FEDERAL COURT OF AUSTRALIA Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v Nestlé Australia Limited [2005] FCA 488 INDUSTRIAL LAW – application for penalty pursuant to s 178 of the Workplace Relations Act 1996 (Cth) – claim for breaches of s 170LJagreement, Nestlé Australia Limited (Framework) Certified Agreement 2003 – meaning of cl 3.6 "no employees shall be employed under a different form of agreement except by the agreement of the parties" – meaning of cl 5A "no extra claims" – new contracts of employment contained medical examination clause – contract of employment not a "different form of agreement" – individual employees not parties to the certified agreement – application dismissed Workplace Relations Act 1996 (Cth) ss 170CK(2)(f), 170CK(3), 170LJ, 170LK, 170LT Nestlé Australia Limited (Framework) Certified Agreement 2003 Byrne v Australian Airlines Ltd (1995) 185 CLR 410, referred to Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v Unilever Australia Ltd (2003) 132 IR 34, referred to AUTOMOTIVE, FOOD, METALS, ENGINEERING, PRINTING AND KINDRED INDUSTRIES UNION v NESTLÉ AUSTRALIA LIMITED V 52 OF 2005 MARSHALL J 3 MAY 2005 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 52 OF 2005 BETWEEN: AUTOMOTIVE, FOOD, METALS, ENGINEERING, PRINTING AND KINDRED INDUSTRIES UNION APPLICANT AND: NESTLÉ AUSTRALIA LIMITED RESPONDENT JUDGE: MARSHALL J DATE OF ORDER: 3 MAY 2005 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The application is dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 52 OF 2005 BETWEEN: AUTOMOTIVE, FOOD, METALS, ENGINEERING, PRINTING AND KINDRED INDUSTRIES UNION APPLICANT AND: NESTLÉ AUSTRALIA LIMITED RESPONDENT JUDGE: MARSHALL J DATE: 3 MAY 2005 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 The issues for determination in this application concern the correct interpretation to be given to an agreement certified by the Australian Industrial Relations Commission ("the Commission") pursuant to ss 170LJ and 170LT of the Workplace Relations Act 1996 (Cth) ("the Act"). 2 The certified agreement in question is the Nestlé Australia Limited (Framework) Certified Agreement 2003 ("the certified agreement"). The clauses, the meaning of which are in contention in the proceeding, are: · Clause 3.6: "This agreement shall apply to all existing and new employees and no employees shall be employed under a different form of agreement except by the agreement of the parties." · Clause 5A: "The parties to this Agreement agree that they will not, for the duration of this agreement pursue any extra claims except where consistent with the terms and conditions of this Agreement." Factual background 3 The applicant, the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union ("the Union") is an organisation of employees registered pursuant to the Act. The respondent, Nestlé Australia Limited ("Nestlé") manufactures confectionery in Broadford, rural Victoria ("the Broadford site") amongst other sites. 4 At the Broadford site, Nestlé employs persons who are eligible for membership of the Union. The employment of persons engaged at the Broadford site is regulated by the certified agreement and by a local agreement known as the Broadford Site Agreement 2003 ("the site agreement"). Although cl 16 of the certified agreement contemplates that the site agreement will prevail in the event of inconsistency, no relevant inconsistency applies for the purposes of this proceeding. 5 Persons employed by Nestlé at the Broadford site, from time to time, have been required to indicate acceptance of an offer of employment contained in a letter of appointment. 6 In January and February 2005 the following persons were offered permanent positions by Nestlé and some of them accepted those positions, without prejudice to the current proceeding, after being engaged for periods of temporary employment: · Steven Bailey; · Jeanette Bromley; · Trevor Drew; · Raelene Garth; · Kristine Lane; · Kevin Louch; · Peter Nelson; and · Chris Nolan ("the relevant employees"). 7 Each of the relevant employees, at all material times, was a member of the Union. Mr Bailey, in particular, became a member of the Union when he commenced employment with Nestlé in October 2002. 8 Mr Russel Venables is a member of the Union and has been a shop steward for about 5 years at the Broadford site. When he commenced employment at the Broadford site as a permanent employee Nestlé gave him a letter of appointment, which he had not been required to sign. The letter merely congratulated him, welcomed him and was accompanied by an employee manual setting out Nestlé's policies and procedures. 9 Ms Lucinda Warren is the Employee Relations Manager – Oceania Region of Nestlé. She has been employed by Nestlé since 1995. During the course of Ms Warren's employment it has been Nestlé's practice (although not consistently applied) to confirm its offers of permanent employment in writing. 