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Howe, John; Newman, Andrew --- "Collective Bargaining and the Ownership of Employee Creation: An Empirical Examination of Statutory Industrial Instruments" [2013] UMelbLRS 5

Last Updated: 5 May 2014

This paper was first published in the Australian Journal of Labour Law, Volume 26. Issue 3, 2013

Collective Bargaining and the Ownership of Employee Creation: An Empirical Examination of Statutory Industrial Instruments

John Howe and Andrew Newman^[∗]
The concept of employee creation is a broad one, encompassing a range of explicit, tacit and personal knowledge. The relevant literature has to date focused upon legal regulation via intellectual property and individual employment law, including express and implied contractual terms and equitable obligations. This study aims to fill a gap in legal analysis by considering the role of collective labour law regulation in governing the ownership of employee creation. The authors commence this task by reviewing the contents of modern awards and enterprise agreements concluded under the Fair Work Act 2009 (Cth) in a range of ‘creative’ industries. The authors find that agreements often purport to regulate the ownership of employee creation, either by facilitating the equitable sharing of the fruits of employee creation, or by restricting employee entitlements and imposing onerous legal obligations. A number of recent tribunal decisions are also reviewed, which serve to define the parameters of collective bargaining over the ownership of employee creation and call into question the enforceability of various agreement clauses reviewed. The article considers the implications of this research and argues that, with a careful crafting of language by the parties involved, collective bargaining can be employed to facilitate the sharing of the ownership of employee creation and avoid many of the regulatory pitfalls associated with individual employment law regulation.

Part One: Introduction

The ownership of employee creation is a significant workplace law issue, which has been subject to long-standing legal uncertainty.^[1] Employee creation is the ‘product of inventive ingenuity; an original work, especially of the imaginative faculty’.^[2] The concept of employee creation is therefore a broad one and encompasses various manifestations of explicit, tacit and personal knowledge.^[3] Arup characterises ‘explicit’ knowledge as: ‘information-based, objective, task-related knowledge, so-called “know-what”’,^[4] which is generally amenable to codification.^[5] Due to its objective and frequently codified nature, explicit knowledge often falls under the umbrella of intellectual property regulation via copyright, patents or trade mark. However, the economic value of employee creation also extends to trade secrets, ‘know-how’ or ‘human capital’, which itself encompasses a wide range of employee knowledge, skills and expertise.^[6] Such manifestations of employee creation often reside in the individual employee herself, and form part of that employee’s ‘tacit knowledge’, which Arup defines as: ‘experience-based, subjective knowledge, so-called “know-how”’. ^[7] Also residing in the employee is ‘personal knowledge’ including ‘talent, aptitude, artistic ability, creativity and intuition’.^[8] This form of knowledge may also be of substantial economic value in the modern services-based economy, as it contributes to the quality of relationships between employees and customers, which takes on particular significance in certain sectors.^[9]

Whether classified as intellectual property or not, employers and employees have an interest in regulation pertaining to the ownership of employee creation. This is most obvious in relation to intellectual property, as the owner of that property is in the best position to capture its value. However, in relation to less tangible employee creation, often classified as tacit or personal knowledge, enterprises have an interest in cultivating employee creation and retaining such employees in order to remain competitive. The ownership of employee creation is also important to the employee, as it can enhance his or her labour market value. The extent to which it may do so depends upon whether or not the employee has incentives to engage in creation in the first place, and whether or not the employee is able to take advantage of his or her knowledge when moving between firms. It has also been argued that employee mobility can serve a broader public benefit, as it may assist with the diffusion of economic innovation.^[10]

The question of who owns employee creation, and whether an employee is able to take explicit, tacit and personal knowledge from one firm to another, has for the most part been considered a matter governed by individual employment law. Existing studies focus primarily upon the role of express and implied terms of the individual employment contract, workplace policies and equitable obligations in regulating employee creation.^[11] This paper aims to fill a gap in legal analysis by examining the role of collective labour law in regulating the ownership of employee creation. As a first step, the paper reports on a review of the content of a sample of modern awards and registered enterprise agreements concluded under the terms of the Fair Work Act 2009 (Cth) (FW Act) in selected ‘creative’ industries.^[12] The paper reveals that enterprise agreements and (to a much lesser extent) awards, do address the ownership of employee creation. This is a significant finding given the previous scholarly focus on individual employment laws in relation to this issue, and the fact that collective instruments govern the terms and conditions of employment of at least 58% of Australian employees.^[13]

As a second step to the research, we reviewed a number of recent decisions of Fair Work Australia (‘FWA’)^[14] where terms of ownership governing employee creation have been found in enterprise agreements submitted for approval under the FW Act.^[15] In many of these cases, members of the tribunal have decided that clauses purporting to assign intellectual property ownership to employers, restrict disclosure of confidential information and impose non-compete provisions on former employees covered by the agreement fail to meet the requirements of both the Better Off Overall Test (BOOT) and ‘matters pertaining to employment’ test.^[16] The existence of numerous recent decisions of this kind supports our general finding that enterprise agreements do increasingly purport to govern the ownership of employee creation. Moreover, many of the FWA decisions apply to proposed enterprise agreements concluded outside of the ‘creative’ industries selected for review. This indicates that the legal regulation of the ownership of employee creation by way of enterprise agreements may be a significantly more widespread phenomenon than originally anticipated. While these decisions appear to impose significant limitations upon the inclusion in enterprise agreements of terms governing the ownership of employee creation, they also leave room for a positive and constructive role for collective bargaining. In particular, based on the research presented in this article, it is argued that collective bargaining can, and in some cases demonstrably does, produce agreements which facilitate the equitable sharing of the ownership of employee creation without imposing substantial legal restrictions upon the mobility of employees (and their knowledge) post-employment. However, our findings concerning the content of many agreements suggest that, although collective bargaining over the ownership of employee creation may provide a variety of regulatory advantages over individual regulation, there is some way to go before these are realised in practice.

The paper is structured as follows. Part Two of the paper will explain the relevant background and methodology to our study. Part Three will explain our findings. Part Four will discuss the FWA decisions concerning the permissible parameters of collective bargaining over the ownership of employee creation. Part Five then explores the implications of our findings and sets out our conclusions.

Part Two: Background and Method

How is the ownership of employee creation regulated through intellectual property and individual employment law?

As noted above, employees frequently create valuable intellectual property for the businesses that engage them. The assets covered by the category ‘intellectual property’ include copyrighted documents and software, patented inventions, registered designs, trade marks and plant breeders’ rights. In Australia, the requirements for the protection of these assets, and the benefits that accrue to them, are regulated by specific federal statutes: the Copyright Act 1968 (Cth), the Patents Act 1990 (Cth), the Designs Act 2003 (Cth), the Trade Marks Act 1995 (Cth) and the Plant Breeder’s Rights Act 1994 (Cth). Intellectual property is a form of property and the rights to it may be assigned by the rights-holder. This provides a simple basis for a worker and their employer to bargain over the benefits arising from an intellectual property innovation, including over the assignment of the rights themselves.

When questions arise concerning the conflicting rights of employee inventors and their employers in these works, the answer is normally found through consideration of both intellectual property law and individual employment law.^[17] More specifically, it is the interaction between intellectual property statutes, general law, the terms of individual employment contracts, and employer human resources policies (which may be expressly or impliedly incorporated within individual employment contracts), which is most often considered to be the source of relevant principles and rules.^[18]

As we have also noted, the broader class of protectable intangible interests, such as tacit and personal knowledge, does not necessarily fall within existing categories of intellectual property regulation. A range of contractual and equitable obligations shape the way that the benefits of such knowledge are allocated. In addition to its express terms, for example, a contract of employment includes an implied obligation of fidelity to an employer. Thus an employee is bound not to profit personally from that which is their employer’s; including confidential information, trade secrets, know-how or client relationships.^[19] This obligation of fidelity continues in a limited way even after their contract of employment has concluded, although its scope will vary according to the degree of originality and specificity attaching to the process or product in question.^[20]

As implied obligations and equitable duties are uncertain in their scope, it is common for firms to use express contractual terms to attempt to maintain control of the benefits of innovation. It is here that individual employment law often operates to extend the scope of what is intellectual property, by upholding restrictions on the mobility of tacit knowledge.^[21] Personal knowledge may be similarly restricted.^[22] Typically, firms include a non-compete and/or a confidentiality clause in their employment contracts to limit an employee’s ability to use their knowledge to compete with a firm after the end of their work relationship.^[23] In principle, the common law insists upon freedom to trade, and so upon a worker’s freedom to make a living from the value of their labour. Thus, a contractual clause imposing a post-employment restraint on competition will be subjected to close scrutiny by the courts, and upheld only so long as it is ‘reasonable’.^[24] A confidentiality clause operates in a similar way. By creating an expansive definition of the information, processes and products the parties to an employment contract agree to consider as ‘confidential’, these clauses can both clarify the uncertainty attending implied duties, and also considerably expand their capacity to limit an employee’s ability to profit personally.^[25]

There are oft-discussed issues with the regulation of the employment relationship by individual contracts. As noted earlier, the firm or employer’s imperative to use these legal devices is obvious: employee creation (whether explicit, tacit or personal) is valuable and must be captured if at all possible. However, it is not at all obvious that such rules operate effectively as incentives to workers to innovate or trade on their knowledge to find more lucrative employment elsewhere in the job market; indeed their typical use would appear likely to have the opposite effect.^[26] Individual employees may be in a particularly weak position to oppose the imposition of non-compete/restraint of trade clauses.^[27] Moreover, the uncertainty that pervades reliance on negotiation and enforcement of regulation on an individual basis is a concern for both employees and employers.^[28]

By contrast to individual regulation, most labour law systems also provide for public, statutory regulation of employment rights and conditions, and/or mechanisms by which terms and conditions can be negotiated collectively at industry and/or enterprise level. The motivation for this particular study was to find out whether the ownership of employee creation was also regulated through collective forms of labour law, and to consider whether this might be a more or less appropriate mechanism by which to regulate ownership of employee creation given the shortcomings of individual regulation identified above.

