Enterprise agreement quashed – no “genuine agreement” by employees

The Federal Court has agreed with the CFMEU to “undo” a two year old enterprise agreement that applied to the employees of One Key Workforce Pty Ltd on the basis that it was not “genuinely agreed” to by employees.

Under the applicable legislation, the Fair Work Commission must, before ratifying an enterprise agreement, be satisfied the agreement has been “genuinely agreed” to by the employees covered by it at the time of the approval vote.

In some instances, employers seek to make enterprise agreements with a small number of employees who do particular work with the intent of later applying the enterprise agreement to a much broader range of future employees.

In this case, the employer asked three current employees who worked exclusively in mining and construction occupations to approve an enterprise agreement that would ultimately cover future employees in 11 occupations including transportation, hospitality and clerical work.

The enterprise agreement was made by the Fair Work Commission based on it having been approved by the three employees. Two years down the track, the enterprise agreement applied to a large number of new employees in a vast range of occupations. 

The Court ultimately found that the three employees who made the agreement could not have “genuinely agreed” to it on the grounds that they had no experience working in the other 11 occupations to which the agreement purported to apply. The Court further held that such an agreement would lack “authenticity” and “moral authority”.

Critically, the Court acknowledged that it may, depending on the circumstances, be permissible for an enterprise agreement that is approved by only a very small number of employees, to be applied to a large number of employees.  

When making an enterprise agreement, employers should seek to ensure that at the time the agreement is voted on by employees, there is at least one employee in each classification covered by the enterprise agreement to avoid challenges to the industrial instrument of the type that occurred in this case by the CFMEU. 

As an aside, but of equal importance for employers, the Court in this case also found that it was insufficient for the employer to simply rely on the fact that the HR Manager read out each clause of the enterprise agreement to the employees as satisfaction that the employer had “taken all reasonable steps to explain the terms of the Agreement and the effect of those terms”. The best approach here is for employers to provide a comprehensive explanation of the terms and effect of the enterprise agreement and avoid simply giving lip service to this mandatory obligation. 

The employer in this case has appealed the decision. 

CFMEU v One Key Workforce Pty Ltd [2017] FCA 1266 

If you would like to know more about this case, please contact National Workplace Lawyers on (02) 9233 3989.

National Workplace Lawyers

Note — this is for information purposes only and does not purport to be comprehensive or to render legal advice.