A Full Federal Court decision confirms that an approved enterprise agreement remains legally binding even where deficiencies in making the agreement are later discovered
In an important case regarding the enforceability of approved enterprise agreements, a Full Federal Court has held that an enterprise agreement approved by the Fair Work Commission will remain legally binding, even if it is subsequently discovered that there were deficiencies in the agreement-making and approval process.
After the relevant EA was approved by the FWC in 2017, it was discovered that a number of pre-approval steps failed to meet the requirements of the Fair Work Act. In particular, about 40% of relevant employees were deprived of the opportunity to vote on the EA. The Full Federal Court “safely assumed” that had the FWC known of that issue when the application was made for the approval of the 2017 EA, the EA would not have been approved by the FWC.
When the voting deficiency became known to the employer and the union, they began negotiating another enterprise agreement and ultimately a new enterprise agreement, the 2018 EA, was approved by the FWC.
Later, the union brought claims in the Western Australian Industrial Magistrates Court for unpaid overtime under the 2017 EA on behalf of seven employees and also sought civil penalties against the employer for the alleged underpayments. In the case, the union argued that the 2017 EA remained legally binding despite the voting deficiency. The employer, on the other hand, argued the 2017 EA was invalid such that the union could not pursue the underpayment claim.
At first instance, the industrial magistrate concluded that the 2017 EA remained valid despite the deficiencies in the agreement-making and approval process. The employer appealed the decision of the industrial magistrate in the Federal Court.
The Full Federal Court decision
In dismissing the appeal, some aspects of the Full Federal Court’s reasoning are outlined below:
- An EA becomes operative through being approved by the FWC.
- Consequently, when there is an issue as to an EA’s enforceability, it is not appropriate to look back at whether the EA was validly made at a time prior to its approval.
- “Enforceability depends upon approval and approval depends upon the state of satisfaction of the FWC as to various matters including whether the agreement has been ‘genuinely agreed to by the employees’”.
- “The legislation gives no significance to whether, in fact, the agreement has been made in accordance with s 182 or there has been compliance with other provisions of the Fair Work Act that deal with the process for making an enterprise agreement”.
- “The operation of an enterprise agreement does not depend upon any view that the Court may take about the way the agreement was made. Rather, the Fair Work Act entrusts the relevant authority to the FWC.”
- “Upon approval by the FWC (and the passing of the required number of days after approval) the enterprise agreement is in operation.”
In holding that the 2017 EA remained legally binding, the Full Federal Court explained that there is a need for industrial parties to be certain about the operation of an enterprise agreement and therefore the decision of the FWC to approve an enterprise agreement after undertaking its evaluative power to determine whether the relevant matters are established to its satisfaction must be determinative.
This is an important decision for employers, emphasising the certainty afforded to an approved enterprise agreement as the Full Federal Court rejected arguments to ‘unpick’ an approved EA because of subsequently discovered deficiencies in how it was made.
If you would like more information about the case, please contact our office on +61 2 9233 3989.
National Workplace Lawyers
Note — this is for information purposes only and does not purport to be comprehensive or to render legal advice.5 April 2022 back to news feed | back to top