National Union of Workers v Kagan Logistics Pty Ltd

Case •

[2010] FWA 3907

•

1 JUNE 2010

No judgment structure available for this case.

Note: An appeal pursuant to s.604 (C2010/4161) was lodged against this decision and the order arising from this decision [PR996978] - refer to Full Bench decision dated 18 March 2011 [[2011] FWAFB 1724] for result of appeal.

[2010] FWA 3907


FAIR WORK AUSTRALIA

DECISION

Fair Work Act 2009
s.437 - Application for a protected action ballot order

National Union of Workers
v
Kagan Logistics Pty Ltd
(B2010/48)

COMMISSIONER MCKENNA

SYDNEY, 1 JUNE 2010

Proposed protected action ballot by employees of Kagan Logistics Pty Ltd.

[1] The National Union of Workers, New South Wales Branch (“the NUW”) has made an application, pursuant to s.437 of the Fair Work Act 2009 (“the Act”), seeking a proposed protected action ballot order (“order”) for employees of Kagan Logistics Pty Ltd (“Kagan”). The application for the order is opposed by Kagan, which was represented in the proceedings by Ms C Brooks of the Australian Industry Group (“AIG”).

[2] Ms Brooks submitted Fair Work Australia could not be satisfied the NUW has been, and is, within the meaning of s.443(1)(b) of the Act, genuinely trying to reach an agreement with the employer of the employees who are to be balloted. Ms Brooks’ contention was advanced on the basis that certain provisions within the proposed draft enterprise agreement (“the draft agreement”) being pressed by the NUW are not “permitted matters” pursuant to s.172 of the Act.

[3] The provisions in question are contained within cl.14 of the draft agreement, a clause titled “Casual employees”. The provisions to which particular objection is taken by Kagan are underlined in following extract of cl.14 of the draft agreement:

    “14.2 Casual employees

    14.2.1 Casual employees shall be paid an hourly rate equal to the appropriate weekly rate divided by 38, plus 25 per cent, with a minimum payment on any day of four hours.

    14.2.2(a) The Company and the NUW confirm their commitment to permanent direct employment whilst recognising the need for some labour flexibility to achieve job security and productivity requirements.

    (b) It shall be a term of this agreement that any direct casual employee of the Company shall be offered permanent employment once that casual employee has been engaged for a period of six months on a regular and systematic basis.

    (c) It shall be a term of this agreement that the Company shall only engage labour hire on the basis that persons who perform work covered by the agreement and are engaged through labour hire are engaged in accordance with the terms and conditions of this agreement.

    (d) The Company shall consult with its employees and the union no less than every three months about the use of agency labour including the number of agency employees being utilised and their length of service.

    (e) Consistent with subclause (b) above, the Company shall offer any person engaged through an agency who performs work covered by the agreement on a regular and systematic basis for a period of six months direct permanent employment with the Company. Such employment would be subject to completion of a probationary period.

    (f) The Company agrees that it shall not dismiss any casual employee in order to avoid the rights of those employees under this clause. Further it will not take any action (directly or indirectly) in relation to agency employees that would seek to avoid compliance with the terms of this clause.

    (g) The employer agrees that casual employees and non-direct agency labour (in relation to work performed under this agreement) shall not exceed 15% of the total workforce. This percentage may be exceeded in exceptional (short term) circumstances subject to prior consultation with the NUW and on site delegates.

    Clause 14.2.3 Labour Hire Agency and Training Providers

    Without limiting the Company’s ability to retain cost effective companies to provide labour and training services to the Company, the Company hereby commits to working consultatively and in co-operation with the Union, to ensure that companies are retained that provide the Company’s site rates and conditions to their employees, an adequate safe induction process prior to employees beginning work and adequate workers’ compensation policies.

    The Company recognises the Union’s entitlement to be invited to attend inductions for Labour-hire staff for 30 minutes.”

    [My underlining]

Background to proceedings

[4] At the initial listing of the matter on 11 May 2010, Ms Brooks foreshadowed the basis of Kagan’s objections concerning cl.14 of the draft agreement. The hearing of the application was, by consent, stood-over until 18 May 2010 to allow Mr S Mueller of the NUW to take advice concerning the matters foreshadowed by Ms Brooks. On the resumption of the proceedings on 18 May 2010, Mr A Joseph of counsel entered an appearance for the NUW. That day, the proceedings were stood-over again pending the filing of final written materials.

[5] After the proceedings had adjourned pending the filing of further materials, two matters arose which caused me to relist the matter of my own initiative. First, there appeared to be an issue between the parties about whether there had been an inappropriate re-opening of submissions (but that matter has now been resolved). Second, on 20 May 2010, Hamberger SDP delivered a decision in Transport Workers’ Union of Australia v Airport Fuel Services Pty Ltd[2010] FWA 2850. The decision appeared to be apposite to some matters which had been raised in submissions before me. As such, I thought it appropriate that Kagan and the NUW be given the opportunity to make any further submissions as may have been considered appropriate.

[6] At the conclusion of the further submissions on 26 May 2010, I announced it was my intention to grant the NUW’s application for the protected action ballot order, but would not be in a position to issue my reasons thereto that day. I noted that there is a time imperative in the Act concerning the determination of such applications given the operation of s.441, which provides that Fair Work Australia must, as far as practicable, determine an application for a protected action ballot order within two working days after the application is made. Mr Joseph submitted, without demur from Ms Brooks, that the NUW did not press for the making of the order on 26 May 2010. He indicated it was the NUW’s submission that it would be preferable that the order and the decision be issued concurrently.

[7] Against that background, I today issue the protected action ballot order and also publish my reasons for granting that application.

Submissions

[8] As I have noted, at the initial listing of the matter, Ms Brooks had foreshadowed the basis of the objections that would be raised by Kagan to the making of the order. Against that background, Mr Joseph’s opening submissions in support of the application focussed on what he had notice of being the general objections that would be raised by Kagan.

