The Fair Work Act 2009 (Cth) says that some terms cannot go into
enterprise agreements, or can be disallowed by Fair Work Australia
– but how far does it go? Some useful clarification of
the lawfulness of some common terms has been given by the Full
In Australian Industry Group v Fair Work Australia  FCAFC
108, four key elements of the enterprise agreement between ADJ
Contracting and its workers were challenged – and all
four were upheld by the Full Federal Court.
The restriction on outsourcing to independent contractors
– is it adverse action?
ADJ agreed to "only engage contractors and employees as
contractors, to do work that would be covered by the Agreement if
it was performed by the Employees, who apply wages and conditions
that are no less favourable than that provided for in this
AIG argued that any contractor has a workplace right (ie. to
have the benefit of its own industrial instruments such as
enterprise agreements with its own employees). By requiring a
contractor to give its employees the same wages and conditions as
ADJ gave its own employees, ADJ would be denying it that benefit,
and engaging in adverse action.
The Full Court saw three problems with this. First, it's not
certain that employers have workplace rights under the Fair Work
Secondly, even if they did, there is no evidence that applying
this clause would be adverse for a contractor in all cases
– so it is not automatically objectionable.
Thirdly, even if the first two points were in ADJ's favour,
it would still have to show that the clause requires ADJ to take
any action against a contractor because the contractor is entitled
to the benefit of any industrial instrument. The clause is about
pay and conditions, and it doesn't matter if they arise under
an industrial instrument or not.
Is the restriction on outsourcing to independent contractors an
unlawful secondary boycott?
Secondary boycotts are prohibited under section 45E of the
Competition and Consumer Act 2010 (Cth). Is the clause in the
enterprise agreement a contract, arrangement or understanding to
create a secondary boycott?
No – it's more than that. It has statutory force,
which means it has more formality and greater consequences than a
contract or arrangement. Even if it were not, it is not made with a
union, which is one of the crucial elements of an unlawful
Encouraging union membership is not the same as inducing
ADJ is required to promote union membership to all prospective
and future employees, and to encourage members of the ETU to
participate in union meetings and exercise their rights.
AIG argued this required ADJ to unlawfully induce its employees
to engage in membership action. The Full Court disagreed; there are
ways to encourage employees which do not amount to inducement. As
this clause can be complied with in a lawful manner, it isn't
Union right to entry – is it limited to the
circumstances in the Fair Work Act?
The enterprise agreement gives a right of entry which goes
beyond that set out in the Fair Work Act. The Full Court said that
this was perfectly legal, as the Fair Work Act clearly contemplates
the possibility of entry for other purposes or for other kinds of
discussions than those set out in the Act.
What does this mean for employers?
This decision certainly provides some clarity about some fairly
common clauses in enterprise agreements. It's unclear yet if
there will be an application for special leave to appeal to the
It's also come at a time when the Fair Work Act is under
more than usual scrutiny, with the release of the
Fair Work Act Review. Given that Review's recommendations
on enterprise agreements and right to entry, it will be interesting
to see if those recommendations and this decision prompt some
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.
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