While the FWA decisions reviewed below indicate some of the limitations to collective regulation of the ownership of employee creation, there are a number of general arguments in its favour. First, it may promote a greater degree of clarity and consistency in the regulation of employee creation within workplaces than can be expected from individual negotiation, for the reasons cited above. This is particularly important in an area of the law often characterised by a confusing array of unclear and overlapping obligations. Such clarity and consistency could also arguably promote increased adherence to each parties’ legal obligations. Second, from both parties’ perspectives, collective regulation might simplify the cost of enforcement by providing access to FW Act mandated dispute resolution processes and remedies, including the potential imposition of civil remedy provisions against parties in breach of their obligations. By contrast, individual regulation leaves enforcement up to court actions based on alleged contractual breaches of express and implied terms and equitable obligations (with the necessity of proving damages). Third, collective regulation may promote ‘worker voice’ and dialogue between employers and employees on important workplace issues that often otherwise remain invisible by virtue of being ‘off the bargaining table’. Fourth, the registering of publicly available industrial instruments provides other parties within the sector with information on industry standards, thus facilitating a level playing field across the industry. This is particularly important given that the regulation of employee creation is often directly relevant to the mobility of employees and competition within an industry. Fifth, collective regulation serves to balance the frequently uneven bargaining power inherent between many employers and their individual employees.

As a first step to considering the role of collective labour law regulation, we carried out a review of a sample of awards and enterprise agreements in order to determine whether clauses purporting to regulate the ownership of employee creation currently appeared in these instruments at all. The following section explains the methodology followed in selecting and reviewing these instruments.

What is the role of collective industrial instruments and which ones were considered?

Under the FW Act, there are two categories of registered statutory industrial instruments, which are both collective in nature: modern awards and enterprise agreements.^[29] Such statutory instruments operate alongside the individual contract of employment, workplace policies, equitable duties and legislation as potential sources of legal rights and obligations governing the ownership and use of employee creation.

Modern awards are industry or sectoral level instruments that may regulate terms and conditions of employment of employees within the scope of the specified coverage of the award. Awards made under the FW Act may only regulate matters specified in the legislation, which are additional to the statutory National Employment Standards (NES).^[30] In addition, awards may contain terms that are ancillary, incidental or supplementary to the NES,^[31] as long as such terms are not detrimental to any employee when compared to the NES. Although the ownership of employee creation is not specifically referred to the list of permitted award content, it was our view that it was possible for such arrangements to be included within the scope of a variety of permitted terms, including wages, skill-based classification and career structures, incentive-based payments, piece rates and bonuses, types of employment and consultation, representation and dispute resolution processes.
The FW Act also seeks to promote and enable collective bargaining in good faith between employers and employees at the enterprise level. A successful bargaining process results in the making of enterprise agreements which, if approved, regulate the minimum terms and conditions of employees within the scope of that agreement, whether an individual employee voted in favour of the agreement or not.^[32] If an employee’s employment relationship is covered by an enterprise agreement, an award cannot apply to that relationship.^[33] To have effect, these agreements must be approved by the tribunal. The FW Act sets a number of requirements that must be satisfied before an enterprise agreement can be approved. Although there are few limitations on the content of enterprise agreements when compared to modern awards, the enterprise agreement may, as noted above, only include permitted matters. These are primarily defined to mean ‘matters pertaining to the relationship between an employer that will be covered by the agreement and that employer’s employees who will be covered by the agreement’.^[34] Examples of clauses not pertaining to the employment relationship, such as those triggering employee obligations post-employment, will be considered in Part Four. It is important to note that the inclusion of a non-permitted matter does not invalidate an enterprise agreement; it simply means that the specific term is not enforceable.^[35] It is also of note that enterprise agreements may incorporate external sources by reference.^[36]

Further, any enterprise agreements lodged for approval after 1 January 2010 must pass the BOOT, which replaced the ‘No Disadvantage Test’ (NDT) that previously was used to vet agreements.^[37] The BOOT requires a comparison of enterprise agreements against the terms of the NES and a relevant modern award and any common law principles operating in conjunction with the award. The tribunal must be satisfied that ‘each award covered employee ... for the agreement would be better off overall if the agreement applied to the employee than if the relevant modern award applied to the employee’.^[38] The tribunal can still approve an agreement that fails the BOOT, but only if there are ‘exceptional circumstances’ and its approval would not be contrary to the public interest.^[39] Further, the tribunal may approve the agreement subject to undertakings by the employer not to apply, rely upon or otherwise enforce certain clauses of the agreement.^[40] It is also of note that the tribunal may consider the impact of non-permitted (and unenforceable) provisions in assessing whether a proposed enterprise agreement has passed the BOOT.^[41] This is because, whether or not a clause is permitted and enforceable may only be determined during the operation of the agreement, or never determined at all (insofar as it is not subject to dispute).^[42]

Which industries were considered?

We reviewed the content of a selection of both awards and enterprise agreements concluded in selected creative industries during the period of 1 October 2009 to 25 February 2011, and approved by FWA — a total of 35 modern awards and 145 enterprise agreements.^[43]

The industries were chosen based on the researchers’ initial perception that they represented ‘knowledge economy’ industries and were likely to contain a high degree of employee creation. The source of our research materials was FWA’s publicly available database of modern awards and enterprise agreements.^[44]

The following industries were reviewed with respect to awards: 1. Engineers and Architects; 2. Computing and IT; 3. Education, Design and the Arts; 4. Entertainment; 5. Science; and 6. Technical Services. We note that this selection of industries was based on the typical coverage of awards prior to the award modernisation process under the FW Act, as an earlier phase of this project (not addressed by this paper) involved pre-FW Act instruments. After award modernisation, many awards became broader in coverage than prior to the FW Act as a result of the drastic reduction in their number.^[45] The modern awards reviewed were therefore selected on the basis that they were likely to include the ‘creative’ occupations covered by the awards under the pre-FW Act system. For example, under the Education sector, the Higher Education Industry — Academic Staff Award 2010 and other related awards were considered.

For our review of enterprise agreements, we selected enterprise agreements that were approved by FWA within the following industry categories: 1. Scientific Services; 2. Educational Services; 3. Pharmaceutical Industry; 4. Graphic Arts; 5. Entertainment and Broadcasting; 6. Publishing; and 7. Journalism.

As there were a limited number of instruments concluded in the selected industries during the period of our study, in most cases we were able to review all the registered instruments in each industry. The one exception to this approach was in the education sector, where the large number of agreements necessitated a narrowed scope.^[46]

What terms were selected to determine ownership of employee creation?

In order to assess the extent to which instruments addressed ownership of employee creation, a PDF keyword search was performed on each instrument. The terms were selected based on the researchers’ belief that they were likely to comprehensively capture a range of provisions directed at governing the ownership and use of employee creation. The search terms were as follows: ‘intellectual property’, ‘intellectual’, ‘original’, ‘rights’, ‘information’, ‘patent’, ‘copy’, ‘copyright’, ‘ownership’, ‘employee enterprise’, ‘worker creations’, ‘employee creations’, ‘authorship’, ‘patentable inventions’, ‘trade secrets’, ‘knowledge’, ‘capital’, ‘ideas’, ‘design’, ‘innovation’, ‘research’, ‘invention’ and ‘departure’. While the search terms did not therefore include relevant phrases such as ‘confidential information’, ‘non-compete covenant’, ‘non-solicitation’, ‘restrictive covenant’ or ‘restraint of trade’, the authors believe that the search terms employed were broad and inclusive enough to capture the content of such clauses. For example, a confidentiality clause would often include search terms such as ‘information’, ‘knowledge’, ‘ideas’, ‘research’, and so on.

Part Three: Research Findings

Findings in relation to modern awards

Of the 35 awards searched, 35 (100%) contained indirect references to aspects of employee creation, by virtue of the appearance of at least one search term in a relevant context, such as a reference to an employee’s ‘knowledge’ being a relevant criteria for promotion.^[47] These indirect references tended to be brief and isolated in nature. Seven awards of the 35 searched (20%) provided a similar but more substantial reference to the search terms, such as ‘performs work requiring mature technical knowledge involving high degree of autonomy, originality and independent judgment.’ These references also tended to appear in the job description/classification sections of the awards.

