Manajemen | Fakultas Ekonomi Universitas Maritim Raja Ali Haji 2003 1 (13)

MAJOR TRIBUNAL DECISIONS IN 2002
JOE CATANZARITI,* YASEEN SHARIFF** AND SIMON BROWN***

T

he authors review some of the important decisions of the last year, including those
relating to redundancy liabilities, transmission of business, union bargaining fees
and the parameters of unprotected industrial action. In their review, the authors note
the increasing propensity of industrial actors to opt for legally enforced resolutions ahead
of industrially negotiated outcomes. The authors also comment that a failure to have regard
to such an increasingly legal approach in industrial relations may hold the potential to
unravel corporate and commercial transactions. In concluding, the authors express the
view that while some of the pressing legal decisions of 2002 remain unresolved, one
certainty is that the role of third party tribunals in abating the increasing trend of
legalism will continue to be debated.

INTRODUCTION
The last twelve months have been noteworthy in that the preferred ‘resolution’
of the parties in many cases was to be found by way of legally-enforced remedies,
often pursued within the jurisdiction of the Federal Court of Australia, rather
than that of the Australian Industrial Relations Commission (the AIRC).

It may be that this tendency towards resolution before the Federal Court
evinces a lack of faith in the conciliatory powers of the AIRC. The reactions of
the ‘parties’ to the present system is perhaps reflective of the confined powers
of the AIRC to resolve industrial disputes. Nowhere was this more evident
than in the AIRC’s s. 127 jurisdiction, where its return to work ‘orders’ were
observed to have been disregarded in several instances throughout 2002.
If 2002 has highlighted the need to reassess the role of the AIRC, the same
must certainly be said of the consequences of the ongoing dispute regarding
the legitimacy of union bargaining fees. In a continuing struggle, the Australian
Manufacturing Workers’ Union (AMWU) and the Australian Workers’ Union
(AWU) have been at the forefront of a long-running campaign to provide for
compulsory union bargaining fees in certified agreements. However, employers
and employer groups have passionately opposed the legitimacy of bargaining fees.
As a result, the ideological lines have been drawn, with the union movement
appearing to be steadfast in its struggle for public acceptance of the contribution
that unions make to improving the terms and conditions of all workers. The level
of contest surrounding the issue suggests that clarity regarding its legal aspects
will not prevail until it is tested in courts of higher authority, or the legislature
sees fit to pass amending provisions.

* Joe Catanzariti, BA LLB, is a partner of national law firm Clayton Utz. Email: j.catanzariti@
claytonutz.com ** Yaseen Shariff, BEc (Social Sciences) LLB (Hons), is a solicitor at national law
firm Clayton Utz. Email: yshariff@claytonutz.com *** Simon Brown, BEc is a law clerk at national
law firm Clayton Utz.

THE JOURNAL OF INDUSTRIAL RELATIONS, VOL. 45, NO. 2, JUNE 2003, 166–183

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Increasing legalism and the respective roles of the Commission and unions are
by no means new industrial phenomena; neither is ‘transmission of business’,
which has been a frequent and vexed issue requiring judicial deliberation in
recent years. In the past year, the Federal Court examined the extent to which a
transmission of an award or certified agreement can be found in circumstances

where two parties are not directly related to each other in a commercial
transaction.
The propensity for the Workplace Relations Act 1996 (Cwlth) (the Act) to unravel
commercial transactions through its complex transmission of business provisions
has been well-documented. What has been notable about the decisions in 2002,
however, is that issues peripheral to a transmission of business have had the same
effect. As the Federal Court has illustrated, failure to give due consideration to
fundamental tenets of employment law, such as award interpretation and employee
consent to a transfer of employment, may lead to either the complete collapse
of the intended transaction, or at least the frustration of its purpose.
Each of these issues was a discrete and significant industrial matter in 2002.
Moreover, they provide a composite picture of past trends, the undercurrents of
which will no doubt flow on into future years.

REDUNDANCY

ISSUES UPON A TRANSMISSION OF BUSINESS

In the seminal case on the issue of redundancy, the Termination, Change and
Redundancy Case,1 the Full Bench of the AIRC stated that it ‘did not envisage severance payments being made in cases of succession, assignment or transmission

of a business.’2
The subsequent case law has been in line with that statement. For instance,
in Shop Distributive and Allied Employees’ Association of NSW v WD & HO Wills
Holdings Ltd,3 WD & HO Wills merged with Rothmans, offering its employees
either continued employment with the merged entity or with another employer,
Imperial. The employees were assured that both the merged entity and Imperial
would honour and continue their current leave and other entitlements. Two of
WD & HO Wills’ former employees refused the offer of employment with
Imperial and sought a redundancy package instead. The Industrial Relations
Commission of New South Wales (NSWIRC) held that the offer of employment with Imperial constituted ‘reasonable alternative employment’, so that WD
& HO Wills was under no obligation to make redundancy payments to its two
former employees.
This apparently well-established position was brought into question by the
Federal Court in Construction, Forestry, Mining and Energy Union v Amcor Limited,4
the facts of which are as follows.
Amcor decision
Amcor operated a packaging business and a fine paper manufacture business, with
paper mills in New South Wales, Queensland and Tasmania. The workers at the
paper mill operated under the Australian Paper/Amcor Fibre Packaging Agreement
1997 (the Certified Agreement), made between Amcor, the CFMEU and another

