| Enterprise agreements must allow disputes to be settled by arbitration | |||
| 24 January 2010 | |||
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According to a recent decision of Fair Work Australia (FWA), enterprise agreements must include a dispute resolution term that enables disputes about the agreement or National Employment Standards to be settled by arbitration, whether the parties want to or not. In the case of Woolworths Ltd trading as Produce and Recycling Distribution Centre [2010] FWA 30, the employer applied to FWA for approval of an enterprise agreement made between it, the Shop Distributive and Allied Employees Association and its employees. The agreement contained a dispute resolution clause that allowed disputes to be referred to FWA for conciliation; failing resolution at that stage, the Director of Human Resources and the employee (or the union on his or her behalf) would attempt to resolve the dispute. If the dispute was still not resolved, the agreement enabled the parties to refer the dispute to FWA for arbitration, but only where both parties agreed. This effectively provided either party with a right to veto an arbitration. Dispute resolution terms and enterprise agreements under the Fair Work Act 2009 Under section 186(6) of the Fair Work Act the FWA must be satisfied before it approves an enterprise agreement that it includes a term that "requires or allows" FWA or another independent decision-maker to "settle disputes" about matters arising under the agreement or in relation to the NES. The employer argued that by using "or" in the phrase "requires or allows" in section 186(6) Parliament intended that access to arbitration in any dispute resolution clause could be voluntary. However Commissioner Smith disagreed. According to Commissioner Smith the section "must be read as creating an obligation to include a procedure that either requires or allows FWA or another independent person to settle disputes". He further held that if the word "or" allowed the parties to arbitrate disputes on a voluntary basis, there would be no need for the section, because it would give the parties a discretion not to settle the dispute. In reaching his decision Commissioner Smith also had regard to the model dispute resolution clause in the Fair Work Regulations 2009 and the Government's Fair Work Principles User Guide which states that agreements must contain clauses enabling disputes to be settled "via a decision binding on the parties". Commissioner Smith concluded that the dispute resolution clause in the Agreement did not meet the requirement of section 186(6) because it did not include a procedure to settle disputes about matters arising under the agreement and the National Employment Standards. What should employers do? Unless the decision is overturned on appeal (we understand that Woolworths are considering such a challenge), if you are currently finalising an enterprise agreement you will need to ensure that your dispute resolution clause:
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