10 Ms Anne Kingston is a Human Resources Manager employed by Nestlé, who had responsibility for the Broadford site between August 1998 and August 2003. In Ms Kingston's experience as Human Resources Manager at the Broadford site, new employees were usually sent a letter of appointment which confirmed that they had been successful in applying for the position in question and which required them to sign the letter to confirm their acceptance of the offer. Generally the letter confirmed the employee's employment (subject to any applicable industrial instrument) and set out some other matters relevant to the establishment of the employment relationship, including some terms of employment which were not dealt with by an industrial instrument. 11 Nestlé requested each of the relevant employees to sign a letter of appointment, indicating acceptance of its terms. It is not in dispute that the letter of appointment, in each case, contained the following clause: "MEDICAL EXAMINATION Should the Company have a valid and demonstrated reason to consider your ability to carry out the inherent requirements of the role, the Company may require you to attend a medical examination in order to assess: · Your current ability to perform the inherent requirements of your position · To ensure your health, safety and welfare during the course of employment You may select the medical practitioner from a list of approved Independent medical providers. These practitioners will be encouraged to communicate with your treating practitioner. You also maintain the right to consult your own treating practitioner in addition to the independent medical practitioner." ("the medical examination clause") The Union's contentions 12 The Union submitted that by requiring the relevant employees to sign a letter of appointment containing the medical examination clause, Nestlé had breached cls 3.6 and 5A of the certified agreement. The Union contended that the letter of appointment constituted employment under "a different form of agreement", contrary to cl 3.6 and involved Nestlé "pursu(ing) [an] extra claim" which was not "consistent with the terms and conditions of [the certified] Agreement", contrary to cl 5A. Nestlé's contentions 13 Nestlé submitted that the letter of appointment did not constitute a "different form of agreement" for the purposes of cl 3.6. It contended that those words referred to industrial agreements other than agreements made in accordance with s 170LJ; for example Australian Workplace Agreements ("AWA") or agreements made pursuant to s 170LK. 14 Nestlé contended that by insisting on the acceptance of the medical examination clause in the letter of appointment, it did not pursue an extra claim within the meaning of cl 5A of the certified agreement. It submitted that cl 5A is only directed to collective claims actually pursued by one of the parties to the certified agreement on another party. It further submitted that the medical examination clause was not an extra claim but a contractual matter which did not affect or derogate from the certified agreement. Consideration – clause 3.6 15 A contract of permanent employment was not brought into existence between a relevant employee and Nestlé until the letter of appointment was signed, indicating the employee's acceptance of its terms. Once a contract of employment came into being, the terms of certified agreement immediately became operative in relation to the new permanent employee. The obligations imposed on Nestlé under the certified agreement were imposed by force of the Act: see Byrne v Australian Airlines (1995) 185 CLR 410 at 420 (per Brennan CJ, Dawson and Toohey JJ). 16 The certified agreement does not deal with all issues relevant to the employment of persons entitled to its benefit or bound by its obligations. For example, as is shown in Byrne, there are benefits and obligations which derive from contract or from statutes other than the Act. Such matters include the obligation of an employer to provide a safe system of work and not to require an employee to perform an illegal act. Others include the obligation on an employee not to disclose an employer's confidential information or to injure a fellow employee in carrying out work. 17 The contract of employment between an employer and an individual employee is not apt to be described as "a different form of agreement". When cl 3.6 refers to "this agreement [applying] to all existing and new employees", its intention is to exclude other industrial agreements, such as AWAs or s 170LK agreements. In other words, the purpose of the sub-clause is to maintain the primacy of collective bargaining. It does not, and cannot, forbid Nestlé from offering employment on terms which do not detract from benefits provided to employees under the certified agreement. No breach of cl 3.6 has been