1
Fair Work Act 2009
s.185—Enterprise agreement
Hydro-Chem Pty Ltd
(AG2014/1705)
HYDRO-CHEM AND AWU ENTERPRISE AGREEMENT 2013-2016
Manufacturing and associated industries
COMMISSIONER RYAN MELBOURNE, 31 JULY 2014
Application for approval of the Hydro-Chem and AWU Enterprise Agreement 2013-2016.
[1] An application has been made for approval of an enterprise agreement known as the
Hydro-Chem and AWU Enterprise Agreement 2013-2016 (the Agreement). The application
was made pursuant to s.185 of the Fair Work Act 2009 (the Act) and was made by Hydro-
Chem Pty Ltd. The agreement is a single-enterprise agreement.
[2] On 18 July 2014 I wrote to the Applicant, its legal representative, Ms Natasha Fletcher
of Workplace Legal Pty Ltd, and the employee bargaining representative, The Australian
Workers’ Union (AWU), outlining two concerns with the terms of the Agreement which are
set out below:
“1. Clause 15.2 - deduction from wages of employee
Clause 15.2 deals with the requirement for employees to give a period of notice if they
terminate their employment with the Company.
Clause 15.2 provides that:
“If the employee fails to give the appropriate notice then the Employer has the
right to deduct from monies owing to the employee an amount equal to the
wages the employee would have earned had the required notice been given.”
The concern with clause 15.2 is that it permits a deduction from wages in
circumstances where such a deduction may not be reasonable.
Section 326(1) of the Act provides as follows:
“326 Certain terms have no effect
Unreasonable payments and deductions for benefit of employer
[2014] FWCA 5163
DECISION
E AUSTRALIA FairWork Commission
[2014] FWCA 5163
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(1) A term of a modern award, an enterprise agreement or a contract of
employment has no effect to the extent that the term:
(a) permits, or has the effect of permitting, an employer to deduct an
amount from an amount that is payable to an employee in relation to the
performance of work; or
(b) requires, or has the effect of requiring, an employee to make a
payment to an employer or another person;
if either of the following apply:
(c) the deduction or payment is:
(i) directly or indirectly for the benefit of the employer, or a party
related to the employer; and
(ii) unreasonable in the circumstances;
(d) if the employee is under 18—the deduction or payment is not agreed
to in writing by a parent or guardian of the employee.”
I note that clause 15.2 of the agreement is similar to clause 22.2 of the Manufacturing
and Associated Industries and Occupations Award 2010 which provides that:
“22.2 Notice of termination by an employee
The notice of termination required to be given by an employee is the same as
that required of an employer except that there is no requirement on the
employee to give additional notice based on the age of the employee
concerned. If an employee fails to give the required notice the employer may
withhold from any monies due to the employee on termination under this
award or the NES, an amount not exceeding the amount the employee would
have been paid under this award in respect of the period of notice required by
this clause less any period of notice actually given by the employee.”
Clause 22.2 of the Manufacturing and Associated Industries and Occupations Award
2010 has its origin in the 1984 Termination, Change and Redundancy Cases. In the
second Termination, Change and Redundancy Case1, the Full Bench of the Australian
Industrial Relations Commission, in settling the orders to be issued to give effect to
the first Termination, Change and Redundancy Case2, considered the issue of
employee notice of termination as follows:
“Notice of termination by employee
1 Print F7262
2 Print F6230
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The decision provided that an employee should be required to give the
additional notice based on years of service but that it would not be appropriate
to require increased notice from the employee based on age.
The primary argument in relation to this part of the decision was concerned
with the question whether an employee should be liable for forfeiture only of
wages held in hand when an employee fails to give the required notice or
whether other moneys in hand might be used. The employers also sought to
provide an award right for an employer to recover any moneys due.
Both of these provisions were opposed by the ACTU. In arguing that the
amount of possible forfeiture should be limited to wages only it argued that
such a restriction would be a balance between the competing considerations of
reciprocity of treatment for employers and employees and the need not to
impede the mobility of labour.
