Commission Dispute Settlement: Federal Court Challenges Not Available?
Wait A Minute Blog Series
Commission Dispute Settlement: Federal Court Challenges Not Available?
Wait a minute: Are you saying that no matter how far wrong the Commission goes in giving an arbitrated decision under enterprise agreement dispute settlement provisions, the Commission’s decision can’t be challenged anywhere? Is that really right?
Answer: Well, the recent decision of a Full Court of the Federal Court in Endeavour Energy, applying an earlier Full Court decision, establishes that, perhaps with one important proviso.
Also, one other thing about both Full Court decisions can be mentioned: Both decisions are largely based on the view that a proposition stated by the High Court in 2001 in its economically worded decision in the Private Arbitration Case about the nature of dispute settlement powers exercised by the Commission in relation to certified agreements made under the Industrial Relations Act 1988(Cth) and about the legal nature of such agreements, applies to enterprise agreements made under the FW Act. There may be a question as to whether all matters relevant to assessing the authority and effect of the High Court’s decision in the Private Arbitration Case have been fully addressed in the Full Court decisions. (These are dealt with under the heading ‘Further Observations’ at the end of this article.)
All this takes a bit of explaining. So much so it is necessary to even put some quite important legal background aspects into endnotes!
In any event, here is our effort:
Endeavour Energy decision:
The decision of the Full Court Federal Court given on 10 June 2016 in Endeavour Energy v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia [2016] FCAFC 82 (Endeavour Energy decision) is the recent decision that establishes that ‘unchallengeable’ aspect of decisions given by the Commission in its enterprise agreement dispute settlement jurisdiction.
It picks up and decisively drives home a conclusion that was expressed in an earlier Full Court Federal Court decision in Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v ALS Industrial Australia Pty Ltd (ALS decision) about the nature of the powers exercised by the Commission when it arbitrates a dispute pursuant to a dispute settlement provision in an enterprise agreement.
Basic legal proposition in Endeavour Energy Decision:
The core proposition established or, more accurately, affirmed in the Endeavour Energy decision is probably best explained by breaking it down into the following elements:
The powers that the Commission exercises when it arbitrates on a dispute which has been referred to it under a dispute settlement provision in an enterprise agreement are ‘private arbitration’ powers which have their legal source and foundation in the agreement of the persons covered by the enterprise agreement to the terms of the dispute settlement provision of the enterprise agreement. The powers are not statutory powers like, for instance, the power that the Commission exercises when determining whether to make an order stopping industrial action under s.418 of the FW Act or approving an enterprise agreement under s.186 of the FW Act.
The avenue by which decisions of the Commission can be challenged is by way of application to the Federal Court. That avenue is limited to challenges made on the basis that the Commission in making the decision has exceeded its jurisdiction, that is, made a particular kind of legal error called a ‘jurisdictional error’ in the exercise of statutory powers conferred on it. (Note: The challenge made by application to the Federal Court is not an ‘appeal’ (as that expression is ordinarily understood) against the Commission’s decision. There is no avenue of appeal as such to the Federal Court from a decision of the Commission. Rather, as mentioned, the Federal Court can only entertain challenges to decisions of the Commission on the basis that the decision made suffers from ‘jurisdictional error’ ; hand in hand with that, the remedies that the law recognises are available are remedies to ‘correct’ jurisdictional errors to keep the Commission within its jurisdiction when dealing with such matters. Those types of remedies are remedies sometimes referred to as public law remedies which is an expression used in the Endeavour Energy decision.
The Federal Court does not have power conferred on it to entertain appeals from decisions of the Commission and, necessarily, nor does it have jurisdiction to review such decisions for jurisdictional error, or the power to grant public law remedies in relation to such decisions. (As already mentioned above, those remedies are available only for decisions made in excess of jurisdiction-an error made in giving a decision made pursuant to decision making powers conferred on a body by agreement of the parties cannot be described as a ‘jurisdictional’ error.)
Accordingly, the Federal Court does not have jurisdiction to entertain challenges to decisions made by the Commission in an arbitration on a dispute which the Commission has dealt with pursuant to dispute settlement terms in an enterprise agreement.
But what does all this mean for industrial practitioners when managing enterprise agreement dispute settlement proceedings in the Commission?
