Some key features of the Fair Work Act 2009 (Cth) (FW Act) are the changes introduced to the collective bargaining framework. We now have concepts such as majority support determinations, scope orders and good faith bargaining requirements. The past few months have seen a number of cases that give guidance on how these collective bargaining elements may operate in practice. It has not all been plain sailing for participants.
In this article we give an overview of some of the more interesting developments to date. The cases bear out the truth of the warning from our colleagues at DLA Piper in the USA that in a good faith bargaining environment you need to be prepared.
LET THE BARGAINING BEGIN – COMMENCING BARGAINING
Our experience tells us that parties are now aware that bargaining commences in quite a different way under the FW Act. Gone is the concept of the 'bargaining period'. And so typically formal bargaining commences either when an employer gives notice to its employees of their representational rights or when a majority support determination is obtained that triggers the notice. Simple? Well not quite.
Determining the scope of an agreement – LHMU v Coca- Cola
The ability of a union to organise employees to force employers to bargain for an enterprise agreement is a critical feature of the new regime. In particular, for employers that have operated with individual agreements or employee collective agreements, the unions' ability to seek to initiate bargaining and organise around these new rights is significant. The recent bargaining round at Coca- Cola Amatil (Aust) P/L (Coca-Cola) in regards to its South Australian operations provides insight into how a proposed bargaining strategy can be affected by the FW Act.
The effect of a majority support determination
In August last year, following some discussions with the Liquor, Hospitality and Miscellaneous Union (LHMU), Coca- Cola issued notices of employee representation rights that identified three categories of employee that it proposed be covered by three separate agreements – namely employees in production, warehousing and maintenance. This is a common way for industrial arrangements to be organised in the FMCG industry and in manufacturing. The notices also identified certain employees to be excluded from the production agreement. The LHMU proposed a single agreement covering the site, including employees Coca-Cola sought to exclude. The dispute raised the issue of whether a majority support determination can set the scope for an agreement or whether that is a separate issue that must be dealt with in an application under the scope provisions.
In the first Coca-Cola case of 19 August 2009 before Fair Work Australia (FWA) ( FWA 101), FWA Senior Deputy President O'Callaghan found that if bargaining has commenced for a proposed enterprise agreement the appropriate tool to resolve issues on coverage are scope orders. In the Coca-Cola decision handed down on October 2009 ( FWAFB 668), the LHMU unsuccessfully appealed this decision. The Full Bench of FWA was clear that a majority support determination does not determine the scope of bargaining any more than it determines the terms and conditions to apply.
The scope of the proposed enterprise agreement remained an issue and shortly after 19 August, the LHMU sought bargaining orders to prevent Coca-Cola from restricting its syrup room, alcohol testing and QA positions to new technical positions that would be salaried and not covered by any enterprise agreement. In the Coca-Cola decision handed down on 31 August 2009 ( FWA 153), the LHMU argued that the restructure by the company amounted to conduct that was capricious and unfair and undermined bargaining. Although Coca-Cola made certain undertakings about its proposal that led O'Callaghan SDP to refuse the application, his Honour made some important observations. O'Callaghan SDP stated that the proposed restructure was not capricious, as it was undertaken in accordance with the consultation provisions in the relevant industrial instrument. In addition, as the consultation required Coca-Cola to consider the union response to the proposal, it was not unfair.
The scope order dispute
The decision of FWA, in another Coca-Cola case ( FWA 818) then considered whether to make a scope order that there be a single agreement. This required an assessment of the state of the negotiations. Again the LHMU failed to persuade FWA of its position. The reasons of O'Callaghan SDP highlight the importance of being able to establish in clear terms that a scope order will promote fair and efficient bargaining. A preference for one type of arrangement over another will not suffice unless it is also supported by evidence of why, as in this case, three agreements were preventing negotiations or gave rise to the risk of wage anomalies. Bald assertions are not enough.
The petitioning process – CFMEU v Mammoet Pty Ltd
The decision in CFMEU v Mammoet Pty Ltd  FWA 1945 considered the position where an employer questions the integrity of a petition claiming majority support.
