The first in a series of three Insights addressing the momentous changes to Australia’s bargaining system brought in by the Federal Government last year which commence 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.
The landmark Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022 passed both houses of Parliament in December 2022 with significant fanfare. After this many chose to stick their heads in the sand and ignore the tsunami of generational changes which were deferred by six months. That time has now quickly passed and these changes are slated to commence operation on 6 June 2023.
It is not an overstatement to observe that these amendments represent the most significant changes to Australia’s bargaining system since the introduction of the Fair Work Act 2009 (Cth) and arguably since the introduction of federal bargaining in 1993.
The changes usher in a fundamental shift in the bargaining dynamic, leading to an alteration of power between employers and employees in many respects. The following are three of the key ones:
First, it gives employees (or rather, in most cases, unions acting on their behalf) significantly expanded abilities to compel employers into the statutory bargaining scheme, including by forcing competitors to engage in multi-employer bargaining against their will. This presents a challenge to direct engagement models, reducing the scope for operational flexibility and potentially stifling innovation across sectors. That is, where it is adopted, it will inevitably result in a one-size-fits all outcome that favours industrial uniformity over creativity, productivity and results.
Second, by empowering the Fair Work Commission to intervene in bargaining by imposing arbitrated outcomes on parties without their consent, there is reduced incentive to give ground or make concessions in bargaining. This increases the risk of being in bargaining where you could end up with an outcome that undermines or fails to properly take account of the industrial realities of your operations. This is because it will be imposed by a third party with no accountability for the success of those operations.
Finally, a number of important levers sometimes used in bargaining (albeit sparingly and far less commonly than some have disingenuously suggested) have been entirely removed or significantly constrained. For example, by rendering it impossible, at least for all practical purposes, for an existing enterprise agreement to be terminated, and imposing restrictions on when employers are able to ask their employees to vote on a proposed agreements.
Practically, this means that it is likely that the status quo will be treated as the baseline, which can never change without agreement, again removing incentive for compromise or cooperation (for example, by working collaboratively to find new ways to achieve productivity gains in return for improved terms and conditions).
The sum effect of these changes is that previous bargaining strategies and approaches are not going to be effective and, particularly over the short term, we are likely to see industrial disputation rise as these new provisions are tested and pushed to their limits. Simply put, these changes are designed to, and will, significantly change the dynamics of bargaining.
This is occurring at a time where there is already slowing economic activity, backwards movement in productivity and ever increasing interest rates.
That is not to say, however, that there aren’t opportunities or ways to manage and mitigate the risks inherent in these changes.
In this Insight series, we want to cut through the complexities, to explain what these changes mean in a simple and practical way for those who are, or may soon be, bargaining. Most employers will have to do so at some point, whether they judge that it is best for their business or not, so it is important to be across these changes and how they are likely to operate in practice.
The Insights will be broken down into the three key stages of bargaining, answering the critical questions that employers are (or should be) asking:
- Commencing bargaining: Who can initiate bargaining and what defines the scope of bargaining? Can you be roped into multi-employer bargaining? Can you avoid bargaining entirely?
- During bargaining: What leverage is still available to employers? How can employers manage industrial action and a more interventionist Commission?
- Concluding bargaining: When can bargaining end? What restrictions are there on putting agreements to vote? When will the Commission approve an agreement? What happens after agreement approval?
This article addresses the commencement of bargaining, with a particular focus on the new multi-employer bargaining regime.
Multi-employer bargaining: what does it mean and should employers be worried?
Multi-employer bargaining is now structured under three streams:
|Cooperative Workplaces Agreements (CWA)||These are voluntary multi-enterprise agreements not made under a Supported Bargaining Authorisation or Single Interest Employer Authorisation. This stream will replace the current purely voluntary multi-enterprise agreement process.|
|Supported Bargaining Authorisations (SBA)||The Fair Work Commission, on application by a union or an employer, may make a SBA compelling “reasonably comparable” groups of employees and employers to bargain for an agreement. SBA replace the current “low-paid bargaining” provisions which were intended to encourage employees and their employers in low-paid industries such as aged care, disability care and early childhood education to negotiate an enterprise agreement. Despite this, SBAs may be made across the economy.|
Single Interest Employer Authorisations (SIEA)
|This is the stream that has received most media attention – it is this stream that significantly changes the current bargaining processes by providing for the Fair Work Commission to make orders compelling a group of employers to participate in multi-employer bargaining without their agreement, where it is satisfied of sufficiently common interests.|
While this Insight will largely focus on the last of these streams, the SBA stream should not be overlooked. Indeed, this stream may have a more significant impact than has so far been predicted. This is because, despite the Government’s comments which indicated that the SBA stream was intended to operate only in relation to workers in lower paid industries, there is no such restriction expressed in the legislation – the Commission is only required to consider the pay and conditions in the relevant industry or sector. Further, this stream is likely to be attractive to unions, given that it is not subject to the same majority support requirements as SIEAs. Consequently, this is an area which should be watched closely.
