By Tony Smetana & Joseph Waters

 

Enterprise bargaining continues to be problematic for some employers, with neither side of politics providing a clear solution.

The Fair Work Act 2009 (Cth) (the FW Act) can make enterprise bargaining a long and complex process.

The number of enterprise bargaining agreements (EBAs) has declined from 25,150 in 2011 to 10,646 in December 2021, and the percentage of Australian workers covered by EBAs has declined from 43.5% in 2010 to 37.9% in 2018.[1]

Unions can, in some cases, have excessive influence over the bargaining process. The ACCC recently reported that the Maritime Union of Australia (MUA) was using industrial action to demand that stevedore employers accept EBA terms and conditions restricting who they can recruit and how the labour can be deployed.[2]

Over the past five years, the Federal Government have sought to make enterprise bargaining easier by introducing:

• the Fair Work Amendment (Repeal of 4 Yearly Reviews and Other Measures) Bill 2017 (Cth) (the 2017 Bill); and
• the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 (Cth) (the 2020 Bill).

The 2017 Bill passed, partly simplifying the Fair Work Commission’s (the FWC) approval process.[3] However, the EBA provisions in the 2020 Bill were all removed prior to the bill passing.[4]

What are enterprise bargaining agreements?

EBAs allow employers and employees to negotiate employment terms and conditions different to the modern awards that would otherwise apply.

This benefits employers by allowing them to tailor employment terms and conditions to suit their particular work environment, rather than applying the “one size fits all approach” of the modern awards. Employers can also combine multiple awards into a single EBA.

Further, an EBA will prevent industrial action until it expires.[5]

EBAs benefit employees because the terms and conditions in the EBA must leave them better off overall compared to any applicable modern award. This is known as the better off overall test (the BOOT).[6]

The 2017 Bill

The 2017 Bill commenced on 12 December 2018.[7] The reform allows the FWC to overlook “minor procedural or technical errors.”[8]

Previously, minor errors could prevent the approval of fundamentally sound EBAs that had received broad support from employees.[9]

Some unfortunate outcomes where the FWC rejected EBAs because the employer technically breached the FW Act included where:[10]

• additional pages were stapled to the “notice of employee representational rights” form (NERR);[11]
• the NERR form was printed on paper containing the employer’s letterhead;[12] or
• the incorrect telephone number for the FWC’s info line was accidentally provided.[13]

Following the reform, the FWC could now find that an EBA has been “genuinely agreed to” if the FWC is satisfied that any minor errors were unlikely to have disadvantaged employees.[14]

The reform reinforced that the substance of EBAs should prevail over technicalities in the bargaining process.[15] However, the reform did not give employers the right to ignore the proper processes under the FW Act.[16]

Whilst the reform helped the FWC’s approval process, further changes may still be needed to make the FW Act’s EBA process more “user friendly”.

The 2020 Bill

In the 2020 Bill, the Federal Government originally included six key reforms aimed at simplifying and streamlining the FWC’s approval process.[17]

However, all of these reforms were removed from the 2020 Bill and did not become law.

Nevertheless, the proposed reforms highlighted some of the issues in the current EBA process.

Proposed Reform 1 – Limiting intervention by unions

Under the FW Act, employees have the right to appoint unions or other organisations to represent them during enterprise bargaining.[18] However, currently, unions that are not appointed as bargaining representatives can make submissions to the FWC on EBAs.[19] This can be obstructive to the parties involved.

The 2020 Bill proposed that the FWC would only be allowed to consider submissions from a union where:[20]

• employees had appointed the union as one of their bargaining representatives;[21] or
• there were exceptional circumstances, such as significant public interest concerns.[22]

This would give greater weight to the priorities of the employers and employees directly involved in the bargaining, rather than those of otherwise uninvolved unions whose views may not reflect the relevant workforce.[23]

The 2020 Bill also tried to extend the timeframe by which the employer must provide employees with the NERR from 14 days to 28 days after the employer agrees to start bargaining.[24]

Proposed Reform 2 – Requesting EBA approval from employees

Once the terms of an EBA have been negotiated, the employer will ask their employees to vote on it.[25] Under the FW Act, before making this request, employers must take all reasonable steps to ensure employees are:[26]

• given a copy of the proposed EBA and any other supporting material;[27]
• given an explanation of the terms of the proposed EBA;[28] and
• notified of the time, place and method of voting.[29]

Under the 2020 Bill, these three steps would not have been explicitly required before employers could request that employees vote on an EBA.[30]

Instead, the FWC would have only needed to be satisfied that employers “took reasonable steps” to ensure that employees were “given a fair and reasonable opportunity to decide whether or not to approve the agreement.”[31]

This would have provided more flexibility for employers.

