The relationship between enterprise agreements and contracts

The relationship between enterprise agreements and contracts of employment. Here is an extract from a very recent decision of the Federal Circuit Court of Australia which deals with the relationship between contracts of employment, enterprise agreements and the Fair Work Act in the context of redundancies.

“Outline of principle

  1. There is a significant body of jurisprudence regarding the construction and interpretation of industrial instruments, in which term must be included enterprise agreements of the kind currently under consideration.[24]  For immediate purposes, it is sufficient to note the following general principles.

[24] In this regard, see the important discussion by Jessup J in NTEU v La Trobe University at [30] regarding various legal distinctions between “awards and orders, on the one hand, and enterprise agreements, on the other.”  In my view, noting that his Honour was in dissent in the result, nothing set out in the paragraph cited relates to the issues currently before this Court.  National Tertiary Education Union v La Trobe University (2015) 254 IR 238.

  1. First, in Amcor Limited v Construction, Forestry, Mining and Energy Union (“Amcor”), the High Court (Gleeson CJ and McHugh J) said, at [2]:[25]

The resolution of the issue turns upon the language of the particular agreement, understood in the light of its industrial context and purpose, and the nature of the particular organisation.

[25] Amcor Limited v Construction, Forestry, Mining and Energy Union (2005) 222 CLR 241 (“Amcor v CFMEU”). See also the comments by Kirby J to similar effect, at [77].

  1. Secondly, in Amcor v CFMEU, at [96], Kirby J referred to a long-cited passage from the Federal Court decision in Kucks v CSR Ltd (“Kucks”) (Madgwick J) (emphasis added):[26]

It is trite that narrow or pedantic approaches to the interpretation of an award are misplaced. The search is for the meaning intended by the framer(s) of the document, bearing in mind that such framer(s) were likely of a practical bent of mind: they may well have been more concerned with expressing an intention in ways likely to have been understood in the context of the relevant industry and industrial relations environment than with legal niceties or jargon. Thus, for example, it is justifiable to read the award to give effect to its evident purposes, having regard to such context, despite mere inconsistencies or infelicities of expression which might tend to some other reading.  And meanings which avoid inconvenience or injustice may reasonably be strained for. For reasons such as these, expressions which have been held in the case of other instruments to have been used to mean particular things may sensibly and properly be held to mean something else in the document at hand.

[26] Kucks v CSR Ltd (1996) 66 IR 182 at 184. The same passage was also cited by Callinan J in Amcor v CFMEU, at [129]. See also the summary of principle in Australian Manufacturing Workers’ Union v Berri Pty Ltd (2017) 268 IR 285 at [38], [65], [83] and [113] – [114]. Other regularly cited authorities include: Australian Meat Industry Employees Union v Golden Cockerel Pty Ltd (2014) 245 IR 394; Transport Workers Union of Australia v Linfox Australia Pty Ltd (2014) 318 ALR 54; and City of Wanneroo v Australian Municipal, Administrative, Clerical and Services Union (2006) 153 IR 426.

  1. I note that in Transport Workers’ Union v Coles Supermarkets Australia Pty Ltd (“TWU v Coles”), the Full Federal Court referred to this same passage from Kucks, but noted in particular a less regularly cited passage that immediately follows it, thus (emphasis added):[27]

But the task remains one of interpreting a document produced by another or others. A court is not free to give effect to some anteriorly derived notion of what would be fair or just, regardless of what has been written into the award. Deciding what an existing award means is a process quite different from deciding, as an arbitral body does, what might fairly be put into an award. So, for example, ordinary or well-understood words are in general to be accorded their ordinary or usual meaning.

[27] Transport Workers’ Union v Coles Supermarkets Australia Pty Ltd (2014) 245 IR 449 at [39] quoting from p.184 in Kucks.

  1. Thirdly, still in AMCOR v CFMEU, at [97], Kirby J observed that it was appropriate to consider the agreement before the High Court using a “broad interpretation” but at the same time cautioned that a more precise document, with a different context, history and purpose, may give a different result.  Purposefully, Kirby J stated, at [97] (emphasis added):

In a more precise document, with a different context, history and purpose, the opposite conclusion might be reached.  But giving this document the broad interpretation that is appropriate to a certified agreement under the Act, the submission advanced by Amcor is acceptable.  But does it represent the preferable construction?

  1. Fourthly, admittedly in the context of contract law and agreements generally, in Toll (FGCT) Pty Limited v Alphapharm Pty Limited (“Toll v Alphapharm”), the High Court said, at [40] (internal citations omitted; emphasis added):[28]

This Court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.

[28] Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165.

