Adverse action & common law contracts

Barnett v Territory Insurance Office [2011] FCA 968

Mansfield J considered whether a common law contract of employment was a workplace instrument for purposes of s 341(1) of the Fair Work Act 2009 (Cth) and found in the absence of more (modern award or enterprise agreement) it was not.


In this case, it is common ground that the contract of employment concerned the relationships between employers and employees so as to satisfy (b) of that definition. The issue is whether the common law contract of employment is an instrument recognised by a workplace law. The term “workplace law” is defined in s 12 as follows:

“Workplace law” means:

 (a) this Act; or

 (b) the Fair Work (Registered Organisations) Act 2009; or

 (c) the Independent Contractors Act 2006; or

 (d) any other law of the Commonwealth, a State or a Territory that regulates the relationships between employers and employees (including by dealing with occupational health and safety matters).


The claim is that the contract of employment is a “workplace instrument” because it is said to be an instrument recognised by the FW Act. The applicant did not say that (d) of that definition was relevant to his claim.


The parties are agreed that there is no present decision which directly informs the outcome of that question.


However, the applicant contends that significant assistance in its resolution is gained by reference to Jones v Queensland Tertiary Admissions Centre Ltd (No 2) [2010] FCA 399; (2010) 186 FCR 22 (Jones) and Australian Licensed Aircraft Engineers Association v International Aviations Service Assistance Pty Ltd [2011] FCA 333 (ALAEA case).


I do not consider that the decision in Jones is of any particular assistance in resolving the present issue. It involved a claim for contravention of s 340(1) of the FW Act. The applicant clearly brought herself within its ambit, because her workplace right arose under s 341(1)(a) and (b) and s 341(2)(e), by reason of her appointment as a bargaining representative of her employer under s 176(1) of the FW Act: see at [15], [45] and [59]. It was not necessary in that case for the Court to consider the expression “… a role or responsibility under a workplace law” in s 341(1).


The decision in the ALAEA case is more to the point. ALAEA was the union for a licensed aircraft maintenance engineer. On the employee’s behalf, it claimed that his employment had been terminated by taking adverse action in contravention of s 340(1) of the FW Act. There are a number of issues in the proceeding. The relevant one for present purposes was whether his written contract of employment was a “workplace instrument” for the purposes of s 340(1)(a). As in the present matter, if it was not, the employee would have had no workplace rights and his claim would have failed. That contract of employment had been entered into prior to the commencement of the FW Act on 1 July 2009. It was made during the regime under the Workplace Relations Act 1996 (Cth) (the WR Act). The Court (Barker J) found the contract of employment there under consideration was a “workplace instrument” recognised by a “workplace law”, namely the Fair Work (Transitional Provisions and Consequential Amendments Act) 2009 (Cth) (the Transitional Act), encompassed within (d) of the s 12 definition of “workplace law” in the FW Act. Under the WR Act, the contract of employment became an Individual Transitional Employment Agreement (ITEA), and consequently it came into operation only by its execution, its lodgment with the Workplace Authority Director and the issue of a receipt, or following the issue of a notice under the WR Act: see ss 340(1), 342(1), 345, 346M(1), 346Q(2) and 347(1) of the WR Act.


Barker J then decided that the Transitional Act concerned the relationship between employees and employers. The final step was to consider whether the ITEA was a “workplace instrument” because it was recognised by the Transitional Act.


His Honour’s conclusion is contained in [237] where he said:

The Transition Act, by recognising and giving legal effect to an ITEA, gives legal life to an agreement which itself prescribes the rights, duties and obligations governing an employment relationship and assumes its continued existence. Given that the agreement is properly characterised as one which regulates the relationship between the employee and the employer, so too, in my view, is a law which recognises and gives legal life to the agreement. Put another way, the law thus adapts the agreement to the circumstances of the employee and employer and, in that sense, regulates the relationship, or controls it. I am not satisfied that the legislative history recounted above and relied upon by the respondent requires any different view to be adopted.

