A recent decision of the Federal Court found that an enterprise agreement, which referred to an internal disciplinary policy document, did not incorporate the terms of that document into the agreement.
Justice Marshall, in Australian Rail, Tram and Bus Industry Union v KDR Victoria Pty Ltd t/as Yarra Trams, noted that for a person to be in breach of, or to contravene, a provision of an enterprise agreement, that person must have failed to perform some obligation that is imposed by the provision. His Honour found that the relevant clause of the enterprise agreement in question did not itself impose any obligation on the employer — it simply observed that staff discipline will be dealt with under the disciplinary policy document. As such, the employer did not contravene a provision of the enterprise agreement.
Yarra Trams employed the second applicant, Stevan Uzelac, as a tram driver based at its Kew Depot. Mr Uzelac was a member of the Australian Rail, Tram and Bus Industry Union (RTBU), the first applicant.
On 20 July 2012, for reasons that were not outlined in the decision, Yarra Trams summarily terminated Mr Uzelac’s employment. On 23 July 2012, by a letter addressed to the Chief Executive Officer of Yarra Trams, Mr Uzelac informed the CEO of his wish to appeal against his termination of employment on the basis that the decision to terminate him without notice was too severe.
A few days later, the RTBU wrote to the Director of Human Resources at Yarra Trams concerning Mr Uzelac’s appeal. The letter referred to an internal Yarra Trams procedure for conducting inquiries against dismissals as contained in the Disciplinary Counselling Policy and Procedures document (Policy) and requested an oral hearing to be conducted, in accordance with the Policy.
Clause 4.6 of the Policy states:
An employee who has been dismissed from the service of Yarra Trams … shall be entitled to an inquiry if within 48 hours of such dismissal … he/she so requests in writing to the Chief Executive. The employee shall be entitled to be represented at an inquiry by a member of a union."
By letter dated 3 August 2012, Yarra Trams noted that there would not be an oral hearing, although Mr Uzelac was invited to provide a written submission setting out the grounds being relied upon.
The appeal was ultimately decided “on the papers” and Yarra Trams determined that the summary dismissal was “justified in the circumstances”.
The enterprise agreement
Clause 23 of the Yarra Trams Enterprise Bargaining Agreement 2009 (enterprise agreement) provides that:
Staff discipline will continue to be conducted in accordance with the Yarra Trams Disciplinary Counselling Policy and Procedures, as contained in MSM document c400im0001. During the life of the Agreement the parties undertake to give further consideration to implementation of the Discipline Panel for all areas of Technical Services."
Proceedings were commenced by the RTBU against Yarra Trams for an alleged breach of s 50 of the Fair Work Act 2009 (Cth). The provision prohibits a person from contravening a term of an enterprise agreement. As part of those proceedings, a preliminary question needed to be addressed — namely, whether cl 23 of the enterprise agreement obliges the respondent to apply the terms of the Policy.
Is the policy incorporated in the enterprise agreement?
Submissions of dismissed employee and union
The applicants submitted that, in effect, the terms of the Policy have been incorporated by reference into the enterprise agreement. They noted that the Policy is the one that existed at the time of the negotiations that led to the creation of the enterprise agreement and was well known to the parties.
The applicants also pointed to the history of the treatment of appeals against dismissals in predecessor agreements. It was uncontested that in the 10 years prior to negotiations for the 2009 enterprise agreement, appeals of the kind specified in the Policy involved the appointment of an independent chairperson, being a person independent of the CEO of Yarra Trams and/or a person not employed by Yarra Trams.
Federal Court ruling
Justice Marshall noted that:
"For a person to be in breach of, or to contravene a provision of an enterprise agreement, that person must have failed to perform some obligation which the provision imposes … cl 23 does not itself impose any obligation on Yarra Trams. Rather, it observes that staff discipline issues will be dealt with under the disciplinary document. 
His Honour found that cl 23 of the enterprise agreement places no obligation on Yarra Trams to conduct an inquiry into a dismissal. Although the Policy itself places obligations on Yarra Trams, it forms no part of the enterprise agreement and cannot be enforced as though it were part of the enterprise agreement.
Furthermore, his Honour found that "custom and practice in the industry" under different industrial instruments cannot prevail over the plain meaning of the enterprise agreement. His Honour found that:
"Assuming that the parties to predecessor instruments acted upon a common understanding, such understanding was based on inadvertence as to the true meaning of the disciplinary document … The procedure adopted may have been the preferred approach of those persons, but this does not mean that the parties were legally obliged to adopt it. "
Reference was also made to the common technique used in the industry of including in an appendix to an enterprise agreement a policy or separate terms, which are in turn incorporated into the industrial instrument. Justice Marshall noted that that was not done in this instance.
Alternative position if Policy not incorporated in enterprise agreement
The court also considered the alternative position — namely, if the court was in error in determining that the enterprise agreement does not incorporate the terms of the Policy, does the Policy require an oral hearing conducted by an independent person?
On this point, Marshall J found that cl 4.6 of the Policy does not deal with the nature of the inquiry to which an employee is entitled. It does not specify whether the inquiry is to be conducted by way of an oral hearing or “on the papers”, nor does it identify the person who is to conduct the inquiry.
His Honour noted that the construction of cl 4.6 must commence with the plain words of the provision, and any evidence as to custom and practice cannot displace the meaning of the text.
His Honour concluded that there is nothing, on a plain reading of the Policy, to support the view that the document prescribes the conduct of an inquiry and that such an interpretation is based on common inadvertence as to the actual requirements of the Policy.
Accordingly, even if the court is in error as to the incorporation issue, Yarra Trams did not contravene the Policy by conducting an inquiry on the papers, as opposed to holding an oral hearing conducted by an independent person.
Implications of the decision and intention of the parties
This decision illustrates that parties need to take particular care when referring to documents in an enterprise agreement. For avoidance of doubt, if parties do not intend to incorporate the terms of a separate document into an enterprise agreement, that should be stated expressly in the agreement.
If, however, parties do intend to incorporate the terms of the external document, then those documents should be annexed to the enterprise agreement. Such an approach is commonly adopted.
Parties cannot rely on custom and practice, even if it is well established, in circumstances where the terms of the document are clear and there is simply a common inadvertence as to their true meaning.
This article was first published in the Employment Law Bulletin, Vol 19 No 2, June 2013
This article was written when Joe was a partner at Clayton Utz and does not necessarily reflect his views as Vice-President of the Fair Work Commission.
 Australian Rail, Tram and Bus Industry Union v KDR Victoria Pty Ltd t/as Yarra Trams  FCA 330. [back]
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