Navigating Award Risks in Enterprise Agreements: Lessons from DP World

| October 29, 2024

Incorporating modern awards into enterprise agreements is a common practice that can offer benefits but also poses challenges.

The recent decision in Construction, Forestry, Maritime, Mining and Energy Union v DP World provides crucial guidance on managing conflicts between enterprise agreements and awards. This ruling has significant implications for employers, particularly those using “in conjunction with” clauses to integrate award provisions. 

Key Principles for Interpreting Agreements Incorporating Awards

Reading Agreements “In Conjunction With” Awards 

The DP World decision clarifies that when an agreement incorporates an award using “in conjunction with,” both documents must be read together unless a direct conflict exists. This means the terms of both the award and the agreement should be applied wherever possible, even if they differ. The Fair Work Commission (FWC) stressed that inconsistency should not be assumed solely because an award modifies or adds to the agreement’s terms. Unless a clear, irreconcilable conflict arises, the award provisions are meant to complement the enterprise agreement.

Understanding Direct vs. Indirect Inconsistency

A key takeaway from the DP World decision is the distinction between direct and indirect inconsistency: 

• Direct inconsistency occurs when two provisions cannot reasonably be applied together.
• Indirect inconsistency arises when an agreement “covers the field” entirely, leaving no room for the award’s provisions. 

Incorporation and Consultation Provisions 

The DP World case also addresses the challenge of overlapping consultation requirements in agreements and awards. The FWC clarified that consultation obligations may arise at different stages in the decision-making process. For instance, award obligations might be triggered when a change is proposed, while enterprise agreement obligations may only activate once a decision is finalised. This can lead to dual consultation processes, potentially complicating compliance for employers.

Mitigating Risks for Employers

To prevent complications when incorporating awards into enterprise agreements, employers should consider the following steps:

• Clear Drafting
  Clearly define how the agreement interacts with award provisions to avoid ambiguity and potential disputes.
• Regular Reviews
  Regularly review agreements to ensure ongoing compliance with legislative amendments and case law developments. 
• Seek Legal Advice
  Engage legal experts when drafting or negotiating agreements to avoid potential pitfalls and ensure compliance. 

Key Takeaway

Incorporating awards into enterprise agreements can streamline compliance, but only when done thoughtfully. Properly understanding how awards interact with agreements is crucial to avoid inconsistencies, disputes, and unintended consequences.

Need Help Navigating Award Incorporation?

The risks of incorporating awards into enterprise agreements can be significant if not managed carefully. Let our team at IRiQ Law support you in drafting clear, compliant agreements and provide guidance on effectively integrating award provisions.

Protect your business and ensure smooth, conflict-free agreements today. Contact IRiQ Law to learn more.