Four recent decisions by the Fair Work Commission (FWC) highlight the potential significance of one of the recent recommendations by the Australian Productivity Commission that, where appropriate, the FWC should be given wider discretion to overlook minor procedural errors when parties ask it to approve an enterprise agreement (EA) they have made. Currently, EAs can be (and are being) refused approval by the FWC because of procedural defects in the bargaining process which, arguably, do not unfairly impact on the EAs otherwise legitimately made.
Where approval of an EA is refused, at least some time, cost and inconvenience will be involved in order to resurrect the bargain including, particularly, the organisation and conduct of a fresh vote on the EA. In some cases it may be necessary to start the whole bargaining process again, with no guarantee that a new bargain will be made on the same or similar terms.
In this alert, Andrew Tobin and Nicole Jones discuss four recent FWC decisions in which EAs have been rejected for seemingly minor defects in the bargaining process, and which serve as a timely reminder to all employers that they must strictly follow the legislated procedures when making an EA.
The EA approval process
Before the FWC can approve an EA it must be satisfied, amongst other things, that the EA was genuinely agreed to by the employees covered by the EA. An EA will be genuinely agreed to if:
- the employer has complied with all pre-approval steps set out in section 180 of the Fair Work Act 2009 (Cth) (FW Act);
- the employer has given a notice of employee representational rights (NERR) to employees at least 21 days before requesting employees to vote for approval of the EA; and
- a majority of employees who cast a valid vote approved the EA.
A number of EAs have been rejected because of defects in the NERR. Relevantly, the FW Act provides that a NERR given to employees:
- must contain the content, and be in the form, prescribed by the Fair Work Regulations 2009 (Cth) (Regulations); and
- must not contain any other content.
The FWC is given no discretion to overlook any deviations from these requirements.
The Productivity Commission’s recommendation
On 21 December 2015 the Productivity Commission released its final report on Australia’s current workplace relations framework, following a 12-month inquiry into the performance of the current system .
The report recommended the FWC be granted wider discretion to overlook minor procedural errors when approving an EA, provided it is satisfied that employees were not likely to have been disadvantaged. The report acknowledged there are good reasons for having strict procedural requirements (for example, to avoid misleading conduct by the parties involved), however minor procedural errors should not be able to “derail” an otherwise sound EA at the approval stage.
The recent decisions of the FWC discussed following highlight the issue.
Rejection due to use of letterhead with the NERR
In DP World Brisbane Pty Ltd  and DP World Melbourne Limited, an employer, DP World, had its Brisbane and Melbourne EAs rejected by the FWC because the NERR given to employees was printed on the company’s letterhead.
As the NERR incorporated the company’s logo and letterhead information, the FWC held it contained content other than that prescribed by the Regulations (even though it was otherwise in the prescribed form). The result, according to Commissioner Cambridge, was to alter “the character of the document” from a “regulatory form” to something with “the character of an employer’s document”.
Commissioner Cambridge observed that although DP World’s inclusion of additional content may appear to be of “little significance”, the FWC has no discretion to overlook such a defect.
This is not the first time DP World’s Brisbane and Melbourne EAs have been rejected. The EAs were previously rejected because the Form F17 - Employer’s Statutory Declaration (made in support of the application to approve the EA) accidentally misstated the number of relevant employees who had voted to approve the EA.
Rejection due to additional content
The FWC similarly rejected an employer’s application for approval of an EA in Neale Ceilings Pty Ltd t/a Neale Ceilings. Here, the employer forgot to attach the NERR to its Form F17 - Employer’s Statutory Declaration. When the employer finally provided the NERR to the FWC, the FWC found the NERR to be invalid because it was in the form of an internal memo and included further information on the employees’ right to appoint a representative and the rationale behind drafting an EA.
Rejection due to inadequate delivery method
In WorkPac Mining Pty Ltd, another EA was rejected by the FWC because the NERR was not in the prescribed form and also because the NERR had not been given to employees correctly. The NERR was sent to employees via text and email, and was found to be invalid for the following reasons.
Firstly, the email sent to employees contained two versions of the NERR which were not in the prescribed form. The first version was at the beginning of the email and omitted the beginning paragraph of the prescribed content and the second version was “sandwiched” between other additional content.
Secondly, both the email and the text message sent to employees contained weblinks to other documents – including another version of the NERR which was in the prescribed form – but the email and text message did not indicate that one of the weblinks contained an NERR. The FWC found that simply sending a weblink, without more, was insufficient. Deputy President Asbury stated that, at the very least, the email and text message should have made clear to employees that the purpose of the communication was to give them a NERR, and identify how the NERR could be accessed. Deputy President Asbury also recommended giving employees an alternative method to access the NERR in case the weblink did not work.
Rejection due to stapled document
The above decisions followed the Full Bench of the FWC’s well-known decision in Peabody Moorvale Pty Ltd v Construction, Forestry, Mining and Energy Union, where the Full Bench refused to approve an EA, on the basis that the NERR given to employees was stapled to the front of two other documents and was therefore invalid.
Watch this space for further information in relation to the progression of any reforms to Australia’s workplace relations system.
In the meantime, the takeaway for employers engaged in enterprise bargaining is that the statutory process for the making of a valid EA needs to be carefully followed to ensure the best prospects for approval of any EA by the FWC.
To a large extent that is unlikely to ever change, although if the Productivity Commission’s recommendation is taken up, the ‘system’ may become a little more flexible and tolerant of human error.
Mistakes can lead not only to huge disappointment but also to significant disruption and cost.
There are multiple ways we can help you to provide the best prospects for reaching an EA that is ultimately approved by the FWC including:
- guiding you through the process;
- sitting in on bargaining discussions and helping to negotiate terms of your EA;
- helping you to draft your EA, whether from a standing start or building on your draft; and
- reviewing your EA for compliance against statutory requirements as drafts of it progress and before the EA is put to a vote.
We can also help you to assemble your ‘supplementary suite’ of contracts and policies to round out your industrial environment. The EA can only ever form a part of a complete industrial system. Some important features of your employment arrangements are best kept out of the EA while others can’t legitimately be there to begin with.