Management’s understanding of notice determines nature of industrial action: Federal Court

By: By Nicholas Ellery (Partner) & Tracy Caspersz (Counsel)

Submitted by Firm:
Corrs Chambers Westgarth
Firm Contacts:
John Tuck

Management’s understanding of notice determines nature of industrial action: Federal Court

In Esso Australia Pty Ltd v The Australian Workers’ Union [2015] FCA 758 (24 July 2015), Jessup J of the Federal Court of Australia held in effect that, if a notice of intended industrial action is ambiguous, the addressee’s (management’s) reasonable understanding of it determines the scope of the intended action, not the understanding of the author (the union).[1]

The significance of this finding is that, if industrial action takes place outside the scope of management’s understanding of what has been notified, it will not constitute protected industrial action within Part 3-3 of the Fair Work Act 2009 (Cth) (FW Act).

Facts of Esso - ambiguity in notice of intended action

Under ss 413(4) and 414 of the FW Act, a union must give at least three working days’ notice to an employer of any proposed protected industrial action (which has been authorised in an employee secret ballot). The notice must “specify the nature of the action and the date on which it will start” (s 414(6)).

In Esso, the Australian Workers’ Union gave notice of a ban on ‘de-isolation of equipment’ by operators at the company’s refinery. The union intended that this term included air freezing and pressure testing based on the electronic ‘ICC’ system that was used during a period when equipment was being returned to service. Management who received the notice understood it differently, based on the terms and definitions used in the company’s Work Management System (WMS) manual.

Management’s reasonable understanding of notice determines scope of action

Jessup J considered that the purpose of a notice of industrial action under the FW Act is “to convey information. Thus the question is not what the author intended, but what the addressee would reasonably have understood from the terms used in the notice.” It followed that, if the notice was capable of more than one meaning, there is “no reason to err on the side of the giver of notice, thereby permitting him or her to take advantage of his or her own ambiguity.”[2]

In the instant case, Jessup J held that the company was entitled to use the notice as an indication of what it would be unable to do, and, no less importantly, of what it would be able to do, during a shutdown. This was a critical aspect of the process of collective bargaining, in its application to the circumstances of the parties.[3]

Given the terms used in the WMS manual, Jessup J held that the notice would not have been understood as encompassing equipment testing, air freeing or leak testing. Nor did it refer to the manipulation of valves associated with those activities, notwithstanding that such manipulations were mentioned on the ICC. Accordingly, the ban on work of that kind was not protected industrial action.[4]

Other important findings

Jessup J also held as follows:

  • The company had a workplace right (under Part 3-1 of the FW Act) being the ability to initiate, or to participate in, a process or proceedings under a workplace law, the FW Act itself, constituted by the making of an enterprise agreement. The action organised by the AWU was taken with intent to coerce Esso to make such an agreement, or to make it “in a particular way”, namely, on terms acceptable to the AWU. Therefore, the industrial action was in contravention of s 343 of the FW Act, which prohibits coercion by a person of another in relation to the exercise of a workplace right.[5]
  • The AWU organised or took action against the company with intent to coerce it to engage in an industrial activity as described in s 347(b)(iv) of the FW Act, namely, to make an enterprise agreement, or to make it in a particular way (on terms acceptable to the AWU). This was in contravention of s 348, which prohibits coercion by a person of another to engage in an industrial activity.[6]
  • By organising industrial action, the AWU took adverse action within the meaning of item 7(a) in s 342(1) of the FW Act. The fact that the company did not comply with the AWU’s request to make the agreement (an industrial activity) was the reason for the adverse action.[7] The AWU was unable to discharge its reverse onus in this regard (contained in s 361). Therefore, the AWU took unlawful adverse action against the company in contravention of s 346(b), which relevantly protects a person from adverse action by another because they do not comply with a request made by an industrial association.[8]
  • The Commission’s powers under s 418 of the FW Act are restricted to making an order to stop the industrial action in question, not industrial action generally.[9]

It is also noteworthy that Jessup J, albeit reluctantly, followed the recent decision of Barker J in Australian Mines and Metals Association Inc v The Maritime Union of Australia [2015] FCA 677 to the effect that a past contravention of an order of the Fair Work Commission by a bargaining representative does not mean that current industrial action is not protected action.[10]

Importance of the Esso decision for employers

In effect, Jessup J’s approach to the notice of intended industrial action means that the ‘nature’ of the intended action specified in a notice is limited to the scope of the action as reasonably understood by management who receive the notice.[11] Employers should immediately analyse a notice upon receipt, to determine what it reasonably means in respect of what it permits and what it does not permit by way of industrial action. 

As a first step, employers should consider the nature/scope of the industrial action specified in a protected action ballot order (PABO). Industrial action that exceeds the scope of proposed action authorised by the PABO, as reasonably understood by management, may not be protected action under the FW Act. An employer could seek a range of statutory and/or common law remedies in relation to such action.[12]

[1] [2015] FCA 758 at [86].

[2] Ibid, at [86].

[3] Ibid, at [88].

[4] Ibid, at [89]-[90].

[5] Ibid, at [154]-[188].

[6] Ibid, at [189]-[192].

[7] See FW Act, s 347(b)(iv).

[8][2015] FCA 758, at [193]-[200].

[9] Ibid, at [91]-[116].

[10] Ibid, at [144]-[147]. An appeal had been filed against this decision at the time of writing.

[11] See FW Act, s 414(6).

[12] These remedies, and some of the strategic considerations for employers to consider in responding to unlawful industrial action, are discussed in an earlier article.