For example, if a firm that only employs longstanding employees proposed a new EBA on largely the same terms as the old EBA except for two changes, then explaining only the two changes could potentially have been enough to give the employees a fair and reasonable opportunity to consider the new EBA.[32]

The proposed reform was criticised as undermining the protections that mandating these steps provides employees, such that employers would no longer have to explain a proposed EBA to employees.[33] However, in essence, the reform would have simply given the FWC discretion to determine what exactly constitutes a fair and reasonable opportunity.[34]

Proposed Reform 3 – Passing the BOOT

The 2020 Bill proposed to detail the specific considerations for passing the BOOT, thereby simplifying the FWC’s approval process.

Firstly, the FWC would have needed to give significant weight to views expressed by employers, employees and bargaining representatives about whether an EBA passes the BOOT.[35]

Importantly, the FWC would not have needed to give significant weight to the views of unions who were not involved in bargaining.[36]

Secondly, the FWC would not have been able to consider:

• hypothetical patterns of work (e.g. rosters, hours, shifts);
• hypothetical kinds of work (e.g. working conditions, skills and responsibilities involved); or
• hypothetical types of employment (e.g. full time, part time, casual or shift work).[37]

Rather, the FWC would only have been able to consider patterns, kinds of work and types of employment that employees were currently engaged in or were reasonably foreseen to be engaged in.[38]

Finally, the proposed reform would have explicitly stipulated that the FWC could consider the “non-monetary benefits” of an EBA, reinforcing that the subjective value of particular terms can be relevant.[39]

Proposed Reform 4 – NES model term

Under the FW Act, the FWC is required to examine each term of an EBA to determine if it contravenes the NES.[40]

The 2020 Bill proposed to remove this requirement, and replace it with a model term in all EBAs explaining the interaction between EBAs and the NES.[41]

The risk with this proposed reform was that it could have allowed terms that did not meet NES to remain in EBAs until they were challenged in litigation.[42]

Whilst this reform could have created a more efficient approval process, leaving the final determination of whether a term contravenes the NES to litigation might waste the resources of some employers and employees in the long run. Overall, it may be more efficient to make that determination at the EBA approval stage.

Proposed Reform 5 – FWC approval process timeframe

The 2020 Bill also proposed implementing a requirement on the FWC to determine EBA approval applications within 21 working days. If they were unable to do so, the FWC would have needed to notify the parties involved and explain the reason for the delay.[43]

This proposed reform was criticised as potentially forcing the FWC to “tick and flick” EBAs because of severe time pressure.[44]

Whilst it could have arguably sped up the approval process, potential oversights in the EBA approval process could have simply led to increased litigation, and ultimately wasted the resources of employers and employees.

Proposed Reform 6 – Greenfields EBAs for new major projects

Under the FW Act, the expiry date of an EBA cannot be more than four years after the FWC approves the EBA.[45] The 2020 Bill proposed to increase this limit to eight years for greenfields EBAs for new “major projects.”[46]

Greenfields EBAs involve new enterprises in which the employer has not employed any of the employees before.[47]

Major projects would have been those that involve at least $500 million capital expenditure. However, the Federal Government could have also declared a project to be a major project if its capital expenditure was above $250 million and the project had national or regional significance, such as contributing to job creation and economic recovery from the COVID-19 pandemic.[48]

EBAs that lasted for longer than four years would have needed to contain an annual increase of the base rate of pay for each employee.[49]

It was argued that EBAs lasting for up to eight years would have created better certainty for investors in the resources and energy sector because there would have been less risk of delays from protracted bargaining mid-way through a project.[50]

However, the proposed reform was also criticised because it could have “locked in” workers to eight-year EBAs where:[51]

• inflexible rosters could have led to more suicides;[52]
• pay rises might not have kept up with the cost of living, despite annual increases;[53] and
• safety issues arising on-site might not have been addressed.[54]

Nevertheless, it was claimed that if employers wanted to reduce turnover and finish projects on-time and within budget, then they would nonetheless need to be prepared to incentivise employees with better pay, rosters and other terms and conditions.[55]

Developments regarding the 2020 Bill

The proposed provisions in the 2020 Bill regarding EBAs were removed in March 2021.[56] However, the Federal Government has indicated that it maintains its commitment to the dropped reforms.[57]

Nevertheless, the necessity and effectiveness of the proposed reforms from the 2020 Bill are still open to question.

