McLennan v Surveillance Australia Pty Ltd

Federal Court of Australia (Full Court)|2005-03-24|Before: Black CJ, Lander JJ, Moore J

Introduction 1 This is an appeal under s 422 of the Workplace Relations Act 1996 (Cth) ("the Act") from two judgments of the Magistrates Court of South Australia. The judgments were given in proceedings brought by the respondent, Surveillance Australia Pty Ltd, against the appellant claiming money due under a bond agreement concerning pilot training undertaken by the appellant. The appellant was employed by the respondent as a pilot when the training took place. In the first judgment of 20 May 2004, the learned Magistrate ordered the appellant to pay the respondent $16 336.86 due under the bond agreement. In the second judgment of 2 July 2004, the appellant was ordered to pay the respondent's costs in the proceedings. 2 As will be seen, the central issue in this appeal is whether an agreement entered into between an employer and an employee which effectively varies an Australian workplace agreement ("an AWA") is unenforceable by the employer if the variation agreement has not been submitted to the Employment Advocate and approved by him or by the Australian Industrial Relations Commission in accordance with the provisions of the Act. The Act makes specific provision for the variation of an AWA but it was not sought to enliven those provisions in the present case.

Background 3 Generally the facts before the Magistrate were not in issue. The following summary is drawn from the findings of fact made by the Magistrate or from uncontentious evidence referred to in the appeal. The appellant commenced employment with the respondent on 24 September 2001 as a pilot of a Britain Norman Islander aircraft operating from Horne Island. The appellant and the respondent entered into an AWA called the Pilots and Observers Australian Workplace Agreement ("the appellant's AWA"). The appellant signed the AWA on 18 September 2001 and it was signed on behalf of the respondent on 10 October 2001. The Employment Advocate issued a notice approving the appellant's AWA on 8 November 2001. 4 On 22 November 2001 the respondent called for expressions of interest from its employees in being promoted to the position of First Officer on a DHC-8 ("Dash 8") aircraft based in Broome or Darwin. This was done by e-mail which read (omitting e-mail addresses): Date: Thu, 22 Nov 2001 10:22:31 +1000 To: From: Rudy Darvill Subject: Expressions of Interest for Dash 8 Pilot Positions Cc: Gents, please ensure this e-mail is passed to all SAPL pilots. Expressions of interest from NAS pilots are requested for the following positions:

ACCEPTANCE OF BOND AGREEMENT Please read and sign below to indicate your acceptance and understanding of the Bond Agreement and return (At this point in the document the appellant's signature appears and the date) 10 The appellant commenced her Dash 8 training on 17 December 2001 and after completing the training, was checked to line on 24 February 2002. On 15 August 2002, the appellant notified the respondent of her resignation to take effect on 26 August 2002. This notice did not accord with the terms of the AWA, which required four weeks notice. The appellant subsequently amended her resignation notice, with her last day at work being 2 September 2002 and approved annual leave from 3 to 12 September 2002. The respondent claimed that on her resignation, the appellant became liable to pay the respondent $16336.86. That sum was the $20 000 bond for the Dash 8 training adjusted on a pro-rata basis.

The terms of the AWA 11 It is necessary to set out some of the terms of the AWA. Before doing so, it should be noted that at the time the appellant commenced employment with the respondent, it was a party to and bound by the Pilots' (General Aviation) Award 1998 ("the Award") which was an award made under the Act. One clause of the Award dealt with training and provided: 19. TRAINING- CLASSIFICATION 19.1 Where the employer requires a pilot to reach and maintain minimum qualifications for a particular aircraft type in accordance with clause 32 - Classification and salary of this award, all facilities and other costs associated with attaining and maintaining those qualifications will be the responsibility of the employer. 19.2 Where a pilot fails to reach or maintain a standard required the pilot will receive further re-training and a subsequent check. The pilot may elect to have a different check captain on the second occasion. 19.3 Where a pilot fails the second check the pilot may, where practicable, be reclassified to the previous or a mutually agreed equivalent position. (Emphasis added) This was the award used by the Employment Advocate when assessing whether the appellant's AWA disadvantaged her when making the assessment required by s 170VPB of the Act. What this assessment entails is discussed below. Clause 19.1 of the Award imposed on an employer an unqualified obligation to meet the costs of training which the employer required an employee to undertake to reach and maintain qualifications in the context described in the clause. 12 The AWA contained seven parts and a schedule. The parts were entitled "Part 1. Agreement Administration", "Part 2. Mutual Trust and Integrity", "Part 3. Your Responsibility and Our Direction, Guidance and Support", "Part 4. Consultation and Communication", "Part 5. Personal Development and being Cleared to Line", "Part 6. Working Conditions", and "Part 7. Signatory Page". The schedule set out the appellant's remuneration and allowances. 13 Several clauses of the AWA should be noted. The first is a clause in Part 1 concerning the effect of the AWA on the appellant's employment. Clause 1.4 provided: 1.4 The effect of this agreement on your employment 1.4.1 The Agreement will apply to your employment with us. 1.4.2 The terms of this Agreement totally replace any previous Agreement or Contract of Employment that applied to you. 1.4.3 If you and we agree, this Agreement can be varied in accordance with the Act. 1.4.4 The Agreement commences the day after its approval by the Employment Advocate in the case of an existing Surveillance Australia Pty Ltd employee and on and from the commencement date of employment in the case of a new employee. 1.4.5 The Agreement will continue in force for a nominal term of three (3) years. After this date the Agreement will continue to apply to your employment until it is varied, replaced or terminated in accordance with the Act. In the event that your employment with us ends before the nominal expiry date, the Agreement will cease to operate at the time your employment ends. 1.4.6 We will, prior to the expiry of this Agreement, review with you the terms and conditions of this Agreement. We will do this to ensure that your views and issues have been considered before a replacement Agreement is finalised with you. 1.4.7 Company policy will supplement the clauses in this Agreement. Where there is any disparity between Company policy and this Agreement, the Agreement will prevail. (Emphasis added) 14 The next clause in the AWA dealt with the respondent's expectations in relation to the way work was to be performed by the appellant. That clause was headed "Our expectation in relation to the way work is to be performed" and included the following subclause: 1.5.2 Subject to your skill, competence, qualification or licensing requirements, you are required to perform, but not limited to, the following duties and responsibilities which contribute to the efficient and safe conduct of our operations:

Flying Time Training Dead Head Travel Standby Administration Duty SAR Training and Duties Low Flying Operations Post Flight Debrief Pre Flight Brief Engine Compressor Washing Aircraft Washing and Cleaning Aircraft Towing Coastwatch courses and Requalification Observer Requalification Basic Approved Aircraft Maintenance Base Vehicle Maintenance and Cleaning Post Flight Report Mission Co-ordinator Training ancVor Duties