[9] Mr Joseph and Ms Brooks referred to various cases in support of their respective contentions. I have listed those cases in date order below:

  • Electrolux Home Products Pty Ltd v Australian Workers’ Union [2004] HCA 40 (2 September 2004) (“Electrolux”);


  • Wesfarmers Premier Coal Limited v The Automotive Food Metals Engineering, Printing and Kindred Industries Union (No 2) [2004] FCA 1737 (“Wesfarmers”);


  • Re Schefenacker Vision Systems Australia Pty Ltd, AWU, AMWU Certified Agreement 2004[2004] AIRC 1064 (Giudice J, Lawler VP, Simmonds C - 18 March 2005) (“Schefenacker”);


  • The Australian Workers’ Union v Alcoa World Alumina Australia Limited[2009] FWA 796 (Williams C - 26 October 2009) (“Alcoa”);


  • Australian Postal Corporation v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia[2009] FWAFB 599 (Acton SDP, Hamilton DP, Blair C - 12 October 2009) (“Australia Post 2009”);


  • Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia[2009] FWA 998 (Roberts C – 9 November 2009); and


  • Australian Postal Corporation v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia – Communications Division[2010] FWAFB 344 (Kaufman SDP, Ives DP, Lewin C - 20 January 2010) (“Australia Post 2010”).


[10] Mr Joseph and Ms Brooks each referred to the explanatory memorandum to the Fair Work Bill 2008 (“the explanatory memorandum”), in support of their respective contentions concerning the application for the order. They also provided tables citing case references and relevant aspects of the explanatory memorandum said to support their respective contentions as to whether the disputed parts of cl.14 of the draft agreement were permitted matters.

[11] Shortly stated, Mr Joseph submitted that a consideration of the provisions of the draft agreement would lead to a conclusion that the order should be made, when viewed in the context of relevant authorities in relation to the notion of matters pertaining to the employment relationship and the explanatory memorandum concerning permitted matters. He submitted, in the alternative, that even if the disputed parts of the draft agreement are not permitted matters, the application ought be granted in any event, given that the NUW reasonably believes the relevant provisions of the draft agreement constitute permitted matters. He submitted also that the NUW does not intend to press the inclusion of the last paragraph of cl.14 of the draft agreement, namely, those words which read: “The Company recognises the Union’s entitlement to be invited to attend inductions for Labour-hire staff for 30 minutes”. While not making any concessions about the validity of the provision, Mr Joseph described this particular aspect of cl.14 of the draft agreement as a “dead issue” so far as this application is concerned.

[12] Again shortly stated, Ms Brooks submitted that aspects of cl.14 of the draft agreement are not permitted matters because they refer to employees of labour hire agencies rather than employees of Kagan itself. She submitted the provisions were not about matters pertaining to the employment relationship because they purported to regulate the relationship between Kagan and third party companies. Moreover, particular aspects of cl.14 were objectionable on other bases, such as potential interference in the relationship between Kagan and its contractors. She also submitted that the last paragraph of cl.14 of the draft agreement effectively comprised a right of entry provision and, as such, amounted to an unlawful term as defined in s.194 of the Act. Ms Brooks submitted it was relevant to the history of the application for the order that the NUW (including relevance as to whether the NUW could be said to have been genuinely trying to reach an agreement) had been pressing that provision and Fair Work Australia should be aware of the history of negotiations leading to the making of the application, rather than what was now being said from the bar table. She submitted the appropriate course would be for the NUW to make a fresh application for an order.

[13] Given that the NUW does not intend to press the inclusion of the words “The Company recognises the Union’s entitlement to be invited to attend inductions for Labour-hire staff for 30 minutes”, it is unnecessary to further consider the submissions about that provision of the draft agreement and whether it amounted to an unlawful term. Moreover, I do not consider it is necessary for the NUW to make a fresh application for an order, given the extant matters in dispute concerning the draft agreement and the undertakings by counsel on behalf of the NUW concerning this particular part of the draft agreement.

The statutory framework

[14] Section 172 of the Act provides that enterprise agreements may be made about permitted matters, which are described as follows:

    “172 Making an enterprise agreement

    Enterprise agreements may be made about permitted matters

    (1) An agreement (an enterprise agreement) that is about one or more of the following matters (the permitted matters) may be made in accordance with this Part:

      (a) matters pertaining to the relationship between an employer that will be covered by the agreement and that employer’s employees who will be covered by the agreement;

      (b) matters pertaining to the relationship between the employer or employers, and the employee organisation or employee organisations, that will be covered by the agreement;

      (c) deductions from wages for any purpose authorised by an employee who will be covered by the agreement;

      (d) how the agreement will operate.”

      [My underlining]

Further, as to the meaning of “employee action claim”, s.409 of the Act reads as follows:

    “409 Employee claim action

    Employee claim action

    (1) Employee claim action for a proposed enterprise agreement is industrial action that:

      (a) is organised or engaged in for the purpose of supporting or advancing claims in relation to the agreement that are only about, or are reasonably believed to only be about, permitted matters; and

      (b) is organised or engaged in, against an employer that will be covered by the agreement, by:

        (i) a bargaining representative of an employee who will be covered by the agreement; or

        (ii) an employee who is included in a group or groups of employees specified in a protected action ballot order for the industrial action; and

      (c) meets the common requirements set out in Subdivision B; and

      (d) meets the additional requirements set out in this section.

    Protected action ballot is necessary

    (2) The industrial action must be authorised by a protected action ballot (see Division 8 of this Part).

    Unlawful terms

    (3) The industrial action must not be in support of, or to advance, claims to include unlawful terms in the agreement.

      …”

[15] Section 443 specifies the circumstances when Fair Work Australia must make a protected action ballot order:

    “443 When FWA must make a protected action ballot order

    (1) FWA must make a protected action ballot order in relation to a proposed enterprise agreement if:

      (a) an application has been made under section 437; and

      (b) FWA is satisfied that each applicant has been, and is, genuinely trying to reach an agreement with the employer of the employees who are to be balloted.

