Secure Jobs, Better Pay? – A lot more than we bargained for

As we noted in our previous recent blogs (see here and here), the changes made to the Australian workplace regulation system by the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Amendment Act) are wide-ranging.

In this part of our series on the new laws, we highlight some of the key changes to the Fair Work Act 2009 (Cth) (FW Act) in relation to enterprise agreements.

What will be the different types of enterprise agreements (EAs)?

The Amendment Act has retained the existing types of EAs that can be made, but in some cases has re-named them and amended how bargaining commences and who the EAs can cover. The types of EAs, together with a brief summary of the material changes, are set out below;

• Single-Enterprise Agreement – the most commonly used form of EA: an agreement between a single employer or multiple related employers, and their existing employees (or, in the case of a greenfields agreement, one or more employee organisations/unions);
• Multi-Enterprise Greenfields Agreement – between multiple new enterprises who are not necessarily related, and their employees (or, in the case of a greenfields agreement, one or more employee organisations/unions);
• Cooperative Workplace Agreement – between multiple employers who are not necessarily related, but who agree to bargain cooperatively, and their employees (provided they are not employees in general building and construction work, which is defined to include on-site work done by employees in the ‘general building and construction industry’ or ‘civil construction industry’ within the meaning of the Building and Construction General On-Site Award 2020). If bargaining for this type of EA, there is no entitlement to apply for a bargaining order, nor an entitlement to take protected industrial action;
• Single Interest Agreement – between multiple employers, some of whom must not be related, and who are listed in a single interest employer authorisation, and their employees (provided they are not employees performing ‘general building and construction work’). The Amendment Act enables the FWC to indicate an employer on a single interest authorisation provided that:
• at least some of the employees are represented by a union;
• the employer has consented, or the majority of employees of the employer have agreed to bargain for this type of EA;
• the employers named have a common interest (e.g., location; the relevant regulatory regime; the nature of the enterprises; the pay/conditions of the industry); and
• the authorisation would not be contrary to the public interest.

Some employers are excluded – that is, they cannot be compelled into making this type of EA – e.g.:

• employers with fewer than 20 employees;
• employers already covered by an EA which has not yet passed its nominal expiry date;
• employers in respect with whom a union has already agreed in writing to bargain for a single-enterprise agreement covering substantially the same group of employees.

A new employer can be added to a single interest authorisation after it has been made in certain circumstances, however the FWC will never vary an authorisation to enable employees in general building or construction work to be covered.

Some commentators have speculated that single interest bargaining will result in sector-wide standardisation of pay and conditions that undermines existing enterprise bargaining practices; and

• Supported Bargaining Agreement – between multiple unrelated employers and their employees (not in general building and construction work), in industries that are typically low paid, or which have a higher proportion of employees who are female, indigenous, culturally or linguistically diverse or who have a disability, or which are substantially government-funded – e.g., social work, child care or aged care.

To make this type of EA, the employers must be specified in a supported bargaining authorisation (akin to the existing ‘low-paid bargaining order’) made by the FWC, which will consider factors such as:

• prevailing pay and conditions within the industry/sector;
• the employers have a clearly identifiable common interest (e.g. location, nature of the enterprises, and the employment terms and conditions in those enterprises, and if substantially funded by government); and
• the number of bargaining representatives likely is manageable in the collective bargaining process.

These changes to the bargaining streams will take effect from 6 June 2023 unless enacted earlier by the Government.

The FWC’s roles in bargaining disputes

The Amendment Act alters the FWC’s interventionalist role in bargaining disputes in the following key ways:

• intractable bargaining disputes – the Amendment Act replaces the current provisions of the FW Act dealing with serious breach declarations, with ‘deadlock’ busting provisions providing for Intractable Bargaining Declarations. Where a bargaining dispute has been dealt with by the FWC and the parties have reached a stalemate with no reasonable prospect of agreement being reached, the FWC may be able to issue an Intractable Bargaining Declaration and ultimately arbitrate the terms of the EA.  No protected industrial action can be taken after an Intractable Bargaining Declaration is made; and
• protected industrial action – the Amendment Act makes the following changes which will take effect from 6 June 2023 unless enacted earlier by the Government:
• between obtaining a Protected Action Ballot (PAB) Order and the completion of a PAB, the parties will need to attend a private conciliation or mediation conference convened by the FWC regarding bargaining. If the FWC makes any order in the course of the conference, the party wishing to take protected industrial action must not have contravened that order.  Industrial action (even if authorised by a PAB Order) will not be protected if these requirements are not met;
• protected industrial action will not be able to be taken in respect of Cooperative Workplace Agreements; and
• 120 hours’ notice of the taking of proposed protected industry action will need to be provided in respect of eligible multi-enterprise agreements (which is an increase on the three working days’ notice period for single enterprise bargaining).