However, one award of the 35 (2.8%) contained a direct and substantial reference to ownership of employee creation in the form of intellectual property rights. This award, the Broadcasting and Entertainment Award 2010, contained in the ‘Design and the Arts’ industry category, made direct references to ownership of intellectual property rights and included a formula for calculating the purchase price of further rights from the employees by the employer.^[48] It may be noteworthy that this award pertains to a highly creative industry in which ownership of intellectual property rights would be of a primary concern to employees and employers. This award is therefore particularly significant because it demonstrates the potential of awards to include such terms within allowable award content under s 139 of the FW Act. In this case, the relevant clauses may be classified as pertaining to ‘wages, incentives and bonuses’ under s 139(1)(a)(ii), as they permit employers to pay employees amounts over and above basic wages in order to acquire intellectual property rights from employees.

By contrast, no awards reviewed in the selected sample contained provisions dealing with confidential information or non-compete covenants (which, as considered above, are common contractual methods of governing the ownership of employee creation) and it appears unlikely that such provisions could be included, given the restrictions on allowable award content present in FW Act s 139.

In conclusion, while it is possible for awards to directly provide for the acquisition of intellectual property rights through wages, incentives or bonuses, and while awards often indirectly recognise the existence of employee creation, sample awards in the industries examined rarely contain provisions governing the ownership of employee creation.

Findings in relation to enterprise agreements

By contrast to awards, of the 145 enterprise agreements reviewed, 30 (20.6%) made direct reference to ownership of employee creation via intellectual property rights in one manner or another (see below), 84 (57.9%) made indirect references, including references to confidential information, and 31 (21.4%) made no reference to the ownership of employee creation.

Intellectual property clauses took many forms. Certain clauses expressly stipulated the nature of employee and employer rights, either by directly assigning ownership to one party or another or by referring to circumstances in which ownership would be assigned if various conditions were met. Other enterprise agreements referred, with varying degrees of particularity, to external sources of intellectual property law, including common law, legislation or workplace policies. In several cases, intellectual property clauses combined both approaches, expressly stipulating the content of intellectual property rights in certain circumstances as well as referring to more generally applicable principles of contract, common law, legislation or workplace policies. With respect to the nature of the reference to external sources, certain enterprise agreements expressly incorporated external sources, other agreements specifically noted that external sources were not incorporated into the agreement, but most were silent on the effect of their reference. In most cases, agreements referred to existing policies, but some agreements referred to policies yet to be negotiated. Several agreements noted that employees or their representatives would be consulted during the creation or amendment of an intellectual property policy. Finally, certain agreements stipulated a process by which intellectual property rights would be determined in individual cases.

Many enterprise agreements also indirectly addressed ownership of employee creations by attempting to restrain employee use of confidential information, often both during and following the termination of the employment relationship. Finally, another indirect method of governing employee creation is via non-compete clauses. The sample of enterprise agreements examined contained no clauses of this type, in contrast to the proposed agreements considered in the FWA approval decisions reviewed in Part Four of the paper.

In analysing our findings, we also note that the degree to which agreements governed the ownership of employee creation varied substantially between the sectors examined. In descending order of industries most likely to least likely to assign ownership rights over employee creation (regardless of the size of the sample), our results were as follows:

Education

Of the 27 tertiary education agreements reviewed, 18 (69.2%) made direct reference to ownership of intellectual property rights, eight (30.7%) made generally frequent and substantial indirect reference to employee creation and one (3%) made no reference. The high proportion of agreements making reference to intellectual property rights was consistent with our expectations, given the UWA v Gray litigation, and evidence of collective bargaining over intellectual property ownership in other jurisdictions.^[49]

The Edith Cowan University Academic Staff Union Collective Agreement 2009 provides the following example of an express and comprehensive intellectual property clause, which seeks to balance the interests of employees and employers:

The University claims ownership of the Intellectual Property created by employees in the course of their duties. Notwithstanding the above, the University will assign its Intellectual Property interests to the Originator in relation to works of the creative arts and to published books and articles, with the exception of those in which substantial university resources have been utilised in their creation (such as University funds, resource development services, University commissioned works, office equipment and supplies and secretarial services).

... As far as practicable, scholarly work should be made available in the public domain to advance knowledge and provide benefit to the community. The University may exercise certain economic rights under common law and by statute to ownership of intellectual property that is created by members of staff in the course of their employment, including where the creation of intellectual property; involves substantial use of the University's resources and/or services, uses pre-existing intellectual property owned by the University, is generated by a number of staff and or students and is managed by the University, or uses University funding... Staff may have legitimate interests and expectations in relation to intellectual property that they create individually or collaboratively that includes: a "fair share" in the commercial exploitation of intellectual property, ensuring that the integrity of research in the area of the property is properly recognised and safeguarded, due acknowledgment, and an input into the development of the property and participation in any further research and development of the property....^[50]

Another clause contained in the agreement refers to the University’s external ‘intellectual property policy’ and agrees to a process of mediation designed to resolve intellectual property disputes by either permitting a mediator experienced in the area to determine the dispute or by permitting him or her to prepare a report and recommendation to FWA.^[51]

A less comprehensive but more direct assignment of intellectual property rights is found in the University of Newcastle Academic Staff Enterprise Agreement 2010, which assigns the University ownership over intellectual property created by originators in the course of their employment, but specifies that ‘a minimum of 50% of the net income received by the University as a result of exploitation ... will be distributed to the originator’.^[52]

Other enterprise agreements in this sector referred to external sources of intellectual property regulation. For example, the Central Queensland University Enterprise Agreement 2009 notes that, for senior staff appointments, a written contract of employment may cover intellectual property rights, and that the contract takes precedence over any arrangement in the agreement.^[53] The Deakin University Enterprise Agreement 2009-2012 recognises intellectual property and moral rights ‘provided by common law and legislation, which recognises copyright provisions consistent with current University legislation and provides for equitable sharing of proceeds (after costs) from commercialisation of intellectual property between the creators of the intellectual property of the University.’^[54]

Overall, our study revealed a great diversity of terms present in education sector agreements. A common feature of agreements reviewed in this sector is the significant extent to which the parties sought to share the benefits of employee creation without imposing onerous obligations upon employees in terms of protecting employer intellectual property or confidential information during and post-employment.

Journalism

Of the 13 journalism agreements reviewed, six (46.2%) had a direct reference to intellectual property rights, five (38.4%) contained other minor indirect references. The remaining two (15.3%) agreements made no reference to employee creation.

Of those six agreements with a direct reference, three of those contained only references to rights not to have authorship ascribed to a journalist. For example, the Journalists’ (ACP Magazines) Agreement 2010 allows authors a right not to have their name attributed to an article that they were instructed to prepare by their employer.^[55]

An additional three agreements contained a more comprehensive description of the ownership of intellectual property. For example, the News Ltd Metropolitan Daily Newspapers – MEAA Agreement 2010 contains a range of specific clauses relevant to the ownership of intellectual property. It stipulates that illustrators and cartoonists will ‘own the original artwork created by him or her’.^[56] It also states that although s 35(4) of the Copyright Act ‘delineates the rights of newspapers, magazines and periodical publishers’, the company expressly wishes to exceed those rights.^[57] It provides for certain payments to various classifications of employees, including sums of $1 to $500 for grants of license under s 10 of the Copyright Act and, in relation to photographs, a payment of half the purchase price of all commercial use photographs not destined to be published in a newspaper.^[58]

By contrast to the above agreements, which contain relatively favourable entitlements for employees while imposing minimal obligations, the Lonely Planet Enterprise Agreement 2009 serves as an example of an agreement that appears to provide a wholesale assignment of intellectual property rights to the employer, as well as imposing onerous obligations upon employees both during and post-employment in relation to intellectual property and confidential information. In addition to its intellectual property provision, the Lonely Planet Enterprise Agreement 2009 purports to protect the employer’s interest in a broad range of ‘confidential information’, including ‘know-how’, ‘ideas’ and ‘designs’.^[59] Further, it is noted that intellectual property and confidential information is:

... one of Lonely Planet's most important assets and its protection is vital for the ongoing success of Lonely Planet. Employees are expected to do all things necessary to assist Lonely Planet to protect its intellectual property and must follow any company policies or instructions pertaining to this ... This clause continues to have effect after the employment relationship ends. The ending of this agreement shall not be regarded in any way as a reassignment of any of the rights and interests referred to above.^[60]

Employees further agree to permit Lonely Planet to use all work created by them during employment, including in the event of any violation of their moral rights (ie, an employee’s work being attributed to another, not attributed or altered without permission).^[61]

Scientific services

Of the 11 scientific services agreements reviewed, three (27.2%) made direct reference to ownership of intellectual property rights, five (45%) made indirect references to employee creation and three (27.2%) made no reference.

