Australia: Unions now need an MSD to kick-start bargaining

A DISRUPTIVE NEW LAW

The Fair Work Amendment Act 2015 (Cth) (FW Amendment Act) came into effect on 27 November 2015.1

One important consequence is that a union is no longer able to apply for a protected action ballot order (PABO) to pressure an employer into bargaining before the 'notification time' starts.2

To engineer this, unions will likely need to apply to the Fair Work Commission (FWC) for a majority support determination (MSD). Once made, an MSD starts the notification time.3 An application for a PABO could then be made after that.

An MSD requires evidence that:

  • a majority of employees who will be covered by an agreement want to bargain; and
  • the employer has refused to bargain; and
  • the group of employees who will be covered by the agreement was fairly chosen; and
  • it is reasonable in all the circumstances to make the MSD.4

The changed paradigm will present an opportunity for employers who want to try to delay bargaining. They may be able to do so by opposing an application for an MSD.

There might be a number of factors in favour of taking this approach. Many Australian private sector workplaces have historically low union membership. Employees may be content with their terms and conditions of employment and not want to become involved with what is commonly the long, drawn-out and sometimes difficult process of bargaining.

A blanket refusal to bargain by an employer could present challenges to a union. It would have to rely on its right of entry powers or other means to communicate with employees to gain support for an MSD application. An employer who has the 'hearts and minds' of their employees might feel comfortable testing a union's ability to do this.

Separately, an employer might want to test the veracity of the 'evidence' of majority support (many times in the form of a 'petition'); or whether the group of employees to be covered by the agreement was not fairly chosen; or whether it is reasonable in all of the circumstances that an MSD be made.

The need for a union to get an MSD before it can get a PABO will give employers a real strategic option. Employers will be able to refuse to bargain, safe in the knowledge that a union could not apply for a PABO and then take protected industrial action on the strength of it in order to force the employer to bargain.

ALCOA V CFMEU

The decision of a Full Bench of the FWC in Alcoa of Australia Limited v Construction, Forestry, Mining and Energy Union [2015] FWCFB 1832 provides a number of insights into the process of opposing an application for an MSD.

The facts were that Alcoa commenced bargaining to replace an agreement that covered employees graded PSO2 and PSO3. It proposed an agreement that would not cover employees graded above PSO3.

The CFMEU represented employees graded PSO5 and PSO6. Those employees wanted to negotiate an agreement with Alcoa. At the time, no PSO4 employees were engaged by Alcoa.

Alcoa refused to bargain for an agreement to cover PSO4, PSO5 and PSO6 employees. The CFMEU applied for an MSD to start the notification time. It was successful at first instance before Lewin C.5 Alcoa appealed to a Full Bench (Hatcher VP, Gostencnik DP and Roe C), but was unsuccessful in the appeal.6

ARGUMENTS ON APPEAL IN ALCOA V CFMEU

On appeal, Alcoa's main arguments related to the following points:

  1. the presumption point - that the FWC at first instance erroneously presumed that it should facilitate bargaining if the employees of the group unanimously wished to bargain;
  2. the fairly chosen requirement - the group of employees who would be covered by the agreement was not fairly chosen because, first, PSO6 employees were senior managers who were operationally different from PSO4 and PSO5 employees; and, secondly, the working conditions of PSO6 employees were incompatible with typical terms of an enterprise agreement;
  3. the reasonableness requirement - it was not reasonable for the MSD to have been made because of the FWC's errors on the presumption point and the fairly chosen requirement. Also, the Commission failed to give weight to the benefits of individual contracts to which PSO5 and PSO6 employees were party, and the historical position whereby they had not previously been involved in collective bargaining.

FINDINGS AND REASONING OF THE FULL BENCH

The presumption point

In the Full Bench's view, while Lewin C should not perhaps have stated that there is a 'presumption' that the Commission should facilitate bargaining if the employees of the group unanimously wish to bargain, this did not amount to appealable error.