We are prepared to provide that the employer shall have the right to withhold
any moneys with a maximum amount equal to the ordinary time rate for the
period of notice but we are not prepared to extend the award by including a
provision which would give the employer an award right to recover any
moneys.
We are prepared to provide that:
5. The notice of termination required to be given by an employee shall be the
same as that required of an employer, save and except that there shall be no
additional notice based on the age of the employee concerned.
If an employee fails to give notice the employer shall have the right to withhold
moneys due to the employee with a maximum amount equal to the ordinary
time rate of pay for the period of notice.”
I also note that in 1996 the Australian Industrial Relations Commission was required
by Item 49 of the Workplace Relations and Other Legislation Amendment Act 1996 to
undertake an award simplification exercise. In the Award Simplification Decision3, the
Australian Industrial Relations Commission made no mention of the issue of
employees forfeiting an amount of wages due to a failure to give the appropriate notice
of termination4. The Award Simplification Decision simply identified that in the draft
order issued by the Commission in relation to the Hospitality Award the existing
provision relating to notice of termination by an employee was retained in the new
simplified award5. The provision in the Hospitality Award was in identical terms to
that first provided by the second TCR decision.
It is not clear in any circumstance that a deduction from the final pay of an employee
pursuant to clause 15.2 of the agreement is a payment which is “directly or indirectly
for the benefit of the employer”.
3 Print P7500, (1997) 75 IR 272
4 (1997) 75 IR 272 at 286
5 (1997) 75 IR 272 at 378
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It is clear that the deduction from an employee’s final pay which is contemplated by
clause 15.2 is intended to penalize an employee for not giving the required notice of
termination to the employer.
The deduction is premised upon the employee having breached a term of the
agreement namely the requirement to give a period of notice to the employer. It is
sufficient for the employer to allege that the employee has breached the notice of
termination requirement as it is the employer who then calculates the value of the
notice not given and it is the employer who then makes the deduction from the
employee’s final pay. As the Full Bench in the second TCR case stated the
withholding is by way of a “forfeiture only of wages held in hand when an employee
fails to give the required notice”.
There is no independent determination that the employee has breached a term of the
agreement and no independent determination of the amount of money to be withheld
from the employee.
Given that Chapter 4 of the Act makes specific provisions for alleged breaches of an
enterprise agreement to be dealt with through appropriate court action it would appear
to be inconsistent with the specific provisions of the Act to permit an employer to
impose an effective penalty on an employee in circumstances where that function is
the Court’s alone.
It would appear that there is a real question as to whether clauses such as clause 15.2
offend against the constitutional doctrine of separation of powers. In Luton v Lessels6,
Callinan J posed 11 questions for considering whether judicial power was being
exercised by the Child Support Registrar under the Child Support (Registration and
Collection) Act 1988. One of the questions was: “is the decision enforceable by the
maker of it or by the institution of which he or she is a member?” Callinan J at para
199 answered this question as follows:
“The scheme does make provision for a system of enforcement. But that
system is different from the system of enforcement by a court's own officials,
bailiffs and sheriffs, acting under specific court orders authorizing various
curial processes, of, for example, forfeiture, seizure, arrest, execution and
sale.”
As can be seen Callinan J considered that part of judicial power was the system of
enforcement by a court's own officials, bailiffs and sheriffs, acting under specific court
orders authorizing various curial processes including forfeiture.
The very fact that the second TCR decision identified that the withholding of monies
from an employee who had not given the appropriate amount of notice of termination
to their employer amounted to a forfeiture of pay suggests strongly that the
enforcement mechanism within clause 15.2 of the Agreement is an exercise of a power
which is judicial and which can only be exercised by the Courts.
6 [2002] HCA 13
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The decisions in both WWF v Alexander7 and R v Kirby; ex parte Boilermakers
Society of Australia8, have made clear the need for a separation between the two
functions of making industrial instruments such as awards and enterprise agreements
and the enforcement of the industrial instruments.9
Section 324 of the Act permits deductions from an employee’s wages where the
employee consents.