    (2) FWA must not make a protected action ballot order in relation to a proposed enterprise agreement except in the circumstances referred to in subsection (1).

    (3) …

    [my underlining]

The explanatory memorandum

[16] It is clear from s.172 of the Act that enterprise agreements properly may be made only about “permitted matters”. The principal issues arising for consideration in this application are, first, whether the draft agreement deals only with “matters pertaining to the relationship between an employer that will be covered by the agreement and that employer’s employees who will be covered by the agreement”; and, second, whether the granting of the order depends on these provisions being so characterised.

[17] As I have noted, Mr Joseph and Ms Brooks referred, in some detail, to the explanatory memorandum. In my opinion, a plain reading of the explanatory memorandum supports the view that matters proposed by the NUW in the draft agreement were intended to come within the meaning of permitted matters. The explanatory memorandum relevantly reads as follows:

    “672. It is intended that the following terms would be within the scope of permitted matters for the purpose of paragraph 172(1)(a):

    • terms relating to particular staffing levels (subject to any other applicable legislative requirements or limitations) particularly if those terms are aimed at ensuring the health, safety and well-being of employees;

    • terms relating to conditions or requirements about employing casual employees or engaging labour hire or contractors if those terms sufficiently relate to employees’ job security – e.g. a term which provided that contractors must not be engaged on terms and conditions that would undercut the enterprise agreement;

    • terms that would provide that casual employees are converted to permanent employees after a set period of time;

    • terms that would prevent an employer from seeking a contribution or indemnity from an employee in respect of personal injuries or losses suffered by that person where such injuries or losses were cause by the employee in the course of their employment.”

[18] The examples given in the explanatory memorandum of permitted matters seem to be on all fours with at least part of what is being proposed in the draft agreement. Clause 14 of the draft agreement contains terms relating to conditions or requirements about employing casual employees and agency casuals. When cl.14 is read as a whole, I accept that those terms which concern agency casuals may be characterised as having a nexus to the job security of Kagan’s own employees. Examples of job security-related provisions include: providing that agency casuals not be engaged on terms and conditions that would undercut the draft agreement; and promoting permanent and direct employment opportunities by constraining the casualisation of the workforce through the limitation on the percentage of different classes of casuals and in relation to offers of direct engagement to agency casuals who have been employed on a regular and systematic basis. These provisions are of a type which were endorsed in Schefenacker as being fundamentally about issues associated with direct employment opportunities and job security for permanent employees. In that case, the Full Bench noted that:

    “[79] … The number of labour hire employees engaged, it is to be inferred, is likely to have a direct effect upon the amount of work available to Schefenacker’s employees and, ultimately, upon the number of employees Schefenacker engages directly. While it is true that cl.17.2 and cl.17.4 may be construed as a partial prohibition on the use of labour hire employees, they are also designed to increase permanent employment by placing obligations upon the employer to engage more permanent employees in the circumstances specified.”

[19] Similarly, the provisions concerning safe induction processes again have a nexus with occupational health and safety for Kagan’s own employees, given they work alongside the other classes of persons contemplated in cl.14. The provision concerning adequate workers’ compensation coverage might be regarded as good industrial practice, in as much as Kagan ought not knowingly countenance labour and training service work being undertaken for it by employees who are not properly insured for workers’ compensation-related injuries that may occur while undertaking duties at its site. Putting that aside, the overall effect of this aspect of the draft agreement concerns safe induction processes for agency employees and adequate worker's compensation policies and, taken collectively, might, I think, be regarded as being concerned with health and safety-related matters for all classes of workers on the site. As Mr Joseph submitted, “it is not a stretch at all” for the draft agreement to address induction for proper and safe working procedures and workers’ compensation matters for agency employees where they are working alongside employees of Kagan. There would seem to be an available view that these parts of cl.14 of the draft agreement are ancillary or incidental to provisions relating to matters pertaining to the employment relationship.

[20] I note also that Ms Brooks referred to Wesfarmers at [109] where French J, as he then was, stated that the proposed agreement there under consideration included provisions restricting or qualifying the employer's right to use independent contractors. As to this, his Honour stated:

    “[109] In my opinion, cl 33 makes clear that the proposed agreement in this case was to include provisions restricting or qualifying the employer’s right to use independent contractors. Having regard to the basic test set out in Electrolux that a matter pertaining to the relationship between employer and employees will affect them in their capacities as such, I am of the opinion that cl 33 imports into the proposed agreement a discrete matter which does not pertain to that relationship. It is not merely ancillary, but substantive and distinct. Having regard to Cocks and the observations of Moore J in Mount Thorley Operations, I am of the opinion that on this ground the proposed agreement is not an agreement of the kind required by section 170LI.”

[21] Ms Brooks submitted that cl.14 of the draft agreement contains provisions restricting or qualifying the employer's right to use independent contractors in the manner described in Wesfarmers; and that reference had been made to Wesfarmers in Australia Post 2009 and Australia Post 2010. Moreover, the NUW has sought such provisions as a substantive term of the draft agreement. The aspect of the draft agreement, she submitted, is not minor, trivial, or ancillary and the evidence indicated the “significantly detailed” clause had been pressed by the NUW. As to this, Ms Brooks submitted the NUW has sought a matter not pertaining to the employment relationship as part of the draft agreement and those provisions do not fall within any the categories in s.172 of the Act.

