One Tree Community Services Inc v United Workers' Union

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FEDERAL COURT OF AUSTRALIA

One Tree Community Service Inc v United Workers’ Union [2021] FCAFC 15  

Appeal from: One Tree Community Service Inc v United Voice (No 2) [2020] FCA 390
File number: WAD 93 of 2020
Judgment of: FLICK, BROMBERG AND KERR JJ
Date of judgment: 24 February 2021
Catchwords:

CONSTITUTIONAL LAW – judicial power of the Commonwealth – dispute resolution clause (cl 77) in an enterprise agreement made under the Fair Work Act 2009 (Cth) provided for binding arbitration – whether in resolving by arbitration a dispute involving the employer brought pursuant to cl 77, the Fair Work Commission was purporting to exercise judicial power – where employer was not involved in the making of the enterprise agreement but became bound by that agreement by reason of the operation of the transfer of business provisions in Pt 2-8 of the Fair Work Act – distinction between a private arbitration and the exercise of judicial power discussed – whether the source of the authority of the Fair Work Commission to arbitrate was the consent of the disputants or the sovereign power of the Commonwealth – whether only an inter partes agreement made between the disputants could provide the requisite consensual foundation for a private arbitration – whether the requisite consent of the employer was established by its voluntary assumption of the binding force of the enterprise agreement and cl 77 thereof upon the employer taking steps to trigger the transfer of business provisions in Pt 2-8.

INDUSTRIAL LAW – s 739 of the Fair Work Act – whether in resolving by arbitration a dispute pursuant to a dispute resolution clause in an enterprise agreement the Fair Work Commission was purporting to exercise judicial power.

Legislation:

Australian Constitution, Ch III, s 71

Fair Work Act 2009 (Cth), ss 318, 320, 739, Pt 2-2, Pt 2-8

Superannuation (Resolution of Complaints) Act 1993 (Cth)

Superannuation Industry (Supervision) Act 1993 (Cth)
Cases cited:

Attorney-General (Cth) v Alinta Ltd (2008) 233 CLR 542

Attorney-General v Breckler (1999) 197 CLR 83

Ah Yick v Lehmert (1905) 2 CLR 593

Brandy v Human Rights and Equal Opportunity Commission (1995) 183 CLR 245

Byrne v Australian Airlines Limited (1995) 185 CLR 410

Chu Kheng Lim v Minister for Immigration, Local Government and Ethnic Affairs (1992) 176 CLR 1

Construction, Forestry, Mining and Energy Union v Australian Industrial Relation Commission (2001) 203 CLR 645

Duggan v Metropolitan Fire and Emergency Services Board [2017] FCAFC 112

Federal Commissioner of Taxation v Munro (1926) 38 CLR 153

Huddart, Parker & Co Pty Ltd v Moorehead (1909) 8 CLR 330

Polyukhovich v The Commonwealth (1991) 172 CLR 501

Precision Data Holdings Ltd v Wills (1991) 173 CLR 167

Private R v Cowen [2020] HCA 31

R v Kirby; Ex parte Boilermakers’ Society of Australia (1956) 94 CLR 254

R v Davison (1954) 90 CLR 353

R v Humby; Ex parte Rooney (1973) 129 CLR 231

R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd (1970) 123 CLR 361

Re…

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Details
Case
[2021] FCAFC 15
Decision Date

CaseChat Overview and Summary

In the case of One Tree Community Services Inc v United Workers' Union, the Fair Work Commission was challenged on the grounds that it was exercising judicial power by resolving a dispute under an enterprise agreement that involved the employer. The dispute centred around the interpretation and application of the "transfer of business" provisions in the Fair Work Act 2009 (Cth) and the binding arbitration clause in the enterprise agreement, which was made between Mission Australia and the United Workers' Union. The central issue was whether the Fair Work Commission, in resolving a dispute involving One Tree, which was not a party to the enterprise agreement but became bound by it through the transfer of business provisions, was exercising judicial power or acting under a consensual arbitration agreement.

The Fair Work Commission held that One Tree, by voluntarily entering into the transfer of business and making employment offers to Mission Australia's former employees, implicitly agreed to be bound by the enterprise agreement, including the arbitration clause. The Commission rejected One Tree's argument that it was not subject to the arbitration power because it had not expressly agreed to arbitrate disputes with the Union. The Commission found that One Tree's voluntary actions constituted an agreement to arbitrate disputes as per the enterprise agreement, thus preventing the exercise of judicial power.

The court concluded that the Commission did not exercise judicial power but rather acted under a consensual arbitration agreement. The Commission's decision was upheld, and the appeal was dismissed. There was no order as to costs.