(Emphasis added) The clause contemplated that the appellant could be required to undergo training. In Part 2 the following appeared: 2.4 Encouraging your skill acquisition and personal development We believe that acceptance of responsibility in your work requires an investment in your development by us. Part 5 of the Agreement outlines our commitment to this cause and your role in making this investment work. While this clause is in general terms and aspirational in focus, it nonetheless evinced an intention on the part of the respondent to facilitate training of the appellant. 15 It is necessary to set out the whole of Part 5: PART 5. PERSONAL DEVELOPMENT AND BEING CLEARED TO LINE 5.1 Our mutual obligations to training 5.1.1 Training and personal development are an important part of your employment with us. 5.1.2 We will provide reasonable access to training to afford you the opportunity to acquire all of the skills, competency and knowledge needed to perform work in your appointed position. 5.1.3 You are required to undertake training to enhance and broaden your work skills as required in your appointed position. By agreement with us, you may train for higher or alternative positions. This training will not entitle you to the rate of pay for that higher or alternative position, unless the training is completed and we require you to use such skills in performing certain duties. 5.1.4 Training may be undertaken in your own time on a non-paid basis. 5.1.5 You may be required to teach work skills and procedures to other employees as part of on the job training. 5.2 Coastwatch annual examination 5.2.1 In order to be Cleared and remain Cleared to Line you will be required to undergo an examination to assess your suitability, skills and knowledge. This will consist of a written, oral and practical flight assessment. 5.2.2 The examination will be based on established criteria (a copy of which will be provided to you prior to the examination). 5.2.3 If you fail the examination you will be given the opportunity to undertake reasonable retraining and re-sit the examination. 5.2.4 If you continue to fail the examination your ongoing employment under this Agreement will be reviewed in conjunction with you in accordance with clause 5.4 5.3 Assessment for upgrade, command potential or equipment change. 5.3.1 You may be required to undergo an assessment for upgrade, command potential, Mission Coordinator potential or equipment change at any time as directed by us. 5.3.2 The assessment program shall take place in accordance with established criteria. The assessment will consider your suitability, experience, skill and operational performance. 5.3.3 If you fail to meet the requirements your ongoing employment under this Agreement will be reviewed in conjunction with you in accordance with clause 5.4. 5.4. Failure to qualify and re-qualify 5.3.1 When required to undergo conversion, re-conversion, upgrade training, line checks, Coastwatch qualification or re-qualification and you fail such training, you will be given a reasonable opportunity to undertake such retraining as may be necessary to convert, reconvert, upgrade or re-qualify. 5.4.2 In instances where re-training is refused by you, or after being given the opportunity, you fail retraining, your employment under this Agreement will be reviewed, which may result in your termination. 5.4.3 As each case will be reviewed on a case by case basis, a decision not to terminate shall not be viewed as a precedent for any other case. (Emphasis added) 16 Part 6 contained clauses dealing with a range of working conditions of the appellant. It included a clause concerning the appellant's classification which was in the following terms: 6.3 Classification 6.3.1 Your classification is that advised to you on the signing page of this agreement 6.3.2 In the event of a classification change you will be advised in writing of the terms of the appointment, salary to be paid (refer Schedule 1) and the allowances applicable to the appointment (refer clause 6.5). 6.3.3 For the purposes of this clause, permanent means that we have appointed you to the classification on a permanent basis and temporary means for a specific time. Part 6 also dealt with termination in the following terms: 6.13 Termination 6.13.1 Dismissal in certain circumstances We may terminate your employment at any time in the following indicative circumstances:

Serious misconduct by you;
A serious breach by you of our policies, practices and procedures;
You have refused to undergo conversion, re-conversion, upgrade training, line checks, Coastwatch qualification of requalification or after given the opportunity, you have failed retraining.
A serious breach by you of this Agreement;
Conduct by you which at common law would justify summary dismissal.
The cessation of a casual or fixed term contract. 6.13.2 Disciplinary action and dismissal in other circumstances 6.13.2.1 If you are negligent, inefficient, incompetent or unsatisfactory in the discharge of your duties, or if your conduct is unsatisfactory, we will inform you of this in writing. We will provide counselling to assist you to overcome the inefficiencies, incompetence or unsatisfactory conduct. 6.13.2.2 The above also applies if you fail to appropriately adhere to our policies, instructions and practices as issued by us (or on our behalf) from time to time and be repeated as necessary, but on no more than three (3) occasions before notice of termination is given. 6.13.2.3 Such notice of termination shall be in writing giving the appropriate period of notice and shall state the reasons for the termination and details of the counselling provided. 6.13.2.4 The provisions of this clause shall not affect our right to dismiss you without notice for serious and or willful neglect of duty, refusing to obey any reasonable instruction, or for willful or serious misconduct or other lawful cause of summary dismissal, in which case you will be paid up to the time of dismissal only. 6.1 3.3 Our notice of termination 6.13.3.1 If you are a permanent employee you are entitled to notice or payment in Iieu of notice based on your years of completed service with us as follows; Period of Continuous Service Period of Notice Less than one (1) year service one (1) week More than one (1) year four (4) weeks 6.13.3.2 In addition to the above notice, you will receive an extra week's notice if you are over 45 years of age and have at least two (2) years' service with us. You are not entitled to notice if we summarily dismiss you for conduct, which would justify summary dismissal at common law. 6.13.3.3 If you are a casual employee we may terminate your employment by giving you one (I) days notice. 6.13.4 Your notice of termination You must give us at least one (1) month's notice. Failure to meet this minimum requirement may mean that you forfeit pay entitlement for the outstanding duration of the notice period. 17 We now consider the reasoning of the Magistrate which led to her Worship's conclusion that the appellant was obliged to pay the respondent monies under the bond agreement having regard to the existence of the appellant's AWA and its terms.

The reasoning of the learned Magistrate 18 The central issue before the Magistrate was whether the bond agreement was enforceable. The appellant advanced several grounds why it was not. One only is relevant to this appeal. It was that the bond agreement was inconsistent with the appellant's AWA and was invalid. 19 The Magistrate found that the purpose of the bond was to both discourage pilots employed by the respondent who were contemplating leaving in the short term from undertaking the training and ensure the respondent's employees met their obligations in relation to the return of service period. The Magistrate also found that the process used by the respondent to identify the sum of money to be repaid, represented a genuine attempt by the respondent to estimate losses incurred in the event that an employee left the respondent's employ before completion of the return of service period. The bond agreement was for a sum of $20 000, adjusted on a pro-rata basis. The return of service period was 3 years from the date of check to line. It appears that the parties did not dispute that the appellant was required to repay $16 336.86 under the bond agreement, if it was enforceable. 20 In summary, the Magistrate found that the bond agreement was enforceable on the basis that the bond agreement did not provide for payment of a penalty, was not executed under duress, was not unconscionable, was a reasonable and genuine pre-estimate of the losses the respondent would incur if the appellant left the respondent's employ before the expiration of the return of service and had not been made in contravention of the Act. As to the last matter, the Magistrate found that the parties had not intended the appellant's AWA to be an exhaustive statement of the rights and obligations of the appellant and respondent and that the appellant's AWA contemplated an agreement between the parties outside the provisions of the AWA. 21 The Magistrate accepted the respondent's submission that had the appellant not signed the bond agreement, she would not have been permitted to undertake the Dash 8 training and would have remained on Horne Island or have gone to Broome as an Islander pilot. In particular, the Magistrate noted that there was no evidence to contradict the evidence of Mr Crowe (who was the respondent's chief pilot) to the effect that had the appellant refused to sign the bond agreement the appellant would have continued in her employ on Horne Island or would have gone to Broome as an Islander pilot. The Magistrate concluded that had the appellant not signed the bond agreement, the appellant would have left Horne Island shortly thereafter. The Magistrate noted that no evidence was led to support the view that the appellant's employment might have been terminated if she had failed to execute the bond agreement. 22 In relation to the interaction between the appellant's AWA and the bond agreement, the Magistrate concluded (at [164] and following) that: It was not intended that the AWA would be an exhaustive statement of the rights and obligations of the [respondent] and [appellant]. The term 'by agreement between the parties' clearly contemplated an agreement between the parties outside of the provisions of the AWA. … I do not consider there to be any conflict between the AWA and the bond agreement. The AWA fits with the imposition of the bond by agreement between the parties. On the basis of my finding that the AWA was not intended to be an exhaustive statement of the rights and obligations of the parties, I find that entering into the bond agreement did not constitute a variation of the AWA and accordingly, there was no breach of section 170VL of the Workplace Relations Act 1996 (Cth). The Magistrate gave judgment for the respondent in the sum of $16 336.86. 23 On 2 July 2004, the Magistrate gave judgment on the question of costs. The respondent sought an order for costs under Rule 53(1) of the Magistrates Court (Civil) Rules 1992 (SA). It submitted the action concerned a claim for breach of contract arising out of the contract of employment. It submitted the fact that the contract of employment was an AWA was incidental to the issue of breach and that the provisions of the appellant's AWA were not relied on by the respondent in that action. The appellant submitted that the action was a matter arising under the Act and that s 347 of that Act applied to the proceedings and no order for costs could be made. 24 The Magistrate concluded that the right or duty sought to be enforced by the respondent related to the bond agreement and did not owe its existence to the Act. The Magistrate found the proceedings did not involve a matter under the Act. Accordingly s 347 of the Act did not apply. The Magistrate ordered the appellant to pay the respondent's costs.