The Commissioner was indicating no more than that significant weight will to be given to employees' wishes, weighed against a countervailing case that the selection of the particular group to be covered by the proposed agreement would be prejudicial to the productivity or efficient conduct of the employer's business.7

The fairly chosen requirement

The Full Bench considered that the group of employees was fairly chosen because:

  1. the operational differences between PSO6 and PSO4 and PSO5 employees were not so significant as to mean that the group was not fairly chosen;8
  2. any conflict of interest from PSO6 employees being in the same group as PSO4 and PSO5 employees was a matter going to the scope of the agreement and was irrelevant to whether an MSD was made.
  3. The object of making an MSD is to kick-start the process of bargaining and nothing more, if a majority of employees who would be covered by the agreement want to bargain.

    If a potential conflict of interest means that excluding senior managers from the scope of bargaining would promote the fair and efficient conduct of bargaining, an application could be made at that point for a scope order to that effect;9

  1. the making of an MSD does not pre-suppose that an enterprise agreement will be made with particular terms, or at all.
  2. It is entirely speculative and irrelevant to take into account the outcome of bargaining if an MSD is made.

    The argument that the working conditions of PSO6 employees were inappropriate for regulation by an enterprise agreement was misconceived for this reason;10

  1. the inclusion in the group of PSO4 employees did not mean that the group to be covered by the proposed agreement was not fairly chosen.
  2. Whether an employer actually employs any employees included in the group is irrelevant to whether the group of employees to be covered by the agreement, once made, would be fairly chosen.11

The reasonableness requirement

Finally, Alcoa's arguments about the reasonableness requirement were rejected by the Full Bench for much the same reasons as its arguments regarding the fairly chosen requirement.

It was held that the Commission at first instance did take into account the benefits of individual contracts to which PSO5 and PSO6 employees were party and the historical position whereby they had not previously been involved in collective bargaining.12

WHAT COULD AN EMPLOYER DO NOW TO COUNTER THE COMMENCEMENT OF BARGAINING?

The decision in Alcoa v CFMEU illustrates the difficulty employers can encounter, in opposing an MSD application, where there is clear evidence of majority employee support for collective bargaining. There have been a number of other FWC decisions in which the tribunal has rejected employer arguments against the issuing of an MSD, based on a preference to continue dealing with employees through individual contracts rather than a collective agreement.13

However, it may be worth-while for an employer to consider whether there are other grounds to oppose an MSD, such as the 'fairly chosen' requirement; or any doubt surrounding the expression of employee views, and therefore whether majority support for collective bargaining genuinely exists.

It is also important for employers to keep in mind that the effect of an MSD is simply to trigger negotiations in accordance with the good faith bargaining requirements. Neither an MSD, nor the good faith requirements, impose any obligation on an employer to agree on terms or (ultimately) to conclude an agreement.

Further, the recent change arising from the FW Amendment Act means that a union must go through the MSD process in order to compel an employer to bargain. Employers now have a new basis for opposing a PABO, where a union is seeking to use protected industrial action as the mechanism for commencing bargaining.

Footnotes

1 See our recent In Brief at: Fair Work Act - Amendments set to become law

2 The FW Amendment Act inserted a new s 437(2A) into the Fair Work Act 2009 (Cth) (FW Act) as follows:

(2A) Subsection (1) does not apply unless there has been a notification time in relation to the proposed enterprise agreement.

Note: For notification time, see subsection 173(2). Protected industrial action cannot be taken until after bargaining has commenced (including whether the scope of the proposed agreement is the only matter in dispute).

The amendment is intended to overcome the effect of the Full Federal Court decision in JJ Richards & Sons Pty Ltd v Fair Work Australia (2012) 201 FCR 297.

3 See FW Act, s 173(2). The notification time can also be commenced by an employer initiating, or agreeing, to bargaining for an agreement; or the making of a scope order or a low-paid authorisation by the FWC.

4 See FW Act, s 237(2).

5 [2014] FWC 7123.

6 [2015] FWCFB 1832.

7 [2015] FWCFB 1832 at [27].

8 Ibid at [29].

9 Ibid at [30]-[31].

10 Ibid at [31].

11 Ibid at [35]-[37].

12 Ibid at [33]-[34].

13 See e.g. MEAA v Australian Football League [2014] FWC 8898; ALAEA v Panasonic Avionics Corporation [2013] FWC 4267.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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