11 March 2015
Practice Group:
Labour, Employment
and Workplace Safety
Cutting Union Grass – Federal Court Endorses
Greenfields Project Carve-Outs
Australia Labour, Employment and Workplace Safety Alert
By Duncan Fletcher and James Parkinson
Introduction
The Full Court of the Federal Court (Court) has handed down its decision in MI&E
Holdings Pty Ltd v Communications, Electrical, Electronic, Energy, Information, Postal,
Plumbing and Allied Services Union of Australia [2015] FCAFC 15 (24 February 2015),
The decision clarifies that new enterprise agreements can validly carve-out future union
greenfields agreements which may be entered into during the life of the new enterprise
agreement.
The Court held that the Full Bench of the Fair Work Commission (Full Bench) fell into
jurisdictional error when it quashed Deputy President McCarthy's approval of MI&E's
(Company) Western Division Enterprise Agreement 2012 (Agreement).
Ultimately, the Court found a project carve-out clause in the Agreement was not
invalidated by virtue of the Fair Work Act 2009 (Cth) (Act) as the Full Bench erred in its
view as to the impact the Act had on such terms.
The Facts
The Company had decided to move away from 'project only' employment to employing a
permanent workforce with continuous short term contracts, and work which could be
performed by the Company's employees on a case by case basis. The aim was to
employ this permanent workforce for short periods of time between projects.
At the time of making the Agreement, only four employees were engaged as part of the
proposed workforce. However, the Company proposed a new agreement which would
facilitate its commercial objectives into the future. Therefore, the Agreement contained 70
classifications but the Company requested only the four employees working at the time to
approve it.
The unions argued that the Agreement's scope was too uncertain and that 200 of the
Company's employees on existing projects, which were subject to expired agreements,
should have been allowed to vote.
First Instance Decision
Deputy President McCarthy found that there was no uncertainty as to scope and
coverage. He said coverage was clear −it covered the four employees who voted on it
and clearly carved out those 200 employees engaged under union agreements, as well
as employees who will be subject to the terms of greenfields agreements entered into by
the Company and unions in the future.
Therefore, the Agreement was approved and unions' objections were dismissed.
Cutting Union Grass – Federal Court Endorses Greenfields Project CarveOuts
The Full Bench's Decision
The Full Bench decided that the Agreement should not have been approved. In
particular, the Full Bench found that the employees engaged at one of the sites covered
by one of the other union agreements should have voted on the Agreement. The
conclusion was based on an interpretation of the Act, that employees would immediately,
when the Agreement came into operation, be covered by it and it would potentially apply
to them.
It was on this basis that the Full Bench held that the Agreement should not have been
approved.
Full Court's Decision
The Court found that the interpretation of the Act, relied on by the Full Bench, was
incorrect and it had made an error in concluding that the Agreement should not have
been approved.
The reasoning of the Full Bench was that the carve-out clause was ineffective. Once the
agreement applied to employees, no other agreements (whether greenfields or
otherwise) could apply.
However, the Court held that the carve-out was quite clear in its operation and is
effective. It was expressed not to cover or apply to employees working at sites where any
greenfields agreement was in operation (or any successor to it) whether its nominal
expiry date had passed or not. It was, therefore, expressed not to cover the employees,
which the unions contended should have voted on it, as the Agreement expressly carved
these employees out of its scope. As the Agreement did not cover them, it could not
apply to them and, therefore, the reasoning of the Full Bench as to the impact the Act
had on the Company's carve-out clause was erroneous.
On this basis, the Court ordered that the Agreement's approval be remitted to the Full
Bench to be considered according to law.
Significance for Employers
This decision highlights that the process of arranging an enterprise agreement to carve
out future scopes of works on the basis that further greenfields agreements will be
entered into, if and when projects are awarded to a company, is a valid means of
industrial relations planning via the Act's agreement making mechanisms.
Importantly, it dispels the uncertainty surrounding the validity of project carve-out clauses
which contemplate further agreements to cover an organisation's workforce in the future.
Authors:
Duncan Fletcher
duncan.fletcher@klgates.com
+61.8.9216.0923
James Parkinson
james.parkinson@klgates.com
+61.8.9216.0948
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Cutting Union Grass – Federal Court Endorses Greenfields Project CarveOuts
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