Enterprise agreements; their legal standing

This dicta from a recent Federal Court general protections case explains the nature of the legal basis for the legal effect of enterprise agreements and their relationship with the Fair Work Act.

“THE ADVERSE ACTION CLAIMS

 

Preliminary issues

 

Actions authorised under a law of the Commonwealth

 

The respondents submit that each of the alleged adverse actions other than the return refusal and the staff email did not constitute “adverse actions” for the purposes of s 340. They rely for this submission on s 342(3)(a), which has been set out above at [9].

The “law of the Commonwealth” under which the actions were said to be “authorised” is the FW Act itself. Each of the five actions to which the submission was directed was, so the respondents submit, within the rights conferred on CHS by the Enterprise Agreement that was operative at the time. Each of those Enterprise Agreements was made and approved by the Fair Work Commission pursuant to the statutory framework in Part 2-4 of the FW Act. Each was given statutory force by the FW Act, in that s 50 provides that a person to whom a term of an enterprise agreement applies must not contravene it (s 50, as noted above, is a “civil remedy provision”, and relief including civil penalties may be ordered in the event it is contravened). Hence, it can properly be said that the Enterprise Agreements, while in force, were given “the force of a law of the Commonwealth” by the FW Act. French J used that turn of phrase in respect of an award under the earlier Workplace Relations Act 1996 (Cth) in City of Wanneroo v Australian Municipal, Administrative, Clerical and Services Union [2006] FCA 813; 153 IR 426 noted at [51] (Wanneroo). Hence, the respondents submit, action which the employer is entitled to take under the terms of an enterprise agreement is within s 342(3)(a) and not capable of constituting “adverse action”.

The evident purpose of s 340, read with the objects in s 336, is to protect workplace rights by ensuring that they can be acquired and exercised without adverse consequences: Qantas Airways Ltd v Transport Workers’ Union of Australia [2023] HCA 27; 326 IR 179 at [41] (Kiefel CJ, Gageler, Gleeson and Jagot JJ) (Qantas HCA). In that vein, the “adverse actions” that contravene s 340(1) and can therefore attract sanction (listed in s 342) are not limited to actions that are unauthorised or unlawful for some other reason. It is the reason why the action is taken, rather than some supervening unlawfulness, that results in contravention of s 340. Relief is thus available for contravention of s 340 whether or not there exists some other basis upon which the relevant action might be restrained or reversed by order of a court. This understanding is at least consistent with the relevant part of the Explanatory Memorandum to the Fair Work Bill 2008 (Cth), which notes that the scope of the conduct captured by the definition in s 342(1) is based on conduct that was the subject of freedom of association, unlawful termination and other provisions in the earlier legislation.

The respondents’ construction of s 342(3)(a) would significantly narrow the concept of adverse action and thus the scope of the protection conferred by s 340. It would exclude from the concept of adverse action any acts that were (to quote from the written submissions) “explicitly required, or otherwise permissible, in the enterprise agreement” and “consistent with a party’s obligations in the enterprise agreement”. Action detrimental to an employee would therefore qualify as “adverse action” only if it was inconsistent with the employer’s obligations under the agreement (in which case it would also contravene s 50) or went further than what was permitted under the agreement. This result is inconsistent with what otherwise appears to be the intention of s 340, and the construction should therefore be accepted only if the text demands it. This point was made by Flick J, rejecting a similar submission, in Construction, Forestry, Mining and Energy Union v Rio Tinto Coal Australia Pty Ltd [2014] FCA 462; 232 FCR 560 at [46] (Rio Tinto).

The respondents submit that Flick J in Rio Tinto did not have the benefit of argument concerning the breadth of the term “under” in s 342(3)(a). The same point is made concerning the reasoning of Wigney J in Construction, Forestry, Mining and Energy Union v De Martin & Gasparini Pty Ltd (No 2) [2017] FCA 1046 at [281]-[294] (De Martin), where Rio Tinto was in substance followed. This may be correct; however, it does not make these cases irrelevant. There was ultimately no real controversy concerning the effect of the term “under”: to the extent that an enterprise agreement gives rise to legal rights and obligations, it plainly does so “under” the FW Act in that the Act (and not, eg, the law of contract) provides the foundation for those rights and obligations: cf, eg, Griffith University v Tang [2005] HCA 7; 221 CLR 99 at [80] (Gummow, Callinan and Heydon JJ).

A more significant question is the nature of the rights created by an enterprise agreement and, hence, the sense in which it can be said to “authorise” action. In Wanneroo at [51] French J said that an award was given the force of a law of the Commonwealth even though it “is not a law”. This distinction is a long-standing one in Australian industrial relations law. French J cited Ex parte McLean (1930) 43 CLR 472 at 479 (McLean), where Isaacs and Starke JJ said:

 

The award itself is, of course, not law, it is a factum merely. But once it is completely made, its provisions are by the terms of the Act itself brought into force as part of the law of the Commonwealth. In effect, the statute enacts by the prescribed constitutional method the provisions contained in the award.