Legislative framework 25 It is necessary to refer in some detail to provisions of the Act concerning AWAs to deal with the central issues raised in this appeal. AWAs are a species of agreement which derive their legal effect from the Act. The Act prescribes procedures to create an AWA. The provisions concerning AWAs are generally found in Pt VID (ss 170VA to 170WL). 26 The ability of an employee (or potential employee) and the employer (or potential employer) to enter an AWA is governed by s 170VF which provides: (1) An employer and employee may make a written agreement, called an Australian workplace agreement, that deals with matters pertaining to the relationship between an employer and employee. (2) The AWA may be made before commencement of the employment. 27 Section 4 of the Act contains a definition of both "Australian workplace agreement" and "AWA" but both definitions simply point to an agreement under Part VID. There is a further definition of AWA in s 170VA which extends the meaning of the expression to include a proposed AWA and an undertaking accepted by the Employment Advocate or the Australian Industrial Relations Commission in the approval process concerning the contents and effect of an AWA. A variation agreement is defined in that latter section as "an agreement to vary an AWA". An "ancillary document" is defined in s 170VA as including a variation agreement. 28 For an AWA to operate with the legal effect conferred by the Act, it must be approved by the Employment Advocate. The Employment Advocate is a statutory office created by the Act. The content of an AWA is addressed by s 170VG which provides: (1) The employer must ensure that the AWA includes the provisions relating to discrimination that are prescribed by the regulations. If the AWA does not in fact include those provisions, the AWA is taken to include those provisions. (2) The employer must ensure that the AWA does not include any provisions that prohibit or restrict disclosure of details of the AWA by either party to another person. (3) The employer must ensure that the AWA includes a dispute resolution procedure. If the AWA does not in fact include a dispute resolution procedure, the AWA is taken to include the model procedure that is prescribed by the regulations. (4) A dispute resolution procedure that is included in an AWA under subsection (3), or prescribed by the regulations for the purposes of subsection (3), may confer powers on the Commission to settle disputes between the parties to the AWA about the application or interpretation of the AWA. The Commission may exercise those powers. 29 Approval both of an AWA and any variation of it (by a variation agreement) is initiated by the filing procedures set out in s 170VN: (1) An AWA or ancillary document may be filed with the Employment Advocate. (2) The Employment Advocate must issue a receipt to the person who filed the document if: (a) the Employment Advocate is satisfied that the filing requirements for the document have been met; or (b) the Employment Advocate is not satisfied that the filing requirements in paragraphs 170VO(1)(a) and (c) for the document have been met in all respects, but he or she is satisfied that the failure to meet those filing requirements has not disadvantaged, and will not disadvantage, a party to the AWA. (3) The Employment Advocate must not issue a filing receipt for an AWA unless the AWA was filed within 21 days after the AWA date. 30 If an AWA is submitted for approval by the Employment Advocate, s 170VPB provides how it is dealt with: (1) The Employment Advocate must approve an AWA for which a filing receipt has been issued if: (a) the Employment Advocate is sure that the AWA passes the no-disadvantage test; and (b) the Employment Advocate is satisfied that the AWA meets the additional approval requirements. Note: The additional approval requirements are in section 170VPA. (2) If the Employment Advocate has concerns about whether the AWA passes the no-disadvantage test, but those concerns are resolved by: (a) a written undertaking given by the employer and accepted by the Employment Advocate; or (b) other action by the parties; the Employment Advocate must approve the AWA. (3) If the Employment Advocate has concerns about whether the AWA passes the no-disadvantage test and those concerns are not resolved under subsection (2), the Employment Advocate must refer the AWA to the Commission. (4) If the Employment Advocate is not satisfied that the AWA meets the additional approval requirements, the Employment Advocate must refuse to approve the AWA. (Emphasis added) 31 The outcome of this process of scrutiny is dealt with by s 170VPF which provides: (1) If the Employment Advocate approves an AWA or ancillary document, the Employment Advocate must issue an approval notice to the employer. (2) If the Employment Advocate refuses to approve an AWA or ancillary document, the Employment Advocate must issue a refusal notice to the employer. (3) If the Employment Advocate refers an AWA or variation agreement to the Commission, the Employment Advocate must issue a referral notice to the employer, advising of the referral. (4) In each approval notice, refusal notice or referral notice issued under this section, the Employment Advocate must identify the relevant or designated award that applies to the AWA to which the notice relates. 32 Similar procedures operate in relation to a variation of an AWA by a variation agreement. Section 170VL provides: (1) An employer and employee may make a written agreement varying an AWA. (2) The variation takes effect on the later of: (a) the day after an approval notice is issued for the variation agreement; or (b) the day specified in the variation agreement as the date of effect. (3) Section 170VG applies to the AWA as varied in the same way as that section applies to the original AWA. 33 Approval of a variation agreement is governed by s 170VPC: (1) The Employment Advocate must approve a variation agreement for which a filing receipt has been issued if: (a) the Employment Advocate is sure that the AWA, as varied, passes the no-disadvantage test; and (b) the Employment Advocate is satisfied that the variation agreement meets the additional approval requirements. Note: The additional approval requirements are in section 170VPA. (2) If the Employment Advocate has concerns about whether the AWA, as varied, passes the no-disadvantage test, but those concerns are resolved by: (a) a written undertaking given by the employer and accepted by the Employment Advocate; or (b) other action by the parties; the Employment Advocate must approve the variation agreement. (3) If the Employment Advocate has concerns about whether the AWA, as varied, passes the no-disadvantage test and those concerns are not resolved under subsection (2), the Employment Advocate must refer the variation agreement to the Commission. (4) If the Employment Advocate is not satisfied that the variation agreement meets the additional approval requirements, the Employment Advocate must refuse to approve the variation agreement. (Emphasis added) 34 It can be seen that approval of both an AWA and a variation agreement is dependent upon the Employment Advocate being satisfied that either the AWA or the AWA varied by the variation agreement satisfies the no disadvantage test. The Employment Advocate must be "sure" the AWA or the varied AWA passes the no disadvantage test. Section 170XA gives content to that test and provides: (1) An agreement passes the no-disadvantage test if it does not disadvantage employees in relation to their terms and conditions of employment. (2) Subject to sections 170XB, 170XC and 170XD, an agreement disadvantages employees in relation to their terms and conditions of employment only if its approval or certification would result, on balance, in a reduction in the overall terms and conditions of employment of those employees under: (a) relevant awards or designated awards; and (b) any law of the Commonwealth, or of a State or Territory, that the Employment Advocate or the Commission (as the case may be) considers relevant. 35 The no disadvantage test requires comparison between the AWA and, amongst other things, the relevant award or a designated award. What is a relevant award or designated award is dealt with by ss 170XE and 170X respectively and which provide (relevantly): (1) If: (a) an employer proposes to make an AWA with a person; and (b) there is no relevant award in relation to the person; the employer must apply in writing to the Employment Advocate for the making of a determination under subsection (2). (2) Upon application, the Employment Advocate must determine, and inform the employer in writing, that an award or awards are appropriate for the purpose of deciding whether the agreement passes the no-disadvantage test. (3) For the purposes of subsection (2), the Employment Advocate must determine: (a) an award or awards under this Act regulating terms or conditions of employment of employees engaged in the same kind of work as that of the person under the AWA; or (b) if the Employment Advocate is satisfied that there is no such award under this Act - a State award or State awards regulating terms or conditions of employment of employees engaged in the same kind of work as that of the person under the AWA. … relevant award, in relation to a person to whom an agreement will apply, means an award: (a) regulating any term or condition of employment of persons engaged in the same kind of work as that of the person under the agreement; and (b) that, immediately before the initial day of the agreement, is binding on the person's employer. The clear objective of these various provisions concerning the no disadvantage test, is to require the Employment Advocate to be sure that the employee to whom the AWA will apply is not disadvantaged in relation to terms and conditions of employment having regard to existing awards (which either actually or notionally apply to that employment). 