16 Mar 2011

FWA Full Bench clarifies tests for approval of agreements

by Jim Simmonds, Dr Graham Smith

Deficiencies in required declarations can be easily remedied, and procedures for notifying employees of the content of proposed agreements and explaining the terms are only those that require "reasonable steps".

Employers seeking the approval of Fair Work Australia (FWA) for an enterprise agreement must satisfy the tribunal of a number of matters. This article deals with the requirement to provide information to FWA by way of written declaration, and the necessary steps to be taken prior to calling on employees to vote on the agreement.

The decision of the Full Bench of FWA in McDonalds Australia Pty Ltd v Shop Distributive and Allied Employees Association [2010] FWAFB 4602 has clarified the operation of various tests that FWA must apply before approving enterprise agreements. The appeal followed a decision of Commissioner McKenna in which she found that the McDonald's Australia Enterprise Agreement 2009 was incapable of approval.

Included in the matters that led to this conclusion was her finding that there were deficiencies in the application and failures to meet the Act's pre-approval requirements.

The importance of the formal application

Apparently the statutory declaration accompanying the application, which is required by the Rules of FWA, was in some respects incorrect and incomplete. Supplementary declarations were provided but were not satisfactory. These deficiencies in the application were, the Commissioner found, enough to enable her to dismiss the application.

The Full Bench decided that this conclusion "incorrectly elevated a requirement to file accurate forms and declarations to a requirement for approval of the agreement". The Bench made it clear:

  • If relevant information was omitted, FWA should draw such omission to the attention of the parties and give them an opportunity to respond.
  • Any material provided should be taken into account, and put in the required form if requested.
  • Often answers to questions in proceedings, or written responses would be sufficient.
  • Should information be incomplete, this is a matter to be considered in relation to the applicable tests for approval.

The Full Bench considered three pre-approval requirements.

The first pre-approval requirement: all reasonable steps

The first is the requirement that the employer take all reasonable steps to notify employees about the time and place for the vote on the proposed agreement and the voting method to be used.

It is not necessary for the employer to establish “in a definitive way” that all employees are informed of such matters; it is enough that the employer took reasonable steps. Immaterial differences about dates on which information was supplied is irrelevant, and hearsay evidence about the process is acceptable. It may be unnecessary or impractical to lead better evidence on such matters.

The second pre-approval requirement: the explanation to employees

The second of the pre-approval requirements is that the employer must ensure that the terms of the agreement and their effect are explained to employees. On this issue the Full Bench made the following points:

  • it is not necessary that particular outcomes be achieved, it is enough that the employer takes reasonable steps to ensure the terms and conditions of the agreement are explained;
  • there is no requirement for a full explanation prior to the vote. Such information may be provided within the access period; and
  • the employer may collaborate with bargaining representatives, including unions to provide relevant explanations.

The third pre-approval requirement: an appropriate manner

The third of the pre-approval requirements considered by the Full Bench is the requirement to explain the proposed agreement in an appropriate manner, taking into account the particular circumstances and needs of the relevant employees.

In the case under consideration there were over 60,000 employees under 21, with a large number under the age of 16. There was no evidence before the Commissioner of a differentiated method of explaining the agreement to such employees, or those with disabilities or those from an non-English speaking background.

The Bench held that it was not necessary to have a differentiated approach where the method of explanation is adequate for all groups of employees. In the matter under review the Bench found:

  • a variety of meeting venues was used;
  • agreement summaries were prepared by the union in consultation with the employer, which set out the differences between the terms of the Agreement and current terms and conditions;
  • hard copies of the summary were provided and access provided to electronic versions and copies on notice boards;
  • explanatory meetings were conducted by the union where questions could be asked and clarification given; and
  • employees could contact the People Resources Department in each State to seek clarification.

Lessons for employers

The decision in this case underlines the primary pre-approval requirement on employers seeking to have an enterprise agreement approved by FWA. The employer must take reasonable steps to advise employees of the time and place for voting, and the method of voting to be used. Reasonable steps must also be taken to explain the effect of the agreement, taking into account any particular circumstances and needs of employees such as the young and those from a non-English-speaking background. What is reasonable will depend on the circumstances – and if in doubt employers should seek legal advice.


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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.