union.5

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Between June 1998 and March 2000, Amcor sold its paper mills to its wholly
owned subsidiary, Paper Australia Pty Ltd. While Paper Australia operated the
mills, the workers therein were still employed by Amcor.
In February 2000, Amcor announced the pending separation of the packaging
business from the fine paper manufacturing business. This process required
the transfer of the paper mill workers from the employment of Amcor to that of
Paper Australia. Therefore, it was proposed that Amcor terminate the employment of its employees, and that those employees then be offered employment
with Paper Australia. This is in fact the course of action that eventuated, and

Paper Australia’s Letter of Offer to the paper mill employees provided for
the preservation of all benefits, ‘including continuity of service for all
employment-related purposes, salary/wage, superannuation and accrued leave
entitlements.’6
The vast majority of the paper mill workers accepted the offer of employment
with Paper Australia. Under their new employer, the employees performed identical work to that which they had performed under Amcor, and on identical terms
and conditions.
However, under clause 55.1.1 of the Certified Agreement binding Amcor
and the CFMEU, Amcor was obligated to make severance payments to its
employees ‘should a position become redundant and an employee subsequently
be retrenched.’7 The CFMEU contended that the termination of the employee’s
employment by Amcor amounted to a retrenchment for the purposes of clause
55 and therefore entitled the employees to severance pay.
Definition of ‘redundant’
His Honour defined redundancy, in its industrial sense, as a situation in
which ‘the employee is no longer required by his (or her) employer because
the employer no longer has a need for the work that the employee was
performing’.8
Justice Finkelstein also referred to the long-standing assumption that an
employee whose employment is terminated because the business in which he or

she works has been sold has effectively been made redundant. According to his
Honour, the fact that the old employer has been able to arrange for continued
employment with the new employer is irrelevant9...a retrenchment is a retrenchment, irrespective of circumstance which may alleviate the effects of that retrenchment after the fact.
With respect to the definition of retrenchment, his Honour relied upon authorities to the effect that retrenchment means no more than that the employee has
been dismissed.10 In the context of the judgement, however, it is clear that
retrenchment refers to a dismissal that is predicated upon the position having
become redundant. Accordingly, the two conditions which would give rise to
Amcor’s obligation to make severance payments under clause 55.1.1 were met in
this case. That is, the employees’ positions became redundant in the sense that
they were no longer required by Amcor, and the employees were subsequently
retrenched. Therefore, Amcor was held liable to make severance payments in
respect of its employees’ retrenchment, despite their employment having, for

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all intents and purposes, continued uninterrupted and with all entitlements
intact.
Significance of the Amcor decision
At first glance, Justice Finkelstein’s judgement seems irreconcilable with the
Termination, Change and Redundancy Case and with WD & HO Wills. The former
stands as authority to the effect that a transmission of business will generally not
give rise to severance liabilities, and the latter as authority to the effect that no
redundancy liabilities will be incurred in the event that reasonable alternative
employment is offered. Yet here was a situation in which severance payments
were found owing upon a transmission of business with reasonable alternative
employment, or more accurately, with a replacement employer offering identical
employment on identical terms, save for the identity of the employer.
However, when the Amcor decision is considered in its factual context, its significance is qualified. Clause 55.1.1 of the Certified Agreement, upon which the
decision was based, provided for redundancy payments in the event that an
employee’s position became redundant and the employee was subsequently
retrenched. It was resoundingly silent on the issue of a retrenched employee who
is provided with alternative employment upon a transmission of business or other
transaction. In contrast, the provision drafted by the AIRC in the Termination,
Change and Redundancy Case expressly stated that redundancy payments were not

to apply to a transmission of business in which similar or suitable employment
was offered by the transmittee.11 This point was alluded to by Justice Finkelstein
himself, where his Honour acknowledged that his decision:
. . . may be seen by some as contrary to commonsense and unfair . . . because on
one view there is no reason why employees who, for all practical purposes, have
maintained continuous employment should be given the benefits that accrue on
redundancy.12

However, in keeping with the legalistic tone that characterised industrial
relations in 2002, the Court’s decision turned upon a strict and unswerving
application of the law. In this case, the result hinged upon contractual construction and the intention of the parties when drafting the Certified Agreement. In
the absence of a clearly identifiable intention of the parties that redundancy
entitlements would not vest upon a retrenchment necessitated by a transmission
of business, the Court was constrained from imputing such an intention.
Put into perspective, the Amcor decision does nothing to change the law with
respect to redundancy liabilities upon a transmission of business, but a great deal
to remind practitioners of the potential consequences of giving inadequate
consideration to the law and its application. It should also be noted that Amcor
has lodged an appeal from Justice Finkelstein’s decision, with the Full Court
hearing listed for 21 February 2003.

