Adverse action in the labour law context Part 2

On 22 July 2017 I posted a blog about the complex world of the general protections, particularly in the labour hire context. I referred to a Federal Circuit Court case in which a union on behalf of a member pursued a general protections claim alleging that a mine holder had contravened the general protections under the Fair Work Act by issuing a directive to its mine operator which had the contract to operate the mine not to  permit the member back on site because she had exercised a number of workplace rights. The judge was first required to pair back what he termed the “pretence” of the mine operator arguing that another entity down the line was the employer. His Honour gave short shrift to that argument, preferring to test the position by the reality that the union member could not have lawfully been on site unless she was an employee of the contractor.

The next and more problematic issue for the court was the question whether upon a proper construction of sec 342 of the Act, it could be said that unlawful adverse action could be said to have been taken when the respondent refused the employee of the contractor the right to attend the workplace.

His Honour put that issue this way;

“In his closing submissions Counsel for the Respondent described the relationship between the worker, the Respondent, and CMG as similar to a tripartite relationship. If his contention about the worker not being an employee of CMG was not accepted by the Court, the worker would be employed by CMG. CMG of course entered into a contract to provide labour services to the Respondent. Thus, for the purposes of s.342(1), Counsel contended that in Item 3, Column 1 the Respondent was the principal, CMG was the independent contractor, and the worker was a person employed by the independent contractor. The Court accepts this broad analysis of the situation.

Turning to Column 2 of Item 3, however, Counsel contended that no adverse action was taken against the worker because, in effect, Column 2 does not refer to the worker. Column 2 does not refer to “a person employed or engaged by” the independent contractor. Thus there could be no adverse action because the Respondent did not refuse the services of CMG.”

And resolved the issue this way;

“Counsel for the Respondent relied on a decision of Judge Jones in Askaro v Leading Synthetics Pty Ltd [2014] FCCA 2081. The tripartite relationship in that case is indeed similar to this case. One difference, however, is that in Askaro the Applicant alleged that adverse action was taken under Item 3, column 2 (c) whereas in this case it is column 2(d). In order to understand the Respondent’s argument, and indeed its implications, it is necessary to set out [45] – [53]:

It is settled that the references to an “independent contractor” in s.342(1) apply both to an individual who offers labour directly to a principal and to a corporate independent contractor who offers labour through its employees: see State of Victoria v Construction, Forestry, Mining and Energy Union [2013] FCAFC 160, [118] – [120]. I am satisfied that the first respondent is the principal, the second respondent is a independent contractor and the applicant an employee of the independent contractor within the meaning of column 1 of Item 3.

The real issue is whether the action by the first respondent (the principal) in transferring the applicant from night to day shift falls within the conduct described in column 2 of Item 3.

The applicant relies on the conduct described in (c) of column 2, Item 3. He submits that whilst the conduct described “does not refer specifically to conduct that alters the position of an employee of an independent contractor (as opposed to the position of the independent contractor itself) to his/her prejudice, it should be understood to include such conduct.”

The applicant relies on the approach adopted by his honour Justice Bromberg in Construction, Forestry, Mining and Energy Union v McCorkell Constructions Pty Ltd (No.2) [2013] FCA 446 (“McCorkell”). In McCorkell his Honour was required to determine whether the reference to “independent contractor” in items 3 and 4 of s.342(1)extended beyond an individual contractor to encompass a corporate independent contractor. His Honour found that it did. In the course of reaching his decision his honour considered the history of predecessor statutory provisions relating to independent contractors and stated as follows at [125]:

……….. Items 3 and 4 of s 342(1) go much further in guarding against the conduct of a principal which has an adverse effect on the workplace rights and industrial activities rights of employees of a contractor. It seems to me that this extended protection involves a recognition that contracting arrangements are a fertile area in which workplace rights and other protected activities are at risk of adverse action taken by a third party principal. It is likely that Items 3 and 4 were substantially directed at that mischief.

The applicant submits that the adoption of a narrow approach to Item 3, column 2 (c) “would have the consequence that a principal would only take adverse action against an independent contractor and its employees where it prejudicially altered the position of the independent contractor (but not where, as here, it altered the position of the employee of an independent contractor). Put another way, a principal could prejudicially alter the position of an employee with impunity, so long as in doing so it did not alter the position of the independent contract.”

The applicant’s submission as to the construction of Item 3, column 2(c) is not supported on a plain reading of the text contained in that column. The applicant’s proposed construction would require the Court to read into the text contained in Item 3, column 2(c), the words “or person employed by the independent contractor” after each reference to the phrase “independent contractor.” I cannot accept that the intention of Parliament was to include action by a principal which altered the position of a person employed by the independent contract to that person’s prejudice. If Parliament had sought to extend the scope of the protections under Item 3, column 2 (c) to action by the principal which altered the position of the independent contractors employee to that employees prejudice, it could have done so expressly.

