|
|
|
|
|
Saturday, 25 May 2013 |
|
The New South Wales unfair contracts jurisdiction
Wednesday, 6 August 2003
Section 106 of the Industrial Relations Act 1996 (NSW) (IR Act) provides the Industrial Relations Commission of New South Wales in Court Session (IRC) with the power to vary or render void contracts, arrangements or collateral arrangements pursuant to which work is performed in an industry in New South Wales. The IRC's power to do this is dependent upon a finding that the contract or arrangement is unfair, harsh or unconscionable, or contrary to the public interest.
The power of the IRC under these provisions (known colloquially as the 'unfair contracts' provisions) is extremely broad, and essentially enables it to rewrite the terms of 'unfair' contracts.
Two recent decisions in New South Wales promise to have a significant impact on the way employers are affected by s.106 proceedings.
In June 2002, the commencement of the Industrial Relations Amendment (Unfair Contracts) Act 2002 amended the unfair contracts provisions in an attempt to limit the scope of the jurisdiction. One of the amendments was the insertion of s.106(6) into the IR Act, which provides that, in making any order, the IRC must take into account whether or not the applicant took any action to mitigate his or her loss.
The facts
In the case under appeal, the applicant had commenced employment with PricewaterhouseCoopers (PwC) in 1993, accepting a two-year secondment to Singapore in 1997. His employment was subsequently terminated in 1999.
At first instance, it was found that the representations made to the applicant that caused him to accept the secondment resulted in an ''unfair' situation, and the applicant was awarded 10 months compensation. On appeal, PwC argued in part that, in calculating the compensation, Justice Haylen had failed properly to take into account the income earned by the applicant from the alternative employment he had secured.
The decision
The Full Bench of the IRC made non-binding observations relating to the operation of s.106(6), commenting that:
- s.106(6) merely requires the IRC to have regard to action taken to mitigate loss, but does not direct the IRC's course after having done so. The IRC's broad discretion is left intact and remains based on what is 'just in the circumstances'.
- as a matter of statutory construction, it was the intention of Parliament to retain the IRC's discretion as to the application of the mitigation principle
- the operation of s.106(6) does not operate inconsistently with previously established common law principles, in that the notion of mitigation is not necessarily applicable to payments in respect of redundancy situations, only to notice payments.
By application of mitigation principles already established at common law, the Full Bench reduced the compensation by the amount earned by the applicant in the four-month period immediately following termination of employment.
Implications for employers
- While the comments of the Full Bench in relation to s.106(6) are legally non-binding, they are likely to be viewed as persuasive authority in future applications of this provision.
- The decision can therefore be taken to indicate that the IRC's broad discretion in awarding compensation is likely to remain intact regardless of s.106(6). Employers consequently cannot assume that the unfair contracts jurisdiction will be restricted in this respect by the legislative amendments.
- Employers should bear in mind the reluctance of the IRC to apply mitigation principles (including under s.106(6)) to redundancy payments when apportioning redundancy and notice payments.
New South Wales Court of Appeal claims ground on IRC regarding s.106 matters
The New South Wales Court of Appeal (Court of Appeal) has handed down another important decision dealing with the unfair contracts jurisdiction of the IRC in Mitchforce Pty Limited v Industrial Relations Commission & Ors [2003] NSWCA 151. The IRC had found that a hotel lease was a contract 'whereby work is performed in an industry' and accordingly could be dealt with under its unfair contracts jurisdiction under s.106 of the IR Act. The Court of Appeal held that the lease was not such a contract.
The decision is significant for a number of reasons. Firstly, the Court of Appeal stated that it does have some scope (albeit limited) to interfere with decisions of the IRC. The IR Act contains a strong privative provision that is intended to prevent other courts interfering with decisions of the IRC. This decision is important in highlighting that the IRC is not completely immune from review.
The Court of Appeal also expressed its concern that the IRC has in the past dealt with commercial contracts which were usually the preserve of the New South Wales Supreme Court. President Mason said that he is: "profoundly troubled by the march of the Commission's jurisdiction into the heartland of commercial contracts' and that the Parliament's intention 'will have been completely dispensed with in the steady but exponential march of jurisdiction under the prevailing interpretation of [s.106]."
Implications for employers
- The Court of Appeal has indicated that in future a narrower approach should be adopted in determining which contracts can be dealt with under the unfair contracts jurisdiction.
- At least two members of the Court of Appeal appear to be of the view that for a contract to fall within the unfair contracts jurisdiction it must have an 'industrial colour or flavour'.
- The decision is important in that a majority of the Court of Appeal left open the issue of whether the privative provision is invalid by reason of it being inconsistent with the Commonwealth Constitution.
It seems that we can expect significant developments in this area.
This article was supplied by law firm Freehills.
Glenn Fredericks and Penny Thew (glenn.fredericks@freehills.com; penny.thew@freehills.com)
Articles and advice on brainbox are for general interest only. You should never act upon anything you see here without first seeking professional advice. Please see our Terms & Conditions for full details.
No documents found
Comments are added by users without any intervention by Brainbox. Brainbox does not take any responsibility for anything that appears here. Go to our Terms & Conditions for full details.
|
|
|
|
|
|