established by Nestlé offering employment to the relevant employees on the condition of the acceptance of the terms contained in the letter, including the medical examination clause. The certified agreement does not apply to a person unless that person becomes an employee. No employment relationship is established until the letter of appointment is signed, indicating the employee's acceptance of employment on the terms offered. The matters dealt with in the letter cannot dilute the conditions provided to employees in the certified agreement because once an industrial instrument applies, it overrides any inconsistent contractual term. As said in Byrne at 421: "The contract may provide additional benefits, but cannot derogate from the terms and conditions imposed by the award… the award operates with statutory force to secure those terms and conditions." Consideration – clause 5A 18 The medical examination clause is not an extra claim within the meaning of cl 5A of the certified agreement. It is not a claim made by one industrial party on another industrial party. The prohibition on extra claims is directed to "the parties" to the agreement not making claims on each other. The parties to the certified agreement are the Union, another organisation of employees ("the CEPU") and Nestlé. Clause 4 of the certified agreement is headed "PARTIES BOUND". Clause 4.3 provides: "This agreement shall apply to: … 4.3 All employees of [Nestlé] who are eligible to be engaged… ." The identification of the certified agreement as applying to employees entitled to its benefit does not convert those employees into parties. See, for example, Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v Unilever Australia Ltd (2003) 132 IR 34 at 40. The parties to the certified agreement are the Union, the CEPU and Nestlé. It was made under Div 2 of Part VIB of the Act and in particular it bears the character of an agreement described in s 170LJ. Section 170LJ provides: "AGREEMENT WITH ORGANISATIONS OF EMPLOYEES (1) The employer may make the agreement with one or more organisations of employees where, when the agreement is made, each organisation: (a) has at least one member employed in the single business or part whose employment will be subject to the agreement; and (b) is entitled to represent the industrial interests of the member in relation to work that will be subject to the agreement. (2) The agreement must be approved by a valid majority of the persons employed at the time whose employment will be subject to the agreement. (3) The employer must take reasonable steps to ensure that: (a) at least 14 days before any approval is given, all the persons either have, or have ready access to, the agreement, in writing; and (b) before any approval is given, the terms of the agreement are explained to all the persons. (4) An agreement must not be made under this section if it is able to be made under section 170LL (which deals with greenfields agreements)." The section identifies the parties as one or more organisations of employees and an employer. Compare s 170LK(1) which provides: "AGREEMENT WITH EMPLOYEES (1) The employer may make the agreement with a valid majority of the persons employed at the time whose employment will be subject to the agreement." 19 The above point is sufficient to answer the Union's contention that Nestlé has breached cl 5A of the certified agreement, in that if the claim is an extra claim it is not made on a party to the certified agreement. However, one may question whether Nestlé's insistence on the medical examination clause is truly an extra claim, as that concept is commonly understood. There is a strong argument open to Nestlé that the clause is intended to give greater protection to its employees from the possibility of being terminated, on the basis that they cannot fulfil the inherent requirements of their positions; see s 170CK(2)(f), when read together with s 170CK(3). Nestlé's subjective views on the ability of employees to perform the inherent requirements of their positions, in this way, may be subject to further checks and balances, in circumstances where the employees are also free to rely on the views of their own medical practitioners. The medical examination clause may also be seen as part of Nestlé's performance of its duty under occupational health and safety legislation to ensure a safe system of work. Order 20 Having regard to the foregoing it is apparent that there is no merit in the Union's application. The Court will order that it be dismissed. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Marshall. Associate: Dated: 3 May 2005 Representative of the Applicant pursuant to s 469(6) of the Workplace Relations Act (1996): Mr T Hale Counsel for the Respondent: Mr S J Wood Solicitor for the Respondent: Mallesons Stephen Jaques Date of Hearing: 20 April 2005 Date of Judgment: 3 May 2005