Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 - Bargaining and Industrial Action

As part of the suite of changes that have been introduced by the Secure Jobs, Better Pay Act 2020 (Act) (as summarised by earlier articles in this series), the Government has made significant changes to the bargaining and enterprise agreement systems in the Fair Work Act 2009 (FW Act). The details of these changes are set out below.

Initiating bargaining for single enterprise agreement

A single enterprise agreement is an enterprise agreement made for a single employer.[1] Under the changes, the process under which employees can initiate bargaining for a ‘replacement’/‘roll over’ single enterprise agreement has been simplified.

Under the new process, a bargaining representative of an employee (for example, a union) covered by a proposed single enterprise agreement can write to an employer making a request to initiate bargaining for a proposed agreement (Bargaining Request). A Bargaining Request can be made if a group of employees is seeking to replace an existing single-enterprise agreement (other than one made under a single interest employer authorisation) that has passed its nominal expiry date by no more than five years, and the ‘replacement’ agreement will cover the same or substantially the same group of employees as the existing agreement.

The use of a Bargaining Request simplifies the process by which employees can commence bargaining for a ‘replacement’ single-enterprise agreement compared to the previous requirements under which it was necessary to obtain the agreement of the employer or apply for various types of orders from the FWC.[2]

The Bargaining Request will initiate bargaining, meaning that a notice of employee representational rights will need to be issued by the employer[3] and bargaining orders or protected action ballot orders may be sought from the FWC.[4]

Bargaining Requests cannot be made in relation to a proposed greenfields agreement or a multi enterprise agreement (that is, a cooperative workplaces agreement or a supported bargaining agreement) or a single-enterprise agreement in relation to which a single interest authorisation is in operation.[5]

Resolving bargaining disputes

The amendments to the FW Act empowers the FWC to make intractable bargaining declarations (Declaration) and intractable workplace determinations[6] (Determination) to deal with ongoing, unresolved bargaining. This expands the power of the FWC to intervene in bargaining disputes and arbitrate workplace determinations (essentially industrial instruments created by the FWC, which set wages and conditions) when the bargaining parties cannot reach agreement. Under the previous regime, workplace determinations could only be made in limited circumstances, and this occurred very rarely in practice. The change allows the FWC more scope to intervene in long running bargaining disputes and, if necessary, bring the bargaining to an end by making a Determination whereas previously, the FWC’s power in this area was very limited.

If an application for a Declaration is made by a bargaining representative for a proposed agreement (whether employer or employees), the FWC may make the Declaration if it is satisfied that:

• the FWC has previously dealt with a bargaining dispute about the proposed agreement, and the applicant for the Declaration participated in the FWC’s processes to deal with the dispute[7]
• there is no reasonable prospect of agreement being reached if the FWC does not make the Declaration
• the minimum bargaining period has passed (being six months after the nominal expiry date of any existing agreement (or the latest nominal expiry date if multiple agreements are involved) that applies to the employees or three months after bargaining dispute application was first made to the FWC), and
• it is reasonable in all the circumstances to make the Declaration, taking into account the views of all the bargaining representatives for the agreement.

In making a Declaration, the FWC may specify a post-declaration negotiating period, during which the FWC will not make a Determination, but may still provide other assistance to the parties, such as conciliation. As with the existing serious breach declarations, protected industrial action cannot be taken while a Declaration is in place.

A Declaration ceases to operate when any employer specified in the Declaration is covered by an enterprise agreement (that is, when the dispute is resolved and an agreement is made) or when a workplace determination is made by the FWC.

The FWC must make a Determination as quickly as possible after making a Declaration (or after the end of any post-declaration negotiating period specified by the FWC in the Declaration). The factors that the FWC must consider in deciding the terms of a Determination include the merits of the case, the public interest and productivity, and the interests of employees and employers who will be covered by the Determination, remain unchanged.[8]

Industrial Action

Currently, the FW Act only permits protected industrial action to be taken in support of single enterprise agreements. However, the amendments to the FW Act will now permit protected industrial action to be taken in relation to a multi-enterprise agreement that is a single interest employer agreement or a supported bargaining agreement (see below for more details) but not for greenfields agreements. The notice period before engaging in protected industrial action in relation to one of these types of agreements is 120 hours (as opposed to three working days for single employer agreements).

Where an application has been made for a protected action ballot order covering the employees of different employers, they will be treated separately. That is, the employees of each separate employer affected by the application would need to approve the action before being eligible to take protected industrial action.

