Thinking | 23 October 2019

Contravening enterprise agreements can be expensive

Under the Fair Work Act 2009 (Cth) (Act) contravening an enterprise agreement can result in orders for compensation and pecuniary penalty orders.  Failing to comply with an enterprise agreement can have severe financial consequences. This was recently illustrated in the case of Ridd v James Cook University (No. 2) [2019] FCCA 2489 (Ridd v JCU).

The substantive decision preceding Ridd v JCU

Professor Peter Ridd was an academic at James Cook University (JCU) who publicly criticised the university and its research on climate change.  Following these criticisms, seventeen allegations of misconduct were made against Professor Ridd. His employment was ultimately terminated by JCU on the basis that he had breached the university’s Code of Conduct.

Professor Ridd issued proceedings in the Federal Circuit Court. He argued that his conduct was protected by clause 14 of JCU’s enterprise agreement, which codified academics’ entitlement to intellectual freedom.

The Court held in favour of Professor Ridd on the basis that JCU had breached clause 14 of the enterprise agreement by finding that Professor Ridd had breached the Code of Conduct by censuring him, by directing him to keep the disciplinary process confidential, and by terminating his employment.

Justice Vasta concluded that ‘[c]lause 14 means that it is the right of Professor Ridd to say what he has said in any manner that he likes so long as he does not contravene the sanctions embedded in [clause] 14’.

In reaching this conclusion, the Court commented that the ‘fundamental error’ made by JCU was to assume that the Code of Conduct takes precedence over clause 14 of the Enterprise Agreement, when in fact the Code of Conduct is subordinate to that clause.

Judge Vasta noted that it would be ‘incongruous’ if a document like the Code of Conduct, which can be changed by JCU, could override a clause in an enterprise agreement which can only be changed in accordance with the Act.

Financial consequences for JCU

The Court ordered JCU to pay Professor Ridd over $1.2 million in compensation and pecuniary penalties.

The largest part of the award was the compensation for the 58 year old’s future economic loss, which was calculated to be $836,000 on the basis that he would have worked for JCU on a full-time basis until the age of 60 and then part-time until the age of 63.

The Court accepted that Professor Ridd’s past and future economic loss included the 17% superannuation contributions to which he was entitled.

Additionally, the court ordered $125,000 in pecuniary penalties for JCU’s ‘egregious abuse of the power an employer has over an employee’.

Lessons for employers

This case demonstrates the willingness of the courts to award significant sums in compensation and penalties when contraventions occur. Indeed, the Court observed that JCU’s conduct ‘deserves … “punishment” that will deter…any other employer from dismissing an employee for exercising basic workplace rights’.

Employers can adopt the following measures to minimise their risks:

  • Obtain legal advice to ensure that the rights and duties set out in an applicable enterprise agreement are properly understood.
  • Carry out investigations and disciplinary measures in a reasonable manner that recognises the rights of the employee.
  • When assessing the risk of liability, recognise that future economic loss can be substantial even for employees approaching retirement, account for entitlements to superannuation which are above the minimum, and consider how the dispute may impact the employee’s future job prospects.

Our employment team would be pleased to assist your business in negotiating, understanding or litigating matters under its enterprise agreement.


Iona Goodwin

Iona is an experienced employment lawyer, assisting clients with both litigious and non-litigious workplace relations matters.

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