Good Faith Bargaining and the Fair Work Act 2009

GOOD FAITH BARGAINING AND THE FAIR WORK ACT 2009

Enterprise Agreements

Part 2-4 of the Fair Work Act (the “Act’) provides for the making of enterprise agreements through collective bargaining. It enables national system employers and employees (as defined in ss13 and 14) to make enterprise agreements (see the attachment to this paper).

Enterprise agreements are collective agreements. There are two types of enterprise agreement; single-enterprise agreements and multi-enterprise agreements (s172(2) and (3)). A single-enterprise agreement or multi-enterprise agreement that relates to a genuine new enterprise (s12) may also be a greenfields agreement (s172(4)).

Single-enterprise agreements are made between a single employer, or two or more employers that are single interest employers as defined in s172(5) (i.e. if they are related bodies corporate, or they are engaged in a joint venture or common enterprise, or they are specified in a single interest employer authorisation from Fair Work Australia (“FWA”) pursuant to ss248 and 249 or a ministerial declaration pursuant to s247).

Multi-enterprise agreements are made between two or more employers and groups of their employees. Other than in the low-paid bargaining stream (which is governed by Part 2-4 Division 9), employers must voluntarily agree to bargain together for a multi- enterprise agreement.

Bargaining Representatives

An employer is required to take all reasonable steps to give notice to each employee of their right to be represented by a bargaining representative (s173(1)). The notice must be given as soon as practicable and not later than 14 days after the notification time (as defined in s173(2)) (s173(3)) unless the employer has already given the employees a notice within a reasonable period before the notification time for the agreement (s173(4)). Regulations may prescribe how such notices are to be given. The notice must specify:

(a) the employee may appoint a bargaining representative to represent the employee in bargaining for the proposed agreement and in a matter before FWA that relates to bargaining for the proposed agreement (s174(2)); (b) explain if the employee is a member of an employee organisation and the employee has not appointed another person as his or her bargaining representative, the employee organisation is automatically the bargaining representative for the employee (s174(3)) (this does not apply where there is a low paid authorisation in relation to the agreement made pursuant to s243);

1 (c) if a low-paid authorisation in relation to the proposed agreement specifies the employer comes into operation, the notice must also explain the effect of s176(1)(b) and s176(2); (d) explain that if an employee appoints a bargaining representative, a copy of the instrument of appointment must be given to the employee's employer (s174(5)); and (e) any other matters prescribed by regulation.

Section 176 specifies the persons who are the bargaining representatives for proposed enterprise agreements that are not greenfields agreements.

Bargaining representatives are required to meet the good faith bargaining requirements set out in s228(1). Such representatives include:

(a) the employer(s) (although the employer may also appoint, in writing, another bargaining representative)(s176(1)(a) and (d)); (b) a person appointed by an employee in writing which may include the employee (s176(1)(c) and s176(4)); (c) an employee organisation (union) will be a bargaining representative where an employee is a member of an employee organisation and the employee does not appoint someone else; (d) if the proposed enterprise agreement is a multi-enterprise agreement in relation to which a low-paid authorisation is in operation and an employee has not appointed another person as his or her representative or has revoked the status of the organisation as his or her bargaining agent under s178A(2), then the employee organisation that applied for the authorisation is the bargaining representative for the employee. This will be the case even if the employee is a member of another employee organisation unless that organisation was one of the applicants for the authorisation (s176(2)).

However an employee organisation cannot be a bargaining representative for an employee unless the employee organisation is entitled under its rules to represent the industrial interests of the employee in relation to work that will be performed under the proposed enterprise agreement (s176(3)).

The employee and/or employer may revoke the appointment of their bargaining agents (s178A).

A bargaining agent as part of the obligation of good faith bargaining requirements must both recognise and bargain with other bargaining representatives for the agreement (s228(1)(f)). The effect of this is by way of example is an employer must recognise and bargain with a union if the union is a bargaining representative.

FWA involvement in bargaining

In addition to the role given to FWA in respect to the low-paid bargaining stream (Part 2-4 Division 9), FWA is empowered to make certain types of orders during the bargaining process. They include:

2 (a) majority support orders; (b) scope orders; and (c) good faith bargaining orders.

Majority support orders

Under s236 a bargaining representative of an employee (who will be covered by a proposed single enterprise agreement) may apply to FWA for a determination that a majority of the employees who will be covered by a proposed enterprise agreement want to bargain with the employer. This is a majority support determination.

