National Union of Workers v Blowflex (SA) Pty Ltd

[2014] FWC 4736

[2014] FWC 4736

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739—Dispute resolution

National Union of Workers
v
Blowflex (SA) Pty Ltd
(C2014/3947)

SENIOR DEPUTY PRESIDENT O’CALLAGHAN ADELAIDE, 17 JULY 2014

Alleged dispute concerning payment of overtime to Thomas Smith - contractor provisions in enterprise agreement - request for findings.

[1] On 8 April 2014 the National Union of Workers (the NUW) lodged a dispute pursuant to s.739 of the Fair Work Act 2019 (the FW Act) and the dispute resolution provisions of the Blowflex Mouldings Pty Ltd (South Australia) - National Union of Workers Enterprise Agreement 2012 (the 2012 Agreement). The NUW advised that the dispute involved both Blowflex Mouldings Pty Ltd (Blowflex) and Programmed Maintenance Services Ltd.

[2] The dispute notification advised that the dispute related to overtime payments claimed with respect to a Mr Thomas Smith from December 2009 to July 2012 when Mr Smith was employed by a labour hire contractor to Blowflex. Mr Smith was subsequently directly hired by Blowflex and there is no argument that he has been paid in accordance with the 2012 Agreement since that time. The NUW assert that Mr Smith should have been paid by his then employer, which it referred to as Programmed Integrated Workforce in accordance with the 2012 Agreement and its precursors consistent with clause 16.4 of the 2012 Agreement and identical provisions in earlier agreements. That clause states:

“16.4 Casuals not employed directly by the employer

16.4.1 Direct engagement shall be the principle and preferred method of employment for all workers including casuals.

16.4.2 The employer agrees that work:

-that is performed by persons who are not directly employed by the employer; and

- that would otherwise be covered by this agreement will only be accepted by the employer if those persons who perform the work receive the same rates of pay and conditions as workers covered by this agreement.”

[3] The application was the subject of a conciliation conference with me on 5 May 2014. Both Blowflex and Programmed Maintenance Services Ltd participated in this conference but expressed concern about the jurisdiction available to the Fair Work Commission to progress this application further. At the conference, the NUW detailed the payments sought by Mr Smith for the period in question. No agreement was reached and an opportunity was extended to the NUW and Mr Smith to decide whether the application was to be pursued.

[4] On 21 May 2014 the NUW advised that it did not seek to pursue the matter with respect to Programmed Maintenance Services Ltd but that it sought an arbitration relative to Blowflex. The matter was then the subject of a telephone conference with me on 26 May 2014. A sound file record of this conference was made. At this conference the NUW and Blowflex agreed on the issue to be referred for arbitration. As a result I issued directions which relevantly stated:

“[2] The directions below are issued following a telephone conference for this purpose convened today.

[3] The issue referred for arbitration is as follows:

Did Blowflex Mouldings Pty Ltd breach the provisions of the Blowflex Mouldings Pty Ltd (South Australia) - National Union of Workers Enterprise Agreement 2005-2007 with respect to work undertaken by Mr Smith between 2009 and 2012?

[4] I confirm my advice to the parties that an initial issue which will need to be addressed by both parties goes to the jurisdiction that enables the Fair Work Commission to consider this matter.

[5] I confirm that the parties have agreed that written submissions in relation to the issue referred for arbitration, and the jurisdictional question I have identified will be filed in the Commission and exchanged by close of business 16 June 2014. Written submissions in reply will be filed and exchanged by close of business 30 June 2014. I note that either party is at liberty to request a hearing in this matter.

[6] Absent any request for a hearing I will determine the issue on the basis of the written material provided to me.”

[5] Both the NUW and Blowflex have now provided written submissions and submissions in reply. Those submissions establish a somewhat unusual circumstance which I have summarised below.

[6] The NUW submissions assert that Blowflex has failed to ensure that Mr Smith was remunerated in accordance with the Blowflex Mouldings Pty Ltd (South Australia) - National Union of Workers Enterprise Agreement 2005-2007 (the 2005 Agreement) and its successor (the 2010 Agreement), to ensure that it was not accepting labour that was paid at a lower rate than the rate applicable under the 2005 and 2010 Agreements. The NUW asserted that the FWC did not have the jurisdiction to answer the question posed in my 26 May 2014 directions. The NUW then continued, to pose its own questions relative to this matter, in the following terms:

“The NUW submits that the FWC does not have jurisdiction to answer the question referred to in paragraph 4 and the two questions that instead must be answered are:

a. What is the obligation imposed by clause 16 of the Blowflex Mouldings Pty Ltd (South Australia) - National Union of Workers Enterprise Agreement 2010 (the 2010 Agreement)?

b. Was Mr Smith paid in accordance with the 2010 Agreement?”