  1. Most recently, in Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Qantas Airways Limited (“Qantas Airways”), reflecting principles generally from earlier decisions, the Full Federal Court said, at [99] (emphasis added):[29]

The principles to be applied in interpreting an enterprise agreement were summarised in WorkPac Pty Ltd v Skene (2018) 264 FCR 563 at [197].  They emphasise the practical character of such instruments which are to be read in a manner that is informed by the circumstances of the relevant industry rather than according to legal nicety.

[29] Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Qantas Airways Limited [2020] FCAFC 205.

  1. In relation to the jurisprudence concerning “redundancies”, the following overview will suffice.
  1. In Dibb v Federal Commissioner of Taxation (“Dibb”), the Full Federal Court (Spender, Dowsett and Allsop JJ), set out at some length, the basic principles to determine whether a redundancy was “genuine”.[30]  The decision in Dibb was in the context of a dispute regarding the characterisation of a termination payment, for the purposes of s.27A of the Income Tax Assessment Act 1936 (Cth) (“the ITA”), following the termination of employment and whether it was a “bona fide redundancy.”  The Full Court’s main point of reference regarding what was and what was not a “genuine redundancy” was the earlier Full Federal Court decision in Short v FW Hercus Pty Ltd (Keely, Burchett and Drummond JJ).[31]  It was not disputed in Dibb, at [33], that there was no definition of “redundancy” in the ITA. At [33] – [37] and [41] – [42] in Dibb, the Full Court said:

[30] Dibb v Federal Commissioner of Taxation (2004) 136 FCR 388.

[31] Short v FW Hercus Pty Ltd (1993) 40 FCR 511.

[33] … there is no definition of the term “redundancy” [in the ITA Act]. The word is often used in the context of industrial relations to describe benefits payable in certain circumstances pursuant to industrial legislation and/or awards. However we do not understand Mr Dibb to claim any such entitlement. Paragraph 42 of TR 94/12 (cited above) refers to the decision of this Court in Short v F W Hercus Pty Ltd (1993) 40 FCR 511.  That decision relied heavily upon an earlier South Australian decision, R v Industrial Commission (SA); Ex parte Adelaide Milk Supply Co-operative Ltd (1977) 16 SASR 6.  In Short, at 520-521, Burchett J said:

‘The starting point may be taken to be the decision of the Full Court of the Supreme Court of South Australia in R v Industrial Commission (SA); Ex parte Adelaide Milk Supply Co-operative Ltd (1977) 16 SASR 6, although it would certainly be possible to go back much further. The Supreme Court of South Australia was concerned with the question of the jurisdiction of the State’s Industrial Commission to make provision by award for redundancy. There was no issue about the substance of the proposed provision, but members of the court made clear their understanding of what was involved. It is convenient to look first at the judgment of Mitchell J, who cited (at 34) the following statement from a decision in the previous year of the New South Wales Industrial Commission:

“It can fairly be said that in industrial circles the term redundancy payment has come to mean compensation for losses of various kinds suffered by employees who have given substantial services to an employer and whose services are terminated because, for one reason or another, the employer no longer needs them.”

Mitchell J accepted this statement.  Bright J, who dissented on the jurisdictional issue, said (at 26-27):

“The word ‘redundant’ does not occur in the Act. In its industrial sense it is not defined in the Oxford Dictionary. The application which I have already set out attempts the definition for the purpose of the proposed award. A consideration of the cases leads me to think that the question of the redundancy of any employee is linked to the question of the continued utility of the job which he is performing.  In other words it does not relate to the personal competence of the employee in the job which he is performing.  If I am right in this, then in its widest form the concept of redundancy connotes that an employee becomes redundant whenever (and for whatever reason) his employer no longer desires to have performed the job which that employee was doing. A wide variety of instances are contained in the definition clause in the application but they all seem to fit into this connotation, even the reference to retrenchment of employees for any reason whatsoever.”

The definition clause to which Bright J referred embraced (as appears at 16) dismissal by reason of diminishment of the requirements of a business for work of particular kind through:

“technological automation, mechanisation change, reorganisation, rationalisation or centralisation in the processing industry; fall in demand of products for whatever reason; or retrenchment of employees or an employee for any reason whatsoever.”

It was in connection with this statement of Bright J and the passage quoted by Mitchell J (to each of which he referred at 8-9) that Bray CJ made (at 8) a statement that has since become in part embedded in a number of awards, including the subject award:

“I should begin by saying that I agree with Bright J that the concept of redundancy in the context we are discussing seems to be simply this, that a job becomes redundant when the employer no longer desires to have it performed by anyone. A dismissal for redundancy seems to be dismissal, not on account of any personal act or default of the employee dismissed or any consideration peculiar to him, but because the employer no longer wishes the job the employee has been doing to be done by anyone.”

