Conflicting employment laws — which provision prevails?

Analysis

Conflicting employment laws — which provision prevails?

How is the legal position resolved when a term of a modern award or enterprise agreement is inconsistent with the applicable modern award or enterprise agreement?

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How is the legal position resolved when a term of a modern award or enterprise agreement is inconsistent with the applicable modern award or enterprise agreement?

Such a clash is referred to as a ‘conflict of law’ (eg the terms of the applicable modern award or enterprise agreement conflict with the minimum entitlement from some other source of entitlement, such as the National Employment Standard (NES), state or territory employment legislation and various court orders).

This article is a commentary on some of the more common interpretation issues that an employer may need to consider when conflict of law occurs in the workplace.

Federal law versus state law
 
In general, it is a principle of the Australian Constitution that where there is an inconsistency between federal and state law on the same subject matter the federal law prevails.

The constitutional principle is often referred to as the ‘supremacy rule’, the ‘collision rule or the ‘inconsistency rule’. See: Clyde Engineering Co Ltd v Cowburn [1926] HCA 6.

Modern award/enterprise agreement versus state/territory law
 
The Fair Work Act 2009 (s29) states that a modern award or an enterprise agreement prevails over a law of a state or a territory, to the extent of any inconsistency.
 
However, s27 of the Fair Work Act prescribes the categories of state and territory laws that are NOT excluded by the Act. These laws include:
  • anti-discrimination
  • attendance for service on a jury
  • business trading hours
  • child labour
  • declaration, prescription or substitution of public holidays
  • leave for victims of crime
  • long service leave
  • occupational health and safety
  • superannuation
  • training arrangements (eg apprenticeships and traineeships)
  • workers compensation
  • workplace surveillance.
This means the relevant state or territory law will prevail over a term of an award or enterprise agreement that is inconsistent with a law that is referred to in the Fair Work Act as a ‘non-excluded matter’.

Cashing out long service leave — enterprise agreements
 
An enterprise agreement will not be approved by Fair Work Australia (FWA) if the proposed agreement contains a clause that provides cashing out of long service leave to an employee employed in a state or a territory where the relevant legislation prohibits cashing out leave.

This means a term of a proposed enterprise agreement that provides cashing out of long service leave is permissible for employees employed in South Australia (cashing out being permissible under the SA Long Service Leave Act 1987), but is not permissible for employees employed (say) in New South Wales or Victoria, because of the respective state long service leave legislation. See: St Marys Rugby League Club Ltd [2010] FWA 8300.
 
Term of a modern award/enterprise agreement versus NES
 
The Fair Work Act (ss55 and 56) states that a modern award or enterprise agreement must not exclude any provision of the NES.

A modern award or enterprise agreement may also include terms that are ancillary or incidental or supplementary to the operation of an entitlement under the NES, but only to the extent that the effect of those terms is not detrimental to an employee in any respect, when compared to the NES. To illustrate this point, a legislative note in the Fair Work Act states that a permissible term is that instead of taking paid annual leave at the rate required by s90 of the Act, an employee may take twice as much leave at half that rate of pay.

A legislative note in s55 of the Act states that a term of a modern award has no effect to the extent that it contravenes the NES, while a term of an enterprise agreement that contravenes the NES must not be approved by Fair Work Australia (FWA) and, if already a term of an enterprise agreement, has no effect to the extent of the contravention.

Annual leave
 
There are, however, other terms that are contentious. For example, a provision common to many modern awards is the right of an employer to deduct the equivalent amount of ordinary pay from all monies due on termination (including accrued annual leave) when an employee fails to provide proper notice of termination of employment to the employer, (eg cl13.2 of the Clerks — Private Sector Award 2010).

The reason for conjecture is whether this term contravenes s90(2) of the Fair Work Act, which provides that an employee is to be paid their accrued annual leave at the end of the employment. The argument is whether s90(2) is to be read and contextualised in isolation from s90(1) of the Act, or whether the intent of s90 of the Act is that it is to be read as a whole and interpreted as such so as not to perpetuate an inconsistency between the Award and the Act. This is currently the subject of a dispute before the Federal Court between the CFMEU and Whitehaven Company, regarding the approval of an enterprise agreement. A decision on this matter is pending.

Cashing out annual leave — enterprise agreements
 
FWA will approve a term of an enterprise agreement that allows cashing out of annual leave because it does not breach the better off overall test (BOOT).

Annual leave cannot be cashed out unless there is a term in the agreement to that effect. The test applied by FWA is a comparison to the cashing out of annual leave provisions under the NES (s93(2)). These conditions are:
  • an annual leave balance of least 4 weeks must be maintained after each cashing out
  • each cashing out must be the subject of written agreement
  • the employee must be paid at least the full amount that would have been payable to the employee had the employee taken the leave that the employee has foregone.

See: Re Armacell Australia Pty Ltd; Wilmaridge Pty Ltd as Trustee for the O’Neill Family Trust t/a Direct Paper Supplies; Downer EDI Works Pty Ltd [2010] FWAFB 9985.

Decision of FWA versus Federal Court — interpretation
 
The Fair Work Act (s608(5)) states that if FWA has made a decision in relation to a matter that is inconsistent with the opinion of the Federal Court, FWA must vary its decision in such a way as to make it consistent with the opinion of the Federal Court.

External affairs power
 
This is a power provided in s51(xxxix) of the Commonwealth of Australian Constitution Act 1901, which enables the Federal Parliament to enact laws that are the result of an implementation of some international treaty or convention to which Australia is a party. A law introduced in such a manner has a broader application than would otherwise be the case. Examples of a provision of the Fair Work Act that fall into this category include unpaid parental leave, notice of termination by the employer, and unlawful termination.

Because the majority of the states have referred their industrial relations powers to the Commonwealth, the effect of this power is only relevant to employees employed by an employer in Western Australia whose business is unincorporated, such as a sole trader or partnership. This has the effect of overriding the relevant WA-based employment law or the provisions of the applicable WA state award or agreement.

Specific reference is made in the Fair Work Act in Parts 6-3 and 6-4 of Chapter 6 regarding the extension of the entitlement to ‘non-national system employees’.

Source: Paul Munro, IR Consultant.
 
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