[7] The NUW asserted that the FWC has the jurisdiction to address the dispute described in these terms because:

1. it was permitted to arbitrate under the 2010 Agreement dispute resolution provisions
2. those dispute resolution provisions are broad and request the FWC to finalise disputes, and

3. Blowflex has been misapplying the clause for a long time.

[8] The NUW asserted that the FWC had the jurisdiction to make a recommendation or express an opinion relative to this matter. Notwithstanding this, it sought a finding that clause 16 of the 2010 Agreement imposed an obligation on Blowflex to ensure that any labour provided by another party is remunerated in accordance with that Agreement. Secondly the NUW sought a finding that Mr Smith was not being remunerated in accordance with the 2005 or the 2010 Agreements. The NUW then sought a recommendation that Mr Smith should be paid the difference between what he should have received and his actual payments.

[9] The Blowflex submissions addressed the question agreed at the 26 May 2014 conference consistent with my directions. Blowflex asserted that, as an employee of Programmed Integrated Workforce, Mr Smith was not engaged under any of its Agreements. Blowflex asserts that the arbitration sought by the NUW is contrary to the provisions of s.739(5) of the FW Act in that the FWC was being asked to exercise judicial power. In this respect, it referred to various decisions which differentiate between arbitral and judicial power.

[10] In reply, the NUW characterised its different question as a request to vary the question so as to avoid jurisdictional impediments. 1 The NUW asserted that it was not seeking restitution or a finding that the agreement had been breached, but was instead seeking a recommendation which addressed the meaning of clause 16 of the 2010 Agreement and, secondly, that the dispute be resolved in a manner which is fair and just. The NUW acknowledged that the FWC conclusion could not represent an enforceable position.

[11] The Blowflex position in reply was that the NUW had unilaterally sought to change the issue before the FWC. Blowflex submitted that the 2010 Agreement could not now have application given the operation of the 2012 Agreement.

Findings

[12] The NUW's behaviour in unilaterally seeking to change the question to be determined by the FWC is, at best curious, given its initial endorsement of the agreed issue for determination. Were it not for the conclusions I have reached it would clearly be necessary to extend to Blowflex an opportunity to further address this change. However, given the position I have arrived at I have not regarded this as necessary.

[13] For the purposes of this decision I have concluded that Programmed Maintenance Services Ltd and Programme Integrated Workforce are the same entity.

[14] Section 739 states:

“739 Disputes dealt with by the FWC

(1) This section applies if a term referred to in section 738 requires or allows the FWC to deal with a dispute.

(2) The FWC must not deal with a dispute to the extent that the dispute is about whether an employer had reasonable business grounds under subsection 65(5) or 76(4), unless:

(a) the parties have agreed in a contract of employment, enterprise agreement or other written agreement to the FWC dealing with the matter; or

(b) a determination under the Public Service Act 1999 authorises the FWC to deal with the matter.

Note: This does not prevent the FWC from dealing with a dispute relating to a term of an enterprise agreement that has the same (or substantially the same) effect as subsection 65(5) or 76(4) (see also subsection 55(5)).

(3) In dealing with a dispute, the FWC must not exercise any powers limited by the term.

(4) If, in accordance with the term, the parties have agreed that the FWC may arbitrate (however described) the dispute, the FWC may do so.

Note: The FWC may also deal with a dispute by mediation or conciliation, or by making a recommendation or expressing an opinion (see subsection 595(2)).

(5) Despite subsection (4), the FWC must not make a decision that is inconsistent with this Act, or a fair work instrument that applies to the parties.

(6) The FWC may deal with a dispute only on application by a party to the dispute.”

[15] The application in this matter was made pursuant to the 2012 Agreement. That agreement came into effect on 27 September 2013.The dispute resolution provisions of that agreement state:

“14 PROCEDURES FOR THE AVOIDANCE OF INDUSTRIAL DISPUTES

The following procedures shall be observed for handling grievances and settling of disputes (including a claim that the Agreement, the NES [including subsections 65(5) or 76(4)] or a General Protection [not involving dismissal] has been breached}. These procedures will not restrict an employer or a duly authorised official of an employers' organisation or a duly authorised official of the Union making representations to each other.

14.1 The Union and employer shall notify to each other in writing the names and/or titles of duly accredited job representatives.

14.2 The accredited Union representative and employer representative shall make themselves available for consultation as required under the procedures.