Changes to EA pre-approval steps

The Amendment Act makes a few significant clusters of changes to the procedural aspects of creating a new EA, including:

• written request to bargain – in a significant change designed to increase access to bargaining,[1] Single-Enterprise Agreement covered employees will have a new power to force a reluctant employer to the bargaining table (once the existing EA has passed its nominal expiry date), by simply writing to the employer, requesting to bargain. This triggers the commencement of bargaining and the employer’s obligation to issue a Notice of Employee Representational Rights (NERR) within 14 days of receiving the written request.  There are some catches:
• the existing EA must not have passed its nominal expiry date by more than five years; and
• the EA proposed by the bargaining representative must have the same or substantially the same scope of coverage as the existing EA.

These changes came into effect on 7 December 2022; and

• pre-vote procedural requirements: obtaining ‘genuine agreement’ – the FW Act currently contains a number of onerous procedural steps that must be taken by the employer within strict timeframes, before employees can vote on the approval of a proposed EA. Failure to follow these steps can, and often does, derail employer applications to the FWC to approve a proposed EA.

These procedural steps will be replaced by ‘one broad requirement for the FWC to be satisfied that an EA has been genuinely agreed to by the employees covered by the agreement‘[2].  This will be achieved by:

• removing the requirement for a NERR to be issued for any type of EA other than a Single-Enterprise Agreement;
• changing the way in which the FWC can be satisfied employees have given ‘genuine agreement’ to a proposed EA. The concept of a pre-vote ‘access period’ and rigid requirements about providing certain information about the vote and documents, will be removed from the FW Act.

Instead, when considering whether ‘genuine agreement’ has been given, the FWC must be satisfied of the following matters:

• that the employees who voted had a sufficient interest in the terms of the EA and are sufficiently representative of the employees to be covered by the EA. Among other things, these new requirements appear to be included to limit the ability of employers to have a small group of employees approve a proposed EA that will cover a broader cohort of employees;
• that employers:
• who have bargained for a Single-Enterprise Agreement have issued an NERR in the required timeframe and have not requested employees to vote for 21 days since the last NERR was issued (this is a pre-existing requirement for some types of EAs);
• who have bargained for a Cooperative Workplace Agreement or a Single Interest Agreement have obtained written agreement from the union to put the agreement to a vote of the employees (or if the union unreasonably failed to provide written agreement, obtained a ‘voting request order’ from the FWC);
• have taken all reasonable steps to ensure that the terms of the proposed EA and the effect of those terms, have been explained in an appropriate way to relevant employees (this is a pre-existing requirement).

However, the FWC will be permitted to disregard minor procedural or technical errors in relation to these steps that are unlikely to have caused employees any disadvantage; and

• any requirements that could be set out in the Fair Work Regulations 2009 (Cth) are met.

The FWC also must take into account the guidance set out in a new ‘Statement of Principles’, that is yet to be issued by the FWC, which will outline a set of principles about how the genuine agreement of employees to a proposed EA can be obtained.

Employers will need to take these amendments into consideration, and potentially adjust their standard practices, before asking employees to vote on a proposed EA.

These changes will come into effect on 6 June 2023, unless enacted earlier by the Government.

Changes to EA approval steps

Apart from the new approach to ‘genuine agreement’ described above, the other general requirements that must be met before the FWC can approve the proposed EA, including that it passes the Better Off Overall Test (BOOT), will continue to apply.

