Setting up shop: "Covered by" an enterprise agreement and the NERR

What you need to know

• When bargaining for an enterprise agreement, consider whether there will be any changes to the roles of employees in order for them to be covered by the agreement. If there are changes, consider whether the employees are in these roles at the time of voting for the agreement and therefore, "covered by" the agreement. If they are not, then they will be ineligible to vote to approve the agreement.
• Replicate the Notice of Employee Representation Rights (NERR) in the form prescribed by the Fair Work Regulations 2009 (Cth). The Commission takes a strict approach in considering the validity of the form, content and timing of delivery of an NERR when considering approval of an enterprise agreement.

What you need to do

• The Federal Court overturned the decisions of the Fair Work Commission to approve an enterprise agreement for a new business site of ALDI. This was because the enterprise agreement was made with employees of ALDI who were still engaged in their current positions at various other sites, and had not yet taken up their roles at the new site which the new enterprise agreement was made for. These employees were therefore not "covered" by the agreement at the time they voted for the agreement or when the agreement was approved, meaning the Commission could not be properly satisfied of the requirement that it had been "genuinely agreed to by the employees covered by the agreement".
• The Federal Court, while not ultimately deciding the matter, considered that the NERR issued by ALDI was not in the correct form as words had been changed within the notice, which meant that the form of the NERR had not been strictly complied with. This may open the door for an enterprise agreement being challenged when an application is made for its approval.

What were the reasons for the Court overturning the approval of the agreement?

The decision in ALDI concerned the approval of an enterprise agreement made by ALDI with 17 of its existing employees from NSW, Victoria and Queensland who had been offered ongoing employment at a new distribution centre to be established in South Australia. ALDI sought to make an enterprise agreement with these employees, although they had not transferred to their new roles in South Australia at the time they voted to approve the enterprise agreement.

A majority of the Full Court considered that these employees were not "covered" by the proposed agreement at the time they voted on it, because they had not yet commenced in the roles in South Australia. The majority considered that the Fair Work Act required that there needed to be genuine agreement of employees that the agreement expresses itself to cover and who are in fact covered by it when it is made. This group does not include employees who will only become covered by the agreement at some point in the future. The majority said, in this case, the agreement did not in fact cover any actual employees at the time it was made, at the time application was made to the FWC, or at the time the agreement was approved.

Importantly, the majority said that the scheme of the Fair Work Act was that (non-greenfields) enterprise agreements are made in relation to existing enterprises and with existing employees working at them.

Will a deficiency in the NERR always invalidate the making of an enterprise agreement?

Each of the members of the Full Court considered that compliance with the NERR requirements was something with which the FWC must be satisfied when considering an application to approve an enterprise agreement. However, whether a deficient NERR would invalidate the making of the agreement was not ultimately decided by the Court.

Each of the judges separately made comments about whether strict compliance with the form of the NERR was required. Justice Katzmann considered that strict compliance with the NERR form was required, and she was not prepared to accept that there could be any change to the words of the form.  Justice White considered that the argument that strict compliance with the form had some force, but he preferred not to express a concluded view.  Justice Jessup, in the alternative, was prepared to accept that changing the phrase "speak to … your employer" to read "speak to your … leader", as occurred in this case, would not amount to a departure in the form.

What is the approach of the FWC to deficiency in the NERR?

The Fair Work Commission has taken a strict approach concerning deficiencies in an NERR. If there is a deficiency in the form, or the time when it is provided to employees, this may be a basis for employees or unions to challenge the validity of the enterprise agreement that has been made, and to object to its approval by the FWC.

Employers that are bargaining for an enterprise agreement should ensure that the NERR is issued in the correct format and within the 14 days of the notification time under the Fair Work Act (see our recent Employment Alert on the decision in Uniline Australia Limited [2016] FWCFB 4969).

Authors: Vince Rogers, Partner; Geoffrey Giudice, Consultant; Trent Sebbens, Counsel; Ed Carroll, Lawyer