The Australian Synchrotron Employee Enterprise Agreement 2010 addresses employee intellectual property rights by noting:

... commercialisation of research and development outcomes may involve a range of strategies such as spin offs, corporatisation and technological transfer initiatives ... In order to facilitate staff involvement in commercialisation activities, affected Employees will be provided with timely information about their rights, entitlements and the conditions that apply.^[62]

While the employer maintains the right to define the parameters of any employee share scheme in the benefits of commercialisation, it agrees to inform and consult with affected employees or their representatives.^[63] Similarly, the Queensland Institute of Medical Research (QIMR) Enterprise Agreement 2010 refers to the institute’s enabling legislation and relevant institute policy in governing royalty payments that may arise with respect to commercial returns from invention or discovery.^[64]

By contrast to the above agreements, which recognise the practice or at least the possibility of compensating employees for their creation, the Symrise Pty Ltd Production Collective Workplace Agreement makes no allowance for employee compensation and imposes extensive obligations upon employees, both during and post-employment. The agreement stipulates that:

... All Intellectual Property rights arising in relation to any Works created or developed by you in

connection with your employment (whether alone or with others) will belong to the Company, and

you agree to immediately disclose to the Company all such Works.

By accepting this offer of employment you agree and unconditionally and irrevocably consent that

all existing Intellectual Property rights, title and interest in all Works created or developed by you in

connection with your employment (whether alone or with others) are vested in the Company and,

upon their creation, all such future rights will vest in the Company. You further agree to execute all

documents and do all acts and things required or desirable to secure any Intellectual Property

rights of the Company.^[65]

The term ‘work’ is broadly defined to include ‘all inventions, designs, plans, software, hardware, reports, documents, systems, improvements and other materials.’^[66] The agreement also contains a confidentiality clause, which refers to ‘confidential information’, ‘trade secrets’ and ‘research and development’ and prohibits unauthorised disclosure of such information during or subsequent to employment. It further requires the employee to ‘use best endeavours to prevent the use or disclosure of Confidential Information by any Person.’^[67] Reference to disclosure of such ‘confidential information’ is also stipulated as being grounds for summary dismissal.^[68]

Entertainment and broadcasting

Of the five entertainment and broadcasting enterprise agreements reviewed, one made direct reference to ownership of intellectual property rights, including a stipulation of payments to be made by the employer to purchase further rights from employees. One further agreement made indirect references to employee creation, including reference to the protection of confidential information. The three remaining agreements made no reference.

The Opera Australia Performers’, Music and Technical Staff Enterprise Agreement 2008-2009 is an example of an agreement that provides employee entitlements to be compensated for intellectual property, without imposing obligations upon employees with respect to intellectual property or confidential information either during or post-employment. Further, the additional benefits are specific to the classification of employee and the type of intellectual property created:

[T]he Company will own copyright in all recordings. The arrangements in relation to artists and staff involved are set out below. Any variation of these arrangements may only be made with the written agreement of the artists concerned and/or their representatives.^[69]

Publishing

Of the 11 publishing agreements reviewed, one (9%) had a direct reference to ownership of intellectual property rights, nine (81.8%) had indirect references to employee creation and one (9%) made no reference.

The Bannershop International Pty Ltd Enterprise Agreement 2010 contains both intellectual property and confidential information provisions. With respect to intellectual property the agreement states:

The copyright and all other proprietary rights in any document, material or thing produced by or contributed to by any employee (whether alone or with others) in the course of their employment, will belong to the company. At the termination of their employment with the Company, without the Company’s express consent, employees are not permitted to take or retain such materials, nor are they permitted to disclose, reproduce or use such materials.^[70]

In addition to this wholesale assignment of intellectual property rights to the employer, the agreement also prohibits the disclosure of confidential information, which is described extremely broadly as including intellectual property and trade secrets, specifications of software designs as well as ‘details of any operational/marketing systems, plans, strategies, methodologies or techniques including but not limited to the details and/or contents of any company specific databases/programs’.^[71]

Pharmaceutical

Of the 25 pharmaceutical agreements reviewed, one (4%) made direct reference to ownership of intellectual property rights, 18 (72%) made indirect references (including several references to confidential information) and six (24%) made no reference.

The Sphere Healthcare Pty Ltd Enterprise Agreement 2010-2012 contains direct references to both intellectual property and confidential information, stating that, upon termination of employment or any other circumstance justifying the request, the employee will return confidential information or intellectual property.^[72] While not directly addressing intellectual property, the Pax Australia - AWU Bargaining Agreement 2010 provides extensive control to the employer over employee creation via a broadly defined confidentiality clause. ‘Confidential information’ is defined in the agreement as:

... any trade secret, technical knowledge, concepts, ideas, designs, programs, processes, procedures, innovations, inventions, data bases, data surveys, customer lists, price lists or information, sales plans or marketing plans, research, software, records or other information concerning the company or any of it's customers or suppliers that is secret and confidential of which an employee may become aware during their employment with Pax.^[73]

Graphic arts

Of the 53 graphic arts agreements reviewed, none made direct reference to ownership of intellectual property rights. Thirty-eight agreements (71.7%) made indirect reference (including a small number that referred to maintaining confidential information and/or trade secrets) and 15 (28.3%) made no reference.

For example, the AC Labels Ltd Production Employees Collective Agreement 2009 imposes obligations upon employees to return ‘confidential information’ upon ceasing employment, including all ‘documents, papers, plans, drawings, equipment, materials...’^[74] It also states that divulging ‘trade secrets’ to a competitor or client is grounds for summary dismissal.^[75] Amcor Closure Systems Pty Ltd Dudley Park – Employee Collective Agreement 2010 imposes similar obligations not to divulge confidential information during the course of employment. Confidential information is defined as including ‘all information relating to the Employer’s business or operational interests, its methodology and affairs, financial information and anything notified as being confidential.’^[76] City Pak Somerton Enterprise Agreement 2010 extends the prohibition against the use of confidential information for the employee’s benefit, either during or following termination of employment.^[77]

Conclusions with respect to research findings

In conclusion, we found that enterprise agreements in creative industries frequently address the ownership of employee creation, both directly and indirectly. In contrast, modern awards rarely do so. Although the results and nature of the references in agreements varied substantially by industry and individual agreement, our review demonstrates that a significant number of agreements addressed the ownership of employee creation via intellectual property and confidentiality clauses. These clauses tended to fall along a spectrum of employee entitlements and obligations. On the one end, a number of agreements (which we will refer to as ‘facilitative agreements’, because they facilitate the equitable sharing of employee creation and employee mobility) provided employee entitlements to additional compensation in the event of creation. Such agreements also tended not to impose obligations upon employees with respect to protecting their employer’s interests to intellectual property and confidential information both during employment and post-termination.^[78] As such intellectual property rights are rarely directly governed by modern awards, enterprise agreements of this type demonstrated the potential of collective bargaining to deliver additional benefits to employees without imposing onerous obligations during or post-employment.

On the other end of the spectrum, various other agreements (which we will refer to as ‘restrictive agreements’ because they restrict employee ownership entitlements and mobility) assigned intellectual property rights to employers in a blanket and wholesale manner. Further, such restrictive agreements often imposed onerous obligations upon employees both during and post-employment over a broadly defined range of intellectual property and confidential information. ^[79] Agreements of this type demonstrated the potential of collective bargaining to be directed primarily or exclusively towards protecting employer interests.

Finally, while many agreements clearly fell within the ‘facilitative’ or ‘restrictive’ categories, many others inhabited a murky middle ground. The complex interplay of enterprise agreement, contract, workplace policy, legislation and equitable obligations in this area often made determining which category a given agreement fell into impossible without a consideration of all of the relevant sources of law. For example, some of the agreements noted above purported to bind the parties to an external ‘intellectual property policy’ or legislation,^[80] raised the potential of individual contractual negotiation,^[81] committed the employer to consultation over policies not yet negotiated,^[82] or committed the employer to provide information on rights that are not clearly outlined or identified.^[83] The precise content of the rights and obligations applicable to employees covered by such agreements therefore cannot be ascertained on a plain reading of the agreement alone.

Part Four: Legal Restrictions on Collective Bargaining in Relation to the Ownership of Employee

As we observed earlier, there are a number of compelling policy reasons why collective regulation, particularly collective bargaining, is potentially beneficial to both employees and employers. These reasons include: potential benefits in relation to clarity of rights and obligations, consistency in the application of such rights and benefits, simpler and more cost effective enforcement via FW Act dispute resolution processes and remedies, enhanced worker voice and workplace dialogue, increased transparency among competitor firms within an industry and a more equitable balancing of bargaining power. However, the potential of collective bargaining to deliver such benefits depends in large measure upon the nature of the clause negotiated between the parties. The review of our research findings indicate that collective bargaining is capable of delivering both ‘facilitative’ agreements and ‘restrictive’ agreements, as well as agreements that fall somewhere in between or are impossible to categorise on a plain reading of the agreement alone.

