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Employer’s ‘inadvertent error’ invalidates enterprise agreement

20 July 2022

8 min read

#Workplace Relations & Safety

Published by:

Annelise Harper

Employer’s ‘inadvertent error’ invalidates enterprise agreement

In a notable decision, the Fair Work Commission (Commission) has dismissed an employer’s application to approve its enterprise agreement, even though it was voted up by its employees, because the employer failed to comply with the strict Fair Work Act 2009 (Cth) (FW Act) requirements in distributing a Notice of Employee Representational Rights (NERR) to its employees.

In recent years, we have seen a steady decline in the number of enterprise agreements being made. This trend can partly be attributed to the technical requirements to make a valid enterprise agreement.

In this article, we unpack the implications of the decision and what this means for employers looking to commence enterprise agreement negotiations.

What were the key facts in this case?

The Central Australian Aboriginal Congress (Congress) made an application to the Commission, seeking the approval of an enterprise agreement covering its employees from 2022 until 2025.

The Congress had initiated the bargaining process by distributing a NERR to its employees. This notice had been prepared using the Commission’s NERR creation tool, which is publicly available on their website. The notice distributed by the Congress omitted a paragraph from the mandatory form set out in Schedule 2.1 of the Fair Work Regulations (Regulations), which related to its employees’ rights to be represented during the bargaining process.

Congress contended that the missing information had been circulated amongst staff in other communications, namely an email from the General Manager of HR, a letter from the CEO, an email from the Manager of Employee Relations and an internal newsletter. The Congress submitted that the omission in the notice was inadvertent, but could have also been caused by an error in the NERR creation tool on the Commission’s website.

Having identified deficiencies in the bargaining notice, the Commission went on to consider the content and form requirements under the FW Act and whether the defects in the NERR could be overlooked in order to approve the enterprise agreement.

What are the requirements for a valid NERR?

Section 174 of the FW Act sets out detailed requirements for the content and form of a NERR.

In short, the NERR must contain the content prescribed by Schedule 2.1 of the Regulations, must not contain any additional content, and must be in the prescribed form. The NERR must also specify that the employee may appoint a bargaining representative to represent them and if they are a member of the union, the union will be their default bargaining representative unless another person is appointed. If the NERR does not meet the requirements in section 174, it will not satisfy the FW Act requirements for a valid NERR.

How has section 174 of the FW Act been construed?

Historically, the Commission has adopted a strict approach when applying the pre-approval requirements prescribed by the FW Act. In Peabody Moorvale Pty Ltd v Construction, Forestry, Mining and Energy Union, the Commission’s Full Bench noted that the wording of section 174(1A) is “clear and unambiguous” in its meaning, indicating that there could be no departure from the content and form of the NERR. This approach was justified on the basis that the NERR contains important information regarding the nature of an enterprise agreement and an employee’s right to representation. A strict interpretation was therefore deemed consistent with the objects of the FW Act, which seeks to promote fairness and uphold the right to be represented at work.

In December 2018, the Fair Work Amendment (Repeal of 4 Yearly Reviews and Other Measures) Act 2018 (Cth) took effect, amending section 188 of the FW Act. Section 188(2) of the FW Act now vests the Commission with the discretion to overlook “minor procedural or technical errors” in NERRs which do not satisfy the FW Act requirements. This discretion may only be enlivened where the Commission is satisfied that the enterprise agreement would have been “genuinely agreed to” but for the minor error, and where the employees covered by the enterprise agreement were “not likely to have been disadvantaged by the errors”.

In Huntsman Chemical Company, the Full Bench explored the operation of the newly inserted section 188(2) in the context of a defective NERR and the pre-approval requirements. The Commission considered the meaning of a “minor error” and provided several helpful propositions which are summarised below:

  • the characterisation of a minor error involves an “evaluative judgment”, having regard to the underlying purpose of the procedural or technical requirement which has not been complied with, and the relevant surrounding circumstances
  • a lower level of non-compliance will likely be characterised as a “minor error”. However, this will depend on the relevant circumstances, such as whether it is the first enterprise agreement, whether the bargaining representatives are inexperienced, and whether the employees are predominantly from a non-English speaking background
  • the nature of the requirement which has not been complied with is also relevant. Informing employees about key dates and times for voting is deemed to be more significant than the method for voting
  • certain errors, such as the omission of prescribed text of the NERR relating to an employee’s right to appoint a bargaining representative, are unlikely to be characterised as “minor” errors
  • the cost or inconvenience to the employer or employee caused by the delay in approving an enterprise agreement is not a relevant consideration when assessing whether the employee is likely to have been disadvantaged by the error.

More recently, the Commission has exercised its discretion under section 188(2) in the context of a deficient NERR in:

  • SCT Logistics, the Commission was willing to overlook a typographical error in the NERR, which mistakenly referenced section 174(6) rather than section 174(1A) of the FW Act. The NERR was otherwise in the same terms as currently prescribed by section 174(1A) of the FW Act
  • Mawson Lakes Community Early Learning Incorporated, the Commission approved an enterprise agreement even though the NERR failed to properly identify the employees covered by the agreement. The Commission was satisfied that all employees understood they would be covered under the new agreement, given that it had been communicated personally to all employees, at a staff meeting and via email. The defect in the NERR was deemed a minor error that did not disadvantage the employees covered by the agreement.

What were the Commission’s findings in the present case?

The Commission rejected Congress’ argument that the omission in the bargaining notice was the result of an error in the NERR creation tool. It was satisfied that this type of error was “not possible” using the tool. Nevertheless, the Commission found that an error generated by the NERR creation tool would not obviate non-compliance, as it was designed merely to assist parties in preparing their notice.

The Commission proceeded to consider whether the defective notice would impede the approval of Congress’ enterprise agreement. In this case, the Commission was unwilling to overlook the irregularities in the NERR and exercise its discretion under section 188. The various internal communications which paraphrased the employees’ right to appoint a bargaining representative could not supplement or remedy the defective notice. The deficiency in Congress’ NERR ultimately proved detrimental to the application for approval of their enterprise agreement. The Commission dismissed the application for approval, meaning Congress was required to restart the bargaining process.

What are the key takeaways?

This recent decision is a timely reminder for employers about the importance of complying with the pre-approval requirements when commencing the enterprise bargaining process. The FW Act requirements prescribed by section 174 of the FW Act and Schedule 2.1 of the Regulations are intended to be strictly applied.

Whilst the Commission has the discretion to overlook minor defects, this discretion has not been exercised lightly. Employers who fail to comply with the pre-approval requirements risk their enterprise agreement being rejected by the Commission, resulting in the recommencement of the bargaining process which is costly and time-consuming for all parties involved.

Employers should consider the following practical steps to ensure that their NERR satisfies the FW Act requirements:

  • pay careful attention to the form requirements. Ensure you cross-reference the draft NERR with the mandatory content set out in Schedule 2.1 of the Regulations to confirm all content contained in Schedule 2.1 is included before distributing the NERR to employees
  • do not include any additional information or content in the NERR or remove any content from the prescribed form contained in Schedule 2.1
  • arrange a second-level review of the draft NERR before distribution to confirm all necessary content in the draft NERR has been included.

If you have any queries about this decision and how it may affect your business, please get in touch with us below or contact our team here.

Authors: Michael Selinger, Jennifer van Bronswijk & Annelise Harper

The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Annelise Harper

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