National Union of Workers v Phillip Leong Stores Pty Ltd

[2014] FWC 6459

[2014] FWC 6459

FAIR WORK COMMISSION

DECISION

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

National Union of Workers
v
Phillip Leong Stores Pty Ltd
(B2014/1057)

COMMISSIONER BULL SYDNEY, 9 OCTOBER 2014

Proposed protected action ballot of employees of Phillip Leong Stores Pty Ltd - whether genuinely negotiating, whether NUW pursuing non-permitted matters - holding a reasonable belief matters are permitted - genuinely trying to reach an agreement.

[1] This is an application for a protected action ballot order (PABO) by members of the National Union of Workers (the NUW) employed by Phillip Leong Stores Pty Ltd (the respondent) (a subsidiary of Woolworths Limited). The application is made pursuant to s.437 of the Fair Work Act 2009 (the FW Act).

[2] Mr Mueller appeared for the NUW and Mr Jolly, a solicitor, sought leave to appear for the respondent. Mr Jolly’s appearance was not opposed and given the complexities of the matter outlined in the parties written submissions, permission was granted to Mr Jolly to appear on behalf of the respondent pursuant to s.596(2)(a) of the FW Act.

[3] An application for a PABO is not indicative of whether employees will take industrial action, it is a mandated step prior to the taking of protected industrial action that the NUW must obtain. Whether the industrial action is taken or not is to be determined by the employees who will have the opportunity, where an order issues, to vote on whether they take protected industrial action. If that vote is successful, the NUW and their members can then determine when, and if, industrial action is to be taken subject to the requirements of the FW Act. The relevant form of protected industrial action is employee claim action as described at s.409 of the FW Act.

[4] The respondent employs approximately 176 permanent employees 1 covered by an existing enterprise agreement known as the Phillip Leong Stores Pty Ltd Sydney Liquor Distribution Centre Enterprise Agreement 20112, whichreached its nominal expiry date on 21 August 2014. The NUW is a bargaining representative for its members, who are said to be covered by the proposed replacement agreement, the subject of the negotiations.

[5] There are also a significant number of labour hire casual employees (approximately 120) employed by two labour hire agencies 3 (agency casuals). All agency casuals are paid at the Level 1 classification of the existing agreement or at the “Saving” pay level in the existing agreement.

[6] The Sydney Liquor Distribution Centre (SLDC) is a storage and distribution centre located in Erskine Park, New South Wales, which stores and distributes liquor and ambient products including cigarettes and other non perishable goods for the Woolworths Liquor Group which includes Dan Murphy’s, BWS and Langtons.

Background

[7] The PABO application was made on 9 September 2014 and on 10 September 2014 the respondent advised the Commission that it opposed the application made by the NUW on the basis that the NUW is not, or has not been, genuinely trying to reach an agreement with the employer as required by s.443(1)(b) of the FW Act.

[8] The respondent explained its opposition to the application on the basis that it asserted that labour hire provisions sought by the NUW for the proposed agreement were not permitted matters as they did not pertain to the relationship between the respondent and its employees, so that the NUW was not, and had not been genuinely trying to reach an agreement.

[9] The NUW asserted that it had participated in the bargaining process with the intention of genuinely seeking a replacement agreement with the respondent and held a reasonable belief that the matters it was pursuing were permitted matters pursuant to s.172(1) of the FW Act.

[10] The legislation as expressed above at s.443(1)(b) requires that the Commission must make a PABO if satisfied the application has been made under s.437 and the applicant has been, and is, genuinely trying to reach an agreement with the employer.

[11] The matter was heard in Sydney on 15, 16 and 23 September 2014.

[12] Accompanying the originating application made by the NUW was a witness statement of Mr James Nero, an NUW Organiser dated 9 September 2014 4.

[13] On 12 September 2014, the respondent filed an outline of submissions 5 and a witness statement of Ms Shauna Brennan, Logistics Manager6.

[14] The NUW filed submissions in reply on 15 September 2014 and a further witness statement of Mr Nero 7.

[15] The evidence of Mr Nero was that most of the agency casual employees (approximately 90%) 8 were members of the NUW.

[16] The labour hire casuals are all engaged at Level 1 - Entry Level - Order Selection whereas the respondent’s permanent staff are employed at Level 2 - Team Member which is a higher paid and more skilled position.

The legislative framework

[17] Section 437 of the FW Act sets out the requirements associated with an application for a protected action ballot. Section 443 relevantly states:

443 WHEN THE FWC MUST MAKE A PROTECTED ACTION BALLOT ORDER

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

(My underline)

[18] In accordance with s.443(1)(a) I am satisfied that the application has been made in accordance with s.437.

[19] The only remaining issue is whether the NUW has been, and is, genuinely trying to reach an agreement.

Permitted matters

[20] On 7 April 2009, the Fair Work Act 2009 received Royal Assent and on 1 July 2009 the current provisions relating to protected industrial action commenced operation.

[21] The definition of a permitted matter is found at s.172(1) of the FW Act:

SECTION 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.

[22] The Explanatory Memorandum to the Fair Work Bill 2008 contained a significant amount of commentary in respect of permitted matters in enterprise agreements. When referring to clause 172 of the Bill it states:

Clause 172 – Making an enterprise agreement

660. This clause provides for the making of enterprise agreements. Enterprise agreements can be made about ‘permitted matters’ (subclause 172(1)). The permitted matters are:

• matters pertaining to the relationship between an employer or employers and employees (paragraph 172(1)(a));



• matters pertaining to the relationship between an employer or employers and an employee organisation or employee organisations (paragraph 172(1)(b));



• deductions from wages authorised by an employee (paragraph 172(1)(c)); or



• how the agreement will operate (paragraph 172(1)(d)).

....

667. Whether an enterprise agreement is about permitted matter is also significant in the context of protected industrial action for the purpose of clause 409 (which deals with employee claim action). Employees and their bargaining representatives cannot organise or take protected industrial action in support of claims for a proposed enterprise agreement that will include terms that are not about permitted matters.

668. Paragraph 172(1)(a) refers to ‘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’, referred to after this as ‘matters pertaining to the employment relationship’.

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.

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.

673 The following terms would not be intended to be within the scope of permitted matters for the purpose of paragraph 172(1)(a):

● terms that would contain a general prohibition on the employer engaging labour hire employees or contractors;

● terms that would contain a general prohibition on the employer employing casual employees;

• terms that would require an employer or employee covered by to the enterprise agreement to make a donation to a political party or charity;



• terms that would require an employer to source only products from a particular supplier or Australian made products (unless, e.g., such a term was directly related to employees’ job security);



• terms that would require an employer to engage or not engage particular clients, customers or suppliers who had agreed to commit to certain employment, environmental or ethical standards (unless, e.g., such a terms was directly related to employees‘ health and safety);



• terms that relate to corporate social responsibility, e.g., terms requiring an employer to participate in charity events or commit to climate change initiatives.