The FWC must now conduct conferences if it has made a protected action ballot order (a precursor to protected industrial action) in relation to a proposed enterprise agreement, and to direct the bargaining representatives to attend.[9]

Other administrative changes have also been made relating to the approval of a protected ballot agent.[10]

Multi-employer bargaining regime

The amendments replace the previous provisions in the FW Act that applied to the low-paid authorisation regime and multi-enterprise agreements[11] and introduce the following new streams for multi-employer bargaining:

• supported bargaining agreement stream
• single interest authorisation stream, and
• cooperative workplace stream.

These multi-employer enterprise agreements are still assessed in accordance with the regular tests for the approval of enterprise agreements (better off overall test, genuine agreement, etc) subject to the amendments set out below. The pre-amendment multi-employer enterprise provisions in the FW Act were very rarely used and were seen by many as overly complex, discouraging the use of this type of agreement as a practical bargaining option.

The FWC has also been given the power to hear applications to vary any multi-enterprise agreement to remove employers and affected employees from coverage of the agreement. Before such a variation is made:

• the variation must be put to a vote of affected employees, and
• a majority of those who cast a valid vote must approve the variation, and
• each union that is covered by the agreement and entitled to represent the interests of an affected employees must agree.

Supported bargaining stream

The FWC now has the power to make a supported bargaining authorisation (Authorisation) in support of the making of a multi-enterprise agreement. An employer covered by the Authorisation is prohibited from entering into a single-enterprise agreement and must not bargain for any other type of enterprise agreement other than that which the Authorisation relates. The FWC then has a range of powers to assist the parties in reaching an agreement on a multi-employer agreement. This is essentially the ‘compelled’ bargaining stream under which employees or unions[12] may obtain an Authorisation to ‘draw in’ employers and groups of employees to bargaining negotiations across a range of employers.

The FWC must make an Authorisation if it is satisfied that:

• it is appropriate for the employers and employees that will be covered by the proposed multi-enterprise agreement to bargain together, having regard to:
• the prevailing pay and conditions within the relevant industry or sector (including whether low rates of pay prevail in the industry or sector), and
• whether the employers have clearly identifiable common interests, and
• whether the likely number of bargaining representatives for the agreement would be consistent with a manageable collective bargaining process, and
• any other matters the FWC considers appropriate, and
• whether at least some of the employees who will be covered by the agreement are represented by a union.

Common interests, for the purposes of determining whether to make an Authorisation, may include the geographical location of the enterprises the employees work for, the nature of the enterprises, the conditions of employment in those enterprises, and whether those enterprises are substantially funded by the Commonwealth or a state or territory. While there has been significant media coverage suggesting that this will enable ‘industry wide’ bargaining, the amendments do not limit this bargaining stream to employers in the same industry. Any group of employers could be covered by an Authorisation provided the relevant criteria are met.

The following restrictions exist in relation to Authorisations:

• Authorisations cannot be made for a proposed enterprise agreement covering employees who perform general building and construction work. This is essentially on-site construction work only and does not extend to other work at construction sites, e.g. manufacturing, quarry work, joinery, etc.
• Authorisations do not apply to employees who are covered by single interest employer agreement which has not yet passed its nominal expiry date unless the main intention in making that enterprise agreement was to avoid being specified in an Authorisation. 

Once the Authorisation is in place, the FWC has powers to assist the parties to reach an agreement, such as by convening conciliation conferences and directing third parties who exercise a degree of control over the conditions of employees who will be covered by an agreement to attend a conference. If an agreement is made pursuant to an Authorisation, it is known as a supported bargaining agreement.

The amendments also allow for applications to be made to vary supported bargaining agreements to cover additional employers and their employees. The variation must be made by consent of the employer and affected employees (determined via a vote of employees) or on the application of a union covered by the supported bargaining agreement alone.

• When an application to add employer(s) and employees to a supported bargaining agreement is made jointly, the application can only be granted if the FWC is satisfied that:
• it would have been required to make an Authorisation in relation to the employer and affected employees had they been included at that time, and
• the affected employees have voted on the variation, and a majority of those who cast a valid vote approved the variation, and
• the variation was genuinely agreed to by the affected employees, or
• When a union only application is made to include employer(s) and employees, the FWC must be satisfied that:
• a majority of affected employees who would be covered by the agreement want to be covered by the agreement, and
• it is appropriate for the employees to be covered by the agreement. In making this determination, the FWC must consider the views of each union and each employer that will be covered by the agreement if the variation is made.

Single interest stream

The new provisions expand when the FWC can make a single interest employer authorisation.[13] Single interest employer authorisations enables employers who are otherwise separate enterprises to bargain together for a single enterprise agreement to cover all participating employers and employees. A single interest employer authorisation can now be made when:

• the employers have clearly identifiable common interests (including reasonably comparable business activities) or are related franchisees
• the group of employees who will be covered by the agreement was fairly chosen
• at least some of the employees who will be covered by the agreement are represented by a union
• the employers and the bargaining representatives of the employees have had an opportunity to express to the FWC their views (if any) on the authorisation, and
• it is not contrary to the public interest to make the authorisation.