[22] Mr Joseph submitted that clause being sought by the NUW relevantly concerns agency labour hire employees, not contractors as such - and so could be distinguished from the circumstances in Wesfarmers. He further submitted that Wesfarmers involved a de facto prohibition on the use of contractors and required the employer to go through various options before contractors could be used, whereas that is not being proposed by the NUW in the draft agreement. He submitted the clause here under consideration is markedly different from that considered in Wesfarmers. He noted also that French J was sitting as a single judge of the Federal Court. While the decision in itself is persuasive, he submitted that it does not carry the same authority for the Tribunal's present purposes as the decisions of the Full Bench to which he had referred, e.g., Schefenacker post-dated Wesfarmers, albeit the recent Australia Post decisions referred to Wesfarmers. In the end, Mr Joseph reinforced that part of the explanatory memorandum indicating it was the legislative intent that the following terms would be within the scope of permitted matters for the purpose of s.172(1)(a), namely, “terms relating to conditions or requirements about employing casual employees or engaging labour hire or contractors if those terms sufficiently relate to employees’ job security – e.g. a term which provided that contractors must not be engaged on terms and conditions that would undercut the enterprise agreement”. He also submitted that Fair Work Australia should take notice of the fact there are “hundreds” of approved enterprise agreements that include clauses dealing with contract and casual labour.

[23] I note also that in Wesfarmers, French J found that in determining whether particular clauses of a proposed agreement were about matters pertaining to the employment relationship, it is the subject matter of the clauses of a proposed agreement that should be considered, rather than the precise terms, stating:

    “[92] The process of characterisation should not require close parsing of the wording of the drafts. The ‘proposed agreement’ has not crystallised into a final draft. It can be assumed that, to the extent that detailed phrasing and redrafting might take a proposed clause out of the area of invalidity for the purposes of certification, it is likely to be addressed before the final settlement of terms. This means the characterisation is addressed principally to the subject matter of the provisions in issue rather than their precise terms. This is consistent with the form of the requirement for certification in s170LI(1) in that the agreement is to be about ‘matters’ pertaining to the employer-employee relationship. …” [My underlining]

[24] As may be drawn from this quote, a proposed enterprise agreement, such as that now before Fair Work Australia in connection with the application for the order, would necessarily be in draft form at this stage and the wording could change as negotiations progressed. Consequently, following from the comments of French J, it would appear that it is not necessary to engage in “close parsing” of the draft agreement. It may be sufficient, at least at this stage, that the subject matter of cl.14 is reasonably believed to be about a matter pertaining to the employment relationship, namely, the overall job security and related matters of permanent employees of Kagan.

[25] In Australia Post 2009 at [51], the Full Bench stated it is “apparent that as part of its claims the CEPU has been and is pursuing claims about contractors as substantive parts of the proposed enterprise agreement”. Further, at [62] the Full Bench stated:

    “We add that we did not need to deal with the issue of whether a person who reasonably believes they have been and are pursuing a claim about a permitted matter as a substantive term of the proposed enterprise agreement has been, and is, genuinely trying to reach an agreement. Given the authority in Wesfarmers case and the status of those in the CEPU who were pursing the claim, the CEPU could not have reasonably believed the aforementioned claim in respect of contractors that it had been and was pursuing as a substantive term of the proposed enterprise agreement was about a permitted matter.”

[26] Here, however, cl.14 of the draft agreement, read in the context of its subject matter and purpose as described by Mr Joseph, does not appear to be directed to the use of contractors simpliciter; the provisions appear to be designed to have the operation as contemplated in Mr Joseph’s submissions. I accept that the “subject matter” of the provisions, as described by French J in Wesfarmers, relevantly is concerned with job security and employment-related matters including occupational health and safety-related issues.

[27] Moreover, to the extent the explanatory memorandum cites examples of terms of an agreement that would not be intended to be within the scope of permitted matters for the purpose of s.172(1)(a) of the Act, cl.14 of the draft agreement does not contain any such examples. For instance, the draft agreement does not contain “terms that would contain a general prohibition on the employer engaging labour hire employees or contractors” or “terms that would contain a general prohibition on the employer employing casual employees”. While the draft agreement places some specifications in relation to agency casuals, the draft agreement does not include the general prohibitions of the type described in the explanatory memorandum.

[28] Section 172(1) of the Act requires that an enterprise agreement be about matters pertaining to the relationship between an employer that will be covered by the agreement and that employer’s employees who will be covered by the agreement. Such matters are characterised as “permitted matters” by the Act. This characterisation is much the same as s.170LI of the Workplace Relations Act 1996, which defined the nature of an agreement which may be the subject of a certified agreement. Section 170LI read:

    "(1) For an application to be made to the Commission under this Division, there must be an agreement, in writing, about matters pertaining to the relationship between:

      (a) an employer who is a constitutional corporation or the Commonwealth; and

      (b) all persons who, at any time when the agreement is in operation, are employed in a single business, or a part of a single business, of the employer and whose employment is subject to the agreement." [My underlining]

[29] The authorities referred to by Mr Joesph and Ms Brooks on the meaning of matters pertaining to the relationship of employers and employees started with the decision of the High Court in Electrolux. Given the phrasing concerning “matters pertaining” in s.170LI of the Workplace Relations Act and 172(1)(a) of the Act, the context does not appear to differ materially and the cases concerning the interpretation of s 170LI are relevant to determining what may constitute a matter pertaining to the employment relationship under the current legislation.

[30] Mr Joseph and Ms Brooks cross-referenced each of the provisions of cl.14 of the draft agreement to case extracts and provisions of the explanatory memorandum in support of their respective contentions as to whether the matters addressed in the draft agreement are permitted matters. Having considered the case references referred to by Mr Joseph and Ms Brooks, together with a plain reading of the explanatory memorandum, I accept Mr Joseph’s submission that cl.14 of the draft agreement could be properly construed as involving permitted matters within the meaning of s.172 of the Act. I accept Mr Joseph’s submission that cl.14 of the draft agreement may be characterised relevantly as involving “matters pertaining” for the purposes of this application.