674. The permitted matters in paragraph 172(1)(a) are focussed on the employment relationship. One effect of this is that terms that are about the relationship between an employer and an employee organisation may not pertain to the employment relationship, even where the terms are closely associated with the organisation‘s representation of employees under the agreement.

675. Paragraph 172(1)(b) permits terms in agreements that are about matters pertaining to the relationship between the employer or employers, and the employee organisation or employee organisations that will be covered by the agreement. For an agreement term to fall within paragraph 172(1)(b), the term needs to relate to the employee organisation‘s legitimate role in representing the employees to be covered by the agreement.

676. The following terms are examples of those intended to fall within the scope of permitted matters for the purpose of paragraph 172(1)(b):

• terms relating to union training leave and leave for training conducted by a union;



• terms that provide for employees to have paid time off to attend union meetings or participate in union activities;



• terms that provide for union involvement in dispute settlement procedures;



• terms that allow unions to promote membership or have noticeboards in the workplace or otherwise provide information to employees;



• terms that require an employer to provide information to a union about employees who are covered by an enterprise agreement or information about a union to an employee;



• terms that provide for the union to attend the workplace for certain purposes such as dispute resolution or consultation meetings (subject to the rules governing unlawful content – clause 194).

677. The fact that a term falls with paragraph 172(1)(b) does not prevent it from also falling within the description in paragraph 172(1)(a).

678. Because of the way in which the relationship arises, there are limitations on the types of terms that would pertain to the relationship between an employer and an employee organisation. For example, a term granting a lease over property owned by the employer to the employee organisation would not be a term about a permitted matter because it would not concern the relationship between the employer as an employer and the employee organisation as a representative of the employees covered by the agreement.

(My underline)

[23] Where an enterprise agreement is made which contains non-permitted matters, the FW Act at s.253 provides that it can continue to operate except as to any non-permitted term:

SECTION 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; or
(b) it is an unlawful term; or
(c) it is a designated outworker term.

Note 1: A term of an enterprise agreement has no effect to the extent that it contravenes section 55 (see section 56).

Note 2: A term of an enterprise agreement permitting or requiring deductions or payments to be made has no effect if it benefits the employer and is unreasonable in the circumstances (see section 326).

(2) However, if an enterprise agreement includes a term that has no effect because of subsection (1), or section 56 or 326, the inclusion of the term does not prevent the agreement from being an enterprise agreement.

[24] In respect of employees taking protected industrial action, the action must only relate to claims supporting “permitted matters” in enterprise agreements or which are “reasonably believed” to only be about permitted matters. This requirement is contained at s.409:

SECTION 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

(My underline)

[25] When discussing Clause 409 Employee claim action the Explanatory Memorandum states:

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)).

...

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.

(My underline)

NUW’s submissions

Evidence of Mr Nero

[26] Mr Nero is an Organiser for the NUW and has had carriage of the NUW negotiations with the respondent. His witness statement of 9 September 2014 9 states that he attempted to guide the NUW delegates on what was prohibited, non-permitted or unlawful content. Mr Nero stated he was an experienced union organiser10 and had a limited understanding what was permitted in enterprise agreements in respect of an employer’s right to use contractors.11 Mr Nero had spoken to barristers and had been advised by a Queens Counsel on what the NUW was permitted to claim.12

[27] Mr Nero filed two witness statements and gave evidence and indicated there had been eight meetings 13 with the respondent prior to the filing of the protected action ballot order application. Mr Nero was taken through the NUW’s log of claims by Mr Mueller and identified the claims where his union had either altered or withdrawn claims. Mr Nero acknowledged in cross examination that the NUW had never at any stage reduced to writing what it had agreed to during the negotiations and presented this to the respondent.14

[28] Mr Nero accepted that some of the NUW meetings with members prior to the log of claims being served on the respondent included agency casuals together with the respondent’s employees. 15 Mr Nero gave evidence of the concessions made by the NUW to the claims contained in its log of claims16 which left only a limited number of claims outstanding17.

[29] During cross examination Mr Nero accepted that the success of the NUW’s claim that cleaning currently undertaken by contractors was to become a storepersons function (except toilets), would result in the respondent having to cease the outsourcing of its general cleaning. 18

[30] It was also acknowledged by Mr Nero that the claim to move Level 1 employees to Level 2 after 12 months 19 would only currently affect casual agency employees as the respondent does not employ anyone at the Level 1 classification.20

[31] Mr Nero’s evidence was that he believed he was clear in advising the respondent’s representatives:

● of the concessions made to the log of claims,
● whether they were no longer pressed or varied, or
● whether the NUW accepted the respondent’s position. 21

[32] In a nutshell, the NUW submitted because of the operation of s.409(1), and consistent with Full Bench authority it is not necessary to decide whether any of the claims at the time of the PABO application contained non-permitted matters because the NUW reasonably believed that they did not, it must follow therefore that the NUW was genuinely trying to reach an agreement.

Respondent’s submissions

[33] The respondent argues that the application for a PABO should be dismissed on the basis that the NUW as the bargaining representative making the application has not been genuinely trying to reach an agreement. This argument is made on two bases:

i. The NUW has been, and is, continuing to demand terms that are non-permitted matters as per the FW Act.
ii. The NUW’s conduct during the negotiations; i.e. by not formally advising the respondent of its position in respect of offers put by the respondent, and the offering of limited concessions and failure to make any formal offers. 22

[34] The respondent submitted that the log of claims was as much about the wages and conditions of the casual labour hire agency employees that are not covered by the proposed agreement. The respondent asserts that the claims affecting the labour hire agency employees do not have a sufficient or direct effect on the relationship between the respondent and its employees. These claims imposed obligations significantly beyond the employment relationship between the respondent and its employees and were thus non-permitted matters.

[35] The respondent also submitted that the NUW were not willing to seriously consider the respondent’s offers of settlement and had not made any formal offers or concessions on any substantive matters.

[36] It was submitted for the above reasons, that the NUW could not be said to be genuinely trying to reach an agreement and that the PABO cannot be made.

Evidence of Ms Brennan

[37] Ms Brennan is employed by Woolworths Limited as the Logistics Manager of the Sydney Liquor Distribution Centre (SLDC) and represented the respondent in the enterprise agreement negotiations. Ms Brennan’s evidence was that the respondent does not pay any of its employees at Level 1 or intend to employ any employees at Level 1, as these classifications are occupied by casual agency employees. 23 Ms Brennan’s evidence was that to accept the NUW’s claim that Level 1 employees be upgraded to Level 2 after 12 months would result in a wage increase of 17.5% to the agency employees.24

[38] Ms Brennan stated that the cleaning at the SLDC is outsourced to a third party cleaning company meaning that to agree to the NUW claim that the respondent’s employees undertake this work would require the respondent to cease the outsourcing of all cleaning except toilet cleaning.

