Manajemen | Fakultas Ekonomi Universitas Maritim Raja Ali Haji 2002 16

MAJOR TRIBUNAL DECISIONS IN 2001
JOSEPH CATANZARITI AND YASEEN SHARIFF*

I

n their review of the major tribunal decisions, the authors review the significant cases
of the previous year. These decisions touch upon newly contested terrains of industrial
conflict such as employee entitlements and the ongoing use of the provisions of the
Workplace Relations Act to thwart outsourcing strategies. To that end, the authors
first analyse the Federal Court decisions arising from the controversial Manusafe employee
entitlements trust fund and the Greater Dandenong City Council’s decision to outsource
home care services. Secondly, the authors proceed to provide a considered review of the
High Court’s assessment of the elusive distinction between employee and independent contractors. Thirdly, the authors reflect upon an interesting decision of the Australian
Industrial Relations Commission which specifically exposed the interconnectedness of the
Air New Zealand and Ansett Group of companies. The authors comment that the
decisions reviewed are symptomatic of the evolving nature of industrial relations and industrial conflict.
On reflection, the year 2001 was one in which industrial Courts and Tribunals
were confronted with legal issues covering the spectrum of old and new. The
breadth of new issues reviewed by industrial Courts and Tribunals during 2001
could be considered to be symptomatic of the evolving nature of industrial relationships. Indeed, this was most notably demonstrated by the industrial disputes
relating to the protection of employee entitlements. In the wake of some very

high profile corporate collapses, it was not surprising that the matter of protecting
employee entitlements in the event of insolvency became one of the most contested industrial matters during 2001, especially in the manufacturing industry.
However, there was an apparent lack of consensus between various employers,
governments and unions as to the appropriate method for the protection of
employee entitlements. Much debate gravitated around whether industry trust
funds, such as the Manusafe Trust Fund (Manusafe), would be suitable to the
interests of all parties. In the manufacturing sector, employees engaged in widespread industrial action in order to advance claims for the inclusion of contributions to Manusafe in certified agreements. Litigation ensued on the grounds
that the making of contributions to a trust fund such as Manusafe was not an
industrial matter and therefore could not be included in a certified agreement,
nor could it be the subject of protected action. Whilst the decisions of Justice
Moore in Transfield Pty Ltd v. Automotive, Foods, Metals, Engineering, Printing and
Kindred Industries Union1 and the decision of Justice Merkel in Electrolux Products
Pty Ltd v. Australian Workers Union2 appeared to have resolved the issue for

* Joseph Catanzariti, BA LLB, is a Partner of national law firm Clayton Utz. Yaseen Shariff, BEc(Social
Sciences) LLB(Hons) is a Solicitor with national law firm Clayton Utz. Email: yshariff@claytonutz.com

THE JOURNAL OF INDUSTRIAL RELATIONS, VOL. 44, NO. 2, JUNE 2002, 211–227

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the moment, further disputation on the matter during 2002 is not out of the
question.
On a related matter, the structures of corporate governance amongst the related
entities of the Ansett and Air New Zealand Group, which were so closely
scrutinised by the public following the disastrous corporate collapse of the domestic airline were also the subject of scrutiny in Justice Boulton’s decision to join
Air New Zealand Limited to a dispute initiated by unions against Ansett and its
related entities. In a significant judgement, his Honour found that despite the
limited evidence before him there was nevertheless sufficient material to suggest
that Air New Zealand may have been in a position to affect the severance
entitlements of Ansett’s employees due to the interlinked relationship between
the two entities. The decision relied on a consistent line of authority and demonstrated the pragmatic approach taken by the Australian Industrial Relations

Commission to the piercing of the ususally impenetrable corporate veil.
The year 2001 also saw a continuation of the trend of employees and unions
creatively invoking the provisions of the Workplace Relations Act 1996 (Cwlth) (the
WRA) in order to thwart outsourcing decisions made by employers. However,
whereas in previous years decisions to outsource had confronted legal hurdles as
a result of the application of the transmission of business provisions, during 2001
there was a shift toward the use of section 298L(1)(h) of the WRA which ostensibly prevents any person or entity from engaging in prohibited conduct because
an employee is entitled to benefits under an industrial instrument. The parameters
of the section were tested in the decision of the Full Bench of the Federal Court
in Greater Dandenong City Council v. Australian Municipal, Clerical and Services
Union,3 however, given the differing views of the Full Bench it would appear, as
was the case with the transmission of business provisions, that uncertainty will
prevail until the High Court considers the scope of the provisions.
The High Court also featured in the industrial landscape once again during
2001, when it delivered its judgement in Hollis v. Vabu Pty Ltd (t/as Crisis Couriers).4
Whilst the High Court affirmed the primacy of the ‘multiple indicia’ test, in practice it would appear that the element of control remains a primary touchstone.
However, in practice, the common law distinction remains elusive and will
undoubtedly continue to vex practitioners.
These issues and cases are the subject of the following review of the major
decisions of 2001.

