Enterprise agreements must include a dispute resolution term
that enables disputes about the agreement or National Employment
Standards to be settled by arbitration, whether the parties want to
or not, following a recent decision of Fair Work Australia
The employer applied to FWA for approval of an enterprise
agreement made between it, the Shop Distributive and Allied
Employees Association and its employees.
The agreement contained a dispute resolution clause that allowed
disputes to be referred to FWA for conciliation; failing resolution
at that stage, the Director of Human Resources and the employee (or
the union on his or her behalf) would attempt to resolve the
dispute. If the dispute was still not resolved, the agreement
enabled the parties to refer the dispute to FWA for arbitration,
but only where both parties agreed.
As such, the parties each effectively held a veto on
Dispute resolution terms and enterprise agreements under the
Fair Work Act 2009
Under section 186(6) of the Fair Work Act, FWA must be satisfied
before it approves an enterprise agreement that it includes a term
that "requires or allows" FWA or another independent
decision-maker to "settle disputes" about matters arising
under the agreement or in relation to the NES.
The employer argued that by using "or" in the phrase
"requires or allows" in section 186(6) Parliament
intended that access to arbitration in any dispute resolution
clause could be voluntary.
Commissioner Smith disagreed. The section "must be read as
creating an obligation to include a procedure that either requires
or allows FWA or another independent person to settle
disputes". He further held that if the word "or"
allowed the parties to arbitrate disputes on a voluntary basis,
there would be no need for the section, because it would give the
parties a discretion not to settle the dispute.
Given that the Act requires a term to "settle"
disputes, Commissioner Smith stated that it would be difficult to
read into the meaning of "settle" as including "not
Commissioner Smith also had regard to:
model dispute resolution clause in the Fair Work Regulations
2009. He held that although dispute resolution terms did not have
to mirror the model clause precisely, they should adopt its
"essential ingredients", including the term which
provides for FWA to arbitrate disputes over an agreement; and
Fair Work Principles User Guide, which states that agreements
must contain clauses enabling disputes to be settled "via a
decision binding on the parties".
He concluded that the dispute resolution clause in the Agreement
did not meet the requirement of section 186(6) because it did not
include a procedure to settle disputes about matters arising under
the agreement and the National Employment Standards.
What should employers do now?
If you're finalising an enterprise agreement, you will need
to ensure that your dispute resolution clause:
allows the dispute to be arbitrated, whether by FWA or some
other independent party. A procedure which allows the parties to
arbitrate the dispute only by consent of both parties will not be
is drafted with regard to the model dispute resolution
Aftermath of the decision
The decision has generated some controversy, and
according to The Australian, the Workplace Relations Minister
Julia Gillard has indicated that the Government may intervene in
response to the decision. A spokesperson for Ms Gillard stated that
the Government is aware that the employer intends to appeal the
decision, and after obtaining advice, will consider whether the
Commonwealth will join the appeal proceedings.
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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Long experience representing many of Australia's leading employers has taught us that in employment litigation the identity of an employee's representative is a major factor in how employee litigation runs.
Australian employees receive certain entitlements (such as annual leave and superannuation) where contractors do not.
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