[39] During cross examination, Ms Brennan accepted that the respondent had never previously put the NUW on notice that any of its claims involved non-permitted matters. 25 Ms Brennan’s evidence was that a number of settlement offers were put to the NUW by the respondent to finalise an agreement, all of which were rejected.

[40] Contrary to the position put by Mr Nero, Ms Brennan stated that the NUW had not made any concessions about their substantive claims or abandoned any of their claims. 26

Conclusion re: genuinely trying to reach an agreement and the NUW bargaining approach

[41] In the Federal Court decision of Wesfarmers Premier Coal Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (No 2) 27, French J (as he then was) made the following comments about the meaning of the term “genuinely trying to reach agreement” in respect of negotiations:

[85] Although it was baldly submitted on behalf of Premier Coal that there had been no genuine attempt to reach agreement prior to the July strike action, it is clear that the discussions which had ensued in relation to the proposal for a certified agreement under the Workplace Relations Act subsumed, and were in a sense a continuation of, the extensive negotiations over many months that had already occurred in relation to the Enterprise Agreement proposal.The use of the draft Enterprise Agreement as the basis for the development of a certified agreement reinforces that proposition. Given the extent of the negotiations about the Enterprise Agreement and the involvement of basically the same personnel as were involved in the discussion of the certified agreement, I am satisfied that in those circumstances, on the balance of probabilities, the relevant officers of the AMWU (Cth) had, before the strike, genuinely tried to reach agreement with Premier Coal.

[42] A Full Bench in Total Marine Services Pty Ltd v Maritime Union of Australia 28 refrained from adopting a formulaic approach when applying the statutory test under s.443(1)(b):

[31] In our view the concept of genuinely trying to reach an agreement involves a finding of fact applied by reference to the circumstances of the particular negotiations. [Australian Industry Group v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union Print T1982; Re Media, Entertainment and Arts Alliance PR928033] It is not useful to formulate any alternative test or criteria for applying the statutory test because it is the words of s. 443 which must be applied. In the course of examining all of the circumstances it may be relevant to consider related matters but ultimately the test in s. 443 must be applied.

[32] We agree that it is not appropriate or possible to establish rigid rules for the required point of negotiations that must be reached. All the relevant circumstances must be assessed to establish whether the applicant has met the test or not. This will frequently involve considering the extent of progress in negotiations and the steps taken in order to try and reach an agreement. ....

(My underline)

[43] As noted by the majority in J.J. Richards & Sons Pty Ltd v Transport Workers’ Union of Australia 29, the word “genuine” includes as defined by the Macquarie Dictionary “being truly such; real”. To give full meaning to the expression genuinely trying to reach an agreement, the Commission must be satisfied that the means undertaken by the NUW to reach an agreement are “truly such” as to reach an agreement; or are “real” efforts to reach an agreement. The words are directed to the authenticity of the NUW’s efforts.

[44] In the Federal Full Court decision of J.J. Richards & Sons Pty Ltd v Fair Work Australia 30 Flick J stated:

[58] It is ultimately concluded that s 443(1)(b) is to be construed such that Fair Work Australia cannot reach a state of satisfaction that an “applicant ... is ... genuinely trying to reach an agreement with the employer” unless:

• an applicant has approached the employer and informed the employer of the general ambit of that for which agreement is sought; and



• the employer has foreshadowed – even in the most general of terms – its attitude as to the proposed agreement.

More may be required. Much may well depend upon the factual scenario in which the terms of s 443(1)(b) are to be applied. But such a minimum statement of that which is required is sufficient to dispose of the present Application.

(My underline)

[45] Establishing that a party wants to reach an agreement will not answer the question of whether the efforts made are “truly such” as to reach an agreement; or are “real” efforts to reach an agreement, 31that is, the efforts must not be a sham.32

[46] What is clear from the above authorities is that each application turns on its own facts and circumstances. The conduct of the NUW must be examined and assessed for the purpose of determining as a matter of fact whether it has been, and is, genuinely trying to reach an agreement. This demands an examination of all of the steps and actions taken by the NUW in genuinely trying to reach an agreement, separately and independently of whether it simply wants an agreement.

[47] Mr Nero, on behalf of the NUW, put his evidence in a frank and open manner without hesitation. I accept his evidence as to the authenticity of the NUW genuinely trying to reach an agreement with the respondent. While the minutes of the negotiation meetings prepared by the respondent do not specifically reflect the concessions stated by Mr Nero as having been made, any communication difficulty or misunderstanding between the parties does not necessarily lead to the conclusion that the NUW were not genuinely trying to reach an agreement. The meeting minutes do not reflect any lack of genuineness on behalf of the NUW representatives.

[48] To be genuinely trying to reach an agreement a party does not have to make concessions but rather give serious consideration to the position of the other party. On what the Commission could glean during the hearing of this matter, the context of the agreement negotiations was typical of the normal cut and thrust of enterprise bargaining, with both parties advancing their own interests while still attempting to reach an agreement.

[49] Having considered all that was put before the Commission I am unable to conclude that the NUW in its negotiations, including numerous face to face meetings with the respondent, lacked genuineness as submitted by the respondent, in trying to reach an agreement.

Conclusion re: genuinely trying to reach an agreement and permitted matters

[50] In regard to whether the NUW claims are permitted matters and the relevance of the NUW holding a reasonable belief that their claims are about permitted matters both parties took the Commission to authorities that supported their respective arguments.

[51] The Respondent submitted that there were conflicting Full Bench decisions which addressed whether when seeking a PABO the applicant could be pursuing non-permitted matters and whether holding a “reasonable belief” that claims were permitted matters was sufficient to meet the test of genuinely trying to reach an agreement.

[52] It is necessary to look closely at the legislation, the Fair Work Bill 2008 Explanatory Memorandum and the relevant authorities to reach a proper conclusion on the arguments put by the parties.