PROTECTION OF EMPLOYEE ENTITLEMENTS: AN INDUSTRIAL MATTER
FOR THE PURPOSES OF PROTECTED ACTION?
Given the prolific number of high profile corporate collapses in recent years,
including National Textiles, HIH, One-Tel and Ansett, and the general decline
in the automotive industry, unions in specific industries established a firm agenda
to protect employee entitlements in the event of corporate insolvency. In fact,
the matter dominated industrial policy debate for much of the second half of 2001,
especially with continued debate between employers and unions over the metal
industry trust fund, Manusafe. When employees engaged in protected industrial

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action in order to advance claims for the inclusion of matters relating to the protection of employee entitlements in certified agreements, the question arose

whether such matters were ‘industrial’ in nature and, if they were not, whether
such action could be taken as protected action.
Transfield Pty Ltd v. Automotive, Foods, Metals, Engineering, Printing and Kindred
Industries Union
On 23 May 2001 the Automotive, Foods, Metals, Engineering, Printing and
Kindred Industries Union (AMWU) gave Transfield notice pursuant to section
170MI of the WRA in order to initiate a bargaining period for the negotiation
of a certified agreement. In accordance with section 170ML the union particularised a list of matters which included provision for monthly payments by
Transfield to Manusafe. On 16 August 2001, following strikes by workers at its
Seven Hills site, Transfield applied under section 127 of the WRA for an order
requiring the cessation of industrial action. Transfield claimed that the AMWU’s
industrial action in support of a new certified agreement was unlawful because
it advanced claims which were not relevantly industrial matters, namely the provision for employer contributions to Manusafe. In doing so, Transfield sought
to rely on sections 170MJ and 170LI which together stipulate that during a bargaining period matters which are included in a claim for inclusion in a certified
agreement must be industrial matters which pertain to the relations between an
employer and its employees.
The primary issue for consideration in the decision of Transfield Pty Ltd v.
Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union5 was
whether claims for the inclusion of Manusafe in the proposed agreement pertained to the relationship between the employer, Transfield, and its employees
as required by section 170LI. Justice Munro reviewed authorities concerning

superannuation funds, which were considered to be analogous to this case, and
stated:
[F]or a duty to pertain to the relevant employment relationship, it must generally
be bound up with either the performance of work or the receipt of reward by the
employee from the employer. The inclusion of a third party, for instance a payee,
as a participant in the operation of any such duty is not inconsistent with the duty
pertaining to the relevant relationship. But the character of that third party must
sustain the connection between, or be within, the employer and employee relationship to which the duty applies.6

Justice Munro, whilst accepting that some matters establishing rights and duties
that secure employee entitlements do pertain to the relationship between an
employer and employees,7 ultimately held that for a number of reasons, the
AMWU’s claim regarding Manusafe did not. First, his Honour stated that under
the Manusafe Trust Deed, an employee’s entitlement to payment from the trust
fund was indirect as it was ‘obscured by the nature and extent of the discretion
in the trustee’. The Manusafe Trust Deed obscured the nature of the duty which
was sought to be imposed on the employer. This was because the trustee under
the Deed was granted a discretion to determine the benefits payable to an

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employee, with the employee’s entitlement therefore being contingent on that
trustee’s discretion. On this basis, Justice Munro found that it was difficult to
ascertain the nature and content of the duty sought to be procured from the
employer in order to establish the relevant connection with the employment relationship. Secondly, in addition to its objective to preserve employee benefits,
Manusafe also had broader investment objectives. As a result, employer contributions could potentially be directed to or applied for hybrid purposes, such
as the generation of an investment income. According to Justice Munro this
‘plurality of objectives’ detracted from the identification of the fund with a
simple duty on the employer to contribute payments for employee entitlements
as they fell due.8 Thirdly, Justice Munro stated that the Manusafe claim required
contributions to be made to Manusafe as the payee, making Manusafe the ‘personification, or icon’ of the employees’ benefits. His Honour stated that whilst
approved superannuation funds are perceived as icons for the delivery of superannuation benefits to employees as rewards for service, Manusafe had not yet

achieved a similar status. Thus the necessary identification of Manusafe as a payee
bound up with the receipt of reward by the employee from the employer was
not yet established, nor did Manusafe possess the legislative and systemic supporting infrastructure available for superannuation funds and which have
assisted such funds in overcoming the issue of portability of benefits.9 Finally,
his Honour stated that as Manusafe had not been erected from foundations within
particular employment relationships as were superannuation schemes, the
Manusafe trustee represented a participant outside of the relationship between
employers and employees.10
Consequently, his Honour held that the AMWU’s claim requiring Transfield
to make monthly contributions to Manusafe for the protection of workers’ entitlements was not a matter pertaining to the relations between an employer and
employee. Accordingly, the industrial action directed at advancing the Manusafe
claim was not protected and a section 127 order was issued ordering its
cessation.11
Following this finding, the AMWU revised its bargaining claim, and once again
commenced industrial action, claiming this action was protected because the new
claim did not demand the establishment of Manusafe. Rather, it particularised
monthly payments to a trust fund approved by the AMWU for the protection
of workers’ entitlements, and/or allowing for benefits to be portable. In
response, Transfield sought a Federal Court interlocutory injunction restraining
its employees from continuing to engage in this industrial action pending a final

