This decision of Teys Australia Beenleigh Pty Ltd v Australasian Meat Industry Employees Union (No 2) [2016] FCA 2 highlights that external materials can, in certain circumstances, be incorporated into and vary an enterprise agreement after the date that it is made.

Implications for employers

Employers should act cautiously when incorporating external material into an enterprise agreement as the Fair Work scheme contemplates the incorporation of variable terms.

Background

A valid majority of employees approved and made the Teys Bros (Beenleigh) Pty Ltd / AMIEU Production Departments Enterprise Agreement 2010 (2010 EA). The 2010 EA included a clause which allowed the parties to agree an alternative remuneration structure that would be binding on both parties and would apply instead of the 2010 EA’s remuneration system (provided the incentive system contained in that structure was at a higher rate).

After the 2010 EA was made, but before it was approved by the Fair Work Commission, Teys and the Australasian Meat Industry Employees Union (Union) signed a document that set out an alternative remuneration structure and incentive payment system for certain workers (Remuneration Document). The 2010 EA was approved, and for about three years, around 300 employees at the Beenleigh plant were remunerated consistently with the terms of the Remuneration Document.

In late 2013, the parties sought to make a new enterprise agreement (2013 EA). The 2013 EA was approved twice by the Commission but each time the approval decision was subsequently quashed by a Full Bench of the Commission.

The Union subsequently demanded that Teys remedy alleged underpayments that resulted from Teys applying the 2013 EA rather than the 2010 EA in remunerating its workforce. The Union argued the incentive payment system contained in the Remuneration Document was incorporated into the 2010 EA and Teys should have paid its employees on that basis.

Teys disagreed and sought a declaration from the Commission that the Remuneration Document did not form part of, or vary, the 2010 EA.

The Union argued that the terms of the Remuneration Document were incorporated into the 2010 EA by the terms of the 2010 EA and section 257 of the Fair Work Act 2009 (Cth) (FW Act). Section 257 permits the incorporation of material contained in an instrument or other writing in force at a particular time, or from time to time, despite section 46AA of the Acts Interpretation Act 1901 (AI Act).[1]

Teys argued that the “material” that may be incorporated under section 257 is limited to material that exists at the time of making an enterprise agreement. When the 2010 EA was made, there was no agreement between Teys and the Union and neither party had signed the Remuneration Document, so the Remuneration Document could not be incorporated. Alternatively, Teys argued that if section 257 of the FW Act or the terms of the 2010 EA incorporated the Remuneration Document after the 2010 EA was made, this would amount, in a practical sense, to a variation of the 2010 EA. Variations permitted in this manner would be inconsistent with and circumvent the requirements of the FW Act that must be followed by parties in order to lawfully vary an enterprise agreement.

Decision

The Federal Court agreed with Teys’ view that the Remuneration Document was not incorporated at the time the 2010 EA was made. It also agreed that any subsequent incorporation following its signing on 23 November 2009 would amount to a variation of the terms of the 2010 EA. However, the Court held that section 257 of the FW Act expressly contemplates the incorporation of variable terms (by referring to a document in force at a different date, and in force from time to time). This section clearly permits an incorporation that effects a variation of an enterprise agreement.

The Court determined that the tension between section 257 and with the FW Act’s variation provisions can be resolved by the Commission when exercising its powers in approving an agreement. It could refuse to approve an agreement where the terms materially compromise the genuine agreement, better off overall test or content objectives. Alternatively, it may be satisfied by the existence of sufficient safeguards (e.g. the nature of the material incorporated). As a result, the later incorporation of variable terms do not circumvent the variation requirements, provided the Commission turns its mind to these issues during the approval stage.

Ultimately, the Court found the Remuneration Document was incorporated into the 2010 EA after it was made (on the date the Remuneration Document was signed). It refused the declarations sought by Teys and dismissed the application.

Teys Australia Beenleigh Pty Ltd v Australasian Meat Industry Employees Union (No 2) [2016] FCA 2