Australia: Enterprise Bargaining

Last Updated: 3 March 2009

The Fair Work Bill 2008 makes significant changes to agreement making. The changes largely reflect the federal government's forward with fairness policy that was taken to the last election, however in some areas, the Bill goes much further than was previously indicated.

Types of agreements under the Bill

The Bill provides for three different types of enterprise agreements. These are:

  • a single-enterprise agreement, which is similar in nature to a collective workplace agreement under WorkChoices
  • a multiple-enterprise agreement, which is similar in nature to a multiple-business agreement under WorkChoices
  • a greenfields agreement, which is similar in nature to a union greenfields agreement under WorkChoices.

The Bill removes the distinction between an employee agreement and a union agreement that exists under WorkChoices, and instead, allows a union that acted as a bargaining representative during the negotiation of an agreement to notify Fair Work Australia that it wishes to be covered by the enterprise agreement.

As expected, the Bill does not provide for an employer to enter into an individual agreement such as an Individual Transitional Employment Agreement (which has replaced an Australian Workplace Agreement). The Bill does however, require an enterprise agreement to contain a flexibility term, which will assist in providing flexibility for individual employees under the terms of an enterprise agreement.

Procedures before commencing negotiating

The Bill requires that an employer who will be covered by a proposed enterprise agreement must take all reasonable steps to issue all employees who will be covered by the enterprise agreement and are employed at the time, a notice of their right to be represented during negotiations. This notice must be provided to employees within 14 days of certain prescribed events occurring, and must contain specific information as required by the Bill.

The issuing of the final notice to an employee starts a minimum period of time before which the employer can seek to have employees approve the proposed enterprise agreement (see below).

Representation during bargaining

An employee or an employer can be represented during the bargaining for an enterprise agreement by a bargaining representative. The Bill specifies certain procedures that must be followed for an employee or an employer to appoint an individual or organisation to be their bargaining representative. Importantly, if an employee is a member of a union, the union is deemed to be the employee's bargaining representative unless the employee nominates another person.

Given that a union is the default bargaining representative for an employee who is a member, and the right that an employee has to appoint an alternate person as their bargaining representative, it is likely that employers will be required to negotiate with multiple bargaining representatives to make an enterprise agreement.

How must the parties conduct themselves during bargaining?

The Bill introduces an obligation on bargaining representatives to bargain in good faith. This obligation does not exist under WorkChoices.

In order for a bargaining representative to satisfy its obligations to bargain in good faith, the bargaining representative must:

  • attend and participate in meetings at reasonable times
  • disclose relevant information (other than confidential or commercially sensitive information)
  • respond to proposals made by other bargaining representatives in a timely manner
  • give genuine consideration to the proposals of other bargaining representatives, and give reasons for the responses to those proposals
  • refrain from capricious or unfair conduct that undermines freedom of association or collective bargaining.

However, the requirements for good faith bargaining do not require a bargaining representative to:

  • make concessions during the bargaining
  • to reach agreement on terms that are to be included in the proposed enterprise agreement.

A failure to comply with the good faith bargaining obligations may lead to Fair Work Australia making a bargaining order requiring the bargaining representative to comply with certain requirements. In circumstances where the bargaining representative does not comply with the bargaining order, Fair Work Australia may make a serious breach declaration, which may in turn lead to Fair Work Australia making a bargaining related workplace determination imposing terms and conditions on an employer and their employees.

Does an employer have to negotiate?

Under WorkChoices, an employer or employee cannot be compelled to negotiate a collective agreement.

Under the Bill, a bargaining representative of an employee who will be covered by a proposed enterprise agreement can apply to Fair Work Australia for a majority support determination. Fair Work Australia must make the majority support determination if certain requirements under the Bill are satisfied, including that a majority of the employees employed by the employer want to bargain for an enterprise agreement.

If a majority support determination is made by Fair Work Australia, the employer covered by the determination is required to negotiate in good faith with the other relevant bargaining representatives.

What matters can be dealt with by an enterprise agreement?

The Bill significantly changes the types of matters that can be dealt with by an enterprise agreement. Under WorkChoices, a workplace agreement can only deal with matters that pertain to the employment relationship between an employer and its employees. In addition, certain matters are deemed to be prohibited content, and cannot be included in a workplace agreement.

The Bill retains the ability for an enterprise agreement to deal with matters that relate to the employment relationship between an employer and its employees, but also allows an enterprise agreement to deal with:

  • matters that pertain to the relationship between the employer and a union that will be covered by the enterprise agreement
  • terms allowing for the deduction from an employee's wages for a purpose authorised by the employee (i.e. union dues).

As noted above, each enterprise agreement must also contain a flexibility term which allows the enterprise agreement to be varied in relation to an individual employee, to accommodate that employee's individual circumstances.

The Bill also specifies a number of matters which may not be dealt with by an enterprise agreement. These include discriminatory or objectionable terms, and terms which are inconsistent with certain other provisions of the Bill.

What is the approval process?

In order for an enterprise agreement to be approved under the Bill, an application must be made to Fair Work Australia to approve the enterprise agreement. Before an application can be made to Fair Work Australia, a valid majority (50% + 1) of employees who vote in a ballot for the enterprise agreement must approve it, and the ballot must not take place until at least 21 days after the last employee to be covered by the enterprise agreement is issued with a notice of their right to be represented. This is a much longer period than the seven days currently required under WorkChoices.

Before an enterprise agreement can be approved by Fair Work Australia, certain procedural requirements must be satisfied. This includes an obligation to explain the terms of the proposed enterprise agreement to employees in a manner which is appropriate taking into account the particular circumstances and needs of the relevant employees. In addition, Fair Work Australia must be satisfied that the enterprise agreement passes the 'better off overall test' (BOOT).

The BOOT is similar in nature to the 'no-disadvantage test' that operates under WorkChoices, however instead of there being a requirement that employees are not disadvantaged by the terms and conditions of a workplace agreement, the BOOT requires that each employee who is to be covered by the enterprise agreement will be better off than they would be under the applicable modern award.

Can terms be imposed on an employer?

Under WorkChoices, the Australian Industrial Relations Commission has very limited ability to impose terms and conditions of employment on a specific employer where bargaining fails.

Under the Bill, in addition to Fair Work Australia having the ability to make a bargaining related workplace determination imposing terms and conditions on an employer and their employees, Fair Work Australia also has the ability to make a low-paid workplace determination imposing terms and conditions on a group of employers and their employees.

Prior to making a low-paid workplace determination, Fair Work Australia must have made a low-paid authorisation. A low-paid authorisation may be made by Fair Work Australia on the application of a bargaining representative or a union, and authorises the bargaining representative or union to negotiate with a group of employers (such as all the employers in a food court at a shopping centre) to secure an enterprise agreement for employees who, amongst other matters, have historically faced substantial difficulty bargaining and whose terms and conditions of employment are substantially equivalent to the minimum safety net of terms and conditions of employment provided by modern awards and the National Employment Standards.

Implications for employers

The arrangements for making an enterprise agreement under the Bill are much stricter than those under WorkChoices. Employers will be exposed to claims for a much broader range of matters than is the case under WorkChoices, and the ability for an employer to negotiate directly with its employees will be significantly curtailed.

It will be important for employers to carefully plan their negotiations for an enterprise agreement, and to assess their current arrangements in preparation for the new regime.

Mark Sant t (02) 9931 4779 e
Kathryn Dent t (02) 9931 4715 e
Ian Dixon t (03) 9252 2553 e
Steve Troeth t (03) 9612 8421 e
John-Anthony Hodgens t (07) 3231 1568 e
Nicholas Linke t (08) 8233 0628 e

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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