hearing. Transfield sought relief primarily on the basis that the industrial action
contravened Justice Munro’s previous section 127 order and that the claims
advanced for inclusion in the certified agreement were sufficiently similar to the
previous ones.
Justice Moore heard the application and in considering whether there was any
material difference between the initial and revised claims, his Honour stated in
respect of the revised claims:
[They] are in general terms and are quite unlike the specific claim considered by
Munro J. It is true that the scheme reflected in Manusafe purportedly dealt with the

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same subject matter . . . However those latter claims are not, in terms, demanding
the establishment of the Manusafe scheme. Indeed . . . the claim of the Manufacturing

Workers Union contemplated the approval of a trust fund by that union which fairly
clearly implies the establishment of a new and different trust in the future as part of
the settlement of the claim.12

Justice Moore further considered Justice Munro’s finding to be referable only to
the specific arrangements proposed for Manusafe and therefore denied Transfield’s
request for interlocutory relief, allowing protected industrial action on the matter to continue.13
Electrolux Products Pty Ltd v. Australian Workers Union
The more recent decision of Electrolux Products Pty Ltd v. Australian Workers
Union14 involved the same issue and a very similar factual scenario to the decisions in Transfield. In this case, the Australian Workers Union (AWU) included
as a matter particularised under section 170MJ, a claim that employers provide
for the protection and portability of employee entitlements by contributing regular payments into Manusafe. The AWU also included in their claims a demand
for the inclusion of a union bargaining fee clause. Electrolux argued that the
AWU’s claim in relation to Manusafe was for payment to a particular scheme,
being Manusafe, which conferred an unfettered discretion on the trustee whether
or not to pay an accrued entitlement. Thus, Electrolux claimed the payment of
contributions was for the benefit of the trust, which was removed from the
employment relationship, and therefore outside the requisite relationship of
employer and employee.15
Rejecting Electrolux’s submissions, Justice Merkel found that the trustee’s discretion to refuse payments in the present case would be subject to the applicability of the proposed certified agreement, which would confer an entitlement

on the employee to receive payment of the accrued entitlements pending entitlements of the employee becoming unconditional. Therefore, in the present case,
the trustee would not have a discretion to refuse payment in circumstances where
the amount would be payable under the relevant certified agreement.16
Referring to Mettoy Pension Trustees Ltd v. Evans17 and Lock v. Westpac Banking
Corporation,18 Justice Merkel noted that a practical and purposive approach must
be taken to the interpretation of the Manusafe Deed. According to his Honour:
A practical and purposive construction of the Manusafe deed would be one which
construes the ambit of the trustee’s discretions by reference to the Deed’s object of
securing payment of employees’ entitlements by enabling payment to the employee
when the entitlement to payment becomes unconditional.19

Justice Merkel further relied on the authority in Re Baden’s Deed Trust,20 and
found that the discretion of a trustee regarding an employees’ benefit fund is a
fettered one. Justice Merkel also relied on the decision in In re Pauling’s Settlement
Trusts21 and stated that a trustee’s discretionary powers must be exercised with
due consideration for the purpose for which they were conferred and not capriciously or with some other benefit in view.22 Based on these authorities, and the

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particular facts of the case, Justice Merkel held that the trustee did not have an
unfettered discretion under the Manusafe Deed to refuse to pay an entitlement.
His Honour also rejected several additional contentions by Electrolux, including the contention that the entitlement of the trustee to earn interest on contributions indicated that the payments are primarily for the benefit of the trust
fund rather than employees.23 His Honour ultimately held, in contrast to Justice
Munro’s earlier findings, that:
[T]he substance of the employee entitlement claim, the central and critical aspects
of it, and its subject matter, relate to payments by the employers, as such, for the
benefit of the employees, as such. The payments relate to particular aspects of the
remuneration to be received by employees for service to their employer . . . and belong
to and are within the sphere of the relationship between Electrolux and its employees, as such. In so far as there may be some circumstances where amounts paid on
account can accrue to the benefit of the trust fund, and interest earned on payments
made by the employer is to be paid to the trustee for its services, such provisions
are ancillary or incidental aspects of the matter to which the claim relates and do
not alter the substantive characterisation of the matter.24