Perhaps the best way to illustrate and appreciate the main implication is to first see what happened in the Endeavour Energy matter from the time it went to the Commission until the Full Court gave its decision, and then add some commentary and further observations.
This is how the Endeavour Energy decision came to be given:
The Commission at single member level came to deal with a dispute notified under a dispute settlement term in the applicable enterprise agreement (i.e. on an application made under s.739(6) of the FW Act).
Clause 29 of the applicable enterprise agreement provided a procedure for the resolution of “all disputes arising out of the employer-employee relationship” and if a dispute of that kind was not resolved through prescribed escalating steps at the enterprise level, provided that the dispute could be ‘referred to the Fair Work Commission for conciliation and/or arbitration with the rights of the parties to appeal being reserved.’
What was basically in dispute was whether electricians in certain categories who held a particular trade certificate were entitled to payment an allowance under a provision in the applicable enterprise agreement which prescribed the allowance and when it was payable.
The dispute therefore was one about the construction of the allowance provision and its application to the facts.
A single member of the Commission, after failed conciliation, arbitrated the dispute and gave a decision favourable to Endeavour Energy.
The CEPU appealed the decision to a Full Bench of the Commission. The Commission Full Bench granted permission to appeal. It heard the appeal and overturned the decision of the single member.
In upholding the appeal and giving its construction of the allowance provision in the enterprise agreement, the Commission Full Bench determined that the decision of the single member should be quashed and the dispute re-decided in accordance with the construction it gave to the allowance provision, but that in the circumstances that should be done by another member of the relevant panel.
Endeavour Energy was unhappy with the Commission Full Bench decision and it made application to the Federal Court challenging it.
It sought the remedies of:
certiorari (which as earlier explained in a footnote is basically an order which quashes the decision of a tribunal on the basis that the decision involved jurisdictional error); and
mandamus, which is an order requiring the tribunal to re-decide the appeal in a way which accords with the explanation of the law in the Federal Court’s decision.
The particular jurisdictional errors that Endeavour Energy claimed that the Commission Full Bench had made were that:
it had asked itself the wrong question by misunderstanding the construction that the single member had placed on the relevant EA provision;
it had taken into account an irrelevant factor in construing the EA, being the conduct of the parties subsequent to the making of the 2012 EA;
it had failed to take into account a relevant consideration namely that legislation regulated the occasions on which a person performing electrical wiring needed to have a licence and inconsistently with the legislative scheme placed a temporal qualification on when the licence was required.
Before the application came on for full hearing, the CEPU applied to have the proceeding summarily dismissed on the basis that the Court did not have jurisdiction/power to review the Full Bench decision and grant public law remedies in relation to it.
The CEPU’s argument placed reliance on the earlier 2015 Full Court Federal Court ALS decision. In the ALS decision, the Full Court had reviewed the decision of the High Court in Construction, Forestry, Mining and Energy Union v Australian Industrial Relations Commission (2001) 203 CLR 645 (Private Arbitration Case) and concluded that:
‘The effect of the High Court’s decision [in that case] and in TCL Air Conditioner (Zhongshan) Company Ltd v Judges of the Federal Court of Australia (2013) 251 CLR 533 was that an arbitrator’s power to resolve a dispute arises out of the agreement to arbitrate. It follows that to the extent that FWC exercises power derived from such an agreement, it is not exercising government powers and so is not susceptible to the issue of the constitutional writs.’
The CEPU contended that the original decision made in the Endeavour Energy proceedings was of a single member of the Commission, that it was made in private arbitration and pursuant to private arbitration powers, and therefore the decision of the Commission Full Bench on appeal could not be subject to an application for public law remedies as per the ALS decision.
In essence, the Federal Court Full Court accepted the CEPU’s argument and dismissed Endeavour Energy’s application without consideration of Endeavour Energy’s contention that the Commission Full Bench had made any of the ‘jurisdictional’ errors alleged.
The Full Court reasoned that the situation presented to it was in all relevant respects ‘on all fours’ with that presented to the Full Court in the ALS matter. The Full Court said that the ALS decision was Full Court authority for the proposition that the constitutional writs sought by Endeavour Energy in the case before it were not available and noted that in accordance with principle and practice the ALS decision should be applied unless the Full Court was persuaded it was clearly wrong.
