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New rules for the construction of enterprise agreements

Recently, a Full Bench of the Fair Work Commission (the Commission​) found that the Acts Interpretation Act 1901 (Cth) (the AI Act) is not relevant to the construction of enterprise agreements approved under the Fair Work Act 2009 (Cth) (the FW Act). 

Background

The union requested the Commission arbitrate a dispute following an alteration to the working hours' arrangement initiated by Golden Cockerel Pty Ltd under the Golden Cockerel Certified Workplace Agreement 2012 (the Agreement) as a result of changes made to distribution processes of its major client. 

Decision at first instance

At first instance, Senior Deputy President Richards found that Golden Cockerel Pty Ltd could alter the working hours' arrangement for the employees concerned under the Agreement, including that Golden Cockerel Pty Ltd:

  • was entitled, under the Agreement, to alter the start time of the employees;

  • could direct an employee to perform reasonable overtime; 

  • has no obligation to maintain an employee’s shift rosters and allowances where operational or business reasons necessitate changes; and

  • met the consultation requirements under the Agreement. 

Appeal

The union appealed the decision alleging, among other matters, errors in the construction of the Agreement's clauses being considered and that Senior Deputy President Richards erred in finding Golden Cockerel Pty Ltd met the consultation obligations under the Agreement. 

Before considering the appeal grounds, the Full Bench considered the established principles regarding the construction of enterprise agreements.  It found, most importantly, that the Commission does not "make enterprise agreements" - rather it approves agreements which have already been made. Consequently, unlike awards, the AI Act is not relevant to the construction of an enterprise agreement approved under the FW Act.

The Commission set out the following criteria regarding the construction of enterprise agreements:

1.  "The AI Act does not apply to the construction of an enterprise agreement made under the Act.

2.  In construing an enterprise agreement it is first necessary to determine whether an agreement has a plain meaning or contains an ambiguity.

3.  Regard may be had to evidence of surrounding circumstances to assist in determining whether an ambiguity exists.

4.  If the agreement has a plain meaning, evidence of the surrounding circumstances will not be admitted to contradict the plain language of the agreement.

5.  If the language of the agreement is ambiguous or susceptible to more than one meaning then evidence of the surrounding circumstance will be admissible to aide the interpretation of the agreement.

6.  Admissible evidence of the surrounding circumstances is evidence of the objective framework of fact and will include:

(a) evidence of prior negotiations to the extent that the negotiations tend to establish objective background facts known to all parties and the subject matter of the agreement;

(b) notorious facts of which knowledge is to be presumed;

(c) evidence of matters in common contemplation and constituting a common assumption.

7.  The resolution of a disputed construction of an agreement will turn on the language of the Agreement understood having regard to its context and purpose.

8. Context might appear from:

(a) the text of the agreement viewed as a whole;

(b) the disputed provision’s place and arrangement in the agreement;

(c) the legislative context under which the agreement was made and in which it operates.

9. Where the common intention of the parties is sought to be identified, regard is not to be had to the subjective intentions or expectations of the parties. A common intention is identified objectively, that is by reference to that which a reasonable person would understand by the language the parties have used to express their agreement.

10. The task of interpreting an agreement does not involve rewriting the agreement to achieve what might be regarded as a fair or just outcome. The task is always one of interpreting the agreement produced by parties."

Having regard to the principles, the Full Bench found that Senior Deputy President Richards did not fall into error and that the he properly interpreted the Agreement and the consultation requirements had been met. 

Conclusion

Although the AI Act is no longer a relevant consideration to the construction of enterprise agreements approved under the FW Act, the same may not be true for agreements made under previous legislation.  The principles established in the above matter will better enable parties to form a concluded view on the meaning of clauses in their own enterprise agreements. 

On its face, this appears to be a relatively simple task.  However, in practice it is quite complex and can have significant legal and financial consequences for an employer.  

National Workplace Lawyers regularly advises employers on the construction of their enterprise agreements and represents them in the Fair Work Commission, in disputes concerning the construction of enterprise agreements. 

If you would like more information about the case or the matter generally, please contact National Workplace Lawyers 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.

 

 
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