The Problem of Uncertainty: An Empirical Analysis of Indeterminate Language and Ambiguous Provisions in Enterprise Agreements

Publication Date01 March 2016
Date01 March 2016
AuthorCarolyn Sutherland
Carolyn Sutherland*
Australian enterprise agreements are intended to be simple documents that are easy for
workers to understand and straightforward for businesses to apply. This article argues
that si mplicity is undermined when agreements contain indeterminate language and
ambiguous provisions, since these features make it difficult to pin down the precise
meaning of agreements. It presents findings from an empirical study that examines two
forms of uncertainty in enterpr ise agreements: first, the use of vague, open-textured
terms such as ‘reasonable’ and ‘practicable’; and, second, t he inclusion of particular
types of poorly drafted provisions that are difficult to interpret. The findings show that
while the use of indeterminate terms increased over time, there was a substantial decline
in the use of particular types of ambiguous provisions. The study also suggests that these
outcomes have been influenced by two factors, legislative change and union
involvement in bargaining. The findings add to our understanding of the nature of legal
complexity and will provide the basis for a nuanced analysis of future proposals to
reform the legislative framework for agreement-making.
Enterprise agreement s are bargains made between employers and employees or
employers and unions to determine key workplace entitlements and obligations,
ranging from pay rates and leave entitlements to consultation and dispute resolution
processes. There are currently over 19 ,000 agreements in operation covering
approximately 2.3 million employees.
Successive Labor and Coalition governments
have consistently argued that enterprise agreements should set out workplace
* Associate Professor, Ethical Regulation Research Group, Monash Business School, Monash
University. My thanks go to Richard Mitchell, Anthony Forsyth, Chris Arup, Richard
Johnstone and Andrew Stewart for their close engagement with the ideas presented in this
paper and their insightful responses to earlier material that provided the foundation for this
paper. I am also grateful to the anonymous referees for their helpful insights.
Department of Employment, ‘Trends in Enterprise Bargaining September 2014’
(Commonwealth of Australia, 20 January 2015) 7.
112 Federal Law Review Volume 44
conditions in a form that is easy for workers to understand and straightforward for
businesses to apply.
However, this goal of simplicity, and the causes of complexity in
workplace rules, have rarely been articulated in any detail.
This article focuses on uncertainty in enterprise agreements as one of a number of
components that contribut e to the problem of complexity in workplace relations rules.
It forms part of a broader project that analyses four different categories of complexity in
enterprise agreements. In addition to uncertainty, these categories are: technicality (how
readable agreements are); density (how ‘wordy’ agreements are) and ‘layering’ (whether
agreements add to or reduce the number of regulatory ‘layers’).
The purpose of this
article, and the broader project, is to analyse the problem of complexity with some
measure of precision so that its disadvantages can be directly assessed in future research
and policy debates and ba lanced with competing objec tives. In doing so, it must be
acknowledged that simplicity is not a primary goal of the workplace relations system.
But it has an important role to play in support of the primary goals of the system:
flexibility (for business) and fairness (for workers). This role is often overlooked in policy
debates about the need for legislative reform.
In the literature about complexity in legal rules, Schuck argues that uncertainty is
problematic because the ‘precise meanings [of legal rules] cannot be easily grasped, nor
can their applications be readily predicted. Confusion and uncertainty follow.
See pt II below. See also Carolyn Sutherland, ‘Mapping Complexity in Australian Enterprise
Agreements: A Multi-Dimensional Approach’ (2013) 26 Australian Journal of Labour Law 50,
The only scholarship which addresses the complexity of Australian industrial instruments in
any depth is Mark Bray and Peter Waring, ‘“Complexity” and “Congruence” in Australian
Labour Regulation’ (2005) 47 Journal of Industrial Relations 1; and Joel Fetter and Richard
Mitchell, ‘The Legal Complexity of Workplace Regulation and its Impact Upon Functional
Flexibility in Australian Workplaces' (2004) 17 Australian Journal of Labour Law 276. For an
analysis of the complexity of Australian workplace relations regulation more broadly, see
Andrew Stewart, ‘A Simple Plan for Reform? The Problem of Complexity in Workplace
Regulation’ (2005) 31 Australian Bulletin of Labour 210.