36 In order to approve an AWA or a variation agreement, the Employment Advocate must, in addition to being satisfied that the no disadvantage test is met, be satisfied that the AWA meets the additional approval requirements: see s 170VPB(1)(b) above, or be satisfied that the variation agreement meets those requirements: see s 170VPC(1)(b) above. The additional approval requirements are specified in s 170VPA which provides: AWA (1) The additional approval requirements for an AWA are: (a) the AWA complies with section 170VG; and (b) the employee received a copy of the AWA at least the required number of days before signing the AWA; and (c) the employer explained the effect of the AWA to the employee between: (i) the time the employee first received a copy of the AWA; and (ii) the time when the employee signed the AWA; and (d) the employee genuinely consented to making the AWA; and (e) in a case where the employer failed to offer an AWA in the same terms to all comparable employees - the employer did not act unfairly or unreasonably in failing to do so. Note: An employer might have valid reasons for not offering an AWA in the same terms to all comparable employees. For the purposes of this subsection, the required number of days is 5 for a new employee and 14 for an existing employee. Variation agreement (2) The additional approval requirements for a variation agreement are: (a) the AWA, as varied, complies with section 170VG; and (b) the employee received a copy of the variation agreement at least 14 days before signing the variation agreement; and (c) the employer explained the effect of the variation agreement to the employee between: (i) the time the employee first received a copy of the variation agreement; and (ii) the time when the employee signed the variation agreement; and (d) the employee genuinely consented to making the variation agreement; and (e) in a case where the employer did not offer a variation agreement in the same terms to all comparable employees who also have an AWA in the same terms - the employer did not act unfairly or unreasonably in not doing so. Note: An employer might have valid reasons for not offering a variation agreement in the same terms to all comparable employees. (Emphasis added) It can be seen that one approval requirement is that the employee has genuinely consented to making the AWA or the variation agreement. 37 Attention should also be drawn to the potential role of the Australian Industrial Relations Commission in considering whether or not a variation passes the no disadvantage test. Section 170 VPH provides: (1) This section applies to a variation agreement that is referred to the Commission by the Employment Advocate. (2) The Commission must approve the variation agreement if the Commission is satisfied that the AWA, as varied, passes the no-disadvantage test. (3) If the Commission has concerns about whether the AWA, as varied, passes the no-disadvantage test, but those concerns are resolved by: (a) a written undertaking given by the employer and accepted by the Commission; or (b) other action by the parties; the Commission must approve the variation agreement. (4) If the Commission considers that it is not contrary to the public interest to approve the variation agreement, it must approve the variation agreement (whether or not subsection (2) or (3) requires the Commission to approve the variation agreement). (5) In any case where the Commission is not required to approve the variation agreement, the Commission must refuse to approve the variation agreement." Reference should also be made to s 170 VPI which requires the Commission to issue approval or refusal notices with respect to AWAs and variations referred to it by the Employment Advocate. 38 Plainly the requirement that an AWA and a variation agreement be assessed by reference to the no disadvantage test is to ensure that an employee who is a party to an AWA has not relinquished benefits under awards, certified agreements or laws in a way that would operate unfairly. However the protection afforded by Part VID to employees extends to the process of negotiation as well. This is reflected in the additional approval requirement that the employee genuinely consented. It is also reflected in s 170WF (which prohibits the use of threats to intimidation by a third party) and in s 170WG (which prohibits the application of duress to either the employer or the employee). Those sections respectively provide: (1) A person who is not a party to negotiations relating to an AWA or ancillary document must not use threats or intimidation with the intention of hindering the negotiations or the making of the AWA or ancillary document. For this purpose party to negotiations includes a bargaining agent. (2) This section does not apply to conduct by or on behalf of an organisation of employees for the purpose of negotiating a certified agreement, if the conduct is authorised by another provision of this Act. and: (1) A person must not apply duress to an employer or employee in connection with an AWA or ancillary document. (2) A person must not knowingly make a false or misleading statement to another person with the intention of persuading the other person to make, or not to make, an AWA or ancillary document. As noted earlier, an "ancillary document" is defined in s 170VA as including a variation agreement. Accordingly, the prohibition on the use of threats or intimidation and on the application of duress apply equally to a variation agreement. 39 Division 6 (ss 170VQ to 170VU) of Part VID deals with the effect of an AWA. Once an AWA has been approved and has started operating (see s 170VJ) it displaces legally effective instruments or laws which might otherwise regulate the terms and conditions of employment of the employee party to the AWA. Firstly, s 170VQ provides, in relation to awards and certified agreements made under the Act and as well as State awards and agreements: (1) During its period of operation, an AWA operates to the exclusion of any award that would otherwise apply to the employee's employment. This subsection has effect subject to subsections (2) and (3). (2) An AWA is of no effect if it is made: (a) after the commencement of an award that is made under subsection 170MX(3) and applies to the employee's employment; and (b) before the nominal expiry date of the award. (3) An AWA does not operate to the exclusion of an exceptional matters order, but prevails over an exceptional matters order to the extent of any inconsistency. (4) During its period of operation, an AWA operates to the exclusion of any State award or State agreement that would otherwise apply to the employee's employment. (6) The relationship between an AWA and a certified agreement is as follows: (a) a certified agreement prevails over the AWA to the extent of any inconsistency if: (i) the certified agreement is in operation at the time the AWA comes into operation; and (ii) the nominal expiry date of the certified agreement is after the date on which the AWA comes into operation; and (iii) the certified agreement does not expressly allow a subsequent AWA to operate to the exclusion of the certified agreement or to prevail over the certified agreement to the extent of any inconsistency; (b) a certified agreement that comes into operation after the nominal expiry date of the AWA prevails over the AWA to the extent of any inconsistency; (c) in all other cases, the AWA operates to the exclusion of any certified agreement that would otherwise apply to the employee's employment. 40 In relation to State laws, s 170VR provides: (1) Subject to this section, an AWA prevails over conditions of employment specified in a State law, to the extent of any inconsistency. (2) Provisions in an AWA that deal with the following matters operate subject to the provisions of any State law that deals with the matter: (a) occupational health and safety; (b) workers' compensation; (c) apprenticeship; (d) any other matter prescribed by the regulations. (3) If a State law provides protection for an employee against harsh, unjust or unreasonable termination of employment (however described in the law), subsection (1) is not intended to affect the provisions of that law that provide that protection, so far as those provisions are able to operate concurrently with the AWA. (4) To the extent of any inconsistency, an AWA prevails over prescribed conditions of employment specified in a Commonwealth law that is prescribed by the regulations. (5) In this section: Commonwealth law means an Act or any regulations or other instrument made under an Act. prescribed conditions means conditions that are identified by the regulations. State law means a law of a State or Territory (including any regulations or other instrument made under a law of a State or Territory), but does not include a State award or State agreement. The effect of an AWA on the parties is dealt with by s 170VT which provides: (1) A party to an AWA must not breach the AWA. 41 While Div 6 does not deal expressly with the effect of a variation agreement, it is clear from Part VID as a whole that a variation agreement, once approved, merges with the AWA once the variation agreement has been approved. Division 6 operates both on an AWA as originally approved and, where relevant, as varied by a variation agreement.

