Requiring contractors to have union agreements not enforceable: FWA reasons

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Requiring contractors to have union agreements not enforceable: FWA reasons

A Full Bench of Fair Work Australia has provided reasons for its decision that clauses requiring outsourced labour-hire suppliers or contractors to have union agreements cannot be lawfully included in Fair Work enterprise agreements.

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A Full Bench of Fair Work Australia has provided reasons for its decision that clauses requiring outsourced labour-hire suppliers or contractors to have union agreements cannot be lawfully included in Fair Work enterprise agreements.
 
It follows that such clauses cannot underpin applications for protected action ballots.
 
On 1 June, the Full Bench quashed a decision by Senior Deputy President Hamberger — the Full Bench reversing an order that had allowed the TWU to proceed with an industrial action ballot against Airport Fuel Services. 
 
The clause
 
The clause in question provided:
‘5. Labour hire and contract labour
 
5.1. The parties agree that when it becomes necessary to engage labour hire employees or to engage contractors the Company will:
5.1.1. consult with the TWU prior to a decision to engage labour hire employees or contractors being made; and
 
5.1.2. ensure that any entity to which it outsources the work has a workplace agreement (as defined in [the FWA] and, if applicable, a registered Contract Agreement with the Union.
5.2. If, after consultation, the Company decides to engage contractors and/or labour hire employees, those contractors and/or labour hire employees must be afforded at least the same terms and conditions of employment they would receive if they were engaged as employees of AFS performing the same work.
 
5.3. Where the company has a contract with any other entity to perform work of a type covered by this agreement then the company shall, upon each contract renewal, or within 6 months of the signing of this agreement (whichever is first in time), ensure that each such entity has a workplace agreement (as defined in the FWA) and, if applicable, a registered Contract Agreement with the Union.’
Full Bench reasons
 
The Full Bench concluded:
‘In summary, from the legislation, the jurisprudence and the Explanatory Memorandum to the Fair Work Bill 2008 it can be concluded that:
  • “Permitted matters” are “matters pertaining to the relationship between an employer that will be covered by the (enterprise) agreement and that employer’s employees who will be covered by the agreement”, “matters pertaining to the relationship between the employer … and the employee organisation … that will be covered by the agreement”, matters concerning employee authorised deductions from wages and matters concerning how the agreement will operate. Fair Work Act 2009 (Cth), s.172(1)
  • It is intended that terms relating to conditions or requirements about employing casual employees or engaging labour hire or contractors, which sufficiently relate to employees’ job security such as a term which provided that contractors must not be engaged on terms and conditions that would undercut the enterprise agreement, would be within the scope of permitted matters which are matters pertaining to the employment relationship. [Explanatory Memorandum to the Fair Work Bill 2008 at item 672. ]
  • It is not intended that “terms that would contain a general prohibition on the employer engaging labour hire employees or contactors” or “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 [sic] was directly related to employees’ health and safety)” would be within the scope of permitted matters which are matters pertaining to the employment relationship. [Explanatory Memorandum to the Fair Work Bill 2008 at item 673. ]
  • Terms restricting or qualifying the employer’s right to use independent contractors are not matters pertaining to the employment relationship. Wesfarmers Premier Coal Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (No. 2), [2004] 183 IR 362 at paragraph 109. 
  • For a term to be about matters pertaining to the relationship between the employer and the employee organisation that will be covered by the agreement, the term needs to relate to the employee organisation’s legitimate role in representing the employees to be covered by the agreement. [Explanatory Memorandum to the Fair Work Bill 2008 at item 675.]
  • A bargaining representative or party proposing that an agreement contain a non-permitted matter as a substantive term cannot be genuinely trying to reach an agreement under the FW Act. [Tyco Australia Pty Ltd trading as Wormald v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia, PR974317 at paragraph 20, Australian Postal Corporation v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia, [2009] FWAFB 599 at paragraph 44, and Australian Postal Corporation v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia, [2010] FWAFB 344 at paragraph 60.]
  • Leaving aside cases in which it is clear on any reasonable view that claims being advanced involve non-permitted matters, it is conceivable that a bargaining representative or a party may be “genuinely trying” to reach an agreement even though, as a matter of ultimate conclusion, the claims it is advancing do contain non-permitted matters. In cases where doubt exists, it is open to a bargaining representative or a party to make it clear that it is not pursuing claims containing non-permitted matters.[Tyco Australia Pty Ltd trading as Wormald v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia, PR974317 at paragraph 20.]
  • The requirement that an applicant for a protected action ballot order “is”, as opposed to “has been”, genuinely trying to reach an agreement is expressed by reference to the time of the making and determining of the application for the order. [Country Fire Authority v United Firefighters’ Union of Australia, PR973841 at paragraph 33.]’
 
 
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