Is this the end of enterprise bargaining?
For 30 years, the industrial relations regulatory environment in Australia has entrusted employers and their employees to negotiate the most suitable terms and conditions to suit their collective circumstances.
The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022 fundamentally alters this dynamic and flips the emphasis of the system onto the setting of conditions, not at the level of individual enterprises, but at the level of the industry or sector.
Removing the ‘bargaining’ from enterprise bargaining
It is true that ‘enterprise bargaining’ (that is, bargaining at the level of the individual enterprise) will remain a part of the Fair Work Act. However, many of the changes made to the single employer bargaining stream will disincentivise employers from bargaining, rather than encourage them to bargain where they may have avoided doing so over the last few years. Those changes include:
- the Fair Work Commission (FWC) can amend an enterprise agreement you have agreed with your employees (if it is concerned it doesn’t pass the BOOT) so that the enterprise agreement approved by the FWC may be fundamentally different to what you agreed with your workforce
- a single employee can commence the bargaining process (including application of the good faith bargaining obligations), rather than the employer choosing (subject to the FWC making a majority support determination) when bargaining will commence
- while it is operational, the FWC will be able to amend an in-term enterprise agreement if it has a concern that the Agreement does not pass the BOOT due to a new pattern or kind of work or type of employment being implemented. This will not require employer approval or a vote of affected employees
- the FWC will be given the power to arbitrate bargaining disputes if it believes that there is no reasonable prospect of an agreement being reached if it does not make it for the parties. This will take the end product of bargaining out of the hands of the bargaining parties and allow the FWC to set terms and conditions for employers who cannot reach agreement with their workforces (or their representatives)
- the changes specify that the BOOT is a global assessment (which was already inherent in the word ‘overall’) and that it should be assessed in relation to existing (not prospective) employees and reasonably foreseeable patterns or kinds of work, or types of employment
- the FWC will be unable to approve an enterprise agreement unless the employees requested to vote for it have ‘a sufficient interest’ in the terms of the agreement and are ‘sufficiently representative’ of the agreement’s purported coverage. This is likely to mean that employers will be unable to request its employees vote on a proposed enterprise agreement unless and until it has employed an employee in every classification to be covered by the agreement.
Removing the ‘enterprise’ from enterprise bargaining
As has been widely reported, the Bill introduces a number of new forms of multi-employer (or industry/sector-wide) bargaining. In particular, employers are very concerned about the ‘supported bargaining’ and ‘single interest employer bargaining’ schemes. Common features include the ability for protected industrial action to be taken by employees negotiating for one of these types of agreements and the potential for employers not initially caught by the agreement being ‘roped into’ it by the FWC (upon a union applying for a roping-in order).
‘Supported bargaining’ stream
The ‘supported bargaining’ stream replaces the existing ‘low-paid bargaining’ stream. In this stream, the FWC will decide whether to authorise a supported bargaining process having regard to the prevailing pay and conditions within the relevant industry or sector and clearly identifiable common interests such as geography, the nature of the enterprises and whether the relevant industry or sector is substantially government-funded.
The Bill’s Explanatory Memorandum states that this may include low paid occupations, female-dominated sectors, as well as employees with a disability, employees who are culturally and linguistically diverse and First Nations employees. As such, it could be significantly broader than the previous low-paid bargaining stream which it is replacing.
If an employer is specified in a supported bargaining authorisation (SBA) the only type of enterprise agreement it can do with those of its employees mentioned in the SBA is a supported bargaining agreement. That is, it cannot negotiate and have approved an enterprise agreement on its own with its employees.
Employees will be able to take protected (lawful) industrial action (across employers in the relevant industry/sector) in pursuit of a supported bargaining agreement.
In areas like meat production, which has a high proportion of workers from linguistically diverse backgrounds, the supported bargaining stream may be utilised by the unions to effectively ‘group’ employers and re-establish their influence (and the application of common employment conditions) in the industry.
‘Single interest employer’ stream
The ‘single interest employer’ bargaining stream exists currently in the Fair Work Act, but is available only to franchisees and those employers who obtain Ministerial declarations allowing them to bargain together for a single interest enterprise agreement. As such, it is a rarely used type of agreement.
The Bill removes the requirement for a Ministerial declaration and replaces it with a range of requirements:
- The employers must not be small businesses (the number of employees required to be classified as a small business is the subject of negotiation in the Senate, however it is currently 15 under the Bill)
- The majority of employees of each employer to be covered must want to bargain for the agreement (it will be up to the FWC to determine how it works out whether a majority of employees want to bargain)
- It is not contrary to the public interest
- The employers have ‘clearly identifiable common interests’ (geography, regulatory regime and the nature of their enterprises including terms and conditions are the listed potential common interests).
Employers do not need to consent to be bound by a single interest employer bargaining process.
The only industry/sector which has been carved out of these forms of multi-employer bargaining is general building and construction (as defined by the Building and Construction General On-site Award 2020, as distinct from civil construction or metal and engineering construction).
It is conceivable that such an agreement could apply, for example, to all employers including contractors and labour providers (and their employees) at a resources project, or even more worryingly, all employers across a region’s resources sector, including those involved in mining and maintenance, transport of product and loading product for export. The potential for supply chain wide protected industrial action is the cause of great concern for employers.
Reintroducing central role of the FWC
Another aspect of the Bill which has caused significant concern for employers is the re-introduction of FWC arbitration as the ultimate form of resolution of protracted bargaining disputes. That is, the FWC will be given the power to resolve such disputes (by the making of a determination) if it considers that there is no reasonable prospect of agreement being reached if it does not make the declaration. Employers have pointed out that such compulsory arbitration (which remains a feature of some State industrial relations systems) incentivises parties to entrench extreme bargaining positions (on the understanding that the FWC may ultimately determine something approaching a middle-ground of the parties’ claims) rather than move toward middle ground.
Applying to terminate expired EAs will be significantly more difficult than it already is
The Bill aims to stop employers applying to the FWC for orders that the FWC terminate expired enterprise agreements. Currently, an employer can apply to the FWC for an order that the FWC terminate an expired EA and the FWC must do so if it is satisfied that termination is not contrary to the public interest and it is appropriate in all the circumstances to terminate (having considered the views of the employer, employees and unions and the effect termination of the EA will have on them).
Under the proposed rules, the Commission will be limited to terminating expired EAs to those situations where the FWC is satisfied:
- The continued operation of the EA would be unfair for the employees OR
- The EA does not and is not likely to cover any employees OR
- All of the following apply
- The continued operation of the EA would pose a significant threat to the viability of the business
- Termination of the EA would be likely to reduce the potential of terminations of employment
- The employer guarantees that it will pay any employment termination entitlements under the EA if it subsequently makes employees redundant.
Employers will need to consider their bargaining strategies carefully given these significant new restrictions on a strategy used in some prolonged bargaining situations.
It is clear that these changes seek to fundamentally alter the way terms and conditions of employment are set in Australia’s industrial relations system. It is the most significant change in the regulation of the labour market since 1992’s introduction of enterprise bargaining. Unions will be keen to make the most of these changes, so it is imperative that employers are alive to the changes and the risks and opportunities presented by the changes.
The Employment Relations and Safety team is already advising many clients on the changes and the effects they will have on their bargaining strategies in the immediate and longer term.
If you would like to discuss any aspect of the changes or how they will impact your business, you should contact Mick Moy below.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.