Employer fails to stop approval of agreement that its own manager negotiated without actual authority

15 April 2013

A recent decision of the Full Bench of the Fair Work Commission (FWC) highlights that an employer will not be able to stop the approval of an enterprise agreement where it has been negotiated and signed by a manager with apparent or ostensible authority to do so, even if that manager has no actual authority to do so.

The case of Kaizen Hospitals (Malvern) Pty Ltd T/A Malvern Private Hospital; Kaizen Hospitals (Mountain District) Pty Ltd T/A Melbourne Eastern Private Hospital; Kaizen Hospitals (Essendon) Pty Ltd T/A Essendon Private Hospital [2013] FWCFB 1846 (the Kaizen Hospitals case) involved the decision of Deputy President Hamilton to approve three enterprise agreements covering nursing employees at three private hospitals in Melbourne (the Kaizen Hospitals).

The agreements were with the ANF, and eligible employees voted and approved the agreements in July 2012.

Each of the Kaizen Hospitals had nominated the Service Industry Advisory Group Pty Ltd (SIAG) to negotiate the agreements with the ANF, but did not appoint SIAG as a bargaining representative in accordance with section 176(1)(d). Mr Subramanian, who was employed directly by the Kaizen Hospitals as a Corporate Manager also participated in the negotiations on behalf of the employers.

The original enterprise agreement applications were made by SIAG and were accompanied by proposed agreements signed by SIAG. The agreements were not approved by the FWC following a Full Bench appeal from the Kaizen Hospitals because the applications were filed and signed by a bargaining representative who was not duly appointed (namely SIAG).

In October 2012 the ANF again applied for approval of the three agreements, this time signed on behalf of the employer by Mr Subramanian under the title of "Corporate Manager". The Kaizen Hospitals again objected to the approval of the agreements. This time FWC Senior Deputy President Hamilton approved the agreements.

The Kaizen Hospitals appealed to the Full Bench, relying on several grounds, including some technical arguments that were quickly disposed of by the Full Bench. The main ground for the Kaizen Hospitals' objection to the approval of the agreements was that there was no agreement between the parties because Mr Subramanian had entered into the agreements without the authority of the employers.

Before the Full Bench, the Kaizen Hospitals submitted that:

  • holding one's self out as having authority is not enough to give rise to apparent authority, and
  • there must be circumstances justifying the ANF's belief that Mr Subramanian had the employers' authority.

 The ANF, on the other hand, submitted that:

  • the concerns raised by the Kaizen Hospitals only concerned their own internal management processes of the employers, and is not a matter of public interest
  • that the Kaizen Hospitals' argument that there were no properly made agreements because the CEO was not aware of the agreements is untenable when the agreements were negotiated and agreed to by officers, employees and/or agents of the employer
  • Mr Subramanian did not need the actual authority of the Kaizen Hospitals, rather he had implied actual authority or apparent authority, and
  • apparent authority arises where an appearance of authority is given and a third party relies on that apparent authority.

The Full Bench considered section 793 of the Fair Work Act (the Act), which provides that where conduct is engaged in on behalf of a body corporate by an officer, employee or agent of the body corporate, the conduct is taken to have been engaged in by the body corporate where the conduct is within the person's actual or apparent authority.

The Full Bench noted that the application of section 793 of the Act has been considered in a number of cases, including AWU v Leighton Contractors Pty Ltd [2013] FCAFC 4 . In that case, where a union official did not have the actual authority of the union to sign an agreement on behalf of the union, section 793 of the Act entitled the employers and the Fair Work Commission to regard the signing of agreements by the official as the execution of the agreements by the union.

The Full Bench relied on the reasoning of Justice Katzmann in the Leighton Contractors case, in relation to the preconditions to the operation of section 793 of the Act. These were:

  • the conduct must be engaged in on behalf of a body corporate
  • the conduct must be engaged in by an officer, employee or agent of the body corporate, and
  • the officer, employee or agent must have been acting within the scope of his or her apparent authority.

Ultimately, the Full Bench upheld Deputy President Hamilton's decision to approve the agreements, and the finding that Mr Subramanian acted with apparent authority of the Kaizen Hospitals. In particular, the Full Bench noted that: 

  • Mr Subramanian acted with SIAG to negotiate with the ANF and sign the agreements
  • Mr Subramanian acted with the appearance that he had the authority of the Kaizen Hospitals to do so, and
  • the appearance that he had authority to act on behalf of the Kaizen Hospitals was supported by his title of Corporate Manager, and that he was involved in the negotiations and interactions with the ANF on behalf of the Kaizen Hospitals.

Key lessons

There are some key lessons for unions flowing from this decision. These include:

  • where an employer engages a contractor to conduct negotiations on its behalf, ensure that the contractor has been appointed as a bargaining representative in accordance with section 176(1)(d) of the Fair Work Act to ensure that an employer does not later object to the approval of the agreement
  • where an employer objects to the approval of an agreement on the grounds that the person who agreed to and signed the agreement did not have the actual authority of the employer, it will be unlikely to succeed unless it can show that:
    • the person was not an employee, officer or agent of the employer, and/or
    • that enterprise agreement negotiation could not reasonably fall within the scope of the person's authority
    • unions should have robust internal processes to ensure that officials do not make enterprise agreements with employers that the Union does not actually authorise, as any objection to the approval of an agreement on this basis is likely to be unsuccessful. 

 

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