FWC president Iain Ross has already implemented new approval process timelines similar to those in Reform 5. For “simple” EBAs that can be approved based on the paperwork filed, the FWC endeavours to determine 50% of them within 10 working days and 95% of them within 20 working days.[58]

What Next?

It is clear that the EBA process under the FW Act is not perfect. It currently involves a sometimes difficult approval process that can be costly for employers to undertake.

With the upcoming federal election on 18 May 2022, it will be interesting to see what sort of reforms will be proposed by the two major political parties to improve the system.

If you have any questions about the enterprise bargaining process, please contact Tony Smetana or Megan Flower at HLS Legal on (08) 9322 5202.

 This article is intended to be informative only and does not constitute legal advice. If you are concerned about your individual circumstances, please contact a lawyer.

[1] Commonwealth, Parliamentary Debates, House of Representatives, 9 December 2020, 11016 (Christian Porter); Business Council of Australia, The State of Enterprise Bargaining in Australia (Report, February 2021) 4, 8–9 <https://www.bca.com.au/the_state_of_enterprise_bargaining_in_australia2021>; Business Council of Australia, The State of Enterprise Bargaining in Australia (Report, August 2019) 4, 9–10 <https://www.bca.com.au/the_state_of_enterprise_bargaining_in_australia>; Attorney-General’s Department (Cth), Trends in Federal Enterprise Bargaining Report: December Quarter 2021 (Report, December 2021) 7 <https://www.ag.gov.au/industrial-relations/publications/trends-federal-enterprise-bargaining-december-quarter-2021>.

[2] Australian Competition and Consumer Commission, Container Stevedoring Monitoring Report 2020-21 (Report, October 2021) 64–9 <https://www.accc.gov.au/system/files/Container%20stevedoring%20monitoring%20report%202020-21.pdf>; ‘IR on Waterfront “requires attention”: ACCC’, Workplace Express (online, 4 November 2021) <https://www.workplaceexpress.com.au/nl06_news_selected.php?selkey=60620>.

[3] Fair Work Amendment (Repeal of 4 Yearly Reviews and Other Measures) Act 2018 (Cth) (‘Amendment Act’).

[4] ‘Parliament Passes Pared-Back Omnibus Bill’, Workplace Express (online, 22 March 2021) <https://www.workplaceexpress.com.au/nl06_news_selected.php?selkey=59908>.

[5] Fair Work Act 2009 (Cth) s 417 (‘FW Act’).

[6] FW Act (n 5) ss 186(2)(d), 193.

[7] Amendment Act (n 3) s 2(1) item 3.

[8] Amendment Act (n 3) sch 2 item 2; FW Act (n 5) s 188(2).

[9] Commonwealth, Parliamentary Debates, House of Representatives, 1 March 2017, 1875 (Peter Dutton).

[10] Commonwealth, Parliamentary Debates, House of Representatives, 1 March 2017, 1876 (Peter Dutton).

[11] Cf FW Act (n 5) s 174(1A)(b).

[12] Cf FW Act (n 5) s 174(1A)(b)–(c).

[13] Cf FW Act (n 5) s 174(1A)(a).

[14] Amendment Act (n 3) sch 2 item 2; FW Act (n 5) s 188(2).

[15] Explanatory Memorandum, Fair Work Amendment (Repeal of 4 Yearly Reviews and Other Measures) Bill 2017 (Cth) ix quoting Productivity Commission, Workplace Relations Framework (Inquiry Report, No 76, 30 November 2015) vol 2, 663 <https://www.pc.gov.au/inquiries/completed/workplace-relations/report/workplace-relations-volume2.pdf>.

[16] Commonwealth, Parliamentary Debates, House of Representatives, 1 March 2017, 1876 (Peter Dutton).

[17] Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 (Cth) sch 3 pts 1–6, 9–11, sch 4 (‘2020 Bill’).

[18] FW Act (n 5) s 173(1).

[19] FW Act (n 5) s 590.

[20] 2020 Bill (n 17) sch 3 pt 9; Explanatory Memorandum, Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 (Cth) 52 [275] (‘EM’). Cf FW Act (n 5) s 590.

[21] 2020 Bill (n 17) sch 3 cl 54 proposing FW Act (n 5) s 254AA(2)(c)(iv).

[22] 2020 Bill (n 17) sch 3 cl 54 proposing FW Act (n 5) s 254AA(2); EM (n 20) 52 [274].

[23] 2020 Bill (n 17) sch 3 cl 1 proposing FW Act (n 5) s 171(a), (b)(iii); 2020 Bill (n 17) sch 3 pt 11; Commonwealth, Parliamentary Debates, House of Representatives, 9 December 2020, 11016 (Christian Porter).