14.3 In the first instance, the employee shall discuss matters with their supervisor.

14.4 If the matter is not resolved the employee or their nominated representative who may be the, the accredited Union representative shall discuss the matter affecting the employees they represent with the supervisor of those employees.

14.5 If the matter is not resolved at this level, the employee or their nominated representative who may be the accredited Union job representative should ask for it to be referred to the employer's representative nominated under subclause 14.1 hereof, and the supervisor shall do so. The employer's representative shall arrange a conference to discuss the matter within 24 hours or such other period as is agreed with the employee or their nominated representative who may be the accredited Union job representative.

14.6 If the Union is the nominated representative for the purposes of this clause and matter is not resolved at the conference convened under subclause 14.5 hereof, the accredited Union job representative shall advise the appropriate local official of the Union of the matter in issue. A conference on the matter will then be arranged, to be attended by such official or officials and the Union job representative concerned as the Union may decide, and by the designated employer's representative and such other representatives of the employer including his/her association as the employer may decide.

14.7 If the matter has not been resolved when the procedures referred to above have been implemented, the employer, the employee and their nominated representative who may be the Union should enter into consultation about it at a higher level, on the employer and the nominated representative who may be the Union , as the parties consider appropriate.

14.8 At any stage in the procedures after consultation between the parties has taken place in accordance with the procedures, either party may ask for and be entitled to receive a response to their representations within a reasonable time. If there is undue delay on the part of the other party in responding to representations, the party complaining of delay may, after giving notice of his/her intention to do so, take the matter to a higher level.

14.9 Without prejudice to either party, and except where a bona fide safety issue is involved, work shall continue in accordance with the Agreement while matters in dispute between them are being negotiated in good faith. Where a bona fide safety issue is involved, the employer and the appropriate Safety Authority must be notified concurrently or at least a bona fide attempt made to notify that authority.

14.10 At any stage of the procedure the parties may seek the assistance of a Conciliator, a member of Fair Work Australia or some mutually acceptable person.

14.11 In the event of the matter remaining unresolved, either party may refer the matter to Fair Work Australia for conciliation and, if necessary arbitration. The decision of Fair Work Australia shall be final subject to any right of appeal and shall bind the parties.

14.12 The parties agree that Fair Work Australia shall be able to exercise whatever functions and/or powers it considers necessary to conduct ant arbitrated process and thereby finalise the dispute in question. This shall include the powers to issue subpoenas, direct witnesses and give evidence.”

[16] I note that the 2012 Agreement is binding on Blowflex and its employees and that it states that it is binding on the NUW. In this latter respect, I note that the Approval Decision 2 confirms the NUW is an organisation covered by the Agreement.

[17] Irrespective of how this dispute is characterised, the FWC must have jurisdiction established under the 2012 Agreement to be able to undertake dispute resolution functions. An immediate issue goes to the extent to which the dispute resolution provisions of the 2012 Agreement provide the jurisdiction for the FWC to consider either the question agreed by the parties on 26 May 2014 or the questions put by the NUW in its submissions.

[18] I have concluded, with some substantial reservations, that the jurisdiction to consider either of these issues exists. That conclusion is founded on the very broad power extended to the FWC under clause 14 of the Agreement and the extent to which Mr Smith is currently an employee of Blowflex.

[19] My reservations about the jurisdiction go to the extent to which the 2005 Agreement was approved under a legislative regime which did not provide for the FWC or its predecessor to determine a dispute which was not related to the employment relationship. Secondly, I have a significant concern that the provisions of clause 14 cannot be taken as extending beyond the operation of the 2012 Agreement so as to empower the FWC to consider matters which may have been addressed in earlier agreement arrangements. Were it not for the conclusions I have set out below, I would have requested further advice from the parties about these issues.

[20] Before addressing the issues relevant to this dispute, I have briefly addressed the provisions of clause 16.4.2 of the Agreement. Provisions of that nature are commonly referred to as "contractor provisions". Notwithstanding that, contractor provisions vary substantially in terms of the obligations that are imposed.

[21] Contractor provisions have been considered by various Full Benches of the FWC and its predecessors. Most of these considerations have been in the context of matters which could be deemed to be allowable for inclusion in an agreement under the legislation which preceded the FW Act and, in terms of later consideration, matters which are capable of being pursued for inclusion in an agreement in the context of applications for protected action ballots. Most of these findings have concluded that contractor provisions which seek to regulate the employment of labour hire employees did not represent impediments to approval of agreements under the legislation which preceded the FW Act. 3 Depending on the nature of the provisions sought, the FWC and its predecessors have permitted protected action ballots to occur.4 In the course of these findings, various observations have been made about the nature of these contractor provisions.

