Australia: New Fair Work Act Amendments ignore Greenfields Agreements Strife

Major new projects in Australia are often delayed because of lengthy disputes between unions and employers on employment conditions. This was recognised by the Panel that last year reviewed the Fair Work Act.

In a March announcement, the government pledged to amend the Act to do something about this. However, in an about-turn, the government has failed to deliver on this promise in its new Fair Work Amendment Bill 2013.

This is another blow for major new enterprises in this country and does nothing to improve Australia's reputation as an attractive investment destination.

Greenfields agreements are made between a union and a new employer, that doesn't yet have employees.

They determine the terms and conditions of employment that will apply and can only be negotiated with a union or unions that have coverage of a majority of the prospective employees.

Importantly, greenfields agreements must involve a genuinely new enterprise; an existing business cannot re-badge its activity and use this as grounds to negotiate a greenfields agreement.

Greenfields agreements benefit employers because they can establish terms and conditions for employees in a new enterprise before employing them.

Employers claim that the requirement to bargain with a union about the terms and conditions on a project gives unions an unfair advantage and allows them to hold employers to 'ransom'.

Employers say that unions know the longer negotiations drag on, project costs increase and start dates are threatened, and eventually employers have to make significant concessions.

The 2012 Review of the Act supported this view, finding that some of the bargaining practices and outcomes associated with greenfields agreements potentially threaten future investment in major projects in Australia.

It observed that the FW Act allows unions with coverage of a majority of prospective workers to frustrate the making of an appropriate greenfields agreement at all, or at least in a timely way.

The situation is exacerbated by the fact that the good faith bargaining requirements contained in the FW Act do not apply to greenfields agreements.

This is because those requirements only apply to a "bargaining representative for a proposed agreement".

Section 176 prescribes who are bargaining representatives but only for enterprise agreements that are not greenfields agreements.

The 2012 Review Panel recommended the FW Act be amended so that the good faith bargaining obligations apply to negotiations for a greenfields agreement.

At the same time, section 240 of the FW Act would then also apply to allow bargaining disputes about the negotiations of greenfields agreements to be dealt with by the Commission (that provision does not currently apply because the applicant must be a bargaining representative for a proposed enterprise agreement, a greenfields agreement not being included in this).

The Review Panel also recommended the FW Act be amended so that, when negotiations for a greenfields agreement have reached an impasse, a specified time period has expired and conciliation has failed, the Commission may, on its own motion or on application by a party, conduct a limited form of arbitration, including 'last offer' arbitration to determine the content of the agreement.

On 8 March, the Federal government announced it would amend the FW Act to provide access to the Commission for arbitration when bargaining for a greenfields agreement reaches an impasse and in "other limited circumstances where bargaining had become intractable."

However, when the Fair Work Amendment Bill 2013 was introduced a mere two weeks later it omitted any changes relating to the application of the good faith bargaining requirements or arbitration of greenfields agreements.

The Minister simply noted the Review's recommendation concerning arbitration of greenfields agreements and said he will continue to work with employers and unions with a view to introducing further reforms during Parliament's Winter Session.

As the Federal election is just a few months away, it is doubtful there will be time for further changes in this area before then. Whether the Opposition will deal with it if it gains power and, if so, how it might do so, is unclear.

In the meantime, the mischief identified by the Review will continue in respect of greenfields agreements and threaten investment in major projects in Australia.

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