Australia: complexity and risk for employers under the Fair Work Act’s bargaining regime continues

• Herbert Smith Freehills is pleased to present our fourth volume of ‘Bargaining under the Fair Work Act’.
• The paper examines the most recent (financial year 2012-2013) developments in relation to Australia’s collective bargaining regime.
• What is clear from the analysis is that the complexity and risks for employers under the Fair Work Act’s (the Act) bargaining regime has continued throughout the fourth year of its operation.
• Employers will continue to be challenged by the need to wrestle with the complexities inherent in the current bargaining regime and devise tailored strategies that are aligned to the achievement of their specific bargaining objectives.

Introduction

We are pleased to present our fourth volume of ‘Bargaining under the Fair Work Act’ - our first volume as Herbert Smith Freehills.

Shortly after the Act's first anniversary, Freehills published its first volume of ‘Bargaining under the Fair Work Act'. The paper entitled '12 months on: A Freehills retrospective’ summarised the first year of the Act's bargaining regime, which had brought significant change to Australia’s collective bargaining system by introducing new concepts (majority support determinations, scope orders, proposed agreements, etc) and re-introducing the obligation to bargain in good faith. Our second and third volumes of ‘Bargaining under the Fair Work Act’  were published in 2011 and 2012, and further examined the impact of the Act on the collective bargaining regime during the respective financial years.

As with our first three volumes, this paper provides Herbert Smith Freehills’ clients with a comprehensive analysis of developments relating to the operation of the Act's bargaining regime over the last financial year.

Key observations

In comparison, financial year 2012-2013 has been relatively quiet in terms of developments in the bargaining space. Nevertheless, there have been many important legislative and case law developments that require detailed consideration. There have also been many decisions that provide timely reminders for employers navigating through some of the more difficult aspects of the Act. The complexity and risks for employers under the Act's bargaining regime is once again highlighted by our comprehensive review of decisions from the 2012-2013 financial year.

We set out below a summary of some of the key observations made in this year’s bargaining paper:

1. Good faith bargaining orders:

• the number of good faith bargaining order applications and orders has remained relatively low,
• employers (unlike unions) remain hesitant to use the good faith bargaining provisions to their advantage,
• we continue to see many decisions that deal with negotiating tactics (or negotiating mistakes) that could fall foul of the requirement to refrain from capricious or unfair conduct that undermines freedom of association or collective bargaining, and
• the Fair Work Commission (FWC) has shown a renewed willingness to make orders stopping employees voting on agreements (or at least delaying votes to allow further bargaining to occur).

2. Bargaining representatives:

• employers are not receiving the voluminous appointments of individual employee bargaining representatives (BRs) that were feared when the Act first commenced operation,
• recent amendments to the Act have clarified that an employee organisation or official of an employee organisation cannot be a BR of an employee unless that organisation is entitled to represent the industrial interests of the employee in relation to the work that will be performed under the agreement, and
• the FWC has reinforced the employers’ right to engage directly with its employees.

3. Protected action ballots:

• the number of protected action ballot orders made by the FWC has remained relatively steady,
• the ratio of orders as compared with applications remains very high, demonstrating that protected action ballot applications continue to remain difficult to successfully defend,
• we continue to see decisions dealing with the clarity of questions to be put to employees in a protected action ballot. It remains worthwhile taking issue with vague and general ballot questions to ensure that employees understand what they are voting for and doing so enables employers to later determine whether notified industrial action is actually authorised by the protected action ballot.

4. Orders to stop or prevent industrial action:

• we have not seen any real change in the number of applications (or orders) suspending and terminating industrial action,
• applications to stop unprotected industrial action have been relatively consistent, and
• there have been a number of cases in the Federal Court relating to breaches of orders, including some decisions where punitive fines have been ordered against unions and officials.

5. Majority support determinations and scope orders:

• the number of MSD applications and orders are in decline,
• employers are becoming less inclined to challenge the integrity of the evidence led by unions to establish majority support, and
• the number of applications made for scope orders have continued to decline.

6. Enterprise agreements:

• the number of applications for approval of agreements remains high,
• content-related problems have remained a focus of the FWC’s agreement approval decisions over the course of the year, and enterprise agreement coverage has been a significant focus, largely in the context of whether coverage is ‘fairly chosen’, or whether the coverage provides a basis for the FWC to find that the agreement has not been ‘genuinely agreed to’ by employees.

The paper explores each of these concepts and the challenges and opportunities they present in detail. Notwithstanding that the bargaining regime under the Act has settled over recent years, it is clear from decisions handed down by the FWC and the courts, that access to a detailed understanding of the bargaining regime and its underpinning case law and practical application is a must for all employers.

Accordingly, employers continue to be challenged by the need to wrestle with the complexities inherent in the bargaining regime and devise tailored strategies that are aligned to the achievement of their specific bargaining objectives.

The full bargaining paper is only available to Herbert Smith Freehills' clients. Please contact a member of the Herbert Smith Freehills Employment, Pensions and Incentives team if you wish to receive a copy.

This article was written by Paul Burns, Partner, Rohan Doyle, Senior Associate, and Brendan Milne, Solicitor, Melbourne.