Australia: Full Bench upholds termination of enterprise agreement decision

The Full Bench of the Fair Work Commission's decision in CFMEU v AGL Loy Yang Pty Ltd t/a AGL Loy Yang [2017] FWCFB 1019 has preserved the decision of Deputy President Clancy to terminate AGL’s Loy Yang Power Enterprise Agreement 2012 (the EA). A summary of the decision is below.

The key takeaway from the decision is that, in determining whether it is appropriate to terminate an enterprise agreement, the Commission will consider an enterprise agreement clause in which an employer commits to maintain certain conditions until a replacement enterprise agreement is made, if the employer appears to intend on departing from its commitment.

Summary

• The EA covered around 578 employees working at the Loy Yang A Power Station and adjacent open cut brown coal mine in the Latrobe Valley.
• On 24 January 2017, Clancy DP’s decision and order were stayed pending hearing and determination of an appeal lodged by the CFMEU ([2017] FWC 504).
• At first instance ([2017] FWCA 226), and on appeal, the unions took issue with employer’s conduct during bargaining and the impact termination would have on the employees (reduction in pay/loss of benefits) and the general community (as in Griffin Coal).
• Of the eight grounds of appeal, the Full Bench only upheld those related to clause 4 of the EA, however in light of an extended undertaking offered by AGL, the Full Bench did not consider this was sufficient to disturb the initial decision to terminate.
• The detail below focuses on the consideration of clause 4, rather than the other grounds of appeal.
• The key lesson is that where an EA includes a representation or a commitment by the employer to maintain certain conditions until a replacement EA is made, the Commission will consider this clause (regardless of its legal effect) in determining whether it is appropriate to terminate an EA on the basis that the employer may intend on departing from its representation or commitment.

Clause 4 of the EA

Clause 4 of the EA provided that:

“…It is the intention of the bargaining parties that this Agreement shall continue to apply after its nominal expiry date until replaced by a new Agreement. In the event that the Company seeks to terminate the Agreement after its nominal expiry date, the following conditions will be maintained by the Company until a replacement agreement is made…”

The conditions related to (for example) wages and classification rates, hours of work, allowances and penalty rates and overtime.

In the first hearing, AGL advanced its case on the basis that clause 4 would have no legal effect if the EA was terminated. It gave an undertaking that, in substance, involved keeping the commitment contained in clause 4 for a period of three months following termination.

At first instance, Clancy DP said at [160]:

“I am cautious about the proposition of the unions that it would be inappropriate to terminate the agreement because it would allow AGL Loy Yang to avoid the undertaking it previously agreed to in clause 4 of the Agreement. This is because it could be concluded that clause 4 is of no effect and should be given no weight (see paragraph [134] above). Ultimately, I am not persuaded that the undertaking weighs in favour of a finding that it is not appropriate to terminate the Agreement.”

On appeal, the CFMEU argued that Clancy DP erroneously discarded AGL’s failure to comply with its commitment in clause 4. Although AGL submitted that clause 4 was not 'discarded' by the Commission and, in any event, had no legal effect, it offered an extended undertaking which, in substance, would require it to continue to apply the provisions referred to in clause 4 for a period of three years from the date of the Full Bench decision.

The Full Bench accepted the CFMEU’s submission that Clancy DP erred in his consideration of the clause 4 issue. The Full Bench said at [40] that 'regardless of its legal effect, clause 4 constituted a representation by AGL Loy Yang to its workforce at the time that the Agreement was approved that it would maintain the identified conditions in the event that its termination was sought after its nominal expiry date had passed'.

In light of this, the Full Bench held it was relevant to consider whether it would be appropriate for termination to be granted on the basis of AGL’s 'apparent intention to depart from the commitment embodied in clause 4'.

Ultimately, the Full Bench was comforted by the extended undertaking offered by AGL in the appeal which it said had the practical effect of '[removing] clause 4 as a relevant consideration in the proceedings, and [rendering] the error we have identified in the Decision immaterial to the ultimate outcome'.

Other grounds of appeal

The Full Bench rejected each of the other grounds of appeal saying (in relation to some) that the CFMEU’s case appeared to rest on the fact that Clancy DP’s decision did not contain a concluding paragraph in which he referred to all the circumstances he had taken into account, and express himself as having weighed the matters, and come to a certain conclusion. It said that 'to uphold such a submission would be highly artificial'.

This article was written by Jane Quinlan, Solicitor, Melbourne. For more information on this topic please contact: