Court Rules Former Employees Entitled to Backdated Wage Increases

On 30 October 2023, the Full Federal Court allowed an appeal from the single member decision in Murtagh v Corporation of the Roman Catholic Diocese of Toowoomba [2023] FCAFC 172.

The Full Court overturned the primary judge’s decision granting two former employees a backdated wage increase despite those employees not being employed at the time the relevant enterprise agreement was approved.

Background and Facts

Mr Murtagh and Mr O’Mara were employees of the Roman Catholic Diocese of Toowoomba (Diocese) and both employees resigned from their employment in December 2019.

Approximately a year later, on 25 November 2020, the Fair Work Commission approved the Catholic Employing Authorities Single Enterprise Collective Agreement – Religious Institutes Schools of Queensland 2019-2023 (2020 Agreement).

The 2020 Agreement contained a relatively unusual provision as part of its commencement clause which stated:

Where this Collective Agreement specifies an earlier operative date in relation to a particular provision, then that provision shall operate from that date for all applicable employees employed at that earlier date.

The 2020 Agreement provided for salary increases from the first full pay period on or after 1 July 2019 (and subsequent annual increases).

As is typical, the Diocese did not apply the 1 July 2019 salary increase until the 2020 Agreement was actually approved by the Fair Work Commission in December 2020. Given that salary increase was retrospective, the Diocese undertook a backpayment process for all existing employees covered by the Agreement following approval.

Notwithstanding they were no longer employed, and had not been for approximately 12 months, Mr Murtagh and Mr O’Mara brought a claim seeking backpayment in line with the retrospective salary increase.

In the first hearing the primary Judge initially dismissed the Application, finding that the 2020 Agreement did not apply to the employees who resigned before its operative date, and therefore had no entitlements under it.

The decision was appealed to the Full Bench.;

The Full Court’s Decision

The main issue addressed by the Full Court was whether the unique commencement clause conferred an entitlement on the two employees, notwithstanding that the 2020 Agreement was not operative until after their resignation.

The Court noted that ‘behind the.. relatively modest amounts [sought by the Applicants] … lurks an industrial law issue … of considerable systemic importance and related difficulty’.

Ultimately, the Full Court allowed the appeal, finding that although the 2020 Agreement did not apply to these employees given the cessation of their employment, they were covered by the Agreement as they were ‘applicable employees’ within the scope of the employer’s back payment obligation.

What does this mean?

The Court’s Decision is significant and highlights the importance of careful and considered Enterprise Agreement drafting.

Employers often agree to backdate wage increases (and potentially other entitlements) in negotiated enterprise agreements. Ordinarily the purpose of such clauses is to secure a successful vote by rewarding existing workers.

This decision highlights the critical importance of precision in drafting.

In light of this decision, we encourage employers to seek advice in relation to the drafting of any retrospective obligation or entitlement before ‘going to vote'.

If you would like further information or assistance with Enterprise Agreement drafting please get in touch on 1300 565 846 or email info@ablawyers.com.au.