Previously, a single interest employer authorisations could only be made on application by employers. Now, the new provisions permit single interest employer authorisations to be sought by employers or unions (or other employee bargaining representatives) acting for employees who would be covered by the proposed agreement. When applied for by an employer, a single interest employer authorisation can only be made if each employer consents. When a union (or other employee bargaining representative) makes an application for a single interest employer authorisation, the FWC must also be satisfied that:

• each employer has more than 20 employees and is not otherwise covered by an enterprise agreement that has not passed its nominal expiry date or subject to a single interest employer authorisation or supported bargaining authorisation, and
• a majority of the employees who would be covered by the agreement want to bargain with the employers that will be covered by the agreement.

The FWC has also been empowered to vary single interest employer authorisations to cover additional employers and their employees. The FWC may approve the variation in circumstances like those that apply for the obtaining of a single interest employer authorisation, including without the consent of the employer, provided the other requirements of the FW Act are met.

An employer who employs fewer than 20 employees may not be added to a single interest authorisation or agreement without their consent. Employees who perform general building and construction work are also excluded from this stream of multi-employer bargaining. Employers with 50 or more employees, must establish that it is not a common interest employer or that its operations and business activities are not reasonably comparable with other employers to allow them to be excluded from a single interest employer authorisation.  The FWC also has the discretion to not include employers in a single interest employer authorisation if:

• good faith bargaining is already occurring
• the employers and employees have a history of effective bargaining in relation to one or more enterprise agreements that has covered the relevant group, and
• less than nine months has passed since the nominal expiry date of the current enterprise agreement.

Cooperative workplace stream

These are multi-enterprise agreements that are not made under the other streams (i.e. without an Authorisation or single interest employer authorisation in operation immediately before the agreement was made). This would likely cover those employers who previously made use of the multi-employer enterprise agreement provisions that were in place (for example, certain parts of disability support sector). A cooperative workplace agreement may be varied to add an employer and affected employees following a joint application by the employer and affected employees.

The Better Off Overall Test

Before an enterprise agreement can be approved by the FWC, it must pass the better off overall test (BOOT). An enterprise agreement passes the BOOT if the FWC is satisfied that each award covered employee and prospective employee would be better off overall if the agreement applied to them instead of the relevant award.

The changes to the BOOT can be summarised as follows:

• requiring the FWC to give consideration to views expressed by the employer or employers, employees, and bargaining representatives in relation to the BOOT
• clarifying that:
• the BOOT is a global assessment, not a line-by-line comparison between the proposed agreement and the relevant modern award (reflecting existing case law), and
• in conducting the BOOT, the FWC may only have regard to patterns or kinds of work, or types of employment, if they are reasonably foreseeable at the test time
• allowing the FWC to amend an agreement to make it pass the BOOT, and
• allowing the FWC to reassess the BOOT on application by an employer, employee or union covered by the agreement if there is a material change in working arrangements or circumstances that were not considered by the FWC during the approval process (the reconsideration process).

The introduction of these changes will be of assistance for employers on following key fronts:

• The likelihood of an enterprise agreement being rejected because of hypothetical or improbable working patterns or engagements has been largely eliminated as this is expressly carved out as an element of the BOOT.
• Technicalities that previously caused enterprise agreements to be rejected (for example, an error on the face of the enterprise agreement, which could not be fixed by an undertaking) will no longer occur. Instead, the FWC will have the power to amend the enterprise agreement itself to ensure it passes the BOOT thereby avoiding the need to dismiss the application and force the parties to undertake the agreement approval process again. This should significantly reduce the administrative and costs burden associated with errors in the body of an enterprise agreement.
• Bargaining representatives can ask the FWC to vary an agreement that has been made if there is a change in work practices or circumstances that would mean the agreement would not pass the BOOT. If the FWC is satisfied that the agreement needs to be varied to ensure employees are better of overall, the FWC will be able to determine the content of the variation, and to give effect to it, without the need for the employer and employees to engage in the usual variation process under the FW Act.

Termination of enterprise agreements after nominal expiry date

The rules for terminating an enterprise agreement after its nominal expiry date have been re-written by more strictly defining when this can occur. Specifically, enterprise agreements can be terminated when the FWC is satisfied that:

• the continued operation of the agreement would be unfair for the employees covered by it, or
• the agreement does not, and is not likely to, cover any employees, or
• the following arises in relation to the agreement:
• the continued operation of the agreement would pose a significant threat to the viability of a business carried on by the employer, and
• the termination of the enterprise agreement would be likely to reduce the potential of terminations of employment for the employees covered by the agreement, and
• if the agreement contains terms providing entitlements relating to the termination of employees’ employment – each employer covered by the agreement has given the FWC a guarantee of termination entitlements in relation to the termination of the agreement.

