Tread carefully on union deals

The federal Treasurer has brought secondary boycott law into focus, SMEs need to know any special arrangement with a union might land them in conflict with the ACCC.

Secondary boycott laws have come into focus as the federal election approaches.

Last week Treasurer Peter Costello announced changes to the Trade Practices Act that would allow the Australian Competition & Consumer Commission (ACCC), to commence litigation on behalf of small businesses affected by illegal secondary boycotts. And chairman Graeme Samuel recently suggested the ACCC would be taking a more active interest in enforcing secondary boycott provisions.

The implications for SMEs are highlighted in a recent landmark decision by the Federal Court, which fined the operator of the La Trobe Valley power station and the Electrical Trades Union for a breach of the secondary boycott provisions.

The court found, in a case brought by the ACCC, that Edison Mission and the Electrical Trades Union, reached an arrangement to shut out from the site any electrical contractors who had refused to sign an enterprise bargaining agreement with the ETU.

The court said the agreement amounted to a secondary boycott and fined the union $125,000 and the company $120,000 for breaches section 45E of the Trade Practices Act. The maximum penalty for a breach of these provisions is $750,000.

The decision means SMEs and large contractors alike can no longer afford to submit to a very common union claim in negotiations for enterprise bargaining agreements.

It is common for agreements between large contractors or manufacturers and unions to contain conditions that have the practical effect of strongly discouraging the engagement of contractors who do not have enterprise bargaining agreements with the relevant union.

But the Edison/ETU decision makes it clear that any company that enters a “contract, arrangement or understanding” with a union preventing the engagement of contractors the company has previously used, might result in a serious breach of the secondary boycott provisions of the TPA.

Since the introduction of WorkChoices, clauses of this nature have been “prohibited content” in workplace agreements. Unions and employers commonly circumvent this by entering a common law agreement, covering the range of matters that would otherwise be prohibited content.

Those agreements are not intended to be lodged with the Office of the Employment Advocate, or indeed to have any status under the Workplace Relations Act. And unions are drafting them very carefully to avoid the agreement being in breach of the TPA – on its face.

What is made clear by this case is that the courts will not just consider the written agreements. The terms “arrangements” and “understanding” have been given very broad meaning and are not just limited to legally binding agreements.

In cases such as the Edison/ETU case there was evidence of discussions between the union and the company, email and other correspondence, and a clear change in Edison’s approach to engaging contractors. The court found that all of this amounted to an illegal arrangement to shut out contractors that did not have a certified agreement with the ETU.

The lessons? Even if your EBA doesn’t say it specifically, having even informal and non binding arrangements with unions to limit the access of contractors to your work could land you in big trouble.

For subcontractors, you can take comfort from the fact that it is more likely that contractors will resist union pressure to only deal with companies doing business with the union.

Peter Vitale is a solicitor, the general manager of workplace relations services at VECCI and a principal at CCI Victoria Legal.