Australia: Federal Court clarifies 'no further claims' clause in Toyota decision

In brief

• The Full Court of the Federal Court has today confirmed that a 'no further claims' clause in an enterprise agreement does not prevent an employer from using the provisions in the Fair Work Act 2009 (Cth) (FW Act) to vary an enterprise agreement.
• The Full Court of the Federal Court unanimously overturned the decision of Justice Bromberg of the Federal Court of Australia.¹
• The decision makes clear that parties to an enterprise agreement are not able to exclude themselves from access to the consensual variation processes set out in section 211 of the FW Act, and to the extent that they seek to do so through a no further claims clause, such a clause is invalid.
• The primary finding of the Full Court was summarised as follows:

Parliament having said that an enterprise agreement may be varied, and that the employer may put a request to its employees in that regard, a term of the agreement which states, or has the effect, that the employer may not so proceed must necessarily be inconsistent with or repugnant to the FW Act to that extent. [paragraph 97]

Background

On 12 December 2013, his Honour Justice Bromberg found that Toyota Motor Corporation Australia Limited’s (Toyota / the Company) request of its employees to vary its enterprise agreement to remove 'outdated and uncompetitive' provisions was a breach of the no further claims clause contained in clause 4 of its enterprise agreement.

Justice Bromberg effectively held that Toyota could only vary its enterprise agreement using a ‘two-stage’ process, whereby Toyota would need to firstly ask its employees to vary the Agreement to remove clause 4.

Appeal to Full Federal Court

Toyota appealed Justice Bromberg’s decision to the Full Court of the Federal Court.

The Full Court unanimously allowed the appeal, finding that:

• the proposals to vary the enterprise agreement were 'further claims' within the meaning of clause 4 of the enterprise agreement,
• the no further claims term in clause 4 was invalid on the ground of inconsistency with the express rights under the FW Act,

The Full Court ordered that Justice Bromberg’s finding that Toyota had contravened section 50 of the FW Act, and was liable for penalties, be set aside.

The decision by the Full Court is a vindication of Toyota’s decision to seek its employees’ approval of changes to its enterprise agreement which were intended to make the business more competitive. However, shortly after Justice Bromberg’s original decision Toyota announced its intention to close its Australian manufacturing operations in 2017. Although the Full Federal Court's decision will have no impact on Toyota’s operations, it does mean that the Company is no longer threatened by the prospect of penalties as a result of the breaches of the FW Act identified in Justice Bromberg’s original decision.

This article was written by Anthony Wood, Partner, Rebecca Mason, Senior Associate, and Catherine Eglezos, Solicitor, Melbourne.

Herbert Smith Freehills acted for Toyota Motor Corporation Australia Limited in this matter.

Endnotes

1. Toyota Motor Corporation Australia Limited v Marmara [2014] FCAFC 84.

More information

For information regarding possible implications for your business, contact a member of the Employment, pensions and incentives team.