The Full Court rejected Endeavour Energy’s argument that s.739(4) of the FW Act which provides that a Commission enterprise agreement dispute settlement decision must not be inconsistent with, relevantly the FW Act or the enterprise agreement concerned, had the legal effect that a decision made in an arbitration conducted under an enterprise agreement dispute settlement provision was a decision made pursuant to statutory powers and was therefore amenable to public law remedies. The Full Court surveyed the legislative history of provisions in the FW Act and its predecessors with respect to the settlement by the Commission of disputes relating to matters regulated by agreements made under the legislation and found no reason to question the authority or correctness of the ALS decision.
Proviso in Endeavour Energy decision:
The Endeavour Energy decision might be construed as representing a proposition that in no case can a Federal Court challenge be made to a decision of a Commission Full Bench where that Commission Full Bench decision relates to a decision made in the exercise of dispute settlement powers granted to the Commission by the terms of a dispute settlement provision in an enterprise agreement.
However, in our view that may not be a correct view. Accepting, as one must, that the Endeavour Energy decision states the current law, there is nevertheless a proviso found within the decision itself.
In that part of its judgment dealing with Endeavour Energy’s argument that s.739(4) of the FW Act converted the function that the Commission performed into a function involving the exercise of statutory power/jurisdiction the Full Court said this at [30]- [34]:
‘30. Critical to the significance of subs (3) and (4) of s 739 is the circumstance that, under the FW Act, the Commission has no general power of arbitration. By s 595(1), the Commission may deal with a dispute only if it is expressly authorised to do so under or in accordance with another provision of the FW Act. Then s 595(2) does provide such an express authorisation in relation to disputes, but arbitration is excluded. To put the matter completely beyond doubt, s 595(3) provides that the Commission may deal with a dispute by arbitration only if it is expressly authorised to do so under or in accordance with another provision of the FW Act.
31. Section 739(4) is such a provision. But it is limited in two ways. First, the parties must, by the relevant term in the agreement, have agreed that the Commission may arbitrate. And secondly, by subs (5), in the arbitration the Commission must not make a decision that is inconsistent with the FW Act or a fair work instrument that applies to the parties.
32. In the light of this understanding of the relevant provisions of the FW Act in the context of the history of broadly corresponding provisions since 1992, does the introduction of s 739(5) into the analysis warrant the conclusion that the Full Court in ALS was plainly wrong in its characterisation of the Commission’s relevant role as that of private arbitration?
33. We would hold not. Section 739(5) does not alter the character of the arbitration which the Commission undertakes under an enterprise agreement in the terms of the Agreement. It merely places a limit on the range of arbitrated (but not conciliated, it may be noted) outcomes available to the Commission in those cases in which the parties have agreed that the Commission may arbitrate (using, in this respect, the same formula as appears as subs (4) of s 740, on any view a private arbitration provision). In our view, the more likely explanation of the absence of any reference to s 739(5) in the reasoning of the Full Court in ALS is that their Honours considered it to make no more than an inconsequential contribution to the disposition of the issue on which they ruled. With respect, we would agree with that assessment of the situation.
34. There may be a question as to how a party to an arbitrated outcome in a dispute-setting process of the kind contemplated in s 739 of the FW Act might go about alleging that the Commission had overstepped the limitations for which subs (5) provides. In the present case, the applicant does allege that the Full Bench decision was inconsistent with a fair work instrument, namely, the Agreement. But the inconsistency is said to reside wholly in the circumstance that the decision was wrong; that is to say, the Full Bench reached the wrong conclusion on the very matter which was given to it for arbitration. Whatever else s 739(5) means, it does not, in our view, produce an outcome of the kind sought by the applicant. Otherwise, we had the benefit of no more than the most tangential of references to the matter in the submissions made in the present case.’
Both the underlined passages, and also perhaps the overall logic of the analysis in those passages, suggests that an argument might be able to be constructed that a dispute settlement decision is amenable to a challenge in the Federal Court where the basis of that challenge is properly framed and capable of being properly argued in terms that the decision is inconsistent with the FW Act or the enterprise agreement concerned.