Not only can employment law issues give rise to significant and unanticipated
costs, as the Amcor decision illustrates, failing to appreciate the relevant legal issues
can result in the frustration of the objectives of a given transaction, or even in
the complete unravelling of the transaction itself. McCluskey v Karagiozis13

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provides a prime example, in the context of a purported transfer of employees
from one group company to another.

UNILATERAL

TRANSFER OF EMPLOYMENT

The common law has long espoused the principle that a person is at liberty to
choose for whom the benefit of his or her services shall be offered. A related
principle, and one which the common law is equally vehement in upholding, is
that the right to an employee’s services cannot be transferred from one employer
to another without the employee’s assent.14
However, this was the very situation with which the Federal Court was
confronted when the controllers of the Coogi group of companies decided to
transfer 240 employees between certain companies within the group. None of
the employees was consulted prior to the transfer, and the only indication that
a transfer had in fact occurred was the appearance of the new employer’s name
on the employees’ payslips and group certificate.15
The effect of the purported transfers was that the employees were ostensibly
in the employment of various shelf companies, which were unable to pay the
employees’ accrued entitlements once the Coogi group went into administration.
The administrator therefore sought directions from the Federal Court under s.
447D(1) of the Corporations Act 2001 (Cwlth) as to which companies were to be
treated as the employer of the affected employees for the purposes of administration and payment of accrued entitlements.16
Applying Nokes v Doncaster, Justice Merkel found that because there was no
consent to the transfer of employment, either express or implied, the employees’
employment with their original employers never ceased and, therefore, employment with the purportedly new employers never commenced.17 Consequently,
for approximately two years, the shelf companies paid the salaries, taxes and other
payments in respect of employees who were not actually in their employment.
Further, the employees’ accrued entitlements were to be paid by their actual
employers.
How to effect a valid transfer
The obvious implication to be drawn from this case is that the right of an
employee to choose for whom he or she works can not be subjugated to the
interests of the employer, and an employer may not simply assume that it has
its employees’ consent to a transfer of employment. However, the case also
raises interesting issues with respect to express verses implied consent to a
transfer of employment.
Justice Merkel held that, generally, the purported transfer of employment was
ineffective without the consent of the employees. However, his Honour made
an exception for an employee in the position of Human Relations Officer. The
reason for making this distinction was that, unlike the other employees, she was
aware of the group restructure. While this point was not explicitly stated in
the decision, presumably the effect of this knowledge was that it could not be
unequivocally concluded that the Human Relations Officer had not consented
to the transfer, either by way of express or implied consent.

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For larger corporations, it may be impractical and financially not viable to
seek the express consent of its employees to a corporate restructure involving
a change of employer. Unfortunately, there is a dearth of authority giving
guidance as to appropriate means of giving effect to a transfer of employment
on the basis of implied authority. Perhaps the most instructive passage in
this regard is that of Viscount Simon L.C., where it was said by way of
obiter, that:
I do not see why there should be any great practical difficulty in the old company
announcing to its work-people that the undertaking is about to be transferred to a
new company, giving the necessary notice to terminate existing engagements and
informing the wage-earners that the new company is prepared to re-engage them
on the same terms, and that continuing service after such a date will be taken as
acceptance of the new offer.18

Of course, in the context of contemporary workplace relations, the course of
action recommended by Viscount Simon L.C. may give rise to significant termination liabilities in the form of severance payments. Whether this is the case will
depend largely upon the terms of the relevant industrial instrument, and as the
Amcor decision illustrated, careful scrutiny should be given as to the potential
consequences of any transmission, retrenchment and re-engagement.

TRANSMISSION

OF BUSINESS:

THREE

DEGREES OF SEPARATION?

The decisions reviewed thus far have considered matters incidental to a transmission of business, namely termination liabilities upon a transmission and consent as a prerequisite to a transfer of employment. However, in a potentially
significant decision,19 the Federal Court has handed down a judgement that goes
to the very essence of the Act’s transmission of business provisions.
In Health Services Union of Australia v Gribbles Radiology Pty Ltd,20 Justice Gray
ruled that there need not be a direct transaction between two successive employers for a transmission of business to have occurred pursuant to s. 149(1)(d). Indeed,
Justice Gray found that one employer was the successor, assignee or transmittee
of the other, despite there having been virtually no interaction between the two.
The circumstances which led to that finding are as follows.
Gribbles decision
Region Dell Pty Ltd runs a number of medical clinics, trading as Heritage Clinics,
which operate radiography services, among other medical services. Region Dell
at no time employed the staff who operated the radiography clinic, but rather,
engaged service providers to operate the radiography equipment that it owned.
Until 31 August 1997, Southern Radiology was the provider of the radiography
services at Heritage Clinic. As of 1 September 1997, MDIG took over the provision of those services. Both Southern Radiology and MDIG were respondents
to, and therefore bound by, the Health Services Union of Australia (Private
Radiology—Victoria) Award 1993 (the Award). Furthermore, the four staff who
were party to these proceedings were employed first by Southern Radiology
and then by MDIG.