Essentially, the test is now refocused around assessments of detriment to the employees. These changes have been introduced in response to the bargaining tactic of employers using applications to terminate enterprise agreements past the nominal expiry date. These amendments narrow the FWC’s discretion to terminate agreements under these provisions in an attempt to eliminate its use in this manner.

Enterprise agreements – other changes

The amendments also:

• require that any remaining transitional agreements (agreements made under previous industrial relations legislation and enterprise agreements made during the bridging period of 1 July 2009 to 31 December 2009), also known as “zombie” agreements will automatically expire on 7 December 2023 unless an extension is obtained from the FWC
• simplify the process for the FWC to determine whether an enterprise agreement has been ‘genuinely agreed’ between the parties by removing the rigid test currently in the FW Act and granting the FWC discretion to take into account certain principles (to be determined by the FWC before these changes come into effect) in assessing whether genuine agreement has occurred. While represented as a simplification, the requirements for genuine agreement are still reasonably complex and many of the same benchmarks are in place. The distinction is that the FWC appears to have a slightly broader discretion in assessing whether there has been genuine agreement than in the previous version of the FW Act, and
• empower the FWC to, on application, vary an enterprise agreement to correct or amend an obvious error, defect or irregularity on application by an employer, employee or union, or on its own initiative. This change is aimed at removing unnecessary complexity and would allow the FWC to more simply remedy issues like typographical errors or incorrect versions of enterprise agreement being submitted to the FWC for approval.

[1]     This definition has not been changed by the recent amendments.

[2]     Specifically, a majority support determination, scope order or low paid authorisation.

[3]     The requirement to issue a notice of representational rights, and the required content of such notices, is set out at sections 173 and 174 of the FW Act.

[4]     In accordance with section 230 of the FW Act, to make bargaining orders, the FWC must be satisfied that one or more of the relevant bargaining representatives are not meeting their good faith bargaining requirements, or bargaining is not proceeding efficiently or fairly because there are multiple bargaining representatives for the agreement. The good faith bargaining requirements are set out at section 228 and include attending and participating in meetings at reasonable times, disclosing relevant information and considering and responding to proposals of other bargaining representatives. Usually, a bargaining representative can only make an application for bargaining orders if they give notice of their concerns and give the other relevant bargaining representatives reasonable time to respond. The requirements for taking protected industrial action are set out at Part 3-3 of the FW Act.

[5]     Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022 Explanatory Memorandum at 722.

[6]     The term intractable bargaining workplace determination essentially replaces the existing bargaining related workplace determination and continues to provide for the FWC to make a determination that includes the core and mandatory terms, permitted terms already agreed by the parties, and terms that the FWC considers deal with the matters that were still in dispute.

[7]     Section 240 of the FW Act provides that a bargaining representative for a proposed enterprise agreement may apply to the FWC for the FWC to deal with a dispute about the agreement if the bargaining representatives for the agreement are unable to resolve the dispute. Under this provision, the FWC may only arbitrate in relation to the dispute with the agreement of the parties.

[8]     Section 275 provides the factors the FWC must take into account in deciding terms of a Determination, which also includes the conduct of bargaining representatives for the proposed agreement, the extent to which bargaining representatives for the proposed agreement complied with good faith bargaining requirements, and incentives to continue bargaining at a later time.

[9]     Such conferences are to be conducted during the period before the ballot closes. These conferences would be conducted in private and the FWC will be empowered to conciliate and to make a recommendation or express an opinion.

[10]    The FWC can now approve a person to be an eligible protected action ballot agent, in which case the person may be approved to conduct a ballot on the nomination of an employee organisation.

[11]    Currently, the FW Act provides a stream of bargaining for multi-enterprise agreements covering low-paid employees who have not historically participated in collective bargaining. This stream is accessed by the making of a low-paid authorisation by the FWC. Section 243 of the FW Act provides that the FWC must be satisfied that it is in the public interest to make an authorisation and sets out matters that it must consider, including current and historical matters related to collective bargaining and matters relating to the likely success of collective bargaining.

[12]    Technically, employers are also able to seek the making of Authorisations although this is unlikely to occur in practice.

[13]    These have been able to be made under the FW Act for some time but have only been made exclusively by employers where there is a common interest identified which makes it appropriate to bargain together. Examples of where it is used include franchises, certain parts of the public sector (for example, public hospitals).