Further Observations:
The Endeavour Energy decision establishes and affirms the law on the subject of challenging Commission Full Bench decisions given in relation to decisions of the Commission exercising dispute settlement powers granted by an enterprise agreement dispute settlement term.
The Full Court’s decision governs the matter unless another Full Court decides otherwise or the issue somehow reaches the High Court and the High Court decides otherwise.
Q: Is there any real argument that either of these events could happen?
A: We think that while it may be unlikely, it might not be completely out of the question.
This is why:
We think there are some questions that can be raised about the soundness of the reasoning in the ALS Decision and the Endeavour Energy decision, in particular in the view taken that the decision of the High Court in the Private Arbitration case required the conclusion that the powers exercised by the Commission under enterprise agreement dispute settlement terms were sourced in, and only in, the private agreement of the persons covered by the enterprise agreement concerned.
The arguments behind our view relate mainly to the authoritative force of the High Court’s decision in the Private Arbitration Case as applied to enterprise agreements made under the FW Act, and also to a reflection made by the High Court in a more recent decision on the critically relevant passage in the Private Arbitration case decision.
The basic arguments run as follows:
As already noted, the High Court’s decision in the Private Arbitration case was concerned with certified agreements made under the Industrial Relations Act 1988(Cth).
The lynch-pin in the High Court’s economical reasoning on the relevant point is carried in the following two passages in its decision and in the connection between them:
First, in contrasting the function/powers that the Commission then exercised in settling interstate industrial disputes by arbitration and that it exercised under dispute settlement provisions in a certified agreement, the High Court stated at [30]- [32]:
‘[30] There is, however, a significant difference between agreed and arbitrated dispute settlement procedures. As already indicated, the Commission cannot, by arbitrated award, require the parties to submit to binding procedures for the determination of legal rights and liabilities under an award because Ch III of the Constitution commits power to make determinations of that kind exclusively to the courts. However, different considerations apply if the parties have agreed to submit disputes as to their legal rights and liabilities for resolution by a particular person or body and to accept the decision of that person as binding on them.
[31] Where parties agree to submit their differences for decision by a third party, the decision maker does not exercise judicial power, but a power of private arbitration. Of its nature, judicial power is a power that is exercised independently of the consent of the person against whom the proceedings are brought and results in a judgment or order that is binding of its own force. In the case of private arbitration, however, the arbitrator’s powers depend on the agreement of the parties, usually embodied in a contract, and the arbitrator’s award is not binding of its own force. Rather, its effect, if any, depends on the law which operates with respect to it.
[32] To the extent that s 170MH of the lR Act operates in conjunction with an agreed dispute resolution procedure to authorise the Commission to make decisions as to the legal rights and liabilities of the parties to the Agreement, it merely authorises the Commission to exercise a power of private arbitration. And procedures for the resolution of disputes over the application of an agreement made by parties to an industrial situation to prevent that situation from developing into an industrial dispute are clearly procedures for maintaining that agreement. Parliament may legislate to authorise the Commission to participate in procedures of that kind. Accordingly, s 170MH of the IR Act is valid.’
Second, the High Court stated at [34] that:
‘[34] The parties to an industrial situation are free to agree between themselves as to the terms on which they will conduct their affairs. Their agreement has effect according to the general law. If their agreement is certified, it also has effect as an award. To the extent that an agreement provides in a manner that exceeds what is permitted either by the Constitution or by the legislation which gives the agreement effect as an award, it cannot operate with that effect. But the underlying agreement remains and the validity of that agreement depends on the general law, not the legislative provisions which give it effect as an award.’ (shading and underlining added)
The first notable point about those passages is that while they are perhaps not categorical that every certified agreement constituted also a contract, they do carry the proposition that the certified agreement in the case before the High Court did have that character.
Before the High Court gave its decision in the Private Arbitration case we think it fair to say that the proposition that a certified agreement had or could have an operation under the general law was not established. On the contrary, we think the then existing law pointed in the opposite direction. We think it is fair to say that at the time, the established legal position in relation to non-registered industrial agreements between a union and an employer was that, as a rule, such agreements could not satisfy the legal elements necessary to render them contracts. Moreover, in the High Court’s decision in Australian Agricultural Co v Federated Engine-Drivers and Firemen’s Association of Australasia (1913) 17 CLR 261 (to which no reference is made in the decision in the Private Arbitration case), the view had been expressed that an industrial agreement made and formulated between a union and employer with the intention that it was to operate as an industrial agreement made pursuant to and enforceable under the then operating Commonwealth industrial relations legislation was not simultaneously to be regarded as a general law contract.
