Woolworths Ltd trading as Produce and Recycling Distribution Centre [2010] FWAFB 1464

In the February 2010 edition of Employment Matters, we reported that Fair Work Australia (FWA) had ruled that a provision guaranteeing a right of arbitration by an independent third party was an “essential ingredient” for dispute resolution clauses in enterprise agreements.  

A Full Bench of FWA has overturned that decision.  

The Full Bench comprising President Giudice, Senior Deputy President Acton and Commissioner Hampton overruled Commissioner Smith’s interpretation of section 186(6) of the Fair Work Act 2009.  

Section 186(6) requires FWA to approve an enterprise agreement where it is satisfied that the agreement includes a term that “requires or allows” FWA, or another independent third party, to “settle disputes” about matters arising under the agreement or the National Employment Standards.  

In its decision, the Full Bench referred to section 739(4) to support its position that section 186(6) does not impose a compulsory requirement for an arbitration clause.  

Section 739(4) provides that FWA may arbitrate a dispute where the parties have agreed to this, and included such a term in an enterprise agreement.  

The Full Bench held that section 739(4) “strongly implies” that FWA has no power to arbitrate, unless the parties have agreed for that to happen.  

This position was supported by section 595 of the FW Act which provides that while FWA has a wider power to conciliate and mediate disputes, it can only arbitrate if it is “expressly authorised” to do so.  

The Full Bench also rejected Commissioner Smith’s reasoning that the compulsory arbitration term in the model dispute clause meant that such a term was an “essential ingredient” for all enterprise agreements under section 186.  

The decision of the Full Bench clarifies that enterprise agreements do not require a clause providing for compulsory arbitration. Parties can of course include such a clause if they agree to do so.