[53] The NUW’s log of claims 33 forwarded to the respondent on 21 July 2014 contained 28 specific claims of which a number make reference to or have relevance to casual labour hire or agency employees. This was conceded by Mr Nero in his cross examination. Examples of the claims concerning agency casuals are:

(Extracts from NUW Log of Claims)

6. A clause requiring you to offer permanent employment to casual employees after 6 months regular and systematic employment; 34

7. A clause requiring you to only use agency labour on the basis such persons are paid in accordance with the proposed agreement and are offered permanent employment after 6 months regular and systematic employment at your sites; 35

8. A clause providing for an engagement of contractors and employees of contractors to do work covered by the agreement only if wages and conditions are provided that are not less favourable than those provided for in the agreement;

9. A clause requiring you to review the use of agency and contract labour in consultation with the union on a quarterly basis;

10. A clause providing that the percentage of casual or contractor employees does not exceed 20% of the permanent workforce. This level may be exceeded in exceptional (short term) circumstances subject to prior consultation with the union and on site delegates;

11. Union recognition clauses, including:

- Union access to new employees during the induction process; 36

12. Rest Pauses:

(a) Increase paid rest break/s to twenty (20) minutes each;

(b) Rest Pause clause to apply when working on Public Holidays or non- rostered days and all breaks to be paid when working on those days;

(c) Rest Pause to apply when working five hours or more; 37

16. Level 1: Adjust to allow progression to Level 2 “Team Member” after a maximum of six months on Level 1.

19. Cleaning to be storeperson’s function (except toilets); 38

23. Casuals to have first preference for permanent jobs;

24. Casuals to have options to be company casuals; 39

28. Casuals to be paid overtime after eight (8) hours per day. 40

[54] On any evaluation it can be seen that the NUW log of claims if acceded to, would significantly improve and secure the wages and conditions of agency casuals as much as it would the respondent’s own workforce. The respondent argues that due to the large number of agency casuals and high NUW membership amongst agency casuals, that many of the claims being made by the NUW are being sought to deliver benefits and protections to agency casuals and not to advance or protect the interests of the respondent’s employees.

[55] It is to be noted that a number of the NUW claims that relate to agency casuals reflect the existing administrative practice of the respondent, which was said to be reflected in various versions of a Memorandum of Understanding between the parties. 41 The NUW claims are an attempt to have that administrative practice reflected in the proposed enterprise agreement thus giving them the force of law. Ms Brennan, on behalf of the respondent, stated that where an administrative practice in respect of agency casuals existed, the respondent was opposed to having that practice legally enforceable through an enterprise agreement.42 The ratio of casual agency employees to permanent employees of the respondent was one such example.

[56] There are a number of decisions of this Commission, its predecessors and courts that have considered the question of a bargaining representative making claims which include non-permitted content and whether they can be said to be genuinely trying to reach agreement.

[57] In view of the competing submissions made by the parties in this matter, it is necessary to examine some of the historical jurisprudence associated with determining whether a matter pertains to the relationship of employer and employee. If not, whether making such claims results in a conclusion the applicant for a PABO is not genuinely trying to reach an agreement as required by s.443(1)(b) including where the applicant holds a reasonable belief its claims are about permitted matters.

[58] In 1968 the High Court decision of R v Commonwealth Industrial Court; Cocks; Ex parte 43 (Cocks) considered whether the Commonwealth Conciliation and Arbitration Commission had the power to include in an award a term prohibiting employers from having work done by independent contractors outside their factory or workshop. The High Court agreed with the earlier Industrial Court decision that such a claim could not be the subject of an industrial dispute as it did not relate to the “relations of employers and employees” nor was it reasonably incidental to the settlement of an industrial dispute as to wages, hours or conditions of work.

[59] In a later High Court decision in 1978 R v Moore; Ex parte Federated Miscellaneous Workers’ Union of Australia 44 the Court held that a claim that no employer should permit any work be performed by a contractor except in accordance with the award gave rise to an industrial dispute with Gibbs J stating (when referring to the decision of the High Court in Cocks):

That case is distinguishable. It decided that a dispute as to whether or not it should be permissible for an employer in a particular industry to employ independent contractors in performing relevant work outside the employer’s factory or workshop is not an industrial matter as defined in the Conciliation and Arbitration Act 1904 (Cth) as amended (“the Act”). However the present dispute, in so far as it relates to cl. 5 of the log of claims, is not as to whether contractors should be engaged, but as to whether, if they are engaged, their employees should be entitled to the benefits of the award, assuming that one is made. The evidence has failed to show that in the circumstances prevailing in the industry in question such a clause could not be capable of being regarded as merely incidental to the settlement of the dispute as to the conditions of employment of workers in or in connection with metaliferous mining. 45

[60] In 1986 the unanimous decision High Court decision in Re Manufacturing Grocers’ Employees Federation of Australia; Ex parte Australian Chamber of Manufactures. 46 stated:

For present purposes, it is sufficient to say that a matter must be connected with the relationship between an employer in his capacity as an employer and an employee in his capacity as an employee in a way which is direct and not merely consequential for it to be an industrial matter capable of being the subject of an industrial dispute. 47

[61] In 2001 Electrolux Home Products Pty Ltd v Australian Workers Union 48 (Electrolux) Merkel J made the following comments:

[52] I doubt that the legislature intended that protected action was able to be taken or support claims in respect of a substantive, discrete, and significant matter that does not pertain to the requisite relationship, or that an agreement about such is to be capable of certification ...

[62] In that matter the union had issued notices to Electrolux that they intended to organise and engage in industrial action that was "protected action" under s.170ML of the Workplace Relations Act1996. A dispute existed over matters including bargaining agent's fees and shop steward access rights.

[63] Merkel J concluded that the bargaining agent's fee claim did not pertain to the relationship of employer and employee, therefore, in the context of ss.170LI and 170ML, the proposed agreement was not a proposed agreement about matters pertaining to the requisite relationship because one of the claims related to a matter that did not pertain to the relationship. Merkel J also held that a term of an agreement need not pertain to the relationship if it is ancillary or incidental to or a machinery provision relating to a matter that does pertain to the employment relationship. 49

[64] A Full Court of the Federal Court overturned the decision, however the High Court restored the orders of Merkel J 50 with McHugh J stating:

Accordingly, when characterised as a whole, the agreement must be an agreement about matters pertaining to the requisite relationship. It may not include discrete and substantive matters that do not so pertain. 51

[65] In 2004, Justice French (as he then was) in Wesfarmers Premier Coal Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (No2) 52 (Wesfarmers) made the following observation when relying on the decision in Electrolux:

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 s 170LI. 53

(My underline)

[66] While some of the decisions above relate to what can be held to be an industrial dispute and this matter deals with whether the NUW is “genuinely trying to reach an agreement” the touchstone is whether the claims sought by the NUW deal with matters that pertain to the employer/employee relationship. This much is made clear in the Explanatory Memorandum at Item 669:

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.

[67] In 2005, when looking at the certification of industrial agreements a Full Bench of the Australian Industrial Relations Commission Re Rural City of Murray Bridge Nursing Employees, ANF (Aged Care) − Enterprise Agreement 2004 and Re Schefenacker Vision Systems Australia Pty Ltd, AWU, AMWU Certified Agreement 2004 54 (Schefenacker) adopted as a source of guidance, the comments of Merkel J in Electrolux.

[68] In Schefenacker the Full Bench was asked to determine whether certain union claims fell within the employee/employer relationship. In the proposed Schefenacker agreement the unions made a claim concerning employees of labour hire agencies relating to the maximum level of employees of labour hire agencies, being 20% of total weekly paid employees.

