Clauses in enterprise agreements that limit the use of labour hire not permitted unless clear connection with employment

Section 172(1) of the Fair Work Act 2009 provides a list of permitted matters that can be included in an enterprise agreement. In short, this section provides that an enterprise agreement can only contain terms that relate to the employer and its employees or a relevant union.

There has long been legal conjecture as to the extent to which clauses in an enterprise agreement that restrict the use of labour hire workers is a permitted matter in an enterprise agreement. Relevantly, the explanatory memorandum for the Act provides as follows in relation to the legality of a clause in an enterprise agreement restricting the use of labour hire workers:

• terms relating to conditions or requirements about engaging labour hire are permitted if those terms sufficiently relate to employees’ job security – e.g.  a term which provided that labour hire workers must not be engaged on terms and conditions that would undercut the enterprise agreement is a term within the scope of permitted matters;
• but, terms that would contain a general prohibition on the employer engaging labour hire workers would not be within the scope of permitted matters.

A Full Bench of the Fair Work Commission, in a decision at the tail end of last month, has confirmed that a narrow and restrictive interpretation needs to be applied when it comes to considering the legality of labour hire clauses in enterprise agreements.

The decision found that clause 16.3 of the Visy agreement which required the employer to offer full-time positions to labour hire workers who have completed three months’ full-time engagement was not a permitted matter as it was not sufficiently related to the job security of the employees covered by the agreement.  

This was contrasted with an earlier decision of the Fair Work Commission (Murray Bridge) which concerned a clause that contained a partial prohibition on the use of labour hire employees. The clause in Murray Bridge placed obligations on the employer in specified circumstances, including a requirement to offer permanent employment applied only once more than 20% of the workforce was made up of labour hire workers and only then “based on specific positions and shifts identified as being needed by the company.” In the absence of a specific workforce need (that is, a specified position or shift), the requirement to offer employment to labour hire workers did not apply.

The Full Bench agreed with the decision at first instance distinguishing the clause in the Visy agreement with the clause considered in Murray Bridge on the basis that the clause in the Visy agreement did not have any connection to specific workforce needs and operated in isolation of workforce numbers.

AMWU v Visy Board Pty Ltd [2018] FWCFB 8 

If you would like to know more about this case, please contact National Workplace Lawyers on (02) 9233 3989.

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Note — this is for information purposes only and does not purport to be comprehensive or to render legal advice.