However, Justice Merkel went on to hold that although the AWU’s claims in
respect of employee entitlements pertained to the employment relationship, the
AWU’s claims in respect of bargaining fees did not. As a result of Justice Merkel’s
finding in relation to the AWU’s bargaining fees claim, his Honour found that
no industrial action supporting or advancing the claims in respect of the proposed agreement were protected. Whilst Justice Merkel conceded that section
170LI does not require that all the terms of the proposed agreement pertain to
the requisite relationship,25 his Honour was of the view that if a substantive
matter advanced in respect of claims for a proposed certified agreement did not
pertain to the employment relationship, and that matter was discrete and significant, it was unlikely that the legislature had intended to permit protected action
to be taken to advance any claims in respect of that proposed agreement:
The claim by the unions for payment of a bargaining agent’s fee is substantive, discrete and significant . . . It follows that that action was pursued for the purpose of
supporting or advancing claims made in respect of an agreement about matters that
did, and a substantive, discrete, and substantial matter that did not, pertain to the
requisite relationship. Accordingly, the agreement proposed by the unions is not an
agreement about matters pertaining to the requisite employment relationship.26

Despite the finding that the industrial action was not protected because of the
bargaining fees element of the claims, the respective decisions of Justice Moore
and Justice Merkel have clarified to some extent that the protection of employee
entitlements can be an industrial matter and the subject of a certified agreement.
The practical consequence of these findings is that claims requiring employers
to make payments to a discretionary trust fund scheme for the protection of workers’ entitlements can be included in a certified agreement, and further, employees can engage in protected industrial action to advance such claims so long as
they do not, at the same time, advance other substantive claims which relate to
matters which are not industrial matters.

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THE CORPORATE VEIL OF GROUP STRUCTURES

Following the collapse of Ansett Airlines, on 12 and 13 September 2001 the
Australian Municipal, Administrative, Clerical and Services Union (ASU) and
the Transport Workers’ Union of Australia (TWU) respectively notified the
Australian Industrial Relations Commission under s.99 of the WRA of the existence of an industrial dispute with Ansett Australia Limited, Air New Zealand
Limited and other companies, which related to disputes regarding consultation
of impending redundancies and the payment of severance entitlements.27 At the
time, a group of Ansett companies including Ansett Australia Limited, Hazelton
Airlines Limited, Kendell Airlines (Aust) Pty Limited and Traveland Pty Ltd (the
Ansett Group) had been placed in voluntary administration.
On 14 September, the administrator decided to end the operations of the airline and consequently the employment of approximately 16 000 Ansett workers
was under serious threat.
The ASU submitted that a dispute should be found to also exist between the
union and Air New Zealand Limited because Air New Zealand Limited was
intimately involved in the operation of the Ansett Group as it owned 100 per
cent of Ansett Holdings Limited which in turn owns 100 per cent of the Ansett
Group. All these businesses were part of the Air New Zealand and Ansett Group
with the ultimate holding company being Air New Zealand Limited. It was submitted that because of its position as the holding company in the group, Air New
Zealand Limited was in a position to control the decisions of the boards of directors of the Ansett companies and to influence and affect the relationship between
those companies and their employees. Air New Zealand Limited opposed the
finding of an industrial dispute with the unions. It was submitted that Air New
Zealand Limited was merely a shareholder in the Ansett Group and not in a position to control the boards of directors of those companies. It was further submitted that the directors were obliged under the corporations law to act in the
companies’ interests and not those of the shareholders. Air New Zealand Limited
was not therefore in a position to control or direct the relationship between the
Ansett Group and their employees. In any event, it was submitted that Air New
Zealand Limited was not in a position to influence the relationship between the
Ansett Group and its employees because the companies were in voluntary administration. It was submitted that as a result of the administrator’s role, as established under the corporations law, Air New Zealand Limited was not in a position
to control the administrator.
Justice Boulton stated that as this was a matter which had proceeded with
expedition, the Commission was required to make findings on the basis of the
limited evidence and material before the Commission at the time. Justice Boulton
stated that in the event that more detailed evidence and material is presented in
the course of conciliation and/or arbitration proceedings or upon application,
the Commission has power to vary or revoke any of the findings made in the
light of that material consistent with the scheme of section 101(1) of the WRA.
His Honour proceeded to find that there was an industrial dispute as defined
in section 4(1) of the WRA in existence between the two unions and Air New
Zealand Limited. Relying on the decision in Re Amalgamated Metal Workers Union;

