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 for their collective circumstances. The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) (Fair Work Amendment Act) fundamentally alters this dynamic, such that conditions of employment will be set at the industry level, and not at the level of individual enterprises.
These changes will impact employers in the resources and renewables sector, and particularly in the renewable energy sector, which has been identified by the Australian Council of Trade Unions as a target for multi-employer bargaining.
Removing the ‘bargaining’ from enterprise bargaining
- in certain circumstances, a single employee can commence the bargaining process (triggering the parties’ good faith bargaining obligations), rather than the employer choosing when bargaining will commence (subject to the Fair Work Commission (FWC) making a majority support determination).
- when approving an enterprise agreement, if the FWC is concerned it doesn’t pass the better off overall test (BOOT), the FWC can decide an enterprise agreement agreed between employer and employees which means that the enterprise agreement approved by the FWC may be fundamentally different to what was originally agreed.
- during its term, the FWC will be able to amend an ongoing enterprise agreement if it is concerned that the agreement does not pass the BOOT, due to a new pattern or kind of work or type of employment being implemented. This amendment 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. 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) within a 9-month period. 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 a middle ground earlier in the negotiation process.
- 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 (and prospective) employees and reasonably foreseeable patterns or kinds of work, or types of employment. In essence, this means no change to the BOOT.
- 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. These terms are undefined and unclear, and are likely to be the subject of significant litigation.
Removing the ‘enterprise’ from enterprise bargaining
The Fair Work Amendment Act introduces a number of new forms of multi-employer (or industry/sector-wide) bargaining. In particular, employers have expressed concern about the ‘supported bargaining’ and ‘single interest employer bargaining’ schemes. Common features include the ability for employees who are negotiating a collective bargaining agreement to take protected industrial action 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).
‘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 a Ministerial declaration allowing them to bargain together for a single interest enterprise agreement. As such, it is a rarely used type of agreement.
The Act removes the requirement for a Ministerial declaration and replaces it with a range of requirements:
- the employers must employ at least 20 employees at the time of the application (many employers in the resources and renewables sector will meet this requirement)
- 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);
- an agreement would not be contrary to the public interest;
- the employers have ‘clearly identifiable common interests’ (geography, regulatory regime and the nature of their enterprises are the listed potential ‘common interests’);
- the operations and business activities of each employer must be ‘reasonably comparable’ with those of the other employers that will be covered. Unfortunately, if the employer employs 50 or more employees, it will be presumed that their operations and business activities are reasonably comparable to the other employers unless it proves otherwise. Many employers have expressed concern that this presumption imposes an impossible task on them to give evidence about the operations and business activities of all other impacted employer.
Importantly, employers do not need to consent to be bound by a single interest employer bargaining process.
Although the civil and building construction sectors have been carved out of this form of multi-employer bargaining, the resources sector is within its scope and the renewable energy sector has been signalled by the Australian Council of Trade Unions (ACTU) as a target.
It is conceivable that such an agreement could, for example, apply to all employers including contractors and labour providers (and their employees) at a resources project. This might extend to 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 protected industrial action across the whole of supply chain is a cause of great concern for employers.
Employees will be able to take protected (lawful) industrial action (across employers in the relevant industry/sector) in pursuit of a single interest employer agreement, which could see significant pressure imposed on projects and employers.
‘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 Act’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 replaces and could extend to employers in the resources sector.
If an employer is specified in a supported bargaining authorisation (SBA) the only type of enterprise agreement it can make 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.
Applying to terminate expired EAs will be significantly more difficult than it already is
The Act aims to stop employers from applying to the FWC for orders that the FWC terminate expired enterprise agreements (EA). 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 that termination of the EA will have on them).
Under the proposed rules, the FWC will be limited to terminating expired EAs to situations where the FWC is satisfied that:
- the continued operation of the EA would be unfair to 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; and
- 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 that conditions of employment are set in Australia’s industrial relations system. The renewable energy sector seems to be a key target for multi-employer bargaining and the resource sector (which has historically had, and continues to have, a heavy union presence) will likely also be impacted as these changes come into effect. We consider these the most significant changes to the labour market since 1992’s introduction of enterprise bargaining, and employers should start to prepare now. 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 them.
For more information on this topic, or to explore other articles from our 2023 edition of Emerging Issues for the Australian Energy and Resources Industry, click here.
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.