A Full Bench of the Fair Work Commission (FWC) has overturned a decision of first instance which held that the dispute resolution clause of an enterprise agreement permitted the FWC to arbitrate a dispute, even though the parties had not each consented.

The decision reiterates that the power of the FWC to arbitrate a dispute under an enterprise agreement is available only where conferred on the FWC by the parties. The FWC does not have an inherent jurisdiction to arbitrate disputes in the absence of such consent.

First instance decision

Section 739 of the Fair Work Act 2009 (FW Act) states that, in dealing with a dispute, the FWC must not exercise any powers limited by the applicable dispute resolution term. It also provides that if, in accordance with the dispute resolution term, the parties have agreed that the FWC may arbitrate (however described) the dispute, the FWC may do so.

At first instance, Commissioner Spencer found that clause 32 of the CC Pty Ltd Enterprise Agreement 2012 (Agreement) empowered the FWC to “exercise any method of dispute resolution permitted” that it considers appropriate to ensure settlement of the dispute. In this regard, the Commissioner held that the clause was not clear on which methods of dispute resolution are permitted, however, found that the clause does not, on its face, limit the power of the Commission.

The dispute resolution clause in question provided for a process for the informal resolution of disputes. Failing that, the clause provided as follows:

Process

The parties may agree on the process to be utilised by FWA including mediation, conciliation and arbitration.

Power of FWA

Where the matter in dispute remains unresolved, FWA may exercise any method of dispute resolution permitted that it considers appropriate to ensure the settlement of the dispute.

The issue in dispute was whether this clause limited the exercise of the FWC’s powers and, if not, had the parties agreed that the FWC may arbitrate the dispute in accordance with the clause. Commissioner Spencer held that the clause did not limit the powers to be exercised by the FWC, but is rather an inclusive description of the “process” that the parties may agree is to be utilised. The Commissioner’s reasoning distinguished between the reference to “process” rather than the “power” of the FWC. The Commissioner noted that the parties created a clause outlining the “Power of FWA”, which empowered the FWC to “exercise any method of dispute resolution permitted” that it considers appropriate to ensure settlement of the dispute. The Commissioner held the clause is not clear on which methods of dispute resolution are permitted and, for this reason, it did not limit the power of the FWC for the purposes of section 739.

Full Bench appeal

The employer (Cook Colliery) appealed the decision, arguing (among other things) that Commissioner Spencer erred in finding that, by virtue of the dispute resolution clause, the parties had agreed (expressly or otherwise) to arbitration. The CFMEU contended in reply that section 739 of the FW Act has the effect that arbitration is a method permitted by the FW Act. That section provides that, if, in accordance with the term, the parties have agreed that the FWC may arbitrate (however described) the FWC may do so

The Full Bench upheld the appeal and quashed the decision of Commissioner Spencer. It considered that the “Power of FWA” provision of the Agreement states that, where the matter in dispute remains unresolved, the FWC may exercise any method of dispute resolution “permitted” that it considers appropriate to ensure the settlement of the dispute. The term “may” conferred the parties with discretion to agree upon the process the FWC may utilise. However, in the circumstances of the dispute before the Commission, no such agreement had been reached by the parties and, in those circumstances, the Commission was not empowered to conduct an arbitration.

In upholding the appeal, the Full Bench relied on Woolworths Ltd T/A Produce and Recycling Distribution Centre (2010) 192 IR 124, which is authority for the proposition that section 739 of the FW Act “strongly implies the negative stipulation that if the parties have not agreed, Fair Work Australia has no power to arbitrate.” In that decision, the Full Bench overturned the decision of Commissioner Smith not to approve an enterprise agreement on the grounds that it did not have a dispute resolution clause which complied with the requirements of the FW Act. The Full Bench upheld the appeal of that decision, finding that compulsory arbitration is not an "essential ingredient" for a valid dispute resolution clause.

CC Pty Ltd T/A Cook Colliery v Construction, Forestry, Mining and Energy Union [2017] FWCFB 2749 (1 June 2017). Appeal against decision [2017] FWC 1447 of Commissioner Spencer at Brisbane on 13 March 2017.