Trade unions and the fair work system

This passage from a recent decision of the Federal Court constitutes and excellent summary of the role trade unions play in the legal mechanics of the industrial relations system.

“It is worth commencing consideration of this factor by remarking that federally registered employee organisations have played, and continue to play, a special and central role in protecting the interests of workers. As I noted to senior counsel for the Minister (who, together with his junior, provided helpful and cogent submissions), the Minister was pushing at an open door is stressing the importance of registered employee organisations, when needed, being able to enforce, and being seen as able to enforce, the rights of employees though access to litigation in a cost-effective way.

Such organisations have long been recognised as a “party principal”, and more than “a mere agent or figurehead” for the employees they represent: Burwood Cinema Ltd v Australian Theatrical and Amusement Employees’ Association (1925) 35 CLR 528 (at 551 per Starke J). Indeed, in R v Dunlop Rubber Australia Ltd; ex parte Federated Miscellaneous Workers’ Union of Australia (1957) 97 CLR 71 (at 82 per Dixon CJ, Webb, Kitto and Taylor JJ), the High Court concluded it was an accepted constitutional principle that employee organisations may, in the exercise of the power conferred by s 51(xxxv) of the Constitution, be established, registered and incorporated so that “in the formulation of demands and the settlement of industrial disputes classes of men in an industry or a group of industries may be represented”: see also Regional Express Holdings Ltd v Australian Federation of Air Pilots [2017] HCA 55; (2017) 262 CLR 456 (at 469 [29] per Kiefel CJ, Keane, Nettle, Gordon and Edelman JJ).

This status was first enshrined in statute in 1974 (s 142A of the Conciliation and Arbitration Act 1904 (Cth) (repealed)) and is reflected in the current legislative scheme, namely the FW Act and the RO Act, as follows.

First, s 5(4) of the RO Act provides that “Parliament’s intention in enacting this Act” includes assisting “employers and employees to promote and protect their economic and social interests through the formation of employer and employee organisations, by providing for the registration of those associations and according rights and privileges to them once registered”. Further, s 5(5) provides that “Parliament recognises and respects the role of employer and employee organisations in facilitating the operation of the workplace relations system.”

Secondly, registration under the RO Act unlocks rights for members under the FW Act: see the distinction between “industrial associations” and an “organisation”, which has been registered, in s 12 of the FW Act. For completeness, I pause here to note that other terms in the FW Act which refer to employee organisations registered under the RO Act include “employee organisation” and “registered employee association” (see s 12). Those rights and privileges include: creating and maintaining industrial instruments (for example, default rights of representation in enterprise bargaining (see ss 176, 177); the right of entry and investigation regime in Pt 3-4; and standing (alongside other legal persons including employees and employers) to seek civil remedies under Pt 4-1.

As to standing, pursuant to s 539, an employee organisation is given broader standing than an “industrial association” (defined in s 12 of the RO Act). Relevantly, an employee organisation enjoys standing to bring a proceeding to enforce contraventions of ss 45 (“contravening a modern award”), 50 (“contravening an enterprise agreement”) and 558B (“responsibility of responsible franchisor entities and holding companies for certain contraventions”) where an industrial association does not. There is no relevant action that may be brought by an employee organisation under s 539 that cannot also be brought by an affected employee in their own right (cf s 536AA).

Thirdly, the FW Act empowers litigants to bring proceedings to vindicate and enforce employee entitlements without requiring them to pay the costs of another party. The benefit of s 570 is, of course, also available to an individual litigant who commences an action under Pt 4-1, including a representative applicant. Section 570 of the FW Act operates as a qualification on the Court’s general discretion as to costs promoting equality of arms and is the current manifestation of a long history of provisions which have restricted the making of costs orders under Commonwealth industrial relations legislation: Australasian Meat Industry Employees’ Union v Fair Work Australia (No 2) [2012] FCAFC 103; (2012) 203 FCR 430 (at 432 [3] per Jessup and Tracey JJ).

Fourthly, registration under the RO Act sets minimum standards for the proper operation of registered employee organisations and their officers, including by:

 

(1)          effecting a regime for democratic control of employee organisations and makes them accountable to their members: Ch 7–10 of the RO Act; and

 

(2)          imposing director-like duties on officers of employee organisations, including a duty to exercise their powers and discharge their duties with a specified degree of care and diligence and in good faith (ss 285 and 286); and a duty not to use their position improperly to gain an advantage for themselves or someone else, or cause detriment to the organisation or to another person (s 287). These provisions are all civil remedy provisions attracting significant civil penalties for contravention under Ch 10.

The Minister is, with respect, correct to caution against any development that would serve to diminish this special role. I accept this role is entirely consistent with, and promoted by, unions playing an active role in providing access to justice for persons they either represent or are entitled to represent. The Court should be astute not to undermine this special role in determining applications such as the present.  But the question here is not whether any fetter should be placed upon registered employee organisations being able to litigate effectively, but rather how one such organisation should have litigated effectively and what is the optimal solution to the circumstances created, in part, by the delays of the SDA and the way the SDA has approached these cases.