In deciding whether to grant a majority support determination, if an application for the determination has been made, the FWA must be satisfied that:

(a) a majority of the employees (employed at a time determined by FWA) who will be covered by the proposed agreement want to bargain (s237(2) (a));

(b) the employer or employers that will be covered by the agreement have not yet agreed to bargain, or initiated bargaining, for the agreement (s237(2)(b));

(c) the group of employees who will be covered by the agreement are fairly chosen taking into account where the group is geographically, operationally or organisationally distinct(s237(2)(c) and s237(3A)); and

(d) it is reasonable in all the circumstances to make the majority support determination (paragraph 237(2)(d)).

The last of these requirements provides a broad discretion to FWA.

There is no direct penalty on an employer for contravening a majority support determination. If the FWA determines that there is majority support for collective bargaining and an employer still refuses to bargain, the employee bargaining representative may seek a bargaining order to require the employer to bargain (s228(1)(a) and s230(2)(a)).

The effect of these orders, if made, will require those employers who do not wish to bargain collectively to bargain collectively where the employees wish that outcome.

Scope orders

Section 238(1) allows a bargaining representative for a proposed single enterprise agreement (unless there is a single interest employer authorisation in operation in relation to the agreement) to apply for a scope order, if a bargaining representative has concerns that bargaining for the proposed enterprise agreement is not proceeding efficiently or fairly because the agreement will not cover the appropriate employees, or will cover employees that it is not appropriate for the agreement to cover. 3 The bargaining representative may only apply for a scope order if the representative: has given a written notice to the relevant bargaining representatives setting out the concerns mentioned in s238(1), has provided the relevant bargaining representatives a reasonable time within which to respond to the concerns and considers that the relevant bargaining representatives have not responded appropriately to the those concerns.

Section 238(4) provides that FWA may make a scope order, only if FWA is satisfied that:

(a) the applicant bargaining representative has met or is meeting the good faith bargaining requirements;

(b) making the order will promote the fair and efficient conduct of bargaining;

(c) the employees of the employer and the group of employees that will be covered by the agreement proposed in the scope order were fairly chosen taking into account whether the group is geographically, operationally or organisationally distinct; and

(d) it is reasonable in all the circumstances to make the order.

Again this provision provides a broad discretion to FWA.

Good Faith Bargaining Orders

Section 228(1) specifies the following good faith bargaining requirements that a bargaining representative for a proposed enterprise agreement must meet:

(a) attending, and participating in, meetings at reasonable times; (b) disclosing relevant information (other than confidential or commercially sensitive information) in a timely manner; (c) responding to proposals made by other bargaining representatives for the agreement in a timely manner; (d) giving genuine consideration to the proposals of other bargaining representatives for the agreement, and giving reasons for the bargaining representative's responses to those proposals; (e) refraining from capricious or unfair conduct that undermines freedom of association or collective bargaining; and (f) recognising and bargaining with the other bargaining representatives for the agreement.

These principles apply equally to both employer and employee bargaining representatives.

The specific requirements are, at least in the absence of any judicial or tribunal considerations, generally self-explanatory except possibly (e). The Explanatory Memorandum when commenting on paragraph (e) (as it now is) stated it was intended 4 to cover a broad range of conduct. For example, conduct may be capricious or unfair conduct if an employer: · does not permit an employee who is a bargaining representative to attend meetings or discuss matters relating to the terms of the proposed agreement with fellow employees;

· dismisses or engages in detrimental conduct towards an employee because the employee is a bargaining representative or is participating in bargaining; or · prevents an employee from appointing his or her own representative.

Importantly, s228(2) specifically provides that the good faith bargaining requirements do not require a bargaining representative to make concessions during bargaining for the proposed agreement or to reach agreement on the terms to be included in an agreement.

The good faith bargaining requirements do not apply to the process of varying or terminating an agreement since they only apply to “a proposed enterprise agreement”.

Bargaining Orders

A bargaining representative may apply to FWA, pursuant to s229, for a bargaining order in relation to a proposed enterprise agreement.

Bargaining orders are not available in relation to a proposed multi-enterprise agreement unless a low-paid authorisation is in operation in relation to the agreement (s229(2)). An application for a bargaining order may not be made where one or more enterprise agreements cover the employees concerned and it is greater than 90 days before the nominal expiry date of the enterprise agreement(s), unless it is after an employer has requested the employees to approve the proposed agreement. If there is no existing enterprise agreement in operation, an application may be made at any time.