The appeal and its disposition 42 It is convenient to discuss the legislative scheme for creating and making AWA's before turning to the specific issues raised in the appeal. The legislative scheme discussed earlier is unclear in at least two respects. The first is whether an AWA needs to deal in a comprehensive way with terms and conditions and employment. The answer is apparently not. Section 170VF establishes as an essential characteristic of an AWA that it be a written agreement that deals with matters pertaining to the relationship between an employer and employee. The reference to "matters" in that section is of some importance to this appeal and will be discussed below. An agreement which dealt with one or a limited number of conditions of employment, would satisfy that description in s 170VF. Moreover s 170VG, which concerns the content of an AWA, requires a certain minimum content. However that section does not suggest that beyond the identified minimum, the AWA must deal with other matters though plainly the section contemplates it can. In addition, by operation of s 170VR an AWA prevails over conditions of employment specified in a State law to the extent of any inconsistency. However the section appears to be drafted on the assumption that an AWA might not deal with certain conditions of employment which themselves were dealt with by a State law. 43 In any event, it might be expected that an AWA will not deal with all aspects of the employment relationship and leave some room for the operation of terms implied by the common law as could have been the case in relation to comprehensive industry awards made under the Act in an earlier form: see the observations of Wilson J in Ansett Transport Industries (Operations) Pty Ltd v Wardley (1997) 142 CLR 237 at 287 but compare the observations of Mason, Brennan and Deane JJ in Metal Trades Industry Association v Amalgamated Metal Workers' and Shipwrights' Union (1983) 152 CLR 632 at 649. That said, the parties may endeavour to create an entire employment agreement and exclude terms which might otherwise have been implied by law: see the observations of McHugh and Gummow JJ in Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 450. On one view that is what the respondent and the appellant sought to achieve in the present matter with clause 1.4.2 set out above at [13]. 44 The second uncertainty concerning the operation of Part VID is the relationship between an AWA and the contract of employment. A related question is the effect of the statutory scheme in Part VID on the capacity of the parties to an AWA to reach agreement, with immediate binding and enforceable legal effect, on matters relating to the employment relationship. Part VID does not appear to address, at least explicitly, the effect of an AWA on contractual arrangements between the parties to an AWA. Obviously if the contractual terms are embodied in an AWA, this issue does not arise. If, however, the agreement which becomes the AWA addresses only some aspects of the employment relationship, questions may arise about its effect on other aspects of the employment relationship dealt with, either expressly or impliedly (as a matter of fact or law), by the contract of employment and, in particular, contractual terms agreed to after the AWA came into force. 45 It is to be recalled that Division 6 of Part VID deals with the effect of an AWA. It gives paramountcy to an AWA in specified ways. In relation to an award made under the Act, the AWA operates to the exclusion of the award and similarly operates the exclusion of any State award or State agreement: see s 170VQ. In certain circumstances the AWA is subordinated to a certified agreement and such an agreement prevails over the AWA to the extent of any inconsistency. Subject to qualifications, an AWA prevails over conditions of employment specified in a State law to the extent of any inconsistency: s 170VR. The expression "State law" is defined and the definition rather suggests it is a reference to legislation given the reference, in the definition, to instruments made under a law of a State. In any event, s 170VR cannot validly have a wider operation than s 109 of the Constitution and the better view is that s 109 operates on State legislation: see Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (1920) 28 CLR 129 at 155 and Hanks: Australian Constitutional Law, seventh edition at 8.6.1. That is not to say, however, that a Commonwealth law might not, as a matter of construction, evince an intention to override the common law: see Ansett Transport Industries (Operations) Pty Ltd v Australian Federation of Air Pilots (1989) 95 ALR 211 at 244. Accordingly, if Division 6 is silent on the effect of an AWA on the common law (and, in particular, contractual provisions made and enforceable under the common law) it can be assumed an AWA does not derogate from contractual terms concerning rights and obligations not dealt with by the AWA whether agreed to before the AWA was entered into or after. This last observation is subject to a qualification to which we now turn. 46 As just noted, and AWA is given paramountcy over awards under the Act and as well as qualified paramountcy over State laws, awards and agreements. An AWA is, for this reason, a potent instrument. However as is apparent from the sections set out at [30] to [38] above, the legislature has been assiduous to ensure that at least as a matter of legislative framework, AWAs are the product of free bargaining that does not disadvantage the employee. The legislature has sought to ensure free bargaining, to the extent that legislation can achieve that result, by prohibiting duress and requiring the Employment Advocate to be satisfied that the employee genuinely consented to making the AWA. Moreover the legislature has recognised the potentially vulnerable position of the employee by requiring the Employment Advocate to be satisfied that the employee has genuinely consented. 47 Having regard to this protective legislative framework, it is unlikely that the legislature intended that the parties to an AWA could reach agreement under the umbrella of that protection about matters pertaining to the employment relationship, obtain approval from the Employment Advocate thereby removing protection which might be afforded by an award (made under the Act or a State award) or afforded by State law, and thereafter bargain without similar protection to reach a collateral agreement (enforceable under the common law) imposing additional burdens on an employee in relation to matters dealt with by the AWA. Indeed it is for this reason (and probably one other) that the Act contains procedures with that protection for parties to an AWA to reach, and obtain approval for, a variation agreement. The other reason would be to allow the parties to an AWA to add to the AWA provisions concerning a matter not then dealt with by the AWA. 48 Nothing in the actual language used by the legislature would suggest a different conclusion. As noted above, a variation agreement is defined in s 170VA as meaning "an agreement to vary an AWA". It is to be recalled that the essential characteristic of an AWA identified by s 170VF is that it is an agreement "that deals with matters pertaining to the relationship between an employer and employee" (emphasis added). Section 170VL provides that an employer and an employee may make a written agreement varying an AWA. While the heading to the section speaks of varying the "terms" of the AWA, the heading does not form part of the Act: see s 13 of the Acts Interpretation Act 1901 (Cth). The language used to describe a variation agreement having regard to the processes which must be undertaken for its approval, are consistent with such an agreement being directed not only to varying the text of an agreement but varying the substance of the agreement as well. Indeed it might be thought that the statutory scheme of approval was directed primarily to the latter type of variation. In our opinion, if an AWA deals with a particular matter pertaining to the relationship between an employer and employee, then the parties to the AWA can only alter their rights and obligations in relation to that matter in a way which might