Orders

Orders of the court

1. The appeal be dismissed.

2. There be no order as to costs.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Contrary to the conclusion of the primary Judge, that question as summarised by the Commission is to be answered in the negative. Contrary to the conclusion of Bromberg and Kerr JJ, it is respectfully considered that the appeal should be allowed.The factual background – the transfer of employees The factual background to the present proceeding dates back to early 2018. In about March 2018 the Commonwealth Department of Defence invited tenders for the acquisition of the childcare facilities then provided to the families of Defence personnel and local communities. Those facilities were operated on behalf of the Department by Mission Australia Early Learning (“Mission Australia”). At that time it was the Mission Australia Early Learning Services Enterprise Agreement, 2013-2016 (the “Enterprise Agreement”) which applied to and covered the relevant employees of Mission Australia. One Tree submitted a tender in April 2018. In July 2018 One Tree was advised that its tender had been successful. Negotiations began in August 2018 between Mission Australia and One Tree, including negotiations going to the potential for One Tree to employ some or all of Mission Australia’s employees who had been involved in the childcare program. Ultimately, offers of employment were made by One Tree to the former employees of Mission Australia. The standard form offer of employment was relevantly in the following terms: This offer of employment is subject to, and incorporates, the following documents (which are enclosed with this letter):(a) Schedule 1 – Employment Details;(b) Schedule 2 – Terms and Conditions of Employment; and(c) Schedule 3 – Position Description.…Full details of the terms of your employment are detailed in the Terms and Conditions of Employment set out in Schedule 2 which is enclosed with this letter. Please read these Terms and Conditions of Employment carefully and contact us in relation any queries you may have. You are also free to seek independent advice should you so wish.The letter of offer also provided as follows:This offer of employment is conditional upon completion occurring under an asset transfer agreement between One Tree and Mission Australia Early Learning (MAEL Agreement) and you providing us with the following prior to … 5 December 2018: …There then followed a list of the documents required. The “asset transfer agreement” was the subject of subsequent correspondence, but that can presently be left to one side. Importantly, the letter of offer set forth the following exclusion from the subject of the offer:Mission Australia Early Learning (MAEL) transferring employees:One Tree will recognise the length and continuity of your period of service with Mission Australia Early Learning (including any period of service deemed by law or contract) for all purposes (except redundancy entitlements) and will assume and take on any:•accrued but untaken annual leave entitlements;•accrued but untaken long service leave entitlements;•accrued but untaken personal/carer’s leave entitlements;•accrued but untaken parental leave entitlements; and•associated service-related entitlements that have accrued to you prior to the Commencement Date.One Tree will not recognise prior service for the purposes of current or future redundancy entitlements (including any redundancy entitlements which may arise under Subdivision B of Division 11 of Part 2-2 of the Fair Work Act 2009 (Cth) or any Applicable Industrial Instrument).Importantly, and of present relevance, is that part of Sch 1 to the standard form offer of employment which provided:Schedule 1 – Employment Details

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

One Tree accepts that by reason of the offer it made for the acquisition of the business of Mission Australia and the employment of its former employees that “these facts triggered the ‘transfer of business’ provisions in Part 2-8” of the Fair Work Act. One Tree further accepts that “[a]s a result, One Tree became covered by the [Enterprise Agreement] by operation of law, without otherwise agreeing to its application or its terms (and indeed, irrespective of its position with respect to those matters)”. The decision of the Commission The March 2019 Application filed with the Commission by the Union identified the dispute it sought to have resolved as relating to the “Part J – Redundancy” clauses of the Agreement and “Clause 61 – Transfer of Employment”. In part, the Application further stated that One Tree “has purported to exclude for the purpose of redundancy the service of the transferring employees with Mission Australia and earlier employers pursuant to subsection 122(1) of the Act”. In summary, the Application further stated that the Union’s view was “that [One Tree] did not have the capacity under the Agreement to refuse to recognise the transferring employees’ service for the purpose of redundancy and is obliged to recognise their service generally”. In rejecting the objection to jurisdiction filed with it by One Tree, the Commission reasoned in part as follows: [30]One Tree contends that it is not bound by the arbitration power in clause 77(b)(i) of the Agreement because it is not a party to the Agreement and it did not agree to the Commission arbitrating disputes in accordance with s.739(4) of the FW Act.[31]One Tree is covered by the Agreement by operation of s.313 of the FW Act. One Tree further contends that the fact that it is covered by the Agreement (by virtue of the transfer of business provisions in the FW Act) is not sufficient to make it a party to the Agreement or that it consented to private arbitration.[32]One Tree then contends that because it “has not agreed to private arbitration, the Commission would not be exercising a private arbitral power but rather judicial power in any ‘arbitration’ of the purported dispute.”[33]One Tree relies upon the High Court of Australia decision in CFMEU v AIRC where it was held that “judicial power is a power that is exercised independently of the consent of the person against whom the proceedings are brought...”…[35]It is a cute argument but it is an argument that is fundamentally flawed and fails to recognise what occurs as a matter of fact when there is a transmission of business. One Tree is not being compelled against its will into arbitration. The Commission in the present matter is not seeking to exercise arbitral power independently of the consent of One Tree.[36] No-one and nothing compelled One Tree to:a)tender to take over the operation of 17 Department of Defence childcare centres; or b)enter into an asset transfer agreement with Mission Australia; orc)make offers of employment to former employees of Mission Australia.[37] One Tree did all of the above voluntarily.[38]It did so, I am entitled to assume, in the full knowledge of the operation of the transfer of business provisions in the FW Act. Likely some junior solicitor sat in a data room and trawled over contracts of employment and applicable industrial instruments (including the Agreement) and this resulted in a due diligence report being received by One Tree about the same.[39]Likely the diligence report advised One Tree about the significant service accruals of Mission Australia employees. Consequently One Tree negotiated a term in the asset transfer agreement, purporting to relieve it of an obligation to recognise service for the purposes of redundancy. That is to say, there is clear evidence that One Tree turned its mind to the implications of making offers of employment to former employees of Mission Australia.[40]Likely also that due diligence report advised One Tree of the existence of the arbitration power in the Agreement. Notwithstanding, One Tree decided to proceed with entering into the transfer agreement and making offers of employment to former employees of Mission Australia.[41]At all times One Tree had it within its power to avoid coverage of the Agreement transmitting to it. It chose not to do so. It knew about the existence of the arbitration power in clause 77.5(b)(i) and it voluntarily elected to enter into a transmission of business that would see it covered by the Agreement and thus subject to the arbitration power. It is plainly wrong for One Tree to seek to characterise the arbitration clause as transferring by operation of law and nothing more (as if One Tree had nothing to do with it). That argument simply ignores the many voluntary acts engaged in by One Tree that brings it to this position. For these reasons, I reject the submission made by One Tree that it is not subject to the arbitration power in the Agreement.An agreement to arbitration?

