Income protection clause in agreement not enforceable

Cases

Income protection clause in agreement not enforceable

The Federal Court has ruled that an income protection clause in an enterprise agreement was not sufficiently connected to the employment relationship and so it could not be justified as a legitimate clause in the agreement.

WantToReadMore

Get unlimited access to all of our content.

The Federal Court has ruled that an income protection clause in an enterprise agreement was not sufficiently connected to the employment relationship and so it could not be justified as a legitimate clause in the agreement.
 
The Australian Maritime Officers Union sought in the case to enforce a clause of an agreement with Sydney Ferries Corporation, which provided for the employer to insure the employees for long-term illness and injury equivalent to 75% of his/her salary after a three-month qualifying period commencing as soon as practicable after the lodgement of the agreement.
 
Insufficient connection
 
Justice Cowdroy found that the income protection insurance scheme was not sufficiently connected to the employment relationship and stated:
‘… the mere assertion by the union that such payments of insurance premiums are a reward for services does not, without more, establish the necessary nexus to the employment relationship.
 
The union’s reliance on the High Court in the Superannuation case ... where it said "the obligation of the employer to make payments ends with the relationship between him and his employee" is insufficient to establish that nexus. This particular passage was used in the context of distinguishing superannuation from pensions, which had been found in Hamilton Knight to not pertain to the relationship between employer and employee, rather than to provide a reason why superannuation could be considered to pertain to the relationship between employer and employee.
 
… the subject matter must still pertain to the relationship between the employer and employee. In the Superannuation case payments were found to be in lieu of remuneration, thus providing a necessary link to the employer and employee relationship. This was also the case in Electrolux No. 1
 
In the absence of similar evidence that the payments of insurance premiums by the employer were a reward for services and in view of the Court’s finding that the benefits do not pertain to the relationship between employee and employer, the claim that such payments are merely a reward for services cannot be sustained …’
The union asked the court, in the event that it decided the clause did not pertain, to rule that it was void only in its overlap with the agreement's disability insurance provision. However, his Honour said that the clause couldn’t be read down in this way.
 
 
Post details