disadvantage the employee, by entering into and obtaining approval for, a variation agreement. By clear implication, the Act prohibits the alteration of such rights or obligations which might disadvantage the employee by means other than those provided in the Act and renders ineffectual any agreement which purports to do so. 49 Broadly similar considerations inform discussion about whether contracts are unenforceable because they are tainted by illegality. A leading Australian authority in this area is Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd (1978) 138 CLR 411. In issue was whether a section in the Banking Act 1959 (Cth) which prohibited a company carrying on a banking business without an authority, rendered unenforceable a mortgage and guaranteed given to a body corporate which had lent money and thereby engaged in unauthorised banking business. The applicable principles were discussed by Gibbs ACJ and Mason and Jacobs JJ. Gibbs ACJ said (at 423): There are four main ways in which the enforceability of a contract may be affected by a statutory provision which renders particular conduct unlawful: (1) the contract may be to do something which the statute forbids; (2) the contract may be one which the statute expressly or impliedly prohibits; (3) the contract, although lawful on its face, may be made in order to effect a purpose which the statute renders unlawful; or (4) the contract, although lawful according to its own terms, may be performed in a manner which the statute prohibits. In the present case we are not concerned with the first of these possible situations. Clearly s 8 does not render it unlawful to borrow or lend money or to give and take a mortgage, supported by guarantees, to secure its repayment. The contract sued upon was therefore not to do anything which s 8 forbids. The principal question in the case is whether s 8, on its proper construction, prohibited the making or performance of the contract. As will be seen, if that question is answered in the negative, it will not be possible to say that the contract cannot be enforced on the ground that it was made in order to effect an unlawful purpose or was performed in an unlawful manner. It is often said that a contract expressly or impliedly prohibited by statute is void and unenforceable. That statement is true as a general rule, but for complete accuracy it needs qualification, because it is possible for a statute in terms to prohibit a contract and yet to provide, expressly or impliedly, that the contract will be valid and enforceable. However, cases are likely to be rare in which a statute prohibits a contract but nevertheless reveals an intention that it shall be valid and enforceable, and in most cases it is sufficient to say, as has been said in many cases of authority, that the test is whether the contract is prohibited by the statute. Where a statute imposes a penalty upon the making or performance of a contract, it is a question of construction whether the statute intends to prohibit the contract in this sense, ie to render it void and unenforceable, or whether it intends only that the penalty for which it provides shall be inflicted if the contract is made or performed. The question whether a statute, on its proper construction, intends to vitiate a contract made in breach of its provisions, is one which must be determined in accordance with the ordinary principles that govern the construction of statutes. "The determining factor is the true effect and meaning of the statute": St John Shipping Corporation v Joseph Rank Ltd [1956] 3 All ER 683; [1957] 1 QB 267 at 286. "One must have regard to the language used and to the scope and purpose of the statute": ; Archbolds (Freightage) Ltd v S Spanglett Ltd [1961] 1 All ER 417; [1961] 1 QB 374 at 390. One consideration that has been regarded as important in a great many cases, of which ; Cope v Rowlands (1836) 2 M & W 149; 150 ER 707 is a notable example, is whether the object of the statute - or one of its objects - is the protection of the public. An antithesis is commonly suggested between an intention to protect the public, and an intention simply to secure the revenue, and it is said that when the former intention appears the contract must be taken to be prohibited, whereas if the intention is only to protect the revenue the statute will not be construed as imposing a prohibition on contracts. The question whether the statute was passed for the protection of the public is one test of whether it was intended to vitiate a contract made in breach of its provisions, but I am with respect in full agreement with the views expressed in ; St John Shipping Corporation v Joseph Rank Ltd [1957] 1 QB at 287 and ; Shaw v Groom [1970] 1 All ER 702; [1970] 2 QB 504 at 518 that it is not the only test. It would be contrary to reason and principle to allow one circumstance to override all other considerations in the interpretation of a statute. As Devlin J said in ; St John Shipping Corporation v Joseph Rank Ltd, supra, at 287: "The fundamental question is whether the statute means to prohibit the contract. The statute is to be contrued in the ordinary way: one must have regard to all relevant considerations and no single consideration, however important, is conclusive": see also ; Shaw v Groom [1970] 2 QB at 523. To similar general effect, were the observations of Mason J (at 423): The principle that a contract, the making of which is expressly or impliedly prohibited by statute, is illegal and void is one of long standing but it has always been recognized that the principle is necessarily subject to any contrary intention manifested by the statute. It is perhaps more accurate to say that the question whether a contract prohibited by statute is void is, like the associated question whether the statute prohibits the contract, a question of statutory construction and that the principle to which I have referred does no more than enunciate the ordinary rule which will be applied when the statute itself is silent upon the question. Primarily, then, it is a matter of construing the statute and in construing the statute the court will have regard not only to its language, which may or may not touch upon the question, but also to the scope and purpose of the statute from which inferences may be drawn as to the legislative intention regarding the extent and the effect of the prohibition which the statute contains. 50 Of particular relevance to this appeal were the observations of Jacobs J (at 431): If a statute imposes a positive obligation to make contracts in a certain way, a prohibition against making contracts in another way can be implied as a matter of construction and will be implied unless the purpose of the statutory requirement is merely to protect the revenue: Victorian Daylesford Syndicate Ltd v Dott [1905] 2 Ch 624. For more recent High Court authorities see Nelson v Nelson (1995) 184 CLR 538 and especially at 551-552 and Fitzgerald v F J Leonhardt Pty Ltd (1997) 189 CLR 215. The principles discussed in Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd (supra) when considered in relation to the legislative scheme in Pt VID, point to the conclusion expressed above. That is, the Act prohibits the alterations of rights and obligations concerning a matter dealt with by an AWA if it might disadvantage the employee, by means other than those provided in the Act. Any agreement purporting to alter rights and obligations in this way would be unenforceable. 