Justice Bromberg’s observation in McCorkell at [125] was directed to the mischief created by “contracting arrangements.”

I find that the action referred to in Item 3, column 2(c) is action taken by the principal against the independent contractor only which may have the consequence of  adversely affecting the position of the independent contractor’s employees. I concur with the applicant’s submissions that this construction of Item 3, column 2(c) does operate to exclude action taken by a principal which alters only the position of an employee of an independent contractor (such as a labour hire company) to his or her prejudice. However, this is a matter for Parliament and not the Court.

Consequently, I find that the first respondent did not engage in an adverse action within the meaning of s.342 of the Act. The applicant’s claim that the first respondent contravened s.340 of the Act is, therefore, dismissed.

The Court does not accept the Respondent’s submissions and respectfully disagrees with the interpretation adopted by Judge Jones. In Construction, Forestry, Mining and Energy Union v McCorkell Constructions Pty Ltd (No.2) [2013] FCA 446 Bromberg J at [88] observed that only a person with a workplace right specified by s.341(1) and is the second person referred to in s.342(1), will fall within the protective scope of s.340. Accordingly, on the Respondent’s interpretation ofs.342(1) the workplace right belongs to CMG, even though it is a company the sole purpose of which is to provide labour to the Respondent through a contract to do so. But what is the workplace right belonging to CMG that is protected in this case? Moreover, on the Respondent’s contended interpretation of s.342(1), the Respondent would be taking adverse action against the worker (i.e. the person employed by CMG in Item 3, Column 1) by doing any of the matters listed in column 2. With respect, that is an unlikely interpretation of s.342(1), and it is highly unlikely that parliament intended a result whereby an independent contractor’s employee could be deemed to have adverse action taken against her by the principal terminating its contract with the contractor. Section 342 is ultimately about protecting workplace rights, rights the employee clearly has, but rights which CMG does not appear to have in this case.

The Court respectfully adopts the approach to statutory interpretation undertaken by Bromberg J in McCorkell at [75] – [130]. On appeal, State of Victoria v Construction, Forestry, Mining and Energy Union [2013] FCAFC 160, the Full Court at [118] – [121] did not demur from the approach adopted by Bromberg J. A number of paragraphs from His Honour’s judgment bear repeating here:

The objects of Pt 3-1 reveal that the FW Act seeks to protect the rights conferred by the Part and to provide to persons on whom those rights are conferred effective relief from being discriminated against, victimised or otherwise adversely affected by reason of the holding or exercising of those rights. The rights protected under Pt 3-1 are:

the workplace rights conferred by Div 3 (the “workplace rights”);

the rights of association and participation in the industrial activities   conferred by Div 4 (the “industrial activities rights”); and

anti-discrimination rights and other protections conferred by Divs 5 and 6.

In interpreting a legislative provision, the Court is required to prefer a construction that “would best achieve the purpose or object of the Act” (whether or not that purpose or object is expressly stated in the Act): s 15AA of the Acts Interpretation Act 1901 (Cth).

Provisions of the kind contained in Pt 3-1, and in particular those in Div 3 and Div 4, have long been regarded as remedial and beneficial in nature despite their penal aspect: Barclay v Board of Bendigo Regional Institute of Technical and Further Education (2011) 191 FCR 212 at [14]-[17] (Gray and Bromberg JJ); Kelly v Construction, Forestry, Mining and Energy Union (No.3) (1995) 63 IR 119 at 130 (Moore J); Australian Municipal, Administrative, Clerical and Services Union v Greater Dandenong City Council (2000) 101 IR 143 (“Australian Municipal, Administrative, Clerical and Services Union”) at [75] (Madgwick J); National Union of Workers v Qenos Pty Ltd (2001) 108 FCR 90 at [48] (Weinberg J); Construction, Forestry, Mining and Energy Union v Pilbara Iron Co (Services) Pty Ltd (No  3) [2012] FCA 697 at [35] (Katzmann J); and see Waugh v Kippen (1986) 160 CLR 156 at 164–5 (Gibbs CJ, Mason, Wilson and Dawson JJ).

Accordingly, the terms of the legislative provisions in question should be given “a fair and liberal interpretation in order that they achieve the Act’s beneficial purposes”: AB v Western Australia at [38] (the Court). The approach that should be taken to the construction questions is one that gives effect to the evident purpose of the legislation and is consistent with its terms:AB v Western Australia at [23] (the Court).

That approach to statutory interpretation is adopted in this case. His Honour undertook an extensive survey of legislative history. At [121] – [126]  Bromberg J concludes:

121.The legislative survey just undertaken satisfies me that at least until the WR Act was enacted, the term “independent contractor” was consistently used in its confined sense, to mean a self-employed individual personally providing work under a contract. Perhaps the term “individual contractor” or “self-employed contractor” would have been a better descriptor for the kind of person that Parliament had in mind. A wider conception of what was meant by independent contractor for some purposes, first appeared in the WR Act, where corporatised independent contractors employing employees were contemplated as falling within the description.