[31] If, however, I am wrong in concluding all the matters in cl.14 of the draft agreement collectively constitute permitted matters, then I consider, in the alternative, there are grounds to accept that the employee claim action for the draft agreement is industrial action that is, within the meaning of s.409 of the Act, “reasonably believed to only be about, permitted matters”. In that respect, I note and accept Mr Joseph’s submission that even if Fair Work Australia were to find that any of the matters being promoted are not permitted matters, there is no basis to find that the NUW did not reasonably believe or was not entitled to reasonably believe they would be permitted matters, based on the case law and the evidence. Certainly, this was the view expressed in the statement of James Nero, an officer of the NUW, whose evidence indicated that the NUW had, for example, “attempted to ensure that we did not request anything to be included in a final agreement which was not allowed under the legislation…”.

[32] As such, I would grant the application on either or both grounds advanced by Mr Joseph - namely that cl.14 of the draft agreement involves permitted matters or, in the alternative, those provisions are reasonably believed to only be about permitted matters.

Matters pertaining to the employment relationship

[33] I note Mr Joseph submitted that the NUW’s “starting” proposition was that the extensive use of casuals and labour hire casuals can amount to a “threat to permanent employment” and the provisions in cl.14 of the draft agreement should be seen as relating to job security. He submitted that the provisions in cl.14 buttress and support the concept of job security, and a safe and secure working environment. The purpose of such clauses is to promote job security for the employees of Kagan, he submitted, not some “ulterior” purpose. Mr Joseph’s principal proposition was that cl.14 of the draft agreement involved permitted matters or, as an alternative proposition, matters which were reasonably believed to only be about permitted matters.

[34] As to the primary proposition, Mr Joseph referred particularly to Schefenacker, a decision of the Australian Industrial Relations Commission which examined s.170LI(1) of the Workplace Relations Act. In Schefenacker, the Full Bench considered whether a clause of an agreement concerning employees of labour hire agencies could be characterised as being about matters pertaining to the relationship between an employer and its own employees. The clause under consideration in Schefenacker is broadly similar in operation and effect to parts of cl.14 of the draft agreement, reading as follows:

    "17.0 EMPLOYEES OF LABOUR HIRE AGENCIES

    17.1 The employer and unions confirm commitment to permanent direct employment, but also recognise that labour flexibility is an ongoing requirement to achieve job security and productivity requirements. The parties agree to the following criteria regarding the engagement of employees of labour hire agencies.

    17.2 The agreed maximum level of employees of labour hire agencies will be 20% of total weekly paid employees. The company agrees to consult with shop stewards when the percentage is in excess of 20% as to the reasons the additional labour hire agency employees are required.

    17.3 There will be a formal quarterly review of labour hire agency employees through the consultative committee. This meeting will review both the total number of labour hire agency employees and their length of service.

    17.4 Employees of labour hire agencies will not be considered for permanent employment until the total percentage of labour hire agency employees exceeds 20% of total weekly paid employees. When the 20% threshold is exceeded, employees of labour hire agencies will be offered permanent employment based on specific positions and shifts identified as being needed by the company.

    17.5 Employees of labour hire agencies who are offered permanent employment will be required to serve a maximum of 3 months probationary period before permanency is confirmed. Offers of employment will be prioritised based on length of service.

    17.6 The company will instruct the labour hire agencies to increase the wage rate of their employees working at Schefenacker Vision Systems Australia by the same percentage that is listed in this Agreement."

[35] As to cl.17 of the Schefenacker agreement, the Full Bench commented:

    “[77] The provision in question evidences a detailed agreement with the company requiring consultation about the usage of labour hire employees, a specific limitation on the proportion of total weekly paid employees made up by labour hire employees, a requirement that labour hire employees be offered permanent employment in certain circumstances, subject to a probationary period, and a requirement that the company instruct labour hire agencies to pass the increases in the agreement on to their own employees.

    [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.

    [79] We agree with [Senior Deputy President O’Callaghan], for the reasons he gave, that the first four sub-clauses pertain to the relationship between Schefenacker and its employees. The number of labour hire employees engaged, it is to be inferred, is likely to have a direct effect upon the amount of work available to Schefenacker's employees and, ultimately, upon the number of employees Schefenacker engages directly. While it is true that cl.17.2 and cl.17.4 may be construed as a partial prohibition on the use of labour hire employees, they are also designed to increase permanent employment by placing obligations upon the employer to engage more permanent employees in the circumstances specified.

    [80] Clause 17.5 imposes obligations on Schefenacker in relation to its own employees and clearly pertains to the relevant relationship.

    …

    [83] It can be seen from this passage that the situation before the Full Bench [in Re National Transport Operations Pty Ltd Certified Agreement 2002 PR932348] was very different to that here. The intent of cl.17.6 is that employees of labour hire agencies working at Schefenacker should receive the same increase as the Schefenacker employees will receive under the agreement. This is sought to be achieved by obliging Schenefacker to give that directive to the agencies. Whether that means will be effective or not, the intent is that the relationship between the cost of labour supplied by the agencies and the cost of the labour of Schefenacker's employees will be relevantly the same after the agreement as it was before. For that reason we think that the sub-clause pertains to the relationship between Schefenacker and its employees. It directly concerns the security of employment of the employees covered by the agreement.”

[36] Mr Joseph referred also to the recent decision of Roberts C in Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia[2009] FWA 998. While that case dealt with provisions in an agreement concerning the use of agency staff and contractors by the Australian Postal Corporation in terms that are different from the provisions of cl.14 of the draft agreement, aspects of the clauses considered by Roberts C nonetheless have similar import to those under consideration in this application concerning labour hire casuals. In that case, Roberts C concluded that the proposed protected action ballot order should be made.

[37] In the appeal against the decision of Roberts C in Australia Post 2010, the Full Bench noted some relevant history to the jurisprudence as follows:

    “[50] The genesis of the jurisprudence is to be found in Electrolux Home Products Pty Ltd v the Australian Workers’ Union and Others where the High Court held that industrial action taken in relation to a proposed agreement which is not capable of certification was not protected under the provisions of the WR Act.