“324 Permitted deductions
(1) An employer may deduct an amount from an amount payable to an
employee in accordance with subsection 323(1) if:
(a) the deduction is authorised in writing by the employee and is principally for
the employee’s benefit; or
(b) the deduction is authorised by the employee in accordance with an
enterprise agreement; or
(c) the deduction is authorised by or under a modern award or an FWC order;
or
(d) the deduction is authorised by or under a law of the Commonwealth, a State
or a Territory, or an order of a court.
Note 1: A deduction in accordance with a salary sacrifice or other arrangement,
under which an employee chooses to:
(a) forgo an amount payable to the employee in relation to the performance of
work; but
(b) receive some other form of benefit or remuneration;
will be permitted if it is made in accordance with this section and the other
provisions of this Division.
Note 2: Certain terms of modern awards, enterprise agreements and contracts
of employment relating to deductions have no effect (see section 326). A
deduction made in accordance with such a term will not be authorised for the
purposes of this section.
(2) An authorisation for the purposes of paragraph (1)(a):
(a) must specify the amount of the deduction; and
(b) may be withdrawn in writing by the employee at any time.
7 [1918] HCA 56
8 [1956] HCA 10
9Airo-Farulla, Geoff and White, Steven, ‘Separation of Powers, ‘Traditional’ Administration and Responsive Regulation”
(2004) 4 Macquarie Law Journal 57.
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(3) Any variation in the amount of the deduction must be authorised in writing
by the employee.”
As s.324(1)(b) makes clear a deduction from pay can be authorised by an employee in
accordance with an enterprise agreement. The deduction sought by clause 15.2 would
be acceptable if the employee authorises the deduction.
An undertaking from the employer that clause 15.2 would only be applied where the
employee consented to the deduction would be acceptable.
Alternatively, the employer will, if it so wishes, be given the opportunity to make
submissions to the Commission that clause 15.2 is consistent with s.326 of the Act.
2. Clause 42 - Duty of Confidentiality
Clause 42 of the Agreement contains a comprehensive provision restricting the ability
of an employee to access and use the Company’s confidential information. The clause
does not provide an exhaustive definition of the term “confidential information”.
Confidentiality clauses are more commonly found in contracts of employment. There
is no corresponding provision in the Manufacturing and Associated Industries and
Occupations Award 2010 and this immediately raises a concern as to the application
of the BOOT. Is an employee better off overall if employed under the terms of the
enterprise agreement as against the relevant award?
The Commission is also concerned as to whether the term and effects of the term were
explained to employees before they voted to make the Agreement. The employer
needs to advise the Commission how it explained this term and the effects of this term
to employees before they voted to make the Agreement.
The Commission is also concerned that the presence of clause 42 in the Agreement
means that should an employee misuse any confidential information the employee
would also have committed a breach of a term of an enterprise agreement and would
be liable to a civil penalty provision. The presence of clause 42 could give rise to a
situation where an employee who accessed and used confidential information for the
purposes of accessing or pursuing a workplace right eg, making an underpayment
claim, pursuing a statutory right or prosecuting the employer for breach of the
enterprise agreement, could be subject to court proceedings for the imposition of a
civil penalty for breach of a term of the enterprise agreement.
Section 50 of the Fair Work Act (the Act) provides as follows:
“50 Contravening an enterprise agreement
A person must not contravene a term of an enterprise agreement.
Note 1: This section is a civil remedy provision (see Part 4-1).
Note 2: A person does not contravene a term of an enterprise agreement unless
the agreement applies to the person: see subsection 51(1).”
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Note 1 to s.50 refers to Part 4-1 of the Act which deals with the Civil Remedies
provisions of the Act.
S.539 sets out the civil remedy provisions in the Act and in relation to each civil
remedy provision identifies which persons can initiate court action for an in relation to
a contravention of the civil remedy provision and sets out the maximum penalty that a
court can order in relation to a breach of a civil remedy provision. Relevantly s539
provides as follows:
539 Applications for orders in relation to contraventions of civil remedy
provisions
(1) A provision referred to in column 1 of an item in the table in subsection (2)
is a civil remedy provision.
