Secure Jobs, Better Pay: Bargaining reforms

The Fair Work Act 2009 (Cth) (‘FW Act’) has, since its inception, proclaimed enterprise bargaining as a major driver of economic prosperity. In recent years, however, enterprise bargaining has been in decline with talk of it reflecting a broken system. At least part of the solution is said to lie in the changes introduced by the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) relating to enterprise bargaining.

This article, which is the second in a series on the new laws, will cover key changes which are set to take effect no later than 7 June 2023 (unless otherwise indicated below).

Multi-employer bargaining

The focus on enterprise level bargaining, that was considered fundamental to unlocking productivity enhancements since the Hawke / Keating reforms, is blurred with the expansion of multi-employer bargaining. In keeping with the stated objectives of the legislation to provide better pay, the changes are intended to ‘leverage the collective power of multi-employer bargaining to secure safe, healthy and fair working conditions’ (Explanatory Memorandum at [106]).

The reforms introduce three new multi-employer bargaining ‘streams’, which will exist alongside the existing regime for single enterprise agreements.

‘Single-interest employer authorisations’ stream

In the most contentious aspect of the new laws, the changes enable unions (and employers) to apply to the Fair Work Commission (‘FWC’) for a ‘single interest employer authorisation’ (‘SIEA’) and nominate any employers as a party to a proposed agreement provided they are not covered by an ‘in-term’ enterprise agreement. The requirement for employers to request Ministerial approval for multi-employer bargaining has been removed.

There are a number of requirements that must be met. Chief amongst these is the need for there to be a clearly identifiable ‘common interest’ between employers. This includes considerations as to geographical location, regulatory regime and the nature of employment, but is otherwise open ended.

The operations and business activities of each employer must also be ‘reasonably comparable’ with those of the other employers to be covered by the agreement. This may give rise to consideration of the nature and size of the enterprise, and the comparability of their operations.

The FWC must also make a SIEA authorisation if it is satisfied:

• at least some of the employees that will be covered by the agreement are represented by a union;
• a majority of the employer’s employees who will be covered by the proposed agreement want to bargain for the multi-employer agreement. This evokes similarities with majority support declarations that are commonly satisfied through the use of petitions;
• the employer is not a ‘small business’ which, in this context, means the employer has at least 20 employees at the time the application for the SIEA was made;
• the employer and union have not agreed in writing to bargain for a single enterprise agreement;
• the employer and its employees who will be covered by the agreement are not covered by an enterprise agreement that is ‘in term’ (not passed its nominal expiry date); and
• the SIEA is not contrary to the public interest. This has typically been a relatively low hurdle, but could foreseeably be invoked where there are competition concerns associated with competitors bargaining together.

There is also an exclusion where the proposed enterprise agreement would cover employees in relation to general building and construction work.

The FWC has a discretion to exclude an employer from a SIEA where it is bargaining in good faith for a new agreement less than nine months after the nominal expiry date of a previous agreement.

The primacy of an in-term enterprise agreement is significant, although it is lost once an employer is covered by a SIEA. When that occurs, the employer is confined to bargaining in the single-interest stream and must not bargain for any other kind of enterprise agreement while the SIEA is in operation. Generally, a SIEA will cease to operate 12 months after it is made, unless extended by the FWC.

Further, employees cannot be asked to vote on a multi-employer enterprise agreement without union agreement, unless otherwise permitted by the FWC. The FWC can permit a vote of employees where union refusal has been unreasonably withheld and granting a request for a vote would not undermine good faith bargaining.

Once a SIEA is made, additional employers may be added by way of further application. Essentially, the same requirements as those making a SIEA apply.

‘Supported bargaining’ stream

The low-paid bargaining provisions in the FW Act, which were largely ineffective, have been replaced and broadened with a ‘supported bargaining stream’.

During ‘supported bargaining’, the FWC will have the capacity to assist parties to reach an agreement through means such as conciliation and mediation.

‘Cooperative workplaces’ stream

The existing voluntary multi-enterprise agreement stream is retained and rebadged as ‘cooperative workplace agreements’. There is now an additional requirement that at least some of the employees to be covered by the agreement are represented by a union in relation to the bargaining, ostensibly to ensure there is a balance of power between the parties.

The ‘cooperative workplaces’ stream are a form of multi-enterprise agreement that is available where there is no ‘supported bargaining authorisation’ in force relating to the agreement.

Overall, the changes to enterprise bargaining have the potential to have employers unwillingly ‘roped into’ multi-employer negotiations and exposed to protected industrial action in support of those negotiations.

Industrial action

Any protected action taken by employees in the context of multi-employer bargaining requires that the majority of employees who are in support of action against an individual employer must be from that employer.

More generally, the scheme for the taking of protected action includes an additional requirement that a party is prohibited from taking protected industrial action until it has participated in a compulsory conciliation conference convened by the FWC.

The new laws also allow the FWC to ‘pre-approve’ persons, in addition to the Australian Electoral Commission, to conduct protected action ballots.