    [51] The first consideration of Electrolux at Full Bench level was in Re Rural City of Murray Bridge Nursing Employees, ANF (Aged Care) -- Enterprise Agreement 2004; Re Schefenacker Vision Systems Australia Pty Ltd, AWU, AMWU Certified Agreement 2004 . The Full Bench observed that an important proposition to emerge from that case is that an agreement that contains a matter which does not pertain to the relationship of employers and employees could not be subject of a valid application for certification pursuant to s.170L of the WR Act. This was not the case if the non-pertaining matter was ancillary or incidental, or a machinery provision relating to, a matter pertaining to the employment relationship.

    [52] Given that industrial action in relation to a non-pertaining agreement could not be protected, it was found that a union that was seeking to make such an agreement could not be genuinely said to be trying to reach an agreement for the purposes of the WR Act and now the FW Act. This is because the agreement that it is trying to reach must be an agreement capable of being made under the legislation.

    [53] In Wesfarmers Premier Coal Ltd v the Automotive, Food, Metals, Engineering, Printing & Kindred Industries Union (No 2) French J, as he then was, found that a clause that restricts or qualifies the employer’s right to use individual contractors imports into the proposed agreement a discrete matter which does not pertain to the employer/employee relationship. It not being merely ancillary, but substantive and distinct, a proposed agreement containing such a clause is not an agreement of the kind required by the legislation. It follows that industrial action taken in support of a proposed agreement containing such a clause could not be protected industrial action.

    [54] Before a protected action ballot order can be made the applicant for the order must be genuinely trying to reach an agreement that can be made under the FW Act. So much is clear from Electrolux and Schefenacker.

    [55] Thus where protected action ballot orders have been sought in relation to proposed agreements containing non-pertaining or non-permissible matters, those orders have been refused on the basis that the union was not genuinely trying to reach an agreement. However, even under the WR Act the position was not so clear when doubt existed as to whether or not the claims being pursued contained non-pertaining matters.” [Endnotes not reproduced]

[38] The Full Bench also noted that the jurisprudence surrounding the legislation that preceded the Act needed to be viewed cautiously, given the legislative changes that have taken place, stating as follows:

    “[56] Given the wording of s.409(1)(a) the jurisprudence prior to the enactment of the FW Act must be viewed cautiously. The first Full Bench adverted to this at paragraph 39 of its reasons. Employee claim action may be engaged in for the purpose of advancing claims that are reasonably believed to be only about permitted matters. It seems to us to follow that if a bargaining agent that reasonably believed that the claims it was advancing at the time it sought a protected action ballot order were only about permitted matters, it could not, for that reason alone, be said that the bargaining agent was not genuinely trying to reach an agreement.

    [57] Further, the recognition in s.253(2) that an enterprise agreement might contain a term which is not about a permitted matter, lends weight to this proposition. The apparent tension between that section and s.172(1)(a), adverted to by the first Full Bench, may be more apparent than real. In our view, the combined effect of ss.172(1) and 253(2) is that the agreement will be an agreement under the Act only insofar as it deals with the matters in s.172(1). Terms which are not about matters set out in s.172(1) are merely of no effect.”

[39] The Full Bench further commented in relation to s.409(1) of the Act:

    “[59] Ultimately, because of the operation of s.409(1), it is not necessary to decide whether the claim at the time of the hearing under appeal contained non-permitted matters as identified by Australia Post. Because the CEPU reasonably believed that they did not, it was genuinely trying to reach an agreement. In any event, for the reasons given by him, we consider that the Commissioner did not err in characterizing those matters as permitted. Further, in our view, even were they non-pertaining, the few remaining clauses to which Australia Post still objected were ancillary or incidental or machinery provisions relating to matters pertaining to the employment relationship.

    [60] It is self-evident that if a union is proposing an agreement containing clearly non-pertaining clauses it cannot be genuinely trying to reach an agreement that may be approved by Fair Work Australia under s.186 of the FW Act. Section 409(1) could not be called in aid because it could not be said that a union advancing such claims reasonably believed that they were only about permitted matters.”

[40] Noting the comments of the Full Bench in Australia Post 2010 and given that the present legislation is under consideration, it is relevant to consider the explanatory memorandum, which cited both Electrolux and Schefenacker:

    “666. It is intended that each substantive term of an enterprise agreement must be about one or more of the permitted matters in order for the agreement to be characterised as about permitted matters. This would not prevent an enterprise agreement from containing other, valid, terms where the term is ancillary or incidental to, or a machinery provision, relating to a permitted matter (Electrolux ibid. at [96]-[97], per McHugh J).

    669. The matters pertaining to the employment relationship formulation is of long standing. Under both the Industrial Relations Act 1988 and the WR Act prior to 27 March 2006, collective agreements had to be about matters pertaining to the employment relationship. Since 27 March 2006, a term of a workplace agreement that was not about such matters was ‘prohibited content’. Between 1904 and 2006, the formula was also used in the definition of ‘industrial dispute’ under successive Commonwealth industrial relations statutes.

    670. Although the precise words used have changed from time to time, the courts have construed each manifestation of the formula in a similar way. There is substantial jurisprudence about what the phrase means. It is intended that paragraph 172(1)(a) should be read in line with that jurisprudence. The courts’ interpretation of the formulation has evolved over time in line with changing community understandings and expectations about the kinds of matters that pertain to the employment relationship, and it is expected that this approach will continue.