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Ex parte the Shell Company of Australia Ltd28 (the Shell Case), his Honour found
that the dispute was ‘about’ matters pertaining to the relationship between
employers and employees and the definition of industrial dispute in the WRA
extended to ‘a situation likely to give rise’ to an actual, threatened, impending
or probable dispute of that kind. In the Shell Case, a majority of the High Court
found that the definition of ‘industrial dispute’ was wide enough to encompass
a dispute with a holding company that was not an employer, but which was in a
position to directly affect the relationship between an employer and its employees as a result of the relevant corporate structure and its powers with respect
to a superannuation fund. His Honour also referred to a number of other
authorities where a non-employer related company has been found to be a party
to an industrial dispute.29
Having regard to those authorities, Justice Boulton considered that even though
Air New Zealand Limited was not the employer of the employees, it was or could
be in a position to directly affect the relationship between the employees and
their employers with respect to severance entitlements and other matters (see
the Shell Case). His Honour found three reasons for adopting this view. First,
Justice Boulton found that despite the limited evidence, the corporate structure
of the Air New Zealand and Ansett Group suggested that Air New Zealand
Limited, as the ultimate holding company, played a significant ‘hands-on’ role
in the operation of the Ansett Group. The evidence also suggested that Air New
Zealand was, and is, in a position to control the decisions made by the Ansett
Group and could thereby influence and affect the relationship between those companies and their employees. Secondly, his Honour found that the human resources
functions of the Air New Zealand and Ansett Group had been centralised and
were managed by the Senior Vice President of Air New Zealand Limited. Further,
as there was also a centralisation of financial information within the group, it was
found that computer records and information relating to Ansett employees which
would be essential to calculating employee entitlements were held within the
group and not by individual companies. Thirdly, his Honour found that there
were suggestions that Air New Zealand Limited had responsibilities in relation
to the payment of debts of the Ansett companies and as the unions had sought
the production of such undertakings, further evidence may be furnished shortly
that demonstrated Air New Zealand Limited’s obligations to pay the severance
entitlements of Ansett Group employees.
Justice Boulton further stated that the appointment of the administrator had
an important impact on the relationship between the Ansett Group and Air New
Zealand Limited. This was evident from a consideration of the provisions of the
Corporations Act 2001 and the role and powers of an administrator under that Act.
Nevertheless, his Honour stated that it seemed to him that Air New Zealand
Limited remained in a position directly to affect the relationship between the
Ansett Group and their employees in relation to severance entitlements and job
prospects.
Although Justice Boulton’s decision affirmed principles which have already been
established, the judgment provides a timely examination of the circumstances in
which the Australian Industrial Relations Commission will join related entities

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to a dispute. Given the ever changing nature of corporate and employment structures, it is reasonable to expect that other industrial tribunals will continue to
adopt a similarly pragmatic approach in finding an industrial dispute to exist
and/or making orders against related bodies corporate.

OUTSOURCING

AND FREEDOM OF ASSOCIATION

Although not always the case, decisions to outsource are often motivated by,
amongst other things, a desire to reduce the labour costs involved in operating
a particular business or function. However, the question of whether such conduct is legitimate has become the source of contention given the application and
interpretation of sections 298K(1), 298L(1)(h) and 298V of Part XA of the WRA.
The relevant part of section 298K(1) states that an employer must not, for a prohibited reason, or for reasons that include a prohibited reason, do or threaten to
dismiss an employee, injure an employee in his or her employment or alter the position
of an employee to the employee’s prejudice. Section 298L(1)(h) states that a prohibited reason includes conduct which is carried out because an employee is
entitled to the benefit of an industrial instrument or an order of an industrial
body. Importantly, section 298V creates a rebuttable presumption that any conduct which is impugned pursuant to those provisisions is considered to have been
carried out for the prohibited reason alleged and the alleged perpetrator is
required to prove that the conduct was not engaged in for a prohibited reason.
The case of Greater Dandenong City Council v. Australian Municipal, Clerical and
Services Union30 concerned the decision made in 1999 by the Greater Dandenong
City Council (the Council) to dismiss 75 employees after outsourcing its home
and community care (HACC) services. In accordance with new regulations, the
Council invited tenders for the provision of its HACC services. The Council
received two tenders: one from its in-house bid team and one from an entity
named Silver Circle. The in-house tender was valued at a price of $7 770 665,
and Silver Circle quoted a price of $6 610 429.31 An evaluation committee was
established to assess the bids. Whilst the Silver Circle bid was assessed more highly
in all criteria,32 the committee’s report stated that the difference contributing most
to Silver Circle’s higher rating was its lower price.33 The primary reason for this
price differential was that labour costs under the Council employees’ award and
certified agreement34 were higher than those under the award binding Silver
Circle employees.35 Prior to receiving the tenders, Council management had
recommended that the in-house team enter an agreement in order to reduce
employee labour costs; however, this recommendation was refused.36 Based on
the committee’s evaluation, a deliberative body comprising Council management
met and resolved to accept the Silver Circle tender, with the result that the
Council’s HACC workers were made redundant.37 Some were subsequently
offered employment with Silver Circle, the terms and conditions of which were
governed by the Silver Circle award, so they were paid significantly less for doing
virtually identical work to that they had previously done.38
The Australian Municipal, Administrative, Clerical and Services Union
(ASU), commenced an action on behalf of the Council’s workers, claiming
that the intended consequence of the Council’s acceptance of the Silver Circle

