Australia: FWC: Enterprise bargaining requires employers - to enter into the theatre of the absurd

A recent decision by the Full Bench of the Fair Work Commission (FWC) in Uniline Australia Limited [2016] has, yet again, made it clear that the FWC will adopt a strict approach to technical deficiencies when employers issue a Notice of Employee Representational Rights (NERR). But what sets the Uniline decision apart is a strong dissenting opinion delivered by Vice President Watson that speaks to the absurdity of such an approach.

In Uniline Australia Limited [2016] FWCFB 4969, the majority (Deputy President Gostencnik and Commissioner Riordan) found that an NERR issued more than 14 days after the start of bargaining was invalid. It therefore had no effect, despite the fact that the majority of employees had voted in favour of the agreement and all had received the NERR more than 21 days prior to the vote taking place.

Watson VP's judgment highlights the real risk facing employers when an unnecessarily heightened role is given to such perceived technical deficiencies as it "arms those opposed to an agreement with the means to dismantle an agreement otherwise genuinely agreed."1

THE BACKGROUND OF THE CASE

The Uniline Australia Limited Enterprise Agreement 2011 passed its nominal expiry date on 21 July 2014. In February 2014, Uniline began initial discussions with a group of employees who would became known as the Uniline Employee Committee. During 2014 and 2015, negotiations stalled between Uniline and its employees.

In February 2016, Uniline recommenced negotiations with the Uniline Employee Committee and on 11 February 2016 issued an NERR to the employees in a form consistent with the statutory requirements. On 9 March 2016 (more than 21 clear days later), the agreement was made when 25 of the 30 employees who cast a valid vote voted to approve the agreement.

On 13 May 2016, Commissioner Roe rejected Uniline's application for approval of the agreement on the basis that he could not be satisfied that there was genuine agreement because the NERR was not issued in conformance with s 173(3) of the Fair Work Act 2009 (Cth) (FW Act).

Roe C relied heavily on the reasoning of Vice President Hatcher in TWU v Hunter Operations Pty Ltd [2014] FWC 7469 and found that the statutory purpose of the NERR could not be met unless it was given shortly after the commencement of bargaining and therefore in accordance with s173(3) of the FW Act – that is, not later than 14 days after the 'notification time' for the agreement, when bargaining is effectively deemed to begin.

Importantly, neither s173 nor any other provision in the FW Act specifies any consequence in the event that the '14 day rule' is not observed.

THE APPEAL

Uniline appealed Roe C's decision to the Full Bench of the Fair Work Commission, arguing that on a proper construction of the relevant provisions of the FW Act, whether the NERR was issued in accordance with s173(3) of the FW Act is not a proper consideration to be taken into account for the purpose of approving the agreement.

Rather, the delineating factor to consider in relation to provision of the NERR is the 21 day period, referred to in s181(2) of the FW Act. An agreement cannot be submitted for a vote until 21 days after the NERR has been issued. This is the provision that was intended to (and does sufficiently) protect the rights of employees.

THE MAJORITY DECISION

The majority found that, because the 14 day rule was not observed, the employees had not genuinely agreed to the proposed enterprise agreement (Proposed Agreement). This was so despite the fact that over 80% of employees had in fact voted in favour of it, and there was no suggestion that employees' bargaining rights had been affected in the slightest way.

In coming to their decision, the majority found that the employees could not have genuinely agreed to the Proposed Agreement because Uniline Australia Limited (Uniline) had, by breaching the 14 rule, also contravened the 21 day rule in s181(2) of the FW Act – it had requested that the employees approve the Proposed Agreement by voting for it before the requisite 21 days had passed since the last valid NERR was given.2

On the face of it, it appears that Uniline had complied with the s 181(2) requirements. After all, Uniline did not hold a vote until after 21 days had passed from when the last NERR was given under s 173(1). However, the majority decided that this was not enough to comply with s 181(2).

