The Fair Work Commission (Commission) has handed down a decision (Australian Municipal, Administrative, Clerical and Services Union v North East Water  FWC 6922) which highlights the extent to which ‘no extra claims’ clauses contained in enterprise agreements can limit an employer’s ability to unilaterally vary employment benefits, even where such benefits do not arise under the terms of the enterprise agreement.
In its decision, the Commission ruled that a ‘no extra claims’ clause contained within a current enterprise agreement barred the employer from altering its Fleet Management Policy (Policy) to phase out limited private use of company vehicles.
The employer and its employees were covered by a current enterprise agreement (Agreement).
Under clause 4 of the Agreement, the parties undertook that “for the life of this Agreement, there shall be no further claims in relation to salary increases or conditions of employment sought or granted, except for those granted under the terms of this Agreement.”
The employer proposed to remove the section of its Policy which permitted limited private use of vehicles by some employees, in order to avoid increases to fringe benefits tax. As a result of the proposed change, approximately 13 employees would no longer be able to use company vehicles for private use.
The applicant union disputed the proposed changes to the Policy, submitting that the wording of clause 4 of the Agreement prohibited any ‘further claims’ relating to salary increases or conditions of employment (irrespective of whether or not those matters were explicitly dealt with in the Agreement). The union argued that, on the evidence, the right to limited private use of company vehicles was given to some employees as a reward for additional supervisory responsibilities and, as such, formed part of the relevant employees’ conditions of employment. As a consequence, any variation of the benefits provided under the Policy constituted a ‘further claim’ by the employer under clause 4 of the Agreement, and was prohibited, while the Agreement continued to operate.
The employer submitted that the reference in clause 4 to ‘conditions of employment’ extended only to matters dealt with in the Agreement and, unless an enterprise agreement specifically deals with the employer’s workplace policies (which the Agreement did not), there is no legal impediment to an employer exercising its management prerogative to vary its policies.
In his decision, Commissioner Wilson held that:
- the natural and ordinary meaning of the term ‘conditions of employment’ in clause 4 of the Agreement extended beyond conditions of employment arising under or connected with the Agreement;
- on the facts, the limited private use arrangements were provided to employees in exchange for them accepting further responsibilities, and thus the arrangements were a condition of the employees’ employment;
- the proposed changes to the limited private use arrangements under the Policy constituted a ‘further claim’ by the employer;
- clause 4 of the Agreement operated to prohibit the employer implementing the proposed changes by changing the Policy; and
- the employer was not prohibited from seeking the proposed changes, but it would need to do so by using the procedures outlined in the Fair Work Act 2009 for varying an enterprise agreement, or by negotiating these changes during the bargaining process for a new enterprise agreement once the Agreement had passed its nominal expiry date.
Implications for employers
The decision highlights that a widely drafted ‘no extra claims’ clause within an enterprise agreement can extend to matters which are not covered by the agreement, and limit an employer’s ability to vary conditions of employment which are provided to employees outside the terms of the agreement.
No extra claims clauses in enterprise agreements should therefore be carefully drafted to ensure their scope is limited to the matters dealt with under the agreement.