Australia: Enterprise bargaining – recent trends and issues

• Two issues relating to collective bargaining – the variation of enterprise agreements and requirements relating to the content of notices of employee representational rights – are currently before the Federal Court and the full bench of the Fair Work Commission (FWC) respectively.
• The issues in these proceedings illustrate the importance of technical compliance with the collective bargaining process set out in the Fair Work Act 2009 (Cth) (FW Act).
• Interestingly, the Federal Government has become involved in both these matters. This is perhaps a reflection of the far-reaching consequences that the decisions in these proceedings may have on employers and employees.

Varying unsustainable enterprise agreements

Clients may be aware of recent comments made by the Prime Minister, Tony Abbott, that tackling uncompetitive, over-award and 'extraordinary' conditions in the workplace is the onus of employers, where 'the restructuring that some Australian businesses need, that some Australian sectors need, is led by business, as it should be'.

Whether the Prime Minister is right or wrong, many employers have been trying to restructure their operations to tackle unfavourable market and economic factors such as the high Australian dollar, high costs of manufacturing and lower economies of scale.

After Holden’s landmark variation of its enterprise agreement in August 2013, many other employers have been considering that they might be able to vary their existing enterprise agreements to ensure the viability of their operations.

In late October 2013, Toyota also announced its intention to vary the terms and conditions of its workplace agreement to provide greater flexibility and increase its global competitiveness. However, four shop stewards took Toyota to court arguing that the company could not vary the agreement until it nominally expires in March 2015. The day before the vote of the employees was to take place, Justice Bromberg of the Federal Court ruled that Toyota could not ask its employees to vote on the proposed changes as this would amount to a breach of the 'no extra claims' clause in the agreement (Toyota decision).¹ The clause provided that ‘the parties agree they will not prior to the end of this agreement make any further claims in relation to wages or any other terms and conditions of employment’.

The 'no extra claims' clause is by no means an unusual clause in enterprise agreements. Toyota may consider itself unfortunate as, of all the variations to enterprise agreements made and subsequently approved by the FWC to date, approximately 70 percent of these agreements have contained such a clause or equivalent. The Toyota decision will be a hurdle for many employers who are seeking to vary an enterprise agreement covering their workforce.

We note a recent FWC decision (6 March 2014)² which approved an application by Aurora Energy Pty Ltd to vary its enterprise agreement despite the existence of a ‘no extra claims’ clause in the agreement. The FWC held that the term had the effect of ‘ousting’ the ability of the parties to vary the agreement in any way, and to the extent that it did so, was inconsistent with the FW Act and therefore invalid.

Despite its decision to cease manufacturing operations in 2017, Toyota has appealed against the Federal Court decision and a hearing is scheduled for 26 and 27 May this year. The issue at the heart of the appeal is whether parties are able to contract out of the provisions in the FW Act. Given many employers and employees may be impacted by the decision, it is perhaps not surprising that the Federal Government has intervened and will join Toyota in the appeal on the basis of public interest in the proceedings. The Minister for Employment, Senator Eric Abetz, commented that 'it is deeply troubling that the employees' right to vote on proposed variations has been frustrated'.

Strict compliance with the FW Act - Notice of representational rights

Under the FW Act, an employer is required to notify its employees of the right to be represented once bargaining has commenced. This must be done in the form of a Notice of Employee Representational Rights (Notice).

Section 174(1A) of the FW Act was introduced by the previous Labor Government and commenced on 1 January 2013. It states that a Notice must comply with the form and content requirements prescribed by the regulations and not contain any other content.

In December 2013, the FWC rejected two proposed enterprise agreements on the basis that the Notices provided to the employees included extra information which rendered the Notices invalid under section 174(1A).

In late February this year, a senior five-member FWC full bench heard an application by Peabody Moorvale Pty Ltd (Peabody) for approval of its enterprise agreement.³ The matter was referred directly to a full bench for a hearing at first instance. The Construction Forestry, Mining and Energy Union (CFMEU) objected to the application on the basis that it contravened section 174(1A) because Peabody stapled two nomination slips to the Notice it provided to its employees. The CFMEU argued that the three pages constituted the Notice because they were stapled together and saved in one PDF document in the company’s system.

Peabody argued that the mere fact that other materials were provided to employees at the same time as the Notice does not result in a breach of section 174(1A). The Minister for Employment has made submissions in the proceedings to the effect that the provision of additional material with a notice of representational rights should not invalidate the Notice.

The full bench will soon make a ruling on the CFMEU’s argument. The decision will concern a number of employers in relation to the extent of their obligations for strict technical compliance with the bargaining process under the FW Act.

Enterprise bargaining workshop – 9 April 2014

The pending decisions discussed above illustrate just some of the current issues in the bargaining process. Employers need to be aware of the complex collective bargaining options under the FW Act, and how to navigate and comply with the stringent procedures that exist.

To assist with this, Herbert Smith Freehills will be presenting a one-day Enterprise Bargaining Essentials Workshop on 9 April 2014. This program is being run in the Melbourne, Sydney and Brisbane offices and will provide an introduction to bargaining in Australia and ensure you use the Fair Work laws to your best advantage in the bargaining process. For detailed program information click here.

This article was written by Anthony Wood, Partner, and Jessica Chen, Solicitor, Melbourne.

Endnotes

1. Marmara v Toyota Motor Corporation Australia Limited [2013] FCA 1351
2. Aurora Energy Pty Ltd [2014] FWCA 1580
3. Application by Peabody Moorvale Pty Ltd (AG2013/12223) - Hearing transcript

More information

For information regarding possible implications for your business, please contact a member of the Employment, Pensions and Incentives Team.