Can employers be compelled to bargain?
The new streams form a spectrum, from the voluntary nature of the CWA stream, through to the involuntary SBA and SIEA streams.
The building and construction industry and the civil construction industry are excluded from all forms of multi-employer bargaining. So are employers with less than 20 employees.
Beyond these exceptions, if a union applies for an SIEA and satisfies the requirements outlined below (or it applies for an SBA and satisfies those requirements), then, yes, an employer can be compelled to bargain alongside other employers.
What is a SIEA and when is it available?
In simple terms, from 6 June 2023 the Commission must make a SIEA (on application by a registered union) in certain circumstances, which compels multiple employers to bargain together for a multi-enterprise agreement in the ‘single-interest employer stream’.
Once a SIEA is made all relevant employers are ‘trapped’ in the stream because they are prohibited from bargaining for any other kind of agreement while the SIEA remains in operation. Generally, a SIEA will cease to operate 12 months after it is made, but its operation can be extended by the Commission.
The question we have been frequently asked is whether our clients are potentially exposed: and the (unfortunate) reality is that, unless you fall within one of the exclusions, the proper question is not ‘if’ you are exposed, but rather ‘how’. That is, the provisions are drafted so broadly that it is inevitable that all employers are likely to be exposed in relation to at least some of their operations, and so the critically important step is to assess where this exposure is and plan accordingly.
The requirements that must be met are set out below.
At least some (but not all) of the employees to be covered by the proposed multi-enterprise agreement must be represented by a union.
A ‘majority’ of each employer’s employees to be covered by the proposed agreement must want to bargain for it. The Commission may ascertain whether such support exists by using any method it considers appropriate. In practice, it is likely that unions will continue to seek to use confidential employee petitions as the means of demonstrating majority support. The Commission typically prevents employers from seeing the petitions.
Common interest test
The Commission must be satisfied that the employers have clearly identifiable common interests – which includes considerations as to geographical location, regulatory regime and the nature of employment, but is otherwise open ended.
Public interest level
|The Commission must determine that the authorisation is not contrary to the public interest. This requirement will represent the main safeguard against competitors being required to bargain together. But the onus is reversed. The process does not need to be shown to be consistent with the public interest, only that it is not inconsistent.|
Reasonably comparable test
|The operations and business activities of each employer must be reasonably comparable with those of the other employers to be covered by the agreement. It appears that issues of nature, size and operational differences would be able to be raised as differentiators in this context.|
No in-term agreement
|The employer and the employees to be covered by the proposed agreement must not already be covered by an enterprise agreement that has not passed its nominal expiry date at the time the Commission makes the authorisation.|
No written agreement with union to bargain
|The employer must not have agreed in writing, with a relevant union, to bargain for a proposed single-enterprise agreement that would cover the employer and the employees.|
Not small business
|The employer must have at least 20 employees (including part-time employees and regular and systematic casuals).|
|If all requirements are met a SIEA must be granted|
Employers must be mindful not only of being compelled to enter multi-enterprise bargaining, but also the possibility of being ‘roped-in’ to these agreements after they have been made.
Once a SIEA agreement has been approved, a union can apply to the Commission to join non-consenting employers where a majority of employees want to be covered and any existing agreement is outside its nominal term. This is subject to the same criteria for SIEAs generally. That is, does the non-consenting employer have a sufficiently common interest, and is it reasonably comparable to, the existing employers.
Provided this criteria is met, the Commission’s discretion to refuse the application is constrained. To avoid losing control of the terms and conditions of their workforce, employers will need to take proactive steps and adopt new strategies.
Are there any mitigations available to employers?
As you will have seen, many of the requirements for a SIEA are mechanical or objective (and, again, if all the requirements set out above are met the Commission must grant the SIEA).
In-term agreements and agreements to bargain
On that basis, the strongest mitigation against being unwillingly drawn into a multi-employer bargaining process would be to either have an existing in-term agreement in place (as neither a SIEA nor a SBA can be granted if the employer and its employees to be covered by the proposed multi-enterprise agreement are already covered by an agreement that has not passed its nominal expiry date). Or, failing that, a written agreement of a union to bargain for a proposed single-enterprise agreement (as this guarantees protection from the single-interest employer stream, though not the supported bargaining stream).
One way to do this may be, if it is likely that an employer will receive a request to bargain for a replacement agreement in circumstances where this is undesirable (for example, where it wishes to restructure its workforce and reshape coverage of its agreements), then it could consider initiating bargaining on its own terms prior to the nominal expiry date of the relevant agreement. Practically, this will allow the employer to assert some control over the issue of coverage of its agreements from the outset of negotiations.
