This is the third and final Insight in our series addressing the momentous changes to Australia’s bargaining system brought in by the Federal Government last year which fundamentally shift the bargaining dynamic, leading to an alteration of power between employers, employees and unions in many respects.
While much remains unknown about how the Secure Jobs, Better Pay (SJBP) changes will impact on bargaining in practice, it is clear unions will have significantly more power throughout the process, including at the pointy end of putting an agreement to vote, and getting it approved through the Fair Work Commission.
Our first Insight in this series discussed the commencement of bargaining and the myriad of ways in which employers could be drawn into the bargaining system without their agreement under the SJBP amendments. Our second article focussed on the changes most relevant to bargaining on foot, particularly in relation to industrial action processes, the new intractable bargaining regime and restrictions on enterprise agreement termination.
This Insight fittingly explores the changes made around the conclusion of bargaining: from putting an agreement out to vote, through to passing the better off overall test (BOOT) and getting the agreement approved by the Fair Work Commission. We have also provided some practical guidance as to how an employer can be ready when inevitably faced with the challenges that arise from these changes.
When can an employer put an agreement out to vote?
Once a single interest employer authorisation (SIEA) or supported bargaining authorisation (SBA) covers an employer, they are ‘locked into’ the multi-employer bargaining system while it remains in effect. Employers cannot refuse to bargain, or try to bargain for a single enterprise agreement.
The SJBP amendments do not stop here, however. Another significant requirement imposed on employers, which also has the effect of limiting autonomy, is a restriction on unilaterally putting proposed agreements to vote.
That is, employers who are negotiating a multi-enterprise agreement cannot put forward a proposed agreement for employee vote without the written consent of any union bargaining representative.
This gives unions a significant level of power, as they can veto any proposed agreement until it is to their complete satisfaction. This could have a particularly concerning impact where, for example, there are issues of strategic importance to the unions in bargaining which are not as important or relevant to the majority of employees.
The situation may be further complicated where there are multiple unions involved and they are not on the same page. If that happens, the proposed agreement cannot be put to vote until all unions have agreed leaving employers in a precarious position.
There is a safety lever, however, in that the Commission may order that a vote be allowed in circumstances where the relevant union(s) have ‘unreasonably’ withheld their consent.
There is no direction given in the legislation as to what matters the Commission must take into account in deciding whether a refusal was unreasonable, and so there is a real risk (at least at an early stage) that there will a divergence of approaches among Commission members.
Nevertheless, employers will bear the onus to obtain such an order, and so they should ensure the bargaining process and any request for vote ‘approval’ are well documented to establish any unreasonableness.
If you are bargaining for a single-enterprise agreement, there is no such restriction, and you are able to continue putting proposed agreements to vote without union consent.
What makes an agreement genuine?
The assessment of whether the agreement (other than a greenfields agreement) was ‘genuinely agreed’ to by employees (an essential prerequisite to agreement approval by the Commission) has also changed – although these changes are only relevant to agreements where the ‘notification time’ occurred after 6 June 2023. For agreements with a notification time before that date, the previous genuine agreement provisions of the FW Act apply “as if the [SJBP] amendments had not been made”.
The Commission will now have to be satisfied that the employees requested to vote had a ‘sufficient interest’ in the terms of the agreement and were ‘sufficiently representative’, having regard to the employees covered by the agreement.
These matters are somewhat reflective of the tests that had been developed and applied in case law over the past few years, where terms such as ‘stake in the agreement’ and ‘moral authority’ had come into vogue, but which were not previously express aspects of the legislation.
Additionally, the SJBP amendments directed the Commission to develop a “statement of principles on genuine agreement” (Statement), which will be considered by the Commission in determining whether employees have genuinely agreed to a proposed enterprise agreement for the purposes of section 188 of the FW Act. The Statement has now been published and can be accessed here.
Whilst the Commission must take into account the matters listed in the Statement, it is worth noting that the matters are considerations rather than a comprehensive checklist of objective requirements. It is yet to be seen how strict compliance with each matter will be required in practice, or if the Commission will make more of a global assessment of the circumstances as against the Statement.
In some ways, the Statement simplifies things for employers by codifying the matters to which the Commission will have regard, which has previously been a somewhat nebulous exercise. However, in others, the Statement may actually cause confusion and make the agreement approval process more opaque, by moving away from objective criteria in some areas and giving the Commission more discretion.