Ratio Decidendi

Legal Principle Established

In rejecting the objection to jurisdiction filed with it by One Tree, the Commission reasoned in part as follows: [30]One Tree contends that it is not bound by the arbitration power in clause 77(b)(i) of the Agreement because it is not a party to the Agreement and it did not agree to the Commission arbitrating disputes in accordance with s.739(4) of the FW Act.[31]One Tree is covered by the Agreement by operation of s.313 of the FW Act. One Tree further contends that the fact that it is covered by the Agreement (by virtue of the transfer of business provisions in the FW Act) is not sufficient to make it a party to the Agreement or that it consented to private arbitration.[32]One Tree then contends that because it “has not agreed to private arbitration, the Commission would not be exercising a private arbitral power but rather judicial power in any ‘arbitration’ of the purported dispute.”[33]One Tree relies upon the High Court of Australia decision in CFMEU v AIRC where it was held that “judicial power is a power that is exercised independently of the consent of the person against whom the proceedings are brought...”…[35]It is a cute argument but it is an argument that is fundamentally flawed and fails to recognise what occurs as a matter of fact when there is a transmission of business. One Tree is not being compelled against its will into arbitration. The Commission in the present matter is not seeking to exercise arbitral power independently of the consent of One Tree.[36] No-one and nothing compelled One Tree to:a)tender to take over the operation of 17 Department of Defence childcare centres; or b)enter into an asset transfer agreement with Mission Australia; orc)make offers of employment to former employees of Mission Australia.[37] One Tree did all of the above voluntarily.[38]It did so, I am entitled to assume, in the full knowledge of the operation of the transfer of business provisions in the FW Act. Likely some junior solicitor sat in a data room and trawled over contracts of employment and applicable industrial instruments (including the Agreement) and this resulted in a due diligence report being received by One Tree about the same.[39]Likely the diligence report advised One Tree about the significant service accruals of Mission Australia employees. Consequently One Tree negotiated a term in the asset transfer agreement, purporting to relieve it of an obligation to recognise service for the purposes of redundancy. That is to say, there is clear evidence that One Tree turned its mind to the implications of making offers of employment to former employees of Mission Australia.[40]Likely also that due diligence report advised One Tree of the existence of the arbitration power in the Agreement. Notwithstanding, One Tree decided to proceed with entering into the transfer agreement and making offers of employment to former employees of Mission Australia.[41]At all times One Tree had it within its power to avoid coverage of the Agreement transmitting to it. It chose not to do so. It knew about the existence of the arbitration power in clause 77.5(b)(i) and it voluntarily elected to enter into a transmission of business that would see it covered by the Agreement and thus subject to the arbitration power. It is plainly wrong for One Tree to seek to characterise the arbitration clause as transferring by operation of law and nothing more (as if One Tree had nothing to do with it). That argument simply ignores the many voluntary acts engaged in by One Tree that brings it to this position. For these reasons, I reject the submission made by One Tree that it is not subject to the arbitration power in the Agreement.An agreement to arbitration?