01 Dec 2016

Can the Fair Work Commission vary common law employment contracts?

By Matt Condello

Employers should always consider the relief that can be sought in disputes to be arbitrated by the Commission under section 739 of the Fair Work Act.

Section 739 of the Fair Work Act 2009 (Cth) confers on the Fair Work Commission (the Commission) the jurisdiction to arbitrate disputes between parties where the relevant enterprise agreement includes a term permitting the Commission to do so. The decision of the Full Bench of the Commission in Monash College Proprietary Ltd v Independent Education Union of Australia [2016] FWCFB 4858 confirms that the Commission does not have the power to retrospectively vary common law contracts of employment when arbitrating a dispute under an enterprise agreement.

The dispute

The Monash College Proprietary College Ltd (Monash University Foundation Year Teaching Staff) Agreement 2012 provides the terms on which Monash College is able to employ staff. Relevantly, cl 9.6 of the Agreement provides that Monash is only able to employ fixed-term staff for particular reasons, which are listed in that clause.

The Independent Education Union of Australia raised a dispute with Monash College, arguing that the reasons Monash College purported to employ 35 fixed term teachers did not fall into one of the categories permitted under the Agreement for the employment of fixed-term teachers. The Union claimed that those teachers had not been employed in accordance with the Agreement. The Union sought that these teachers’ contracts be treated as ongoing employment contracts.

The Union notified a dispute to the Commission under the relevant dispute resolution clause in the Agreement.

Decision at first instance

The Union submitted that, if the allowable reasons for the fixed-term appointments did not exist, the relevant employees must be employed on an ongoing basis, as this was the only form of employment consistent with the Agreement. The Union submitted that the Commission’s power to determine the dispute arises from the terms of the Agreement (that is, the dispute settlement clause), and to the extent that a determination of the Commission might exceed what is permitted by the Act, it has operation under general law.

The Union relied on the decision of Commissioner Roe in National Tertiary Education Industry Union v University of Melbourne [2012] FWA 1202 (NTEIU). In that case Commissioner Roe considered that the Commission could order that fixed-term contracts that were made in breach of an enterprise agreement be treated as continuing contracts when exercising jurisdiction under section 739 of the Act. However Commissioner Roe did not ultimately issue an order to that effect.

Monash College submitted that, even if the reasons for the fixed-term contracts did not exist, the Commission did not have the power to vary common law contracts by converting them from fixed-term contracts to ongoing contracts. Monash College submitted that the relief ordered by the Commission must not be inconsistent with the Act or the Agreement, and that breaches of an enterprise agreement could not result in a change in the nature of employment contracts. Monash College also relied on the observation of McHugh J in Byrne v Australian Airlines (1995) 185 CLR 410, where his Honour stated that the “history of industrial legislation in this country is that the award regime is separate from and altogether independent of the ordinary law of contract”.

Commissioner Bissett found that the reasons for the fixed term appointments did not exist, and, as such, the relevant employees were employed in breach of the Agreement. The Commissioner adopted the reasoning of Commissioner Roe in NTEIU, holding that there was nothing in the Agreement that would be inconsistent with imposing continuing contracts in the place of the fixed-term contracts, with the commencement date of the continuing contracts being the commencement date of the fixed-term contracts.

On appeal to Full Bench of Fair Work Commission

Monash College appealed to the Full Bench of the Commission. The Full Bench (Vice President Catanzariti, Deputy President Hamilton and Commissioner Cirkovic) granted permission to appeal, stating that the appeal raised important questions concerning the interpretation of enterprise agreements in circumstances where the Commission’s discretion to alter existing employment contracts is an issue in the dispute.

Monash College submitted that Commissioner Bissett erred in finding that the Commission had the power to alter common law employment contracts when arbitrating a dispute under section 739 of the Act, particularly where such a finding had retrospective effect. To the extent that Commissioner Bissett relied on NTEIU, Monash College submitted that that case was wrongly decided.

The Union submitted that Commissioner Bissett’s determination was nothing more than an application of the correct interpretation of the Agreement. It also submitted that NTEIU was correctly decided.

The Full Bench found NTEIU did not support the contention that the Commission could retrospectively alter common law employment contracts. The Full Bench also found that there is no jurisdiction under the Act or the Agreement for the Commission to make such an order.

On the basis of this finding (as well as identifying other errors in Commissioner Bissett’s decision), the Full Bench upheld the appeal and quashed Commissioner Bissett’s decision.


Employers should always consider the relief that can be sought in disputes to be arbitrated by the Commission pursuant to section 739 of the Act. The power of the Commission to arbitrate a dispute is conferred on it by the parties through the terms of the relevant enterprise agreement. Therefore, the relief the Commission can order is limited by the terms of the relevant enterprise Agreement and the Act (see Endeavour Energy v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia [2016] FCAFC 82).

An express term in the disputes clause in an enterprise agreement, to the effect that the Commission cannot make an order altering the employment status of employees employed under the enterprise agreement, would protect an employer in the event that the approach adopted by the Full Bench is found not to be correct.

This article was first published in the Employment Law Bulletin, Vol 22 Number 10, December 2016

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.