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Towards the end of August 1999, the respondent to these proceedings
(Gribbles) took over the provision of the radiography services at the Heritage
Clinic. While Gribbles employed the same four staff members who had been
employed by MDIG, it had little if any contact with the former employer.
Importantly, Gribbles was not a respondent to the Award, so for it to be bound
by the terms of the Award, Gribbles had to be the successor, assignee or
transmittee of the business of MDIG, or a part thereof, pursuant to s. 149(1)(d).
This was of relevance in that, if Gribbles was bound by the Award, then it
would be liable for the severance pay of each of the four employees, the amount
of which would be based upon the period of service each employee had with
MDIG.
The issue at hand was, as Justice Gray made clear from the outset:
. . . when one employer ceased to provide a service at a particular location and another
employer immediately began providing that service at that location, with the same
employees and equipment, whether the second employer was the successor, assignee
or transmittee of part of a business.21

In coming to the conclusion that there need not be a direct transaction between
the parties for a transmission of business to have occurred, his Honour
necessarily had to deal with two decisions of the then New South Wales
Industrial Commission.
In Bransgrove v Ward and Syred,22 it was said that:
To constitute successorship there must be some definite legal nexus or privity between
a respondent to the Federal award who is the predecessor, and a successor who then,
by virtue of the Commonwealth statute, becomes bound by the award. The existence of that nexus or privity must be evidenced either by direct proof of a transaction or by facts from which the conclusion may be drawn of some transference
of right to the business from the predecessor to the successor.23

In Bransgrove, the proprietor of a cinema ceased to run the facility, and some
days later another party commenced the operation of the cinema. Since there
had been no dealings between the parties, the Industrial Commission held that
the latter was not the successor to the former.24
In Barrow v Masonic Catering Co-operative Society Limited,25 a caterer was
contracted to provide catering services to the Masonic Temple. When that
contract came to an end, the trustees of the Masonic Temple contracted
with another party to provide the catering services. The second contractor
purchased plant and stock from the previous caterer, and took over three of
its employees, however such transactions were not considered sufficient to
constitute a transmission of business.26 Clearly, the application of these
decisions of the Industrial Commission would lead inexorably to the conclusion
that there had been no transmission of business upon the facts in Gribbles.
However, Justice Gray noted that he was not bound to follow either decision.
Instead, his Honour considered himself bound by the reasoning of the Full
Federal Court in North Western Health Care Network v Health Services Union of
Australia.27

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In that case, Justices Nicholson and Madgwick stated that the terms ‘successor,
assignee or transmittee’ should not be given a technical meaning, but rather should
be construed broadly.28 Justice Gray reaffirmed that s. 149(1)(d) should be given
a liberal interpretation, and also considered that the section should be construed
in accordance with its purpose. According to his Honour, that purpose is:
. . . to prevent the deprivation of the rights of employees under awards by the
simple device of substitution of the employer by another employer not named in
the award or party to the industrial dispute in settlement of which the award was
made.29

His Honour opined that, should s. 149(1)(d) be construed such that there must
be a direct transaction between two employers to constitute a transmission of
business, the very purpose of the provision would be easily evaded.
For instance, it would be a simple matter for the first employer to transfer the
right to conduct the business to a third party, not an employer, who could then
transfer it to the new employer. There would be no direct transaction between
the two employers, but the result would be precisely the same as if there
had been. The presence of a third party cannot of itself exclude a factual situation
from amounting to a succession, assignment or transmission. The use of the word
‘successor’ in s 149(1)(d) suggests that there is not a need for a direct transaction.
It is possible, even in the technical sense of the word, for one person to be the
‘successor’ of another without any direct transaction between them.
In the present case, it seems that Region Dell was the effective controlling party
in determining who was to provide the medical imaging services at the Clinic.
The decision of Region Dell to enter into a contract with the respondent, in place
of MDIG, had the effect of transferring the business of providing medical
imaging services at the Clinic from MDIG to the respondent. That was its
practical effect. What had been part of the business of MDIG became part
of the business of the respondent.30
Implications
In recent years, consideration of the Act’s transmission of business provisions
has focused on the test to be applied in determining whether the business of the
previous employer is sufficiently akin to that of the new employer, such that the
latter might rightly be considered the successor, assignee or transmittee of
the former.31
Upon the facts in Gribbles, however, that issue simply did not arise. It was
common ground that the business conducted by Gribbles, and by MDIG
before it, were identical in almost every respect. The issue at hand in the
present case related to the process by which Gribbles came to be conducting
the radiography services that had previously been provided by MDIG. As such,
Justice Gray was called upon to consider a line of authorities which, to some
extent, ‘chart the outer limits of the concept of a successor, assignee or
transmittee.’32
Upon his Honour’s interpretation of the authorities, a direct transaction
between two employers is not a necessary precondition to a transmission of

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employment. We have only a short wait before the appeal is heard by the Full
Bench of the Federal Court, at which time we shall see whether Justice Gray’s
decision becomes a binding authority to that effect.
On the topic of binding authority, the continued disputation with respect
to the certification of enterprise agreements containing union dues/bargaining
fees clauses has seen various members of the AIRC depart from what might
have appeared to be binding authority from the Full Court of the Federal
Court.