In this case, the Construction Forestry Mining and Energy Union (CFMEU) applied for a majority support determination for employees of Mammoet. Mammoet works on the Woodside Pluto LNG Project in Western Australia. Mammoet's concerns related to the integrity of the CFMEU petition. The case is important in that Mammoet raised some interesting issues on the requirement in section 237(2)(a) of the FW Act that the FWA must be satisfied that a majority of employees want to bargain. What will be sufficient proof?
In this case, the employer argued that the method of handing a petition around in the presence of a union delegate and fellow employees was not a reliable method to obtain the true views of employees. Further, Mammoet argued that the employees had not had a proper opportunity to consider the petition or seek advice and they had no privacy in making their decision. Mammoet highlighted the inherent conflict of interest of the union seeking a petition to organise employees.
FWA Deputy President McCarthy rejected the CFMEU's argument. While his Honour stated that a petition of this nature should ordinarily satisfy the requirements in the FW Act, he noted that the matters raised by the employer had both substance and merit. The case suggests that the mere production of a petition is open to challenge if there are good grounds to suggest that its integrity is in question.
- A majority support determination does not determine the scope of an agreement.
- Employers may have grounds to question the evidence of majority support put forward by a bargaining representative.
- Before a scope order can be obtained, the prerequisites in the FW Act must be satisfied and the evidence must establish that the making of an order will promote fair and efficient bargaining. Mere preferences for a particular scope on their own do not satisfy this requirement.
BARGAINING IN GOOD FAITH
Having kicked off bargaining, issues arise regarding what it means to act in good faith. This matter has been considered by FWA in a number of cases. The cases illustrate that a well-prepared and executed bargaining strategy is vital.
At issue early was the question of communication with employees. In the USA this is a fraught subject and the formal bargaining processes place restrictions on what would be normal practice between an employer and its employees. The Australian cases to date recognise the continued right of employers to communicate directly with employees. But it is not without some additional requirements during a period of negotiation.
Putting agreements to the vote – You need to be transparent
Before the FW Act, it was not uncommon during the bargaining process for an employer to seek the approval of a proposed agreement directly from its employees. Often this occurred when negotiations with a union had stalled. There are now limits to this option under the good faith bargaining provisions as shown in a number of recent cases.
In National Union of Workers v Defries Industries Pty Ltd  FWA 88, FWA considered an application by the National Union of Workers to stop a proposed ballot of Defries employees. The application alleged that the employer's conduct in distributing a draft agreement and advising the date for a vote was in bad faith because it was capricious or unfair conduct (section 228(1)(e)) as it undermined the position of the bargaining representative. FWA Commissioner Whelan stated that putting an agreement to the vote indicates the employer considered bargaining to be at an end and that it no longer intends to bargain. The employer did so without telling the union and it denied the union the opportunity to propose any further amendments. The Commissioner found that this conduct amounted to unfair conduct by undermining freedom of association and collective bargaining. His Honour granted the order.
The issue was again raised before Commissioner Whelan in Alphington Aged Care and Sisters of St Joseph Health Care Services (Vic) t/a Mary McKillop Aged Care; ANF  FWA 301. Alphington Aged Care and Mary McKillop Aged Care made an application for the approval of their respective enterprise agreements. The Australian Nursing Federation (ANF), which was the bargaining representative for some employees, opposed approval. ANF's complaint was that the employers put their agreements to the vote whilst continuing to deal with the union as if the processes were separate. Notice again was not given. Again the Commissioner found in favour of the union.
In each case the issue concerned a failure to give notice to the bargaining representatives of an intention to put the agreement to a vote. It is important to recognise that bargaining is at an end after the union, as bargaining representative, has had a proper opportunity to put forward its position(s).
In a more recent case, Commissioner Smith made an interim order postponing a vote in AMWU and APESMA v DTS Food Laboratories  FWA 1854. The unions sought an order for the postponement of a proposed vote of employees on whether to approve an enterprise agreement. The description of the employer's conduct in putting the proposed agreement to the vote was that it was unilateral, misleading, sought to exclude certain employees from its scope and by doing so the conduct was capricious and unfair.
