Experts applaud Fair Work Australia after settling crucial test case on enterprise agreements

Legal experts and employer groups have applauded Fair Work Australia’s decision to overturn an agreement that could have made compulsory arbitration a feature of every enterprise agreement around the country.

The controversial case between supermarket giant Woolworths and the Shop Distributive and Allied Employees Association was seen as a crucial test case for the Government’s new Fair Work industrial relations system, with the Federal Government, the Australian Council of Trade Unions and the Australian Industry Group all seeking to intervene in the matter.

The original decision by Commissioner Greg Smith concerned an agreement between the Shop Distributive and Allied Employees Association and Woolworths at a distribution centre in the Melbourne suburb of Mulgrave.

Under the process for dispute resolution, the Woolies 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.

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 was 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 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. “

Employer groups and legal experts were unhappy with the deal, with essentially said compulsory arbitration had to be a part of every enterprise agreement.

Workplace lawyer Andrew Douglas from Douglas Workplace and Litigation predicated the decision would be overturned on appeal, arguing that the Fair Work Act does not intend to provide Fair Work Australia with enforceable powers to arbitrate.

He was right, and says Fair Work Australia has made a sensible decision.

“The lesson for employers is that you do not have to have compulsory arbitration as part of an agreement and there are a lot of good reasons that you might not want to do that based on the industry you are in.”

He says the decision should help reduce the current trend of unions using arbitration as a way of putting pressure on companies ahead of an agreement negotiating period.

“It just stops a lot of unnecessary litigation and cost.”

Australian Industry Group chief executive Heather Ridout described the decision as a “commonsense” outcome for employers.

“Today’s decision importantly preserves the flexibility for employers and employees to decide what dispute settling role they want to give to Fair Work Australia in their enterprise agreements.”