The majority found that by focusing only on the 21 day requirement, Uniline had ignored what they called "the full effect" of s 181(2). According to the majority, s 181(2) is not only concerned with time but with "time in relation to the giving of a [NERR]". Gostencnik DP and Riordan C found that "the last notice under s 173(1)" could only mean an NERR that, amongst other things, was given as soon as practicable and not later than 14 days after the employer agrees to bargain or initiates bargaining for the agreement, as required by s 173(3) of the FW Act.3

Uniline did not dispute the fact that it took no steps to give and did not give, an NERR to any employee until well after 14 days had passed. As a result, the majority found that "it cannot be said to be a Notice as contemplated by the Act and in particular for the purposes of s 181(2) was given." According to the majority, it therefore logically followed that Uniline's request for employees to approve the Proposed Agreement was made prematurely, because the 21 day period had not in fact yet begun, as no valid NERR had been given.

VICE PRESIDENT WATSON'S DISSENTING OPINION

Watson VP's decision differed markedly from the majority decision. His Honour took what he called a "common sense approach", emphasising that the FW Act encourages enterprise bargaining and agreement making, and is intended to provide "a simple, flexible and fair framework for agreement making and the facilitation of enterprise agreements".

In Watson VP's view, the proposition that a notice issued more than 14 days after the commencement of bargaining advising employees of their representation rights renders an agreement, otherwise genuinely agreed, to be incapable of approval is "demonstrably inconsistent with the statutory scheme". He went as far as to call such a view "the very antithesis" of a simple, flexible and fair framework.

He considered that a common sense interpretation would give weight to the fact that employees:

  • may already know of their representation rights;
  • may already have made decisions in accordance with their rights; and
  • may have expended significant time and resources to agreeing on the content of an agreement.

On the other hand, a conclusion of automatic failure of a test based on a technicality fails the legal test and produces a nonsensical outcome.

Watson VP paid particular regard to the High Court decision in the Project Blue Sky case (which dealt with the proper approach to interpretation of provisions concerning the exercise of administrative functions consequential to non-compliance with a statutory requirement).4 There, the High Court found that non-compliance with a mandatory statutory requirement did not automatically lead to invalidity. The consequence of non-compliance with a requirement must be discerned from the legislation in question.

In the present case, the FW Act specifies no consequence. Watson VP found that the late notice was not invalid and the Proposed Agreement did not automatically fail an essential test for approval and to reach such a conclusion would entail reading words into the FW Act which are not there. He found that the lateness of the notice may be relevant to whether the agreement has in fact been genuinely agreed under s 188(c).

However, such a consideration requires a full and objective analysis of the actual circumstances, rather than an automatic failure on the grounds of a technicality (as was held by the majority).

THE IMPLICATIONS OF THE DECISION FOR EMPLOYERS

The majority decision has major implications for employers.

It means that employers must ensure strict compliance with the 14 day time frame for issuing NERRs if they wish to establish that an agreement was "genuinely agreed" by the employees who will be covered by it.

If employers are unable to establish this, then the FWC will simply not approve the agreement. It is then (according to Watson VP) back to the drawing board for employers, who must "enter the theatre of the absurd" and restart the entire bargaining process, adding unnecessary costs, delays and resources.

This decision also has significant repercussions for organisations that engage in enterprise bargaining. In particular, it appears there will be a major consideration for organisations currently involved in negotiating enterprise agreements, where NERRs may not have been validly issued. There is also a risk that agreements which were previously approved by the FWC, and did not comply with the 14 day time frame, could be invalidated.

NEXT STEPS

It is understood that Uniline and its representative the Australian Industry Group (AIG) are considering whether to seek judicial review of the FWC Full Bench decision.

If a Full Federal Court finds error in the approach of the majority, the matter will be returned to the FWC to be heard and determined according to the law laid down by the Court. If this aligns with the approach of Watson VP, it would restore a more workable position for employers and all other bargaining participants when negotiating and making enterprise agreements.

Footnote

1 Uniline Australia Limited [2016] FWCFB 4969 at [3] per Watson VP.

2 Ibid at [109] per Gostencnik DP & Riordan C.

3 Ibid at [104].

4 Project Blue Sky v Australian Broadcasting Authority [1998] HCA 28.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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