(2) For each civil remedy provision, the persons referred to in column 2 of the
item may, subject to sections 540 and 544 and Subdivision B, apply to the
courts referred to in column 3 of the item for orders in relation to a
contravention or proposed contravention of the provision, including the
maximum penalty referred to in column 4 of the item.
Standing, jurisdiction and maximum penalties
Item Column 1
Civil remedy
provision
Column 2
Persons
Column 3
Courts
Column 4
Maximum
penalty
4 50 (other than
in relation to a
contravention
or proposed
contravention
of a term that
would be an
outworker
term if it were
included in a
modern
award)
(a) an employee;
(b) an employer;
(c) an employee
organisation;
(d) an inspector
(a) the Federal
Court;
(b) the Federal
Circuit Court;
(c) an eligible State
or Territory court
60 penalty
units
A “penalty unit” is defined in s.4AA of the Crimes Act 1914 as meaning $170.
The effect of clause 42 of the enterprise agreement is that where an employee breaches
the confidentiality requirements then because that also constitutes a breach of a term
of the enterprise agreement the employee could be liable for a maximum court
imposed penalty of $10,200.00!
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What constitutes “confidential information” has been considered by the courts on
many occasions. A relevant discussion on this subject is found in RLA Polymers Pty
Ltd v Nexus Adhesives Pty Ltd10, where Ryan J, said:
“Applicable Principles
42. The following recent analysis by Finn J in Australian Medic-Care
Company Ltd v Hamilton Pharmaceutical Pty Ltd [2009] FCA 1220
(“Australian Medicare”) at [632]-[634], provides a useful summary of the
relevant principles to be applied in a case like the present;
632. The agreed elements of the action for breach of confidence are, for present
purposes, that:
(i) the information in question must be confidential in character: it must have
“the necessary quality of confidence about it”: Saltman Engineering Co Ltd v
Campbell Engineering Co Ltd (1948) 65 RPC 203 at 215;
(ii) it must have been imparted in circumstances importing an obligation of
confidence: Coco v A N Clark (Engineers) Ltd [1969] RPC 41 at 47; Ansell
Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VR 37 at 40; and
(iii) there must have been an actual or threatened unauthorised use or
disclosure of that information: Smith Kline & French Laboratories (Aust) Ltd v
Department of Community Services and Health (1990) 22 FCR 73 at 87, 111-
112; Prince Jefri Bolkiah v KPMG (a firm) [1999] 2 AC 222.
See generally, Dean, The Law of Trade Secrets and Personal Secrets (2nd ed,
2002); Toulson and Phipps, Confidentiality (2nd ed, 2006).
633. The essential attribute of confidential information is what has been
described as “relative secrecy”: Franchi v Franchi [1967] RPC 149, at 153;
Interfirm Comparison (Australia) Pty Ltd v Law Society of New South Wales
[1975] 2 NSWLR 104 at 119. Whether this attribute exists in a given case will
be often a question of degree and a variety of criteria have been invoked in
varying contexts to sharpen the inquiry to be made:
(i) is the information in question widely known, or publicly available in the
relevant industry, trade, etc: Coco at 51; cf Ansell Rubber Co at 50; Titan
Group Pty Ltd v Steriline Manufacturing Pty Ltd (1990) 19 IPR 353 at 381;
(ii) has the confider made the information public by using it in its
manufactured products and placing it on the market, or would the
ascertainment of the information from the manufactured product by reverse
engineering or otherwise require the expenditure of time, effort, money or
experimentation: see eg Ackroyds (London) Ltd v Islington Plastics Ltd [1962]
RPC 97; Aquaculture Corporation v New Zealand Green Mussel Co Ltd (1985)
5 IPR 357 at 379;
10 [2011] FCA 423
http://www.austlii.edu.au/au/cases/cth/federal_ct/2009/1220.html
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(iii) did the confider produce or obtain the information only after the
expenditure of time and/or money by way of research or in the application of
skill and ingenuity; Saltman Engineering Co Ltd; cf United Sterling
Corporation v Felton [1974] RPC 162; Interfirm Comparison (Australia) Ltd,
at 117; could another person acquire or duplicate the information only by going
through a like process: Cranleigh Precision Engineering Ltd v Bryant [1966]
RPC 81 at 89-90; Ansell Rubber Co at 49;
(iv) what steps has the confider taken to preserve the secrecy of the information
and to prevent it becoming public knowledge: Amber Size & Chemical Co Ltd
v Menzel (1913) 30 RPC 433 at 438; Dean, at [3.165]-[3.175];
(v) is the information intrinsically valuable or is it valuable to the confider or to
a competitor or other interested party: Surveys & Mining Ltd v Morrison [1969]
Qd R 470; Measures Brothers Ltd v Measures [1910] 1 Ch 336; and
(vi) would a reasonable person in all the circumstances recognise the
information to be the “property” of the confider: Deta Nominees Pty Ltd v
Viscount Plastic Products Pty Ltd [1979] VR 167 at 191; Printers & Finishers
Ltd v Holloway (No 2) [1965] RPC 239 at 255.
