Joellen Riley, Consultant

A number of the cases before Fair Work Australia (“FWA”) alleging breach of the “good faith bargaining” obligations in s 228 of the Fair Work Act 2009 (Cth) (“FW Act”) have involved union complaints that employers have communicated directly with employees about a proposed enterprise agreement, instead of working only through the union bargaining representatives.

These complaints of “direct dealing” misconceive the FW Act’s enterprise bargaining framework.

Unlike enterprise bargaining in the United States, where a collective bargain is struck between an employer and the single trade union that has secured the right to represent the entire workforce, enterprise bargaining under the FW Act requires the employer to make an enterprise agreement directly with employees. Under the FW Act there are no longer any agreements (apart from greenfields agreements¹) made between employers and unions. Agreements must be voted up by a majority of the employees. Unions will only become parties to enterprise agreements if they specifically request to be named as a party when FWA approves the agreement.

Unions play an important role in the Fair Work bargaining system as bargaining representatives, but ultimately agreements are made directly with employees, and employers must be mindful of their obligations to inform employees directly of the content of any proposed enterprise agreement, and the arrangements for voting.

It is useful to think of enterprise agreement-making as a two stage process: the bargaining phase, and the agreement-making phase.

Employers’ obligations during bargaining

In the bargaining phase, it is the employer’s responsibility to take all reasonable steps to notify employees of their right to appoint a bargaining representative for the purpose of negotiating the terms of an enterprise agreement. The employer must give this notice no more than 14 days after the employer has initiated bargaining, or agreed to bargain. So even if the employer begins to engage in enterprise bargaining only because it has been asked to do so by a union, or because it has been ordered to do so by FWA issuing a majority support determination,² it is still the employer’s responsibility to notify all employees of their right to appoint a bargaining representative.

Every employee has a right to appoint his or her own bargaining representative. Even employees who are members of trade unions are entitled to appoint a different bargaining representative if they wish. The union will be their default bargaining representative if they make no explicit appointment.

It has become more common since the commencement of the FW Act for employers to bargain with a number of different bargaining representatives. For example in Qantas Airways Ltd [2011] FWA 3632, the employer bargained with the Australian Services Union, and also with a separate group of part-time employees based in Brisbane, who were represented by two individual bargaining representatives, in order to reach an agreement covering flight attendants. The independent bargaining representatives unsuccessfully challenged approval of the agreement on a number of grounds. Fortunately for Qantas, it was able to demonstrate that it had bargained in good faith with all representatives in order to secure approval of the agreement.

In Bowers v Victorian Police [2011] FWA 2862, the Victorian Police department was required to bargain with the Police Federation of Australia, and also with Sergeant Richard Bowers who represented himself and another 132 police prosecutors.

The good faith bargaining obligations in s228 require that all bargaining representatives (including employees, unions, and any other person appointed as a bargaining representative) engage cooperatively in negotiations for an agreement.

An employer cannot exclude any bargaining representative from negotiations, and cannot act in a way that undermines employees’ rights to freedom of association. However that does not mean that employers cannot speak directly to their staff during negotiations for an enterprise agreement. The Full Bench decision in CFMEU v Tahmoor Coal Pty Ltd [2010] FWAFB 3510 at [29] makes it clear that so long as the employer does not seek to mislead or deceive employees, and puts forward the same information as has been provided to bargaining representatives, it will not be a breach of the good faith obligation for an employer to hold its own meetings  directly with employees to explain its bargaining position.

Employers’ obligations in the agreement-making phase

Once negotiations for an agreement are either settled, or have reached an impasse, the employer may put a proposed enterprise agreement to a vote of the employees who will be bound by the agreement. A vote cannot take place until at least 21 days have passed since employees received notice of their right to appoint a bargaining representative. A decision to put an agreement to a vote may be delayed by an FWA bargaining order if a bargaining representative is able to persuade FWA that the employer has not met its good faith bargaining obligations. This occurred in Alphington Aged Care [2009] FWA 301 where a nursing home employer put an agreement to a vote of employees without telling the union bargaining representative that it intended to do so. FWA refused to approve the agreement in these circumstances. Nevertheless, so long as the employer has continued to communicate with bargaining representatives and believes that an impasse has been reached, the employer is entitled to put an agreement to a vote of the employees.

Before putting an agreement to a vote, the employer must take reasonable steps to ensure that employees either have a copy of, or access to a copy of, the proposed agreement. Employees must have access for at least a seven-day period before the time that the vote is taken. The employer must also take all reasonable steps to inform employees of when, where and how, the vote will be taken. If employees are on leave during this time, the employer should make reasonable attempts to contact them by mail, phone or email.