UNION

BARGAINING FEES CLAUSES IN CERTIFIED AGREEMENTS

In an article reviewing some of the significant industrial issues of 2001,33 attention was given to the Federal Court decisions in Transfield Pty Ltd v Automotive,
Foods, Metals, Engineering, Printing and Kindred Industries Union34 and Electrolux
Products Pty Ltd v Australian Workers Union (Electrolux No. 1).35 Those decisions
concerned, inter alia, whether an agreement that contains a term that does not
pertain to the requisite employment relationship is capable of being certified under
Division 2 of Part VIB of the Act, so as to form the basis of protected industrial
action.
In that article, it was stated that further litigation on the matter could be
expected in 2002. As it happens, that conclusion seems something of an understatement! The AIRC and the Federal Court have produced a litany of decisions
on the topic, yet despite the consideration it has received, it is safe to say that
the issue is far from conclusively determined.
In light of the number of cases on point, it is beyond the scope of this essay
to outline the facts of each case. Suffice to say that each decision involved an
attempt to certify an enterprise agreement containing clauses, which, arguably,
are unrelated to the relationship between an employer and its employees who
would be bound by the agreement. Most commonly, the disputation centred
around the inclusion of ‘union bargaining fees’ clauses, alternatively known as
‘union dues’ clauses, an example of which is as follows:
The employer shall deduct from an employee’s wages union membership fees
and forward such fees to the appropriate Branch of the Union on a regular basis,
provided that the employee has authorised the employer in writing to do so.36

The issues for consideration were, generally, whether such clauses pertained
to the requisite employment relationship, and if not, whether the inclusion of
such clauses in an agreement rendered it incapable of certification by the
Commission.
Round 1: Electrolux No. 1
Section 170LI is entitled Nature of Agreement, and provides that for an
application to be made to the Commission under this Division, there must
be an agreement, in writing, about matters pertaining to the relationship
between:
(a) an employer who is a constitutional corporation or the Commonwealth; and

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(b) all persons who, at any time when the agreement is in operation, are employed
in a single business, or part of a single business, of the employer and whose
employment is subject to the agreement.
Justice Merkel interpreted s. 170LI as precluding an agreement from
being certified if it contains a clause which does not pertain to the employment
relationship, either directly or incidentally, and which is ‘substantive, discrete
and significant’.37 However, if a term within an agreement is ‘ancillary or
incidental to, or a machinery provision relating to, a matter pertaining to the
employment relationship’, then the agreement containing that term may still
be certified.38
His Honour found that the unions’ claim for the payment of a bargaining
agent’s fee was a substantive, discrete and significant matter that did not pertain
to the requisite relationship under s. 170LI. Far from being a matter pertaining
to the requisite employment relationship, Justice Merkel held that the bargaining
agent’s fee would, in fact, create an entirely new relationship:
The relationship between the employer and the employee that would be created were
the claim acceded to is, essentially, one of agency; Electrolux is to contract with its
employees on behalf of the relevant union, as its agent. The agency so created is
for the benefit of the union, rather than for the benefit of the employee upon whom
the contractual liability is to be voluntarily imposed. The resulting involuntary
‘bargaining’ agency is, as a matter of substance, if not form, a ‘no free ride for
non-unionists’ claim, rather than one by which the union is undertaking its
traditional role of representing the interests of union members in respect of the
terms and conditions of employment of employees.39

Consequently, the industrial action undertaken by the unions was in support
of claims contained in a proposed agreement that did not pertain to the relationship between Electrolux and its employees, and the industrial action was therefore unprotected.40
Round 2: Atlas Steels No. 141
This round of litigation took place in the AIRC, and was decided on the basis
that Deputy President Ives considered himself bound by the decision of the
High Court in Re Alcan Australia Limited and Others; ex parte Federation of
Industrial Manufacturing and Engineering Employees.42 That case stands as
authority, according to the Commissioner, for the proposition that:
. . . the deduction of union dues by the employer from the employees’ salary is not
a matter pertaining to the relationship between employer and employee within the
meaning of the Act, even if that deduction was with the authorisation of the
relevant employee(s).43

The Deputy President also considered himself bound by the decision of
Justice Merkel in Electrolux No. 1. Since, on the authority of the High Court, a
union dues clause does not pertain to the requisite employment relationship,
and since in this case the clause was substantive, discrete and significant, the

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Deputy President considered himself constrained by precedent from certifying
the agreement.44
In short, Atlas Steels No. 1 was decided on the basis that:
In accordance with the Act, and with decisions of the High Court and the Federal
Court, an agreement which contains a unions dues clause which is substantial,
discrete and significant does not comply with s. 170LI of the Act and cannot be
certified. While it may be inconvenient that this is the case, I am bound by the Act
and by authority not to certify each Agreement if it contains the offending union
dues clause.45