Enterprise agreements have a similar status. In James Cook University v Ridd [2020] FCAFC 123; 278 FCR 566 at [42], Griffiths and SC Derrington JJ described an enterprise agreement as a “statutory artefact made by persons specifically empowered in that regard, and under conditions specifically set down by the [FW Act]”, before setting out the following passage from Toyota Motor Corporation Australia Ltd v Marmara [2014] FCAFC 84; 222 FCR 152 at [89]:

 

[T]he Act does more than merely impose conditions upon, and give additional legal effect to, an agreement made between private parties. The effect of the legislation is to empower the employer and the relevant majority of its employees to specify terms which will apply to the employment of all employees in the area of work concerned. The legal efficacy of those terms will arise under statute, not contract, and … will be felt also by those who did not agree to them. Someone such as an employee subsequently taken on, who had nothing to do with the choice of the terms or the making of the agreement, will be exposed to penal consequences under s 50 if he or she should happen to contravene one of the terms. When viewed in this way, it is not difficult to share in the perception that an enterprise agreement approved under the FW Act has a legislative character.

Rangiah J (dissenting in the result) set out the same passage at [223], having said at [222]:

 

Enterprise agreements are not contracts: cf Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 421-422, 452-453 [Byrne]. Neither are enterprise agreements legislative instruments within s 8 of the Legislation Act 2003 (Cth). Although enterprise agreements have been described as having a “legislative character” and “statutory force” and as being “a creature of statute”, they are not laws.

His Honour then referred to the passages from McLean and Wanneroo that I have set out above (at [224], [226]) and to Byrne at 425, where Brennan CJ, Dawson and Toohey JJ said:

 

Having regard to the public aims of the legislation, its scope and purpose is not such as to disclose any intention to benefit or protect employees or any other class of persons by conferring on them a right of action at common law for breach of an award obligation. However, in pursuit of those aims the Act does provide for the enforcement of awards thereby giving them statutory force. The appellants’ argument tended to focus upon the award itself rather than the Act. But an award is not a statute and if a duty imposed by an award is to be regarded as a statutory duty enforceable by way of a civil action for damages, then the necessary intention that it should be so regarded must ultimately be found in the Act and not the award. The Act discloses no such intention and, indeed, cannot do so in the absence of any specification of the duties which might be imposed by an award. On the other hand, the Act can and does disclose a contrary intention in providing a means for the enforcement of awards which does not contemplate the existence of private rights enforceable by way of an action for damages.

 

(Footnotes omitted.)

In the same case at 455, McHugh and Gummow JJ said:

 

The present case is concerned with the operation and effect of the Award, which draws its legal efficacy from the rather special provisions of the 1904 Act and now the 1988 Act. Of itself, the Award could not answer the description of a law of the Commonwealth. It is well established that the Award is made part of the law, not by its own force but by force of its adoption by the statute, which makes the directions contained in it “binding and enforceable in law”.

 

(Footnotes omitted.)

While an enterprise agreement is made “under” the FW Act, therefore, it is neither an exercise of delegated legislative power nor a statutory instrument that derives from the Act a capacity to alter legal rights and duties. It is a quasi-contractual document (though clearly not a contract in any legal sense) which s 50 of the FW Act requires to be complied with by the persons to whom it applies (a “factum”, as it was put in McLean, upon which s 50 operates).

Thus, where an enterprise agreement requires something to be done by an employer, there is in effect an obligation to do that thing by force of s 50. Doing that thing might well therefore not constitute adverse action, as a result of s 342(3)(a). That issue may not arise in practice, because (a) the motivation for the action would likely be the statutory obligation rather than any exercise of a workplace right, and (b) the court would be unlikely to grant any remedy for doing an act that was required to be done anyway. On the other hand, where an enterprise agreement permits something to be done, it is neither granting a statutory power to take that action nor exempting that action from consequences under statute or the general law. It is merely confirming that the taking of that action does not contravene any express or implied obligations under the agreement. The agreement does not thereby “authorise” action in the sense of conferring on somebody a right to do something that would otherwise be unlawful (cf De Martin at [289], quoting Rio Tinto at [66] and Ex parte Johnson; Re MacMillan (1946) 47 SR (NSW) 16 at 18 (Jordan CJ)).

I therefore reject the submission that actions which were permitted under the Agreements were “authorised” under the FW Act within the meaning of s 342(3)(a) and for that reason not “adverse actions”. In what follows, I will not refer to this submission again in relation to the individual adverse actions pleaded in this case. However, other submissions are advanced under s 342(3)(a) which will be dealt with in my reasoning on the individual actions.”

Atkins v North Australian Aboriginal Justice Agency Ltd [2024] FCA 686 delivered 27 June 2024 per Charlesworth J