Fair Work Commission majority confirms when an Enterprise Agreement is made

The full bench of the Fair Work Commission has split over when an agreement is “made” and whether bargaining can continue or must re-start if the Commission refuses to approve it.  This arose in the context of an appeal against Commissioner McKinnon’s decision to refuse a scope order application by the AMWU.  The decision continues to highlight the complexity in agreement making and the need for strict compliance with procedural steps.

The issue

Section 182(1) of the Fair Work Act 2009 states that an agreement is made, “when a majority of those employees who cast a valid vote approve the agreement.

In refusing the union’s application for a scope order, an enterprise agreement was found to be made “when the agreement was approved by a majority of employees and application was made to the Commission for its approval”.

This decision was quashed, with the majority of the full bench finding that the “critical question” was whether the vote to approve the proposed agreement, “resulted in an agreement being ‘made’ in accordance with s182(1)”. The majority held that the agreement “cannot have been ‘made’ unless each employee who will be covered by the proposed agreement and who is employed at the notification time has been given the Notice of Employee Representational Rights (NERR) within 14 days of the notification time”.

This invalidity in the process meant that the agreement had not yet been made, even in circumstances where a ballot of employees had voted in favour of approving the agreement.

In dissent, Commissioner McKenna held that the original notification for bargaining and NERR were ‘spent’ once the majority of employees voted to approve the agreement. In her view, the invalidity of the process does not affect whether an agreement is made under the Act, only whether it can be approved by the Commission. Accordingly, Commissioner McKenna’s view was that bargaining could not continue and must re-start in the above scenario.

Implications for employers

An enterprise agreement may not be considered to be “made” if the process leading up to the agreement is invalid or non compliant with the Act. Employers must ensure that the NERR is provided to all employees that will be covered by the proposed agreement who are employed at the time it is issued.