[69] The Full Bench in Schefenacker relying on previous High Court authority 55 concluded that the concept of matters falling within the relevant relationship is not to be artificially limited by reference to the contract of service, its incidents and the work performed pursuant to the contract.56 The Full Bench went on to state:

... 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 employment. For that reason 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.

...

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. 57

[70] The Full Bench concluded that while the ratio of labour hire employees to permanent employees may be construed as a partial prohibition on the use of labour hire employees, it is also designed to increase permanent employment by placing obligations upon the employer to engage more permanent employees in the circumstances specified. 58

[71] For the same reasoning, the Full Bench also found the claim that employees of labour hire agencies should receive the same wage increase as permanent employees, directly concerns the security of employment of the employees covered by the agreement.

[72] In 2005 a Full Bench of the Australian Industrial Relations Commission in Re Nation Union of Workers; Re Agreement with Exel (Australia) Logistics Pty Ltd 59 (Exel Logistics) dealt with the then statutory requirements for certification of agreements under s.170LI of the Workplace Relations Act 1996. Section 170LI required the agreement to be about matters pertaining to the relationship between the employer and employees. The majority decision (Giudice J and Mansfield C) relied on the earlier Full Bench decision of Schefenacker stating that the Commission recognised a distinction between a prohibition on the use of contractors and the regulation of conditions to be afforded to contractors’ employees.60

[73] The majority decision went on to state:

In our view agreed measures to protect the wages, conditions and employment of employees, by attempting to ensure parity of wages and conditions for the employees of contractors, pertain to the relationship between employers and employees in a direct way. 61

and

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. 62

[74] In 2006, a Full Bench of the Australian Industrial Relations Commission Tyco Australia Pty Ltd trading as Wormald v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia 63(Tyco),dealt with the question of whether a union was genuinely trying to reach agreement while pursuing prohibited content in the proposed agreement

[75] In dismissing Tyco’s appeal the Full Bench observed:

[20] There is no doubt that the provisions dealing with the negotiation and making of workplace agreements outlaw prohibited content. In that respect the construction of the legislation urged on us by Wormald and the Commonwealth is clearly correct. It may be accepted that a union which makes prohibited content a part of its claims cannot be said to be genuinely trying to reach agreement. That is because agreement in this context must mean a workplace agreement under the Act, as explained by Senior Deputy President Acton in Kempe Engineering Services. Of course it is not always easy to say whether claims involve prohibited content. Whether it can be said that a union is advancing such claims depends upon the evidence as to the nature of the claims and the union’s statements and conduct. Leaving aside cases in which it is clear on any reasonable view that claims being advanced involve prohibited content, it is conceivable that a party may be “genuinely trying” to reach an agreement under the Act even though, as a matter of ultimate conclusion, the claims it is advancing do contain prohibited content. ...

(Reference omitted, my underline)

[76] In a decision dated 12 October 2009, Australian Postal Corporation v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia 64 (Australia Post One) a Full Bench considered the question of whether a union was genuinely trying to reach agreement when making an application for a PABO while pursuing a claim in relation to contractors not being a permitted matter for an enterprise agreement under the FW Act. This decision addressed the relevant new provisions of the FW Act and held that given the authority in the Wesfarmers case and the status of those in the CEPU who were pursuing the claim, the CEPU could not have reasonably believed that a claim relating to contractors was about a permitted matter.

[77] The Full Bench stated:

[44] As a result, an applicant for a protected action ballot order pursuing a claim as a substantive term of a proposed enterprise agreement which is not about a permitted matter is not genuinely trying to reach an agreement with the employer of the employees to be balloted.

[78] As a result of the Full Bench’s conclusion, the originating orders for a PABO were quashed on 12 October 2009.

[79] A further application for a PABO was dismissed by a single Commissioner on 29 October 2009, on the basis that the CEPU was persisting with claims about non-permitted matters. 65

[80] On 4 November 2009, a further application for a PABO was made by the CEPU and granted by the Commission 66 that decision was also subject to appealin Australian Postal Corporation v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia - Communications Division67 (Australia Post Two). In dismissing the appeal the Full Bench commented:

[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.

...

[58] The history of the negotiations demonstrates that the CEPU, especially after the decision of the first Full Bench, was seeking to formulate a contractors’ clause that did not restrict or qualify the right of Australia Post to use contractors or agency staff and pertained to the employer/employee relationship. It is clear that by the time of the last hearing before Commissioner Roberts, and indeed well before, the CEPU reasonably believed that the clauses it was promulgating did not contain non-permitted matters.

[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. ...

[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.

[81] A further Full Bench decision in 2010, dealt with permitted matters and protected ballot order applications. In Airport Fuel Services Pty Limited v Transport Workers’ Union of Australia 68 (Airport Fuel Services), the Full Bench upheld the employer’s appeal and quashed the protected ballot order of a single member finding that the Transport Workers’ Union had been and was pursuing non-permitted matters, the Full Bench observed:

[14] While section 409(1)(a) of the FW Act provides that “employee claim action” for a proposed enterprise agreement is industrial action that “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”, we do not apprehend the reference in s.409(1) to a reasonable belief is intended to affect the jurisprudence in respect of the tribunal being satisfied an applicant for a protected action ballot order has been, and is, genuinely trying to reach an agreement with the employer of the employees to be balloted. Section 409(1)(a) is concerned with the nature of the industrial action that constitutes “protected industrial action” and protected industrial action can only exist after a protected action ballot order is made.

[82] Shortly after the Airport Fuel Services decision another Full Bench in Alcoa Australia Limited Australian Workers’ Union - Western Australia Branch 69 (Alcoa Australia) referred to the decision in Australia Post Two and concluded:

[16] In Australia Post [Two] it was held that “[u]ltimately, 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 agreement.”

...

[18] Further as was also noted in Australia Post, s.253 recognises that an enterprise agreement may contain terms that are about non-permitted matters. This seems to reinforce the conclusion that the mere fact that a proposed agreement contains non-permitted matters is not fatal to a conclusion that the bargaining representative who propounded it is genuinely trying to reach an agreement.

(Reference omitted)

[83] The Full Bench referred to the Airport Fuel Services decision and stated at footnote (13):

“But see Airport Fuel Services Pty Limited v Transport Workers’ Union of Australia [2010] FWAFB 4457, delivered on 17 June 2010, after the hearing of this appeal. We do not read paragraph 14 of that decision as suggesting that reasonable belief is not a factor that may be taken into account in deciding whether a bargaining representative is genuinely trying to reach agreement.”

[84] In July 2010 a Full Bench was again asked to consider the question of permitted matters and holding a reasonable belief that the matters claimed were permitted when applying for a PABO Asurco Contracting Pty Ltd v Construction, Forestry, Mining and Energy Union 70.

