Australia: Enterprise bargaining: Restructuring and genuine redundancy: Annual wage review
Workplace relations update

Contents

• What has been happening in enterprise bargaining
• A cautionary tale – lessons learned for restructuring and genuine redundancy
• Fair Work Australia annual wage review

What has been happening in enterprise bargaining

Enterprise bargaining is a key feature of the Fair Work Act 2009 (Cth) (FW Act) which has been used by a number of employers since the FW Act commenced in July last year. However, the processes and steps that an employer must follow to make an enterprise agreement are much more prescriptive than was previously the case.

Over the past few months, Fair Work Australia (FWA) has had the opportunity to consider the requirements of the FW Act in relation to enterprise bargaining. In this update, we provide an overview of some of the issues FWA has considered.

Timing requirements

The FW Act has very specific requirements which must be complied with when making an enterprise agreement. These include:

• an obligation that an employer provides its employees with a notification of their bargaining rights
• a requirement to not hold a ballot to approve an enterprise agreement until at least 21 days have passed since the notification of bargaining rights has been distributed
• a requirement that employees be given a minimum of seven full days notice of a ballot to approve the enterprise agreement (which means the ballot cannot be held until the eighth day after the last notice of the ballot was given).

There have been a significant number of enterprise agreements which FWA has refused to approve as a result of these timing requirements not being complied with, even though the enterprise agreements concerned had been approved by a significant majority of the employees, and the enterprise agreements otherwise complied with the requirements of the FW Act.

Voluntary additional hours

A key feature of a number of industries over recent years has been the introduction of voluntary overtime arrangements, under which an employee could elect, and their employer could agree, for the employee to work hours above and beyond the ordinary hours under the enterprise agreement without the payment of overtime rates. Whilst these were generally approved by FWA's predecessors, there is currently uncertainty as to whether these arrangements are available under the FW Act.

A full bench of FWA is currently considering an appeal in relation to a decision by a single member of FWA who declined to approve an enterprise agreement made between an aged care provider, its employees (an overwhelming majority of whom had voted in favour of the enterprise agreement) and the relevant union (Bupa Care Services Pty Ltd [2010] FWA 16). At first instance, FWA found that the voluntary additional hours clause caused the enterprise agreement to fail the no-disadvantage test as it resulted in a reduction in the terms and conditions of employment of employees. The full bench's decision in the appeal will have significant ramifications for the continued use of these types of arrangements.

Flexibility arrangements

The FW Act provides that an enterprise agreement must contain a flexibility clause which complies with certain requirements, or alternately a model clause prescribed by the regulations to the FW Act is taken to be included in the enterprise agreement. The effect of the flexibility clause is to allow the employer and an individual employee to agree to vary the effect of certain terms of the enterprise agreement.

In a recent decision, FWA declined to accept a flexibility clause contained within an enterprise agreement on the basis of what appears to be a very technical drafting error in the flexibility clause of the enterprise agreement (TriMas Corporation Pty Ltd [2010] FWAA 1485). Accordingly, FWA found the clause which had been agreed by the parties to the enterprise agreement was invalid, and it imposed the model clause instead.

This decision also highlights the importance of ensuring that the drafting of an enterprise agreement is precise, and is reviewed to ensure compliance with the FW Act generally to ensure that the terms of the enterprise agreement have their desired effect.

Dispute resolution

Under the FW Act, an enterprise agreement must contain a clause which provides for the resolution of disputes regarding the terms of the enterprise agreement and the National Employment Standards. Since the commencement of the FW Act, FWA has refused to approve a number of enterprise agreements as they did not contain a procedure for resolving disputes about the operation of the National Employment Standards.

FWA has clarified however the requirements in relation to a dispute resolution clause in an enterprise agreement. This was following an appeal in relation to an enterprise agreement made between a large employer and the relevant union which only allowed a dispute to be referred to FWA for arbitration by the agreement of the parties. At first instance, FWA found the dispute resolution clause did not comply with the requirements of the FW Act as it did not allow for compulsory arbitration of a dispute whereby FWA could impose an outcome on the parties to the dispute.

On appeal however, the full bench of FWA held that a dispute resolution clause does not have to afford FWA the power to arbitrate a dispute over the enterprise agreement or the National Employment Standards (Woolworths Ltd trading as Produce and Recycling Distribution Centre [2010] FWAFB 1464).