A bargaining representative may only apply for a bargaining order if the representative (s229(4)):

(a) has concerns that the good faith bargaining requirements are not being met by one or more of the bargaining representatives or if the bargaining process is not proceeding efficiently or fairly because there are multiple bargaining representatives for the agreement;

(b) has given a written notice setting out those concerns to the relevant bargaining representatives; and

5 (c) after giving them a reasonable time within which to respond, considers that the relevant bargaining representatives have not responded appropriately to those concerns (s229(4)).

It is clear that a bargaining representative can seek orders even where the concerns relate to a representative on the “same side”.

FWA has discretion to allow a bargaining order application even though the written notice of concerns has not been issued, if FWA is satisfied it is appropriate given all the circumstances (s229(5)).

FWA may make a bargaining order pursuant to s230 where an application for an order has been made, the requirements of the section are satisfied and FWA is satisfied that it is reasonable in all the circumstances to make the order (s230(1)).

Prior to granting a bargaining order FWA must be satisfied that one of the following applies (s230(2)): (a) the employer or employers have agreed to bargain, or have initiated bargaining, for the agreement; (b) a majority support determination in relation to the agreement is in operation; (c) a scope order in relation to the agreement is in operation; (d) all of the employers are specified in a low-paid authorisation that is in operation in relation to the agreement.

In the absence of one of the matters set out in (b)-(d) above, a bargaining order cannot compel an employer who has refused to bargain at all.

FWA must also be satisfied prior to exercising their discretion to make a bargaining order that either a bargaining representative has not met the good faith bargaining requirements or that the bargaining process is not proceeding efficiently and fairly because there are too many bargaining representatives (s230(3)).

Section 231(1) specifies what FWA must include in an order and s231(2) provides examples of the type of orders the FWA may make, including an (a) order may specify that the employer must not terminate the employment of an employee if the termination would constitute capricious or unfair conduct undermining freedom of association (s231(2)(c)); or (b) order may require the reinstatement of an employee whose employment has been terminated if the termination constitutes, or relates to, a failure by a bargaining representative to meet this particular good faith bargaining requirement (s231(2)(d)). 6 Section 231(3) enables regulations to prescribe the factors FWA may or must take into account in deciding whether or not to make a bargaining order for reinstatement of an employee and provide for FWA to take action and make orders in connection with, and to deal with matters relating to, a bargaining order of that kind.

It is clear from the Explanatory Memorandum that it is proposed that regulations be made to make clear that FWA can make orders to require the repayment of lost wages to the employee and to ensure continuity of service for accrued entitlements where an employee has been terminated in breach of s231(2)(d).

Breach of a Bargaining Order-Civil Penalty

Section 233 provides that a person to whom a bargaining order applies must not contravene a term of the order.

In the event the bargaining order is contravened then (a) an employee who the proposed enterprise agreement will cover; or (b) a bargaining representative for the proposed enterprise agreement (which could be the employer); or (c) an inspector may commence proceedings to recover a maximum penalty of 60 penalty units in the case of individuals (s539) and 300 penalty units in the case of a corporation (s546(2) (b)).

The Court may also order that penalty or part of the penalty be paid to a particular person or organisation (s546(3)).

The Federal Court and Federal Magistrates Court also have a broader power to make other orders upon a breach of a civil penalty provision that includes s233. In particular, pursuant to s545(1) such a Court may make an order granting an injunction, or interim injunction, to prevent, stop or remedy the effects of a contravention or an order or awarding compensation for loss that a person has suffered because of the contravention or an order for reinstatement of a person or any order the Court considers appropriate if the Court is satisfied that a person has contravened, or proposes to contravene, a civil remedy provision.

Interestingly multiple breaches of a bargaining order are not taken to constitute a single contravention if the contraventions are committed by the same person and the contraventions arose out of a course of conduct by the person unlike many other civil remedy provisions (s557(2)).

The Court’s power to award costs in such applications remains limited (s570).

Breach of a Bargaining Order-Serious Breach Declaration

7 In addition to, or in substitution for an application for a civil remedy provision, where there is a breach of a bargaining order a bargaining representative may apply for a serious breach declaration (s234).