Hence, at the risk of repetition, I agree the Minister and the SDA are correct in stressing it is important not to lose sight of broader issues of public policy, but one must not lose sight as to how this special role to advance industrial interests by litigation is best fulfilled.

Reference was made above (at [70]) to Professor Morabito and Ms Caruana’s article ‘Australian Unions – the Unknown Class Action Protagonists’, where the authors, including one of Australia’s leading class action academics, noted (at 383) that the involvement of unions in Pt IVA proceedings has been “largely ignored by legal scholars” and that unions can play a significant role “in protecting and advancing the interests of workers through the use of the class action mechanism” (and to some extent have already done so). After surveying the nature of employee rights likely to be sought to be vindicated by litigation and the barriers to commencing such litigation, the authors note (at 388–389):

 

The utility of class actions in enforcing the rights of employees in the United States may perhaps be gauged by the increasing use by US employers of “class action waivers” which are essentially mandatory arbitration provisions that prohibit class actions.

 

Can the involvement of unions in class actions have beneficial effects? Hamilton and Anderson have provided an affirmative answer by drawing attention to the fact that American courts have recognised that:

 

“unions possess more resources and information than any individual claimant and are uniquely situated to advance their members’ interests as class representatives … [L]abor unions can be a powerful ally for plaintiffs seeking class relief … Plaintiff’s counsel looking for a source of information, for funding, for a means of reaching out to the individual members of a given class, should consider the possibility that a labor union may be an excellent tool for accomplishing their clients’ goals of obtaining a better workplace.”

 

This assessment appears to have been endorsed by the Civil Justice Council of England and Wales (“CJC”) in November 2008 when it recommended the introduction of a new collective action regime for England and Wales. In fact, the CJC recommended that trade unions be included among the “socially responsible collective bodies” that should be allowed to act as representative parties under this proposed collective action regime.

 

The reference to unions possessing greater resources in the passage quoted above is particularly relevant to the Australian Federal regime given that… the Australian Government refused to implement the measures recommended by the ALRC in order to overcome the cost barriers to the employment of the Pt IVA device …

 

(Footnotes omitted).

As was made plain by the Full Court (comprising Wilcox, Ryan and Madgwick JJ) last century in Finance Sector Union of Australia v Commonwealth Bank of Australia (1999) 94 FCR 179 (at 184–186 [14]–[20]), there is no barrier to a union being a representative applicant under Pt IVA and seeking compensatory and penal remedies for the benefit of employees in an appropriate case. Despite this, as Professor Morabito and Ms Caruana point out (at 392), “instances of a union assuming the role of class representative in Pt IVA proceedings have been rare”. Even when a union promotes or participates in promoting a class action, as with the RAFFWU, there seems to be a misconception it is necessary for an employee to fulfil the role of lead applicant. There might be some reason for this in an individual case (although none is readily apparent to me), but if the decision rests upon a misapprehension there is some difficulty with a registered employee organisation being a representative applicant, that notion should be exploded.

Even when they are willing to advance representative-type claims, some registered employee organisations seem to have proceeded on the basis that the existence of procedural provisions within the FW Act facilitating one form of “representative” action means that Pt IVA is unavailable (as was evidently the case here). If the resolution of this case has a broader utility, it might be to bring home to any lawyer conducting FW Act litigation that is heretical to think Pt IVA class actions are unavailable or confine the nature of relief that can be sought. As discussed further below, when properly understood, class actions offer protections and procedural advantages not present in other forms of representative or quasi-representative proceedings. That is their raison d’etre. Speaking generally, vacating the field for commercial operators is hard to reconcile with best advancing the interests of those persons such organisations are entitled to represent.

Faced with a common issue of substance, unions should at least consider entering the arena by becoming representative applicants or assisting a member in conducting Pt IVA litigation. This would not diminish but, in my view, would enhance cost-effective access to justice for employees. When trying to make this point previously, apparently ineffectively, I pointed out that in doing so, such organisations would not generally need to be concerned about providing security for costs, which is often an inhibitor to non-funded class actions: Turner v Tesa Mining (NSW) Pty Ltd [2019] FCA 1644; (2019) 290 IR 388 (at 412 [86]).

In any event, as we know, an available course for bringing the compensatory claims of the unnamed Workers was adopted, albeit belatedly, by the SDA. As I have previously remarked, superficially, it might be thought in doing so the SDA is performing a “representative” function, comparable with the role of a representative applicant in Pt IVA and other representative functions known to the law, for example, representation by an agent, trustee and tutor or guardian: see Tomlinson v Ramsay (at 524 [40] per French CJ, Bell, Gageler and Keane JJ). But there are, for reasons I explained in McDonald’s (at [352]–[356]) and Transport Workers’ Union of Australia v Qantas Airways Ltd (No 4) [2021] FCA 1602; (2021) 312 IR 133 (at 138–141 [11]–[23]), real differences between representative proceedings and proceedings brought by an employee organisation under the FW Act.

