The Fair Work Commission (FWC) has approved a rail contractor’s enterprise agreement after an earlier finding that the contractor had failed to adequately explain the deal’s effect and it was therefore not genuinely agreed to according to s.188(1) of the Fair Work Act 2009 (FW Act).

The decision represents an important demonstration of the FWC’s new discretionary powers to overlook or seek corrections to “minor procedural or technical errors” in the enterprise agreement making process, in this case leading to a positive outcome for the company and its employees.

Background

As analysed by AMMA (see earlier case summary here), in April 2019 Deputy President Abbey Beaumont found she could not approve Karijini Rail Pty Ltd’s 2018 enterprise agreement given the employer did not adequately explain the breakdown of pay rates and shift patterns when quizzed by an employee.

The question in this earlier decision was whether the enterprise agreement would have been genuinely agreed had it not been for a minor procedural or technical error under s 188(1)(a) where Karijini did not meet the requirements in s 180(5) to adequately explain the terms of the proposed enterprise agreement and their effects.

DP Beaumont issued directions to the parties to address this point, in addition to whether an undertaking may meet the concern identified in the original decision.

Karijini provided a draft undertaking which provided protection of current rostering practices and flat hourly rates which it submitted was 53% higher than the relevant award rates.

FWC exercises discretionary power

In her subsequent decision of 16 September 2019, DP Beaumont considered whether the undertaking provided by the employer satisfied the requirements under s180(5) and therefore the agreement was genuinely agreed (s188(1)).

The CFMMEU, objecting to the agreement, submitted the new pay undertaking had nothing to do with explaining the components of the salary nor did it satisfy the pre-approval requirements that all reasonable steps were taken to explain the terms of the Agreement and their effect.

DP Beaumont disagreed, however, and found Karijini’s undertaking satisfied requirements under the Act and could be approved.

“The protective purpose of provisions in Subdivision B of Part 2-4 of the FW Act, does not preclude the use of an undertaking to meet a concern about an enterprise agreement satisfying or meeting the genuine agreement requirements in s 186,” she said.

“It is uncontroversial that the Commission can still approve the agreement if satisfied that the undertaking meets the concern given the reliance on undertakings in the past to address BOOT issues.”

DP Beaumont referred to a full bench decision that undertakings can be used to address concerns about “each of the approval requirements set out in ss 186 and 187”.

She also cited a single member decision which found that concerns about each of the approval requirements in ss 186 and 187 are at least capable in-principle of being addressed by an undertaking. DP Beaumont referred to the FWC member’s observation that “were s 186(2)(a) intended to have been immune from s 190, Parliament would have dealt with it as a standalone approval requirement”.

Further, DP Beaumont in considering the underlying purpose of s 180(5) to take all reasonable steps to explain the terms of the Agreement and their effect, along with the relevant circumstances in the matter, was satisfied the error made by Karijini was minor.

“There was no uneasiness arriving at the conclusion that the two employees were not likely to have been disadvantaged by the employer’s error in relation to the requirement in s 180(5),” she said.

Implications for employers

In December 2018, longstanding efforts by the Coalition Government to provide the FWC with greater discretion to overlook and/or amend “minor procedural or technical errors” in the agreement making and approval process, finally passed both Houses of Parliament.

The intent of this new power, provided for under the Fair Work Amendment (Repeal of 4 Yearly Reviews and Other Measures) Act 2018, was to see more agreements amended and approved in the approvals stage instead of rejected and sent back to the drawing board for seemingly innocuous errors.

The Karijini Rail agreement approval is an important demonstration of this power, including that it is not limited to minor errors related to the Notice of Employee Representational Rights (NERR), which was the primary driver for the amendments.

AMMA’s advocacy was instrumental in getting these new discretionary powers legislated by Parliament in 2018.

It has long been AMMA’s view that where a minor procedural or technical error does not cause employees any disadvantage and the employees have voted to approve the deal, the FWC should work with the employer party to approve the agreement with minimal delay, as was the case in this matter.

AMMA will continue to encourage the FWC to exercise this power in future where it supports efficient approval of agreements made in good faith between employers and employees.

The full decision is available here.