Job security clauses under the Fair Work Act


Qantas and job security: What will FWA decide?

The Qantas dispute highlights the issue of the extent to which employees and their union representatives can press for inclusion of job security clauses in enterprise agreements.

Fair Work Australia (FWA) is about to undertake a process of making a workplace determination to break the impasse between Qantas and its unionised workforce. In effect, that is a process of compulsory arbitration to determine the unresolved issues that have not been settled to date by industrial negotiations.

One of the unresolved issues is the claim by some of the Qantas unions to include in the enterprise agreement terms that would require parity between the conditions afforded to employees covered by the agreement and those afforded to employees who are not covered by the agreement performing similar work in related businesses (e.g. Jetstar) or for third party contractors engaged by Qantas.

The Fair Work Act requires that terms contained in enterprise agreements be about ‘permitted matters’. As far as clauses concern the relationship between the employer and employees, they must pertain to the “relationship between an employer that will be covered by the agreement and that employer’s employees who will be covered by the agreement” (s 172(1)(a)).

At first glance this would appear to rule out many job security clauses. However, in a number of decisions FWA has indicated that it is prepared to accept that the conditions paid to employees of third party contractors engaged by the employer may pertain to the employment of the employer’s direct employees.

For instance in Asurco Contracting Pty Ltd v Construction, Forestry, Mining and Energy Union (2010) 197 IR 365, the Tribunal considered whether an enterprise agreement could impose obligations on the employer to:

• Consult with employees and their unions prior to the engagement of contractors who are engaged to perform similar work to employees to be covered by the proposed agreement; and

• Ensure the employees of contractors engaged by the employer were afforded terms and conditions that are no less favourable to the terms and conditions for employees.

The employer argued that the clause was not a “permitted matter” and that in seeking the clause, the union was not genuinely trying to reach an agreement. Therefore, the employer argued that the union should not be granted its application to conduct a protected action ballot.

The Full Bench found that clauses that “do not prohibit contracting arrangements or restrict or qualify the employer’s right to use contractors” may be about permitted matters in that they sufficiently relate to security of employment. They do so by ensuring that employers do not undercut the wages of employees.

More recently, the Full Bench in AiG v ADJ Contracting Pty Ltd [2011] FWAFB 6684 (“ADJ”) considered an issue that had been touched on in Asurco — whether such terms are objectionable on the basis that they offend the general protections contained in the Fair Work Act. AiG argued that a clause that provided job security measures similar to the clause in Asurco required the employer to refuse to engage contractors who were covered by workplace instruments that were less generous than the ADJ workplace instrument. This would, in AiG’s view, lead to a refusal to engage a contractor because the contractor is entitled to the benefit of a workplace instrument. AiG argued as a consequence that the Tribunal had invalidly authorised ADJ’s enterprise agreement.

The Full Bench rejected this argument and held that the clause did not require any consideration of existence or terms of any other workplace instruments. The Full Bench also held that the clause did not permit or authorise any breaches of the general protections provisions.

AiG also argued that job security clauses breach trade practices legislation. It was argued that the ADJ enterprise agreement would be a “contract or arrangement” that would prevent or hinder ADJ from acquiring the services of contractors and expose ADJ to liability under the Competition and Consumer Act 2010 (Cth) (C&C Act). The Full Bench stated that it was not persuaded that the ADJ clause constituted a “contract or arrangement” for the purposes of trade practices law that would expose ADJ to liability. However, the Full Bench left open that enterprise agreements could, potentially, be “contracts or arrangements” under the C&C Act.

AiG has indicated that it will seek to challenge the decision in ADJ in the Federal Court. This will provide an opportunity for the Court to authoritatively determine the arguments raised by AiG in ADJ. These issues are of great importance to employers in determining the scope of their ability to increase productivity by managing their labour supplies.

Of course, even if FWA concludes that the job security clauses sought by the Qantas unions are permitted matters, it still has to determine whether to include the clauses in its workplace determination. In deciding this issue, FWA must take into account any impact that the inclusion of the clauses will have on productivity within Qantas.

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Kimberly Hiller, PHR
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Kimberly Hiller, PHR

Interesting information. Will have to see the results that come through and look for FWA guidance.