Round 3: Webforge46
Interestingly, it was of Justice Munro’s own volition, and not in resolution of a
contest between the parties, that his Honour considered the interpretation to be
given to s. 170LI. It is true that s. 170LT requires the Commission to be satisfied
that all the statutory prerequisites to certification are met, but nonetheless, that
his Honour focused squarely upon s. 170LI might be considered an indication
of the importance and topical nature of this issue.
Webforge is of interest primarily for the manner in which Justice Munro distinguished the union dues clause before him from the relevant clause before Justice
Merkel in Electrolux No. 1. His Honour noted that the consideration of the
bargaining fees clause before the Federal Court took place in the context of an
industrial dispute and subsequent contested litigation. In short, Electrolux
opposed the unions’ claim for the inclusion of a bargaining fees clause. However,
the parties in Webforge came before the Commission seeking certification of an
agreement. That is, Webforge Australia Pty Ltd did not contest the inclusion of
the union dues clause. On this point, his Honour stated that:
There is a sense in which an agreed term unequivocally pertains to the relationship
between an employer and the persons who by reason of their employment being
covered, are entitled to the benefit or are under the burden of the agreement of which
it forms part.47

Alternatively, Justice Munro would characterise the substance of the union dues
clauses before him in an altogether different fashion than Justice Merkel’s
characterisation (in fact, his Honour preferred the term ‘Payroll Deduction’ to
either ‘union dues’ or ‘bargaining fees’ clause). As aforementioned, Justice Merkel
was of the opinion that the union dues clause before him would create an entirely
new relationship, by which Electrolux would become the agent of the unions.
Justice Munro, however, characterised the ‘Payroll Deduction’ clauses before him
as allowing that ‘the employer provide a deduction and payment by direction
facility upon written authorisation from an employee to whose employment or work
the agreement applies.’48 This characterisation would place the substance of a
union dues clause squarely within s. 170LI, which Justice Munro construed
as importing a less abstract notion of the employment relationship than the
traditional ‘master–servant’ relationship. His Honour interpreted s. 170LI as
involving ‘a more specific actual relationship between an eligible employer and all

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persons constituting the relevant class of employees whose employment in a business
is subject to the agreement.’49
Having satisfied himself that the ‘Payroll Deduction’ clause in question did
pertain to the requisite relationship under s. 170LI, his Honour was not required
to determine whether an agreement containing a term that did not pertain to
that relationship was capable of certification under the Act.
Round 4: Atlas Steels No. 250
The Full Bench of the AIRC51 interpreted s. 170LI in much the same vein as
Justice Munro, above. That is, s. 170LI requires that the nature of the matters
be assessed by reference to the relationship between the employer bound by the
agreement and the employees to whom the agreement applies, rather than by
reference to the broader ‘employment relationship’.52
The Full Bench also followed Justice Munro’s lead insofar as their treatment
of Electrolux No. 1 was concerned. The Full Bench considered themselves
unconstrained by the Federal Court’s decision in that case, using the distinction
between a contested claim and an agreement as justification for departing from
that authority.53
The Full Bench held that an agreement containing some provisions which do
not pertain to the s. 170LI relationship can not be described as an agreement
pertaining to that relationship. If it were to be held otherwise, then s. 170LI would
require a highly subjective weighing up of whether, on balance, the agreement
can be considered to have passed the s. 170LI requirements. Furthermore, such
a construction would give rise to an anomaly in which an agreement containing
few provisions, some of which do not pertain to the requisite relationship, would
not be able to be certified. However, were those same provisions to appear in
an agreement containing a large number of provisions which do pertain to the
s. 170LI relationship, then the agreement would be capable of certification.54
The Full Bench held that a union dues clause:
adjusts the manner in which the employer’s obligation to pay wages earned by the
employee is to be discharged. It pertains to the relationship between the employer
as such and the employees covered by the agreement as such.55

In light of this conclusion, the Full Bench quashed the decision of Deputy
President Ives in Atlas Steels No. 1 and held that the agreements should have
been certified.
Round 5: Electrolux No. 256
The Full Court of the Federal Court57 upheld the unions’ appeal, on the basis
that Justice Merkel incorrectly identified the critical issue. According to the Full
Court, the issue was not whether the proposed agreement satisfied s. 170LI
so as to be capable of certification, but rather, whether the unions’ claim was in
accordance with s. 170ML(2)(e).58 Namely, whether it was genuinely made
‘in respect of the proposed agreement’. Their Honours were satisfied that the
industrial action fell within s. 170ML(2)(e), allowed the appeal and set aside the

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declarations made by Justice Merkel. In light of this conclusion, the Full Court’s
comments on s. 170LI were strictly obiter dicta.
We do not see why the presence of one or more provisions that do not pertain to
the relationship necessarily takes an agreement outside the description embodied in
s 170LI. As counsel for the Unions pointed out, s. 170LI does not refer to the terms
of an agreement. It talks about ‘an agreement . . . about matters pertaining to the
relationship’. So it is necessary to characterise the agreement itself, considering it
as a whole.59

