Competitors Oblige Agreement Termination

What to do with an agreement with generous conditions when your competitors keep beating you on all your tenders? This problem faced a company that found earlier largesse was coming back to bite as more players entered their patch, leaving them behind.

The employer decided to cancel the agreement since it had passed its nominal expiry date and right at that time it had no employees working under the agreement. It made application to the FWC to terminate the agreement.

But the union opposed the termination even though there were no employees covered. It said the company was likely to get work soon, the lack of business was merely temporary, and the ‘new’ employees would not have a chance to decide if the agreement should be cancelled or not.

The FWC however didn’t agree with the union, indicating that since no employee was currently covered by the agreement, speculating about who might be employed by the company sometime in the future, and under what terms, was not the correct approach.

The first requirement on the FWC was to ensure that terminating the agreement was not contrary to the public interest. In deciding that it wasn’t, the FWC said a modern industry award existed to provide for ‘proper industrial standards’ in the absence of an agreement. So if the agreement were terminated, and new employees came on board, then the award would apply in the normal way. Also of course the new employees would be free to bargain for an agreement.

That finding allowed the FWC to then consider if it was appropriate to cancel the agreement in the circumstances. In this regard, the evidence of the company about being pipped for several tenders by competitors was telling, with the FWC saying ‘’ more likely than not, the … Agreement has contributed to inability to win .. work, and that the Agreement is now out of step with the need to cater to changing economic and competitive environments.’’

The FWC went on to say that by cancelling this agreement the path was made clear for the parties to negotiate a new agreement with ‘appropriate terms and conditions of employment that focus, not on the past, but on the circumstances that prevail in 2021’’.

While it is true the decision was made easier because there were no employees covered by the agreement right at the time the matter was heard, nevertheless a key determinant was the competitive disadvantage that had arisen. As the FWC said in this case, “it cannot be expected that the terms and conditions of an agreement will continue unaltered in perpetuity after it has passed its expiry date”.

Boskalis Australia Pty Ltd [2021] FWCA 457 (20 May 2021)


By Ross Clarke and Shane Coyne