Principles for approval of NSW enterprise agreements 12/1/01


Principles for approval of NSW enterprise agreements 12/1/01

The Federal Court has dismissed a claim by five unions that BHP's offer of individual contracts to award employees in the Pilbara region injured or altered their employment or constituted conduct aimed at inducing the workers to resign from their respective unions.


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The Federal Court has dismissed a claim by five unions that BHP's offer of individual contracts to award employees in the Pilbara region injured or altered their employment or constituted conduct aimed at inducing the workers to resign from their respective unions. In rejecting the claim that BHP had offended the freedom of association provisions of the Workplace Relations Act 1996, Kenny J accepted that BHP had introduced individual agreements because it was considered to be the best way to improve flexibility and efficiency at its Pilbara operations (Australian Workers' Union & Ors v BHP Iron-Ore Pty Ltd, [2001] FCA 3, 10 January 2001).


As a wholly-owned subsidiary of the Broken Hill Proprietary Company Ltd, BHP Iron Ore Pty Ltd (BHPIO) carried out iron ore production and processing in the Pilbara region in Western Australia. BHPIO employees had their terms and conditions of employment governed by a Western Australian State Award and an Enterprise Agreement, both arrived at through collective bargaining.

In November 1999, BHPIO refused to negotiate collectively with respect to the terms and conditions of award employees, and offered each award employee an individual workplace agreement. Western Australian Workplace Agreements (WPAs) are individual contracts registered under the Workplace Agreements Act 1993(WA). They override the statutory effect of any other relevant collective industrial instrument. According to BHPIO three months after the initial offer nearly half of the award employees had signed WPAs.

The unions at Pilbara objected to the making of individual contracts and claimed that the offers violated the freedom of association provisions of the Workplace Relations Act 1996. To this end, the unions sought orders pursuant to s298Uto remedy the effects of conduct that was alleged to have contravened s298Kand s298M. These allegations related to injuring, discriminating and altering the position of employees because they were union members; and inducing employees to cease being union members. The applicant unions also sought damages for breach of contract, in that the WPAs were void to the extent that they facilitated the loss of employee entitlements under the Award.

This matter commenced with applications by the union for interlocutory injunctions preventing BHPIO from offering further individual contracts until the substantive matters relating to the freedom of association breaches were heard by the Court. Having found there to be serious questions to be tried, Gray J in AWU & Ors v BHPIO P/L, [2000] FCA 39, and on appeal the Full Federal Court in BHPIO P/L v AWU & Ors, [2000] FCA 430, considered it appropriate to grant an interlocutory injunction. Thereby BHPIO was restrained from entering into further workplace agreements until the hearing and determination of this matter.

Injury in employment and alteration of position - contravening s298K

Section 298Kprohibits employers injuring an employee or altering the position of an employee to the employee's prejudice. According to the unions, the company injured certain employees when it made a general offer of improved terms and conditions, subject to the signing of individual workplace agreements. BHPIO is said to have injured those employees who did not accept the individual agreements, because the company failed to extend to them the improved remuneration and conditions afforded to those who signed the individual agreements.

In the interlocutory injunction proceedings the Full Court noted BHPIO had offered each employee improved remuneration and conditions that were embodied in an individual workplace agreement. Therefore, the relative change or injury that resulted was brought about by the acceptance by some employees and the rejection by others of an offer that was indiscriminately made to all employees. In hearing the substantive merits of the case, Kenny J concurred with the observation of the Full Court that the undisputed facts did not point to a contravention by BHPIO of s298K, as the injury complained of flowed from the independent acts and decisions of the employees who accepted WPA offers.

Inducement to stop being union members - contravening s298M

Section 298Mof the Workplace Relations Act 1996provides that an employer must not induce an employee to stop being a member of an industrial association. Conduct that leads or moves, by persuasion or influence, an employee to stop being a member of a union may contravene s298M.

The unions did not claim that BHPIO had made any express threat or promise that was conditional upon employees giving up union membership. Nor was it submitted that this was a case in which the company was alleged to have done something which directly amounted to an inducement. Rather, the unions argued that BHPIO offered WPAs in the knowledge that in other workplaces the introduction of WPAs overwhelmingly led employees to give up union membership.

In the interlocutory injunction proceedings, the Full Court held that the question of whether an employer contravenes s298Mis essentially a question a question of fact. Where an employer's express threats or promises constitute the inducement, then the issue of intent does not arise. However, in instances where more subtle persuasion or influences are relied upon, then the issue of intent may prove to be crucial.

The unions submitted that if the question of intent in this instance was deemed to be essential in establishing an inducement within the meaning of s298M, then s298Vought to apply. Section 298Vof the Workplace Relations Act 1996provides that in applications under the freedom of association provisions, conduct that is alleged to have been carried out with a particular intent is presumed in Court proceedings to be conduct carried out with that intent unless proved otherwise. Therefore, in this matter, the union submitted that if the issue of intent was canvassed then the onus was upon BHPIO to demonstrate that it did not offer WPAs with the intent of causing mass union resignations.

In this instance, her Honour was of the view that s298V had no application in a s298M case. This is because the correct allegation of a s298M breach is not that there has been lawful conduct that was rendered unlawful because it was done for a particular reason or intent. Rather, the allegation goes to the act required to induce an outcome.

Breach of contract

The applicants also claimed that by making WPAs with some award employees, BHPIO had breached the relevant employment contracts. This claim relied upon the assumption that the terms of the award were expressly incorporated into the contract of employment of each award employee. This assumption was in turn based upon the existence of a document that was given to employees when their employment commenced. The document provided that the conditions of employment were 'as prescribed by the award'. Therefore, by entering into WPAs, BHPIO it was claimed breached the contract of employment of some employees as the existence of a WPA meant that some of the terms of the agreement were inconsistent with the Award.

Kenny J held that the document given to employees on the commencement of employment could not be evidence of an intention by the employer and individual employees to create contracts of employment that incorporated the terms of the award. The submission of the unions was accordingly held to be based on the erroneous view that the award was incorporated into each employee's contract of employment.


Central to her Honour's consideration of this matter, were the reasons adopted by BHPIO for introducing WPAs. Herein, Kenny J was required to outline her assessment of the evidence and her consideration of the facts. From the evidence, Kenny J adduced that by the end of July 1999 the primary focus of BHPIO was to catch up with a competitor's greater productivity. To this end, BHPIO's senior managers were of the view that WPAs contributed to the competitor's better productivity. Her Honour held that BHPIO management genuinely believed that the pursuit of WPAs would yield benefits in improved flexibility, pay for performance, attitude and greater commitment to the business. According to Kenny J, BHPIO's '...primary purpose was to achieve a form of industrial regulation that would best suit its business objectives by facilitating change within the workforce'. In accepting the evidence of BHPIO management, Kenny J rejected the unions' basic premise that BHPIO's object was to deprive the unions of any role at the workplace.

Given her finding that the company did not set out to induce workers to resign from their unions, Kenny J held it to be beside the point to address the union claim that BHPIO might have reasonably foreseen that a reasonable number of employees would have resigned. Further, her Honour was of the view that the unions failed to demonstrate that 'almost invariably' employees who signed WPAs resigned from their union.

Kenny J ordered that the injunction initially granted by Gray J on 31 January 2000 and subsequently varied by the Full Court on 7 April 2000 ought to be discharged. The parties were instructed to prepare submission on consequential orders such as costs.

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