A Full Federal Court has found that an employee collective agreement made under the now repealed Workplace Relations Act 1996 (WR Act) was invalid, because the scope of the agreement was confined by reference only to the date the employees commenced employment.

Implications for employers

This decision has implications for employers where:

  • the employer is bound by an employee collective agreement made under the WR Act; and
  • the agreement purports to cover only a particular group of employees within a larger group who perform the same work.  

It is unlikely that an agreement made under the Fair Work Act 2009 (FW Act) would be affected by this decision, as when approving agreements Fair Work Australia is required to be satisfied that the group of employees covered by the agreement was “fairly chosen”. 

For those employers who may be affected, the decision makes it clear that when making an agreement under the WR Act to cover only part of a business, what constitutes “part of the business” must be a recognised “section, segment or constituent of the business”.  It is not possible to classify a particular group of employees as constituting “part of the business”, while excluding other employees performing the same work.

On this basis, WR Act agreements which apply to employees on the basis of characteristics other than distinct geographical, operational or organisational factors could be challenged and invalidated.  An employer in this position might find itself exposed to, for example, claims for failure to comply with the otherwise applicable award during the relevant period.  If a WR Act agreement has not already passed its nominal expiry date, the employees may seek to commence industrial action in support of a new agreement prior to that date.

Background

Pilbara Iron Company (Services) Pty Ltd (Pilbara Iron) entered into an employee collective agreement (Agreement) for its rail operations network.  The Agreement applied only to employees who performed a particular type of work and who were hired after July 2008.  It did not cover employees who performed work of the same kind, and at the same location, but who had been hired before July 2008. 

CFMEU’s claim

The CFMEU challenged the validity of the Agreement, on the basis that it did not meet the requirements of section 327 of the WR Act.

Section 327 of the WR Act provides (emphasis added):

“An employer may make an agreement (an employee collective agreement) in writing with persons employed at the time in a single business (or part of a single business) of the employer whose employment will, or would but for the operation of an ITEA that is passed its nominal expiry date, be subject to the agreement.”

The CFMEU claimed that a group of employees engaged after a particular date could not be described as “part of a single business”.

The decision at first instance

At first instance, the Federal Court rejected the CFMEU’s claim. The Court ruled that although the legislation required an agreement to be made with employees in a part of a single business, it was not necessary for the agreement to be made with all employees performing the same type of work.

The CFMEU appealed to the Full Federal Court

Full Federal Court decision

The Full Federal Court took a different view, holding that the identification of the “part of a single business” must be separate from the identification of the persons employed in it.  The part of a single business must itself be a “recognisable section, segment or constituent of the business”.  This would normally be identifiable by reference to distinct geographical, operational or organisational factors.

In the present case, the group of employees to which the Agreement related was not the entire category of persons employed in the “recognisable section, segment or constituent” of the business.  Accordingly, the Agreement was not validly made.

The Full Federal Court issued an order declaring the Agreement had never come into operation, as the Agreement did not meet the requirements of section 327 of the WR Act. 

The High Court’s position

The High Court recently refused special leave to appeal the Full Federal Court’s findings, thereby entrenching the Full Federal Court decision.

Construction, Forestry, Mining and Energy Union v Pilbara Iron Company (Services) Pty Ltd [2011] FCAFC 91

Pilbara Iron Company (Services) Pty Ltd v Construction, Forestry, Mining and Energy Union [2012] HCATrans 37 (10 February 2012)