What is notable about the change made in 1996 to the WR Act with the inclusion of s 298L(1)(c)(i), is that for the first time, the provisions addressed what must have been perceived to be a need to protect against action taken by a third party directed at employees of an independent contractor. In that case, the concern was limited to adverse action taken because the employees of the independent contractor were not or did not propose to become members of a union. What I think is telling about the current provisions, is that the concern about action taken by a principal against employees of an independent contractor has been significantly expanded. Not only is non-membership of a union covered, but each and every workplace right and each of the industrial activities protections, now operate in respect of persons employed (or engaged) by an independent contractor. That result is consistent with the observations made in the Explanatory Memorandum to the Bill which became the FW Act at [1336] as follows:

The consolidated protections in Part 3-1 are intended to rationalise, but not diminish existing protections. In some cases, providing general, more rationalised protections has expanded their scope.

There is a discernable rationale for the expansion of the protections afforded to employees of independent contractors from action taken by a principal who engages the contractor.  It is well known that the trend to self-employment was accompanied by a growing practice by enterprises to contract out or outsource to contractors many of the functions which had formerly been performed internally by a part of an enterprise’s direct workforce. As Owens and Riley point out, throughout the 1980’s and 1990’s the organisational model utilised by business underwent transformation. Many companies resolved to focus on their “core business” and to carve out or outsource non-core functions to separate enterprises that could provide services under contract: Owens R and Riley J, The Law of Work (Oxford University Press, 2007) p 145. The carving out or outsourcing of cleaning, security or maintenance services provide common examples.  As a result, there has been a proliferation of employees of contractors working in the workplaces of enterprises involved in outsourcing.

In that context, enterprises that engage contractors have a heightened interest in the industrial rights, practices and arrangements made between the contractor and its employees.  That is primarily because the employees of contractors commonly work in the same workplace as the direct employees of the principal or with employees of other contractors also engaged by the principal.  Additionally, the labour costs of a contractor will often be of significant relevance to the ultimate price paid by the principal.  In many situations, those costs may be directly passed on to the principal.  As a result, the interests of a principal in the workplace relations arrangements of a contractor may extend to the selection of employees, their terms and conditions of employment and the nature and extent of their union activities.  Any or all of those matters have a capacity not only to affect the price paid by the principal, but also the relations between the principal and those of its own employees employed in the same workplace as that in which the independent contractor’s employees work.

The terms of the former s 298L(1)(c)(i) of the WR Act show that the mischief sought to be addressed by that provision, was directed against a principal requiring a contractor to have its employees join a union. Items 3 and 4 of s 342(1) go much further in guarding against the conduct of a principal which has an adverse effect on the workplace rights and industrial activities rights of employees of a contractor. It seems to me that this extended protection involves a recognition that contracting arrangements are a fertile area in which workplace rights and other protected activities are at risk of adverse action taken by a third party principal. It is likely that Items 3 and 4 were substantially directed at that mischief.

The only mischief that the State identifies to explain why adverse action by a principal against the employees of an independent contractor has been prohibited, if independent contractor is to be given its confined meaning, is the protection of the workplace rights of the owner/operator who is employed by his or her own company from adverse action by a principal.  It is possible to conceive of a situation such as that.  For instance where adverse action might be taken by a principal against the owner/operator employed by his or her own company because he or she has decided to join a union.  However, the possibility of protection is so narrow and the occasion for its use likely to be so rare, that it is difficult to imagine that Items 3 and 4 were enacted for such an inconsequential purpose.  It is far more likely that the very significant expansion of protection provided by Items 3 and 4 has been undertaken to guard against the unique power and interest in industrial matters, of principals who engage contractors.  With that objective in mind, it is unlikely that “independent contractor” when used in Items 3 and 4 was intended to have a confined meaning.

The same principles apply to this case. The same rationale justifies interpreting independent contractor in s.342(1)Item 3 Column 2(d) as including a person employed or engaged by the independent contractor, just as it is in Column 1. This interpretation does not stretch the meaning of s.342(1) beyond its reasonable boundaries as contemplated by the legislature.

The Court acknowledges, however, that an alternative to the interpretation postulated would be to interpret the word ‘services’ in Column 2(d) as including the services of persons employed or engaged by the independent contractor. The effect would be the same, and that is to give effect to what parliament must have reasonably intended.

The refusal by the Respondent to use the services of the worker on the facts of this case did fall within s.342(1). That does not necessarily mean that the Applicant is successful in its claim on behalf of the worker.”

CFMEU v Hunter Valley Energ Coal Pty Ltd (2017) FCCA 1559 delivered 18 July per Altobelli J

 

Summary

The general protections do indeed protect an employee who is treated adversely for a prohibited reason by an entity with whom the employee’s employer has a contract to provide services. It is a great pity that my client did not have the resources to take the matter on in the Federal Court or the Federal Circuit Court.