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tender was to avoid the more generous terms and conditions of the Council
employees’ agreement and therefore it had breached sections 298K(1)(a), (b) and
(c) of the WRA.39 In response, the Council contended that the reason for the
dismissal of the HACC employees was grounds of redundancy, and that at no
time was their entitlement to the benefit of an award or agreement a motivating
factor.40 Moreover, the Council asserted in accepting the lowest priced tender,
it was merely obeying State laws regarding competitive tendering.41
At first instance, Justice Madgwick of the Federal Court found that the price
differential between the bids was a reason for the Council’s acceptance of the
Silver Circle bid.42 Although Justice Madgwick stated that price alone does not
constitute a prohibited reason, his Honour found that in this case, the only significant factor contributing to the price differential was the Council employees’
entitlements under their respective agreement and this constituted the operative
reason for the Council’s acceptance of the Silver Circle bid and the subsequent
dismissal of its in-house HACC employees.43 His Honour stated:
The major and decisive factor in the Silver Circle bid’s acceptance was its price. The
major and decisive factor in the difference in price was that, as everyone conceived
it, Silver Circle would remunerate the workers doing HACC work under the Silver
Circle Award and not the Council’s industrial instruments.44

Justice Madgwick then turned to the meaning and scope of sections 298L(1)(h)
and 298K. His Honour identified two ways of interpreting section 298L(1)(h).
First, the section could be read as meaning that an employer cannot dismiss an
employee, injure an employee in his or her employment or prejudicially alter an
employee’s position because of the fact of the existence of an entitlement, such
as the fact that an award or agreement merely exists. Alternatively, under the
second view the section could be read as meaning that an employer cannot engage
in that same conduct because of the level, degree or extent of the entitlement,
such as particular benefits under an award or agreement. The Council submitted that the first approach was correct and for that reason said they had not
engaged in prohibited conduct because they did not dismiss the HACC employees because of the mere fact that they were subject to an award or agreement.
The ASU, however, submitted that the second approach was correct and that
the Court was required to consider not whether the Council acted because an
award or agreement existed, but whether the Council acted because of the
benefits received by the employees pursuant to the award or agreement. The first
interpretation fixes on the mere fact of an entitlement, the second on the nature
of the entitlement.45 Justice Madgwick preferred the second approach.46 Justice
Madgwick proceeded to find that the Council had breached both sections
298K(1)(a) and (c) and that the Council had failed to discharge its onus under
section 298V. That is, the Council failed to show that it had dismissed the HACC
employees for reasons other than that the HACC employees were entitled to
more beneficial entitlements under their agreement.47 Based on these findings,
Justice Madgwick ordered reinstatement of those employees who desired it, and
referred issues concerning compensation for the reinstated workers, and those
not desiring reinstatement, to a conference before a Registrar.48