    671. Whether a particular term is about matters pertaining to the employment relationship will depend on its precise construction, as well as the circumstances surrounding the particular employment relationship. Frequently, it will be obvious that a term pertains to the employment relationship – e.g., a term about the payment of wages or a term about hours of work and shift patterns. However, there are some terms where it is not so immediately clear whether the terms are about matters pertaining to the employment relationship (see, e.g., the discussion in Re Schefenacker Vision Systems Australia Pty Ltd, AWU, AMWU Certified Agreement 2004 [2004] AIRC 1064.” [My underlining]

[41] Ms Brooks submitted that Fair Work Australia cannot be satisfied that the NUW is genuinely trying to reach an agreement with the employer of the employees to be balloted, due to the inclusion of non-permitted matters. In so submitting, Ms Brooks referred particularly to Electrolux, Wesfarmers and Alcoa. She submitted that while Schefenacker contradicted certain aspects of Electrolux, Schefenacker itself had now been superceded by the Full Bench decision in Australia Post 2009. She submitted that Australia Post 2009 had upheld Electrolux. She further submitted further that Australia Post 2010 involved a consideration of provisions which differ from cl.14 of the draft agreement.

[42] Despite Ms Brooks’ submissions that the decision in Schefenacker had been replaced, I accept Mr Joseph’s submission that Schefenacker remains good law. So much is evinced by the references to Schefenacker in the explanatory memorandum and at an appellate level by Fair Work Australia in Australia Post 2010, being the most recent Full Bench decision on this subject. Moreover, item 670 of the explanatory memorandum noted it was the legislative intention that s.172(1)(a) should be “read in line” with the substantial jurisprudence concerning the meaning of the former legislative phraseology.

[43] On my reading of the cases to which reference was made, there is nothing that would lead to the view that Schefenacker has been so much as distinguished, let alone overturned. The paragraphs to which reference was made by Ms Brooks do not, in my view, lead to such a conclusion; and a further, single-member decision to which reference was made (Alcoa) did not involve consideration of Schefenacker. While the decision in Australia Post 2010 comments on the changed legislative framework in relation to the significance of non-permitted matters for the granting of protected action ballot orders, it does not overrule or otherwise replace Schefenacker as authority for determining what non-permitted matters may involve.

Reasonable belief

[44] Electrolux is authority, among other matters, for the proposition that protected industrial action could not be taken in support of claims that could not validly be included in an agreement under the Workplace Relations Act. Given the operation of s.409 of the Act and drawing from comments in the decision of the Full Bench in Australia Post 2010, there may now be some broadening of the circumstances in which Fair Work Australia may make a protected action ballot order. That is, in Australia Post 2010, the Full Bench has now adverted to the operation of s.409(1)(a) of the Act, which provides as follows:

    “409 Employee claim action

    Employee claim action

    (1) Employee claim action for a proposed enterprise agreement is industrial action that:

      (a) is organised or engaged in for the purpose of supporting or advancing claims in relation to the agreement that are only about, or are reasonably believed to only be about, permitted matters; “

[45] The Full Bench highlighted the fact the Act now allows “employee claim action” for the purpose of: “advancing claims that are reasonably believed to be only about permitted matters” [at 56]. From this, the Full Bench appears to have drawn the conclusion that it could no longer be said that a bargaining agent was not genuinely trying to reach an agreement with an employer merely because the proposed agreement may contain some potentially non-permitted matters, as long as the bargaining agent reasonably believed the claims it was advancing related only to permitted matters. If this is the case, the arguments put forward by Mr Joseph – based on Full Bench authority and aspects of the explanatory memorandum - may demonstrate that the NUW reasonably believes it is advancing claims for permitted matters to be included in the draft agreement. As to the reasonableness of the belief, I consider that the arguments advanced on behalf on the NUW are supportable, strongly perhaps, by the case law and the explanatory memorandum. As such, a belief of the NUW that the proposed clauses dealing with labour hire employees is a permitted matter can be said, accepting Mr Joseph’s submissions thereto, to be reasonably founded (albeit I note that Mr Joseph’s primary submission was based on the contention that the matters within cl.14 of the draft agreement squarely could be characterised as permitted matters).

[46] Once again, it is relevant to consider the text of the explanatory memorandum. As to s.409 of the Act, the explanatory memorandum stated:

    “Clause 409 – Employee claim action

    1640. The first element of employee claim action is that it is organised or engaged in for the purpose of supporting or advancing claims in relation to a proposed enterprise agreement that are about, or are reasonably believed to be about, permitted matters (paragraph 409(1)(a)).

    1641. An enterprise agreement may only contain terms that are either required under this Bill or that are about permitted matters. (The description of clause 172 discusses relevant case law and lists examples of the types of matters are that intended to be permitted matters for enterprise agreements). In most cases, it is clear that particular claims are about permitted matters.

    1642. In limited cases it is not so clear. However, industrial action is protected if – at the time of the action – the person reasonably believes they are pursuing claims about permitted matters (paragraph 409(1)(a)). What constitutes a ‘reasonable belief’ depends on the circumstances of the case and the person concerned. For example, a tribunal would expect an official of an employee organisation with extensive experience in enterprise bargaining to have a greater appreciation of the limits of the permitted matters than a novice employee bargaining representative who has been appointed by his or her colleagues to represent them in bargaining with the employer.

    1643. Another factor that is relevant to the question of reasonable belief is whether the employer attempted to advise its employees or its bargaining representatives that they were pursuing claims about non-permitted matters. If the employer did so and the industrial action proceeded nonetheless, then it is much more likely that it would not be found to be protected.

    1644. In addition, the pursuit of claims about non-permitted matters during bargaining for a proposed enterprise agreement does not necessarily prevent a finding that a bargaining representative is genuinely trying to reach an agreement (which is also a pre-condition to the taking of protected industrial action under subclause 413(3)) e.g., where those claims have subsequently been abandoned.”

[47] In its deliberations in Australia Post 2010, the Full Bench also took into account s.235(2) of the Act. This provision relevantly provides as follows:

    “253 Terms of an enterprise agreement that are of no effect

    (1) A term of an enterprise agreement has no effect to the extent that:

      (a) it is not a term about a permitted matter;”

The Full Bench considered this provision lent support to its view that the fact a proposed agreement may contain a non-permitted matter cannot, alone, determine the question of whether a bargaining agent is genuinely trying to reach an agreement (at [57]).