[85] At paragraph [9] of the decision, the Full Bench in identifying the reasons why the appeal invoked the public interest 71 requirements stated:

[9] The matters included tension between recent Full Bench decisions on the relevance of genuine belief about the status of potentially impermissible matters, the arguments that the clauses on contractors and supplementary labour hire were objectionable terms, ...

(My underline)

[86] While finding that the claims pursued by the union were permitted matters, the Full Bench stated:

[17]... It is not “sufficient”, in our view, that a bargaining agent reasonably believes that its claims are only about permitted matters. ...

(My underline)

[87] Finally in 2011, a Full Bench in Kagan Logistics Pty Ltd v National Union of Workers, New South Wales Branch 72 (Kagan) while holding that a union was pursuing permitted matters and dismissing the appeal made the following comments:

[12] We think it is apparent from the Commissioner’s decision that in deciding to make the order for a protected action ballot the Commissioner substituted a test of whether the NUWNSW reasonably believed the sub-clauses in question were permitted matters for the test in s.443(1)(b) of the FW Act. Such substitution may lead to appealable error.

(My underline)

[88] In summarising the ratio of the above authorities, there appears to be some Full Bench conflict in decisions since the operation of the FW Act in regards to the relevance of an applicant for a PABO holding a “reasonable belief” as to the pursuing of only-permitted matters. One line of authority would appear to conclude that where an applicant holds a “reasonable” belief that claims are permitted matters it is not necessary for the Commission to determine whether the claims made are permitted matters. This authority can be adduced from the following Full Bench decisions in Australia Post Two and Alcoa Australia.

[89] In Australia Post Two (January 2010):

[56] 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.

[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. ...

[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.

[90] In Alcoa Australia (July 2010):

[18] ... the mere fact that a proposed agreement contains non-permitted matters is not fatal to a conclusion that the bargaining representative who propounded it is genuinely trying to reach an agreement.

[91] The two decisions above are to be contrasted with the Full Bench decisions in Airport Fuel Services, Asurco and Kagan where holding a “reasonable belief” was deemed as insufficient or irrelevant where non-permitted matters are being pursued in determining whether the applicant is genuinely trying to reach an agreement.

[92] In Airport Fuel Services (June 2010):

[14] ... we do not apprehend the reference in s.409(1) to a reasonable belief is intended to affect the jurisprudence in respect of the tribunal being satisfied an applicant for a protected action ballot order has been, and is, genuinely trying to reach an agreement with the employer of the employees to be balloted.

[93] In Asurco (August 2010):

[17] ... It is not “sufficient”, in our view, that a bargaining agent reasonably believes that its claims are only about permitted matters. ...

[94] In Kagan (March 2011):

[12] ... the Commissioner substituted a test of whether the NUWNSW reasonably believed the sub-clauses in question were permitted matters for the test in s.443(1)(b) of the FW Act. Such substitution may lead to appealable error.

[95] The respondent submitted that where there is conflicting authority that the later authority is to be taken as that which applies. 73

[96] I am persuaded to follow the Full Bench authority in Airport Fuel Services, Asurco and Kagan (Kagan also being the most recent) in holding that a reasonable belief that only permitted matters are being pursued is not an absolute defence to not having tried to genuinely reach an agreement, where non-permitted matters are being sought. Section 409 Employee Claim Action in the FW Act is specific in its reference to the holding of a reasonable belief whereas s.443 or Subdivision B Protected action ballot orders makes no such reference. Where however, claims for non-permitted matters have been abandoned before an application for a protected action ballot is made, this would not preclude a finding that the applicant was genuinely trying to reach an agreement, this is in my view consistent with that expressed in the Explanatory Memorandum at Item 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.

(My underline)

[97] In examining whether the NUW have been and are continuing to pursue non-permitted matters via their log of claims, I have applied the following principles gleaned from the FW Act, the relevant case law and the Explanatory Memorandum.

• Terms relating to conditions or requirements which sufficiently relate to an employee’s security of employment and maintenance of wages and conditions, such as a requirement that contractors must not be engaged on terms and conditions that would undercut the enterprise agreement, are permitted matters as they pertain to the employment relationship.



• Terms that contain a prohibition on the employer engaging contractors or labour hire employees or the employer’s right to use independent contractors are not matters pertaining to the employment relationship, as opposed to those which may relate to the regulation of conditions to be afforded to contractor employees.



• A bargaining representative pursuing an agreement that contains non-permitted matters as substantive terms cannot be genuinely trying to reach an agreement under the FW Act.



• The legislation requires that an applicant for a PABO is genuinely trying to reach an agreement at the time of the making the application for the order.

[98] The respondent has argued that the NUW log of claims contains substantive terms which are non-permitted matters. Particular emphasis was placed on:

● cleaning (except toilets) be undertaken by storepersons
● Level 1 employees to progress to a Level 2 after 12 months 74, resulting in a 17.5% wage increase for agency employees.75

● An established contractor/employee ratio

[99] These claims are to be read in conjunction with the NUW claim (8) that contractors and their employees must only be engaged on the basis that their wages and conditions are no less favourable than those contained in the proposed agreement.

Cleaning to be storeperson’s function (except toilets)

[100] This claim constitutes a direct prohibition on the engagement of contractors for cleaning (other than toilets), a task which is currently undertaken by agency casuals. This was acknowledged by Mr Nero on behalf of the NUW.

[101] Mr Nero stated in cross examination, the following:

PN108
So effectively then clause 19 would require-if it was accepted, would require the company to cease outsourcing the cleaning. Is that correct?---Not entirely. The other DCs outsource their work as well in regards to the toilet cleaning, so it would probably be general cleaning, yes.

PN109
So it would require them to cease outsourcing the general cleaning, with the exception of the toilets?---If they had accepted the claim, that’s my understanding.

Mr Nero went on to confirm that this claim had not been withdrawn. 76

[102] A prohibition on the use of contractors does not pertain to the relationship of the employer and employee, the High Court decisions in Cocks and Electrolux have made this clear, and these decisions have been followed by this Commission and its predecessors.

[103] In the NUW’s final reply submissions, Mr Mueller on behalf of the NUW, advised the Commission that the NUW withdrew this claim and did this for an abundance of caution as the claim had been misunderstood. In my view such a withdrawal subsequent to the filing of the PABO may be relevant to a future PABO application but cannot impact on the application now before the Commission. This is because the NUW must be genuinely trying to reach an agreement at the time it makes the application for a PABO.

[104] In Airport Fuel Services, the Full Bench addressed this issue where a non permitted claim was subsequently withdrawn:

[31] Further, there was no evidence before his Honour that the TWU made it clear that it was not pursuing claims containing non-permitted matters for the enterprise agreement. The evidence before his Honour was that the TWU had been, and was, pursuing its claim for clauses 5.1.2 and 5.3, despite AFS advising them they were non-permitted matters. The TWU did withdraw its claim for clauses 5.1.2 and 5.3 to be part of the proposed enterprise agreement on 28 May 2010, but this was well after it had made its application for a protected action ballot order.

