Briefing Note on Some Aspects of proposed Fair Work Act Amendments – November 2022

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Introduction

In late October, the federal government introduced a Bill to amend the Fair Work Act in a range of areas and has subsequently introduced an amendment to that Bill in response to various business reactions. The Bill includes measures concerning, among other things, equal remuneration, sexual harassment, fixed term contracts, anti-discrimination, flexible working arrangements and a range of measures surrounding enterprise agreements.  Below is a commentary on the main items to do with enterprise bargaining and agreement-making as well as a brief comment at the end of this Note about the fixed term contracts proposal.

Of necessity this Briefing Note is explanatory rather than definitive because of the fluid nature of the parliamentary process. As that process sorts out the eventual look of the legislation, it is likely more amendments will be needed if passage of a Bill is to be achieved on the government’s preferred timetable, and updates may be necessary.

Initiating Bargaining

Currently, where an agreement has expired, it is not straightforward for an employee to initiate bargaining say where there is no union or no majority support. The Bill proposes that an employee bargaining rep may initiate bargaining by writing to the employer where an EA has passed its expiry date within the last five years. This is like an equivalent action to the employer issuing a Notice of Representational Rights to start bargaining formally. This means the FWC would be able to issue a bargaining order if the employer has received such a request to bargain. [s.173 (2A) and 230(2)(a)]

Supported Bargaining

This is the new set of provisions which will allow multi-employer agreements to be made more easily including a mechanism that can force employers to be bound by an agreement already in existence.

When an application for a supported bargaining authorisation is made, the FWC must consider whether it is appropriate for the parties to bargain together. The FWC would consider the prevailing pay and conditions in the relevant industry, whether employers have clearly identifiable common interests, and whether the number of bargaining representatives would be consistent with a manageable collective bargaining process [s.243].

Common interests may include:

  • a geographical location;
  • the nature of the enterprises to which the agreement will relate and the terms and conditions of employment in those enterprises;
  • being substantially funded, directly or indirectly, by the Commonwealth, a State or a Territory.

Once an employer is named in a supported bargaining authorisation, they can’t bargain for any other agreement in relation to those employees [s.172(7)].

An employer can apply to the FWC to be added to a supported bargaining authorisation [s.251(4)], or removed if their circumstances have changed [s.251(1)].

When a supported bargaining agreement is made and approved by the FWC, the agreement may then be varied to cover additional employers and their employees. A variation may be made jointly by the employers and their employees and approved by the FWC. The employees would vote in the same way as if making an EA now. [s.216A]

Alternatively, a union may apply to the FWC for variation of a supported bargaining agreement to cover additional employers and their employees, if a majority of those employees want to be covered by the agreement. This does not require the consent of the employer (effectively a roping-in mechanism). [s.216B]

To make a supported bargaining agreement the employees of each employer to be covered must vote separately. If a majority of employees of one employer do not ‘vote up’ the agreement, then that employer will not be covered by the agreement.

Intractable Bargaining Disputes, Declarations and Determinations

The amendments would provide for the FWC to issue an intractable bargaining declaration if satisfied, among other things, that there is no reasonable prospect of the bargaining parties reaching agreement. Before this happens, the FWC must have dealt with the dispute by way of conciliation/mediation (existing s.240 refers) and decided if there will be a post-declaration negotiating period or not. [ss.235, 235A] Also, it is proposed that the FWC will need to be satisfied that a minimum period of good faith bargaining, ranging from three to six months depending on the particular circumstances, has elapsed before issuing an intractable bargaining declaration [235(1) and (5)].

If so, then at the end of that period if the parties have not settled, then the FWC will proceed to make a Determination, which is effectively, an arbitrated EA. The Bill requires the FWC to do this “as quickly as possible” [s.269].

Termination of agreements after expiry date as bargaining tactic

Sometimes as part of the bargaining process, the employer applies to have the expired agreement terminated and the working conditions revert to the award. This tactic is targeted by a provision that before terminating the agreement in such circumstances, the FWC must take account of whether or not the termination would adversely affect the employees bargaining position [s.226(4)].

There is also a guarantee of termination entitlements proposal which would cover, for example, where an agreement contained very generous redundancy provisions, and the employer was seeking to terminate the agreement to revert to NES standards. The proposed provision will require an undertaking from the employer to maintain certain key provisions of the agreement as part of the termination application [s.226A].

“Zombie Agreements”

Agreements approved prior to 1st January 2011 will be cancelled (sunsetting) with limited opportunity to extend the time frame within which this will occur. A grace period of 12 months commencing the day after the new legislation is assented to, subject to other conditions which will allow extensions of the grace period, will apply. In most cases it is likely the “zombie agreement will not measure up to the conditions to permit the extension given the principal condition is that the employees would be better off under the “zombie” agreement that the award.

Enterprise Agreement Approval Process Steps

For the vast majority of typical (single employer) agreements, the pre-approval steps are to be simplified and greater powers given to the FWC to amend or otherwise deal with petty irregularities (slip rule) so that the process is more streamlined. For example, the clumsy and detailed seven day “access period” requirements which create confusion and are often logistically messy (and has problems surrounding absentee votes) would be removed.  As part of that the FWC will be required to issue a Statement of Principles which will contain an overarching requirement for the FWC to be satisfied that an enterprise agreement has been genuinely agreed to by employees [s.188B].

Better Off Overall Test (BOOT)

Summary of proposed changes:

  • requiring the FWC to give consideration to the views of specified persons, including primary consideration to any common views expressed by the specified bargaining representatives, when applying the BOOT (NOTE: the term “specified bargaining representatives” excludes employee bargaining representatives that are not union officials);
  • applying the BOOT as a global assessment (ie not a line-by-line comparison between the proposed agreement and relevant modern award);
  • requiring the FWC to only have regard to patterns or kinds of work, or types of employment, that are reasonably foreseeable at the test time;
  • enabling the FWC to directly amend or excise a term in an agreement that does not otherwise meet the BOOT. This appears to be an administrative type of action so that instead of attachments to an EA with Undertakings, the actual EA will be amended and published as a consolidation making understanding and observance of it better. However, oddly, the proposed legislation says the FWC “may” seek the views of the parties before amending the agreement. This is a shift, and goes further than the current process of an undertaking, which is the employer’s choice to give or not [s.191A(3)];
  • enabling the BOOT to be reassessed if there has been a material change in working arrangements or the relevant circumstances were not properly considered during the approval process (reconsideration process). The reconsideration process will need to identify a difference in treatment on the grounds of types and/or patterns of work between the original employees (those employed when the agreement was first approved) and new employees employed at later times. Essentially it appears to be aimed at ensuring that “new” employees are subject to the same overall work types or patterns as the “original” employees. Rostering, penalty rates for ordinary hours and the like are the key considerations in this.

The BOOT would still require that each and every existing employee is better off, despite the inclusion of the words “global assessment”. This does not mean that an EA where even the vast majority of employees are better off, but a few are found not to be, will pass.

Enabling an EA to be effectively re-opened during its life to reassess the BOOT may reduce certainty and affect planning. There does not appear to be any mechanism whereby an employer subject to such a re-assessment could walk away from the EA and return to the award. This proposal needs close consideration. [s.227A]

Fixed term Contracts

The proposal here is to limit the use of fixed term contracts by restricting their use to two consecutive contracts or a maximum term of two years, whichever is less. Any contract that exceeds these limits will be prohibited by the proposed new legislation. Very limited exceptions may apply including for example where the employee is engaged under the contract to perform only a distinct and identifiable task involving specialised skills.