In Esso Australia Pty Ltd v The Australian Workers' Union [2015] FCA 758, the Federal Court upheld the validity of some, but not all, orders made by the Fair Work Commission (FWC) against industrial action at Esso's Longford Plant in Victoria.

The decision is a win for employers facing industrial action in some important respects:

  • Where the meaning of a notice of protected industrial action is unclear, the Court will look at what the employer's management reasonably understood the notice to mean, not what the author (here the AWU) had intended.
  • A claim against a union which has organised industrial action later found to be unprotected because of a defective notice (eg. a coercion claim) will not avoid liability if the union thought the industrial action was protected industrial action – the union will only avoid liability if the action was in fact protected industrial action.

However, there is a sting in the tail. Justice Jessup also decided that an FWC order against industrial action will only be effective against the industrial action being taken and that industrial action must be identified in the order.

Both parties have appealed the decision.

What happened?

There was industrial action at Esso's Longford Plant in Victoria including a ban on ‘de-isolation of equipment’ by operators at the refinery. The industrial action was part of enterprise bargaining and purported to be protected action.

Esso obtained s418 orders (that industrial action stop or not occur) from Deputy President Hamilton of the FWC on the basis that the industrial action failed to meet the notice requirements for protected action. For the most part, those orders were general in scope – applying to all industrial action.

Despite the orders, the industrial action continued.

Esso then brought a claim in the Federal Court arguing, amongst other things, that those s418 orders had been breached.

The AWU sought to defend the prosecution on a range of bases.

One of the major issues in the case was whether the notices of protected action covered the industrial action taken. The argument centred on the meaning of the phrase '[a]n indefinite ban on the de-isolation of equipment by employees … ' referred to in the AWU's notices of protected action. The AWU argued this had an accepted and well understood meaning at the site (ie. a process around returning equipment to service, including tasks known as air freeing and leak testing). Esso argued that the 'de-isolation of equipment' did not include the distinct tasks of air freeing and leak testing.

Justice Jessup ultimately preferred Esso's view of what the phrase meant. In doing so, His Honour emphasised the statutory requirement to provide specific information about what aspects of a company's operations will be affected by industrial action and, just as importantly, what aspects will not be touched by the intended action. Justice Jessup also stated that '... the question is not what the author [of the notice] intended, but what the addressee would reasonably have understood from the terms used in the notice.'

Based on Justice Jessup's conclusion as to what the specified ban on 'de-isolation of equipment' meant, he held that some of Deputy President Hamilton's s418 orders had been breached.

However, Justice Jessup went on to hold that the orders had to specify the nature of the industrial action, so only those orders which stated that specific industrial action should stop were held to be valid. Importantly, this is inconsistent with a line of Full Bench FWC authority including Health Services Union v Victoria Hospitals Industrial Association [2008] AIRCFB 311.

Justice Jessup also held that the AWU's organising of industrial action was intended to apply direct pressure to Esso to cause Esso to act otherwise than in the exercise of its own free choice in relation to making an enterprise agreement. In the absence of statutory "protection", that pressure was held to be illegitimate, meaning that the AWU had engaged in coercion and taken adverse action in contravention of the FW Act.

Why is it important?

First, the decision highlights the importance of employers carefully scrutinising protected action notices to:

  • confirm that the proposed industrial action notified was actually approved by the workforce
  • make sure the notice clearly identifies what industrial action will take place, and
  • monitor any industrial action which has been notified.

Secondly, the decision places the FWC in an awkward position about whether the s418 orders must specify the particular kind of industrial action which is being prohibited – rather than being general in scope. There is Full Bench authority which says this is not required, based on an express statement to this effect in section 418(3). In many cases this will be relatively straightforward. However, 'catch-all' references to 'industrial action as defined in s19 of the FW Act' or other general language is unlikely to be sufficient.

Finally, the case confirms that unless the action is actually protected, unions and their members will not be able to rely on the immunity under s415 of the FW Act. Significant claims for penalties and damages may exist if the action taken is not protected.

Both Esso and the AWU have lodged appeals in relation to the case.

One issue raised by Esso's appeal is whether, if the union has previously contravened a s418 order, this precludes protected action in the future. Justice Jessup ruled against this argument, following Justice Barker's decision in Australian Mines and Metals Association Inc v The Maritime Union of Australia [2015] FCA 677 on this point. The AMMA has also appealed Barker J's decision.

Watch this space.

A link to the decision is here.