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Job security clauses under the Fair Work Act


Qantas and job security: What will FWA decide?

The Qantas dispute highlights the issue of the extent to which employees and their union representatives can press for inclusion of job security clauses in enterprise agreements.

Fair Work Australia (FWA) is about to undertake a process of making a workplace determination to break the impasse between Qantas and its unionised workforce. In effect, that is a process of compulsory arbitration to determine the unresolved issues that have not been settled to date by industrial negotiations.

One of the unresolved issues is the claim by some of the Qantas unions to include in the enterprise agreement terms that would require parity between the conditions afforded to employees covered by the agreement and those afforded to employees who are not covered by the agreement performing similar work in related businesses (e.g. Jetstar) or for third party contractors engaged by Qantas.

The Fair Work Act requires that terms contained in enterprise agreements be about ‘permitted matters’. As far as clauses concern the relationship between the employer and employees, they must pertain to the “relationship between an employer that will be covered by the agreement and that employer’s employees who will be covered by the agreement” (s 172(1)(a)).

At first glance this would appear to rule out many job security clauses. However, in a number of decisions FWA has indicated that it is prepared to accept that the conditions paid to employees of third party contractors engaged by the employer may pertain to the employment of the employer’s direct employees.

For instance in Asurco Contracting Pty Ltd v Construction, Forestry, Mining and Energy Union (2010) 197 IR 365, the Tribunal considered whether an enterprise agreement could impose obligations on the employer to:

• Consult with employees and their unions prior to the engagement of contractors who are engaged to perform similar work to employees to be covered by the proposed agreement; and

• Ensure the employees of contractors engaged by the employer were afforded terms and conditions that are no less favourable to the terms and conditions for employees.

The employer argued that the clause was not a “permitted matter” and that in seeking the clause, the union was not genuinely trying to reach an agreement. Therefore, the employer argued that the union should not be granted its application to conduct a protected action ballot.

The Full Bench found that clauses that “do not prohibit contracting arrangements or restrict or qualify the employer’s right to use contractors” may be about permitted matters in that they sufficiently relate to security of employment. They do so by ensuring that employers do not undercut the wages of employees.

More recently, the Full Bench in AiG v ADJ Contracting Pty Ltd [2011] FWAFB 6684 (“ADJ”) considered an issue that had been touched on in Asurco — whether such terms are objectionable on the basis that they offend the general protections contained in the Fair Work Act. AiG argued that a clause that provided job security measures similar to the clause in Asurco required the employer to refuse to engage contractors who were covered by workplace instruments that were less generous than the ADJ workplace instrument. This would, in AiG’s view, lead to a refusal to engage a contractor because the contractor is entitled to the benefit of a workplace instrument. AiG argued as a consequence that the Tribunal had invalidly authorised ADJ’s enterprise agreement.

The Full Bench rejected this argument and held that the clause did not require any consideration of existence or terms of any other workplace instruments. The Full Bench also held that the clause did not permit or authorise any breaches of the general protections provisions.

AiG also argued that job security clauses breach trade practices legislation. It was argued that the ADJ enterprise agreement would be a “contract or arrangement” that would prevent or hinder ADJ from acquiring the services of contractors and expose ADJ to liability under the Competition and Consumer Act 2010 (Cth) (C&C Act). The Full Bench stated that it was not persuaded that the ADJ clause constituted a “contract or arrangement” for the purposes of trade practices law that would expose ADJ to liability. However, the Full Bench left open that enterprise agreements could, potentially, be “contracts or arrangements” under the C&C Act.

AiG has indicated that it will seek to challenge the decision in ADJ in the Federal Court. This will provide an opportunity for the Court to authoritatively determine the arguments raised by AiG in ADJ. These issues are of great importance to employers in determining the scope of their ability to increase productivity by managing their labour supplies.

Of course, even if FWA concludes that the job security clauses sought by the Qantas unions are permitted matters, it still has to determine whether to include the clauses in its workplace determination. In deciding this issue, FWA must take into account any impact that the inclusion of the clauses will have on productivity within Qantas.

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Kimberly Hiller, PHR
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Kimberly Hiller, PHR

Interesting information. Will have to see the results that come through and look for FWA guidance.

More on HRM