The decision in the Private Arbitration case makes no reference to those matters and contain an explanation as to why an agreement made under the statutory regime in the Industrial Relations Act 1988(Cth) was also be treated as having the character of contract under the general law. The decision does not address the question of how a certified agreement satisfied the criteria of a legal contract, including the question of privity i.e. what persons were contractually bound by it and according to what course of legal reasoning.
Of course that point (so far as it is a good one at all) would not be enough in itself to re-open the issue decided in the ALS Decision and the Endeavour Energy Decision. It is only a critique made of one aspect of a long-standing High Court decision.
Hence, even if a Full Court of a Federal Court saw something of significance in the point, without more, it is difficult to see how as a matter of principle it could justify not applying the decision in the decision in the Private Arbitration case, just as has happened in the ALS decision and the Endeavour Energy decision.
But we think there might be more that can added to the argument.
A Full Court of the Federal Court in a judgment of the Court in Toyota Motor Corporation Australia Limited v Marmara [2014] FCAFC 84 (Marmara decision) at [88]- [90] said this:
88. Under the FW Act, an enterprise agreement is an agreement in name only. Those who, by s 172(2), are empowered to “make” an enterprise agreement are the employer and “the employees who are employed at the time the agreement is made and who will be covered by the agreement”. A contract lawyer would assume that those persons would be parties to the agreement, and that the assent of all of them would be necessary for the agreement to be “made”. But the lawyer would be wrong on both counts. The FW Act does not identify the employer, or any employee, as a “party” to an enterprise agreement. Further, notwithstanding the specific empowering terms of s 172, it is not necessary for all the employees who are employed at the time an agreement is made and who will be covered by the agreement to assent to the terms of the agreement. Once a majority of those employees have agreed by voting, the agreement must be sent to the Commission for approval and, if approved, thenceforth applies to all the employees in the relevant group, even those who did not agree, and even those, subsequently taken into employment, who were not part of the relevant group at the time the vote was taken under s 182.
89. In his reasons, the primary Judge said that “Toyota contended and it was not disputed, that an enterprise agreement made under the FW Act is a form of delegated legislation”. It appears that that contention was made in the context of Toyota’s submission based on s 46 of the AI Act to which we have referred. However, although the FW Act provides that an enterprise agreement is “made” otherwise than by the Commission, the Act does more than merely impose conditions upon, and give additional legal effect to, an agreement made between private parties. The effect of the legislation is to empower the employer and the relevant majority of its employees to specify terms which will apply to the employment of all employees in the area of work concerned. The legal efficacy of those terms will arise under statute, not contract, and, as mentioned above, will be felt also by those who did not agree to them. Someone, such as an employee subsequently taken on, who had nothing to do with the choice of the terms or the making of the agreement, will be exposed to penal consequences under s 50 if he or she should happen to contravene one of the terms. When viewed in this way, it is not difficult to share in the perception that an enterprise agreement approved under the FW Act has a legislative character.
90.An enterprise agreement is a statutory artefact made by persons specifically empowered in that regard, and under conditions specifically set down, by the FW Act. It is enforceable under that Act, and not otherwise. There is, in the circumstances, no reason to approach the question of legislative intent with a predisposition informed by notions of freedom of contract.‘(underlining added)
The Marmara decision is not referred to in either the ALS decision or the Endeavour Energy decision although it pre-dates both.
In these circumstances, it seems to us that there is a good argument that in determining the binding quality of the decision in the Private Arbitration case, the Full Court in both the ALS and Endeavour Energy cases did need to explicitly consider the effect of the Marmara decision and, as far as possible, reconcile it to an application of what each Full Court discerned to be relevant and binding principle stated by the High Court in the Private Arbitration case.
