Wednesday 19 March 2014

Does that clause have any claws? Re AEU and Public Sector Industrial Relations

The Federal Court’s recent decision in United Firefighters Union of Australia v Country Fire Authority [2014] FCA 17 (UFU v CFA) raises some important issues for public sector employers about the validity of certain clauses being included in industrial instruments.

The United Firefighters Union (UFU) instituted a claim against the Country Fire Authority (CFA) on the grounds that the CFA was not complying with Clause 27 of the Country Fire Authority/United Firefighters Union of Australia Operational Staff Enterprise Agreement 2010 (Agreement). Clause 27 imposed an obligation on the CFA to recruit 342 career firefighters over a six year period. The CFA filed a cross-claim seeking declarations that Clause 27, and a number of other clauses in the Agreement, were invalid on the basis that they were inconsistent with the Melbourne Corporation principle as it was applied in Re Australian Education Union; Ex parte Victoria [1995] HCA 71 (Re AEU).

Melbourne Corporation principle

The Melbourne Corporation principle in the context of UFU v CFA can be expressed most simply as a principle imposed by Australian courts to the effect that the Commonwealth Constitution contains an implied limitation on federal legislative power which prohibits a law from operating to destroy or curtail the continued existence of the States or their capacity to function as governments.

This principle has been applied by the High Court in an industrial context in Re AEU, where it was held that the principle extended to the State's right to determine:
  • the number and identity of its employees;
  • the term of appointment of those employees; and
  • the number and identity of employees it wishes to make redundant.


The UFU conceded that the clauses fell within the Re AEU categories. However, they argued that because the CFA, and thereby the State of Victoria, had agreed to the clauses being included in the Agreement, they did not infringe Re AEU because they had not been imposed on the State by the Commonwealth.

The CFA argued that because the clauses in the Agreement were only given effect by certification of the Fair Work Commission (FWC), and because the source of the FWC's power is Commonwealth legislation (i.e. the Fair Work Act 2009 (Cth) (FW Act)), clauses in the Agreement which infringe Re AEU would be invalid and unenforceable on the basis that the FWC had no power to certify them.

The decision

Justice Murphy of the Federal Court agreed with the CFA's submissions and held that the clauses were invalid and unenforceable, even though they had been entered into voluntarily by the CFA. His Honour held that, because '(t)he implied limitation is a recognition that the Constitution is concerned with the federal structure of government in Australia', the important thing to focus on was the limiting effect of the Commonwealth law, as opposed to the fact that the State had agreed to that limitation.

Impact on compliance with your industrial instrument

If the employment relationship in your organisation is governed by an enterprise agreement or workplace determination which has been certified by the FWC in accordance with the FW Act, it may be prudent to conduct a review of the instrument to determine whether any of its clauses fall within the Re AEU categories outlined above.

If a union is purporting to rely on suspect clauses, your organisation may decide to seek a declaration in the Federal Court that the clauses are invalid and unenforceable.

Some common examples of clauses which could infringe Re AEU include:

  • Limits on offering fixed-term employment;
  • Job security provisions;
  • Maintenance of classification provisions;
  • No contracting out provisions; and
  • Minimum numbers of employees provisions.

Having provided those examples, we recommend that legal advice is sought to address these matters in light of the specific industrial context in which your organisation exists.

There will also be policy considerations to be taken into account. For instance, the nature of the relationship between each organisation and its corresponding union could necessitate the adoption of a particular approach. Moreover, we note that public sector organisations are required to comply with the Public Sector Workplace Relations Policies.

Impact on enterprise bargaining

If your organisation is currently engaged in bargaining for a new industrial instrument, you will need to consider the content, scope and operation of the clauses you are currently negotiating. If any of the clauses could potentially infringe Re AEU, the organisation should request that the union withdraw those claims, as they will fall outside the scope of the FWC's certification powers.

A bargaining representative cannot pursue claims in bargaining that are unlawful or not about permitted matters, and, in light of UFU v CFA, the position previously put forward by unions that the State’s agreement is enough to displace the operation of Re AEU is no longer valid. If a bargaining representative continues to press for the inclusion of matters which are inconsistent with Re AEU in an enterprise agreement, they may leave themselves open to being found in breach of the good faith bargaining requirements of the FW Act.

If you are currently bargaining for a new enterprise agreement, we recommend that you raise your concerns directly with the bargaining representatives during bargaining, and subsequently in writing. If the union with which you are currently negotiating will not withdraw the claims that are believed to be inconsistent with Re AEU, your organisation should consider making an application under s 229 of the FW Act for good faith bargaining orders.

Watch this space

The UFU has appealed Justice Murphy’s decision to the Full Court of the Federal Court. Given the significance of this issue for public sector industrial relations, we suspect that the matter will eventually be considered by the High Court.

If you are in the Victorian Government and would like more information on the effect of UFU v CFA on your specific industrial instrument, please contact:

Matt Garozzo
9032 3006

Matthew Minucci
0417 695 188

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