Australia: Good Faith Bargaining - Will It Be Good For You?

Last Updated: 10 April 2008
Article by Chris Hartigan

Key Point

  • Depending on how the good faith obligation is articulated in the proposed legislation, the whole atmosphere of collective bargaining may change significantly.

Good faith bargaining is not a new concept to Australian workplaces. Many employers will remember such provisions from the superseded Industrial Relations Act 1988 (Cth) (the "pre-1996 Act"). Some employers in states such as Queensland and Western Australia will also be familiar with the provisions relating to good faith bargaining in their state legislation (which have largely become redundant due to the overriding nature of the Work Choices changes to the Workplace Relations Act 1996 in March 2006).

Labor's recent victory in the federal election means that workplace laws will change yet again. One potentially significant proposal in the Labor Party policy is the reintroduction of an obligation on all parties to bargain in good faith when negotiating collective workplace agreements.

New Federal Government Proposals

The new Federal Government proposes to introduce a legislative requirement that all bargaining participants must bargain in good faith. The Government has stated that this will require the bargaining parties to:

  • attend and participate in meetings at reasonable times;
  • disclose relevant information in a timely manner;
  • respond to proposals made by a party in a timely fashion;
  • give genuine consideration to the needs of the other parties, and providing reasons for their responses; and
  • refrain from capricious or unfair conduct or conduct that undermines freedom of association or collective bargaining.

The new Federal Government has also announced that "if a majority of employees at a workplace want to bargain collectively, their employer will be required to bargain collectively with them in good faith."

Presumably, Fair Work Australia (which will subsume the Australian Industrial Relations Commission and which is proposed to come into operation on and from 1 January 2010) will be given a broad discretion to make orders requiring employers to meet, disclose information to unions and take other steps to satisfy their obligation to bargain in good faith.

When Will The Proposals Come Into Effect?

The Federal Government has said that it will introduce its changes to the workplace relations system in two stages. On 12 February 2008 it introduced a Transitional Bill which covered the abolition of AWAs (and the introduction of ITEAs which will replace AWAs). Good faith bargaining was not dealt with in this Transitional Bill.

More substantive changes will be introduced in the latter part of 2008, or even 2009. This second part of the reforms will be more likely to contain the changes relating to good faith bargaining, although this is not clear at this time.

What Is Good Faith Bargaining?

In broad terms, good faith bargaining requires the negotiating parties to an agreement to make genuine attempts to reach consensus, rather than merely going through the motions of bargaining. But under the proposed changes to the legislation, the requirements are mostly procedural, rather than substantive.

We can get some idea of how the proposed good faith bargaining provisions are likely to operate in practice by examining the situation pre-1996 when good faith bargaining obligations were enshrined in federal legislation and also by looking at the recent New Zealand experience.

Under the pre-1996 Act, the Commission could make orders in relation to the negotiation of an agreement for the purposes of ensuring that the parties were negotiating in good faith. As part of its consideration the Commission would look at matters such as whether or not the parties had agreed to meet at reasonable times, whether or not the parties attended the meetings that the party agreed to attend, and whether or not the parties disclosed information as appropriate for the negotiations.

The Commission has in the past expressed a strong reluctance to order a party to do something in good faith. In one decision a Full Bench considered whether or not it had the power to order a person to negotiate and reached the conclusion that it could make an order for the parties to meet at a specified time, but it could not make an order that the parties negotiate in good faith once they were at the meeting.1 In other words, it could not require a party to make concessions in negotiations. The Commission also commented that "the role of the Commission in the bargaining process is facilitative rather than interventionist.2" The question remains whether the new Fair Work Australia will take a more interventionist approach.

Good Faith Bargaining In Other Jurisdictions

In other countries such as New Zealand, there is a statutory duty to bargain in good faith for each employer and union when bargaining for a collective agreement. Under New Zealand laws, the employer and union must use their best endeavours to enter into an arrangement, which sets out a process for conducting the bargaining in an "effective" and "efficient" manner.

New Zealand courts have considered the concept of "good faith" and found that it could be interpreted as having a willingness to engage in effective problem solving, bargaining with honest and open conduct and ensuring issues are addressed in a timely and transparent fashion.3

Implications For Employers

The introduction of mandatory good faith bargaining into Commonwealth legislation is likely to mean that where a majority of the employees at a workplace want to bargain collectively, employers will be required to regularly meet with them and/or the union and explain their position on matters that are in issue, and to disclose relevant information to the other negotiating party or parties. This could have a significant impact on employers in terms of the amount of time and resources that they dedicate to negotiating a new agreement, especially smaller employers who do not have a dedicated human resources team to negotiate workplace agreements. It may also mean that employers may be forced to disclose information which is adverse to their interests.

A regime of this sort also fundamentally departs from the model that has operated since the commencement of the Workplace Relations Act. Under that model an employer did not have to acknowledge a union as a bargaining agent in relation to a collective agreement and was not required to meet with their employees or their union to discuss bargaining proposals.

Consequently, depending on how the good faith obligation is articulated in the proposed legislation, the whole atmosphere of collective bargaining may change significantly.

Watch this space for details of the new laws once they are introduced.


1 Asahi Diamond Industrial Australia Pty Limited and Automotive, Food Metals and Engineering Union (1 March 1995, Print L9800)

2 Ibid, at page 36.

3 P Cranney, G Davenport, "Bargaining Law - the Parties flex their muscles" New Zealand Law Society Conference, 2006.

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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