The second part of our study consisted of a review of FWA enterprise agreement approval decisions since the commencement of the FW Act in July 2009. These decisions were searched using the FWA agreement approval decision database.^[84] The purpose of this review, which was not limited by industry, was to determine whether any FWA decisions made reference to clauses that directly or indirectly addressed the ownership of employee creation. Our search revealed 35 approval decisions in relation to such clauses between October 2009 and 2012.^[85] Interestingly, the proposed agreements considered in these decisions covered a number of industries not considered in our study of agreements in creative industries, including real estate, retail, banking, finance and insurance, licensed and registered clubs, hospitality, security services, health and welfare and agriculture. Despite the lack of highly ‘creative’ elements of work in such sectors, the proposed agreements often contained clauses similar to those classified as ‘restrictive’ agreements above. In addition to the type of restrictive intellectual property and confidentiality clauses considered above, a number of agreements contained non-compete clauses (also referred to as ‘restraint of trade’ or ‘non-solicitation’ clauses), which would more usually be expected to appear in individual contracts of employment. Within industries, clause content frequently appeared to be boilerplate language, suggesting that such provisions are being adopted by the parties without consideration of the individual workplace or categories of employees within those workplaces.

In one sense, these decisions reinforce the findings of our review of agreements, confirming that clauses regulating the ownership of employee creation are being included in agreements in a wide range of industries, thus pointing to the need for further research into the nature and extent of this trend. However, these decisions also raise a number of questions about the enforceability of ‘restrictive’ clauses and whether or not these agreements ought to have passed the BOOT.

In particular, the Commissioners in the relevant approval decisions were concerned by the appearance of intellectual property, confidentiality and non-compete clauses. The two most detailed of these decisions are Glen Eden Thoroughbreds Pty Ltd T/A Ray White Shailer Park,^[86] a decision of Asbury C, and Smith & Nephew Pty Ltd,^[87] a decision of Gooley C.

In Glen Eden I, Asbury C concluded that the provisions of a proposed agreement dealing with employee obligations with respect to confidential information, intellectual property and restraint of trade failed to pass the BOOT. In addition, Asbury C held that such obligations, insofar as they followed the termination of the employment relationship and applied to all employees without distinction, could not be characterised as ‘matters pertaining’ to the employment relationship according to s 172 of the FW Act. The relevant provisions of the proposed agreement assigned substantial rights to the employer.

In respect of the duty of confidentiality, the proposed clause prohibited the employee from obtaining, copying or using such information, both during and following the termination of the employment relationship, other than in certain narrowly defined circumstances such as written permission of the employer, necessity to the performance of his or her duties or in accordance with a court or tribunal order. The proposed clause extended so far as to require the employee to ‘ensure’ that a third party to whom such information was disclosed was aware of the obligations in the agreement and would not disclose that information themselves. The meaning of ‘confidential information’ was not defined. The proposed confidentiality clause in Glen Eden I was therefore arguably similar to those found in the ‘restrictive’ agreements reviewed in Part Three of the paper.
With respect to intellectual property, including intellectual property defined as confidential information, while the proposed clause reserved some limited moral rights to the employee during the course of employment (albeit specifically without recourse for breach of such rights by the employer), it provided for a wholesale assignment of all intellectual property rights to the employer, including rights following the termination of the employment relationship. These provisions were therefore again similar to those found in several of the ‘restrictive’ agreements reviewed in part three.

The proposed restraint of trade clause in the agreement prohibited the employee from undertaking any similar work for a period of 12 months, unless the employee received written permission from the employer. If such a clause were found unenforceable against the employee, a further provision in the ‘step clause’ included in the enterprise agreement prohibited the employee from competing for 12 months post-employment within a 10 km radius of the employer. As noted above, none of the sample agreements reviewed at part three contained such clauses.

The proposed agreement was ultimately certified in a subsequent approval decision, but without the ability of the employer to rely upon the majority of the above noted provisions.^[88] The employer provided a written undertaking to the effect that it would not ‘refer to and/or rely on’ the clause purporting to establish a duty of confidentiality, the clause regulating intellectual property rights, and those parts of the restraint of trade clause that purported to impose restrictions after the termination of employment. It is worthy of note that the portions of clause 31 (Restraint of Trade) that prohibited competition with the employer during the course of employment was permitted content. The decision to permit this obligation to remain in the agreement is consistent with the individual contractually implied duty of fidelity during the course of employment discussed above, by which employees are prohibited at common law from acting against their current employer’s business interests by competing with them or encouraging other employees to do so.

Indeed, Asbury C’s objection to the proposed intellectual property, confidentiality and post- employment restraint of trade clauses relied in part on the fact that such clauses are usually contained in the individual contract of employment, either expressly or by way of an implied term. However, Asbury C’s primary objection to such clauses was that they were: ‘not found in the Award nominated for the purposes of establishing whether the Agreement in this case passes the better off overall test. It is true to say that such provisions are not found in awards generally.’^[89] Our research supports Asbury C’s finding that awards rarely contain such provisions. As we observed above, while general references to employee creation in position descriptions and classifications are common, only one award reviewed in the course of our research directly addressed ownership rights of intellectual property. No awards directly addressed confidential information or contained restraint of trade clauses.

However, the fact that the reference award does not make provision for matters addressed in the proposed clauses should not on its own prevent an agreement passing the BOOT. More specifically, Asbury C held that the presence of such restrictive provisions in the agreement before her failed to pass the BOOT on the following grounds:

[54] ... If obligations and restrictions such as those contained in the provisions of the Agreement dealing with restraint of trade, confidential information and intellectual property were contained in a contract of employment, a prospective employee to whom the contract was offered would have a choice as to whether or not to accept it, or an option to obtain advice as to the effect of those terms before the contract was accepted. If the Employer sought to implement such terms with respect to existing employees, it could do so by way of policy or by seeking the agreement of employees to an alteration to their contracts of employment. By including such terms in an enterprise agreement they are binding on current and future employees, including employees who may not have approved the terms of the Agreement.

[55] Such terms, whether they were contained in an employment contract, a workplace policy, or implied at common law, would be subject to common law principles of reasonableness in the event that they were required to be enforced. The terms would also be enforced in a court with equitable jurisdiction. This can be contrasted with the enforcement of the terms of an enterprise agreement. The Act prescribes civil penalties for breach of the terms of an enterprise agreement. By including such terms in an enterprise agreement, employees may be liable not only for common law actions for any breach, but to civil penalties under the Act. Issues of reasonableness would not be relevant.

[56] In my view, consideration of whether an enterprise agreement passes the better off overall test, can be directed to circumstances where an enterprise agreement contains terms such as those dealing with restraint of trade, confidential information and intellectual property, that are not found in a relevant award. In such cases, FWA can give consideration to the question of whether by including such terms in an enterprise agreement, employees are disadvantaged on the basis that the terms of the agreement impose an obligation or restriction on them which is not imposed under a relevant award, and is not able to be imposed under any relevant common law principles which operate in conjunction with the award.^[90]

The key question with respect to whether a proposed agreement passes the BOOT is therefore whether the inclusion of intellectual property, confidentiality and non-compete type clauses disadvantage the employee by imposing an obligation or restriction not imposed under the reference award or a common law principle operating in conjunction with the award. While this decision suggests that a number of ‘restrictive’ agreements reviewed in part three perhaps should not have passed the BOOT, the reasoning of Asbury C does not appear to limit approval of agreements in the ‘facilitative’ category. Such ‘facilitative’ agreements do not disadvantage employees. Rather, they provide additional ownership entitlements over and above the relevant award and do not seek to impose additional confidentiality or restraint of trade provisions. Nevertheless, given that the BOOT is a highly specific analysis involving the examination of a large range of factors on a case-by-case basis, it is difficult to make any generalisations.

Also of significance, Asbury C further found that the provisions did not meet the requirement of ‘matters pertaining’ to the employment relationship^[91] as they continued to operate following the termination of the employment relationship and did not create a right or benefit for employees post-employment. Instead, the proposed provisions imposed only obligations and restrictions in relation to ‘confidentiality, intellectual property and carrying on a business in competition with the former employer.’^[92] The provisions were also framed in an overly broad manner without regard to the particular situation or position of an individual employee. The provisions therefore had only indirect connection to the employment relationship:

The obligations and restrictions sought to be imposed relate to employment in a way that is indirect. It is not every employee covered by the Agreement who will access confidential information; generate work product that gives rise to intellectual property considerations; or be in a position to engage in business in competition with the former employer. Further, to the extent that the obligations are intended to continue after employment ceases, they are not triggered by termination of employment, but by some conduct on the part of the former employee - for example starting a business in competition with the former employer. The connection with the employment relationship is therefore consequential and not direct.^[93]

It would therefore seem that several of the ‘restrictive’ agreements considered in part three would also suffer from the same deficiencies - intellectual property and confidentiality obligations were imposed upon all employees both during and post-employment, without regard to that employee’s role within the enterprise. If such is the case, this would mean that agreement clauses imposing intellectual property, confidentiality and non-compete obligations post-employment to a wide group of employees without regard to their role would not be ‘permitted matters’ as defined by s 172 of the FW Act. However, this does not mean that the enterprise agreement is invalid because it contains non-permitted content. What it does mean, however, is that such clauses are not enforceable. ^[94] However, as Asbury C has pointed out in a recent decision,^[95] employees may not know clauses are unenforceable. Therefore, the issue may in fact never be clarified and, as noted above in the context of individual contracts, the very existence of such a clause (even if unenforceable) may be enough to secure compliance on the part of the employee. It is therefore preferable, from the perspective of fairness to employees and certainty of obligations, that such clauses be considered as part of the BOOT and dealt with at the point of approval. Although such clauses may not be permitted content (and thus may be potentially unenforceable), they can be considered as part of the tribunal’s scrutiny with respect to the BOOT^[96] and either not approved and subject to renegotiation or, approved with undertakings not to apply or rely upon ‘restrictive’ provisions.