20.Whilst not directly applying to the present circumstances, I think that decision illuminates the concept of recognition in the definition of “workplace instrument” in the FW Act. I shall refer to that a little later in these reasons.


The applicant’s contention in this case is a straightforward and accessible one. He says that the contract itself is recognised by the FW Act because the FW Act recognises that some employment relationships will continue to be governed by the terms of the contract itself, subject to their terms being suppressed or overridden by applicable provisions of the FW Act, such as the National Employment Standards (NES) prescribed by ss 43 and 61. Section 12 includes a definition of an “award/agreement free employee” as someone to whom neither a “modern award” nor an “enterprise agreement” applies. Section 43 moreover clearly recognises that there will be employees whose employment is covered by a “fairwork instrument” as defined in s 12, that is by a modern award, an enterprise agreement, a workplace determination or an FWA order. Each of those types of instrument will be instruments made under the FW Act, so as to be “workplace instruments”. The FW Act also recognises that there will be employees whose employment is not covered by such an instrument. In addition, and as already mentioned above, s 382 dealing with unfair dismissal creates additional rights which will apply to a person not covered by such an instrument made under the FW Act, including a person whose employment is covered simply by a contract of employment, provided the remuneration package does not exceed the “high income threshold”.


In the sense of recognition by acknowledging the existence of, and treating as valid, the terms of a contract of employment, subject to the operation of the FW Act, it may fairly be said that the FW Act recognises the contract of employment. This is the broad interpretation of the first limb of the definition of “workplace instrument” as favoured by the applicant. Such a proposition also, it is argued, should be accepted because it is consistent with the objects of the FW Act as expressed in s 3 and as explained in the Minister’s Second Reading Speech on the Fair Work Bill 2008 (House of Representatives, Hansard, 25 November 2008 at 11193).


However, in my judgment, the concept of recognition in the definition of “workplace instrument” does not have that expanded meaning. I do not think that such a meaning can properly be derived from the context and background to that expression, or having regard to other considerations to which I refer below.


The first reason for that conclusion is that, underpinning every employment relationship is a common law contract of employment that is a contract under which a person agrees to work for another person in return for remuneration. The existence, for example, of an award does not create the relationship of employer and employee. That arises from the agreement between the employer to engage, and the employee to be engaged in employment. The contract of employment may, subject to the law, specify the detailed terms and conditions of that employment relationship. If relevant statutory provisions or instruments such as an award or enterprise agreement sourced from a workplace law or the NES, are superimposed over that contract of employment, the agreed terms of the contract are either suppressed or unlawful to that extent. But the contract of employment itself stands. The legislative structures are built upon the premise of an agreement to employ and to be employed.


In Amalgamated Collieries of WA Ltd v True [1938] HCA 19; (1938) 59 CLR 417 the contract of employment of the respondent, who was a miner employed by the appellant, provided through an express oral term, that the respondent be paid consistent with the terms and conditions of an award made under the Industrial Arbitration Act 1912 (WA). Dixon J said the following at 431:

The right to payment of award wages is really a term imported by statute into the contract of employment, and imported independently of the intention of the parties … The distinction between express promise and obligation imputed by the statute relates only to the juristic source of the obligation….


Brennan CJ, Dawson and Toohey JJ in Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410 at 420 said of that passage:

…we do not understand Dixon J to be saying in that passage that “a term imported by statute into the contract of employment” loses its statutory character and becomes incorporated in the contract as one of its terms. On the contrary, he recognises the distinction between obligation originating in a statute and an obligation arising from a contract.