The most significant aspects of the Statement that add to, or build on, the existing landscape are set out below.
|Issue||What will the Commission consider?|
|Sufficient interest/sufficiently representative||When considering whether employees have a sufficient interest and are sufficiently representative, considerations include whether the employees entitled to vote on the enterprise agreement are to be paid the rates of pay provided for in the agreement, and the extent to which the employees entitled to vote are employed across the full range of classifications, types of employment, geographical locations and any industries and occupations covered by the agreement.|
|Time periods||Employers are now required to provide employees with a "reasonable opportunity to consider a proposed enterprise agreement before voting”, which is to be “at least” seven full calendar days – but could potentially be longer (although the circumstances in which this would be the case are not detailed in the legislation). Employers are able to agree with an employee organisation as to what the period should be.|
|When explaining the terms of the agreement, employers must now also explain any changes that have been made to the underpinning modern award since the previous agreement was made. There is generally no need to explain trivial differences between the proposed agreement and an existing enterprise agreement or modern award that have no effect on employees’ entitlements or obligations. Careful consideration should be given to what is deemed ‘trivial’ and, if in doubt, the employer should explain the change.|
If an employer makes an incorrect representation, or misleads its employees (by words, actions, or other means) about a significant term of the proposed agreement, then the Commission will generally not be satisfied that employees were properly informed, and therefore will not approve the agreement.
There is no exception provided for innocent or inadvertent representations.
|Voting||Each employee’s vote must be free and informed. To satisfy a vote being free and informed, employers should consider how the vote is conducted.|
The Statement has given some guidance on how to ensure the employee is free to vote. Relevantly, the vote of employees must not be disclosed or ascertainable by the employer. This safest and easiest way around this for an employer is to conduct a secret ballot.
In relation to the informed aspect, the time periods and explanatory materials discussion above provides for the best way to ensure employees are sufficiently informed before any vote.
|Authentic exercise in agreement making||The Commission will also consider if the agreement was the product of an “authentic exercise in agreement making”, a phrase ambiguous enough that it is sure to be a contentious point of litigation in the coming years.|
The ‘authentic exercise’ test appears designed to avoid scenarios where an employer attempts to pass an agreement that is not the result of bargaining in good faith. This includes where the cohorts are unrepresentative, or the agreements are made with small cohorts, which is an example highlighted in the SJBP Explanatory Memorandum, where it is explained that when a small cohort is paid at a higher rate than those provided in the enterprise agreement, they should not be capable of being found to have genuinely agreed.
|Genuine agreement||Finally, unions now have a larger seat at the table when the Commission is considering if an agreement was genuinely agreed. This is especially significant where the union(s) acted as a bargaining representative for a ‘large proportion’ of employees. In such circumstances, the Commission must give ‘significant weight’ to their views, if they support the approval of the agreement. Curiously, the Statement only provides that the views of a union should be given weight when they support the agreement; however, it seems likely that, in practice, the absence of such support is inevitably going to be factored in by the Commission.|
Employers should document union agreement wherever possible in relation to whether the enterprise agreement was genuinely agreed.
It is clear that these amendments have given the unions a far greater voice. Employers must be across the new genuine agreement principles and ensure positive steps are taken to adapt, or risk the Commission declining to approve their agreement and sending the parties back to the bargaining table.
Putting the BOOT in
There are also a raft of changes that were made to the BOOT process as of 6 June 2023. Relevantly, section 191A was introduced, under which the Commission is able to amend an agreement during the approval process. The rationale behind this change is, in part, to limit the use of undertakings which can create confusion when trying to interpret the agreement.
Amendments can be made in circumstances where the Commission has concerns that the agreement does not meet the BOOT. When making these amendments, the Commission must seek the views of the employer, any award covered employees, and all bargaining representatives in order to satisfy itself that an amendment is ‘“necessary” to address the concern.
It is some comfort that the Commission must consult the employer as part of the process, and it appears to be intended that the Commission will work with the parties in a constructive manner when proposing any amendments. In practice, however, this process may work in a similar fashion to the former way in which increasing numbers of undertakings were requested even where the employer argued they were not necessary (with the implication that, if they were refused, the agreement would not be approved).
To be prepared for this change, employers should ensure they are confident that the proposed agreement satisfies the BOOT, and should be in a position to show this where the Commission seeks to amend any provision. More on what this looks like is explored below.
The new section 193A modifies the BOOT in several aspects:
- the BOOT is to be undertaken on a ‘global’ rather than a ‘line-by-line’ basis;
- the Commission, when applying the BOOT, must take account of any views that have been expressed by the employer(s), award-covered employees, or any bargaining representative(s);
- the Commission must give ‘primary consideration’ to any ‘common view’ of employers and bargaining representatives who are registered unions as to whether an agreement passes the BOOT (other than where the agreement is a greenfields agreement); and
- the Commission may only have regard “to patterns or kinds of work, or types of employment”… “if they are reasonably foreseeable at the test time”, having regard to the nature of the enterprise.
Employers will also be comforted by the prescription that the BOOT is to be conducted on a global basis. However, this does not mean that the assessment should be any less diligent.
Employers should still conduct a comprehensive BOOT analysis to ensure the proposed agreement passes the test. Whilst this change makes clear that that a line-by-line assessment is not required, it is likely that in order to obtain a true global assessment, the agreement will need to be looked at on a line by line basis.
