In a recent decision regarding enterprise agreements, the Fair Work Commission (the “FWC”) has confirmed that it does not have the power to correct an “obvious error” in already-approved agreements.

In this case, the employer made an obvious error when drafting the agreement by omitting the word “casual” in a clause when describing those employees that would be entitled to receive higher weekend penalty rates. The consequence of this mistake was to extend the benefit of the higher weekend penalty payment to all employees, while the employer only wanted this provision to apply to casual employees.

Section 602 of the Fair Work Act 2009 (Cth) (the “FW Act”)

The employer made the application pursuant to s602 of the FW Act which states that “the FWC may correct or amend any obvious error, defect or irregularity in relation to a decision of the FWC. If the FWC makes a decision to make an instrument, the FWC may correct the instrument under this subsection”.

According to this section, two elements are necessary in order for the FWC to exercise its discretion to correct an obvious error in an enterprise agreement:

• a decision is required; and
• an instrument must have been made by that decision.

Instrument made by the FWC

The Deputy President stated that “there is a distinction to be drawn between instruments made by the Commission and instruments given effect by the Commission”. The terms of an enterprise agreement are not determined by the Commission, but by the parties when a valid majority of employees vote to approve it. Therefore, the FWC has no power to correct an obvious error in an enterprise agreement pursuant to s602 of the FW Act.

Variation of an enterprise agreement

In the present case, the employer would have had to apply for a variation by agreement to correct this obvious error. The process is similar to the process for making an agreement. The employer would need to request that those affected employees approve the variation by way of a vote, which might be difficult if employees are not willing to agree to the variation.

Takeaways

• Organisations should ensure when drafting or renovating an enterprise agreement that clauses are clear and unambiguous.
• Getting it right the first time will save organisations time and money.
• Seeking legal assistance, even if it is only to review the final draft of an agreement, is highly advised.

Read the full decision here.

People + Culture Strategies