In ADJ Contracting Pty Ltd, Senior Deputy President Acton approved an enterprise agreement based on a standardised framework prepared by the National Electrical and Communications Association and the Electrical Trades Union adopted by ADJ Contracting Pty Ltd (“ADJ”) (“ADJ EA”).  Senior Deputy President Acton rejected arguments raised by employer groups that the ADJ EA contained unlawful terms relating to the minimum terms and conditions of contractors, union right of entry and union promotion.

Implications for employers

The decision provides some guidance as to enterprise agreement terms that will be acceptable under the Fair Work Act 2009 (Cth) (“FW Act”).  In particular, this decision provides that enterprise agreements clauses requiring contractors to be engaged on terms and conditions “no less favourable” than employees in a particular workplace will be valid under the FW Act.

Employers who are seeking flexibility in the way they engage contractors will be unable to oppose such clauses on the legal basis they are inconsistent with the FW Act.  Accordingly, the inclusion of such a clause may act as a disincentive for some employers to engage contractors.

We note that the Australian Industry Group has lodged an appeal against this decision.

Background

The ADJ EA was submitted by ADJ for approval by Fair Work Australia (“FWA”).  Various employer organisations objected and argued that particular clauses of the ADJ EA were unlawful.

Section 194 of the FW Act provides that a term of an enterprise agreement will be “unlawful” if (among other things) it is discriminatory, objectionable or creates an entitlement to enter workplaces other than in accordance with Part 3-4 of the Act.

An “objectionable term” is a term that requires or permits a contravention of Part 3-1 of the FWA Act, which provides for certain protections including prohibiting a person from taking adverse action against someone because they have a workplace right.

“Discriminatory term” is defined in section 195 as a term of an enterprise agreement which discriminates against an employee covered by an agreement for various reasons including sex and race.

Engagement of contractor’s on terms “not less favourable” to that of employees

Clause 4.3(b)(v) of the ADJ EA provided that:

“The Employer shall only engage contractors and employees of contractors… who apply wages and conditions that are no less favourable than that provided for in this Agreement”

Clause 4.3(b)(v) was argued to be “objectionable” because it may prevent contractors from having the benefit of “workplace” rights contained in their own workplace agreements, in favour of the terms in the ADJ EA.

In rejecting this argument, SDP Acton endorsed the finding by the Full Bench in Asurco Contracting Pty Ltd v Construction, Forestry, Mining and Energy Union [2010] FWA 6180 that a clause requiring contractors to have certain pay and conditions merely supplemented the rights of the contractor and did not preclude the observation of any obligation in the contractor’s own workplace agreement.

With respect to the submission that the clause was discriminatory (namely, that it only permitted the engagement of contractors with a particular standard of employment conditions), SDP Acton held that the applicable discrimination provisions of the FW Act were concerned with discrimination on the basis of whether or not a person was “covered” by an enterprise agreement.  Clause 4.3(b)(v) did not specify that a contractor must be covered by such an agreement, rather it specified their minimum terms and conditions.

Right to enter premises

The ADJ EA also included a clause which (in general terms) gave union representatives an entitlement to enter a workplace where a dispute arose over the application of the ADJ EA.

Under section 194(f) of the FW Act, a term of an enterprise agreement will be an “unlawful term” if it provides for an entitlement to enter premises to investigate suspected contraventions of the FW Act or to hold discussions other than in accordance with Part 3-4 of the FW Act.

Previously, the Full Bench of FWA in Australian Industry Group v Pacific Brand Limited t/a Dunlop Foams [2010] FWA 4337 held that a provision of an enterprise agreement providing a general right of entry to union officials would be an “unlawful term” under section 94(f).  This was because it was broad enough to include union entry onto premises to investigate a suspected contravention of the FW Act or to hold discussions.

However SDP Acton distinguished this decision finding that the provision in the ADJ EA merely created an entitlement to entry for union officials representing an employee under the dispute resolution clause of the ADJ EA only, and not for a purpose referred to in Part 3-4, accordingly most of the clause did not contravene the FW Act.

However, SDP Acton did express reservations about the last paragraph in the clause which permitted union officials to enter the workplace if there was a dispute about entry to the workplace under the processes in ADJ EA.  SDP Acton concluded this might overlap with the rights to entry dealt with in Part 3-4 of the FW Act and he may require a written undertaking from ADJ to meet his concern before it could be approved.

Promotion of union membership

Clause 16.6 of the ADJ EA provides that:

“…Union membership shall be promoted by the Employer to all prospective and current Employees;

… The employees who are members of the ETU shall be encouraged to participate in Union meetings and exercise their democratic rights”

The employer organisations submitted that these provisions were objectionable on the basis that they breached section 350 of the FW Act which prohibits an employer from “inducing an employee to take or propose to take membership action of an industrial association”.  A person takes “membership action if the person becomes, does not become, remain or ceases to be, an officer or a member of an industrial association”.

SDP Acton held that “promoting” membership did not amount to “inducing”, and accordingly the provision was valid.  SDP Acton referred to the Workplace Relations Act 1996 which clearly distinguished between “inducing” and “encouraging” and that the Macquarie Dictionary defined “promote” as meaning “encourage”.