On appeal, a Full Bench of the Fair Work Commission has decided that the Commission had no jurisdiction to retrospectively alter the contracts of 35 fixed-term employees whose employment contracts did not comply with the relevant enterprise agreement.
Implications for employers
This decision confirms that the Commission has no jurisdiction to retrospectively alter employment contracts, even where there is non-compliance with requirements set out in an enterprise agreement.
Monash College Pty Ltd (Monash College) runs a program called the ‘Monash University Foundation Year’ (MUFY) which provides a pathway to university for international students from countries which do not have recognised final year school results, by providing a qualification recognised for the purpose of entry into an Australian university. Since 2015, it was the practice of Monash College to employ most teachers in the MUFY program on a fixed-term basis. The majority of teachers on fixed-term contracts had a previous fixed-term contract immediately prior to their current contract. At the date of the decision at first instance, there were 35 MUFY teachers employed on fixed-term contracts.
Pursuant to clause 9.2 of the Monash College Proprietary College Ltd (Monash University Foundation Teaching Staff) Agreement 2012 (Agreement), a teacher who is employed on a fixed-term contract must have explained in their letter of engagement the reason for their fixed-term employment. Clause 9.6 of the Agreement provides the reasons for which a teacher may be employed on a fixed term basis, for example for specific tasks or to meet peak student enrolments.
In December 2015, there were 22 teachers employed on fixed-term contracts which did not specify the reason for their appointment. On 1 December 2015, Monash College issued replacement contracts for these 22 employees which included a new provision setting out the reason for their appointment. Contracts issued after that date met the requirement in clause 9.2 insofar as they specified the reason for the fixed-term engagement.
The first issue for determination was whether the 35 fixed-term employees currently employed by Monash College were actually employed for the reason stated in their fixed-term employment contract as required by clause 9.6 of the Agreement. Secondly, whether Monash College contravened clause 9.2 of the Agreement by not including any reason for fixed-term employment in the contracts of the 22 fixed-term employees engaged prior to December 2015. Thirdly, whether Monash College cured the breach of clause 9.2 when it re-issued contracts of employment for those 22 employees.
In relation to whether the 35 fixed-term employees were employed contrary to clause 9.6, Monash College argued that there should be subjective assessment of the decision-maker’s reason for appointing the employee on a fixed-term contract. The Independent Education Union of Australia (IEU) argued that the clause should be given its plain meaning and the reason must actually objectively exist.
Decision at first instance
At first instance, Commissioner Bissett found that the 22 employees employed in December 2015 were employed in contravention of clause 9.2, given that their employment contracts did not specify a reason for their fixed term employment. Further, Commissioner Bissett found that the replacement contracts of employment did not cure this breach.
Commissioner Bissett decided that objective assessment of the reason for fixed-term employment is required for clause 9.6. When assessed objectively, Commissioner Bissett was not satisfied that the 35 fixed-term employees were employed for the reason set out in their employment contract, and therefore the contracts breached clause 9.6 of the Agreement.
The Commissioner then turned her mind to the appropriate remedy. The Commissioner compared the circumstances of the case to those in National Tertiary Education Industry Union v University of Melbourne  FWA 1202 (University of Melbourne decision) and adopted the reasoning and conclusions of Commissioner Roe. In the University of Melbourne decision it was found that imposing a continuing contract as a resolution to a dispute about an inappropriate fixed-term appointment would not be inconsistent with the clause in the enterprise agreement which enabled the employer to offer fixed-term employment.
Commissioner Bissett found that there was nothing in the Agreement which would be inconsistent with imposing continuing contracts in the place of the fixed-term contracts provided to 35 MUFY teachers. There was found to be no reason to assume that, had fixed-term contracts not been available (because the reason for appointment was not a reason set out in clause 9.6), Monash College would not have otherwise employed the teachers.
The Commissioner issued a decision pursuant to section 739 of the Fair Work Act (FW Act) to the effect that, had Monash College acted in accordance with the Agreement, it would have appointed 35 of its MUFY teachers on an ongoing basis. The Commissioner directed the parties to consult on how to give effect to this decision.
Decision on appeal
Monash College appealed the decision on the basis that the Commissioner erred in construing clause 9.6 of the Agreement, and subsequently erred in finding that the 35 fixed-term teachers would have been appointed on an ongoing basis in the event that Monash College had acted in accordance with the provisions of the Agreement.
In granting permission to appeal, Vice President Catanzariti, Deputy President Hamilton and Commissioner Cirkovic (Full Bench) were of the view that the appeal raised important questions regarding the interpretation of enterprise agreements in circumstances where the Commission’s discretion to alter existing contracts is an issue in dispute.
The Full Bench narrowed the appeal to three of the four errors alleged by Monash College. Firstly, that the Commissioner erred in her fact-finding task. Secondly, that the determination was made without precedent and was beyond the power of the Commission. Thirdly, that even if the source of power for such a drastic determination did exist (which Monash College disputed), the discretion to make such an order miscarried.
Monash College contended that to the extent Commissioner Roe relied upon the University of Melbourne decision to reach her determination, the decision at first instance was wrongly decided. Further, it argued that such a radical approach is contrary to the principle set out in the High Court decision in Byrne v Australian Airlines (1995) 185 CLR 410 that the industrial relations regime is separate from and independent of the ordinary law of contract. Monash College argued that the determination had retrospective effect and should be quashed.
In response, the IEU submitted that the Commissioner had done no more than interpret the Agreement, and that given the process for engaging fixed-term employees under the Agreement was not followed, the only other proper basis for the employment of the 35 teachers was as permanent employees. The IEU argued that the contracts were not changed with retrospective effect nor did the contractual relationships change, given the Commissioner merely directed the parties to consult to give effect to the decision. It relied on CFMEU v AIRC (2001) 203 CLR 645 to contend that the Commission’s power to arbitrate disputes and make determinations is not constrained by the constitutional powers invested in the Commission by the FW Act.
In considering the matters raised in the appeal, the Full Bench accepted the evidence of the Chief Executive Officer of Monash College, Joanne Mithen, that in the event all current fixed term staff were deemed to be ongoing employees, given the impact this would have on the MUFY business and loss of flexibility in managing staffing requirements, she would not have appointed any of these teachers as permanent employees.
The Full Bench found that the weight of evidence provided no support for the conclusion that Monash College would have employed the 35 teachers on ongoing contracts of employment in the event that all fixed-term employees were deemed to be ongoing employees. The Full Bench were of the opinion that by finding the commencement date of the ongoing employment would have been the date the employees commenced their original fixed-term contract, the Commissioner in effect retrospectively transformed the contracts.
The Full Bench agreed with Monash College that the jurisdiction relied on by the Commissioner for her determination was not supported by precedent, nor was it provided for in the FW Act or in the Agreement. For this reason, the Commissioner lacked jurisdiction to arrive at the determination that she reached.
Monash College was found to have demonstrated that the Commissioner did not properly exercise the discretion vested in the Commission and as such, the Full Bench upheld the appeal and quashed the original decision.
Monash College Proprietary Limited v Independent Education Union of Australia  FWCFB 4858