The benefit for employers can be found where one entitlement is being reduced but another is being introduced or increased. In this scenario, it is possible that these changes mitigate each other to a degree and result in satisfaction of the global BOOT. Whilst this was (theoretically) always the case, the line-by-line approach would often give undue weight to any potential ‘negatives’ of the agreement.
The last of the modifications detailed above is a welcome change. The approval process should no longer be hindered by comparisons to purely hypothetical situations. However, as we discuss below, the BOOT can be reconsidered where award-covered employees for the agreement engage in other patterns of work or other types of employment to which the Commission did not have regard when approving the agreement. In any event, this change is positive for employers and should streamline the BOOT process.
It should be noted that the Commission must give primary consideration to a common view between the employer and the relevant union as to whether the agreement passes the BOOT. If an employer is able to obtain the agreement of the relevant union(s), it may act to push the BOOT over the line where the Commission considers the BOOT to be lineball. However, even in the presence of a common view, the Commission must still undertake its own assessment.
Outgrowing your BOOTs
Presumably in response to union concerns regarding adverse effects of the BOOT being relaxed, the new Division 7A of Part 2-4 allows the Commission to reconsider the BOOT during the life of the enterprise agreement.
An employer, employee organisation, or an employee covered by the agreement may apply to the Commission to reconsider if the relevant enterprise agreement still passes the BOOT. In order for an application to be made, the following two criteria in section 227A(2) must be satisfied:
- prior to approving the agreement, the Commission had regard to patterns or kinds of work, or types of employment engaged in, or to be engaged in, by award covered employees; and
- at the test time, or at a later time, one or more employees covered have engaged in other patterns or kinds of work, or other types of employment, to which the Commission did not have regard to previously.
If your enterprise agreement is amended with retrospective effect, you will be protected from any pecuniary penalty for a breach of the agreement which would not have been a breach prior to the amendment being made. It may be of some relief to employers that the reconsideration of the BOOT will only apply to agreements made under the new regime, and not any pre-existing agreement made prior to 6 June 2023 (as a refresher, an agreement is ‘made’ when a majority of those employees who cast a valid vote approve the agreement).
It is also not mandatory that the Commission make an amendment to the agreement; the Commission is alternatively able to accept an undertaking which will be taken to be a term of that agreement. The rationale behind the reconsideration process is to allow for adjustments to the agreement only to the extent necessary to address the Commission’s concerns. The Commission will also avoid unnecessarily disrupting the operations of the enterprise.
If the Commission does adjust the agreement, it is likely (although far from certain) that it will seek the views of the parties, in line with the Commission’s ability to amend the proposed agreement when undertaking the BOOT initially.
Final takeaways for employers
This Insight concludes our series on the wave of changes introduced by the SJBP Act. The enterprise bargaining landscape has changed – fundamentally. Employers need to be aware of the changes, and importantly, have a plan in place to identify opportunities and successfully navigate the challenges inherent in this brave new world.
A plan is vital, especially considering an employer may find themselves roped in and having to engage in bargaining when they would not otherwise be expecting to. Tactics and levers used previously have changed, and in some cases removed entirely, and the position and powers of unions in bargaining have been considerably enhanced. Significantly, this includes:
- being drawn into multi-employer bargaining, or roped into a multi-employer agreement after it is made;
- being required to bargain for a replacement single-enterprise agreement on demand;
- exposure to industrial action in multi-employer bargaining, which might be taken in support of issues that are not actually related to your operations;
- increased involvement of the Commission in bargaining, particularly through compulsory conciliation processes before industrial action is taken, the ability to arbitrate intractable bargaining disputes and powers to unilaterally amend agreements at the approval stage;
- restrictions on terminating expired enterprise agreements, particularly during bargaining, or putting proposed multi-employer agreements to vote without union consent; and
- a whole new swathe of principles and considerations impacting on the agreement approval process.
These changes potentially pose identifiable risks to employers and their bargaining objectives, especially employers who are not prepared. Employers need to enter bargaining with a settled mandate, supporting communications and engagement strategies (for all relevant stakeholders), a clear understanding of the matters of importance to employees and their representatives, a sophisticated negotiation plan that is capable of delivering a successful vote within the required timeframe, and robust contingency arrangements to mitigate the risk of disruption to your operations.
 Which is, for practical purposes, when the bargaining commenced, either by way of an agreement to bargain, an order of the Commission or otherwise: see FW Act, section 173(2).
 Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth), section 66(a).
This publication is introductory in nature. Its content is current at the date of publication. It does not constitute legal advice and should not be relied upon as such. You should always obtain legal advice based on your specific circumstances before taking any action relating to matters covered by this publication. Some information may have been obtained from external sources, and we cannot guarantee the accuracy or currency of any such information.