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In brief
- Following the 2007 Federal Election, the Rudd Labor Government abolished AWAs. Many employers who had engaged employees on AWAs looked to make employee collective agreements to maintain direct engagement with employees.
- Some employers utilised ‘new starter’ scope clauses with the intention that the agreement would only apply to employees who commenced employment on or after a certain date.
- The CFMEU claimed that delineating a part of a business in this manner was contrary to the provisions of the Workplace Relations Act 1996 (Cth) as the agreement was not made in a single business or part of a single business as required by section 327 as it then was.
- Employers with ‘new starter’ scope clauses should consider the impact of this decision on their collective agreement.
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The facts
Pilbara Iron Company (Services) Pty Ltd made an employee collective agreement known as the Pilbara Iron Employee Agreement (PIEA) under the Workplace Relations Act 1996 (Cth) (WR Act). The PIEA was made with a group of employees who commenced work on 28 July 2008.
The scope of the PIEA was to apply to employees who commenced on or after 28 July 2008 so that the terms and conditions of existing employees were not impacted. Importantly for present purposes, while the PIEA reflected the substantially similar terms and conditions to existing AWAs, the PIEA terms and conditions were never applied to any employees who were employed prior to 28 July 2008.
The issues
The CFMEU primarily challenged the PIEA’s validity on a two bases:
- that the scope clause meant that all employees who were in employment on 28 July 2008 were covered by it and, as such, should have been given an opportunity to vote on the PIEA (ie. the scope extended beyond ‘new starters’), and
- that the agreement was not validly made under the WR Act as relying on a commencement date to define ‘scope’ did not satisfy the requirements under s.327 of the WR Act that an agreement could be made with employees employed in a single business or part of a single business.
The decision
His Honour Justice Buchanan dismissed the CFMEU’s application in its entirety.1
The construction issue
His Honour considered the competing constructions proposed by the CFMEU and by the employer. The CFMEU argued that the words ‘employed on or after 28 July 2008’ included any employee who was employed as at 28 July 2010, while the employer argued that the intention was for the PIEA to apply only to employees who commenced employment on 28 July 2008.
In deciding the issue of construction, His Honour looked to the industrial context and purpose of the PIEA and paid particular regard to the objective but common intention of the parties to the PIEA. In doing so, His Honour found that the inclusion of a date in the scope clause which provided identification of the new starter employees, along with the meaning of the language used in the scope clause, led to the conclusion that the objective mutual intent of the parties to the PIEA was to make an agreement which applied to the employees ‘whose service actually commenced on or after 28 July 2008’.
The ‘scoping’ issue
His Honour then moved to consider whether the statutory framework of the WR Act permitted an employer to make a collective agreement with a group of employees delineated from the remainder of the workforce (who would not be subject to the agreement) based on the employees’ commencement date. The CFMEU argued in this regard that an employer could only make a collective agreement under the WR Act with all employees in a business or all employees in a part of a business.
In considering this ground of challenge, His Honour considered the overall statutory regime of the WR Act at the time the PIEA was made and found that the WR Act did not require that an agreement must be made in the manner contended by the CFMEU. In other words, in the present circumstances, an agreement made with a ‘group’ of employees (such as the ‘new starters’) within the single business or part did not offend the pre requisite for agreement making set out in section 327 of the WR Act.
In concluding his consideration of the statutory framework, His Honour considered that the CFMEU bore the onus of showing that the PIEA did not satisfy the requirements of the WR Act and found that this had not been made out and the application must be dismissed.
Implications
This decision affirms the validity of ‘new starter’ scope clauses made under section 327 of the WR Act. Employers who made agreements under the WR Act with similar scope clauses should review the decision to consider its impact on their collective agreement.
The approval requirements for enterprise agreements under the Fair Work Act 2009 (Cth) (FW Act) are fundamentally different to the requirements considered in the decision. For example, one of the approval requirements under the FW Act is that the ‘group of employees covered by the agreement’ be ‘fairly chosen’. Nevertheless, His Honour’s analysis of what might constitute ‘part of a single business’ may be relevant to the approach adopted by Fair Work Australia to the approval requirements for enterprise agreements made under the FW Act.
This article was written by Russell Allen, Partner and Drew Pearson, Senior Associate, Perth who acted for Pilbara Iron in the proceedings.
Endnotes
- Construction, Forestry, Mining and Energy Union v Pilbara Iron Company (Services) Pty Ltd 2010 FCA 822
More information
For information regarding possible implications for your business, contact a member of the Employee Relations team.