Although other minds may see it differently, it also seems to us that the reconciliation would not be all that easy. And if it cannot be achieved, we would ask rhetorically ‘how can it be said that the source of the Commission’s power to arbitrate lies only in the private agreement of the parties embodied in the enterprise agreement terms if Marmara still stands; and following on, why is a decision of the Commission given pursuant to dispute settlement powers immune from correction through public law remedies if, as Marmara holds, the legal efficacy of enterprise agreement terms arise under statute, not contract?’.
There is another point: In the ALS decision the Full Court said that the decision of the High Court in TCL Air Conditioner (Zhongshan) Co Ltd v The Judges of the Federal Court of Australia [2013] HCA 5 (TCL decision) supports the proposition that ‘an arbitrator’s power to resolve a dispute arises out of the agreement to arbitrate’ going on to say that ‘It follows that to the extent that FWC exercises power derived from such an agreement, it is not exercising government powers and so is not susceptible to the issue of the constitutional writs.’
Clearly, the TCL decision does support the proposition that an arbitrator’s power to resolve a dispute arises out of the agreement to arbitrate and the corollary that ‘to the extent that FWC exercises power derived from such an agreement, it is not exercising government powers and so is not susceptible to the issue of the constitutional writs’; but it is the ‘to the extent’ phrase that is critical, and in that respect the TCL decision does not, in our view, provide support for the proposition that in conducting an arbitration under an enterprise agreement dispute settlement procedure term, the Commission is only exercising power derived from a private agreement, as distinct from statutory powers, and is therefore not amenable to public law remedies.
We would suggest that the TCL decision actually lends distinct support to the opposite conclusion by adding a type of elaboration to the critical passage in the High Court decision in the Private Arbitration case.
The relevant passage in the TCL decision at [29] (which is reproduced in the ALS decision to make, we think, a slightly different point) reads as follows:
‘The context of [the passage in paragraph [31]] in the decision in the Private Arbitration case] puts its reference to “private arbitration” in appropriate perspective. The context was that of a challenge to the capacity of a statutory body consistently with Ch III of the Constitution to exercise a statutory function to settle a dispute where so empowered by an agreement entered into as a result of statutory processes. The reference to “private arbitration” was not to a private function, as distinct from a public function, but rather to a function the existence and scope of which is founded on agreement as distinct from coercion.’ (underlining added)
It seems to us that this recent High Court reflection on the meaning of the critically relevant passage in the Private Arbitration case decision can be forcefully argued to mean that, while the existence and scope of function performed by the Commission in enterprise agreement dispute settlement is founded on agreement of those covered, that agreement is a ‘statutory agreement’, and therefore, ultimately the power to arbitrate is an instance of the exercise by the Commission of a statutory (and public) function.
That would seem to us to be a solid starting point for saying that the decision of the High Court in the Private Arbitration case, in view of the TCL decision, has not been properly construed in either Federal Court Full Court decision; that a decision given by the Commission under an enterprise agreement dispute settlement term does involve the exercise of statutory power (the anchor point in the FW Act being s.595(1)) and that a decision given in the exercise of that power can in an appropriate case be subject to the grant by the Federal Court of public law remedies.
So our concluding observation is that perhaps these (admittedly not fully developed) arguments afford a ground upon which the issue decided by the two Full Court decisions could be re-opened in the Federal Court itself, although that might require the unusual step of constituting a five-member Full Court to do so.
Certainly for workplace relations practitioners, both those who are lawyers and those who are not, the issue might be thought to be of sufficient importance to warrant that.
This is especially so since the published decisions given by the Commission in arbitration under its dispute settlement function, particularly those at Full Bench level, as a matter of fact, quite often involve the expression of opinions on matters central to the operation and application of the FW Act; are treated as having general ‘authority’ and for that reason have implications and effects that ripple out across the whole industrial relations landscape regulated by the FW Act, well beyond that part of the landscape occupied by the parties who are covered by the particular enterprise agreement under which the arbitration takes place.
Author: Bryan Mueller
Director, Workplace Litigation
Date: 2016
Upcoming Dispute Settlement Seminar
Bartlett Workplace is conducting a seminar entitled ‘Enterprise agreement disputes: Handling them when they go to the Commission’ on Tuesday 13 September 2016 at 4pm.The seminar will be presented primarily by Bryan Mueller, Director of Workplace Litigation at Bartlett Workplace. Details of the seminar including registration to attend can be found on our website.