Although the mode of “representative” proceeding adopted is not determinative and should not be given disproportionate weight in choosing between whether a joint trial model should be adopted or a stay ordered, the differences amount to a relevant consideration and need to be explained in a little more detail.

The most important is the possibility of legitimate disjunct between the interests of affected workers (or a subset of them) and the union’s interests, where the representative applicant in a class action has a duty to act in the interests of all group members. While both a representative applicant and an employee organisation are eligible to bring applications on behalf of other persons (see ss 33C(1) and 33D(1) of the FCA Act and s 539 of the FW Act), statutory eligibility says little of the capacity in which claims are brought.

On the one hand, as noted above, a registered employee organisation: is a body separate and distinct from its members; acts in an independent capacity; and is given standing to pursue its legitimate industrial objectives. It “represents a class, not a definite series of individuals”, the membership of which is liable to change, or a group or class “formed by reference to an industrial relationship”: Metal Trades Employers Association v Amalgamated Engineering Union (1935) 54 CLR 387 (at 431 per Dixon J; 404 per Latham CJ; and 418 per Rich and Evatt JJ); R v Dunlop Rubber (at 81 per Dixon CJ, Webb, Kitto and Taylor JJ).

It was suggested by the SDA in oral submissions that the SDA and its officers “owe fiduciary obligations and act as a regulator”: T23.16–17; T28.9. If this description was being used to characterise the nature of the relationship of the SDA and its officers qua the persons the SDA is entitled to represent, the use of “fiduciary” in this context might best be described as a slogan. There is no precise or comprehensive definition of the circumstances in which a person is considered a fiduciary in their relations with another, but a fiduciary relationship is, of course, characterised by trust and confidence, and a person will be in a fiduciary relationship with another when and insofar as that person has undertaken to perform such a function for, or has assumed such a responsibility to, another as would thereby reasonably entitle that other person to expect that they will act in the other person’s interest to the exclusion of their own interest: see Hospital Products Limited v United States Surgical Corporation (1984) 156 CLR 41 (at 96–97 per Mason J); News Limited v Australian Rugby Football League Limited (1996) 64 FCR 410 (at 538–541 per Lockhart, von Doussa and Sackville JJ).

But it is evident that an employee organisation such as the SDA is conducting litigation as a “party principal” and is entitled to act on its own account and in its own interests (subject to the requirements of the RO Act). In Burwood Cinema v ATAEA (at 548), Starke J explained the definitive membership of a group a union is entitled to represent cannot be essential, as claims and demands are made for the benefit of “the ever changing body of workmen that constitute the trade”. When one appreciates this indeterminacy, it is at best problematical to describe an organisation such as the SDA as acting as a fiduciary of any of the Workers in the conduct of litigation. This does not detract, however, from the statutory obligations imposed under the RO Act and identified above.

The reality is that the interests of an employee organisation may not necessarily align with those of a particular subset of employees whose industrial interests the organisation is entitled to represent. An obvious example is upon settlement. One could readily conceive of circumstances where it would legitimately further an employee organisation’s aims to enter into a bargain with an employer to compromise litigation and effectively (if not technically) extinguish present workers’ claims, provided that in the next round of enterprise bargaining negotiations, the employer agreed to make what are perceived to be more valuable concessions for the then combination of employees going forward. Such a settlement could, of course, be put in place absent Court scrutiny.

By way of contrast, a representative applicant is an individual whose claim shares common issues of law and fact with the claims of group members. The relationship has been described in different ways: see, for example, discussion as to fiduciary relationships in Dyczynski v Gibson [2020] FCAFC 120; (2020) 280 FCR 583 (at 635–636 [209] per Murphy and Colvin JJ); Wigmans v AMP (at 646–647 [44] per Kiefel and Keane JJ; 670 [117] per Gageler, Gordon and Edelman JJ); see also authorities from the United States, including the Supreme Court in Cohen v Beneficial Industrial Loan Corp 337 US 541 (1949). I prefer to say that the representation by an applicant of group members is a kind of limited statutory agency to deal only with claims within the scope of the class action: BHP Group Ltd v Impiombato [2021] FCAFC 93; (2021) 286 FCR 625 (at 632 [27] per Middleton, McKerracher and Lee JJ). Put another way, the representative applicant is a “privy in interest” with respect to the claim the subject of a given proceeding, but not with respect to their individual claims: Timbercorp Finance v Collins [2016] HCA 44; (2016) 259 CLR 212 (at 235–236 [53] per French CJ, Kiefel, Keane and Nettle JJ).