[105] Further, even if I was to uphold the NUW’s position that holding a reasonable belief that a claim was a permitted matter results in a finding that the NUW is genuinely trying to reach an agreement, I am not satisfied that on the evidence of Mr Nero, that the NUW could have held a reasonable belief that the claim prohibiting the use of contract cleaners was a permitted matter.

[106] Mr Nero agreed in cross examination that a provision prohibiting the use of contractors is not a permitted matter 77 and accepted that the claim as made would require the respondent to cease outsourcing the cleaning except toilets.78 Mr Nero stated he believed that the claims being pursued were permitted matters. In respect to the prohibition on using cleaning contractors and having regard to Mr Nero’s status and experience as a union official, that belief, although legitimately held, was not reasonable.

[107] It follows that the proposed agreement is not one in respect of which the NUW can be held to be genuinely trying to reach an agreement.

Automatic progression from Level 1 to Level 2 after 12 months

[108] As mentioned previously this claim was varied by the NUW to require the progression from Level 1 to Level 2 to occur after 12 months from the original claim of 6 months. The respondent argues that this claim is a non-permitted matter as it solely relates to the benefit of agency casuals and not the respondent’s employees. This is because only agency casuals are classified at Level 1 and while the existing agreement contains a Level 1 classification the respondent does not employ anyone on Level 1 and has no intention of doing so.

[109] As a general proposition, claims that on their face concern only third parties can still be found to relate to the employer/employee relationship where the claim concerns the employees’ job security or safeguarding of conditions. 79

[110] In respect of the matters in the NUW log of claims that impact on agency casuals, little was put in evidence as to how improving the position of agency casuals through inserting terms in the proposed agreement would enhance the position of the respondent’s employees. Mr Nero for the NUW did not address this aspect in any detail and no employee of the respondent gave evidence. 80 I was not taken to any reference in the meeting minutes that demonstrated the concerns of the respondent’s employees in regard to their job security.

[111] The situation of the respondent, where its own employees are not engaged in positions occupied by the labour hire employees (the Level 1 classification) nor likely to be, distinguishes the circumstances applying in Schefenacker where it was held the claims were designed to increase permanent employment by placing obligations upon the employer to engage more permanent employees.

[112] I am not satisfied that this particular claim is sufficiently connected to concerns of the respondent’s employees to be a matter concerning the employer/employee relationship. I arrive at this conclusion on the basis that there are no Level 1 employees engaged by the respondent, with agency casuals being the only employees paid at the Level 1 rate of which there are approximately 120. 81 Mr Brennan’s evidence, which was not contested in cross examination on this point, was that the respondent did not intend to employ any company employees at Level 1 as it only uses agency casuals at this level.82 In the respondent’s submission, increasing the agency casuals’ rate of pay by 17.5% would be potentially prejudicial to the respondent’s employees as it would be an additional cost to the respondent.

[113] On this basis it also follows that the proposed agreement is not one in respect of which the NUW can be held to be genuinely trying to reach an agreement.

Contractor/employee ratio

[114] The NUWlog of claimsseeks a clause in the proposed agreement, providing that the percentage of casual or contractor employees does not exceed 30% of the permanent workforce. This level may be exceeded in exceptional (short term) circumstances subject to prior consultation with the union and on site delegates. 83

[115] The effect of this claim is a restriction to a limited degree on the use of contractor employees. Mr Mueller relied on the decision in Schefenacker, where a similar term was sought to argue that this claim was a permitted matter. In Schefenacker the Full Bench stated they had some difficulty in characterising the provision, as such, a term may be construed as a partial prohibition on the use of labour hire employees but on the other hand is designed to increase permanent employment by placing obligations on the employer to engage more permanent employees. 84

[116] In the Full Bench decision of Exel Logistics the majority decision also raised the “difficult question of characterization” of a partial prohibition on the engagement of casual contractors. 85 The provision in question, although only a partial prohibition was held to be “nevertheless sufficient to take it outside the relationship between the employer bound by the agreement and the employees covered by the agreement.”

[117] Mr Nero acknowledged that a 70:30 ratio was a partial prohibition on the engagement of agency casuals. 86 In Schefenacker the Full Bench stated it agreed with the Senior Deputy President for the reasons he gave, that a clause in the following terms pertained to the employment relationship:

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. 87

[118] The reasons that the Senior Deputy President gave in his decision were:

I have taken the obligation in clause 17.2 as simply an obligation to consult because to take it further may raise issues associated with the Freedom of association provisions in the Act. 88

(My underline)

[119] The Full Bench stated the clause may be construed as a partial prohibition on the use of labour hire employees. It was also designed to increase permanent employment by placing obligations on the employer to engage more permanent employees. The Full Bench said:

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. 89

[120] The respondent again submits that the Schefenacker decision is distinguishable as the claimed ratio is not protective of the respondent’s employees because casual or contractor employees are only engaged at Level 1 and the respondent does not employ any of its permanent workforce at Level 1.

[121] In this instance it is necessary to draw a link between the provisions of the clause and how the term affects the respondent’s employees, such as the amount of work available to the respondent’s employees or issues of job security. As stated in the Explanatory Memorandum:

● 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;

[122] The Full Bench in Schefenacker described the extent to which an agreement can regulate the contractual relationship between an employer and labour hire agencies yet still pertain to the relevant relationship, as a question of degree. 90

[123] It is not enough in my view, to simply refer to a similar provision having been approved elsewhere without establishing the requisite connection to the respondent’s workforce. While some terms are self evident in how they may impact on the respondent’s own employees, insufficient information has been provided about the consequences of this claim on the respondent’s employees.

[124] In the 2005 decision of Simsmetal v Transport Workers’ Union of Australia and Others 91, Senior Deputy President O’Callaghan considered a clause in an agreement which concerned the ratio of owner drivers to employed drivers and held that the clause was not a matter pertaining to the employment relationship. In reaching this conclusion the Senior Deputy President stated that he was faced with a lack of information about how the clause concerned the employer’s employees.

[125] While the requisite relationship is not mutually exclusive of other relationships. 92 I am unable to make an informed determination on the potential impact of the operation of this clause on the respondent’s permanent employees, none of whom are engaged at the Level 1 classification. It could be argued that this impacts on the respondent’s employees but that argument was not put in evidence. Mr Nero in his evidence did not traverse this area other than to state that he believed he was able to “bargain for ratios”93. The clause clearly represents a partial prohibition in the context considered by the Full Bench of the Commission in Exel and is therefore outside the employment relationship and a non-permitted matter.