By contrast, the ‘facilitative’ agreements reviewed often created entitlements for certain classes of employees (ie photographers, authors or academic staff) that may continue to benefit the employee post-employment (ie by creating proprietary rights to intellectual property or royalties), without imposing post-employment obligations. Such agreements would therefore appear more likely to satisfy the BOOT and to remain within permissible parameters of the ‘matters pertaining’ test (and thus be enforceable permitted content).

In support of her decision regarding the BOOT, Asbury C referred to an earlier decision of Gooley C in Smith.^[97] In that decision, Gooley C considered similar confidentiality, intellectual property and restraint of trade clauses (in those case, non-solicitation clauses) contained in a proposed enterprise agreement. As in Glen Eden I, Gooley C noted that the proposed agreement ‘contains a number of additional obligations not normally found in collective agreements and which are not contained in any of the reference instruments’.^[98] The employer submitted that because the reference instruments did not prevent an employer reaching a contractual agreement regarding these matters, and given that such arrangements often operate concurrently with such an instrument, the inclusion of such clauses in the proposed agreement did not result in a reduction in the overall terms and conditions of employment of employees under the reference instruments for the purposes of assessment of the NDT.^[99] Gooley C rejected this argument, observing that the employer’s argument ‘misses the point’:

An enterprise agreement is not subject to individual negotiations between an employer and employee, it is imposed by operation of law on employees, both existing and new employees, whether they agree with the terms or not. While breach of such contractual obligations may give rise to a claim for damages and injunctive relief, their inclusion in an enterprise agreement would expose employees who breach the obligation to civil penalties.

In my view the inclusion of such obligations in enterprise agreements are inappropriate as the codified obligations go beyond the obligations imposed on employees at common law, impose obligations not imposed on employees by the reference instruments and expose employees to penalties in the event of breach.^[100]

Contrary to the observation of Gooley C in Smith, our research demonstrates that many enterprise agreements do contain provisions in respect to intellectual property and confidential information, but not restraint of trade. However, as also noted above, many ‘facilitative’ agreements would appear more likely to satisfy the BOOT as they do not impose obligations upon employees beyond those present in the reference instruments or common law.

Although Glen Eden and Smith represent the most detailed reasoning by FWA concerning the potential for including terms governing employee creation in enterprise agreements, there have been numerous other FWA decisions addressing this issue. Most of the decisions have required the employer to make undertakings not to refer to, rely upon or apply clauses in relation to confidential information and intellectual property and not to request the imposition of civil penalties against employees for breach of restraint of trade provisions.^[101] Although the contents of the clauses vary, the general concerns expressed by the tribunal reflect those expressed in Glen Eden I and Smith. Therefore, ‘restrictive’ clauses that provide employees with no additional entitlement to share in the ownership of their creation and impose substantial obligations (including those that extend post-employment) to protect employer intellectual property, confidentiality and business relations regardless of the employee’s role will often fail the BOOT and ‘matters pertaining’ test. By contrast, ‘facilitative’ agreements that provide additional benefits over the award and do not impose such obligations upon employees, would appear more likely to pass the BOOT and to meet the ‘matters pertaining’ test.

Part Five: Implications of Research and Conclusions

Our findings in part three revealed that only one modern award directly addressed ownership of employee creation by way of a formula for the purchase of intellectual property rights. Awards also contained many other indirect references to the existence of employee creation, but without governing the rights surrounding it. By way of contrast, five of the six industries we reviewed contained at least one enterprise agreement dealing directly with ownership of intellectual property rights. With respect to indirect references to employee creation, agreements frequently contained provisions in relation to confidential information, including obligations continuing post-employment. Non-compete/restraint of trade/non-solicitation clauses such as the clause contained in the proposed Glen Eden I or Smith agreements did not appear in any of the agreements in creative industries that we reviewed. However, our review of FWA decisions in Part Four suggests that a range of direct and indirect references to ownership of employee creation, including non-compete clauses, are being incorporated in enterprise agreements in a broad range of industries covering a diverse array of jobs and occupations. Taken together, the findings of our review of agreements and FWA decisions indicate a willingness (at least among employers) to use collective bargaining to regulate employee creation, and a recognition that valuable employee creation extends beyond explicit knowledge and know-how to include personal knowledge.

The agreement clauses we found took a variety of forms, both of the ‘facilitative’ or ‘restrictive’ type, as well as those in the ‘murky middle’ in between. Our review of the FWA decisions in part four demonstrates that many registered agreements falling within the ‘restrictive’ category may contain clauses that are not permitted matters and hence unenforceable. Further, given the analysis above, such clauses perhaps ought not to have been approved in the first place by virtue of the BOOT, or approved only with relevant undertakings. It is possible that, while aware of the existence of such clauses in agreements, not all tribunal members have been concerned about the issue,^[102] especially given the potential lack of enforceability of such clauses. However, of the 35 decisions reviewed in which these issues were expressly raised, not a single decision resulted in the approval of ‘restrictive’ clauses without undertakings. This fact, coupled with the existence of several registered and approved agreements (that we know of) with such clauses and without undertakings attaching to them,^[103] suggests that the issue may simply have flown ‘under the radar’ in many cases.
How many such agreements exist? For the reasons considered above, it is impossible to tell on a plain reading of many ‘murky middle’ agreements, which refer to a host of other legal obligations, some of which do not yet exist. It is also impossible to assess how many agreements ought to pass the BOOT, given the requirement of a case-by-case analysis.

Further, employers, employees and (perhaps) unions may assume these clauses are enforceable unless otherwise tested. This ‘testing’ could arise in a number of ways. For example, the issue may arise if the tribunal deals with a dispute about a matter arising under an agreement according to ss 738–739 of the FW Act, if a person seeks to rely on breach of the agreement by way of civil penalty provision under s 50, or if the tribunal seeks to vary an agreement due to ambiguity or uncertainty under s 217.

One issue we did not consider in the design of the study was the extent to which such ‘facilitative’ or ‘restrictive’ agreements involved unions as bargaining agents. A review of the 11 approval decisions chosen as random representative agreements from different bargaining sectors found that 9 of the ‘restrictive’ agreements did not involve a union bargaining agent; while in the remaining two agreements, unions opposed the inclusion of such ‘restrictive’ clauses.^[104] This raises questions as to whether the employees covered by non-union agreements truly believed that the obligations were worth accepting both during and post-employment because they obtained wage or other concessions from the employer to justify the inclusion of such terms (and may not be enforceable anyway), or alternatively, whether such terms and their significance largely went unnoticed despite the statutory requirement for employees to have terms and effects of such terms explained to them.^[105] Our findings, and the FWA decisions, suggest that the inclusion of these clauses may often involve the ‘cutting and pasting’ of provisions commonly used in individual contracts into collective agreements, without consideration being given to the nature of the enterprise or the diversity in employment categories and roles regulated by the agreement. This issue points to the need for further research into the knowledge and motivations of the parties to the bargaining process. Are such clauses more likely to appear in union or non-union agreements? Did the parties understand the nature of such obligations? What did the employees get in return, if anything? Have such clauses been enforced and if so, how often and to what effect? These important questions, and others, are beyond the scope of this paper.

By contrast, our review in Part Three also indicated that carefully crafted agreements in industries such as tertiary education strove to strike a balance between the wishes of employees and employers with respect to the ownership of employee creation. To the extent that such agreements provide entitlements (such as to a share in intellectual property, royalties or preservation of moral rights, which may also extend post-employment) above and beyond the reference award and do not impose obligations during and post-employment, such provisions are, all else being equal, likely to pass the BOOT and ‘matters pertaining’ test.

It does, however, appear that the potential of collective bargaining to overcome the regulatory pitfalls of individual employment law is far from fully realised. Our findings demonstrate that many ‘murky middle’ agreements, both of the ‘restrictive’ and ‘facilitative’ variety, fail to achieve some of the potential advantages of collective regulation discussed in this article, such as increased clarity of legal obligations, simpler and more cost-effective enforcement, and increased transparency among competitor firms. In particular, the transplantation of terms commonly used in individual employment contracts into enterprise agreements, and the complex interplay between agreement, contract, workplace policy, legislation and equitable obligations, appear to lead to a similar lack of legal clarity as would more frequently be associated with individual employment law. Despite this failure, we believe that there is a significant legal space for positive and constructive collective bargaining over the ownership of employee creation, based on our review of clearly ‘facilitative’ agreements. In the absence of statutory reform, the reality of that potential will therefore be determined by the parties themselves, in the crafting of each agreement.

