Bargaining under Secure Jobs, Better Pay: Welcome to the brave new world

This is the second in a series of Insights addressing the momentous changes to Australia’s bargaining system brought in by the Federal Government last year which commenced operation on 6 June 2023. These changes fundamentally shift the bargaining dynamic, leading to an alteration of power between employers and employees in many respects.

Bargaining under the Secure Jobs, Better Pay (SJBP) regime which came into force on 6 June will look very different to previous rounds of bargaining in which employers may be have been involved. The prospects are now much greater for third party intervention, including in the form of compulsory arbitration where the Fair Work Commission may set terms and conditions of employment without employer consent, and preparation for bargaining is key.

Our previous Insight in this series discussed the commencement of bargaining and, in particular, the new ways in which employers could be drawn into the bargaining system without their agreement. This Insight focuses on the SJBP amendments which are most relevant once bargaining has commenced, namely – the introduction of the intractable bargaining regime, changes to industrial action processes and the removal of enterprise agreement termination as a viable option for employers. It explores the significantly increased powers of the Fair Work Commission to intervene in bargaining, and recommendations to help employers navigate the new bargaining world.

The system has reverted to a version of industrial relations where the focus is less on individual enterprises directly negotiating agreed terms with their workforces (which was so fundamental to unlocking productivity enhancements since the Hawke/Keating reforms in the 1980s and 1990s), and more on industry or sector-wide bargaining (or at least across multiple employers) and arbitrated outcomes reminiscent of pre-Accord award making processes.

Welcome to the brave new world.

Intractable bargaining 

What happens after an impasse in bargaining is reached has always been a strategically important step. The intractable bargaining provisions introduced by the SJBP amendments add a further dimension to bargaining as they allow the Commission to intervene in bargaining that has reached an impasse and impose an outcome on the parties.

In short:

• these provisions allow bargaining representatives to apply to the Commission for an intractable bargaining declaration (Declaration) in certain circumstances (discussed further below). A Declaration is recognition by the Commission that bargaining negotiations have become intractable. Importantly, no industrial action can be taken once a Declaration is in place; and
  
  
• if a Declaration is made, the Commission is then required to make an intractable bargaining workplace determination (Determination) “as quickly as possible” subsequent to the Declaration being made or after a post-declaration negotiation period specified in the Declaration ends. A Determination sets the terms of the enterprise agreement. It is binding on the parties and operates just like an enterprise agreement.

The intractable bargaining provisions apply to all forms of bargaining (including for single enterprise agreements and multi-enterprise agreements), other than greenfields agreements.

An overview of the intractable bargaining process is set out below:

Intractable Bargaining Declarations

The Commission has discretion whether to make a Declaration, if one is applied for by a bargaining representative and the minimum bargaining period has elapsed (nine months after bargaining has commenced for the proposed agreement), provided it is satisfied that:

• the Commission has dealt with a dispute about the proposed agreement under section 240 and the applicant for the declaration participated in the Commission’s processes to deal with the dispute;
  
  
• there is no reasonable prospect of agreement being reached if the Commission does not make the Declaration. The revised explanatory memorandum to the Secure Jobs, Better Pay Bill provides some guidance. It explains that it is not intended to require the Commission to be satisfied an agreement could never be reached. But rather, the chance of the parties reaching agreement by themselves is so unlikely that it would not be a reasonable chance. The explanatory memorandum says it is unlikely the Commission would reach this state of satisfaction unless the parties had exhausted all reasonable efforts to reach an agreement.
  
  This raises a number of practical questions: does there have to have been industrial action taken by employees? Does the employer have to have put a proposed agreement to vote? While it will be interesting to see what approach is taken as the first of these cases work their way through the Commission, in our view, where the Declaration is opposed by one of the bargaining representatives, the Commission will be reluctant to grant it in the absence of at least an unsuccessful ballot (unless it is clear that the party is deliberately dragging its feet on those fronts to avoid a Declaration being made); and
  
  
• it is reasonable in the circumstances to make the Declaration, taking into account the bargaining representatives’ views. The considerations which may inform this state of satisfaction are not specified in the Fair Work Act 2009 (Cth). The explanatory memorandum provides that the Commission could consider the dispute in the context of the whole of the relationship of the parties, the history of the bargaining, the conduct of the parties, the prevailing economic conditions, and the bargaining environment.

Interestingly, the Commission can rely on conduct of the parties in bargaining prior to commencement, when deciding whether to make a Declaration. While there is potential for unfairness here for bargaining that has been on foot since before the SJBP amendments were made, particularly where the parties could not have been aware of this potential consequence, one would hope that this power will be used positively, for example by condemning unpalatable and vindicative behaviour as seen at times on social media, often directed towards named or identifiable company representatives.

