and, as a result, the Agreement. It was successful in its defence. The filing of the appeal put its defence again in issue. A short time before the appeal was to be heard, SFC's solicitors announced to the Court, by letter, that SFC proposed to take no part in the appeal. When the appeal was heard SFC did not appear. As a result, although the point at issue is an important one, the Court was denied the usual assistance it would have expected from a public authority about the legal issues which arose for consideration. On the appeal we had the benefit of assistance from senior counsel for the appellant and for the Minister for Employment and Workplace Relations, who exercised a statutory right to intervene in view of the general importance of the matter, but their energies were directed principally in support of the appeal. 7 As will appear we have reached a view about the legal issues which leads us to a different conclusion from the primary judge. However, we wish to emphasise that our conclusion should be seen as directly related to the particular clause we were required to consider, in its actual setting and in circumstances where our deliberations were not assisted by a considered contribution from a contradictor. The actual setting in which the agreed term appears includes the fact that the maritime officers, for whose benefit the agreed term operates, are subject to specific regimes and medical standards which may become more rigorous. Unlike many occupations, a failure to meet revised standards would, under the Agreement, generate an entitlement to the benefit of provisions otherwise designed for redundancies. 8 Although we are satisfied that the circumstances revealed by the present appeal lead comfortably to the conclusions we shall now explain, we do not intend to lay down any general rule, at this stage, concerning "income protection" provisions.