^[∗] Associate Professor John Howe is a Director of the Centre of Employment and Labour Relations Law, Melbourne Law School. Andrew Newman is a Barrister at the Victorian Bar and PhD Candidate at Melbourne Law School. This research forms part of a project funded by an Australian Research Council Discovery Grant DP0987637 from 2009–2011. The authors thank Ben Strong for his research assistance in an earlier phase of this project. The authors also thank Chris Arup, Chris Dent, William van Caenegem and participants at the Mobility and Competition Clause Workshop held at Ludwig‐Maximilians‐University, Munich in December 2012, for their helpful comments on an earlier draft of this paper.
^[1] As Stewart has observed, in relation to ownership of intellectual property in the context of employment: ‘There often appears to be widespread misunderstanding in business and industrial circles as to the relevant legal principles, which cannot always be said conform with intuitive impressions or suppositions based on common sense’: A Stewart, ‘Ownership of Property in the Context of Employment’ (1992) 5 AJLL 1. For more recent consideration of uncertainty concerning restraint of trade clauses in employment contracts based on an empirical study of Australian employment law practitioners, see C Arup et al, ‘Restraints of Trade: The Legal Practice’ [2013] UNSWLawJl 1; (2013) 36 UNSWLJ 1.
^[2] Macquarie Dictionary Online, <http://www.macquariedictionary.com.au/anonymous@9c9FF88635757/-/p/dict/index.html> at 26 February 2013.
^[3] C Arup, ‘What/Whose Knowledge? Restraints of Trade and Concepts of Knowledge’ [2012] MelbULawRw 10; (2012) 36 MULR 369 at 378–9.
^[4] Ibid 378.
^[5] Ibid.
^[6] W van Caenegem, ‘Inter-Firm Migration of Tacit Knowledge: Law and Policy’ (2005) 23 Prometheus 285 at 296; J Riley, ‘Who Owns Human Capital? A Critical Appraisal of Legal Techniques for Capturing the Value of Work’ (2005) 18 AJLL 1.
^[7] Arup, above n 3, at 378.
^[8] Ibid.
^[9] Ibid 399–400. Arup notes that printing, legal and financial services industries are examples of sectors in which personal relationships between clients and employees may take on particular significance. See also, J Riley, ‘Sterilising Talent: A Critical Assessment of Injunctions Enforcing Negative Covenants’ [2012] SydLawRw 29; (2012) 34 Syd LR 617 at 620. Riley notes that the era of the word processor and precedent documents has increased the prevalence of restrictive covenants to many moderately paid employees.
^[10] See, eg, C Dent, C Fenwick and K Newitt, ‘Legal Incentives to Promote Innovation at Work: A Critical Analysis’ (2010) 21 Economic and Labour Relations Review 27; N D Bishara, ‘Covenants Not to Compete in a Knowledge Economy: Balancing Innovation from Employee Mobility against Legal Protection for Human Capital Investment’ (2006) 27 Berkeley Journal of Employment and Labor Law 287; Riley, ‘Sterilising Talent’, above n 9.
^[11] The parameters of individual intellectual property and employment law regulation are discussed in greater detail in Part Two of the paper.
^[12] Our methodology is discussed in further detail in Part Two of the paper.
^[13].Australian Bureau of Statistics, Employee Earnings and Hours, Australia, May 2012, Cat No 6306.0, ABS, Canberra, 2013. The ABS estimates that 42% of employees are paid under enterprise agreements and 16% by awards only. However, ABS figures may underestimate coverage of collective instruments, particularly awards: see J Buchanan and G Considine, 'The Significance of Minimum Wages for the Broader Wage Setting Environment: Understanding the Role and Reach of Australian Awards', Australian Fair Pay Commission, 2008 Minimum Wages Research Forum Proceedings, Melbourne, Australia, 2008.
^[14] On 1 January 2013, FWA was renamed the ‘Fair Work Commission’. All decisions referred to in the paper were made by FWA. This paper will therefore continue to refer to ‘FWA’ or, more generally, ‘the tribunal’.
^[15] FW Act, Part 2-4 governs enterprise agreements and Part 2-4 Div 4 governs enterprise agreement approval generally.
^[16] These decisions are discussed in Part Four of the paper.