Commissioner Smith focussed on whether the negotiations had reached an impasse. His Honour recognised that the FW Act does not require an agreement to be reached or concessions made, but stated that sending an agreement out for a vote prior to a failure in negotiations, would not be dealing openly and honestly with those who have been charged with the responsibility of seeking to reach agreement.
The lessons for employers is that whilst you can seek the approval of an agreement when negotiations have reached an impasse, you need to first take steps to ensure you communicate that intention and act transparently.
Employers can communicate directly with employees
Employers will be comforted by two FWA decisions that recognised the good management practice of directly communicating with staff.
In Queensland Nurses Union of Employees v Lourdes Home for the Aged  FWA 1553, the FWA recognised that an employer can seek its employees' views on whether they should negotiate a new agreement. The FWA dismissed the application by the union that the employer had acted in bad faith by organising a ballot of its employees to see whether they supported bargaining for a new agreement, prior to any bargaining taking place.
In LHMU v Mingara Recreation Club Ltd  FWA 1442, FWA Vice President Watson dismissed an application for good faith bargaining orders that would have permitted the union to attend any meetings relevant to the negotiations for a new agreement. His Honour noted that the FW Act requires genuine recognition of a bargaining representative and genuine bargaining. But it does not preclude concurrent communication and discussions with employees. There is still scope for an employer to meet with employees in the absence of the bargaining representative. This is a step away from the recommendation made by FWA Senior Deputy President Drake in the early days after the commencement of the FW Act in a matter involving bargaining at Transfield.
Employers are not required to pay for employee meetings with the union
In LHMU v Foster's Australia Ltd  FWA 750 the company successfully opposed a union bid for bargaining orders that would have forced the company to allow workers at one of its breweries to hold paid mass meetings to discuss their wage negotiations and possible industrial action. In this case, the company, represented by DLA Phillips Fox, successfully argued that it was entitled to reject a request for paid meetings. The company had long had a protocol in place that it would not allow mass meetings where workers planned to discuss or organise industrial action against the company.
FWA Senior Deputy President Kaufman rejected the union's application for the bargaining order, saying that it was not capricious for an employer to refuse to extend the 'indulgence' to allow the paid meetings when they were, at least in part, held to give a union the opportunity to convince members to vote in favour of protected industrial action.
- Preparation is not only key, but it can give you an edge in negotiations and protect your strategy. You need to understand the process in which your organisation is involved as more and more union bargaining representatives do.
- You should consider having a strategy for clear and open communication with your employees during negotiations. This strategy will need to comply with your good faith bargaining obligations or you will run foul of the FW Act.
- If negotiations reach an impasse you may want to seek approval of the proposed enterprise agreement from your employees. However notice of an intention to put the agreement to an employee vote should be provided to bargaining representatives.
Enterprise agreements are now made between an employer and its employees. An agreement (excluding a greenfields agreement) is made when a majority of employees that will be covered by the agreement vote to approve it. Before the vote, there are a number of important pre-approval processes. Employees must have access to the proposed agreement for seven days, they must also have the terms of the agreement explained to them and any vote must not be conducted until at least 21 days after the last giving of the notice of representation rights. These are important matters to get right and recent decisions of FWA bear this out.
Explaining the agreement is still important
The FWA in Class Electrical Services Pty Ltd v CEPU  FWA 1541 reminds us that an employer must explain to their employees the differences between their current conditions and those that apply under a proposed enterprise agreement. This is part of the pre-approval process.
In this case, the company had met with employees. However Commissioner Cargill formed the view that while the FW Act did not explicitly require an employer to go through the differences between the two agreements, any proper explanation of the effect of a term (such as one that changed redundancy entitlements) necessarily involved some comparison with existing arrangements. Employers must still take reasonable steps to ensure the terms of the agreement and the effect of those terms are explained to employees. As this did not happen in this case the mandatory pre-approval steps had not been met and the agreement was not approved.