Intractable bargaining and arbitration

In a significant change directed at preventing protracted bargaining disputes, the new laws provide a mechanism for compulsory arbitration of enterprise agreements where bargaining negotiations reach an impasse. The new laws empower the FWC to arbitrate an outcome in the form of a workplace determination that will set the terms and conditions for a workplace. This is different to the current system where workplace determinations were significantly limited.

Under the new framework, a bargaining representative for a proposed enterprise agreement (other than a cooperative workplaces agreement), may apply to the FWC for an ‘intractable bargaining declaration’. The FWC may make such a declaration if it is satisfied that:

• it has previously exercised its powers to deal with the dispute about that agreement;
• there is ‘no reasonable prospect of agreement being reached’ if the declaration is not made;
• it is ‘reasonable in all the circumstances to make the declaration, taking into account the views of the bargaining representatives for the agreement’; and
• the ‘minimum bargaining period’ has elapsed (generally, nine months after the nominal expiry date of a previous agreement or nine months after the start of bargaining, whichever is later).

The making of such a declaration may, at the discretion of the FWC, be followed by a ‘post-declaration negotiating period’. If no such period is initiated, or if no agreement is reached during the post-declaration negotiating period, then the FWC must proceed to make an ‘intractable bargaining workplace determination’ to set the terms of the agreement.

These amendments have the potential to encourage bargaining representatives to be more ambitious in their claims, and use both the threat and actuality of arbitration to extract better outcomes than employers would otherwise be prepared to concede.

Initiating bargaining

Effective from 7 December 2022, an employee bargaining representative may now unilaterally initiate bargaining with an employer for a single enterprise agreement that will replace a previous agreement, provided that no more than five years have passed since the nominal expiry date of the former agreement.

The effect of this change is to allow bargaining to commence at the initiative of employees in the absence of majority support.

Enterprise agreement approval process

In broadly supported changes, the reforms include several changes relating to the approval process for enterprise agreements, including:

• the requirement to provide employees with a copy of the agreement and any material incorporated during a seven day ‘access period’ is abolished, and will be replaced by requirements set out in a ‘statement of principles’ to be formulated by the FWC;
• removing the need to give a notice of representational rights (‘NERR’) to employees who will be covered by a single-interest employer, supported bargaining or cooperative workplaces agreement (it remains for single enterprise agreements);
• allowing the FWC the discretion to disregard minor procedural errors in relation to a NERR;
• simplifying the ‘better off overall test’ (‘BOOT’), including by providing that the BOOT be undertaken as a ‘global’ assessment, and requiring the FWC to only have regard to patterns or kinds of work, or types of employment if they are ‘reasonably foreseeable’. The FWC must also give primary consideration to any common view held by the employer and bargaining representatives as to whether an agreement passes the BOOT;
• permitting the FWC to approve an agreement with amendments ‘specified by the FWC’ in circumstances where it has concerns that the agreement as lodged for approval does not meet the BOOT; and
• allowing the FWC to ‘reconsider’ the approval of an agreement if material changes occur to patterns of work or types of employment that the FWC did not have regard to when approving the agreement.

However, there is additional prescription in assessing whether an agreement has been ‘genuinely agreed’ to by employees. The FWC is now required to be satisfied that the employees requested to vote have a ‘sufficient interest’ in the terms of the agreement and are ‘sufficiently representative’. This change is directed at criticisms that a small group of employees can be used to vote up an agreement that will apply to a much larger group of employees at a later date, even though the small group voting may not represent the work covered by the agreement or does not have a sufficient long term interest in the agreement.

Termination of enterprise agreements

Effective since 7 December 2022, the threshold for terminating an enterprise agreement has been significantly raised, greatly reducing the prospect of an employer successfully applying to the FWC to unilaterally terminate an existing agreement.

Now the FWC must terminate an enterprise agreement that has passed its nominal expiry date if it is satisfied:

• the continued operation of the agreement would be ‘unfair’ for the employees covered by the agreement;
• the agreement does not, and is not likely to, cover any employees; or
• where the continued operation of the agreement ‘would pose a significant threat to the viability’ of a business carried on by the employer(s); termination of the agreement would reduce the likelihood of terminations of employment because of redundancy; and the employer has given the FWC a guarantee in relation to any termination entitlements.

There are also provisions directed at terminating ‘zombie agreements’ (those made before the passing of the FW Act). More than 100,000 such agreements will end on 7 December 2023, subject to an application to extend a particular agreement.

Conclusion

The reforms to enterprise bargaining significantly alter the bargaining dynamic and have the capacity to impact employers who otherwise were not drawn into bargaining. The changes are the most controversial element of a system that is designed to avoid employers competing on wages.

The full impact of the changes will not be known for some time. Already, however, many unions have indicated their intention to utilise the reforms. It appears inevitable that the reforms will lead to higher levels of bargaining, and increased pressure on employers to agree to employee proposals, especially in the face of being ‘roped in’ to multi-employer bargaining and the possibility of arbitrated bargaining outcomes.

Jack de Flamingh is a Partner and Lukas Powling is a Lawyer, both at Corrs Chambers Westgarth.