Enterprise Agreements – the danger of unclear and ambiguous clauses

Recently the Fair Work Commission (FWC) found employer, Kentz Pty Ltd, was applying its enterprise agreement incorrectly due to an ambiguous term.

The main issue in Kentz Pty Ltd v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU) was terms within the enterprise agreement provided for a number of different interpretations.

The FWC Full Bench noted the problem of poor drafting was an issue it faced frequently, and in this instance could have arisen because the parties did not draft the clause, rather it was a ‘pattern agreement’ which had widespread application to a number of employers.

Following evidence from the employer’s former IR/ER manager and CEPU’s acting secretary, it was determined the employer’s interpretation was not consistent with the intention of the parties at the time of bargaining.

The employer sought to argue it was entitled to take out income protection insurance with a provider of its choice. However, the CEPU argued only the providers listed in the enterprise agreement were available, unless agreed otherwise by both parties.

Ambiguities arose because a number of key definitions were missing, including:

  • the types of policies required to be taken out and with whom; and
  • the process and body for approval or reaching agreement.

The FWC confirmed the dispute was not able to be resolved by reading the ordinary meaning of the words. It held the clause required the employer to take out income protection insurance using an insurance product referred to in the clause, unless an agreement was reached between parties to the enterprise agreement.

In delivering the judgment, the FWC set out the following lessons for employers:

  • sufficient time and resources should be dedicated to ensuring the terms of the enterprise agreement reflect the agreed position, even when the enterprise agreement is a ‘pattern agreement’;
  • employers should ensure agreement and compliance with any clauses included in the enterprise agreement; and
  • employers should ensure accurate documentation and records are kept during the negotiation for use in the event of dispute.

If you would like us to evaluate your enterprise agreements or assist in with the enterprise agreement making process, please contact us.

This article was written by Rebekah French, Senior Associate,  Kelly Ralph, Lawyer, and  Ayshe Sevden, Graduate Lawyer.