The High Court sets the new rules for industrial negotiations and strikes

In a significant decision for the federal industrial relations system the High Court has clarified the scope of industrial disputes and restricted the statutory protection for industrial action. Electrolux Home Products Pty Ltd v Australian Workers Union [2004] HCA 40 (2 September 2004).We examine the decision and its implications for industrial negotiations.

The dispute

Electrolux was served with notices under section 170MI of the Workplace Relations Act 1996 by the AMWU indicating an intention to negotiate a federal certified agreement covering the relationship between an employer and persons employed in the employer's business (section 170LI of the Act). The AMWU notice included a claim for a bargaining agent's fee.The claim required the employer to notify all employees of an obligation to pay a fee to the union on commencement of employment and an obligation on the employer to provide a payment facility to the union for the collection of the fee.

Electrolux did not accept the claim for a bargaining agent's fee and the union then gave notice of its intention to take industrial action in support of its claim. The Workplace Relations Act allows a union to take industrial action for the purpose of supporting or advancing claims in respect of the proposed certified agreement (section 170ML(2)) of the Act. That industrial action will be "protected" and not leave the Union open to claims for losses caused by the strike.

Going to Court

Then the lawyers became involved and Electrolux and the AMWU went to the Federal Court to determine if the union could strike over the fee. Electrolux claimed that the bargaining agent's fee did not relate to the relationship between it and its employees.

The Union lost the first round but on appeal the Full Federal Court held that the Union could take protected industrial action in support of its claim for the bargaining fee whether or not the fee could be included in the certified agreement.

Following that cue, the Australian Industrial Relations Commission, in another case, took the view that it had power to certify an agreement, even if the agreement contained a clause that did not pertain to the employment relationship (AFMEPKIU v Unilever Australia Ltd, 31 October 2003). The AIRC said that provided the agreement, looked at as a whole, dealt with the employment relationship, then it could be certified.

The scene was set for disputes about the scope of certified agreements and the legitimacy of industrial action in support of claims.

Electrolux appealed the Full Federal Court decision arguing that where a proposed agreement contains a provision that is not about a matter pertaining to the employment relationship, then industrial action is not protected.

The High Court decides

The High Court decided that the bargaining agent's fee did not pertain to the relationship between employers and employees as such. The claim required Electrolux to act as the union's agent and was simply directed to strengthening the position of the union. Without more, the clause did not pertain to the employment relationship.

The next issue for the Court was whether an agreement containing the bargaining agent's fee clause was an agreement pertaining to the employment relationship as required by section 170LI of the Workplace Relations Act.

In a six to one majority the High Court held that the agreement to be certified must only contain matters relating to the employment relationship. If the agreement contains a substantive matter that is both discrete and significant which does not pertain to the employment relationship then the entire agreement cannot be certified. The Court observed that demands of an "academic, political, social or managerial nature" do not pertain to the employment relationship.

The final issue for the High Court was whether industrial action in support of a proposed agreement containing a clause not pertaining to the employment relationship was protected industrial action. The Court found that such action could not be protected as it was not in support of an agreement that could be certified.

Implications of the Decision

The implications of the decision will require further judicial and industrial consideration. But we make the following observations:

• All provisions in a federal certified agreement must pertain to the relationship between employers and employees as such.

• Industrial action must relate to the relationship between the particular

  employer and the employees.

• The Commission cannot approve a certified agreement that contains a

  provision not relating to the employment relationship.

• Industrial action by a union will only be protected industrial action when

  it relates to the advancement of claims that can be included in a certified

  agreement.

• An issue will now be whether agreements that have been certified which

  contain clauses not pertaining to the employment relationship are still

  enforceable and valid certified agreements.

• Bargaining fees can be made the subject of an industrial dispute in NSW

  so employees may find state branches of unions seek bargaining fees

  to assist their federal affiliates.

The High Court decision only relates to negotiations for a federal certified agreement. While the decision appears to place limits on union activity, it simply confirms that union activity attracting statutory protection can only relate to matters concerning the employment relationship.

What next?

The decision is already having an impact. Only a few days after the High Court decision, Franklins and the SDA in a conciliation conference before the AIRC, agreed to delete clauses relating to union membership, union meetings, union noticeboard and union visits from the proposed agreement as it could not be certified with those clauses.

Whilst the decision may derail current negotiations it is likely that unions will develop alternate strategies for the next round of negotiations. One approach could be to limit the dispute notification to allowable matters but be prepared to settle the dispute for a deal including other benefits perhaps using individual common law agreements. But such an approach increases complexity and could expose unions to claims of phoney bargaining, breaching other provisions of the Workplace Relations Act.

The importance of the case is that it gives judicial confirmation to the restructuring of industrial relations negotiation as envisaged by the Workplace Relations Act. Whether industrial outcomes are improved remains to be assessed.