For an overview of the larger study, see Sutherland, ‘Mapping Complexity in Australian
Enterprise Agreements’, above n 2; for an analysis of the findings in relation to technicality
and ‘layering’ (respectively), see Carolyn Sutherland, ‘The Elusive Quest for Simplicity:
Measuring and Assessing the Readability of Enterprise Agreements, 1993 to 2011’ (2013) 35
Sydney Law Review 349; and Carolyn Sutherland, ‘Enterprise Bargain ing as a Tool to Reduce
Regulatory Layering: A Content Analysis Study’ (2014) 42 Federal Law Review 559.
For a discussion of simplicity as a goal that has been used to justify legislative reforms to the
framework for enterprise bargaining in Australia, see below nn 2527 and accompanying
Peter H Schuck, ‘Legal Complexity: Some Causes, Consequences, and Cures’ (1992) 42 Duke
Law Journal 1, 22. For further analysis of the nature of legal uncertainty, see Werner Z Hirsch,
‘Reducing Law’s Uncertainty and Complexity’ (1974) 21 UCLA Law Review 1233; Anthony
D’Amato, ‘Legal Uncertainty’ (1983) 71 California Law Review 1; John Miller, ‘Indeterminacy,
Complexity, and Fairness: Justifying Rule Simplification in the Law of Taxation’ (1993) 68
Washington Law Review 1; Scott Dodson, ‘The Complexity of Jurisdictional Clarity’ (2011) 97
Virginia Law Review 1.
2016 The Problem of Uncertainty: An Empirical Analysis 113
uncertain or indeterminate rules are characterised as being ‘open-textured, flexible,
multi-factored, and fluid’.
As set out in pt II, one of the underpinning policy justifications for the introduc tion
of enterprise bargaining was to enable workplace relations rules to be expressed in a
form that is clear so that the rules are easy for employers and workers to understand
and apply. Such clarity supports the integrity of agreement-making outcomes, whereby
the commitments made by the bargaining parties are translated into provisions which
are legally effective. In contrast, uncertainty contributes to increased transaction costs
and reduced levels of compliance.
Employer uncertainty about the meaning of
agreement provisions can also act as a disincentive to bargaining.
Of course, the obverse of indeterminacy, precision, can also raise i ssues of
A rule that is too precise may be difficult to understand because it is
cumbersome or it may be difficult to apply because it f ails to provide for circumstances
that were not foreseen at the time the rule was form ulated.
While it is important for
both employers and workers that the rules in enterprise agreements are straightforward
to interpret, the use of this measure in the study sh ould not be taken to suggest that
indeterminate language will always crea te uncertainty about meaning. Rather, it is
argued that a significant i ncrease in the use of indeterminate language is likely to
contribute to problems in the application of agreements at the workplace level .
The adverse consequences of using indeterminate language are highlighted in a
recent case in the Federa l Court, National Tertiary Education Union v La Trobe University,
in which the union sough t to enforce a job security provision in a higher education
enterprise agreement.
The provision in question required the employer ‘wherever
possible’ to avoid redundancies and to use compulsory retrenchment only as a last
The employer and the union held opposing views about whether this meant
the employer was required to offer voluntary redundancies before dismissing 100
members of staff by way of compulsory redundancy. Justice Tracey found that the
Schuck, above n 6, 4.
Ibid 6.
For a discussion of the relationship between complexity and non-compliance, see Schuck,
above n 6, 234.
Angela Knox, ‘Better the Devil you Know? An Analysis of Employers’ Bargaining
Preferences in the Australian Hotel Industry’ (2009) 51 Journal of Industrial Relations 25, 40. In
a legislative context, Schuck identifies the reluctance to engage in legislative reform as a
‘governance cost’ associated with complexity: Schuck, above n 6, 201.
See, eg, Isaac Ehrlich and Richard Posner, ‘An Economic Analysis of Legal Rulemaking’
(1974) 3 Journal of Legal Studies 257; Louis Kaplow, ‘A Model of the Optimal Complexity of
Legal Rules’ (1995) 11 Journal of Law, Economics, and Organization 150; Colin Diver, ‘The
Optimal Precision of Administrative Rules’ (1983) 93 Yale Law Journal 65. The complexity or
‘complication’ arising from precisely defined rules is particularly evident in the context of
taxation laws: see Deborah Paul, ‘The Sources of Tax Complexity: How Much Simplicity can
Fundamental Tax Reform Achieve?’ (1997) 76 North Carolina Law Review 151.
See Diver, above n 11, 723.
[2014] FCA 1330 (11 December 2014).
Ibid [13].

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