634. There is no single test for determining when the communication of
confidential information will import an obligation of confidence. As Gowans J
said in Ansell Rubber (at 40):
That obligation may come into existence by reason of the terms of an
agreement, or what is implicit in them, by reason of the nature of the
relationship between persons, or by reason of the subject-matter and the
circumstances in which the subject-matter has come into the hands of the
person charged with the breach.
Identification of Confidential Information
44. In GlaxoSmithKline, Harper J explained at length at [38] the burden borne
by an applicant of properly informing the respondent, and also the Court, with
a high degree of particularity, what is claimed to be confidential information or
a “trade secret”;
[t]he law must insist not only upon the clear and precise identification
of the information upon which the plaintiff relies, but also that that
identification be restricted to information that is properly characterised
as confidential. I respectfully adopt the words of Laddie J in Ocular
Sciences v Aspect Vision Care Ltd [[1997] RPC 289, at 360]:
“The requirement of particularity may impose a heavy burden on the
plaintiff. In a case where the plaintiff has a large quantity of
confidential information and much of it has been taken by the
defendant, the obligation to identify all of it might involve a great deal
of work and time. ... The normal approach of the court is that if a
plaintiff wishes to seek relief against a defendant for misuse of
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confidential information it is his duty to ensure that the defendant
knows what information is in issue. This is not only for the reasons set
out by Edmund Davies LJ in Zink (John) & Co Ltd v Lloyds Bank Ltd
[1973] RPC 717 but for at least two other reasons. First, the plaintiff
usually seeks an injunction to restrain the defendant from using its
confidential information. Unless the confidential information is
properly identified, an injunction in such terms is of uncertain scope
and may be difficult to enforce ... Secondly, the defendant must know
what he has to meet. He may wish to show that the items and
information relied on by the plaintiff are matters of public knowledge.
His ability to defend himself will be compromised if the plaintiff can
rely on matters of which no proper warning was given. It is for all these
reasons that failure to give proper particulars may be a particular
damaging abuse of process.”
These principles do not apply only to the question of the content of the
pleadings. Just as it may be an abuse of process to fail properly to identify the
information on which the plaintiff relies, it can be an abuse to give proper
particulars but of information which is not, in fact, confidential. A claim based
even in part on wide and unsupportable claims of confidentiality can be used as
an instrument of oppression or harassment against a defendant. It can be used
to destroy an ex-employee’s ability to obtain employment or a competitor’s
ability to compete. The wider the claims, the longer and more expensive the
litigation. ... A competitor or ex-employee is entitled to copy non-confidential
material, but if the plaintiff mixes a large amount of technology together, some
of which has been copied by the defendant, there is a risk that the court will
jump to the conclusion that some of what was copied must have been
confidential."
Whilst the Commission accepts the need for employers to protect their confidential
information the appropriate mechanism for such protection appears to be through court
action based upon either breach of contract or in equity and not through enterprise
agreements.