51 Before turning to the particular circumstances of this appeal, one further comment should be made about the legislative scheme. As noted earlier the essential characteristic of an AWA is that it is an agreement "that deals with matters pertaining to the relationship between an employer and employee". A similar reference to matters was found in s 65 of the Conciliation and Arbitration Act 1904 (Cth) which concerned the relationship between awards made under that legislation and State laws. The section provided: Where a State law, or an order, award, decision or determination of a State Industrial Authority, is inconsistent with, or deals with a matter dealt with in, an award, the latter prevails and the former, to the extent of any inconsistency or in relation to the matter dealt with, is invalid. This section invited a comparison between awards (amongst other things) made under federal law and awards and other determinations made under State law and the matters each dealt with to determine inconsistency. The High Court has, on several occasions, considered the operation of this section or earlier versions of it. The most recent consideration (as the central issue raised in the proceeding) was in Metal Trades Industry Association v Amalgamated Metal Workers' and Shipwrights' Union (supra). The way the comparison should be made, and in particular, how the "matter" should be identified, was discussed by Mason, Brennan and Deane JJ in the following passage (at 649): The critical question then is: What is the conduct or matter with which the relevant awards deal? For the effect of s 65 is to make the provisions of the awards exclusive in relation to that conduct or matter and thus to make it inconsistent for the law of a State to govern what is dealt with by the awards. The section contradicts the hypothesis that the award provisions are intended to operate side by side with the provisions of a State law dealing with that conduct or matter. There are powerful reasons which support the approach which finds expression in s 65. General industry awards have steadily become more comprehensive in their reach, regulating in a detailed fashion the terms and conditions of employment. It is not uncommon now to find in a general industry award clauses setting out in detail rights and obligations of the parties under the contract of employment, particularly in relation to termination of employment. Moreover, an award is the final product of the complex process of conciliation and arbitration set in train by the service of a log of claims and its non-acceptance. It is a settlement, intended to be enduring, of the terms and conditions which are to govern the industrial relations of employers and employees in the industry to which the award relates. In this situation it is natural and convenient that the award should be regarded to the exclusion of State law, as expressing the relations of the parties governing the matters with which it deals. It would undermine the settlement embodied in the award if its provisions were to be disturbed by the operation of State law on matters with which it deals. Of course it is inevitable that there are some matters with which a comprehensive general industry award fails to deal, either because the parties are content to accept the application of State law, eg workers' compensation, or because it has been considered that an award cannot validly deal with the matter, eg superannuation and pension benefits (v Hamilton Knight; Ex parte Commonwealth Steamship Owners Association (1952) 86 CLR 283, a decision which may require reconsideration in the future). The more difficult questions of inconsistency occur in this area. We shall return to it shortly. These reasons led their Honours to take a fairly broad view of what was the matter dealt with by the industry award in question leading to the conclusion that a State law concerning employment protection on termination had no field of operation for employees covered by that industry award. The fact that awards are now limited to allowable matters: see s 89A, does not in our opinion, detract from this reasoning. 52 Similar reasoning to that adopted in Metal Trades Industry Association v Amalgamated Metal Workers' and Shipwrights' Union (supra), would lead to a similar conclusion in relation to AWAs. That is, what matters are dealt with by an AWA should not be viewed narrowly when determining its legal effect in relation to, amongst other things, State laws. However, if the matters an AWA deals with are not viewed narrowly for that purpose, there would be no apparent reason for treating more narrowly the matters an AWA deals with for the purpose of determining the circumstances in which contractual terms can be agreed between the employer and employee bound by an AWA without having to enter a variation agreement and having it approved. 53 This leads to a consideration of whether, in the present case, the bond agreement was an enforceable agreement. It might not be because the appellant's AWA provided in clause 1.4.3 that it could be varied in accordance with the Act. This clause may have limited the means of varying the AWA. The bond agreement may be an ineffective variation. A related question is whether the bond agreement constituted a variation which was ineffective by operation of the Act because the procedures under the Act for approval of a variation agreement were not followed. 54 The answer to the first question is caught up in the answer to the second. Clause 1.4.2 evinced an intention that the appellant's AWA dealt comprehensively with her terms and conditions of employment, even if the provisions left room for other terms and conditions of employment arising either by operation of law or further collateral agreement. At the very least this clause evinced an intention that the appellant's AWA dealt comprehensively with the matters addressed in the AWA. Training is dealt with in various ways. An employee could be required to undergo training: clause 1.5.2. Having regard to clause 2.4 and Part 5, there was a mutual commitment to the acquisition by the appellant of work-related skills. It may be accepted that the distinction was drawn in clause 5.1.3 to the acquisition of skills in a position to which the appellant was appointed (which was not as an officer on a Dash 8) and the acquisition of training for higher or alternative positions. Nonetheless, the appellant's AWA identified rights and obligations in relation to both types of training. The former type, necessary training, interacted with clause 6.13.1. That is, had the appellant refused to undergo necessary training her employment could be terminated. The latter type, training not required for the appellants appointed position, would not have created an entitlement in the appellant to a higher rate of pay unless it was completed and the skills obtained used in her employment. We should, at this point, indicate that we do not accept the submission of the respondent (and adopted by the learned Magistrate) that the expression "by agreement with us" in clause 5.1.3 allowed for a collateral bond agreement. Fairly clearly that clause was a reference to agreement about whether such training can be undertaken and is not directed to any collateral agreement, such as the bond agreement, concerning such training. 55 In addition, the appellant's AWA dealt with the circumstances in which the appellant's employment could be terminated. It conferred on the respondent a right to terminate the appellant's employment summarily in the circumstances specified in 6.13.1 or on notice in circumstances dealt with in 6.13.2 (subject to the procedures specified in that clause) or on notice otherwise: see 6.13.3. The appellant could terminate her employment on notice as provided in 6.13.4. The AWA did not qualify the appellant's right to terminate on notice other than providing for a forfeiture of pay if a minimum period of notice was not given. It certainly did not qualify the appellant's right to terminate by requiring the payment of an amount of the type referred to in the bond agreement. Nor did the AWA confer on the respondent a right to payment of such an amount in the event it dismissed the appellant summarily for serious and wilful misconduct or dismissed the appellant for failing to adequately carry out her duties and responsibilities in any position to which she was promoted (such as a Dash 8 pilot). The bond agreement did. 56 It appears to us that the bond agreement concerned aspects of the matters dealt with in both Part 5 and 6.13 of the appellant's AWA and it imposed an additional burden on the appellant. Accordingly to create the rights and obligations found in the bond agreement, it would have been necessary for the appellant and respondent to make a variation agreement and have it endorsed by the Employment Advocate. The failure of the parties to do so had the result that the bond agreement was unenforceable. The learned Magistrate erred in concluding it did.

