Agreements Must be Authorised

Kaizen Hospitals (Essendon) Pty Ltd v Australian Nursing and Midwifery Federation [2014] FCA 428 (2 May 2014)

In a long running case, the federal court has cancelled three enterprise agreements because the person who signed them on behalf of the company was not a duly authorised representative – and Fair Work was therefore wrong to approve the agreements he had signed.

The trouble started back in August 2012 when FWC initially approved three EAs on the basis that the company’s representative (a HR services provider) was duly authorised to negotiate the EAs and the group corporate manager was also duly authorised to sign off on them. However none of this was in fact true. Firstly, the representative was not a bargaining agent duly appointed according to law, so had limited standing and secondly, the corporate manager did not have the authority to agree to some of the items in the EAs themselves.

The chief executive and the board of the company made their objections known to FWC but instead of refusing to approve the EAs, seized on the long standing principle of “apparent or ostensible authority” in deciding that the employees, their union and hence FWC were all entitled to assume the senior manager was duly authorised at the time the agreement was made.

However on review in the federal court, the judge said that by the time the approval application came before FWC, the company had well made it known that the agent had not been duly appointed, nor the manager duly authorised, to make the agreement on behalf of the company.

The federal court said the FWC should have stopped the process at that point. The court said FWC was not bound to act on the basis of what happened at the time the agreement was made, but rather to act on the facts and evidence before the commission when the matter came to it for approval. The legal process did not stop at the time the agreement was made, because the application for approval is made after that and the granting of its approval is also made after that.

This has been a complex and long running matter which has shown the importance of making sure those involved in the development, negotiation and approval of enterprise agreements on behalf of companies are properly authorised. This is why in many cases CEOs are encouraged to participate in these agreements so that what happened here cannot occur. The unravelling of agreements after they’ve been in place is a negative experience for the workplace.