Beyond dispute: the FWC cannot resolve a dispute under an inoperative enterprise agreement

The Fair Work Commission (FWC) may hear and determine disputes if expressly authorised to do so by a dispute resolution term in an enterprise agreement. These terms are the source of the FWC's dispute resolution power, which it exercises by way of private arbitration between the parties.

Whether this power continues when an agreement ceases to apply to a particular employee (ie. because the agreement is terminated or replaced by a new enterprise agreement) has been the subject of varied and conflicting authorities from the FWC and its predecessor.

This unclear issue is back on the agenda following the recent decision of the Full Bench of the FWC in Simplot Australia Pty Ltd v AMWU [2020] FWCFB 5054.

The decision in Simplot confirms that the FWC has no jurisdiction to deal with a dispute under a disputes procedure in an enterprise agreement that has ceased to operate. This is the case whether the dispute was on foot at the time that the agreement ceased to operate or not.

The cessation of operation of an enterprise agreement means rights under that agreement no longer exist. Subject to an applicable savings provision in a replacement enterprise agreement, the FWC has no power to deal with the matter.

Key facts from Simplot

Simplot entered into an enterprise agreement in 2014 pursuant to Part 2-4 of the Fair Work Act 2009 (Cth) (FW Act), which contained a clause allowing the FWC to conciliate and arbitrate disputes arising under it. In October 2018, the AMWU filed an application in the FWC to deal with a dispute in accordance with that clause.

On 10 December 2018, a new enterprise agreement replaced the 2014 agreement. It was common ground that the 2014 Agreement ceased to operate on 10 December 2018 by virtue of it having been replaced, and that since that time it has not applied to anyone, and that the scope and application clauses of the 2014 and 2018 Agreements are the same. 

Simplot challenged the jurisdiction of the FWC to hear a dispute arising under the 2014 Agreement, as it had ceased to operate.

The conflicting authorities on dispute settlement procedures

At first instance, Deputy President Barclay held that the FWC retained the power to deal with a dispute under a dispute settlement procedure contained in the 2014 Agreement, after examining a number of relevant decisions:

1. Stephenson v Senator the Hon Eric Abetz [2004] AIRC 1059, a decision of a Full Bench of the Australian Industrial Relations Commission, where it was held that, under the equivalent provisions of the now repealed Workplace Relations Act 1996 (Cth), the Commission had no jurisdiction to exercise dispute resolution powers conferred by an enterprise agreement which had ceased to operate.
2. Grabovsky v UPA [2015] FWC 2504, in which Vice President Lawler concluded that, similar to an arbitration clause generally surviving the termination of a contract, a dispute settlement power survives the cessation of an agreement (as long as the application was properly made at the time the agreement was still operating). On the basis of that principle, his Honour found that the Full Bench in Stephenson was per incuriam and need not be followed. This conclusion was not accompanied by any examination of the critical differences between the character of a common law contract and an enterprise agreement made under, and operating strictly in accordance with, statute.

   Vice President Lawler also found that, to conclude otherwise would be to extinguish an “accrued right” of an applicant to have its dispute determined, which was said to survive the operation of an enterprise agreement. The nature of the right was not explored in detail by his Honour — in particular, it was not explained how a so-called accrued right to have a dispute determined, where the determination itself would not then be enforceable under the non-operational agreement, could have substantial utility so as to impact upon a construction of the legislative provisions applying to enterprise agreements.

3. APESMA v TransGrid [2018] FWC 6335, in which Deputy President Sams discarded the Full Bench authority in Stephenson in favour Lawler VP’s reasoning in Grabovsky. This was despite the fact that, as Sams DP himself acknowledged, he had come to the opposite conclusion in another case a few years prior.

At first instance, Deputy President Barclay applied TransGrid and Grabovsky as the correct approach, and cast doubt on the correctness of Stephenson. It was held that the right to have a dispute determined by the FWC, once properly invoked (ie. while an agreement was in operation), could not be extinguished otherwise than by clear language. This was said to be so despite the fact that, by virtue of section 51(1) of the FW Act, an enterprise agreement does not impose an obligation, nor confer a right, on a person unless it applies to the person.

This mixture of authorities on the question of the FWC’s jurisdiction to determine disputes, and the resulting uncertainty in that regard, was unfortunate, and warranted clarification. This uncertainty was exemplified by the fact that, only one month prior to Barclay DP’s decision being handed down, Commissioner Cambridge had thoroughly considered exactly the same issue in Australian Workers' Union v Costa Exchange Pty Ltd T/A Costa (Berry Category) [2020] FWC 2418, and come to the opposite conclusion, considering that he was obliged to follow the reasoning in Stephenson. Commissioner Cambridge’s decision was not referred to by Barclay DP in his decision.

Decision of the Full Bench: the dispute clauses die with the enterprise agreement

On appeal, the Full Bench quashed the decision of Barclay DP, holding he had misinterpreted the relevant provisions of the FW Act.

The predominant reasons for the Full Bench’s decision were:

• Firstly, a proper interpretation of the relevant FW Act provisions demonstrates that entitlements are not given to a person by an agreement unless the agreement applies to the person. The Act does not contain a provision for any extra-operational effect of an agreement that has ceased to operate. It is simply an inoperative agreement.
• Secondly, if an inoperative agreement was to have some special, peculiar effect as a source of authority for the FWC to deal with disputes under an agreement beyond its operational life, one would expect this to be indicated in the Act. There is no such indication.
• Thirdly, the proposition that an inoperative agreement continues to act as a source of power for the FWC to deal with disputes gives an incoherent meaning to the concept of an agreement being “in operation” under the FW Act.
• Fourthly, that proposition is also incompatible with other relevant provisions of the FW Act that concern the manner in which rights and obligations are created under an agreement. The 2014 Agreement is inoperative and applies to no-one. It follows that it does not give a person an entitlement or right to request the FWC to continue to hear or determine a dispute.
• Fifthly, the legal basis of an applicant’s “accrued right” to have the FWC continue to hear his or her dispute (as relied upon in Grabovsky and TransGrid) was not identified. The FW Act establishes no such right.
• Finally, section 58(1) of the FW Act states that only one agreement can apply to an employee at any particular time. The 2014 Agreement did not govern the dispute at the particular time of the Deputy President's decision because it had ceased to operate. The 2014 Agreement does not apply to anyone now, nor did it apply at the time of Barclay DP's decision.