Here the expression containing the words “no longer wishes” was first composed. In its original setting, it is plain that it was not meant to convey the limitation for which the respondent contends.  On the contrary, it was meant to capture the full breadth of the concept elaborated by Bright J and referred to in the passage quoted by Mitchell J.’

[34] We note also the observations of Ryan J in Jones v Department of Energy and Minerals (1995) 60 IR 304 at 308 as follows:

‘However, it is within the employer’s prerogative to rearrange the organisational structure by breaking up the collection of functions, duties and responsibilities attached to a single position and distributing them among the holders of other positions, including newly-created positions. It is inappropriate now to attempt an exhaustive description of the methods by which a reorganization of that kind may be achieved. One illustration of it occurs where the duties of a single, full-time, employee are redistributed to several part-time employees. What is critical for the purpose of identifying a redundancy is whether the holder of the former position has, after the re-organisation, any duties left to discharge. If there is no longer any function or duty to be performed by that person, his or her position becomes redundant in the sense in which the word was used in the Adelaide Milk Co-operative case.’

[35] Similarly in Quality Bakers of Australia Ltd v Goulding (1995) 60 IR 327, Beazley J said at 332-333:

‘There was no dispute that “the operational requirements” of a business may include redundancy.  A redundancy will arise where an employer has labour in excess of the requirements of the business; where the employer no longer wishes to have a particular job performed; or where the employer wishes to amalgamate jobs….  As was said in Bunnetts’ case (Bunnett v Henderson’s Federal Spring Works Pty Ltd) (1989) AILR 356:

“Organisational restructuring may result in a position being abolished and the functions or some of them being given to another or split amongst others.” ’

[36] The Macquarie Dictionary (3rd Ed) now relevantly defines “redundant” as meaning:

‘… denoting or relating to an employee who is or becomes superfluous to the needs of the employer … .’

[37] In the Oxford English Dictionary (2nd Ed) the word is defined relevantly as:

‘The condition of having more staff in an organization than is necessary. Hence, the state or fact of losing a job because there is no further work to be done; a case of unemployment due to reorganization, mechanization, loss of orders, etc.’

[41] In Jones, Ryan J observed that a job involves ‘a collection of functions, duties and responsibilities entrusted, as part of the scheme of the employer’s organisation, to a particular employee.’ We accept that view. Ryan J then observed that where such duties are re-assigned, the question is whether any function or duty remains to be performed by the employee. We do not understand his Honour to have meant that if any aspect of the employee’s duties is still to be performed by somebody, he or she cannot be redundant. His Honour’s meaning appears clearly from the following paragraphs at 308-9:

‘In this case, the respondent led evidence of the major changes which were made to the Department between September 1993 and late 1994.  According to Mr Downie, the applicant’s former position as Director, Mining Inspectorate, was abolished and the duties attached to it were combined with those of the previous Director, Environmental Management. In addition to a number of other, newly-created functions, those pre-existing duties were to be performed by a newly created General Manager, Mineral Operations. Thus, it is clear that although some of the tasks previously assigned to Mr Jones still had to be carried out, the employer’s rearrangement of its operational structure had the consequence that they be combined with other functions and performed by the holder of a new, more generally-oriented position.

On this basis, it appears that Mr Jones’ former position was rendered “generally redundant”.  When it became apparent that he could not be redeployed, Mr Jones was found to be surplus to the respondent’s personnel needs.  This amounted to a reason for dismissal which was clearly based on his employer’s operational requirements.’

[42]  As Beazley J observed in Quality Bakers:

‘A redundancy will arise where an employer has labour in excess of the requirements of the business; where the employer no longer wishes to have a particular job performed; or where the employer wishes to amalgamate jobs … .’

  1. Perhaps curiously, perhaps not, there was no consideration by the Court because neither party raised it, of s.389 of the Fair Work Act 2009 (Cth) (“the FW Act”) and its definition of “genuine redundancy.” Nothing turns on this lacuna. In this regard, for completeness, I simply refer to (but need not consider further) the detailed discussions in Hodgson v Amcor Ltd regarding the general definition and understanding of “redundancy” under the FW Act, and more particularly the consideration of “genuine redundancy” under s.389 of the FW Act by the Full Federal Court in Port Kembla Coal Terminal Ltd v Construction, Forestry, Mining and Energy Union.[32]

[32] Hodgson v Amcor Ltd (2012) 264 FLR 1 especially at [371]; Port Kembla Coal Terminal Ltd v Construction, Forestry, Mining and Energy Union (2016) 248 FCR 18.