The employer also bears the responsibility of taking reasonable steps to explain to employees the terms of the agreement and the effect of those terms. Typically, these explanations will include information about which terms and conditions of employment will change as a result of making the new agreement. These explanations need to be appropriate to the employees’ circumstances. The FW Act stipulates that what steps are “reasonable” must take account of language and cultural diversity in the workplace, and the needs of young people. The employer cannot leave it to unions or other bargaining representatives to explain the agreement, although the extent to which an employee has been actively represented by a union will be a circumstance that is taken into account in determining whether the employer has taken reasonable steps to inform those employees.

Clearly, the framework of the FW Act positively requires employers to deal directly with their employees. While it is important that employers respect the role of unions as bargaining  representatives, and do not act in ways calculated to undermine the unions’ participation in negotiations, ultimately, it is the employer who bears the onus of ensuring that employees are informed at the agreement-making stage. Union representatives also need to appreciate that employers bear these responsibilities under the FW Act. It is a misconception that unions have a monopoly in representing employees in collective bargaining. The Fair Work system is very different in this respect from North American enterprise bargaining systems.

1. ^{A “greenfields agreement” is made before any employees are engaged at a site. Greenfields agreements can be made by an employer with a union or unions who are entitled to represent the industrial interests of the occupations who will be engaged when the site commences operations.}
2. ^{A “majority support determination” is an order by FWA that the employer must agree to bargain collectively with employees, because a bargaining representative has convinced FWA that a majority of employees want to engage in collective bargaining: s 237.}

Ed Austin-Woods, Associate

Employers in the process of bargaining for a new Enterprise Agreement (“Agreement”), and who are considering terminating an expired Agreement, should consider their strategy in light of a recent FWA ruling.

Under the previous Workplace Relations Act 1996 (Cth), a party to an expired agreement did not experience a high degree of difficulty in seeking to have it terminated. However, that position has now markedly changed.

In Tahmoor Coal Pty Ltd [2010] FWA 6468, Vice President Lawler (“Vice President”) considered FWA’s discretionary power to terminate agreements under s 226 of the Fair Work Act 2009 (Cth) (“FW Act”).

Facts

Tahmoor Coal Pty Ltd (“Tahmoor”) applied to FWA to terminate two agreements that had nominally expired in April 2008 and April 2009 respectively.

At the time, Tahmoor was bargaining with the CFMEU for a replacement agreement. The negotiations could best be described as robust and had involved a high degree of animosity. The bargaining had continued for more than 18 months. There had been almost 60 bargaining meetings and significant industrial action which included both a number of employee strikes and an employer lockout. The parties had also brought proceedings in FWA in relation to the bargaining process.

The expired agreements imposed a number of commercial constraints and operational restrictions on Tahmoor that adversely affected its profitability to “a material degree”. This included restrictions on the hours of work, shift arrangements, contractors and minimum manning requirements.

The central issue was whether it was “appropriate” to terminate the agreements under the new “appropriateness test” in the FW Act.

The Vice President highlighted that FWA must not only be satisfied that terminating an agreement is not contrary to the public interest, but that FWA considers it “appropriate” to take this action after taking into account all of the circumstances.

The Vice President stated that in determining “appropriateness”, FWA must necessarily examine the objects of the FW Act which indicate that enterprise bargaining “is the central way in which, in the framework that has been established by the FW Act, productivity benefits are to be achieved”.

The Vice President further stated that the FW Act emphasises that a key role of FWA is to facilitate good faith bargaining and the making of agreements. Consequently, FWA must consider how termination will influence the prospects of the parties concluding a new agreement.

Decision

The Vice President held that it was not appropriate to terminate the two agreements because it would reduce the chance of the parties reaching agreement during their current bargaining process. This would be contrary to the objects of the FW Act.

He reasoned that termination would give Tahmoor all of the productivity benefits that it was seeking in a new deal which would naturally reduce its appetite for a new agreement. Conversely, it would also result in the employees, and the unions, becoming “disproportionately” worse off and significantly weaken their bargaining position.

Furthermore, and most importantly, the Vice President stated that it will generally not be appropriate to terminate an expired agreement if bargaining for a new agreement is ongoing and there remains a reasonable prospect for success, even where the process has become “protracted”.

Implications

This decision is highly problematic for employers that have an expired EA and are seeking to have it terminated. The process is no longer a “tick-the- box” exercise and a mere formality, particularly where negotiations for a new agreement have commenced.

Terminating an agreement has now become measurably more difficult and employers will need to carefully consider their industrial strategy in light of this decision.

The “appropriateness test” means that FWA has a broad discretion to examine all of the surrounding circumstances relating to an agreement, and will pay particular attention to whether bargaining has commenced and the effect termination will have on the respective position of the parties.

Your Key Actions:

1. Review your agreement and determine whether it should be terminated before bargaining for a new instrument commences.
2. Remain informed on the latest bargaining and industrial developments, and contemplate their consequences and implications.
3. Create a sound industrial strategy which is carefully planned and considered.
4. Understand that an agreement’s nominal expiry date does not mean that it will cease to operate on that date.
5. Ensure that you are prepared for an agreement to continue to apply beyond its stated nominal expiry date.