The Federal Court has found that clauses in an enterprise agreement between the Country Fire Authority (CFA) and the United Firefighters Union of Australia (UFU) are unconstitutional and invalid. The agreement was approved by the Fair Work Commission (FWC) in 2010 and contained a clause requiring the CFA to employ an additional 342 firefighters over a six-year period, to conduct at least three recruit training courses per year and to train at least 30 recruits at each training course. The CFA didn’t comply with the recruitment regime in the agreement, which also contained clauses constraining the CFA’s management prerogative to restructure work classification, implement redundancies or recruit laterally. The UFU brought proceedings against the CFA in the Federal Court, seeking a declaration that the CFA had breached the Fair Work Act 2009 (FW Act) by failing to comply with the agreement, as well as injunctive relief requiring the CFA to comply with the relevant clause and remedy the effects of any contraventions of the agreement found to have occurred.

Is the CFA a constitutional corporation?

Murphy J of the Federal Court accepted the UFU’s argument that the CFA was a constitutional corporation, being a ‘trading corporation’ for the purposes of the constitution (although this issue was ultimately not decisive). His Honour found in this respect that:

• It is a corporation’s activities, rather than what the corporation was set up to do, that will usually be determinative of the issue.
• The fact that the CFA conducts activities in the public interest does not exclude those activities from being trading activities.
• Despite less than three per cent of the CFA’s total revenue during the relevant period being referrable to its trading activities, those activities were not ‘peripheral, insignificant, incidental or trivial’.

Implied limitation

In its defence, the CFA argued, among other things, that the recruitment clause was invalid and unenforceable by reason of the implied constitutional limitation on Commonwealth legislative power described in a previous High Court decision concerning the Australian Education Union (AEU) and the State of Victoria. The concept of an implied constitutional limitation refers to a prohibition on the Commonwealth making laws which impose a special burden on a state, or which curtail a state’s capacity to function as a government. In the CFA case, Murphy J dismissed the UFU’s application, finding that:

• The principle in the AEU case extends to an enterprise agreement approved by the FWC.
• It is of ‘little relevance’ that the CFA agreed to the recruitment clause by voluntarily entering into the agreement.
• The recruitment clause was invalid and unenforceable, as were the other clauses constraining the CFA’s ability to deal with its recruitment, redundancy and work classification requirements referred to above.

The Court held that broad dispute resolution and consultation clauses are valid and enforceable, even where they cover matters not otherwise arising under the agreements, and allow for union nomination of committee membership.

Referral Act

The CFA also argued that the recruitment clause was invalid by reference to the Fair Work Act 2009 (Referral Act). Murphy J held that it was unnecessary to decide this issue, given his finding that the CFA was a constitutional corporation. However, His Honour:

• Agreed with the Full Bench of the FWC in the decision of Parks Victoria v Australian Workers Union and Ors [2013] FWCFB 950 that the FWC does not have jurisdiction.
• To approve an enterprise agreement (even though its terms have been agreed between the parties) containing clauses that deal with matters within the exclusion set out in section 5 of the Referral Act.
• Held that if the FWC’s power to approve the agreement had been derived from the Referral Act, the FWC would equally have had no power to approve the recruitment clause in the Agreement.

What can we learn from this?

The state of Victoria and its agencies are parties to a number of enterprise agreements and a workplace determination that contain terms that are now likely to be unenforceable. A state agency may be a trading or financial corporation for constitutional purposes, even if its trading activities are but a small percentage of its total revenue. This has implications for access by, for example, employees of councils or statutory authorities, such as the CFA, to the FWC’s anti-bullying jurisdiction, which is limited to constitutional corporations. That right of access may be broader than previously thought. Employers need to think carefully about the time and productivity costs, among other things, of having issues susceptible to a consultation and/or dispute resolution process that prevent or delays the timely implementation of management decisions, and establishes the union as the exclusive point of consultation on behalf of employees in general.