Their Honours then continued at 420:

A right to the payment of award rates is imported by statute into the employment relationship, which is contractual in origin, and, express promise apart, it is only in that sense that it can be said that award rates are imported into the contract of employment. The award regulates what would otherwise be governed by the contract. By award rates are imported as a statutory right imposing a statutory obligation to pay them. The importation of the statutory right into the employment relationship does not change the character of the right. As Latham CJ points out in his judgment in Amalgamated Collieries of WA Ltd v True…the legal relations between parties are in that situation determined in part by the contract and in part by the award. And as the judgment of the Privy Council in that case suggests, a provision in an award may also be made a term of the contract by agreement between the parties, but that is only to emphasis the distinction between an obligation imported by statute and one arising by agreement.


In R v Gough; Ex parte Meat and Allied Trades Federation of Australia [1969] HCA 71; (1969) 122 CLR 237 the award provision under consideration forbade, inter alia, harsh or unreasonable termination of employment in certain circumstances and harsh or unreasonable refusal of employment in certain other circumstances. Windeyer J described of that award provision (at 246) as operating to “create new rights as between master and servant superimposed on the common law incidents of their relationship.” See also Wheeler v Phillip Morris Ltd [1989] FCA 230; (1989) 97 ALR 282.


Consequently, as a contract of employment at common law must underlie every employment relationship to which the FW Act applies, it is unlikely that the concept of recognition by a “workplace law” was intended to refer to the contract itself. As noted above, there are clear expressions in the FW Act that assume an underlying existence of a contract of employment, the terms of which might, but will not necessarily be suppressed or superimposed by an instrument made under the FW Act. That is apparent more generally in various provisions in Pts 2-6, 2-7, 2-9 and 3-2 (including s 382).


In my view, the concept of recognition by a workplace law in the definition of “workplace instrument” has a more refined meaning than that contended for by the applicant. I accept the respondent’s contention that it is intended to refer to instruments which are given particular “legal effect” or “legal life” (terms used by Barker J in the ALAEA case in the passage quoted above) by a statutory enactment. The FW Act does not enliven the contractual rights of the parties as expressed within the contract of employment, unlike the ITEA which was considered in the ALAEA case and which was given legal effect by the Transitional Act. That case therefore informs the concept of recognition in relation to an instrument which was given effect by the Transitional Act and was encompassed within the definition of “workplace law”, particularly by (d) of that definition which extends to any other law which regulates relationships between employers and employees, and to avoid doubt includes laws dealing with occupational health and safety matters.


In my judgment the expression “an instrument made under or recognised by a workplace law …” in the definition of “workplace instrument”, in conjunction with the definition of “workplace law” means an instrument must be given legal significance by reason of a particular workplace law.


The definition of “workplace law” refers to enactments of a particular character. The specified enactments may give particular legal significance to an instrument or to a role adopted under an instrument. It is the status of the instrument or of the activity under an instrument to which attention is drawn by the particular “workplace law”. The mere fact of the existence of a contract of employment does not enliven the relevant concept of recognition contained within the definition of “workplace instrument”. If it were simply the existence of a contract of employment on which the particular enactment operated, the expression of “made under or recognised by” would have been unnecessary. It would have been easy to have indicated that s 340(1)(a) includes a right under a contract of employment. It is also more consistent with the grouping of “workplace law”, “workplace instrument” and “order made by an industrial body” in s 341(1)(a) that the reference to recognition by a workplace law in the definition “workplace instrument” should refer to an instrument that is given legal effect or legal life by a provision of an enactment. Those three sources of the existence of a “workplace right” may be taken to have a common type of origin, or genus, in either an enactment or some formal process provided for by an enactment. That, too, is consistent with the genus in the “workplace law” definition, as (d) of that definition is confined to enactments as distinct from private contracts. That interpretation also avoids the potentially idiosyncratic outcome that a written contract of employment might contain a term which would give rise to a workplace right (if the argument for the appellant were accepted), whereas an oral contract of employment providing for the same term would not because it could not be an instrument.


