May 2010

AIER was granted standing to present its submission regarding the requirements of the Fair Work Act 2009 pertaining to dispute resolution procedures in collective agreements in the matter Woolworths Ltd t/as Produce and Recycling Distribution Centres [2010].  AIER argued that the Fair Work Act required that the mechanisms to settle disputes included a requirement that a matter that remained unresolved be finally determined by an independent party.


Woolworths Ltd had applied to the Fair Work Australia (FWA) for approval of a collective agreement made between it and the Shop Distributive and Allied Employees Association (SDA). The dispute resolution clause of the agreement provided that if a dispute about matters arising under the agreement or the NES arose, FWA could only arbitrate if it is permitted to do so by all parties concerned.

In the initial ruling, Commissioner Smith of the FWA tribunal refused to approve the agreement because it did not contain a compulsory arbitration procedure to settle disputes.  The tribunal held that access to arbitration is a prerequisite of a dispute settlement term under the Fair Work Act, that the Fair Work Act empowers the FWA to arbitrate disputes, that arbitration was an “essential ingredient” of the required dispute resolution clause, and finally that dispute resolution procedures should contain the capacity for an independent person to issue a decision binding on the parties.

Woolworths successfully appealed the decision after further examination of the Fair Work legislation by the Full Bench of FWA found that arbitration by a third party can only occur upon authorisation from all parties involved.  In addition the Full Bench also ruled that the reliance of the tribunal at first instance on the model dispute settlement term was misplaced, as rather than being a compulsory model to adopt, it instead exists to simply illustrate the types of procedures and powers that may be dealt with in a dispute settlement term agreed between parties to an enterprise agreement.

AIER Submission Summary

The AIER Submission argues that the Woolworths Enterprise Agreement does not meet the requirements of section 186 (6) of the Fair Work Act 2009 (Cth) (“the Act”), and that therefore the order of Commissioner Smith was correct.

Specifically, AIER posits that Section 186 (6) of the Act provides that under ‘Requirement for a term about settling disputes’ that the FWA must be satisfied that the agreement “provides a procedure that requires or allows FWA, or another person who is independent of the employers, employees or employee organisations covered by the agreement, to settle disputes”.

Secondly, Part 2-4 of the Act, which is concerned with establishing terms and conditions of employment for federal system employees by means of enterprise agreements, subjects such agreements to a regime that includes an approval process and that agreements proposed for approval must comply with specified requirements. Importantly, it rules that although parties are free to make an agreement that does not comply with the requirements in the Act, if the parties seek to gain the advantages of the approval of the agreement, then they must comply with the mandatory requirements.

To meet the requirements of subsection 186 (6) the term must “provide a procedure that requires or allows FWA (or another dispute settler) … to settle disputes”. The phrase “to settle” has been carefully chosen by the legislature, and is defined by the Shorter Oxford Dictionary as follows:  “decide, come to a fixed conclusion on (a question, a matter of doubt or discussion); to bring to an end (a dispute) by agreement or intervention; put beyond dispute, establish (a principle or fact).”  AIER argues that a key notion at the heart of settling a dispute is its finality and resolution, and that the alternative interpretation of the phrase “to settle” sought by Woolworths – “to deal with” – is untenable, as it lacks the essential elements of finality and resolution as outlined above.

The submission notes that Section 3 of the Act provides that “The object of this Act is to provide a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians…”. The resolution of disputes between industrial parties is in the public interest. The economy cannot afford long, protracted unresolved disputes, especially given their potential to spill over into the political and social sphere, creating division and disharmony. This destructive potential has been etched on the Australian workplace psyche for over a century. Disputes cause instability and loss and take their toll on the health and well-being of participants. Adopting the position advanced by Woolworths permits disputes to remain unresolved and has the potential to reek harm.

Finally, subsection 186(6) states there must be a dispute settler, either the FWA or an independent third party.  There may be conditions upon the exercise of the dispute settling functions by the FWA.  Those conditions may be imposed by the parties.  However the conditions cannot be formulated in a way so as to defeat the purpose of the necessary term.  As noted above, the purpose of the s186(6) term is to settle disputes.  The parties cannot formulate conditions to the exercise of the FWA functions that subvert that purpose.

Woolworths submission

Related News Articles

15 May, 2010: Why Effective Dispute Resolution Includes the Requirement for Third Party Determination