Rushed undertaking creates headache

It’s commonplace for employers to give undertakings when applying for approval of enterprise agreements. And one employer’s eagerness to get a matter sorted has required a thorny follow-up case to rectify an undertaking that went well beyond what was needed.

The problem arose because the reference award provided penalty rates on certain rosters for part timers and casuals; these weren’t in the EA. The undertaking referred to “employees in the work areas” and did not restrict the benefit to part-timers and casuals to accommodate FWC concerns.

The undertaking was OK’ed by the unions, accepted by FWC and the EA approved. Almost immediately the employer realised the error and its implications; it sought to utilise a section of the Fair Work Act available to correct errors, but FWC declined to entertain that approach.

So the employer applied to amend the EA on the basis of an ambiguity or uncertainty. This was not a straightforward matter. The unions opposed the application, arguing the words and meaning weren’t ambiguous; and that the claim was for correcting an error, and therefore wrongly before the FWC. This was despite the fact that that door had been closed by the FWC itself.

The employer explained the unintended consequences of the drafting of the undertaking brought significant windfall benefits to full-time employees. Their unions had not claimed these benefits during bargaining. Further, the original concern was only about part-timers and casuals, so the broader remit was never on the agenda.

The FWC rejected the unions’ arguments, making the point an undertaking is not the result of negotiations, but a concession made by an employer in the approval process. As such, in determining if an ambiguity existed and, if so, should the FWC intervene, the intentions of the parties in bargaining were not determinative; what mattered was the mischief sought to be cured by way of undertaking when the approval assessment was made.

If the undertaking were directed at that and, in the rush to prepare and submit it, it went beyond what was needed to cure the problem, then there was scope for repair. The unchallenged evidence of the employer was that the undertaking was “intended to limit the application of the Undertaking to the employees the subject of the Commission’s concern”. The FWC accepted this and made the variation to the EA as the employer had requested.

The lesson here is employers asked to give undertakings should not rush, nor be rushed. Often the FWC asks for responses within short time frames. However, most EA applications come up for assessment weeks after a vote is taken – a few more days won’t hurt. The understandable keenness to wrap up a matter should not outweigh due diligence. The FWC will grant extensions readily to permit parties to get it right and employers shouldn’t hesitate to avail themselves of this courtesy.

City of Stirling [2022] FWCA 3438 (6 October 2022)

 

By Ross Clarke and Shane Coyne