[126] I consider the NUW’s claims against the respondent in respect of the cleaning to be storeperson’s function (except toilets), the contractor/employee ratio and automatic progression from Level 1 to Level 2 after 12 months to be substantial claims as opposed to matters which are ancillary, incidental or are machinery in nature to matters which pertain to the employment relationship as discussed by Vice President Ross (as he then was) in K L Ballantyne & National Union of Workers (Laverton Site) Agreement 2004. 94.

[127] The above matters address the claims which the respondent devoted most of its time in opposing the PABO issuing based on the claims being non-permitted matters. 95 Having found that these claims are non-permitted matters based on the evidence before the Commission and the circumstances applying at the respondent’s workplace it follows that the NUW cannot be held to be genuinely trying to reach an agreement and its application must be dismissed.

[128] The respondent also argued that the NUW claim that agency casuals receive the benefit of the terms and conditions of the agreement was a non permitted matter. As a general proposition, it is well established that claims of this nature relate to the employer/employee relationship because they are concerned with protecting the employer’s employees. 96While the respondent sought to argue why its case was distinguishable from the relevant authorities in view of the above conclusions already reached I do not need to address this question, suffice to say on any reconsideration of the same claim in a further PABO application, the protection of the respondent’s employees’ conditions and security of employment and would need to be addressed.

[129] The application is dismissed.

COMMISSIONER

Appearances:

Mr S Mueller for the National Union of Workers

Mr G Jolly, Solicitor on behalf of Phillip Leong Stores Pty Ltd

Hearing details:

2014.

Sydney:

15, 16 and 23 September.

 1   Transcript PN693.

 2   AE890096

 3   All Staff Australia and Advance Australia.

 4   Exhibit A1 Witness Statement of Mr Nero 9 September 2014.

 5   Respondent’s outline of submissions dated 12 September 2014.

 6   Exhibit R1 Amended Witness Statement of Ms Brennan plus annexures dated 12 September 2014.

 7   Exhibit A2 Witness Statement of Mr Nero 15 September 2014.

 8   Transcript at PN148 - 149.

 9   Exhibit A1.

 10   Transcript PN60.

 11   Transcript PN303.

 12   Transcript PN422.

 13   Transcript PN207.

 14   Transcript PN222.

 15  Transcript PN75.

 16   Exhibit A3.

 17   Transcript at PN34-35.

 18   Transcript PN109.

 19   Varied from the original claim of 6 months, see transcript PN164.

 20   Transcript PN101.

 21   Transcript at PN226 and PN239.

 22   Exhibit R2 Respondent’s revised outline of submissions dated 23 September 2014 at paragraph 2.

 23   Exhibit R1 at paragraph 12.

 24   Exhibit R1 at paragraph 42(c).

 25   Transcript PN495.

 26   Exhibit R1 at paragraph 42(c).

 27 [2004] FCA 1737.

 28   [2009] FWAFB 368.

 29   [2010] FWAFB 9963 at 57-58.

 30 [2012] FCAFC 53.

 31   T. Caspersz, Bargaining and the Protected Action Ballot Order (November 2011) WA Law Society Brief.

 32   The fifth edition of the Australian Concise Oxford Dictionary definition of “genuine”.

 33   Exhibit A3 NUW Log of claims against Sydney Liquor Distribution Centre dated 21 July 2014.

 34   Mr Nero advised the Commission that this claim had been abandoned.

 35   Mr Nero advised the Commission that the offer of permanent employment after 6 month was no longer claimed.

 36   Mr Nero in his evidence explained that his claim would also apply to casual agency employees.

 37   Mr Nero advised the Commission that while this claim would also apply to agency casuals it was no longer being pursued by the NUW.

 38   Cleaning is currently undertaken by agency employees.

 39   Mr Nero advised that this claim was no longer pursued, see transcript PN35.

 40   Mr Nero advised that this claim was no longer pursued, see transcript PN35.

 41  Exhibit R1, see Annexure 1 of Ms Brennan’s Witness Statement.

 42   Transcript PN500.

 43 (1968) 121 CLR 313.

 44 (1978) 140 CLR 470.

 45   Ibid at 473.

 46 (1986) 160 CLR 341.

 47   Ibid at 353.

 48 [2001] FCA 1600 at paragraph 52.

 49   Ibid at paragraph 50.

 50   Electrolux Home Products Pty Ltd v Australian Workers Union (2004) 221 CLR 309.

 51   Ibid at paragraph 111.

 52 (2004) 138 IR 362.

 53   Ibid at 390 paragraph 109.

 54 [2004] 142 IR 289 at 299.

 55   Re Manufacturing Grocers’ Employees Federation of Australia; Ex parte Australian Chamber of Manufactures (1986) 160 CLR 341 and Re Cram; Ex parte NSW Colliery Proprietors’ Association Ltd (1987) 163 CLR 117.

 56   Schefenacker at 319.

 57   Ibid at 319-320.

 58   Ibid.

 59 (2005) 146 IR 334.

 60   Ibid at 340.

 61   Ibid at 341.

 62   Ibid at 343.

 63   PR974317.

 64   [2009] FWAFB 599.

 65   [2009] FWA 878.

 66   [2009]FWA 998.

 67   [2010] FWAFB 344.

 68   [2010] FWAFB 4457.

 69   [2010] FWAFB 4889.

 70   [2010] FWAFB 6180.

 71 s.604(2) of the FW Act.

 72   [2011] FWAFB 1724.

 73   See SZLIW v Minister for Immigration & Anor [2009] FMCA 333 at paragraph [54] and [57].

 74   The original claim was after 6 months

 75   Exhibit R1 at paragraph 42(c)

 76   Transcript PN111.

 77   Transcript PN303.

 78   Transcript PN109.

 79   R v Moore; Ex parte Federated Miscellaneous Workers’ Union of Australia (1978) 140 CLR 470.

 80   Mr Nero stated increasing the rate for Level 1 agency employees was important to permanent employees but no reference was made to job security (see transcript PN168 and PN173).

 81   Transcript PN696.

 82 Ms Brennan’s Witness Statement at [12].

 83   The initial NUW claim was for a 20% limitation.

 84 142 IR 289 at 319-320.

 85 146 IR 334 at 344.

 86   PN317.

 87 (2004) 142 IR 289 at 317.

 88   Ibid.

 89 142 IR 289 at 320.

 90   Ibid.

 91   PR962522.

 92   K L Ballantyne & National Union of Workers (Laverton Site) Agreement 2004 PR952656.

 93   Transcript PN422.

 94   PR952656 paragraph [39].

 95   The respondent identified the prohibition on outsourcing cleaning and claims with respect to agency casuals in its revised outline of submissions as important Exhibit R2 at 2(a).

 96 142 IR 289 at 321 Schefenacker.

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