Intractable Bargaining Determinations

If a Declaration has been made in relation to a proposed enterprise agreement, the Commission must make a Determination as quickly as possible after any specified post-Declaration negotiation period. A Determination in effect sets the terms of the enterprise agreement.

The Determination must include the terms that have already been agreed by the parties, with any outstanding matters at issue (including in relation to core terms such as coverage, consultation, expiry, etc) being decided by the Commission following an arbitral process.

In making a Determination, the Commission must take into account the same matters that it has to consider in making a ‘normal’ workplace determination (as provided for in section 275). This includes the interests of the employer and employees, productivity, the public interest, and the parties’ conduct during bargaining (including their compliance with good faith bargaining obligations).

Once a Determination is in place, it has the same effect under the Fair Work Act as if it were an enterprise agreement.  Accordingly, if a person contravenes a term of a Determination, the civil remedy provisions apply.

What should I be doing now?

On the one hand, there are concerns that the changes will stifle genuine attempts to reach agreement with parties concerned about making concessions and/or making exaggerated claims believing the Commission may look to ‘split the difference’.

On the other hand, there are concerns that decisions will be taken out of employers’ hands and given to a third party with the commensurate risk that the outcome is unworkable, uncommercial or simply inappropriate for your operations and workforce. After all, an externally imposed outcome is likely to be inferior to an agreement reached voluntarily between those who ‘live and breathe’ the workplace.

With risks, however, there may be opportunities. We believe employers should now be looking to:

• approach bargaining in a way that increases the prospect of critical terms being ‘agreed’ before a Declaration is available (i.e. during the first nine-months of bargaining);
  
  
• keep a record of, and call out, any poor conduct or potential breaches of good faith bargaining obligations by other bargaining representatives, noting that conduct prior to 6 June 2023 can be taken into account;
  
  
• keep a comprehensive record and chronology of bargaining which may be drawn on to demonstrate whether bargaining has reached an impasse;
  
  
• consider the basis upon which you make concessions in bargaining. Typically you will be bargaining for a package of changes and concessions on one matter may be tied to the overall package. This is important given the Commission will only arbitrate those matters not agreed;
  
  
• be prepared to justify your bargaining position in the event you find yourself in a Determination process. You will need to be able to demonstrate why the terms being sought are unsustainable or inappropriate.  The message needs to be consistent and aligned with what has been communicated in the bargaining;
  
  
• have clear evidence supporting your position. The evidence can be from the workplace or, if necessary, may be drawn externally. This could include, for example, expert evidence about prevailing market conditions and the potential negative impact of particular terms or practices where they would limit much needed flexibility or competitiveness, or would potentially have an adverse effect on employment.

Industrial action more readily available

The SJBP amendments introduced changes to the availability of, and process for, taking industrial action which will affect how parties bargain in a number of ways. Two of the most critical are likely to be:

• Industrial action is available in multi-employer bargaining

Employees are able to take industrial action during the course of multi-employer bargaining. This opens the door to unions exerting pressure on groups of employers based on their industry, sector or geographic location. For example, unions may seek to coordinate a number of contractors operating at a site, or across a supply chain, to take industrial action together with the operator’s direct employees, such that the operator may be unable (or less able) to implement any effective mitigation strategy to minimise the operational impact of the industrial action.

One important protection which has been included in the SJBP amendments is, for the purposes of multi-employer bargaining, each employer is treated separately, meaning that for protected industrial action to occur against an employer there needs to be support from the majority of employees of that employer. While this may be of limited relief to employers, given that protected action ballots are so often voted up by comfortable margins, it does emphasise (as discussed further below) how important it is for employers to maintain strong and effective communications with their workforces, so that a vote in favour of a protected action ballot is not a fait accompli.

One other wrinkle is that the minimum notice for the proposed protected industrial action, if the proposed enterprise agreement is a multi-enterprise agreement, is 120 hours. Otherwise, the notice remains three clear working days (which does not include weekends). However, in both cases, the Commission may still extend the period of notice required to up to seven working days, where ‘exceptional circumstances’ exist justifying such an extension.

• The Commission will have a significantly increased role

The second significant change, which does not just apply to multi-employer bargaining, is the new requirement that the Commission must conduct a conciliation or mediation conference after making every protected action ballot order (PABO), and the parties must participate in that process in order for any subsequent industrial action to be protected.

There is little prescription about the substance of the process itself: it may involve more than one conference, provided that the process must be completed prior to the close of the PABO vote, and the Commission may issue (non-binding) recommendations or express an opinion. Guidance from the Commission has emphasised the need for the conference to be a meaningful process directed at reaching an agreement, and the conference will be conducted in private. It is likely, however, that there may be some diversity in the approach taken by different Commission members.