However, the BOOT is changing in an effort by the Government to address the criticism levelled at the complexity of the test.  Importantly:

• the FW Act will clarify that the BOOT is to be undertaken by the FWC as a ‘global assessment’ (rather than a line-by-line analysis). However, the general principle developed through case law that employees must generally be financially better off under the proposed EA than the modern award and that financial benefits cannot be offset by non-financial benefits, will continue to apply;[3]
• in undertaking the BOOT, the FWC must consider any views expressed about the BOOT by the employer(s), relevant employee(s) and any bargaining representative(s), with primary consideration to be given to any common views held by the employer(s) and employee organisation/union bargaining representative(s)[4];
• the FWC will have a new power to amend a proposed EA as it considers necessary to resolve a BOOT issue, rather than relying on the employer to provide an undertaking to resolve the issue (although the undertaking option will still be available). In practice, the FWC can propose an amendment to the EA to address a BOOT issue and, seek the views of the employer(s), employees and bargaining representative(s), before making a decision on whether to incorporate the proposed change.  This change is intended to short circuit the current undertaking process; and
• in relation to potential future employees (called ‘reasonable foreseeable employees’), the FWC must apply the BOOT having regard only to patterns of work or types of employment that are reasonably foreseeable at the time the test is applied. This change is intended to narrow the scope of the hypothetical employee analysis in order to reduce complexity.

These changes came into effect on 7 December 2022.

Changes to EA post-approval steps

One of the most significant amendments to post-approval applications introduced by the Amendment Act concerns the ability of the FWC to correct or amend an ‘obvious error, defect or irregularity (whether in substance or in form)’ in an existing EA: s. 218A. The FWC can do this on its own accord or on application for one of the parties to an EA.

The provision is designed to extend the ability of the FWC to correct its own errors without the need to go to the Full Bench and the explanatory material suggests that correcting typographical errors or obvious omissions would fall within this category. It is not clear, however, whether this provision might be used to correct substantive errors made by the FWC in, for example, approving an EA that did not, when reconsidered by the FWC, pass the BOOT at the time of its approval. This particular change came into effect on 7 December 2022.

The Amendment Act also enables a union to apply for an employer who is not covered by a Supported Bargaining Agreement, Single Interest Agreement or a Cooperative Workplace Agreement to be covered by such an EA after it has been made. The FWC will only make the variation to the EA to cover the prospective employer and its employees if certain requirements are met and the views of all the parties are considered. This change will come into effect on 6 June 2023, unless enacted earlier by the Government.

Changes to provisions dealing with the termination of EAs

Section 225 of the FW Act permits a party covered by an EA to unilaterally apply to the FWC to terminate a nominally expired EA.  These provisions have come under scrutiny recently because they have been controversially utilised by some employers as a tactic to apply pressure during bargaining for a new EA.  Accordingly, the ‘test’ set out in section 226 of the FW Act to be applied by the FWC to a section 225 application, is being replaced with a potentially more onerous test.

There will only be three circumstances under which an EA can be unilaterally terminated by the FWC:

• where the EA’s continued operation would be ‘unfair’ to employees covered by it; or
• where the EA does not, and is not likely to, cover any employees; or
• where the continued operation of the EA poses a significant threat to the viability of the business carried on by the employer(s), and terminating it is likely to help save jobs of employees covered by it. If an EA is terminated on this ground, and it contains termination/redundancy provisions which are more beneficial than the modern award that will otherwise apply if the EA is terminated, then the employer must commit to honouring those more beneficial EA entitlements for a maximum of four years by giving a ‘guarantee of termination entitlements’.

In addition, in each case the FWC must be satisfied that it is appropriate in all the circumstances to approve the termination, including by taking into account the views of all parties covered by the EA and whether or not the parties are in the process of bargaining for a replacement EA.

These changes came into effect on 7 December 2022.

Finally, undead ‘zombie agreements’ entered into before the FW Act commenced in 2009/2010 will officially cease to have effect on 6 December 2023.  Employers covered by this type of agreement are encouraged to seek legal advice on steps that need to be taken in the next 12 months to notify employees of these changes in the required manner within the required timeframes, and to prepare for a new set of terms and conditions to apply to those employees.

Next steps

These, and other changes to the FW Act as a result of the Amendment Act, are significant.  We encourage our clients to contact a member of our Employment & Safety team for further information and advice specific to your circumstances.

[1] Revised Explanatory Memorandum to the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022, [752].

[2] Revised Explanatory Memorandum to the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022, [700].

[3] Revised Explanatory Memorandum to the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022, [780].

[4] Except in the case of proposed greenfields agreements.

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