Government may intervene as Fair Work Australia rejects Woolworths’ workplace agreement

Federal Workplace Minister Julia Gillard is considering intervening in an important test of the new Fair Work industrial relations regime, after a workplace agreement between Woolworths and the shop assistants’ union was rejected by Fair Work Australia.

The decision by Commissioner Greg Smith has been greeted with surprise by industrial relations lawyers, with leading IR lawyer and SmartCompany writer Andrew Douglas saying he expects the decision will be overturned.

The dispute concerns an agreement between the Shop Distributive and Allied Employees Association and Woolworths covers workers at a distribution centre in the Melbourne suburb of Mulgrave.

Under the process for dispute resolution, the agreement states that either the union or the employer can refer a dispute to Fair Work Australia for conciliation.

However, a dispute could not be referred to Fair Work Australia for arbitration unless both sides agreed.

Douglas says many employers removed arbitration clauses from agreements during the WorkChoices era, in an attempt to keep the dispute resolution process in-house and away from the tribunal arbitration process.

But Commissioner Smith described the agreement as working as though either side held a “power of veto to the matter being settled” and rejected the agreement on the basis that it did not comply with the new Fair Work Act.

Central to Smith’s decision is a section of the Fair Work Act which states that Fair Work Australia can only approve an agreement that “provides a procedure that requires or allows FWA, or another person who is independent of the employers, employees or employee organisations covered by the agreement, to settle disputes”.

Woolworths essentially argued that an agreement does not need a clause that “requires” FWA to arbitrate disputes, but rather that an agreement needs a clause that “allows” FWA to become involved.

Smith disagreed. “[The Act] must be read as creating an obligation to include a procedure that either requires or allows Fair Work Australia or another independent person to settle disputes. “

However, Douglas expects that this reading of the word “allow” is the main reason the case would be overturned on appeal, and believes the Fair Work Act does not intend to provide Fair Work Australian with enforceable powers to arbitrate.

“I think the decision is likely to be overturned if it’s appealed.”

Woolworths is reportedly considering an appeal and a spokesperson for Gillard’s office told The Australian that the minister may become involved in the case if an appeal occurs.

The Australian Chamber of Commerce and Industry said it was concerned that Fair Work Australia was rejecting agreements made in good faith between employers and employees.

Douglas says the decision does provide something of a warning for employers, coming as it does after a flurry of dispute applications from unions in the last four months.

“It does create a real bump in the road for organisations that have, since WorkChoices, tried to water down the dispute resolution process and localise them.”

However, he does not advise businesses to remove arbitration clauses from agreements and says the arbitration often provides business certainty needed.