Key lessons for employers

The decisions of FWA clearly demonstrate that employers who are considering enterprise bargaining must ensure that they have clearly planned out the process they intend to follow to negotiate the enterprise agreement, and the terms they want to have in an enterprise agreement so as to ensure that the process and the enterprise agreement meets the requirements of the FW Act.

The decisions of FWA also highlight the importance of ensuring that the enterprise agreement itself is carefully drafted to ensure compliance with the FW Act, and to ensure that the enterprise agreement operates in the manner intended by the parties.

As can be seen, a failure to do so can result in weeks or months of work being thrown away due to technical difficulties, or worse, in certain circumstances, an employer and its employees being required to comply with terms which are substantially different from what was originally contemplated.
By Michael Cooper of Gadens Lawyers, Sydney

A cautionary tale – lessons learned for restructuring and genuine redundancy

The Fair Work Act 2009 (Cth) (FW Act) brought significant changes to an employee's ability to challenge their dismissal if their employment was terminated on the ground of redundancy ( click here to see our update on the changes to unfair dismissals). A recent decision of Fair Work Australia (FWA) has highlighted the significance of these changes.

Ulan Coal Mines Limited (Ulan) made a decision to increase the proportion of its experienced mineworkers possessing trade qualifications in underground crews in order to improve efficiency and productivity. Accordingly, Ulan decided to reduce the number of non-trade qualified mineworkers. Importantly, under Ulan's enterprise agreement, there was no distinction between trade and non-trade qualified mineworkers and the functions performed by trade qualified mineworkers were not substantially different to the functions that were performed by the non-trade qualified mineworkers.

Ulan sought expressions of interest for voluntary redundancies from non-trade qualified mineworkers only and subsequently 14 non-trade qualified mineworkers were retrenched. At the same time, Ulan engaged 11 additional trade qualified mineworkers. Ten of the employees who were retrenched applied to FWA for an unfair dismissal remedy, alleging their dismissals were harsh, unjust or unreasonable.

Ulan claimed that the employees' dismissals were genuine redundancies and as such, argued that the employees were not entitled to seek an unfair dismissal remedy (as the FW Act provides that employees have not been unfairly dismissed if the dismissal was a case of genuine redundancy). Commissioner Raffaelli rejected Ulan's objection.

In his decision, Commissioner Raffaelli noted that while the presence of additional trade-qualified mineworkers may have enhanced repairs and maintenance underground, it does not 'meaningfully diminish the fact that the work performed by all mineworkers ... remains essentially the same' and that there was no evidence as to what work performed by non-trade qualified mineworkers was no longer performed. On this basis, Commissioner Raffaelli held that it could not be said that the positions held by the non-trade qualified mineworkers were no longer required to be performed by anyone, as it was clear that Ulan still wanted the job done, albeit by trade qualified mineworkers.

In addition, Commissioner Raffaelli held that Ulan had failed to meaningfully comply with its consultation obligations under its enterprise agreement, which is a necessary requirement for a dismissal to be as a result of a genuine redundancy under the FW Act.

Commissioner Raffaelli held that as the dismissals were not cases of 'genuine redundancies' as required by the FW Act, the employees could proceed with their claims.

Ulan has appealed against Commissioner Raffaelli's decision. The appeal is to be heard by a full bench of FWA in late April 2010.

Key lessons for employers

This decision demonstrates the care that must be taken by employers in restructuring their businesses so as to minimise their exposure to unfair dismissal claims. Whilst in this case Ulan was genuinely motivated to ensure the continued profitability of its business, its failure to thoroughly review its policies, agreements and position descriptions to satisfy itself that the roles performed by the employees no longer needed to be performed and its failure to comply with the consultation requirements under their enterprise agreement, ultimately brought Ulan unstuck.
By Tamara Gilliesof Gadens Lawyers, Brisbane

Fair Work Australia annual wage review

Fair Work Australia (FWA) is required under the Fair Work Act 2009 (Cth) to review modern award minimum wages and make a national minimum wage order each year. The annual wage review for the 2009/2010 financial year will be conducted between March and June 2010 by FWA. The minimum wages set out in modern awards may be varied, set or revoked by FWA in its annual wage review, with any variation resulting from the review having effect from 1 July 2010.

FWA has invited written submissions in relation to the 2009/2010 financial year annual wage review from any interested person. Initial submissions will be published on the FWA website. There is also an ability for interested persons to make submissions in reply.

Please contact a member of the Gadens Lawyers' workplace relations group if you require further information.
By Lisa Nash of Gadens Lawyers, Sydney

For more information, please contact:

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.