Earlier this year, the Federal Court of Australia held that separate documents incorporated into an enterprise agreement can vary the agreement after it is made (read our update here). This decision was recently overturned on appeal in Teys Australia Beenleigh Pty Ltd v Australasian Meat Industry Employees’ Union  FCAFC 122. The Court held that it was not permissible to incorporate material that was yet to be agreed.
Implications for employers
This decision emphasises the importance of agreeing upon all relevant aspects of an enterprise agreement at the time of negotiation and expressly including those terms in the agreement submitted to the Fair Work Commission for approval. While it is possible to incorporate separate documents into an enterprise agreement, the Fair Work Act (FW Act) does not allow for the incorporation of material that would vary the content of the enterprise agreement itself.
In late 2009, employees of Teys Australia Beenleigh Pty Ltd (Teys) approved an enterprise agreement (2010 EA) that included a clause which allowed them to subsequently agree to an alternative remuneration structure. After the 2010 EA was made, but before it was approved by the Fair Work Commission, Teys and the Australasian Meat Industry Employees Union (Union) signed a document which set out an alternative remuneration structure and incentive payment system (Remuneration Document). In a subsequent dispute, the Union argued that the incentive payment system in the Remuneration Document was incorporated into the 2010 EA. Teys disagreed and argued that the variation of the 2010 EA was not valid as it did not follow the variation procedures in the FW Act.
Decision at first instance
The Federal Court considered:
- section 257 of the FW Act, which allows an enterprise agreement to incorporate material ‘as in force from time to time’ (i.e. content that is subject to change); and
- the FW Act’s procedures for varying enterprise agreements.
The Court accepted that the incorporation of the Remuneration Document would vary the contents of the 2010 EA, but said this was contemplated by section 257. It determined that incorporating terms that change the content of an enterprise agreement would not undermine the variation requirements, provided that the Commission considered the relevant issues at the approval stage.
Decision on appeal
The Full Court disagreed, and said that section 257 and the variation provisions should be interpreted consistently. Section 257 permitted existing material to be incorporated (eg a modern award), but could not circumvent the strict variation requirements. For this reason, only reference documents that do not vary the contents of an agreement may be incorporated into enterprise agreements. In this case, as the incentive payment provisions in the Remuneration Document varied the terms of the 2010 EA, it was not validly incorporated and could not vary the 2010 EA unless the variation requirements were satisfied. The Court made a declaration that the incentive payment provisions did not become terms of the 2010 EA.
Teys Australia Beenleigh Pty Ltd v Australasian Meat Industry Employees’ Union  FCAFC 122