[22] In Schefenacker 5 a Full Bench considered a contractor provision which specified a maximum component of labour hire employment, a review process and a requirement that the first employer instruct the labour hire agencies to increase the wage rates of their employees by the same percentage listed in that agreement. The Full Bench stated:

“[78] We admit to some difficulty in characterising this provision, comprised as it is of a series of sub-clauses with a number of legal effects. On the one hand, it may be accepted that Schefenacker's employees have a legitimate interest in the engagement of labour hire employees because of the effect of such engagement on their own employment. For that reason it may be that the engagement of labour hire employees is a matter pertaining to the relationship between Schefenacker and its own employees. On the other hand, the extent to which the agreement can regulate the contractual relationship between Schefenacker and labour hire agencies, yet still pertain to the relevant relationship, is obviously a question of degree.”

[23] In NUW 6 a Full Bench considered various contractor provisions. The majority position was that:

“[9] We have set out the clauses relating to contract labour in each of the agreements in contention in Schedule A. It is practicable to deal first with the principal term, one which is common to each of the clauses, namely: a term designed to ensure that all employees of contractors engaged by the employer will be paid the rates of pay and receive the conditions of employment which the agreement prescribes for the employees of the employer. (While there is a degree of ambiguity in some of the clauses, we have concluded that in each case the relevant clause is directed to employees of contractors, and not to persons engaged pursuant to a contract for services.)”

[24] The majority continued:

“[21] In his 18 April 2005 decision the Senior Deputy President expressed doubts about the legal effect of these provisions, indicating that in his view some of the conditions would be incapable of application to casual employees of contractors and also because of the potential for collision with State laws. He said that it is important that agreements apply to employers and employees in a direct way, and noted that the contractors and their employees did not have a right to vote on the agreement. Similar issues were raised in the decision of 14 June 2005. In that decision His Honour stated that the provision had the potential to interfere with a labour hire employer’s legal obligation to a significant degree, confirming the conclusion that the provision is not one about the relationship between, in that case, Melbourne Logistics Pty Ltd and its own employees. We do not think these considerations lead to the conclusion that the provisions do not pertain.

[22] It is clear that an agreement cannot bind contractors directly. It can only affect the employer bound by the agreement. The fact that the employer might seek to alter its contractual arrangements or enter into new ones as a result of the provision is not of itself an indication that the matter does not pertain. Such consequences were clearly in contemplation in Moore. What is not permissible is a provision which is not about the relations between the employer and its employees, but the relations between the employer and third parties with which it contracts or some other person. A provision is not in the latter category simply because it affects relations between the employer and third parties. It always remains a question of characterization. As was said in Schefenacker, this is a question of degree. It necessarily involves the Commission deciding where the line should be drawn. In this case, for the reasons we have given, the provisions fall on the permissible side of the line.

[23] We agree that it is undesirable that the obligation created by agreements should be ill-defined or that in other ways the terms of the agreements should be uncertain in their application. On the other hand the Commission’s role is to certify agreements which comply with the statutory criteria. There is no scope to refuse certification on the basis of drafting or unfairness to third parties, for example, if all of the statutory criteria are complied with. We do not think the Senior Deputy President had a different view. We note in particular he said:

“[T]he clauses appear to encounter a number of severe practical difficulties, though these may not inhibit certification.””

[25] The matter before me now appears to reflect those same undesirable realities about ill-defined obligations which can clearly be incorporated in an agreement but which give rise to uncertainty as to their legal effect. Those same obligations may give rise to rights and/or penalties but they clearly give rise to uncertainty.

[26] Finally, I have had particular regard to the provisions of Part 4 of the FW Act which, in broad terms, establishes the jurisdiction and the power of the courts to enforce the provisions of agreements. Substantial care needs to be taken by the FWC in the performance of its dispute resolution functions so as to ensure that dispute resolution does not purport to establish rights associated with enforcement.

[27] I have considered the various issues before me in this context.

[28] The issue agreed between the parties at the Directions Conference on 26 May 2014 was:

“Did Blowflex Mouldings Pty Ltd breach the provisions of the Blowflex Mouldings Pty Ltd (South Australia) - National Union of Workers Enterprise Agreement 2005-2007 with respect to work undertaken by Mr Smith between 2009 and 2012?”

[29] The parties both agree that the FWC does not have the jurisdiction to address this question. Simply put, it requires a determination of rights which is clearly the domain of the courts.