The Full Court also indicated that a union dues clause might correctly be
characterised as a matter pertaining to the relationship between the employer
and the employer’s employees.60
Round 6: Health Minders61
The clause that came before the Commission in this case was a ‘union notification’ clause, however, the case warrants a mention for the fact that Deputy
President Ives applied the Full Bench decision in Atlas Steels No. 2 over the Full
Court decision in Electrolux No. 2.
According to the Deputy President, the comments of the Full Bench of the
Commission in Atlas Steels No. 2, regarding the interpretation to be given to
s. 170LI, formed part of its ratio decidendi. Since the comments of the Full Court
in Electrolux No. 2 were strictly obiter, they were not considered to be binding on
the Commission.
While the Federal Court has a supervisory role over this Commission with
respect to questions of law, it is a fundamental tenet that a tribunal is not bound
by statements of law that are obiter dicta. In contrast, the proper construction
of s. 170LI of the Act arose squarely in issue before the Full Bench in the Atlas
Steels case.62
Round 7: NUW63
In a bold, some might say brazen decision, the Full Bench of the Commission
stated that the Federal Court’s interpretation of s. 170LI, as espoused in Electrolux
No. 2, was incorrect. The Commission preferred, and in fact applied, the interpretation given to that section by the Full Bench in Atlas Steels No. 2.
We would have thought the proper construction of that section was that there must
be ‘an agreement’ about matters pertaining to the requisite relationship. We fail
to see why an agreement which is not about matters pertaining to the requisite
relationship would be such an agreement.64

In respect of whether a union dues clause can be characterised as pertaining
to the relationship between an employer and its employees covered by the
agreement, the Full Bench had this to say:
At best it can be said to pertain to the relationship between unions and the employees concerned, but the existence of that relationship is we think of no relevance to
the employer.65

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Effectively then, the Full Bench in NUW applied part of the decision in
Atlas Steels No. 2. It agreed that an agreement containing a clause that does
not pertain to the requisite relationship can not be certified. However, it
disagreed with the finding in Atlas Steels No. 2 (albeit in consideration of a
differently worded clause) that the union dues clause pertains to the requisite
relationship.
Resolution in sight?
Clearly, whether a bargaining fees clause is a matter pertaining to the relationship
between an employer and its employees who are subject to the agreement is a
matter in urgent need of resolution. It may well be that the answer will vary from
clause to clause and case to case, the result being contingent upon its form and
substance, content, context and effect.66 The current state of affairs, in which
the result will depend largely upon whether the matter is heard before the
Commission or the Federal Court, is patently unsatisfactory.
Similarly, whatever the ultimate decision may be with respect to the characterisation of bargaining fees clauses, the parties need to understand what consequences
run with the inclusion of such clauses in agreements. In particular, can an agreement containing a bargaining fees clause be certified by the Commission? Is
industrial action in support of the inclusion of such a provision to be protected
under the Act?
It seems that the answers to these questions will come in one of two ways. Either
the matter will be heard, and hopefully resolved by, the High Court. Electrolux
has applied for special leave to appeal to the High Court, with that hearing listed
for 9 May 2003. Or, it is possible that Parliament may intervene to resolve the
issue. If that is the case, then the outcome may be predicted with a fair degree
of accuracy. At the time of writing, the Workplace Relations Amendment (Prohibition
of Compulsory Union Fees) Bill 2002 is currently before Parliament. This Bill, if
passed by Parliament, would amend the Act so as to prevent the Commission
from certifying an agreement that contains a bargaining fees clause. Any such
clause within a certified agreement would be void to the extent that it requires
the payment of a bargaining agent’s fee to a union.

INDUSTRIAL

ACTION AND S.

127 ‘ORDERS’

The role of unions in contemporary industrial relations may fairly and accurately
be described as contentious, if not precarious. The debate surrounding union
bargaining fees itself is not so much a technical legal argument over statutory
interpretation, as it is a political struggle waged by various unions in a desperate
bid to keep themselves from the fringes of Australian industrial relations, and
ultimately, from industrial oblivion.
It is no wonder then, in this socio-political context, that 2002 was marked by
a plethora of litigation regarding the termination of bargaining periods, s. 127
orders and Federal Court injunctions restraining industrial action. In keeping
with current trends, recent industrial disputation has been tainted by considerable animosity between the parties and a noticeable keenness to take the fight to
the Courts in any manner permissible.