The Transitional Act repealed the WR Act. It nevertheless preserved the status of certain instruments called “transitional instruments” for its purpose. Those instruments can extend to instruments made under the WR Act. Instruments made under the WR Act do not qualify as workplace instruments because the WR Act has been repealed. But they are variously recognised under the Transitional Act, such that their legal effect continues in certain circumstances. The ALAEA case so determined: see per Barker J at [234], a conclusion reached after careful consideration of the competing contentions: see at [205]-[203]. That is a legislative device apparently also used when the Industrial Relations Act 1988 (Cth) was repealed and replaced by the WR Act. The legislative ancestor of the “workplace instrument” in the FW Act appears to be the corresponding “industrial instrument” in the WR Act: see Part 16 of the WR Act, including the definition of “industrial instrument” in s 779. It is not necessary to undertake a detailed analysis of the various forms of instrument made under the WR Act, or recognised by it, and which now continue to have effect by reason of the operation of the Transitional Act. The ALAEA case provides one illustration.


Senior counsel for the respondent stressed that s 340 of the FW Act is in Part 3-1 dealing with “General Protections” within Chapter 3 dealing with “Rights and Responsibilities and Employees, Employers, Organisations, Etc.” He also correctly pointed out that, in general terms, such provisions have consistently been directed to ensuring freedom of association of employees with industrial organisations and their protection from adverse consequences for action taken to secure and preserve collective benefits derived from that association. Wilcox J in Greater Dandenong City Council v Australian Municipal, Clerical and Services Union (2001) 111 IR 121 at [46]-[80] described that state of affairs in the legislation up to the WR Act. I shall not repeat it. When the definition of “industrial instrument” was inserted into the WR Act by the Workplace Relations and Other Legislative Amendments Act 1996 (Cth), the Explanatory Memorandum to the Bill clearly indicated that it did not include a common law agreement, but was confined to a Federal or State or Territory statutory instrument. Collier J in Jones at [62] referred to that history, and remarked that s 340 of the FW Act “extends protection much more broadly” than freedom of association and the rights of employees to join industrial organisations. That is so. I do not take her Honour’s observation to be directed specifically to the nature of an “industrial instrument” or of a “workplace instrument” but to the widened spectrum of “adverse actions” by s 340. The correspondence between the relevant wording of the two successive definitions in the WR Act and then the FW Act supports the conclusion that the FW Act did not intend to expand the scope of a “workplace instrument” simply by changing the designated name.


There are further provisions in the FW Act which, in my view, support that more limited construction.


Part 2-8 deals with transfer of business of an employer to another employer. When that occurs, Fair Work Australia may make orders in relation to the transfer of rights and obligations under a “transferable instrument” (which is defined in s 312 to be an enterprise agreement, a workplace determination or a named employer award under the FW Act). Sections 318(3), 319(3) and 320(4) each require Fair Work Australia to take into account, when considering the making of orders under those sections, among other things “the degree of business synergy between the transferable instrument and any workplace instrument that already covers the new employer”. That reference to “workplace instruments” is unlikely to apply to a contract of employment, because it would then contemplate the terms of a contract potentially being given some hierarchy in the balancing of employees’ rights when the general structure and purpose of the FW Act does not recognise that hierarchy. The proper construction of “workplace instrument” in this context does not purport to reduce an employee’s contractual rights, but it does prescribe terms and conditions of employment in various contexts so that those rights are not compromised by, or balanced against, any contractual rights. In a practical sense, too, a broader interpretation of “workplace instrument” as contended by the applicant could impose burdens on the new employer and Fair Work Australia of having to identify and take account of potentially large numbers of individual contracts and reach a different view about the business synergy of each of them with the terms of the transferable instrument. The use of the word “covers” in those provisions also supports my conclusion that “workplace instrument” does not contemplate a contract of employment, as it is an accepted use of that term or the term “coverage” to describe the scope of operation of a statutory instrument or of an instrument made under a statutory regime, such as an award (now a modern award) or an enterprise agreement. That understanding of the word “covers” is consistent with its usage in ss 48 and 53 of the FW Act, and in Sch 3, cl 3(1) of the Transitional Act.