^[17] C Arup, ‘Employee Inventions: Labour Law Meets Intellectual Property’ (2008) 21 AJLL 208.
^[18] Stewart, ‘Ownership of Property in the Context of Employment’, above n 1, at 1.
^[19] See generally, A Stewart, Stewart’s Guide to Employment Law, 4th edn, Federation Press, Sydney, 2013, pp 257–9; R Owens, J Riley and J Murray, The Law of Work, 2^nd edn, Oxford University Press, South Melbourne, 2011, pp 264–73; C Sappideen et al, Macken’s Law of Employment, 7^th edn, Lawbook Co, Sydney, 2011, pp 216–46.
^[20] See Owens, Riley and Murray, above n 19, p 265.
^[21] Riley, ‘Who Owns Human Capital?’, above n 6. The decision in Stacks/Taree Pty Ltd v Marshall [No 2] [2010] NSWSC 77 (1 March 2010) at [44] contains a concise statement of principles. The principal text is J D Heydon, The Restraint of Trade Doctrine, 3^rd edn, LexisNexis Butterworths, Chatswood, 2008.
^[22]Arup, above n 3, at 399–400.
^[23] Sappideen et al, above n 19, pp 223–30.
^[24] Ibid p 223; For a recent critical appraisal of the reasonableness of non-compete clauses, see Riley, ‘Sterilising Talent’, above n 9.
^[25] Sappideen et al, above n 19, pp 229–30.
^[26] See Riley, ‘Sterlising Talent’, above n 9.
^[27] Even where an employee agrees to a restraint of trade clause which a court would be likely to hold unenforceable, the threat of legal proceedings ‘will often be enough to persuade a departing
employee to comply, and so give the employer a practical benefit to which they have no legal entitlement’: Riley, ‘Who Owns Human Capital?’, above n 6, at 21, citing A Stewart, ‘Drafting and Enforcing Post Employment Restraints’ (1997) 10 AJLL 181. See also Riley, ‘Sterilising Talent, above n 9.
^[28] See references cited in n 1 above.
^[29] FW Act Parts 2-3 and 2-4 govern the creation, content and varying of modern awards and enterprise agreements, respectively.
^[30] FW Act s 139.
^[31] FW Act s 55(4).
^[32] For a more detailed discussion of the collective bargaining and agreement making regime under the FW Act, see B Creighton and A Stewart, Labour Law, 5^th edn, Federation Press, Sydney, 2010, chaps 12, 21. We acknowledge that it is likely that many enterprise agreements are agreed to by employer and employees without any formal bargaining process being followed.
^[33] FW Act s 57.
^[34] FW Act s 172(1)(a). Section 172(1)(b) also permits an agreement to deal with ‘matters pertaining to the relationship between the employer or employers, and the employee organisation or employee organisations that will be covered by the agreement’.
^[35] FW Act s 253.
^[36] FW Act s 257. See Jellifish! Pty Ltd [2012] FWA 9640 (13 November 2012) (Jellifish) at [72].
^[37] FW Act ss 186(2)(d), 193 stipulate that all proposed agreements must meet the BOOT, except where approval of the proposed agreement would be in the public interest or upon employer undertakings (FW Act ss 189, 190). See generally C Sutherland, ‘Making the “BOOT” Fit: Reforms to Agreement-Making from Work Choices to Fair Work’, in A Forsyth and A Stewart (Eds), Fair Work: The New Workplace Laws and the Work Choices Legacy, Federation Press, Sydney, 2009, p 99.
^[38] FW Act s 193(1).
^[39] See FW Act ss 189(1)–(2). The FW Act provides the example of where an agreement is ‘part of a reasonable strategy to deal with a short term crisis’ in a business enterprise, although the tribunal’s discretion is not limited to such an example. See Re ABC Developmental Learning Centres Pty Ltd [2010] FWAA 1687 (23 February 2010).
^[40] FW Act s 190.
^[41] Jellifish, above n 36, at [72].
^[42] Ibid.
^[43] Although we initially examined statutory industrial instruments concluded before the FW Act commenced, for the sake of clarity we decided to focus our study on modern awards and enterprise agreements made under the FW Act.
^[44] All materials were obtained via the search functions for Awards and Agreements on FWA’s website: <www.fwa.gov.au>, now <www.fwc.gov.au> (accessed 1 April 2013).
^[45] Prior to the FW Act, there were over 4000 federal and state awards in operation throughout Australia. Under the process of award modernisation conducted between 2008 and 31 December 2010, 1500 of these awards (multi-employer awards, as distinct from enterprise awards) were rationalised into 122 ‘modern awards’. A good discussion of the nature, content and coverage of modern awards can be found in M Bray, ‘The Distinctiveness of Modern Awards’, in M Baird, K Hancock and J Isaac (Eds), Work and Employment Relations: An Era of Change, Federation Press, Sydney, 2011, p 17.
^[46] We only reviewed agreements concluded in the tertiary education sector applicable to academic staff or all staff (including academics and general/professional staff), a total of 27 agreements, and not agreements concluded in other parts of the education sector.
^[47] We differentiated between ‘direct’ and ‘indirect’ references. A ‘direct’ reference was defined as one that directly addressed and governed intellectual property rights. ‘Indirect’ references took many forms and ranged from substantial confidentiality clauses on the one hand to minor references to one or more search terms that acknowledged the existence of some form of employee creation (ie reference to ‘knowledge’, ‘design’, ‘innovation’ contained in a job classification description) but did not govern rights and obligations surrounding it.
^[48] See cl 62.11.
^[49] In the Gray litigation, the Federal Court dismissed the University of Western Australia’s claim to intellectual property developed by a Professor of Surgery it employed, a decision upheld by the Full Federal Court: University of Western Australia v Gray [2009] FCAFC 116; (2009) 179 FCR 346 at 394; University of Western Australia v Gray [2008] FCA 498; (2008) 246 ALR 603. Leave to appeal to the High Court of Australia was denied. For discussion, see W van Caenegem, ‘University of Western Australia v Gray’ (2010) 23 AJLL 327 at 328; C Arup, ‘Employee Inventions: Labour Law Meets Intellectual Property’ (2008) 21 AJLL 208. For a study of collective bargaining over IP policies in the higher education sector in two US States, see M W Klein and J Blanchard, ‘Are Intellectual Property Policies Subject to Collective Bargaining? A Case Study of New Jersey and Kansas’ (2012) 20 Texas Intellectual Property Law Journal 389.
^[50] Edith Cowan University Academic Staff Union Collective Agreement 2009 [2010] FWAA 1508 (24 February 2010, corrected 2 March 2010) (‘Edith Cowan Agreement 2009’), cl 59.2.
^[51] Ibid, cls 16.3 and 49.5, respectively.
^[52] University of Newcastle Academic Staff Enterprise Agreement 2010 [2011] FWAA 455 (21 January 2011), cl 21.1.2.
^[53] Central Queensland University Enterprise Agreement 2009 [2010] FWAA 3456 (29 April 2010) (‘Central Queensland University Enterprise Agreement 2010’), cl 4.4.4.
^[54] Deakin University Enterprise Agreement 2009–2012 [2010] FWAA 8102 (20 October 2010), cl 70.1.
^[55] Journalists’ (ACP Magazines) Agreement 2010 [2010] FWAA 7156 (13 September 2010), cl 36.1.
^[56] News Ltd Metropolitan Daily Newspapers – MEAA Agreement 2010 [2010] FWAA 9410 (6 December 2010) (‘News Ltd Metropolitan Agreement 2010’) , cl 4.4.(c).
^[57] Ibid, Appendix 1, Recitals B and D.
^[58] Ibid, cls 4.1 and 3.1, respectively.
^[59] Lonely Planet Enterprise Agreement 2009 [2010] FWAA 1727 (5 March 2010), cl 23.
^[60] Ibid, cl 24.1.
^[61] Ibid, cl 25.
^[62] Australian Synchrotron Employee Enterprise Agreement 2010 [2010] FWAA 3659 (10 May 2010) (‘Synchrotron Agreement 2010’), cl 42.
^[63] Ibid.
^[64] Queensland Institute of Medical Research (QIMR) Enterprise Agreement 2010 [2010] FWAA 6612 (25 August 2010) (QIMR Enterprise Agreement 2010), cl 45.
^[65] Symrise Pty Ltd Production Collective Workplace Agreement [2010] FWAA 7801 (6 October 2010) (‘Symrise Agreement’), cl 5.1.
^[66] Ibid.
^[67] Ibid, cl 5.2.
^[68] Ibid, cl 4.6(a).
^[69] Opera Australia Performers’, Music and Technical Staff Enterprise Agreement 2008–2009, Agreement ID AG846929, cl 13.1.2.
^[70] Bannershop International Pty Ltd Enterprise Agreement 2010 [2011] FWAA 72 (6 January 2011) (‘Bannershop Agreement 2010’), cl 23.
^[71] Ibid, Dictionary (b)(ii)(I).
^[72] Sphere Healthcare Pty Ltd Enterprise Agreement 2010–2012 [2011] FWAA 746 (4 February 2011), cl 42.1(a).
^[73] Pax Australia – AWU Bargaining Agreement 2010 [2010] FWAA 8174 (22 October 2010), cl 35.
^[74] AC Labels Ltd Production Employees Collective Agreement 2009, Agreement ID AC328365 (‘AC Labels Agreement’), cl 27.
^[75] Ibid.
^[76] Amcor Closure Systems Pty Ltd – Dudley Park – Employee Collective Agreement 2010 [2010] FWAA 3915 (24 May 2010), cl 2.1.10.
^[77] City Pak Somerton Enterprise Agreement 2010 [2010] FWAA 7200 (5 September 2010), cl 22.
^[78] See, eg, Edith Cowan Agreement 2009, above n 50 or University of Newcastle Academic Staff Enterprise Agreement 2010, above n 52.
^[79] See, eg, Lonely Planet Enterprise Agreement 2009, above n 60 or Symrise Pty Ltd Production Collective Workplace Agreement, above n 66.
^[80] See, eg, QIMR Enterprise Agreement 2010, above n 65.
^[81] See, eg, Central Queensland University Enterprise Agreement 2010, above n 53.
^[82] See, eg, Griffith University Academic Staff Enterprise Agreement 2009–2012 [2010] FWAA 9593 (13 December 2010), cl 48.
^[83] See, eg, Synchrotron Agreement 2010, above n 63.
^[84] Fair Work Australia, Enterprise Agreement Decisions (30 November 2012) <http://www.fwa.gov.au/index.cfm?pagename=cdreadecisions> . Search terms included ‘intellectual property’, ‘confidential information’ and ‘restraint of trade’.
^[85] In the real estate industry, see, eg, Fraumano Real Estate Pty Ltd as trustee for ETJ Discretionary Trust T/A Ray While Ormeau [2010] FWAA 8493 (3 November 2010); in the security services security, see, eg, KBK Security Services and Sentinel Traffic Control Service T/A KBK Enterprise Pty Ltd [2012] FWA 7336 (27 August 2012); in the health and welfare sector, see, eg, Radploy Ptd Ltd T/A Lake Imaging [2011] FWA 39 (5 January 2011); in the retail industry, see, eg, Mooloolaba Boost Pty Ltd T/A Mooloolaba Boost [2010] FWAA 7842 (12 October 2010) and Palcove Pty Ltd T/A Cheap as Chips [2010] FWAA 2501 (26 March 2010); in the agricultural industry, see, eg, Trustee for the Hill Family Trust T/A Bailey Creek Piggeries [2010] FWA 10086 (24 December 2010) and Bellview Orchards Pty Ltd [2010] FWAA 9842 (21 December 2010); in the banking, finance and insurance industry, see, eg, Waterdale Enterprise Pty Ltd as Trustee for the Boag Family Trust T/A Peel Finance Brokers [2010] FWA 4509 (21 June 2010); in the licensed and registered clubs industry, see, eg, Pelican Flat RSL Sub Branch Club Ltd [2010] FWAA 7933 (20 October 2010); in the hospitality industry, see, eg, Capricornia Pty Ltd T/A Quality Hotel Bateman’s Hill on Collins [2011] FWA 727 (10 February 2011).
^[86] [2010] FWA 7217 (16 September 2010) (Glen Eden I).
^[87] [2010] FWA 2465 (25 March 2010) (Smith).
^[88] See the subsequent approval decision, Glen Eden Thoroughbreds Pty Ltd T/A Ray White Shailer Park [2010] FWAA 8455 (3 November 2010) (Glen Eden II) at [2].
^[89] Glen Eden I, above n 87, at [53].
^[90] Ibid, at [54]–[56] (authors’ emphasis).
^[91] Ibid, at [59]–[63].
^[92] Ibid, at [60].
^[93] Ibid.
^[94] FW Act s 253; See JelliFish, above n 36, at [72].
^[95] Jellifish, above n 36, at [72].
^[96] Ibid.
^[97] Smith, above n 88.
^[98] Ibid, at [40].
^[99] Ibid, at [41].
^[100] Ibid, at [42]–[43]. Ultimately, the tribunal did not decide the application on this issue, as the agreement had failed to comply with a number of mandatory pre-approval requirements. However, Gooley C observed that the agreement failed to pass the NDT and that she would not have been satisfied with undertakings offered by the employer concerning these clauses.
^[101] See above n 86.
^[102] Inconsistency between tribunal members in the application of a vetting test for enterprise agreements has been empirically observed in relation to the No Disadvantage Test which operated between 1996 and 2006: R Mitchell et al, ‘What’s Going on With the ‘No Disadvantage Test’? An Analysis of Outcomes and Processes under the Workplace Relations Act 1996 (Cth)’ (2005) 47 JIR 393.
^[103] When agreements were searched via FWA’s agreement database, the authors kept records of where such search terms appeared. If there had been undertakings attached to the agreement, they would have appeared at the commencement of the agreement. The authors have no record of such keywords appearing in undertakings affixed to an agreement.
^[104] See above n 88.
^[105] FW Act s 180(5). Particular reference is given in FW Act s 180(6)(c) to explaining terms to ‘employees who did not have a bargaining representative for the agreement’.