DECISION TO OUTSOURCE OFFENDED FREEDOM OF ASSOCIATION PROVISIONS

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DECISION TO OUTSOURCE OFFENDED FREEDOM OF ASSOCIATION PROVISIONS

The decision to outsource particular functions, because the entitlements under the relevant industrial instruments meant that it would cost more to keep on the existing employees, has been held to be an infringement of the federal Act's freedom of association provisions.

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The decision to outsource particular functions, because the entitlements under the relevant industrial instruments meant that it would cost more to keep on the existing employees, has been held to be an infringement of the federal Act's freedom of association provisions. The decision of the Full Federal Court in Greater Dandenong City Council v Australian Municipal, Clerical and Services Union & Anor, [2001] FCA 349(4 April 2001), suggests that the freedom of association provisions of the Workplace Relations Act 1996are part of a wider statutory scheme that protects the integrity of award and agreement making processes.

This matter was an appeal against the first instance decision of Madgwick J in Australian Municipal, Administrative, Clerical and Services Union & Anor v Greater Dandenong City Council, [2000] FCA 1231, 4 September 2000, (HR Link 113/2000). In that decision, his Honour determined that the Greater Dandenong City Council (the Council) had infringed the freedom of association provisions of the Workplace Relations Act 1996, in particular s298K(1)(a) and (c), by dismissing Council employees because they were entitled to the benefits afforded by the relevant award or agreement.

Background

Generally, s298K(1) of the federal Actprovides that an employer must not for a prohibited reason:

  1. dismiss an employee;

  2. injure an employee in his or her employment; or

  3. alter the position of an employee to the employee's prejudice.

The prohibited reasons referred to in s298K(1) are detailed in s298Land include an employee's entitlement to the benefit of an industrial instrument or an order of an industrial body [s298L(1)(h)]. In this matter the relevant industrial instruments were the Victorian Local Authorities Interim Award 1991 (the Award) and the Greater Dandenong City Council Enterprise Bargaining Agreement 1998 (the Agreement).

The Council employed 75 people to provide home and community care services (HACC) for the disabled, the frail and the aged. The union submitted that the Council accepted a tender from a company (trading as Silver Circle) to perform the HACC work at a lower price than the Council could perform. The difference in price was attributed to the fact that Council was bound by the terms and conditions of the Award and Agreement, whereas Silver Circle could remunerate its intended employees by reference to the less-favourable terms of another award—the Home and Community Care Award 1995.

On 23 February 1999, Council informed HACC staff that they would be made redundant on 21 May 1999. Also on 23 February 1999, Silver Circle invited all HACC workers to apply for work with Silver Circle. The implication of this invitation was that the workers who accepted the invitation would be paid significantly less for doing identical work.

First instance decision

At first instance, Madgwick J noted that while the price differential was one of the reasons for Council's acceptance of the Silver Circle bid, there was a strong inference that the dismissals occurred because of the employees' award and agreement entitlements. The decisive factor in the Silver Circle bid was the price and the fact that Silver Circle could remunerate workers under its own award. In this regard Council's decision was in part motivated by the fact that HACC staff were entitled to the benefits of the award and agreement.

His Honour also referred to s298Vof the Act, which required that in applications for alleged breaches of the freedom of association provisions of the Act, it is presumed that the conduct in question was being carried out for the alleged reason unless it is proven otherwise. In the context of this matter, therefore, it was presumed that the employees were dismissed because they were entitled to the benefits of the relevant industrial instruments. It was therefore, incumbent upon the Council to demonstrate the contrary. Madgwick J held that the Council failed to establish that the terminations were not because of the entitlements of the relevant industrial instruments.

Issues on appeal

Council raised three issues on appeal. The first related to his Honour's interpretation and application of s298L(1)(h). The second was the claim that Madgwick J erred in failing to find a constitutional immunity in respect of the application of the freedom of association provisions. The third issue related to the subsequent order of Madgwick J on 10 November 2000 to reinstate 47 employees. Only the first two issues will be considered in this summary.