Both parties referred to the purpose and objects of the FW Act, and the extrinsic materials comprising the Explanatory Memorandum to the Fair Work Bill 2008 (Cth) and the Second Reading Speech of the Minister in relation to the Fair Work Bill 2008 (Cth) (Hansard, House of Representatives, 25 November 2008 at 11189-11195). I do not consider that those materials inform the resolution of the present question. It is not a matter which is specifically addressed in those materials. It is clear that the FW Act was intended to prescribe workplace relations laws which are “fair to working Australians” and ensure a “guaranteed safety net” of conditions of employment: s 3(a) and (b) of the FW Act, and as the Explanatory Memorandum stated: “to protect persons against a broader range of adverse action”. However, that level of generality does not really assist in determining the answer to the present issue.


There is one additional matter to refer to.


A workplace instrument must have both the characteristics specified in the definition. I have assumed in this matter that any contract of employment does concern the relationships between employers and employees, so as to fall within (b) of the definition of “workplace instrument”. Section 23(b) of the Acts Interpretation Act 1901 (Cth) says that words in the plural import the singular, unless the contrary intention appears. There was no detailed submission that the use of the plural in (b) of the definition of “workplace instrument” should be construed as demonstrating that it should only apply where the particular instrument concerns the relationships between employers and employees rather than the relationship between a particular employer and a particular employee, so as to exclude a contract of employment from its scope. That question did not arise in either Jones or in the ALAEA case. In Jones the relevant contractual terms involved the employee in fact being accountable for the relationships between the employees of that employer by the designated workplace bargaining representative role. In the ALAEA case, the conduct which was under consideration concerned allegations that the adverse action was taken because the particular employee and other employees had expressed concern about underpayment of himself and a number of other employees having regard to the amount of overtime which they were collectively working. Even if I am wrong in my conclusion, I do not wish to be taken as accepting that, for the purposes of the definition, the mere fact that a contract of employment necessarily deals with the relationship between that employee and that employer it should necessarily follow that that agreement satisfies (b) of the definition of “workplace instrument”.


It is plain enough from the FW Act that it operates within a framework of a series of relationships between employers and employees. Within that relationship it prescribes minimum terms and conditions through the NES, modern awards and national minimal wage orders: s 3(d) and (f) including reference to the NES in Pt 2.2 of the Act which prescribes minimum terms and conditions that apply to all national system employees.


Section 5(2) and (3) provides:

(2) Pt 2-1 has the core provisions for the Chapter. It deals with compliance with and interaction between the sources of the main terms and conditions provided under this Act – the National Employment Standards, Modern Awards and Enterprise Agreements.

(3) Pt 2-2 contains the National Employment Standards, which are minimum terms and conditions that apply to all national system employees.


Section 5(4) deals with modern awards, s 5(5) deals with enterprise agreements, and s 5(6) deals with workplace determinations, all of which are then dealt with in separate parts of the Act. Section 12 then defines a “fair work instrument” as meaning a modern award, an enterprise agreement, a workplace determination or an FWA order. It is clear that a “fair work instrument” is not the same as a “workplace instrument”, which is apparently a wider concept because it contemplates the recognition of the workplace instrument under, relevantly, the FW Act or another prescribed enactment whereas a “fair work instrument” is confined to being made under a workplace law such as the FW Act.


It is also clear enough to say that the FW Act has regard to the fact that not all employees or national system employees will be employed under a “fair work instrument”. As mentioned, s 12 defines “an award/agreement free employee” as an employee to whom neither a modern award nor an enterprise agreement applies. That status as an award/agreement free employee is also recognised in s 43 of the FW Act.


For those reasons, in my judgment the applicant’s contract of employment with the respondent is not a “workplace instrument” for the purposes of s 341(1) of the FW Act. The consequence of that conclusion is that the application itself is to be dismissed. I so order. The parties are agreed that it is appropriate to make no order for costs.


Brisbane Barrister – David Cormack

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