A Fair Work Australia Full Bench has confirmed that section 187(2) of the Fair Work Act 2009 (Cth) (FW Act), which requires that Fair Work Australia (FWA) be satisfied that the good faith bargaining (GFB) requirements be met before approving agreements, applies only where a scope order is in place.  However, it has suggested that whether the GFB requirements have been met may be relevant in determining whether employees have genuinely agreed to make an agreement.

Implications for employers

Employers should remain conscious that whether the GFB requirements have been met may be an issue at agreement approval time. FWA may consider it relevant to determining whether employees have genuinely agreed to make an agreement.  The Philmac case makes clear in particular that employers should ensure that communications regarding the agreement do not exclude some bargaining representatives or employees. Where possible, employers should refrain from providing important communications and conducting voting processes at times when bargaining representatives or employees may be absent, for example, during holiday periods.

However, employers can be reassured that it is only in cases where a scope order is in force that the GFB requirements are a mandatory consideration for FWA.

Background

Facts

By way of summary, the facts of this case were that:

  • There were three unions and 11 other bargaining representatives involved in negotiations.
  • When the agreement was lodged for approval, His Honour Senior Deputy President O’Callaghan (SDP O’Callaghan) sought further information about the process of reaching the agreement.  Among other things, he noted that some affected employees had contacted him anonymously to express concerns about the voting process. 
  • A hearing was held on 25 February 2011 to obtain further information about the process.  At that hearing, it became clear that:
    • the agreement had initially been voted down in late November or early December 2010.  Feedback from employees was sought, the matter was discussed with the unions and a fresh version of the agreement prepared;
    • on 17 December 2010, Philmac sent to each of its employees the fresh agreement, an explanation, a ballot paper and a reply paid envelope and advised that the voting period was to run from 31 December 2010 to 5 January 2011.  Votes could be posted or placed directly in a ballot box at Philmac; and
    • also on 17 December 2010, Philmac closed for Christmas, re-opening on 4 January 2011.  One of the bargaining representatives, and some employees, did not receive the information in a timely fashion and had difficulty participating in the vote.
  • There was no scope order in operation.

The law

Section 187(2) of the FW Act states that, FWA cannot approve an enterprise agreement unless it is satisfied that this would not be inconsistent with or undermine good faith bargaining for a “proposed enterprise agreement, or an enterprise agreement, in relation to which a scope order is in operation”.

Sections 186(2)(a) and 188 of the FW Act require FWA to be satisfied, prior to approving an agreement, that the employees have genuinely agreed to the agreement.  FWA must be satisfied that there are no reasonable grounds for believing otherwise.

The judgment at first instance

At first instance, SDP O’Callaghan found that there were two questions for him to determine.

  • Firstly, in light of section 187(2), was Philmac’s approach to the fresh agreement consistent with the GFB requirements?

SDP O’Callaghan found that although there was no deliberate non-compliance, the process Philmac followed meant that it had not met the GFB requirements to consult with all bargaining representatives and provide information in a timely manner.  Accordingly, His Honour declined to approve the enterprise agreement.

  • Secondly, did the postal ballot, given that it was sent on the last day of work and over the Christmas period, enable genuine employee agreement to be achieved?

SDP O’Callaghan did not form a concluded view given the conclusion he had reached in relation to section 187(2), but stated that although postal ballots are not inherently unfair, he believed that given the timing issues there was room for doubt about whether employee agreement had been genuine in this case.  

Philmac, supported by the Australian Industry Group, appealed to the Full Bench.

The Full Bench’s findings

The Full Bench, comprised of Senior Deputy Presidents Bolton and Kaufman and Commissioner Bisset, handed down a unanimous judgment.  It found that SDP O’Callaghan had erred in law, as 187(2) only applied if a scope order is in operation.

The Full Bench further stated that its tentative view was that the GFB requirements may be relevant in deciding whether the employees had genuinely agreed to the agreement. It accepted the parties’ proposal to withdraw the application for approval of the agreement and resubmit the agreement to a further ballot of employees. 

Philmac [2011] FWA 1639

Appeal by Philmac Pty Ltd [2011] FWAFB 2668