In Esso Australia Pty Ltd v The Australian Workers Unions [2017] HCA 54, the High Court of Australia held that:

  • Where a person contravenes an order in relation to an enterprise agreement or matter arising from bargaining, that person remains precluded from taking protected industrial action after the expiry of the contravened order, until the conclusion of the relevant bargaining. This is so, even if the order concerns minor procedural matters and even if the breach is quickly rectified.
  • Where a person takes action with the intent to coerce another person in breach of section 343 or 348 of the Fair Work Act 2009 (Cth) (FW Act), the intent or belief of the person with respect to lawfulness of the action will not be relevant to determining whether the conduct amounts to coercion.

Below we have summarised the basis of these findings and some of the practical effects for employers.

Protected industrial action and the effect of breaching an order

This decision considered bargaining and industrial action in relation to the replacement of several enterprise agreements between Esso Australia Pty Ltd (Esso) and the Australian Workers Union (AWU). Protected industrial action was organised by the AWU and taken by its members from early 2015. The protected action was described in the relevant notices issued by the AWU as bans on the “de-isolation of equipment”. There was a subsequent dispute between Esso and the AWU as to whether “de-isolation of equipment” included equipment testing, ‘air freeing’ and leak testing.

In March 2015, Esso obtained a section 418 order from the Fair Work Commission that required the AWU to cease organising certain industrial action, namely the bans on equipment testing, ‘air freeing’ and leak testing. The order was set to expire on 20 March 2015. Despite the section 418 order, the AWU continued to organise bans on equipment testing, ‘air freeing’ and leak testing between 6 March and 17 March 2015.

Section 413 of the FW Act provides the common requirements that must be satisfied for industrial action to constitute protected industrial action. Relevant to these proceedings, section 413(5) requires that, in order to undertake protected industrial action, relevant bargaining representatives and employees:

… must not have contravened any orders that apply to them and that relate to, or relate to industrial action relating to, the agreement or a matter that arose during bargaining for the agreement.

Esso sought declarations in the Federal Court of Australia that, pursuant to section 413(5), the AWU’s breach of the section 418 order in March 2015:

  • rendered all industrial action organised by the AWU after the breach to be unprotected; and
  • precluded the AWU from organising any further protected industrial action in relation to bargaining for the replacement agreements with Esso.

Esso’s application was denied by the Federal Court and a majority in the Full Court of the Federal Court of Australia. These denials were primarily based on findings that only orders that were currently on foot (i.e. had not yet expired), and that had been contravened, could preclude protected industrial action.

Esso appealed the decision to the High Court of Australia arguing that the use of the words “apply to” solely referred to the identification of the party that the orders applied to and did not mean that an order had to be current so as to preclude protected industrial action.

The High Court, by a 4 – 1 majority, found in favour of Esso on the following bases:

  • The use of the words “must not have contravened” at the outset of section 413(5) were a clear shift from a previous equivalent in the Workplace Relations Act 1996 (Cth) which used the words “has complied with”. The High Court held that the change in wording signalled a clear intention to express that the FW Act provision applies to the past contravention of orders.
  • The subdivisions within section 413 include explicit changes in tense between ‘present tense’ and ‘present perfect tense’ (such as 413(5)). The use of ‘present perfect tense’ in 413(5) indicates a present requirement to have complied with a past obligation. The High Court held that the notable change in tense between subdivisions is indicative of an intentional shift between each requirement.
  • The FW Act is predicated on its subjects complying with the rules therein. An interpretation that allowed non-compliance with orders, regardless of their period of operation, is unlikely to have been the intention of legislature.
  • There is nothing clear in section 413(5) to suggest that an order must be currently on foot to preclude protected industrial action. In contrast, section 413(7) uses the explicit words “in operation” to make clear that the subdivision refers to an order that is on foot.

Further, the Court was not persuaded by the AWU’s arguments that Esso’s position amounted to ‘double punishment’. Rather, it was held that protected industrial action is not a ‘right’ that can be taken away as punishment, rather it is a ‘privilege’ available to those who comply with the requirements of the FW Act.

The matter was remitted to the Federal Court to determine Esso’s claims for pecuniary penalties and compensation arising from unprotected industrial action.

Effect on employers

The practical impact of this decision for employers who are bargaining or are planning to bargain is significant. Key considerations are:

  • the enhanced value of seeking orders to stop and prohibit unprotected industrial action;
  • the importance of monitoring conduct in bargaining and seeking bargaining order where an employee representative fails to comply with their obligations;
  • the importance of monitoring and recording non-compliance with orders made by the FWC.

The effect of intent on coercive conduct (or lack thereof)

In the same proceedings, the AWU appealed findings of coercion in relation to the work bans on equipment testing, ‘air freeing’ and leak testing organised between 6 March and 17 March 2015.

Sections 343 and 348 of the FW Act, in effect, prohibit a person from organising or taking, or threatening to organise or take, any action against another person with an intent to coerce the person (or a third person) to:

  • exercise or not exercise, or propose to exercise or not exercise, a workplace right;
  • exercise, or propose to exercise, a workplace right in a particular way; or
  • engage in industrial activity.

Pursuant to the common law, for conduct to amount to ‘coercion’ under the FW Act, the relevant conduct must be unlawful, illegitimate or unconscionable. The AWU argued that its conduct in organising the relevant work bans between 6 March and 17 March 2015 did not amount to coercion because the relevant AWU officials believed that the conduct was protected industrial action (and therefore believed that the conduct was lawful).

The High Court rejected the AWU’s argument, holding that an understanding of the lawfulness of the conduct was not relevant to determining whether conduct amounted to coercion. Rather, it was sufficient to establish that a person had an intent to coerce where:

  • the person intended to negate the choice of another person; and
  • had actual knowledge of the circumstances that made his or her conduct coercive.