Australia: Agreements made with part of a business - are they valid?

Last Updated: 30 September 2011
Article by Alison Spivey and Shae McCartney

Key Points:

If only some employees are covered by a workplace or enterprise agreement, the agreement won't be valid unless the part selected forms an operationally, organisationally distinct part of the business.

Agreements made with a part of your business will have to be considered carefully, following a landmark decision by the Full Federal Court (CFMEU v Pilbara Iron Company (Services) Pty Ltd [20110 FCAFC 91).

Although the agreement in this case was made under the Workplace Relations Act 1996 (Cth), the Fair Work Act 2009 (Cth) uses the same wording and we see no reason why the reasoning in this case would not be applied to the Fair Work Act.

The agreement made between Pilbara Iron and some of its employees

Pilbara Iron entered into the agreement after amendments to the Workplace Relations Act in early 2008 removed its ability to enter into AWAs with new employees.

The workplace agreement in this case covered new employees "employed by Pilbara Iron on or after 28 July 2008" in classifications connected with the rail network.

The offer was limited to a small number of employees and was not made to existing employees employed on a variety of different arrangements (including AWAs (current and expired), ITEAs and common law contracts underpinned by a federal award, all in respect of which the CFMEU was not a party).

It was approved by the then Workplace Authority and took effect in November 2008.

Pilbara Iron has since engaged all new employees in the relevant classifications and performing the relevant types of work under the Agreement (at the time of the hearing at first instance, 31 CFMEU members had been employed after 28 July 2008 in connection with the rail network).

What is "part of a single business"?

To come into operation, the Agreement had to meet the requirements of section 327 of the Workplace Relations Act, including being made with "persons employed at the time in a single business (or part of a single business) of the employer whose employment will... be subject to the agreement".

But what is "part" of a single business?

The Court looked at the words of section 327 themselves, in conjunction with the definition of "part of a single business" found in section322(3) – "a geographically distinct part of the business" or "a distinct operational or organisational unit within the single business" and held:

"The fact that the employees with whom the agreement is made must be employees "in" a single business or part of a single business is the clearest indication that the identification of the part of the single business (if that is the choice made) must be separate from the identification of the persons employed in it. The part of the single business concerned cannot simply be the employees with whom the employer has chosen to make the agreement. The part must be identifiable by reference to factors other than the employees themselves or the date they acquire that characteristic. The part cannot be constituted simply by those employees whom the employer has chosen as the other parties to the proposed agreement".

In this case it could not be said that "employees employed after 28 July 2008" constituted a recognisable "part" of Pilbara Iron's business. Rather, it was a selection of employees determined by Pilbara Iron. The workplace agreement was therefore invalid

The effect of this decision is that in order for a group of employees to be said to be "part" of a business for the purposes of section 327, those employees must constitute a recognisable section, segment or constituent of the business and cannot be merely an arbitrary selection of employees (on whatever basis) by the employer.

The decision makes it clear that selecting employees to be covered by a workplace agreement based on when they became employees amounts to an arbitrary selection on the part of an employer, and will therefore not constitute a "part" of a business for the purposes of s 327 of the WR Act.

What does this mean for employers?

There are workplace agreements made under the Workplace Relations Act still operating which were voted on by only a small number of employees. The effect of this decision on other existing agreements will depend on, amongst other things, the particular circumstances in which the agreement was made, and the precise terms of the agreement. Employers should consider:

  • the impact of this decision goes beyond these agreements. As noted above, this reasoning could be applied to enterprise agreements made under the Fair Work Act, and employers should consider the following: if you're selecting a part of a business to which an enterprise agreement is to apply, you must be able to show that the part selected forms an operationally, organisationally distinct part of the business. This will become even more of an issue with bargaining parties able to challenge the proposed coverage of an agreement by way of seeking scope orders under the Fair Work Act;
  • if you're concerned about the validity of existing workplace or enterprise agreements, seek advice on their status and whether employees or their representatives will be able to have the agreement set aside and to commence bargaining under the Fair Work Act; and
  • if you are negotiating or plan to negotiate an enterprise agreement that relates to only part of a business, seek advice as to the bargaining strategy, including contingency options.

Pilbara Iron intends to apply for special leave from the High Court to appeal the decision, and we will keep following this important case.

You might also be interested in ...

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.