The Federal Court decision in Blue Star Pacific has been overturned in Blue Star Pacific Pty Ltd v CEPU  FCAFC 187. At first instance, the Federal Court had found that in regards to the obligations under the Workplace Relations Act 1996 (Cth) (WR Act) to allow employees a reasonable opportunity to decide whether they wanted to approve an agreement, employees should have the opportunity to meet and confer as a collective group. The Full Court of the Federal Court upheld the appeal. In three separate judgments the Court found that a reasonable opportunity to decide does not give rise to a universal or general requirement to conduct a meeting. The steps inevitably vary from employer to employer, but many will be relieved that collective meetings are not necessarily a requirement. The case remains relevant for employers who made agreements before 1 July 2009 and had concerns whether the agreements were valid. It continues to be important as a number of unions had sought to rely on the decision for other cases under the FW Act.
Dispute clauses are now mandatory and are not subject to the parties' consent
When assessing whether an enterprise agreement is approved, FWA must be satisfied that certain requirements are met. One requirement is that the agreement includes a term about settling disputes. We have previously highlighted the expanded role given to FWA under section 186(6) of the FW Act in that the dispute clause in an agreement now extends to disputes on any matters arising under the agreement and in relation to the NES.
Previously, dispute terms have had a far more limited role. Under section 170LW of the WR Act the power of the Australian Industrial Relations Commission was limited to disputes over the application of the agreement and there was no requirement that the settlement clause permit arbitration, even by consent. The FW Act now requires a term that '...requires or allows FWA ...to settle disputes...' .
Recently Woolworths sought the approval of an enterprise agreement made between it and its employees in which a union was a bargaining representative. FWA raised a concern about the term on settling disputes.
The disputes clause provided a common formula for the escalation of disputes. Either party was permitted to refer a matter to FWA for conciliation. If the matter remained unresolved, then there was a further escalation point where the parties may agree to have the matter arbitrated by FWA.
Commissioner Smith rejected this clause in his decision Woolworths Ltd trading as Produce and Recycling Distribution Centre  FWA 30. Commissioner Smith drew a number of distinctions between the requirements in the FW Act as opposed to the requirement that prevailed under the WR Act. His Honour held that the language 'requires or allows' does not create discretion with the makers of the agreement whether or not to have a disputes procedure at all. In addition, the use of the term 'to settle' indicates a direction to an action.
This decision is important to many employers. It is common for arbitration to be the subject of agreement in enterprise agreements and many of the agreements already approved by FWA have such clauses. Unlike the provisions regarding the mandatory consultation term, there is no default to a model dispute settlement provision where the clause is found not to meet the requirements in the FW Act.
The matter was appealed. The appeal was heard on Friday 5 February 2010. At the time of writing, the decision of the Full Bench had not been delivered.
Allowing time for employee approval
FWA has clarified the proper approach to the calculation of the 21 day period required before a request can be made to employees to approve a proposed enterprise agreement. Section 181 of the FW Act states that a request to employees to approve a proposed enterprise agreement must not be made until at least 21 days after the day on which the last notice under section 173(1) which deals with notice of employee representational rights has been given. In Lofa Pty Ltd  FWA 1348, FWA Senior Deputy President Richards found that an agreement approved on the 21st day was not able to be approved by FWA. The proper calculation commences on the following day after the last day on which notice was given.
It follows that the request to approve an agreement cannot take place until the 22nd day, at the earliest.
We have prepared guides to help our clients understand the changes introduced by the FW Act - The Workplace Guide to Bargaining under the Fair Work Act and the Workplace Guide to Industrial Action. If you would like to receive a copy of either guide please contact Rebecca Veli at firstname.lastname@example.org
© DLA Phillips Fox
DLA Phillips Fox is one of the largest legal firms in Australasia and a member of DLA Piper Group, an alliance of independent legal practices. It is a separate and distinct legal entity. For more information visit www.dlaphillipsfox.com
This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances.