Secure Jobs, Better Pay legislation: enterprise bargaining reform

On 2 December 2022, the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022 was passed by the Australian Parliament and now awaits Royal Assent. The Secure Jobs, Better Pay legislation represents the first substantive amendment of the Fair Work Act 2009 (Cth) since the ALP was elected to government.

The Secure Jobs, Better Pay legislation contains significant amendments:

• in a number of areas, including pay secrecy, sexual harassment, fixed term contracts, flexible work and enterprise agreements and bargaining;

• along ideological lines that engages the right to work and rights in work by granting more protections to employees and permits more involvement by unions in industrial relations;

• encouraging improvements in wages and conditions of employment; and

• that increases the administrative burden on employers in managing employment entitlements and rights.

In this bulletin, we will explore aspects of the key legislative amendments in the area of enterprise agreements and bargaining. These are significant amendments that encourage or compel enterprise bargaining with the hope of repairing a broken enterprise agreement system and achieving wage increases for employees.

While these amendments to the existing FW Act are said to be designed to achieve a simpler system of bargaining, that may not be the case. There is a degree of complexity to the new regime and it is inevitable that the meaning and operation of the Secure Jobs, Better Pay legislation will only become clearer once we receive decisions from the Fair Work Commission and Courts. 

New streams of bargaining

The Secure Jobs, Better Pay legislation encourages or compels employer involvement in enterprise bargaining, to increase wages and benefits, by introducing new streams of enterprise bargaining:

Table: Streams of enterprise agreements

The Secure Jobs, Better Pay legislation retains the ability for an employer and its employees to agree to an enterprise agreement. Some primacy is given to employers that have existing enterprise agreements to have the opportunity to retain their agreements. There are said to be some improvements in the approval process discussed below.

Though the name can be misleading, “single interest employer agreements” are a different species to the normal enterprise agreement. If a single interest employer authorisation is made, multiple employers subject to the authorisation are compelled to bargain for a new enterprise agreement and cannot bargain for their own enterprise agreement. This stream will see multiple employers bargaining alongside their competitors and other businesses in the industry.

An employer or bargaining representative, like a union, can apply for an authorisation. Employers, other than a small business employer (fewer than 20 employees), can be subject to an authorisation if, amongst other requirements:

• the employer agrees to the authorisation or a majority of employees employed at the time want to bargain;

• the employers have clearly identifiable common interests;

• some of the employees are represented by a union; and

• it is not contrary to the public interest to make the authorisation.

In determining if there is a common interest, regard can be had to geographical location, any applicable regulatory regime and the nature of the enterprises to which the agreement will relate.

Supported bargaining enterprise agreements is the new stream to replace the existing low paid authorisation regime; which was not utilised. The Secure Jobs, Better Pay legislation simplifies the requirements for the Commission to authorise bargaining in these industries. It is hoped by the Government this regime will be more easily accessed to increase wages in these traditionally low paid industries.

Other mechanisms to encourage bargaining

There was little doubt that the existing bargaining system under the FW Act was broken and a disincentive to make enterprise agreements improving terms and conditions of employment. 

A series of amendments are also made by the Secure Jobs, Better Pay legislation to seek to encourage bargaining and improve the system:

There will be fewer options for employers to resist bargaining for an enterprise agreement.

Under the FW Act, employers could often resist bargaining unless ordered to do so under a majority support determination or low-paid authorisation.

The Secure Jobs, Better Pay legislation gives a bargaining representative of employees the ability to effectively require an employer to bargain to replace an existing enterprise agreement that has expired. This is in addition to the new requirement to bargain if the employer is subjected to a single interest employer authorisation. 

Employers can be added to single interest authorisations and agreements.

An employer and its employees can apply to be covered by a single interest employer authorisation or agreement. 

A union can also make such an application to cover an employer. The above common interest and majority support requirements need to be met.

It will be difficult for an employer to be removed from a single interest employer authorisation or agreement.

The ability to terminate an existing enterprise agreement is severely curtailed.

A (mis)perception of the current FW Act system was that employers were applying to the Commission to terminate enterprise agreements that had passed their nominal expiry date during bargaining to apply pressure on workers to accept a new agreement. 

Even though the ability to terminate an agreement under the FW Act was difficult, the Secure Jobs, Better Pay legislation imposes further limits:

1. An enterprise agreement can only be terminated in more limited circumstances of unfairness to employees, the agreement will no longer cover any employees or when the continued operation of the agreement would pose a significant threat to the viability of the business and to avoid the potential for loss of employment; and

2. If terminated, an employer must give a guarantee of termination entitlements to employees to ensure they continue to be entitled to receive any more generous benefits under the terminated agreement to redundancy pay etc if they do lose their employment.

The approval process is clarified and simplified (but still with tricks and traps).

In an attempt to simplify the approval process, the Commission must consider if the agreement has been genuinely agreed by reference to a statement of principles which will guide employers. These principles include that an employer:

• informed employees of the right to be represented,

• gave employees a reasonable opportunity to consider the proposed agreement; and

• explained the terms of the proposed agreement and their effect to the employees.

Further, the Commission must be satisfied that employees who vote on the agreement had a sufficient interest in the proposed agreement and were sufficiently representative of the employees to be covered.

The Secure Jobs, Better Pay legislation will simplify the better off overall test or BOOT. It does this by ensuring a “global assessment” (rather than line by line) of whether employees, or “reasonably foreseeable employees” are better off compared to the modern award. The BOOT is to be based on the patterns of work at the time of approval or that are reasonably foreseeable. The Commission must give primary consideration to any common view held by the employer and bargaining representatives as to whether the agreement passes the BOOT.

Further, if material changes occur to patterns of work or types of employment, that were not considered by the Commission at the time of its original approval, a reconsideration process can occur to ensure the agreement remains better off overall.

Finally, the Commission is given the power to amend a proposed enterprise agreement to pass the BOOT if it has a concern the proposed agreement does not meet the BOOT (rather than seeking an undertaking from the employer). The amendment is then binding on the employer.

Termination of “zombie” agreements.

All “zombie” agreements, that is, those agreements made before the FW Act commenced on 1 January 2010, will end twelve (12) months after Royal Assent. Six (6) months before the agreements expire, employers need to provide written notice to employees of prescribed matters.

Empowering industrial action with some safeguards

There are also changes to provisions in the FW Act relating to industrial action, that include:

• Parties to a single interest enterprise agreement or supported bargaining will be entitled to take industrial action. This can result in industrial action across an industry or multiple employers in support of better wages and conditions.

• The Commission must direct the parties to attend a conference during the protected action ballot period to see if it can resolve the dispute before industrial action is taken. The Commission otherwise retains its powers under s 240 of the FW Act to assist in the conciliation of a bargaining dispute.

• Three working days’ notice of industrial action must be given or 120 hours for single interest employer agreements and supported bargaining agreements.

• The ability for the Commission to make an “intractable bargaining declaration” that will enable it to arbitrate an agreement between the parties.
  
  Provided the parties have utilised the Commission’s services under s 240, and there is no reasonable prospect of the parties reaching an agreement, then the Commission can make the declaration if it is reasonable to do so in all the circumstances. There are time limits on when the declaration can be made to ensure the parties have spent some minimum time bargaining.

While the ability for industrial action has been expanded, and will likely see an increase in such action, the regime provides greater mechanisms for the Commission’s involvement to assist in resolving disputes (rather than stand helpless against such action).

Moving forward

Whether employers are encouraged or compelled to bargain, there is no doubt we will see an increase in enterprise bargaining and industrial disputation under the Secure Jobs, Better Pay legislation. It is hoped that the new regime provides, in practice, appropriate mechanisms to assist the parties to resolve disputes quickly rather than being trapped in unhelpful and prolonged disputation.

Aspects of the new system seem reminiscent of the old ‘roping in’ days where unions could have businesses brought into awards. Employers will need to consider whether there is a benefit to get on the front foot and make its own enterprise agreement before being brought into a single interest employer agreement.

And as with legislation in the Federal jurisdiction, there is an awful lot of prescription that will see significant litigation in the Commission to avoid being covered by the regime. For example, expect a lot of businesses to argue there is not a common interest to avoid bargaining alongside other businesses.

One thing is for certain: 2023, and industrial relations, will not be dull!

Author: James Mattson