The appeal yielded three separate judgements. Whilst Wilcox and Merkel JJ arrived at essentially the same conclusions, Finkelstein J provided a dissenting judgement.

Proper interpretation of s298L(1)(h)

The proper interpretation of s298L(1)(h) constituted the major issue in the appeal. According to Wilcox J, (this was one point in which Finkelstein J disagreed) there are two ways of reading s298L(1)(h). As such, it is important to distinguish whether the Council's conduct was undertaken because the employees were entitled to the benefit of an industrial instrument (that is the mere fact of entitlement) or was the conduct in response to the content of the industrial instruments. Wilcox J favoured the later, holding that s298L(1)(h) does not apply only to conduct motivated by the FACT that an industrial instrument or order applies to an employee. It applies, also, where the employer is motivated to engage in proscribed conduct because of the CONTENT of the instrument or order. In this regard, Wilcox J was of the view that his Honour at first instance did not fall into any error in relation to the application of the interpretation of s298L(1)(h).

Merkel J was of the view that the factors relied upon by the judge at first instance in inferring that the employment of HACC employees was altered to their prejudice for reasons that included entitlements to the relevant industrial agreement were not justified. Nonetheless, Merkel J was satisfied that the Council failed to establish that it had discharged the onus placed upon it by s298V.

Constitutional immunity

At first instance the Council contended that the implied constitutional immunity against the interference of Commonwealth laws with a State's capacity to function operated to prevent the union's application under the freedom of association provisions. In Re Australian Education Union; ex parte State of Victoria, (1995) 184 CLR 188, the majority of the High Court held that:

It seems to us that critical to that capacity of a State is the government's right to determine the number and identity of the persons who it wished to employ, the terms of appointment of such persons and, as well, the number and identity of the persons whom it wishes to dismiss... on redundancy grounds. An impairment of a State's rights in these respects would in our view, constitute an infringement of the implied limitation.

In this regard Council argued both at first instance and again on appeal that the Council should be considered as part of the State of Victoria and that the implied constitutional immunity applied to prohibit the operation of the federal Act'sfreedom of association provisions. Madgwick J accepted the Council submission that the governmental nature of municipal councils operated to bring the Council within the meaning of a 'corporation exercising governmental functions'. His Honour did not, however, find that the implied immunity applied to prohibit the operation of the freedom of association provisions. According to his Honour, the State cannot lawfully select HACC employees for dismissal on grounds proscribed by s298Land then claim constitutional immunity on supposed redundancy grounds. The immunity outined in Re AEU does not give a State, immunity against remedies for conduct proscribed by s298Kand s298L.

On appeal, Council continued by arguing that the application of the freedom of association provisions affected the capacity of the Council to govern because they inhibited the reorganisation of Council's service delivery. Wilcox J concurred with Madgwick J in holding that the immunity did not apply to sections 298Kand 298L, and that the Council could not be protected against engaging in prohibited conduct merely because it declared 'redundancy' to be the reason for dismissal.

Merkel J was also of the view that Council's argument that the freedom of association provisions served to impair its capacity to function as an agency of the State to be an argument without substance. His Honour could not accept that sections 298Kand 298Loperated to limit, impair or interfere with Council's capacity to carry out governmental functions by its employees. It was determined that a prohibition against the Council engaging in discriminatory conduct against its employees by reason of their entitlements does not unduly impede the functioning of the Council.

Implication of decision

Wilcox and Merkel JJ held that in respect of each of the issues raised on appeal that the appeal ought to be dismissed. The orders of Madgwick J were varied to require that the reinstatements take place on or before 4 May 2001.

On the implications of this decision for the prerogative of employers to outsource functions of work, it ought to be noted that the Workplace Relations Act 1996does not prevent outsourcing per se, and the resolution of this case in favour of the union carries no such implication. Rather, the Actoperates to render outsourcing illegal in circumstances where outsourcing is wholly or in part motivated by an employer's dissatisfaction with employee entitlements under an industrial instrument.

 
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