Developing strong engagement with the workforce
Assuming that these mitigations are not possible or practicable, the most effective method for employers is likely to be to focus on developing strong engagement with their workforce to reduce the prospects that a majority of the employees will vote in favour of bargaining. This is likely to be a key battleground, particularly at sites or operations where, for historical reasons, parties have co-operatively negotiated their own arrangements outside the IR System, and/or where union density is low (such as in WA’s iron ore sector).
Understanding ‘common interest’ and ‘reasonably comparable’ criteria
There will also, in our view, be real opportunities, particularly as the first few test cases work themselves through the Commission and the courts, to argue that the ‘common interest’ and ‘reasonably comparable’ criterions cannot be given unlimited operation. That is, while the unions will seek for the Commission to give these tests the widest possible ambit, there are reasonable arguments that the tests should only be satisfied where you are comparing ‘like-for-like’ operations.
On this basis, employers should be thinking carefully about what differentiates their sites, workforces and operations from other operators located in the same geographical area or in the same industry. If an SIEA application is made, an employer seeking to oppose it on these grounds will need to bring very clear and compelling evidence, perhaps supported by an appropriate independent expert, of these operational and organisational distinctions.
Can employers be compelled to bargain for a single employer agreement?
Setting aside the multi-employer bargaining provisions, another significant change - which has already commenced - is to give unions and other employee bargaining representatives the power to initiate bargaining for a single enterprise agreement by simply making a written request to the employer, without employer consent or any evidence of employee support.
Under the previous regime, bargaining could not commence unless it was initiated or agreed to by the relevant employer(s) or, failing that, where the Fair Work Commission made a Majority Support Determination (MSD) or granted a scope order. While the bar to obtaining an MSD was generally seen as a low one, the process was important in two main respects:
- It allowed the employer an opportunity to test whether there was legitimate support amongst employees for bargaining. This included by scrutinising evidence of support, for example where the employer could show that the employees were unduly influenced or misled to procure their signatures on an MSD petition.
- It allowed the employer to contest the appropriateness of the proposed cohort of employees. For example, because they were dispersed across various geographical sites, or because the cohort were not distinct from other employees who were excluded from the scope of the proposed agreement.
Similarly, scope order applications, which were sometimes used to expand the bargaining to include additional cohorts of employees where the employer was reluctant to bargaining with those employees inside the IR system, allowed employers to oppose based on various grounds, including the current progress of the bargaining and if the new proposed scope would not enhance the efficiency of bargaining.
While these procedures have been retained under the new regime, the new mechanism removes the need for an MSD or scope order for enterprises with recently expired agreements. The relative ease and efficiency with which bargaining can be commenced via the new provisions means they are likely to replace MSDs and scope orders as the primary mechanism addressing the refusal of an employer to bargain.
When can a request be made?
|Replacing expired single-enterprise agreement|
The proposed agreement will replace an earlier single-enterprise agreement that has passed its nominal expiry date.
|There must be an earlier ‘single-enterprise agreement’ – defined under the incoming 6 June 2023 changes to encompass an agreement covering:|
Multi-enterprise agreements are excluded.
- a single employer; or
- multiple ‘related employers’ (being employers engaged in a joint venture or common enterprise, or which are related bodies corporate).
|Five-year time limit|
No more than five years have passed since the nominal expiry date of the earlier agreement.
|The request to bargain must be given to the employer within five years of the nominal expiry of the earlier agreement.|
Substantially the same employees
The proposed agreement will cover the same or substantially the same group of employees as the earlier agreement.
|The new mechanism for initiating bargaining is confined to replacement agreements (i.e. agreements covering substantially the same group of employees as the earlier agreement). While unions are unable to unilaterally initiate bargaining for other cohorts of employees, using the phrase ”substantially the same” opens the door for unions to push for changes to the scope of the agreement, for example, by including additional classifications of employees who perform similar roles but were deliberately carved out of coverage of the previous agreement (for sound industrial reasons).|
A SIEA did not cease to be in operation because of the making of the earlier agreement.
|The effect of this requirement is that the new mechanism does not cover bargaining to replace an earlier agreement to which a SIEA related.|
As the Fair Work Act is currently drafted, this means that any SIEA that applied to bargaining for the earlier single-interest agreement will prevent the use of the new mechanism to initiate bargaining for a replacement agreement.
Once the employer receives a valid written request to bargain, it must take all reasonable steps to give a notice of employee representational rights (NERR) to employees to be covered by the agreement within 14 days, kick-starting the bargaining process and subjecting the employer to good faith bargaining obligations.
 Section 249(1D)(b) FW Act.
 Sections 249(1D)(a), 243A(1)-(2) FW Act.
 Sections 172(2), 172(5A) Fair Work Act.
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.