Whatever else the relationships are and are not, a representative applicant cannot properly represent a class of persons if the interests of the applicant are antagonistic to, or in conflict with, the interests of group members: Tropical Shine Holdings Pty Ltd v Lake Gesture Pty Ltd (1993) 45 FCR 457 (at 464 per Wilcox J). It is inconsistent with the duties of a representative applicant to act contrary to the interests of the group members represented. More specifically, an applicant would not be acting licitly if the applicant acted contrary to the interests of group members as a whole in the conduct or resolution of the litigation or sought to procure a benefit for a differently constituted group of persons at the expense of group members. A series of protections are built into Pt IVA to ensure the interests of the group members are protected in this regard, most notably, the necessity to secure Court approval of any settlement or discontinuance (s 33V) and the ability to make an application to replace the applicant (s 33T). As such, there is not only a requirement of similarity of interests between the representative party and the group members, but also safeguards.

What is also evident is that the Workers here are not privies of the SDA in any relevant respect. Notwithstanding they are affected third parties, as non-parties to the litigation, they are not bound at law or in equity by orders made in the SDA Actions seeking any representative relief on their behalf (such as would be the case by operation of a s 33ZB “statutory estoppel” in a Pt IVA proceeding or in a Chancery representative proceeding). This statement of the position is of course subject to the qualification in this case that it is difficult to see why it would be an appropriate exercise of power to make a compensatory order in the exercise of the discretion in s 545 of the FW Act if a Worker had already had a compensatory claim dealt with on the Worker’s behalf by an employee organisation (or whether any attempt at a “second go” may be prevented by novel arguments reliant upon notions of abuse of process).

For present purposes, what matters is that differences in “representative” roles, powers and duties exist. The genius of Pt IVA is that it provides a statutory mechanism for achieving finality on common issues and “issues of commonality” for the benefit of a respondent facing multiple claims but also, importantly, for non-parties. In doing so, Pt IVA has the flexibility to ensure group members can pursue their individual claims optimally, including by the appointment of subgroup representatives or sample claims.

As noted above, there is real force in the Minister’s submission that the special statutory role of an employee organisation must be given full effect and not be diminished. I also accept that as a general proposition, from a public policy perspective, if litigation to obtain employee compensation and penal orders is merited, then the conduct of that litigation by a registered employee organisation, or an employee assisted by a registered employee organisation, has real benefits over the commercialisation of such litigation by the involvement of commercial funders. In part, this will be because a registered employee organisation will be more interested in penal orders deterring future contravening conduct and, if conducted efficiently, such litigation provides the prospect of employees obtaining compensation without the added cost of litigation funding.

It is the next step in the Minister’s argument that is problematical: the notion that to allow this Class Action to proceed may have a “diminishing effect” on the special statutory role of the SDA.

The Minister referred to the material diminishment of the SDA’s role but did not point to anything in the FW or RO Acts to demonstrate that the continuation of the Class Action in the circumstances of this case would somehow impede the rights and privileges of registered employee organisations more generally. As set out above, a purpose of the provisions granting standing to the FWO and employee organisations is the desirability that employees have access to affordable justice with respect to their workplace rights. The question of how this is best facilitated in an individual case is a bespoke enquiry.

Nothing put to me as to standing under s 439 or the FW Act’s costs provision in s 570 said anything of proceedings commenced by employee organisations which did not apply with equal force to Pt IVA proceedings. Nothing about rejecting a stay in this case is meant to, or will, diminish the special role of employee organisations. But if an employee organisation is to fulfil its role by pursuing large scale litigation, this judgment may serve to remind it to do it with celerity, in accordance with the overarching purpose, and in a way that at least considers the most effective procedural mechanism for vindicating numerous, small claims with a substantial common issue.

For completeness, I should note the SDA sought to rely upon the decision of Charlesworth J in Thomas v Romeo Lockleys Asset Partnership [2022] FCA 1106 (at [43]–[53]) in support of the SDA’s exhaustive or unique role. There, her Honour set out the purpose of ss 539 and 570, explaining how the provisions “advance the objectives of the FW Act by providing a means by which employees may assert and enforce their entitlements in a way that does not expose them to an outcome in which any damages or other award is subsumed by their own legal fees”, and reasoned (at [46]):

 

there is a clear public interest in a regulator such as the Ombudsman having standing to bring claims on behalf of a group of employees, particularly where the claims of each individual employee may be small, and yet the profits gained by employers from contraventions of the FW Act affecting multiple employees may potentially be very large indeed.

It suffices to say this passage does no more than explain a policy reason for unions such as the SDA and the FWO to have standing.”

 

Elliott-Carde v McDonald’s Australia Limited (Stay Application) [2023] FCA 1210 delivered 12 October 2023 per Lee J