Navigating Intractable Bargaining: Tips for Australian businesses

On 6 June 2023, the intractable bargaining regime under the Secure Jobs, Better Pay reforms to the Fair Work Act commenced. The regime gives the Fair Work Commission the power to arbitrate disputed terms of an enterprise agreement by making an ‘intractable bargaining workplace determination’. These provisions have changed the way employers need to prepare for bargaining and think about their bargaining strategies. 

The Commission has already considered several applications for intractable bargaining declarations (IBDs). These decisions provide useful guidance in relation to the Commission’s approach to assessing whether bargaining has become ‘intractable’.

Importantly, the subsequent workplace determination proceedings have also yielded some key learnings that businesses should be aware of when bargaining or preparing for upcoming bargaining rounds.

Here are our key tips for employers navigating this new landscape:

1.   Understand the bargaining timeline

Employers should not underestimate the significant bargaining process and work required before an IBD can be made. Nine months is a long period of time in bargaining. It is critical that employers use this time to position themselves for a potential IBD application. Employers will also need to consider the strategies they have in place to withstand potential protected industrial action during this time.

Before an IBD application can be made, the following must have occurred:

• Minimum bargaining period must have passed: That is 9 months after (the later of):
  • the nominal expiry date of the existing agreement; or
  • the notification time for the proposed agreement (i.e. when an employer agrees or initiates bargaining).
• Section 240 dispute process: The Commission must have dealt with the bargaining dispute and the Applicant must have participated in the process. This will generally include attending conciliation conferences to deal with the ‘core issues’ in dispute.

In making an IBD, the Commission must also be satisfied there is no reasonable prospect of an agreement being reached. This will generally require a consideration of the evidence of the negotiations to date (including details of bargaining meetings which are likely to be in the range of around 10 to 20 meetings) and results from any unsuccessful ballots.

The Commission must also be satisfied it is reasonable in all the circumstances to make the declaration considering the views of the bargaining representatives. Interestingly, so far only one application has been refused by the Commission which was opposed by the relevant union bargaining representative.¹

2.   Remember the ‘no less favourable’ requirement

Employers need to be wary of the limitations the Commission has in making a workplace determination. The Closing Loopholes reforms to the Fair Work Act² introduced a requirement that in making a workplace determination, the Commission must not include terms that are ‘less favourable’ to employees (and any relevant employee organisations) than the existing terms and conditions in their current enterprise agreement. However, there are exceptions to this requirement which employers may need to try and leverage, including the following:

• Agreed terms: If terms are agreed between the bargaining representatives, they will be ‘agreed terms’ for the purposes of a workplace determination and may be less favourable.
• Wage increases: Terms that provide for wage increases are expressly excluded from the requirement and it may be possible for employers to achieve less favourable wage outcomes. However, sound and objective evidence will be required to support these types of claims.
• Compulsory arbitration: The Commission cannot impose compulsory arbitration on a party in a workplace determination if they do not consent (regardless of whether the current dispute resolution clause provides for compulsory arbitration).
• Grandfathering: The ‘no less favourable’ requirement applies to employees to which the current enterprise agreement applies, meaning it may be possible to convince the Commission to grandfather existing provisions for current employees and provide different terms for future employees.

3.  Ensure any concessions involve a quid pro quo

Employers must be careful about inadvertently agreeing to certain terms. ‘Agreed terms’ are terms that are agreed between all the bargaining representatives and must be included in a workplace determination. A term will be an ‘agreed term’ at three points during the IBD process:

1. when the application for an IBD is made;
2. when the IBD is made; and
3. at the end of any post-declaration negotiating period (if there is one).

Mere statements that ‘nothing is agreed until the overall package is agreed’ may not be effective unless they truly reflect the positions of the parties. The Commission will look behind these types of statements and examine the reality of negotiations and the deals that have been put on the table or to ballot in determining what has been agreed between the parties.

In light of the ‘no less favourable’ requirement, it is important that employers carefully consider making concessions unless they can secure something in return. Employers must ensure that genuine conditions are attached to concessions and must be specific about exactly what they need in return for agreeing to a claim.

4.   Have a sound justification for claims or changes in positions

Employers need to have objectively justifiable positions on claims, supported by evidence, and their conduct at the bargaining table needs to align with their position. It is unlikely that the Commission will find in an employer’s favour on certain claims unless they have a sound justification.

Employers also need to exercise caution in changing their position or putting an agreement to vote. For example, the Commission may consider pay rates contained in a previous rejected offer demonstrated the company had financial capacity to pay those rates. To mitigate this risk, employers must be prepared to justify any changes in their position and explain, for instance, why they can no longer afford a certain pay rise.

Back pay claims are also likely to be a big-ticket item for unions given the significant length of time it will take to reach a workplace determination proceeding. In most cases, this is likely to be well in excess of 9 months. Employers should therefore be cognisant that if they are responsible for delays in bargaining there is a high risk the Commission will order back pay.

5.   Invest in employee engagement

The best way for employers to maintain control over the bargaining process is to convince employees to vote a deal up. This requires demonstrating to employees (and any relevant union) that the deal on the table is better than what they could reasonably expect to receive from the Commission.

To achieve this, employers will need to build a strong relationship with their workforce and ensure they are actively communicating with employees, both during bargaining and regularly throughout the life of the agreement.

Employers will need to rethink their enterprise bargaining tactics and strategies in light of these reforms. However, with the right preparation and planning, there is opportunity for employers to use the regime to their advantage if they are unable to reach agreement and are faced with unreasonable ambit claims or industrial action.