FWC Full Bench clarifies limits on dispute settlement powers under enterprise agreements - Employee Rights/ Labour Relations

A Full Bench of the Fair Work Commission (FWC) has provided clear authority on parties' obligations to comply with preliminary dispute settlement steps under an enterprise agreement, in The Australian Workers' Union v MC Labour Services Pty Ltd [2017] FWCFB 5032.

The FWC has no discretion to deal with such disputes unless authorised under the agreement.

THE FACTS OF THE CASE

The Australian Workers' Union (AWU) brought an application under section 739 of the Fair Work Act 2009 (FW Act) for the FWC to deal with an alleged dispute about payment of overtime by MC Labour Services Pty Ltd (MC Labour).

The dispute arose under the MC Labour Services Pty Ltd and the CFMEU (Victorian Construction and General Division) Labour Hire Industry Enterprise Agreement 2016-2018 (Agreement).

While not covered by the Agreement, the AWU maintained that it had members who were employees of MC Labour affected by the alleged non-payment of overtime. MC Labour brought a jurisdictional objection to the application on the basis that the AWU had not followed the dispute settlement procedure in the Agreement (DSP clause).

The DSP clause only allowed involvement of the Commission in either of the following circumstances:

to review a decision of the Victorian Building Industry Disputes Panel (provided previous attempts to resolve the dispute at site level had failed); or
if any party fails or refuses to follow any steps under the DSP clause, the non-breaching party could seek assistance through the Commission.

MC Labour's jurisdictional objection was upheld, both at first instance and on appeal.

THE FIRST INSTANCE DECISION

Having accepted MC Labour's evidence that it was only made aware of the dispute when it first received the section 739 application from the AWU, Commissioner McKinnon found that each step of the DSP clause was a mandatory step and none of those steps had been followed by the AWU.

Accordingly, McKinnon C found that the DSP clause had not been followed and upheld MC Labour's jurisdictional objection,¹ concluding that the Commission did not have jurisdiction to deal with the dispute.

THE FULL BENCH DECISION

The AWU appealed McKinnon C's decision, contending that the FWC has discretion under the FW Act to deal with a dispute referred to it under the Agreement, regardless of whether the procedures in that clause were adhered to. This contention was based on the arguments that McKinnon C:

did not take into account the legislative framework of the FW Act; and
failed to take into account the decisions of Commissioner Ryan in AMWU v CBI Constructors Pty Ltd² (CBI) and AMWU v Unilever Australia Trading Limited³ (Unilever).

The Full Bench of the FWC upheld McKinnon C's decision, finding that:

the Agreement's DSP clause set pre-conditions for the capacity of the Commission to deal with a dispute and, in the circumstances, those pre-conditions were not met; and
the Commission did not have a discretionary power to deal with the dispute.

Rejection of CBI and Unilever analysis

The Full Bench rejected key aspects of the decisions in CBI and Unilever, in particular, the analysis in those decisions of section 186(6) of the FW Act. Section 186(6) relevantly provides that, in order for the Commission to approve an enterprise agreement, it must be satisfied that the agreement includes a term which 'requires or allows the Commission, or another person who is independent of the employers, employees or employee organisations covered by the agreement, to settle disputes'.

In CBI and Unilever, Ryan C held that, where a DSP clause contains several steps for dealing with the dispute at the workplace level and provides for the dispute to be referred to the FWC, the steps for dealing with the dispute at the workplace level cannot operate as a bar to the FWC having jurisdiction to settle the dispute. This is because that term would not meet the requirements of section 186(6).

Ryan C also considered that the contrast between this section and its predecessor under the Workplace Relations Act 1996 (Cth), which specifically required compliance with any steps that had to be taken under the DSP prior to the dispute being referred to the FWC, was relevant. On the basis of this analysis, the FWC was ultimately permitted to deal with the disputes in question, notwithstanding that the pre-requisite steps under the applicable DSP clauses had not been followed.

The Full Bench of the FWC rejected the above analysis, finding that section 186(6) does not mandate an unconditional or universal role for the FWC or other independent person in settling disputes. It held that section 739 of the FW Act makes clear that the FWC's function (if any) in dealing with a dispute referred to it under an enterprise agreement depends on the terms of that agreement. It also makes clear that the parties to the agreement may structure or limit the role of the FWC or other independent person.

The Full Bench observed that:

the operation of section 739 has a logical connection with the requirements of section 186(6);
it must be given its natural meaning; and
it should not be read down simply because a provision in the predecessor legislation was not replicated in the FW Act.

The Full Bench also considered situations where it is genuinely impossible for a party to comply with a mandatory step in a dispute resolution procedure, with the result that the FWC or other independent person cannot attempt to settle the dispute. The Full Bench observed that the existence of such circumstances did not empower the FWC to recast or ignore certain steps in a DSP clause. These clauses are presumed to be valid terms of an enterprise agreement upon approval by the Commission, unless overturned on appeal or found invalid by a Court.

The Full Bench concluded that the FWC does not have a general discretion under the FW Act to deal with a dispute under an enterprise agreement. While an enterprise agreement must contain a procedure that requires or allows the FWC or other independent body to settle disputes, parties are free to agree limitations on the role of that body in settling disputes. If those limitations are not observed, the FWC has no discretion to deal with the dispute.

KEY IMPLICATIONS FOR EMPLOYERS

Where a DSP clause sets out prerequisite steps to be followed prior to the FWC dealing with a dispute, those steps must be followed. Failing this, the FWC cannot deal with the dispute (absent any express provision in the agreement to the contrary).

While employers can, in such circumstances, volunteer to participate in dispute procedures before the FWC (e.g. conciliation), they are under no obligation to do so and may prevent the FWC from having any involvement by way of jurisdictional objection.

The FWC's powers to deal with disputes under an enterprise agreement are drawn from sections 595 and 739 of the FW Act, and the DSP clause in the applicable agreement. The FWC has no general discretion under the FW Act to deal with disputes. This is the case even if it is impossible for a party to comply with a DSP clause.

However, employers must take care to avoid including procedures in DSP clauses that could be seen to be unworkable, or otherwise non-compliant with section 186(6), as this may result in the agreement being rejected at the approval stage or subsequently by a Court.

Chris Leong appeared for MC Labour in the Fair Work Commission proceedings at first instance and on appeal in this case.

Footnotes

¹ [2017] FWC 4075.

² [2016] FWC 4896.

³ [2016] FWC 7600.

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