Costs 57 The appellant challenged the costs order of the Magistrate in this appeal. Initially the respondent sought to support the costs order. Ultimately, however, the respondent accepted that the order should not have been made having regard to the terms of s 347 of the Act and authorities concerning its construction and operation. Accordingly it was agreed that the costs order should be set aside.

Conclusion 58 For the preceding reasons, the appeal should be allowed and the orders of the Magistrate of 20 May 2004 and 2 July 2004, set aside. Because of s 347, no order as to costs should be made in the appeal. I certify that the preceding fifty-eight (58) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Black and Justice Moore.

ON APPEAL FROM THE MAGISTRATES COURT OF SOUTH AUSTRALIA

LANDER J 59 I have had the advantage of reading the draft reasons of Black CJ and Moore J. I adopt their statement of the facts. I agree in the result which their Honours have arrived. I agree with the orders which they propose. 60 Section 83BA of the Workplace Relations Act 1996 (Cth) (the Act) provides for an Employment Advocate. Relevantly, for the purpose of this appeal, the Employment Advocate provides advice to employers and employees in connection with Australian Workplace Agreements (AWAs) about the relevant award and statutory entitlements, and about the relevant provisions of the Act. The Employment Advocate performs functions under Part VID including functions relating to the filing and approval of AWA and ancillary documents; and investigating alleged breaches of AWAs, alleged contraventions of Part VID and any other complaints relating to AWAs: s 83BB. 61 Part VID of the Act provides for employers and their employees entering into an AWA dealing with matters pertaining to the relationship between an employer and an employee: s 170VF. An AWA, which has been approved in accordance with the Act, operates to the exclusion of any award that would otherwise apply to the employee's employment: s 170VQ. 62 An employer has an obligation to ensure that the AWA includes provisions of the kind referred to in s 170VG of the Act. First, the employer must ensure that the AWA includes provisions relating to discrimination that are prescribed by the regulations under the Act; secondly, that the AWA does not include any provisions that prohibit or restrict disclosure of details of the AWA to another person; and thirdly, that the AWA includes a dispute resolution procedure. 63 Apart from those matters, the Act does not regulate what must or must not be included in an AWA. 64 However, the Act provides that an AWA may be filed with the Employment Advocate who must issue a receipt if satisfied that the filing requirements provided for in s 170VO of the Act have been met: s 170VN. The Employment Advocate must approve an AWA for which a filing receipt has issued if he/she is sure that the AWA passes the no-disadvantage test and is satisfied the AWA meets the additional approval requirements: s 170VPB. 65 Part VIE provides for the no-disadvantage test and s 170XA(1) provides that an agreement will pass 'the no-disadvantage test if it does not disadvantage employees in relation to their terms and conditions of employment'. 66 Section 170XA(2)(a) requires the Employment Advocate to have regard to relevant awards or designated awards and any relevant Commonwealth or State or Territory law in determining whether an AWA disadvantages employees in relation to their terms and conditions of employment. 67 The Employment Advocate has to compare the AWA with the relevant awards or designated awards and have regard to any law of the Commonwealth or of a State or Territory before forming a judgment as to whether, on balance, the AWA gives rise to a reduction in the overall terms and conditions of employment. 68 To that end, the Employment Advocate must identify the relevant award which applies to the agreement, which will be an award which regulates the terms and conditions of employment of persons engaged in the same kind of work as that of a person under the AWA: s 170X (definition of relevant award). If there is no such relevant award then the Employment Advocate must determine which designated award applies: s 170XE. In that regard, the Employment Advocate must have regard to the matters in s 170XE(2). 69 In all cases, therefore, an Employment Advocate cannot determine whether the AWA passes the no-disadvantage test without comparing the AWA with either a relevant award or designated award. 70 Moreover, the Employment Advocate cannot approve the AWA unless the AWA also meets the additional approval requirements under s 170VPA. In particular, under that section, the Employment Advocate needs to be satisfied that the employee genuinely consented to making the AWA: s 170VPA(1)(d). 71 If the Employment Advocate is sure that the AWA passes the no-disadvantage test and is satisfied that the AWA meets the additional approval requirements, he/she must approve the AWA: s 170VPB(1). In those circumstances, where the Employment Advocate approves an AWA, the Employment Advocate must issue an approval notice to the employer: s 170VPF. If, on the other hand, the Employment Advocate refuses to approve an AWA, the Employment Advocate must issue a refusal notice to the employee. 72 It can be seen, therefore, that the purpose of Parts VID and VIE is to provide a system whereby employers and employees can agree on terms and conditions pertaining to the relationship between an employer and an employee outside the terms of any award. However, the AWA cannot be approved by the Employment Advocate unless the terms and conditions which have been agreed upon do not disadvantage the employee under the relevant or designated award and the Employment Advocate is satisfied that the employee genuinely consented to the making of the AWA. 73 The employee is thus protected from entering into any AWA with an employer which is not at least as advantageous to the employee as the relevant award or designated award. 74 It is thus in that context that the content of any AWA must be considered. 75 It seems to me that an Employment Advocate could not satisfy himself or herself that an AWA did pass the no-disadvantage test unless the AWA included most, if not all, of the terms and conditions which are governed by the relevant award or designated award. 76 An agreement which only provided for the wages of a particular employee would not be capable of being approved because the Employment Advocate could not be satisfied that the particular wage provided for in the agreement meant that the employee suffered no disadvantage compared with a relevant award or designated award. 77 I think therefore that if an agreement is to be approved as an AWA it must deal with most, if not all, of the terms and conditions which the relevant award or designated award applying to the employee addresses. 78 Part VID also addresses the question of ancillary documents. An ancillary document includes a variation agreement: s 170VA. 79 A variation agreement is defined to include an agreement to vary an AWA. Section 170VL provides that an employer or an employee may make a written agreement varying an AWA but s 170VG applies to the AWA as varied in the same way as the section applies to the original AWA: s 170VL(3). 80 If an employer and an employee enter into a variation agreement to vary an AWA, the variation agreement, because it is an ancillary document, may be filed with the Employment Advocate: s 170VN(1). 81 If so filed, the Employment Advocate must issue a receipt to the person who filed the document if the Employment Advocate is satisfied that the filing requirements for the document have been met: s 170VN(2)(a). The filing requirements for a variation agreement are set out in s 170VO(3). 82 The Employment Advocate must approve a variation agreement, for which a filing receipt has been issued, if the Employment Advocate is sure that the AWA, as varied, passes the no-disadvantage test and is satisfied that the variation agreement meets the additional approval requirements: s 170VPC(1). 83 The additional approval requirements for an ancillary document, and in particular a variation agreement, are provided for in s 170VPA(2). In particular, an Employment Advocate needs to be satisfied that the employee genuinely consented to making the variation agreement: s 170VPA(2)(d). 84 If the Employment Advocate approves an ancillary document which, of course, includes a variation agreement, the Employment Advocate must issue an approval notice to the employer. If, on the other hand, the Employment Advocate refuses to approve an ancillary document, the Employment Advocate must issue a refusal notice to the employer: s 170VPF. 85 The no-disadvantage test is provided for in s 170XA and, like an AWA, the agreement will pass the no-disadvantage test if it does not disadvantage employees in relation to their terms and conditions of employment by a reduction of those terms and conditions of employment under a relevant award or designated award or under any law of the Commonwealth or a State or Territory: s 170XA(2). 86 The Act thus provides that an AWA cannot be varied except in accordance with the Act itself which means that the employer and employee cannot enter into a variation agreement of the AWA which disadvantages the employee relative to the relevant award or designated award. 87 That way, the Act ensures that the employee continues to be protected after entering into the AWA by requiring any variation agreement to the AWA to be subject to the same system of filing and approval as the AWA itself. 88 If the employer and employee entered into an agreement to vary an AWA they have, therefore, under the terms of the Act, then entered into an ancillary agreement. That variation agreement also requires the approval of the Employment Advocate in the same manner as the original AWA required his/her approval. 89 Thus it is, that the variation agreement must also pass the no-disadvantage test and the additional approval requirements which are provided for in s 170VPA(2), which again requires the Employment Advocate to be satisfied that the employee genuinely consented to making a variation agreement: s 170VPA(2). 90 The effect of an AWA is that it operates to the exclusion of any award that would otherwise apply to the employee's employment: s 170VQ(1). 91 An AWA also prevails over conditions of employment specified under State law to the extent of any inconsistency: s 170VR(1). 92 That means once made and approved by the Employment Advocate the relationship of employer and employee is governed entirely by the AWA or the ancillary document. Because it operates to the exclusion of the relevant award or designated award and any State law, insofar as the State law may be inconsistent with the AWA, it must contain most, if not all, of the conditions of employment usually addressed in an award. 93 That confirms, in my opinion, the need for the AWA to address most, if not all, of the matters contained in the relevant award or designated award. In those circumstances, it would ordinarily contain at least the matters in s 89A(2) of the Act. 94 The purpose of Parts VID and VIE is to replace awards by an AWA. That purpose can only be achieved if the AWAs themselves address most, if not all, of the matters contained in an award. 95 In this case, in my opinion, for the reasons stated by Black CJ and Moore J, the bond agreement was a variation agreement and therefore an ancillary document, and needed to be approved by the Employment Advocate. No steps were taken in that regard so that, in my opinion, the bond agreement did not operate to vary the AWA which otherwise governed the employment relationship between the appellant and the respondent. 96 In those circumstances, the bond agreement was unenforceable by the employer.

97 For those reasons, I agree that the appeal must be allowed and the orders proposed by Black CJ and Moore J should be made. I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander.

Counsel for the Appellant: Mr H Borenstein SC with Mr W Friend

Counsel for the Respondent: Mr H Dixon SC with Mr R Manuel

Workplace Relations Act 1996(Cth)

Magistrates Court (Civil) Rules 1992(SA)

Conciliation and Arbitration Act 1904(Cth)

At a glance

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Judgment (16 paragraphs)

Parties

Legislation Cited (5)

Cases Cited (9)

Cited By (1)