New Fair Work Commission powers to end ‘intractable’ enterprise bargaining require a complete re-think on strategy in Australia

The Fair Work Act’s new intractable bargaining regime represents one of the most significant changes in enterprise bargaining in Australia in decades. It will turn the enterprise bargaining system on its head and the enterprise bargaining strategies and tactics of the past will no longer be effective. The new regime will impact the way employers need to prepare for and approach enterprise bargaining. It is inevitable that we will start to see a significant difference between the bargaining outcomes achieved by those employers who are well prepared for these changes, and those who are not. 

What is the intractable bargaining regime?

The intractable bargaining regime under the Secure Jobs, Better Pay reforms to the Fair Work Act commences on 6 June 2023. This new regime represents one of the most significant changes to enterprise bargaining, not just under these reforms, but since the Keating-era ALP Federal Government’s shift towards enterprise-level bargaining during the early 1990s. 

The making of an ‘intractable bargaining declaration’ by the Fair Work Commission will be the gateway to an ‘intractable bargaining workplace determination’, where disputed terms and conditions can be arbitrated and determined by the Commission. The prospect of arbitrated outcomes will loom large over the process of enterprise bargaining and will fundamentally change the bargaining paradigm. Employers will no longer have the same degree of power over the process and the prospect of the industrial umpire intervening to set terms and conditions absent agreement will significantly increase.

The intractable bargaining regime will enable bargaining representatives (employees, unions and employers alike) to make an application to the Commission for an ‘intractable bargaining declaration’. Generally speaking, the Commission is empowered to make such a declaration after the later of nine months after the nominal expiry of the current agreement or nine months after the commencement of bargaining for the proposed agreement. The Commission must make a declaration where it is satisfied that (1) the proposed agreement has been the subject of a section 240 bargaining dispute resolution process, (2) there is no reasonable prospect of agreement being reached in the absence of such a declaration, and (3) it is reasonable in all of the circumstances to do so. 

The Commission may also specify a ‘post-declaration negotiation period’ to provide bargaining representatives with a final opportunity to reach agreement before heading down the path towards an ‘intractable bargaining workplace determination’. The Commission cannot make such a determination during this negotiation period, but can still provide parties with assistance to reach agreement.

The Commission’s declaration enlivens its power to arbitrate the disputed terms of the agreement by way of an ‘intractable bargaining workplace determination’. The Commission must make such a determination if an ‘intractable bargaining declaration’ has been made and the issues in dispute have not been resolved by the bargaining representatives. Only a Full Bench of the Commission can make such a determination.

The intractable bargaining regime gives employees and unions a new ability to potentially force employers to agree to higher wages and improved conditions in bargaining under the threat of the industrial umpire arbitrating those outcomes absent agreement. This will encourage emboldened claims by employees and unions who will be less likely to compromise and, in our opinion, will ultimately lead to more industrial conflict. 

A new strategy for bargaining

This fundamentally changes the way employers need to prepare for bargaining, engage with their employees and engage with unions. Why? Under the old regime, an employer’s objective in bargaining was quite simple – convince employees and unions that the deal on the table was the best deal available from the employer. If the employer did so, they could put their proposed agreement to a vote of employees and bargaining would conclude with a successful majority vote. Under the new regime, convincing employees and unions that the deal on the table is the best available from the employer will not be enough. Employers will have to go further, and also convince their employees and unions that the deal is better than what they can expect to obtain from the Fair Work Commission. Whilst employers may, in some cases, see some advantages in these new powers, for most employers it simply represents a loss of control.

This will necessitate strong investment from employers in their communications and engagement with their workforce and unions. This will also necessitate employers taking a more proactive approach to bargaining by investing in more rigorous planning processes; not only in the development of the claims the employer wishes to pursue, and the position the employer will adopt in response to employee and union claims, but also in how the employer intends to justify the reasonableness of its position on these matters. 

We say this because if bargaining ends up in the Commission, and the employer is facing the prospect of arbitrated terms and conditions, it will need to be ready with robust evidence to justify the reasonableness of its positions, grounded in objective data and facts. This will require rigour and discipline. This is why the new regime will create a huge gap between the outcomes achieved by those employers who are well prepared for bargaining under this new paradigm, and those who are not. It will require a new mindset when it comes to planning and bargaining strategies, with many employees and unions no doubt already positioning themselves to access this new jurisdiction in the hunt for a better deal.