Critically, as foreshadowed above, for industrial action to be protected, the party taking the action must not have contravened any order made by the Commission “about [the] mediation and conciliation conferences”.[1]  Our expectation is that this will extend to attending the conference so that if a bargaining representative (employee or employer) does not attend the conference, the relevant party and those it represents cannot take protected action.

Employers may also be able to utilise these new provisions in a defensive manner, as the non-contravention requirement is not just limited to the other party attending the relevant conferences – if any orders are issued by the Commission during the course of the process and these orders are not complied with it would effectively operate as a bar to subsequent industrial action being protected. For example if orders have been issued for the production of documents or information, or that a party fully articulate their claims, by a particular date, or orders that a party refrain from posting certain material on social media), non-compliance with these order would bar the protection of subsequent industrial action.

Accordingly, employers should not just approach these conferences with a ‘tick-the-box’ mindset. Careful planning should be undertaken before you get into the conference(s), as there may be real value to be extracted by engaging meaningfully in the process.

What can employers do to prepare?

Proper planning prevents poor performance

In this new environment, there is an old adage that is more applicable than ever: proper planning prevents poor performance. Under this new regime, it is even more critical for businesses to have a comprehensive plan in place, preferably before bargaining even commences.

At a minimum this would involve:

• a clear and compelling engagement strategy with employees. Employers who pay at or near the top of the market can be drawn into multi-employer bargaining and should be prepared to call it out where their employees are being used as leverage to encourage less-generous employers to rise to their level, or where the action is being taken to impose pressure on some other employer;
  
  
• a proactive communications strategy, where the terms proposed by the employer are justified and ‘sold’ to employees. If employees are happy with the terms, or at least have a proper appreciation of the employer’s position, they may be far less likely to vote in favour of a PABO. These communications may also assist demonstrate the genuine reasons for an employer’s position and could support influencing third parties such as the Commission;
  
  
• setting clear bargaining strategies with justifiable objectives. Your internal stakeholders should be aligned, and fully prepared for what the bargaining process might involve (including, for example, significant public campaigns, a distracted and hostile workforce, and disruptions to operations caused by industrial action); and
  
  
• a clear-eyed understanding of your mitigation and exit strategies in the event that prolonged industrial action is taken during the course of bargaining. All of the usual avenues to managing industrial action are still available (such as section 240 processes and orders suspending or terminating industrial action), and you should be planning whether (and, if so, when) any of these levers could be pulled.

Terminating existing agreements during bargaining not viable

The prospect of successfully applying to the Commission to unilaterally terminate an existing agreement during bargaining is, for all practical purposes, no longer available to employers.

The prospect of employers seeking to terminate enterprise agreements during bargaining, typically where the terms and conditions under the existing agreement was no longer appropriate or sustainable, was often seen as a compelling reason for employees to agree to a replacement of those earlier terms. In practice, therefore, an application to terminate an existing agreement was seen as altering the bargaining dynamic by forcing the employees to accept the new arrangements, or to at least make some concessions or more meaningfully engage in the bargaining process.

Contrary to the narrative consistently pushed by unions, however, this ‘nuclear option’ was only used sporadically, and usually as a last resort after prolonged periods of bargaining where the employer was unable to secure any substantive change at the negotiation table (because the current industrial arrangements are so often treated as the ‘floor’ or starting point for negotiations).

These changes, which have been in effect since 7 December 2022, make terminating an enterprise agreement after the nominal expiry date significantly more difficult for employers. Now, the circumstances in which the Commission is required to terminate an expired agreement are only where:

• the continued operation of the agreement would be ‘unfair’ for the employees covered by the agreement; or
  
  
• the agreement does not, and is not likely to, cover any employees; or
  
  
• the following three criteria are all satisfied:
  
  
  • the Commission is satisfied that the continued operation of the agreement “would pose a significant threat to the viability” of a business carried on by the employer(s);
    
    
  • the Commission is satisfied that termination of the agreement would reduce the likelihood of terminations of employment because of redundancy; and
    
    
  • the employer has given the Commission a guarantee in relation to termination entitlements (for example, if the agreement contains an above-NES redundancy pay formula).

This test removes the discretion the Commission previously had, and makes it effectively impossible for employers to terminate expired enterprise agreements. This is particularly the case if bargaining for a new agreement is underway, as the employer will also need to satisfy the Commission that the termination of the enterprise agreement will not adversely affect the employees’ bargaining position. The consequence of this is that businesses can be ‘stuck’ with expired enterprise agreements that are no longer reflective of the business.

On this basis, the only agreement terminations we are likely to see will be where unions utilise these provisions to terminate enterprise agreements where the terms or conditions are less favourable than the applicable modern awards (which could possibly occur during bargaining, given that the requirement on the Commission is only to consider whether the termination would “adversely affect the bargaining position of the employees” (emphasis added)).

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_{[1] This requirement applies to both employee claim action and employer response action.}