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The Council appealed the decision of Justice Madgwick on the grounds that
the first interpretation of section 298L(1)(h) was the correct approach.49 The
Council also submitted that even if Justice Madgwick’s interpretation of section
298L(1)(h) was correct, his Honour erred by not focusing on the fact that any
alteration of the HACC workers’ position and their dismissal was not effected
by the intentional act of the Council, but rather by the consequences of it.50
Interpretation of Section 298L(1)(h)
The Full Bench of the Federal Court51 unanimously agreed that Justice
Madgwick had correctly found that section 298L(1)(h) does not prohibit only
that action which has been taken because of the mere fact of an entitlement, but
extends to conduct engaged in because of the content of an entitlement. Justice
Wilcox undertook a historical analysis of the legislative antecedents of section
298L(1)(h), before concluding that the provision had never been considered to
be restricted to considerations of an employer’s ideological objection to the
existence of an award.52 In his Honour’s view, such an interpretation would give
too narrow a view to the concept of freedom of association.53 Justice Merkel also
made similarly salient findings by holding that the ambit of an entitlement under
an industrial instrument is so broad that no legislative purpose or policy would
be served by confining section 298L(1)(h) to the fact of the entitlement. Further,
in his Honour’s opinion, the fact of an entitlement is of no relevance until linked
to its content.54 Justice Finkelstein took a different approach by stating that the
provision covers both a situation where the relevant conduct is motivated by the
mere fact that an employee is entitled to an industrial instrument as well as one
where the conduct is motivated by the level, degree or extent of that entitlement.55
Justice Finkelstein stated that in either situation the dismissal occurs because of
the benefit of an award.56
Was the operative reason for the council’s decision to outsource a prohibited reason?
Justice Wilcox stated that Justice Madgwick had not erred in his decision. Justice
Wilcox rejected the Council’s argument that dismissal and prejudicial alteration
of the workers’ positions was not the intentional act of the Council. In his
Honour’s view, the Councillors who voted to outsource were aware that the
inevitable result of their acceptance of Silver Circle’s tender would be the dismissal of the Council’s HACC employees. The Council’s decision directly and
immediately caused the employees’ position to be altered to their prejudice.57
His Honour considered it unproblematic to infer from the facts that the principle reason why they took that course was the HACC employees’ entitlement
to the benefit of the award and certified agreement.58
Although Justice Merkel agreed with Justice Madgwick that the position of
the Council’s employees was altered to their prejudice within the meaning of section 298K(1)(c),59 his Honour did not agree that the operative reason for the
Council’s decision to accept Silver Circle’s bid was because the HACC employees were entitled to benefits under an agreement. Justice Merkel stated that the
proper inferences to be drawn from the facts were that the operative reason for
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a circumstance that led to the Council accepting the lower price was the higher
award and agreement entitlements of the Council’s employees. His Honour stated
that whilst the higher entitlements under the agreement may have been causally
linked to the Council’s acceptance of the Silver Circle tender, the evidence did
not support the conclusion that they were the operative reason for the Council’s
acceptance of the tender. Justice Merkel found that Justice Madgwick had failed
to distinguish between the operative reason for the Council acting and the
circumstances that led to the price of the in-house bid being higher than the price
of the Silver Circle bid. The fact that the Councillors were aware of those
circumstances did not make them an operative reason for their decision.60
In line with Justice Merkel’s analysis, Justice Finkelstein relied on an ‘unbroken line of authority’ from both the NSW and Federal jurisdictions to hold that
it is necessary to draw a distinction between the reason or motive underlying the
dismissals and what produced that reason or motive.61 By way of example, his
Honour stated that if there was a legitimate reason for the dismissal, such as the
desire to avoid bankruptcy or the need to maintain a profitable operation, the
dismissal would be lawful, even if the cause of the impending bankruptcy or
the unprofitable trading is high award or agreement entitlements. Although
the benefits under an industrial instrument may have caused the employer to
dismiss the relevant employees, that does not necessarily make them the reason
or motive for the act.62 Consequently, in Justice Finklestein’s view, whilst the facts
supported the findings that the Council’s decision was based on the lower price
and that the Council knew the reasons for the difference in lower price between
the in-house tender and the Silver Circle tender, the evidence did not justify the
conclusion that the Council was motivated because of the HACC employees’
superior entitlements. According to Justice Finkelstein, Justice Madgwick had
failed to distinguish between the immediate reason and the proximate reason for
the dismissals. According to Justice Finkelstein, the finding that price was a ‘major
and decisive factor’ was correct, but Justice Madgwick erred in describing the
price differential due to different award rates as the other major and decisive
factor motivating the decision.
Section 298V Onus of Proof
Only the judgments of Justices Merkel and Finkelstein discussed the operation
of section 298V. Justice Merkel dismissed the Council’s appeal because his Honour
agreed with Justice Madgwick that the Council had failed to discharge its onus
of proof that its conduct was not motivated by the fact the HACC employees
were entitled to benefits under the Council’s agreement which were superior to
those available to Silver Circle’s employees.63 Justice Merkel concluded that
although the Council demonstrated that Justice Madgwick had erred by drawing an incorrect inference, the Council had not demonstrated that Justice
Madgwick had erred in ultimately concluding, in reliance upon section 298V,
that the Council breached sections 298K(1)(c) and 298L(1)(h).64 Consequently,
Justice Merkel dismissed the appeal.
In contrast, Justice Finkelstein argued that there is a limit to the operation of
section 298V and that it ceases to have application where there is sufficient evi-

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dence to enable a judge, upon review, to determine the true facts. In that situation, the judge cannot resort to section 298V as an alternative to finding facts.65
Justice Finkelstein stated that as Justice Madgwick was satisfied that there was
sufficient evidence to find that the relevant conduct had been engaged in for a
prohibited reason, it was inappropriate for Justice Madgwick to place any reliance
on section 298V.66 Although Justice Finkelstein was of the view that the evidence
was sufficient to discharge the onus imposed by section 298V, he found it
inappropriate for the Full Court to decide the matter for itself upon appeal,
and therefore recommended the matter be remitted to the trial judge for reconsideration.67
An unresolved issue
Decisions to outsource are invariably and inextricably linked to questions of cost
and efficiency. It is not unusual then that decisions to outsource may be motivated by a desire to cut labour costs. The question arises whether such decisions
to outsource are prohibited. If the approaches of Justice Merkel and Justice
Finkelstein are adopted, then the operative reason for the outsourcing is the desire
to reduce the overall costs, even if one of the reasons for reducing costs is that
certain employees are entitled to benefits under an industrial instrument.
However, it remains unresolved whether an underlying reason, such as an
employer’s desire to avoid the application of an industrial instrument, can in some
circumstances become an operative reason even though other genuinely commercial reasons exist. Indeed, the decisions of the Full Bench demonstrate the
difficulties a court may face when called upon to infer the reasons underlying a
decision to outsource, especially where various justifiable explanations for the
decision exist. In any event, it is apparent that at present the legal tests in relation to these matters remain nascent and will require further development and
judicial elaboration in the future.

EMPLOYEE

OR INDEPENDENT CONTRACTOR?

