Australia: High Court decision clarifies industrial action payment rules in the Fair Work Act

Summary

• In Construction Forestry Mining & Energy Union v Mammoet Australia Pty Ltd, the High Court of Australia has clarified that the prohibition on making ‘payments to employees in relation to the total duration’ of protected industrial action in the Fair Work Act 2009 (Cth) (FW Act) does not extend to the provision of non-monetary benefits such as subsidised accommodation.¹
• The effect of this decision is that employers must now ensure that they continue providing non-monetary benefits (such as the provision of subsidised accommodation) to employees, that they would normally be entitled to, during periods that the employees take protected industrial action.
• Otherwise, an employer may be in breach of the general protections provisions of the FW Act, and potentially in breach of the relevant enterprise agreement. 

What was the background to this decision?

The relevant employees were ‘fly-in-fly-out’, and the employer provided employees with either suitable accommodation (by paying a third party who owned the accommodation), or paying a specified living away from home allowance (LAHA). A group of employees commenced a 28 day period of protected industrial action in the form of a complete stoppage of work. The employer had told employees that if they engaged in the action, they would not be provided with accommodation or paid LAHA during the period of the action.

The Construction, Forestry, Mining and Energy Union (CFMEU) commenced proceedings against the employer, and argued that the removal of accommodation and the LAHA was a contravention of the enterprise agreement, and was also adverse action that was taken because employees exercised a workplace right to participate in protected industrial action (and therefore a breach of the general protections provisions of the FW Act). The employer argued that the provision of accommodation was a ‘payment’ within the meaning of section 470 of the FW Act, and that there was no adverse action because the action was ‘authorised’ by section 470 of the FW Act.²

In late 2012, Justice Gilmour of the Federal Court of Australia upheld the first instance decision of Federal Magistrate Lucev³ that the provision of accommodation was a ‘payment’ for the purposes of section 470 of the FW Act, and therefore the employer did not breach the general protections provisions of the FW Act.⁴ Justice Gilmour concluded that a ‘payment’ under section 470 should not be construed narrowly, and extended to ‘payments in kind’.  This included the benefit of accommodation provided ‘to enable the employees to be in a position to perform their employment and earn their pay.’

The CFMEU appealed the decision of Justice Gilmour to the High Court of Australia.

What were the findings of the High Court?

In a unanimous decision, Justices Crennan, Kiefel, Bell, Gageler and Keane allowed the appeal against Justice Gilmour’s decision and remitted the matter back to the Federal Circuit Court.

The High Court considered that the purpose of section 470 is to prohibit ‘strike pay’ – that is, payments by an employer to ‘make up’ in whole or part wages not earned by an employee during periods of industrial action. The High Court concluded that for there to be a ‘payment’, there needed to be a ‘payment in money’ to the employee. This was supported by the use of the words ‘pay’ and ‘payment’ in other parts of the FW Act.⁵

While the High Court considered that the provision of accommodation by an employer to an employee is likely to involve the transfer of an economic benefit from the employer to the employee, the transfer of that benefit did not mean that the provision of accommodation was a ‘payment’ to the employee of that sum. As the provision of accommodation was not a payment of money, nor provided in relation to the non-performance of work during the period of industrial action, the High Court concluded that it was not a ‘payment made in relation to the total duration of the industrial action.’⁶ 

What does this mean for employers?

This decision is particularly important for employers that have fly-in-fly-out arrangements, and for workplaces that rely on the provision of non-monetary benefits such as subsidised accommodation. The High Court’s decision confirms that employers must continue providing non-monetary benefits, that employees would normally be entitled to, during periods of protected industrial action, to avoid breaching the general protections provisions of the FW Act.

The High Court’s decision is consistent with the Fair Work Act Review Panel’s recommendation in 2012 that the provision of accommodation should not constitute ‘payment’ under section 470 of the FW Act. The Fair Work Act Review Panel was concerned that the first instance decision of Federal Magistrate Lucev undermined the capacity for employees who live away from home for work in accommodation provided by their employer to take protected industrial action, and had significant potential to create practical problems for employers when employees take short periods of industrial action.

In its decision, the High Court did state that whether the prohibition is intended to capture any given ‘payment’ may depend on the circumstances of the case. For example, a payment by way of a gift might be caught of the circumstances were such to show that it was made by way of recompense for wages not earned.

For specific advice on whether specific types of payments that your company pays to its employees fall within the prohibition in section 470 of the FW Act, please contact us.

This article was written by Paul Burns, Partner, and Wendy Fauvel, Solicitor, Melbourne.

Endnotes

1. Construction Forestry Mining & Energy Union v Mammoet Australia Pty Ltd [2013] HCA 36
2. Section 342(3) of the FW Act
3. CFMEU v Mammoet Australia Pty Ltd [2011] FMCA 802
4. CFMEU v Mammoet Australia Pty Ltd [2012] FCA 850
5. Construction Forestry Mining & Energy Union v Mammoet Australia Pty Ltd [2013] HCA 36, at [47] – [49], [52], [59]
6. Ibid, at [46], [61]

More information

For information regarding possible implications for your business, contact a member of our Employment Pensions and Incentives team.