Federal Court backs union clauses restricting contractors


Federal Court backs union clauses restricting contractors

The right of unions to negotiate workplace agreements that restrict the use of contractors has been backed by a full bench of the Federal Court, blocking a third attempt by employers to have the clauses declared unlawful.


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The right of unions to negotiate workplace agreements that restrict the use of contractors has been backed by a full bench of the Federal Court, blocking a third attempt by employers to have the clauses declared unlawful.

[Full text of this case: Australian Industry Group v Fair Work Australia [2012] FCAFC 108 (14 August 2012)]

The Federal Court was hearing an appeal by the Australian Industry Group (Ai Group) in the ADJ Contracting case.
Ai Group was arguing that a number of clauses in a union pattern agreement for the Vic electrical contracting industry were unlawful. The clauses:
  • impose substantial restrictions on the engagement of contractors and labour hire, including the payment of site rates
  • grant wide rights for union officials to enter workplaces
  • require employers to encourage their employees to join the union.
Ai Group argued the contractor clause was unlawful because it required ADJ to contravene the general protections provisions of the Fair Work Act 2009 by taking ‘adverse action’ against a contractor which it claimed had its own workplace instrument covering its workers.

No jurisdictional error
Ai Group argued that there had been jurisdictional error by FWA, but the Federal Court disagreed:
‘None of the grounds advanced by AIG can be fairly described as falling within these categories of jurisdictional error. AIG advanced no argument that FWA deliberately arrived at the wrong conclusion.

The categories of jurisdictional error are not necessarily confined by the facts of past cases. But in whichever way the submissions for AIG are shaped, in the end they appear to us to be no more than submissions that the FWA reached the wrong conclusion at law. The traditional approach has been that a judicial determination of invalidity will not be precluded where the making of an assessment involves ‘jurisdictional error’. However, it may well be precluded where the error, even if one of law, is not so as to take the decision-maker outside or beyond the available jurisdictional power. Even an error of law may be an error made within jurisdiction.

For these reasons, we would not consider that any of the contended errors, as contended, on the part of FWA would constitute jurisdictional error. This is applicable to the entirety of the analysis of the grounds of review. However, regardless of this central point, we do not discern error in the approach taken by FWA for the reasons advanced by AIG or otherwise …’
Not ‘automatically objectionable’
The court also said there was no evidence that such clauses would be adverse for all contractors and were therefore not ‘automatically objectionable’.

Ai Group comments
Ai Group chief executive Innes Willox said the decision was ‘another example of problems in the Fair Work Act that need to be rectified urgently’.

‘It is clear from this decision that the Government needs to immediately amend the Fair Work Act to prevent clauses in pattern agreements that restrict legitimate commercial arrangements between contractors and subcontractors,’ he said.

‘These clauses inhibit the productive and cost-effective organisation of work.’

‘The list of “unlawful terms” in section 194 of the Act needs to be tightened to ensure that clauses like those which were the subject of the ADJ Contracting case are once again outlawed, like they were prior to the Fair Work Act.’

‘Ludicrous’ say employers
‘The decision highlights the ludicrous situation that the general protections in the Act may protect everyone in the workplace except employers.’

‘The general protections need to be amended to clarify that employers have “workplace rights”, just like employees and other parties. [The] general protections are poorly drafted and have led to a raft of unreasonable claims being pursued against employers by some employees and unions.’

However Victorian ETU secretary Dean Mighell said the decision was a big win for all Australian workers.

All about job security: ETU
‘This is all about job security and contractors’ clauses are the last bastion of job security,’ he said.

‘Having a clause that can regulate the use of contractors is fundamental to maintaining the terms and conditions of our members. Without such a clause, there would be little utility in entering into an agreement, as an employer can simply avoid the agreement by engaging contractors.’

Mighell said the decision means that clauses which require consultation prior to the engagement of contractors and the paying of wages and conditions no less than the in-house employees have been upheld.

‘The Ai Group might want everyone to be a contractor but the courts have ruled three times now that the ETU’s contractors’ clause guaranteeing contractors equal rights and conditions to those under EBA’s on the same job is legal and valid,’ he said.

‘The Ai Group harps on about flexibility and productivity, but in reality their attack on this clause is all about avoidance of fundamental obligations.’

‘The Ai Group wants their big businesses to be able to avoid providing superannuation, penalty rates, public holidays and annual leave by being able to use contractors instead of employees.’

‘That is not flexibility — that is exploitation, and all driven by the purpose of greed.’
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