The common law distinction between an employee and an independent contractor
has proved to be an amorphous one in practice, even despite the seminal decision of the High Court in Stevens v. Brodribb,68 which established the primacy of
the ‘multiple indicia’ test. This point is most notably reflected in the remarkable
fact that over the past six years several judges confronted with almost the same
factual matrix have made different findings as to the nature of the relationship
between a courier company and its bicycle couriers.
In Vabu Pty Ltd t/as Crisis Couriers v. The Commissioner of Taxation69 (Crisis
Couriers 1), the appellant courier company, Vabu Pty Ltd (Vabu), sought a
declaration in the Administrative Law Division of the Supreme Court of New
South Wales that it was not the employer of the couriers it had engaged. Vabu
further sought an order that it was not obliged to lodge a Superannuation
Guarantee Statement. At first instance, Justice Ireland found that an employment
relationship existed because Vabu controlled the couriers’ work by requiring them
to meet certain standards of conduct and service, as well as adhering to certain

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methods of delivery.70 As a result, Vabu was ordered to lodge the Superannuation
Guarantee Statement. Upon appeal, however, the New South Wales Court of
Appeal overturned Justice Ireland’s findings and held that the relationship between
Vabu and its couriers was one of principal and independent contractor. In applying the multiple indicia test espoused in Stevens v. Brodribb, the Judges of the
Court of Appeal focused primarily on factors other than the degree of control
exercised over the couriers, such as the fact that running costs were to be borne
by the couriers, the couriers were required to provide and maintain their own
equipment, the couriers received no wage or salary and were permitted to operate as a company and bore the risk of operating at a loss. An application by the
Commissioner of Taxation for special leave to appeal was refused by the High
Court. At the time, the decision of the New South Wales Court of Appeal
represented a confirmation of the multiple indicia test, but with a decrease in the
significance of control as being a determinative factor, most notably reflected in
Meagher JA’s statement that the ‘old test of “control” is now superseded by something more flexible’.71
However, the relationship between Vabu and its couriers was once again
required to be scrutinised in the context of a determination of whether Vabu was
vicariously liable for a personal injury inflicted by one of its bicycle couriers upon
Mr Hollis, himself a courier with another firm. At first instance, and upon appeal
to the New South Wales Court of Appeal, much emphasis was placed on the
decision in Crisis Couriers 1. Accordingly, the couriers were dealt with as independent contractors, with the result that Vabu could not be held vicariously liable
for Mr Hollis’ injury. However, on appeal the majority of the High Court72 in
the decision on Hollis v. Vabu Pty Ltd (t/as Crisis Couriers) (Crisis Couriers 2)73
held that the Court of Appeal gave too much weight to the fact that the bicycle
couriers owned their own bicycles, bore the expense of running them and
supplied their own accessories.74 An examination of various relevant indicia led
the majority of the High Court to conclude that, viewed practically, the bicycle
couriers were indeed engaged under a contract of service with Vabu. First, the
majority reasoned that it was ‘intuitively unsound’ to consider that the couriers
were running their own enterprise. Secondly, and notably, the majority found
that Vabu exercised considerable control over the performance of the couriers’
work75 by requiring them to commence work by 9.00 am and assigning work in
accordance with a rigid work roster, which also did not permit the couriers to
refuse work. Thirdly, the majority found it material that the couriers were required
to wear uniforms bearing Vabu’s logo at all times, so that pedestrians would identify the couriers as a part of Vabu’s own working staff. Fourthly, the majority found
as a matter of public policy there was merit in applying the principles of vicarious
liability to act as a deterrence in some instances, such as the present, where Vabu
knew of the dangers its couriers posed to pedestrians and had failed to adopt effective means to avert the risk. Fifthly, the majority found that Vabu’s methods of
payment and its requirement that couriers seek permission for leave suggested
that the engagement by Vabu left the couriers with ‘limited scope for the pursuit of any real business enterprise on their own account.’ Sixthly, the majority
held that it was not contrary to a relationship of employment for employees to

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provide their own equipment and tools, especially when there is only a small
capital outlay on the equipment and in instances such as the present where the
bicycles could not strictly be construed as tools that were only capable of use for
courier work, but can also provide a means of personal transport or even a means
of recreation out of work time. Finally, the majority concluded that the method
by which couriers were required to deliver goods was in fact very systematic and
controlled. The majority succinctly and simply stated that:
Viewed as a practical matter, the bicycle couriers were not running their own
business or enterprise, nor did they have independence in the conduct of their
operations.76

In contrast to the majority, Justice McHugh decided the matter by sole reference to principles of vicarious liability.77 His Honour drew upon established
authority78 to hold that a principal, in certain circumstances, may be vicariously
liable for the conduct of an agent that is neither an independent contractor nor
an employee.79 It should be noted that Justice Callinan delivered a dissenting
judgment based on the fact that Mr Hollis had conceded in the Court of Appeal
that the relationship between Vabu and its couriers was one of principal and independent contractor, and held that Mr Hollis should not subsequently be allowed
to withdraw that concession. Furthermore, his Honour also disagreed with the
extension of the principles of vicarious liability and suggested that given the
policy considerations involved it was a matter better left to institutions other than
the courts.80
Arguably, the decision of the majority of the High Court has reaffirmed the
indicium of control as the most prominent, but by no means sole, determinant
of the nature of the emp