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The interests and entities involved in s. 127 proceedings of that kind are susceptible
also to embroilment in civil litigation about the industrial action or associated conduct. Causes of action in tort: with or without the fiat of a s. 166A certificate; proceedings for Supreme Court injunctions; and interlocutory applications for anti-suits
in the Federal Court; or proceedings for injunctions in the Federal Court restraining
breaches of a penalty provision of the Act are now seen as options that might be
selected before, after or in conjunction with a s. 127 proceeding.67

Section 127 orders: The swordless scabbard
The Commission’s s. 127 jurisdiction has been much criticised of late,68 primarily
for its inability to bring an expeditious end to industrial action that is either not
protected under the Act or that is specifically prohibited by the Act.69 The very
fact that s. 127 applications are often accompanied by a multitude of other actions
is evidence enough of the inadequacy of a stand-alone s. 127 order.
The effectiveness of a s. 127 order will sometimes depend upon the terms used
by the Commission in constructing the order. For instance, the following order
cast a positive obligation upon the union to prevent the relevant industrial action
from continuing.
The CFMEU must take any and all steps necessary and available under the rules of
the CFMEU to ensure that the employees referred to comply with the orders.70

The CFMEU failed to take all steps necessary and available under its rules to
ensure that the order was complied with by the employees, and consequently the
Federal Court ruled that the union had breached the order.
By way of contrast, Keppel Prince Engineering Pty Ltd recently failed in its application to the Federal Court for an interlocutory injunction under subsection
127(6), restraining the AMWU from engaging in industrial action in breach of
a s. 127 order of the Commission.71
The order which the AMWU was alleged to have breached stated that
‘industrial action as defined in clause 3.2 of this Order shall not occur’ at
various premises of the employer. Clause 3.2 defined ‘industrial action’ as
follows:
1. In respect of the members of the AMWU and AWU it means the failure or
refusal by a member to attend for work and/or to perform work as required
by the Award/Certified Agreements and their contracts of employment;
2. In respect of the AMWU and AWU, its officers and delegates, it means the
incitement or encouragement of any of the members to fail or refuse to attend
for work and/or to perform work as required by the Award/Certified
Agreement and their contracts of employment.72
The application was directed at an alleged breach of the order by the AMWU.
Given the distinction between the conduct proscribed with respect to the unions
and their officers and delegates, and the conduct proscribed with respect to the
unions’ members, the application necessarily failed. The order cast no obligation
upon the AMWU to ensure that the industrial action was discontinued per se, it
merely cast an obligation to refrain from inciting or encouraging the continuance of the industrial action.

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While it was arguable that the employees were in breach of the Commission’s
s. 127 order, the application was not directed at them.73 Targeting individual
employees is not generally an option that employers have been keen to pursue,
although there have been some exceptions. While naming individual employees
in s. 127 orders and injunctions would be likely to increase the probability
of compliance,74 pursuing them for damages or contempt of court for noncompliance would simply prolong an already protracted dispute and lead to
increased court costs and production costs.
Legislative intervention
It is not only employers and employers’ associations that have expressed dissatisfaction with s. 127 in practice. The Minister for Employment and Workplace
Relations, Mr Tony Abbott, released a document outlining no less than ten
significant disputes throughout 2002, in which industrial action continued in
disregard of the Commission’s s. 127 orders and Federal Court injunctions.
Mr Abbott has in fact recognised that ‘delays in making or enforcing s. 127 orders
have sometimes extended the period during which enterprises and their
workers are exposed to unprotected industrial action.’75 In a bid to counter
some of the deficiencies of the current s. 127 jurisdiction, the Minister has introduced into Parliament the Workplace Relations Amendment (Improved Remedies for
Unprotected Action) Bill 2002. If passed by Parliament, the Bill would amend subs.
127(3) so as to require the Commission to hear and determine a s. 127 application, as far as is practicable, within 48 hours. Further, where the Commission
is of the opinion that it will be unable to determine the application within
48 hours, it would be able to issue an interim s. 127 order.

CONCLUSION
Probably the one common thread that links each of the decisions and issues
reviewed in this article is that they are far from settled. Electrolux No. 2, Gribbles
and Amcor are either being appealed or leave is being sought to appeal. The
Workplace Relations Amendment (Prohibition of Compulsory Union Fees) Bill 2002 and
the Workplace Relations Amendment (Improved Remedies for Unprotected Action) Bill
2002 have been introduced to Parliament. If and when they are passed, they
may or may not resolve the issues to which they are addressed. The diminished
jurisdiction and powers of the AIRC has been topical since the enactment of
the Coalition’s 1996 Act, and will undoubtedly be the topic of discussion for
some time to come.

REFERENCES
1.
2.
3.
4.
5.
6.
7.
8.

(1984) 8 IR 34.
Ibid at 75.
[2000] NSWIRComm 98.
(2002) 113 IR 112.
Ibid at 112.
Ibid at 113.
Ibid at 114.
Ibid.

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9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.

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Ibid at 115.
Ibid at 117.
Note 1 at 103.
Note 4 at 117.
(Unreported: no. V3152 of 2002, Federal Court of Australia, 12 September 2002).
Nokes v Doncaster Amalgamated Collieries Limited [1940] AC 1014 per Viscount Simon L.C.
at 1020.
Note 12 at par. 6.
Ibid at par. 7.
Ibid at par. 13.
Ibid at 1023.
It is of only â