[48] More recently, in Transport Workers’ Union of Australia v Airport Fuel Services Pty Ltd, Hamberger SDP considered an application for a protected action ballot order. The proposed agreement being pressed by the union in that matter included a clause titled “Labour Hire and contract labour”, which contained the following provisions:

    “5.1The parties agree that when it becomes necessary to engage labour hire employees or to engage contractors the Company will:

    …

    5.1.2 ensure that any entity to which it outsources the work has a workplace agreement (as defined in [the FWA] and, if applicable, a registered Contract Agreement with the Union.

    …

    5.3 Where the company has a contract with any other entity to perform work of a type covered by this agreement then the company shall, upon each contract renewal, or within 6 months of the signing of this agreement (whichever is first in time), ensure that each such entity has a workplace agreement (as defined in the FWA] and, if applicable, a registered Contract Agreement with the Union.”

[49] In his decision, Hamberger SDP noted Airport Fuel Services had submitted that Fair Work Australia could not be satisfied the union had been genuinely trying to reach an agreement for reasons including the contention that the union was continuing to press a claim for a non-permitted matter. After a consideration of the Act, Australia Post 2010 and the explanatory memorandum, Hamberger SDP said this:

    “[18] In the context of this matter, whether the proposed clause is about ‘permitted matters’ can be equated to whether it is about matters pertaining to the relationship between AFS and those employees of AFS who would be covered by the proposed agreement. The explanatory memorandum says at item 671:

      ‘Frequently, it will be obvious that a term pertains to the employment relationship - e.g., a term about the payment of wages or a term about hours of work and shift patterns. However, there are some terms where it is not so immediately clear whether the terms are about matters pertaining to the employment relationship.’

    [19] The explanatory memorandum then goes on to list specific examples of terms that would fall within the scope of permitted matters. These include (at item 672)

      ‘terms relating to conditions or requirements about employing casual employees or engaging labour hire or contractors if those terms sufficiently relate to employees’ job security – e.g. a term which provided that contractors must not be engaged on terms and conditions that would undercut the enterprise agreement.’

    [20] At item 673 the explanatory memorandum lists terms that would not be intended to be within the scope of permitted matters. These include ‘terms that would contain a general prohibition on the employer engaging labour hire employees or contractors.’

    [21] The proposed labour hire clause does not contain a general prohibition on the engagement of labour hire employees or contractors. Indeed it specifically envisages that the employer might find it necessary to engage labour hire employees or contractors. Rather it provides that labour hire employees or contractors would need to be engaged under the terms of agreements negotiated with the TWU. It is at the very least arguable that such a provision is precisely the type of provision envisaged by the explanatory memorandum at item 672 as being a permitted matter. Without preventing the use of labour hire employees or contractors. the [sic] clause seeks to impose conditions which prima facie are arguably designed to prevent the undercutting of the proposed enterprise agreement, in order to protect the job security of the employees covered by the agreement. Given this, I consider that the TWU has a ‘reasonable belief’ that the proposed clause is about permitted matters. Accordingly I do not consider that the inclusion of the proposed clause in the TWU’s draft agreement means that the TWU is not genuinely trying to reach an agreement.

    [22] …

    [23] I am satisfied that the TWU has been, and is, genuinely trying to reach an agreement with the employer of the employees who are to be balloted. The jurisdictional prerequisites set out at s.443 are met. An order for a protected action ballot has accordingly been issued.”

[50] The clause that was under consideration by Hamberger SDP is different in form and content from cl.14 of the draft agreement. Nonetheless, the comments in the decision at [21] seem to have some general relevance to the issues concerning the job security aspects of this application, such as to support the NUW’s contentions in relation to the making of the order. I note also that as to the question of reasonableness of the belief, Mr Joseph submitted that belief should be seen in terms of the explanatory memorandum and the extent to which it deals with permitted matters. He submitted that if the clauses that are being promoted have some reasonably arguable basis for being permitted, such as the explanatory memorandum, that informs Fair Work Australia as to the reasonableness of the belief. Ms Brooks submitted that there was, arguably, some inconsistency between Australia Post 2009 and Australia Post 2010; but that neither of the Full Bench decisions carried greater weight than the other and Kagan relied on Australia Post 2009 as well as item 666 and 1642 of the explanatory memorandum as to the description of reasonable belief in relation to practitioner experienced in industrial relations.

Conclusion

[51] While the submissions advanced by Mr Joseph and Ms Brooks were each well-supported by reference to (sometimes conflicting) authorities and aspects of the explanatory memorandum in relation to their respective contentions, it seems to me, on balance, the more persuasive view has been advanced by Mr Joseph - and a case has been established that the protected action ballot order should be granted. Although Wesfarmers may seem to contraindicate the making of the order, the more recent decisions and those focussing specifically on labour hire employees seem apposite to this application, more particularly in light of the references in the explanatory memorandum to “engaging labour hire or contractors if those terms sufficiently relate to employees’ job security”. In particular, Australia Post 2010 is the most recent, authoritative decision which has considered how matters pertaining to the employment relationship should be characterised under the new legislation and the circumstances in which a protected action ballot order should issue.

[52] For the reasons set out above, I consider that:

    (a) the matters being proposed by the NUW in cl.14 of the draft agreement are permitted matters in as much as they involve matters pertaining to the relationship between an employer that will be covered by the agreement and that employer’s employees who will be covered by the agreement;

    and/or

    (b) the employee claim action for the proposed agreement is industrial action that is being organised for the purpose of supporting or advancing claims in relation to the agreement that are only about, or are reasonably believed to only be about, permitted matters.

[53] An order for a protected action ballot has been issued in conjunction with the publication of these reasons.

COMMISSIONER

Appearances:

A. Joseph of counsel with S. Mueller for the National Union of Workers, New South Wales Branch.

C. Brooks for the Australian Industry Group.

Hearing details:

2010

Sydney

May 11, 18, 26



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