In a sobering decision for employers, the Fair Work Commission (Commission) has ruled that an employer had no authority to remove from employees their right to limited private use of the employer’s motor vehicles, as this was a change to an employment condition and contrary to a ‘no further claims’ clause in the applicable enterprise agreement: Australian Municipal, Administrative, Clerical and Services Union v North East Water [2014] FWC 6922.

Facts 

North East Water has a Fleet Management Policy (Policy) that allows certain employees to use motor vehicles owned and maintained by North East Water for various purposes, including limited private use. The Policy stated that provision of a vehicle for limited private use was 'a reward for exceptional performance' and 'subject to periodic review'. North East Water had sought to phase out this part of the Policy as a result of legislative changes to fringe benefit tax which would increase North East Water’s costs.

The North East Water Enterprise Agreement 2011 (Enterprise Agreement) contained a no further claims clause. This prohibited any claims from being made in relation to 'salary increases or conditions of employment sought or granted, except for those granted under the terms of this Agreement' during the life of the Enterprise Agreement.   North East Water contended that changing the Policy was within its managerial prerogative as workplace policies did not form part of the bargaining that led to the Enterprise Agreement.

Commissioner Wilson rejected this argument, despite recognising that:

  • there were no specific provisions in the Enterprise Agreement that dealt with the use of motor vehicles
  • the Full Federal Court has held on a number of occasions that there is no legal obstacle to an employer varying a policy provided that an applicable enterprise agreement does not deal with the specific policy.

Commissioner Wilson held that North East Water’s intended change constituted a further claim under the Enterprise Agreement, in that it attempted to change a condition of employment. This was prohibited by the no further claims clause in the Enterprise Agreement, given its wording.

In deciding that the limited private use provision of the Policy was a condition of employment, the Commission noted that two of the employees who would be affected by its removal specifically received the benefit of this Policy, instead of an increase in salary, when promoted into supervisory roles. This meant the entitlement to limited private use was, in the Commission's view, a 'condition of employment', and thus within the scope of the 'no further claims' clause.

North East Water was found to have no capacity to implement its proposed change to the Policy, other than by seeking to vary the Enterprise Agreement using the procedures set out in the Fair Work Act 2009, or by negotiating a new enterprise agreement once the Enterprise Agreement had passed its nominal expiry date.

What does this mean for employers?

Unless successfully appealed, this decision will have a significant impact on an employer’s ability to withdraw or modify benefits provided to employees under a policy.    To date, the general position has been that if a matter is not dealt with by a term of an applicable enterprise agreement, then (subject to individual contractual constraints) an employer can exercise managerial prerogative to vary or implement policies dealing with that matter.  If this decision is correct (and it must represent the law unless and until it is overturned) then great care should be taken in drafting 'no further claims' clauses. Moreover, if an employee has clearly received a benefit specifically in return for taking on extra duties, it is likely that benefit will be less susceptible to dilution or removal without offending a no extra claims clause.