In The Australian Industry Group v ADJ Contracting Pty Ltd
 FWAFB 6684, a Full Bench of Fair Work Australia determined
that the following three clauses, commonly advocated by unions, are
not "unlawful terms" and can be included in enterprise
contracting out clause – requiring the employer to
only engage contractors who apply wages and conditions that are no
less favourable than that provided for in the Enterprise
entry clause – permitting union entry into the
workplace to represent an employee for dispute resolution purposes,
union recognition clause – encouraging union members
to participate in union meetings and requiring the employer to
promote union membership.
The contracting out clause
The "contracting out" clause required that, if the
employer wished to engage contractors to do work that would be
covered by the Enterprise Agreement, the employer could only hire
contractors that applied wages and conditions that were no less
favourable than those in the Enterprise Agreement.
The Australian Industry Group (AIG) and the Australian Mines and
Metals Association Inc. (AMMA) argued that FWA should not have
approved the Enterprise Agreement because this clause:
required the employer to breach the "adverse action"
provisions of the Fair Work Act 2009 (Cth) (FW Act), by
discriminating against contractors on the basis of the
contractor's "workplace rights", and
breached section 45E and 45EA of the Competition and Consumer
Act 2010 (Cth) (CC Act) because it was an arrangement or
understanding between ADJ Contracting and a union that ADJ
Contracting would not engage contractors unless they satisfied
The Full Bench unanimously held that the clause did not require
or permit a breach of the "adverse action" provisions,
because the clause did not deal with specific enterprise agreement
terms, just with the terms a contractor must apply. It also held
that the contracting out clause did not breach section 45E or 45EA,
because the Enterprise Agreement wasn't an
"arrangement or understanding" with a union for the
purposes of the CC Act.
The entry clause
The "entry" clause permitted a union official to enter
ADJ Contracting's workplace to assist with representing an
employee under the Enterprise Agreement's dispute
AIG and AMMA argued that FWA should not have approved the
Enterprise Agreement because it provided for right of entry, other
than in accordance with Part 3-4 of the Fair Work Act 2009 (Cth)
(FW Act), and in that way was an unlawful term under section 194 of
the FW Act.
The majority (2 to 1) of the Full Bench held that because the
clause related to entry for the purpose of dispute resolution only,
it was a term that dealt with different rights to the right of
entry provided by the FW Act and was therefore lawful.
The union recognition clause
Clauses 16(b) and (d) of the Enterprise Agreement provided:
"(b) Union membership shall be promoted by the Employer to all
prospective and current employees.
The employees who are members of the ETU shall be encouraged to
participate in Union meetings and exercise their democratic
AIG and AMMA argued that the Enterprise Agreement should not
have been approved because the clause "induced" union
membership, in contravention of section 350 of the FW Act.
The Full Bench unanimously held that while the clauses promoted
union membership, they did not require the employer to
"induce" union membership. However, the Full Bench noted
that it was hypothetically possible that an employer applying the
clause could breach the prohibition on inducing union membership
under the FW Act, but there was no evidence that had occurred
Key points for employers
The ADJ Contracting case means that enterprise agreements may
that prevent the employer from hiring contractors that pay
their workers less than the terms and conditions in the enterprise
that permit union entry for the purpose of representing an
employee in dispute resolution procedures, and
that require employers to "promote" union membership,
or that otherwise encourage union membership.
However, employers should be particularly aware of what the ADJ
Contracting case does not extend to. For example, the case
does not state that clauses can be included that:
prevent the employer from hiring contractors unless the
contractors have an enterprise agreement binding a particular
allow union entry for any purpose, or
requires the employer to pressure their employees into becoming
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Long experience representing many of Australia's leading employers has taught us that in employment litigation the identity of an employee's representative is a major factor in how employee litigation runs.
Australian employees receive certain entitlements (such as annual leave and superannuation) where contractors do not.
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