[3] Further, on 24 July 2014 my associate wrote to the Ms Fletcher, solicitor for Hydro-
Chem Pty Ltd, raising an additional concern I had in relation to clause 7 of the Agreement, in
the following terms:
“There is one additional thing required, made necessary by the recent Full Federal
Court decision in Toyota Motor Corporation Australia Limited v Marmara [2014]
FCAFC 84, an undertaking is required in relation to Clause 7 – No Extra Claims.
The Commissioner draws your attention to particular sections of the Toyota decision:
paras 93, 97 and 101.
The following undertaking would be acceptable to address this issue:
“The company undertakings (sic) that clause 7 will not operate so as to prevent
the employer from exercising a right under Part 2-4 of Division 7 of the Fair
Work Act.”
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[4] Mr Nicholas Duncan, Chief Executive Officer of Hydro-Chem Pty Ltd provided the
following undertakings in response to the concerns I raised:
“In relation to the application for approval of the Hydro-Chem and AWU Enterprise
Agreement 2013-2016 ('the Agreement'), Hydro-Chem gives the following
undertakings:
1. That Hydro-Chem will not use clause 7 of the Agreement to prevent itself
from exercising a right under Part 2-4 of Division 7 of the Fair Work Act 2009
2. That clause 15.2 of the Agreement will only be applied where an employee
authorises the deduction; and
3. That whilst the Agreement is in operation, clause 42 of that Agreement will be
treated as having been deleted from the Agreement and Hydro-Chem will not refer to,
rely on or apply it.”
[5] Pursuant to s.190(4) of the Act, I have sought the views of the AWU with respect to
these undertakings and the AWU advises it agrees with the undertakings provided.
[6] In accordance with s.190 of the Act, I am satisfied that the written undertakings
provided meet my concerns and I accept the undertakings provided and these undertakings
have become terms of the Agreement in accordance with s.191(2) of the Act and are
appended at Appendix A.
[7] Subject to these undertakings, I am satisfied that each of the requirements of ss186,
187 and 188 as are relevant to this application for approval have been met.
[8] The Australian Workers’ Union, being a bargaining representative for the Agreement,
has given notice under s.183 of the Act that it wants the Agreement to cover it. As required by
s.201(2) I note that the Agreement covers the organisation.
[9] The Agreement is approved and, in accordance with s.54(1), will operate from 7
August 2014. The nominal expiry date of the Agreement is 30 June 2016.
COMMISSIONER
Printed by authority of the Commonwealth Government Printer
Price code J, AE409359 PR553733
THE FAIR WORK COMMISSION HE SEALO
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APPENDIX A
@ HydroChem Water Specialists 27 Viking Court 28 July 2014 Cheltenham VIC 3192 ABN 57 005 556 605 Ph: (03) 9553 1011 Fax: (03) 9553 1387 National: 1300 558 788 Commissioner Ryan info@hydrochem.com.au Fair Work Commission www.hydrochem.com.au Level 4, 11 Exhibition Street Melbourne, VIC 3000
By email: chambers.ryan.c@fwc.gov.au Dear Commissioner Ryan UNDERTAKINGS In relation to the application for approval of the Hydro-Chem and AWU Enterprise Agreement 2013-2016 ('the Agreement'), Hydro-Chem gives the following undertakings: 1. That Hydro-Chem will not use clause 7 of the Agreement to prevent itself from exercising a right under Part 2-4 of Division 7 of the Fair Work Act 2009
2. That clause 15.2 of the Agreement will only be applied where an employee authorises the deduction; and 3. That whilst the Agreement is in operation, clause 42 of that Agreement will be treated as having been deleted from the Agreement and Hydro-Chem will not refer to, rely on or apply it. These undertakings are made according to section 190 of the Fair Work Act 2009 ('the Act') and Hydro-Chem understands that these undertakings will be taken to be a term of the Agreement, pursuant to section 191 of the Act. Yours sincerely
Nãoo. Nicholas Duncan Chief Executive Officer ATIONAL TEAM ATIONAL TEANATIONAL Ca Australian Owned · Over 35 Years of Excellence CERTIFIED CERTIFIED CERTIFIED Adelaide . Brisbane . Melbourne . Newcastle + Perth . Riverina · Sydney QUALITY SAFETY .......... ......