The Explanatory Memorandum at [965] states:

It is intended that serious breach declarations would be made rarely and only as a last resort in the event that a bargaining representative has behaved in a manner that shows disregard for the bargaining obligations and that significantly undermines bargaining and where the framework of good faith bargaining orders has been demonstrated to have failed to bring about good faith bargaining.

FWA may issue a serious breach declaration if satisfied of each of the following: (a) a bargaining representative has contravened one or more bargaining orders in relation to the proposed agreement; (b) the contravention(s) is serious and sustained and has significantly undermined bargaining for the agreement; (c) the other bargaining representatives have exhausted all other reasonable alternatives to reach agreement on the terms for the agreement; (d) agreement on the terms for the proposed agreement will not be reached in the foreseeable future; and (e) it is reasonable in all the circumstances to make the declaration, taking into account the views of all the bargaining representatives for the proposed agreement.

If FWA makes a serious breach declaration in relation to a proposed agreement and the post-declaration negotiating period ends (21 days after the day upon which the serious breach declaration is made [unless the time period is extended by FWA]) and the bargaining representatives for the agreement have not settled all of the matters that were at issue during bargaining for the proposed agreement, FWA must make a determination (a bargaining related workplace determination) as quickly as possible after the end of that period (s269). FWA must be constituted by a Full Bench to make a bargaining related workplace determination (s616(4)).

This is a significant departure from the current role of the Commission where the parties are unable to conclude an agreement.

Where FWA makes a bargaining-related workplace determination, the determination must include the following terms: (a) a term specifying a date as the determination's nominal expiry date, which must not be more than four years after the date on which the workplace determination comes into operation (s272(2));

8 (b) terms such that the determination, if it were an enterprise agreement, would pass the “better off overall test” under s193 (s272(4)); (c) a term that provides a procedure for settling disputes about any matters arising under the determination and in relation to the National Employment Standards (s273(2)); (d) the “model flexibility term” unless FWA is satisfied that an agreed term for the determination would, if the determination were an enterprise agreement, satisfy paragraph 202(1)(a) and section 203 (which deal with flexibility terms in enterprise agreements)(s273(4)); (e) the “model consultation term” unless FWA is satisfied that an agreed term for the determination would, if the determination were an enterprise agreement, satisfy subsection 205(1) (which deals with terms about consultation in enterprise agreements)(s273(5)); and (f) the agreed terms which, for a bargaining-related workplace determination, are defined in s274(3) to be the terms that the bargaining representatives for the proposed enterprise agreement concerned had, at the end of the post- declaration negotiating period, agreed should be included in the agreement (s270(2)).

The determination must also include the terms that FWA considers deal with the matters that were still at issue between the parties at the end of the post-declaration negotiating period (s270(3)). The factors that FWA must take into account in deciding which terms to include in a bargaining related workplace determination are set out in s275 and include the following: (a) the merits of the case; (b) the interests of the employers and employees who will be covered by the determination; (c) the public interest; (d) how productivity might be improved in the enterprise or enterprises concerned; (e) the extent to which the conduct of the bargaining representatives for the proposed enterprise agreement concerned was reasonable during bargaining for the agreement; (f) the extent to which the bargaining representatives for the proposed enterprise agreement concerned have complied with the good faith bargaining requirements; and (g) incentives to continue to bargain at a later time.

The determination must not include (s272(3) and (5)):

(a) any terms that would not be about permitted matters if the determination were an enterprise agreement; or

9 (b) a term that would be an unlawful term if the determination were an enterprise agreement; or (c) any designated outworker terms; or (d) a term that would, if the determination were an enterprise agreement, mean that FWA could not approve the agreement because the term would contravene section 55 (which deals with the interaction between the National Employment Standards and enterprise agreements etc.) or because of the operation of Subdivision E of Division 4 of Part 2-4 (which deals with approval requirements relating to particular kinds of employees).

A workplace determination operates from the day on which it is made. A workplace determination ceases to operate on the earlier of the following days; the day on which a termination of the determination comes into operation under ss 224 or 227 as applied to the determination by section 279 (which deals with the application of this Act to workplace determinations) or the day on which section 278 first has the effect that there is no employee to whom the agreement applies.

As a general rule a workplace determination covers an employer, employee or employee organisation if the determination is expressed to cover the employer, employee or organisation. For the most part, the Act applies to a workplace determination as if the determination was an enterprise agreement (s279).

A person must not contravene a term of a workplace determination and a breach of a workplace determination is a civil remedy provision (s280).