Masterclass; managerial prerogative explained

The extent to which an employer retains management rights to manage a business without contravening its obligations (often called managerial prerogative) will at the end of the day depend upon what rights it retains, and that will depend upon an analysis of its rights under

(a) the Fair Work Act (which contains many prescriptions upon what an employer can lawfully do, for example to not dismiss employees unfairly);

(b) a modern award if applicable;

(c) contractual terms, express and implied (for example policies and procedures, custom and practice);

(d) an enterprise agreement if applicable( an EA displaces a modern award and prevails over (c) to the extent of any inconsistencies because it is an instrument given quasi-statutory effect by the Fair Work Act; and

(e) the National Employment Standards (NES)

So a useful starting point in assessing whether management has a right to exercise a particular power is to assess it in light of the above. In AMWU Kraft Foods Australia Pty Ltd (2013) FWC 791 the Fair Work Commission was required to rule upon the right of Kraft Foods to requite its food processing staff to remove wedding rings whilst at work. The AMWU invoked the dispute settlement procedure in the enterprise agreement to refer the dispute to the Commission. The Commission followed a long line of cases in recognizing that there is an inherent right which management has to manage its business as it sees fit, subject to the above considerations. The Commission ruled that the requirement by Kraft did not constitute an extra claim which might have contravened the no extra claims commitments by the parties to the agreement for the life of the EA and thus was not prohibited by that provision or any other of the EA. See also Wagstaff Paling Pty Ltd v CFMEU (2011) FWCFB 6892 and (2013) FCAFC 87 which applied the same principle to the introduction of an alcohol and drug testing policy. However in AMACSU v North East Water (2014) FWC 6922 the Commission decided that the limited withdrawal of a policy which allowed the private use of company vehicles would “materially change the terms and conditions of employment set out in the relevant agreement other than in a manner already provided for by the agreement” and was thus a breach of the no extra claims term, with the Commissioner applying the findings of Bromberg J in Marmara v Toyota Motor Corporation Australia Ltd [2013] FCA 1351 that “a proposal by one party to vary the outcome arrived at in a way which advances its interests is apt to be regarded as a further claim”, particularly “where the proposed variations are significant and suggest an attempt … to strike a new bargain.”
The fact that the claim by Kraft did not involve a proposal that affected remuneration, or a change of contractual entitlements or conditions of employment appears to be dispositive.