Reminder to ensure the terms of an enterprise agreement are more than just explained to employees

The Fair Work Act 2009 (Cth) (FW Act) establishes the criteria that must be satisfied by the Fair Work Commission before approval of an enterprise agreement. Section 180(5) of the FW Act provides that the employer must take all reasonable steps to ensure that the terms of the agreement, and the effect of those terms are explained to the relevant employees, before obtaining their ‘genuine agreement.’

The FW Act’s criteria regarding whether employees have ‘genuinely agreed’ to the terms of an enterprise agreement was scrutinised in One Key Workforce Pty Ltd v Construction, Forestry, Mining and Energy Union [2018] FCAFC 77 (One Key decision).

In 2015, One Key Workforce Pty Ltd (One Key) determined it would make an agreement with its three employees and took the following actions prior to the vote:

• sending emails to employees with copies of the proposed agreement and 11 incorporated Awards;
• discussing the terms of the agreement with each employee;
• emailing employees with a summary of the terms and effect of the proposed agreement; and
• phoning employees to clarify any questions.

The Enterprise Agreement was approved by Commissioner Roe in October 2015. However, on 8 November 2017, Justice Flick overturned the decision approving the agreement on the basis that One Key:

• failed to take all reasonable steps to sure the terms of the agreement (and their effect) were adequately explained to employees; and
• relevant employees did not “genuinely agree” to the agreement.

Of particular concern to Justice Flick was the fact that while the three employees were (at that stage) One Key’s only employees, the enterprise agreement was capable of covering a vast range of employees who would otherwise have been covered by 11 different Awards.

On appeal, the Full Federal Court found the Commission could not have been satisfied that One Key took all reasonable steps and that therefore, the agreement should not have been approved.

The Full Federal Court was particularly concerned that One Key only attempted to bargain with a small portion of the employees who were to be covered by the agreement and in doing so, failed to ensure the three employees understood the true impact of the agreement.  

Important consideration for employers

This case acts as a reminder that in seeking approval of an enterprise agreement, employers are required to do more than simply declare that the terms of the agreement and their effect have been explained to employees.

Employers should ensure employees understand what it is they are being asked to agree to and help them understand how wages and conditions may be affected if the agreement is approved. In seeking the Commission’s approval, employers should ensure they are able to prove employee’s understanding of the terms and the effect of the terms, if required.  

Please click the link below to view the full decision:

http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FCAFC/2018/77.html