[24] FW Act (n 5) s 173(3); 2020 Bill (n 17) sch 3 cl 2.

[25] FW Act (n 5) s 181(1). Cf s 182(3).

[26] FW Act (n 5) s 180.

[27] FW Act (n 5) s 180(2).

[28] FW Act (n 5) s 180(5)–(6).

[29] FW Act (n 5) s 180(3).

[30] 2020 Bill (n 17) sch 3 pt 3.

[31] 2020 Bill (n 17) sch 3 cl 8 proposing FW Act (n 5) s 180(2).

[32] EM (n 20) 40.

[33] Commonwealth, Parliamentary Debates, Senate, 16 March 2021, 1900 (Anne Urquhart).

[34] EM (n 20) 39 [209]–[210].

[35] 2020 Bill (n 17) sch 3 cl 25 proposing FW Act (n 5) s 193(8)(c).

[36] 2020 Bill (n 17) sch 3 cl 1 proposing FW Act (n 5) s 171(a), (b)(iii); 2020 Bill (n 17) sch 3 pt 11.

[37] EM (n 20) iii, xlix, lxix, 45–6.

[38] 2020 Bill (n 17) sch 3 cl 25 proposing FW Act (n 5) s 193(8)(a); EM (n 20) 45–6.

[39] 2020 Bill (n 17) sch 3 cl 25 proposing FW Act (n 5) s 193(8)(b); EM (n 20) lxix, 46 [240]–[244].

[40] FW Act (n 5) ss 55(7) (Note), 186(2)(c).

[41] 2020 Bill (n 17) sch 3 pt 6; FW Act (n 5) ss 55(1), 56, 61(1); EM (n 20) 48 [250], [253].

[42] Commonwealth, Parliamentary Debates, Senate, 18 March 2021, 2190 (Penny Wong).

[43] 2020 Bill (n 17) sch 3 pt 10.

[44] Commonwealth, Parliamentary Debates, Senate, 16 March 2021, 1900 (Anne Urquhart).

[45] FW Act (n 5) s 186(5).

[46] 2020 Bill (n 17) sch 4 cl 3 proposing FW Act (n 5) s 186(5)(b).

[47] FW Act (n 5) s 172(2)(b), (3)(b), (4).

[48] 2020 Bill (n 17) sch 4 cl 2; EM (n 20) 59 [311]–[312].

[49] 2020 Bill (n 17) sch 4 cl 4.

[50] Commonwealth, Parliamentary Debates, House of Representatives, 9 December 2020, 11017 (Christian Porter), Senate, 16 March 2021, 1991 (Paul Scarr). See also Senate, 16 March 2021, 1890 (Benjamin Small).

[51] Commonwealth, Parliamentary Debates, Senate, 17 March 2021, 2028 (Nita Green), 2058 (Louise Pratt), 18 March 2021, 2190 (Penny Wong).

[52] Commonwealth, Parliamentary Debates, Senate, 17 March 2021, 2028 (Nita Green), 2058 (Louise Pratt).

[53] Commonwealth, Parliamentary Debates, Senate, 17 March 2021, 2034 (Malarndirri McCarthy), 2054 (Alex Gallacher), 18 March 2021, 2190 (Penny Wong).

[54] Commonwealth, Parliamentary Debates, Senate, 18 March 2021, 2190 (Penny Wong).

[55] Commonwealth, Parliamentary Debates, Senate, 16 March 2021, 1991 (Paul Scarr).

[56] ‘Coalition Jettisons Bulk of Omnibus Bill’, Workplace Express (online, 18 March 2021) <https://www.workplaceexpress.com.au/nl06_news_selected.php?selkey=59899>; ‘Parliament Passes Pared-Back Omnibus Bill’, Workplace Express (online, 22 March 2021) <https://www.workplaceexpress.com.au/nl06_news_selected.php?selkey=59908>.

[57] ‘Coalition Hasn’t Given Up on IR Change’, Workplace Express (online, 24 March 2021) <https://www.workplaceexpress.com.au/nl06_news_selected.php?selkey=59920>.

[58] ‘New Agreement Processing Deadlines Mirror Statutory Proposal’, Workplace Express (online, 13 April 2021) <https://www.workplaceexpress.com.au/nl06_news_selected.php?selkey=59972> citing Justice Ross, ‘President’s Statement: Enterprise Agreements – Timeliness Benchmarks’ (Media Release Fair Work Commission, 12 April 2021) 7 [30] <https://www.fwc.gov.au/documents/documents/media/president-statement-agreements-timeliness-2021-04-12.pdf>.