[30] The first alternative question posed by the NUW goes to what is the obligation imposed by clause 16 of the 2010 Agreement. This clause of the 2010 Agreement is in the same terms as clause 16.4.2 of the 2012 Agreement. Notwithstanding this, the question must, by definition, require an assessment of what obligation is imposed by that 2010 Agreement. In simple terms no obligation is imposed by that Agreement as it has now been superseded by the 2012 Agreement. To the extent that the question should be read as requiring an assessment of what obligation was imposed, I have endeavoured to address this.

[31] The clause refers to "the employer". In this respect it must refer to Blowflex. It does not establish any direct obligation on Mr Smith's labour hire employer. It appears to establish an obligation on Blowflex to not accept work done by a labour hire employee unless that employee is, or was, paid rates of pay consistent with the 2010 or 2012 Agreements. Given the provisions of this clause, it would appear that this obligation presupposes some form of commitment by the labour hire employer to Blowflex to make payments in accordance with the Agreements, prior to labour hire employees being assigned to work for Blowflex. The alternative, namely that the work is done and issues associated with payment are then considered would appear to be inconsistent with the provisions of the clause relating to work being "accepted". The clause is silent on how this obligation will be met. On the information before me, I am simply unable to specify this obligation any further. It may be the case that the obligation is fully satisfied by discussions and/or arrangements agreed between Blowflex and its labour hire contractor. Alternatively, the clause may give rise to questions about whether arrangements agreed between Blowflex and its labour hire contractors represent enforceable obligations or are capable of being complied with. The inherent deficiencies in this clause also give rise to questions about what form of industrial regulation applied to employees of labour hire contractors who undertook work for Blowflex and hence, the extent to which clause 16 established contradictory obligations relative to those employees.

[32] To the extent that the first alternative question posed by the NUW goes to the same issue of whether there has been a breach of this provision on the part of Blowflex, I repeat that I do not consider that the FWC has the jurisdiction to determine that issue and, in any event, the information before me does not enable it to be addressed.

[33] Clause 16, with respect to its contractor provisions is so vaguely phrased that, with respect to events which occurred up to 5 years ago, and about which I have not been provided with information, I am simply unable to make a definitive finding.

[34] The second alternative question posed by the NUW seeks a finding about whether Mr Smith was paid in accordance with the 2010 Agreement. In this respect I have been provided with a pay advice from Programmed Integrated Workforce for Mr Smith for a pay period ending 13 May 2012. The accuracy of this pay advice has not been confirmed to me. I am not prepared to make findings of this nature on the limited information before me. In this respect I note that the NUW does not appear to be pursuing a monetary claim with respect to Programmed Integrated Workforce and there is simply nothing from that business which enables an assessment about amounts paid or payable to Mr Smith over the duration of his placement as a labour hire employee with Blowflex.

[35] In its initial submissions, the NUW submits that the FWC should find that the 2010 Agreement obligation on Blowflex is to ensure that any labour provided to it by another party is remunerated in accordance with the terms of the 2010 Agreement. I do not consider that the provisions of clause 16 are as clear as this. In this respect the inherent uncertainty associated with what obligations are actually established by the clause do not enable such a categoric answer.

[36] Secondly the NUW appears to seek a finding that when Mr Smith was working for Programmed Integrated Workforce between 15 December 2009 and 1 July 2012 he was not being remunerated in accordance with the 2010 Agreement, or the 2005 Agreement in its extended form. Information which establishes this is simply not available to me.

[37] Finally, given the position I have adopted in relation to these issues I am not prepared to recommend that any difference between what Mr Smith was receiving and what the Blowflex employees under the relevant Agreement should be paid by Blowflex who was not his employer.

[38] In the event that Mr Smith or the NUW consider that Blowflex has breached its obligations under any of the Agreements which applied during Mr Smith's employment as a labour hire employee, that issue should be referred to the Court as it may involve a breach of the agreement provisions.

[39] In the event that there is a current dispute about what actions Blowflex is, or is not taking pursuant to clause 16.4.2 of the 2012 Agreement, that dispute may be referred back to the FWC but the parties should be on notice that additional information about that clause and any arrangements between Blowflex and its labour hire providers will be required.

SENIOR DEPUTY PRESIDENT

 1   NUW submissions in reply, para 3

 2   [2013] FWCA 7135

 3   See, for example Schefenacker PR956575 and TWU and Australian Air Express PR959284

 4   See, for example Airport Fuel Services Pty Ltd v TWU[2010] FWAFB 4457

 5   PR956575

 6   PR962259

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