Practical Consequences of the Electrolux Decision

08 September 2004

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The decision of the High Court in Electrolux Home Products Pty Ltd v Australian Workers’ Union & Ors [2004] HCA 40 (Electrolux) deals with the subject-matter of claims that can be pursued through "protected" industrial action and that can be included in an agreement certified under the WR Act.

Media commentary on this decision has focused upon its impact in limiting the types of claims that employees and their unions can pursue through protected industrial action. However the decision has other far-reaching consequences, including the likelihood that many existing enterprise agreements were not properly certified by the Australian Industrial Relations Commission (Commission) and that the Commission will be unable to certify new agreements that contain provisions dealing with union-related matters and other issues that do not "pertain to" the relationship between employer and employee in the requisite sense.

Background

In the course of EBA negotiations between Electrolux and the AWU, AMWU and CEPU in 2001, the unions made a claim for a bargaining agents' fee clause to be included in the proposed EBA. This clause required Electrolux to advise prospective employees that non-union members were required to pay a fee of $500 per annum to the unions and to provide a direct debit facility for these payments. Electrolux rejected this claim.

Section 170LI of the Workplace Relations Act 1996 (WR Act) provides that for an application to be made to the Commission for certification of an agreement under Part VIB of the Act, there must be an agreement, in writing, "about matters pertaining to the relationship between an employer...and all persons who, at any time the agreement is in operation, are employed in a single business, or a part of a single business, of the employer and whose employment is subject to the agreement."

Section 170ML of the WR Act allows employees, their unions and employers during a bargaining period and after giving the prescribed notice of intention to take industrial action, to take "protected" industrial action for the purpose of supporting or advancing claims made in respect of a proposed certified agreement.

Section 170NC of the WR Act prohibits a person taking or threatening industrial action with the intent to coerce another person to agree to making a certified agreement. This prohibition does not apply to protected action.

In September 2001 the unions initiated bargaining periods, gave notice of intention to take industrial action and organized industrial action in furtherance of their EBA claims, including the claim for a bargaining agents' fee. Electrolux commenced proceedings in the Federal Court arguing that the unions' EBA claims included matters that did not pertain to the relationship between employer and employee and so could not be included in a certified agreement, and consequently that the industrial action was not protected.

At first instance, Merkel J of the Federal Court accepted Electrolux's argument and made declarations that the industrial action was not protected and constituted coercion in breach of section 170NC of the WR Act. The unions appealed this decision and in June 2002 the declarations were set aside by the Full Court of the Federal Court. Electrolux appealed the Full Court’s decision to the High Court of Australia.

The High Court’s Decision

The majority in the High Court found that the subject-matter of the bargaining agents' fee clause did not pertain to the relationship between employer and employee within the meaning of section 170LI of the WR Act and so could not be included in an agreement to be certified under the WR Act. In doing so, the High Court rejected a line of authority in the Federal Court and Commission to the effect that an agreement could contain some "non-pertaining" subject-matter, provided that the agreement considered as a whole could be characterised as an agreement pertaining to the relationship between employer and employee.

Strictly, the binding authority of the High Court's decision is restricted to the bargaining fee issue. Given that claims for bargaining fees were prohibited by amendments to the WR Act in 2003, this aspect of the decision is of little practical consequence. However, the reasoning by which the majority reached its decision has important and far-reaching implications for employers and unions and this reasoning is likely to followed in future cases in the courts and the Commission.

Consequences of the Decision for existing and new Agreements

One consequence of the reasoning adopted by the majority in the High Court is that an agreement that includes any discrete and substantive subject-matter that does not pertain to the relationship between employer and employee, cannot be certified as an agreement under Part VIB of the WR Act.

It seems to follow that any agreement containing "non-pertaining" subject-matter that was purportedly certified by the Commission is not a valid certified agreement for the purposes of the WR Act. If this is correct, such an agreement would not be enforceable under the WR Act and employees, their unions and employers may be able to initiate bargaining periods and take protected action in pursuance of a new agreement during the term of the improperly certified agreement.

The approach taken by the majority in the High Court indicates that the question as to what subject-matter does or does not pertain to the relationship between employer and employee for the purposes of a certified agreement, is to be answered by reference to the principles applied in determining what subject-matter could be the subject of an industrial dispute for the purposes of making an award of the Commission. There is extensive case law on this question stemming back to the earliest days of the Federal conciliation and arbitration system.

The problem with this case law is that it does not yield clear principles that can be applied to determine with confidence whether particular subject-matter does or does not pertain to the relationship between employer and employee (or can be regarded as ancillary to such subject-matter). Subject-matter that is relatively common in enterprise agreements but might fall outside the relationship between employer and employee includes:

• deduction of union dues (almost certainly not a "matter pertaining") and possibly other provisions for deductions that are to be made from wages and remitted to third parties;
• entitlements of union delegates and trade union training leave;
• encouragement/facilitation of union membership;
• notification to unions of employee details;
• union rights of entry to workplaces;
• requirements to contribute to trust funds and other schemes for securing employee entitlements;
• limitations on the use of contractors and labour hire agencies and on the terms and conditions of contractor and agency employees; and
• use of Australian-made goods.

Whether any particular subject-matter does or does not pertain to the relationship between employer and employee, and consequently whether such subject-matter can be included in a Federal certified agreement, must await authoritative determination by the courts.

Employers with existing agreements containing subject-matter that may not pertain to the relationship between employer and employee should be aware that their agreements may not have properly been certified, and so may not be enforceable under the WR Act or operate to exclude further bargaining and protected action.

Employers who are currently negotiating new agreements or have finalised new agreements that are yet to be certified, should review their agreements for "non-pertaining" subject-matter to minimize the possibility of being refused certification by the Commission, or of an agreement purportedly being certified but later being found to be invalid in the light of subsequent case law on "matters pertaining".

Employers with existing or new agreements that may contain "non-pertaining" subject-matter should seek legal advice.

Consequences of the Decision for Protected Action

A further consequence of the reasoning adopted by the majority in the High Court is that industrial action taken in furtherance of enterprise bargaining claims that include claims in respect of "non-pertaining" subject-matter, cannot be protected action for the purposes of the WR Act. Consequently, employees, their unions and employers who take industrial action in furtherance of such claims are exposed to legal proceedings, including proceedings for coercion under the WR Act.

Employers should carefully review enterprise bargaining logs of claims to try to identify "non-pertaining" subject-matter that may result in industrial action being "unprotected" and consequently give the employer access to legal remedies in the Commission and courts.

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