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Enterprise Bargaining Reforms & What You Need to Know

Enterprise Bargaining Reforms & What You Need to Know

Enterprise Bargaining Reforms

As part of our ‘IR Deep Dive’ series we have been exploring the Federal Government’s recent workplace reforms which passed in December last year under legislation known as the ‘Secure Jobs, Better Pay Act’. A key part of these reforms are changes to Australia’s enterprise bargaining framework with a number of changes taking effect in early June 2023.

The reforms have been positioned by the Federal Government as a way to generate ‘real wage growth’ by simplifying and encouraging participation in ‘enterprise agreement’ (Agreement) bargaining. For small to medium size business owners with Agreements (or those considering bargaining for one) it’s important to understand what the key changes are, how they might impact you, and what you need to do.

Enterprise bargaining: Key reforms ‘at a glance’

The reforms are complex and multi-faceted and whether they will achieve the ‘simplification’ the Government has set out to achieve is yet to be seen. The significant shifts relevant to employers including those with Agreements that are close to nominal expiry (or have expired) include:

  1. Simplification of the Agreement pre-approval process. Some of the ‘red tape’ associated with Agreement pre-approval has been simplified. For example the Fair Work Commission can now disregard minor procedural or technical errors in pre-approval documents like a ‘notice of employee representational rights’ or in the timing of an Agreement vote (so long as employees aren’t disadvantaged).
  2. A new ‘Better Off Overall Test’. The Fair Work Commission is now required to conduct its ‘Better Offer Overall’ or ‘BOOT’ test on a global rather than line-by-line basis meaning it must take a more holistic view when deciding whether or not to approve an Agreement (in effect this is expected to give greater weight to the views of the bargaining parties and allow some flexibility in the terms that can be incorporated into an Agreement).
  3. Unions can ‘more easily’ initiate bargaining. Unions can now initiate bargaining by simply writing to an employer (where an Agreement has passed its nominal expiry date within the past 5 years) rather than having to go through a more onerous notification and commencement process that was previously required.
  4. No unilateral termination of Agreements. Employers can no longer ‘unilaterally’ terminate nominally expired Agreements without extreme difficulty. Termination now requires the majority consent of employees or the approval of the Fair Work Commission (subject to a strict test which assesses amongst other things fairness to employees).
  5. No more zombies! From 7 December 2023 all Agreements entered prior to the commencement of the Fair Work Act will automatically ‘sunset’ (a nice way of saying terminate). Parties to an Agreement can apply to the Commission prior to the above date to extend the term subject to various conditions – however, time for that is fast running out.

Multi-employer bargaining: What is it and what are the different Agreement ‘types’?

A topical and hotly debated aspect of the bargaining reforms is the new ‘multi-employer bargaining’ concept. These are in effect an update of existing ‘Agreement types’ which support multiple employers to bargain under one Agreement where appropriate to do so. The table below gives a high-level overview of the differences between current Agreement types:

Single Enterprise Single Interest Employer Agreement Supported Bargaining Agreement Cooperative Workplace Agreement
Any employer (who is a corporation) can be covered by a single enterprise agreement

This is the most common form of Agreement applicable to ‘most’ employers and employees covered by an Agreement.
An Agreement that applies to two more employers (generally franchisees) with ‘common interests’

Employers and employees (not applicable to small businesses) can now apply to the Commission to authorise a single interest employer agreement (previously this could only occur with ministerial approval). This is most commonly applicable to franchisees.
An Agreement which applies to an industry occupation or sector

This must be specified by the Minister or the Fair Work Commission as having a ‘common interest’ taking into account prevailing pay and conditions. This replaces the old low-paid bargaining stream. The intent of this Agreement type is to assist employers or employees who may find it difficult to bargain at a single-enterprise level.
Two or more employers who have agreed to bargain together where they are not included in a supported bargaining authorisation or single interest authorisation

A group of employers who decide to enter into a multi-enterprise agreement are now known as “cooperative workplaces” with new options available to add or remove employers from the scope of these Agreements.
Most employers with one enterprise agreement. Franchises, sometimes schools & some health services. Aged care, childcare, hospitality, etc. Any employers that consent.

* Note: general building & construction is ‘carved out’ (excluded) of new multi-employer bargaining streams.

The Fair Work Commission: Expanded scope & arbitration powers

In addition to the various other changes introduced this year the Federal Government has set an ambitious target for the Fair Work Commission’s role in the enterprise bargaining process (including new dispute resolution ‘powers’ enabling it to do so). To that end:

  1. The Fair Work Commission’s arbitration ‘powers’. The Commission can now arbitrate to resolve what are known as ‘intractable bargaining disputes’. This effectively allows the Commission to issue determinations to resolve bargaining disputes with some pre-conditions (for example, the parties must have attempted and failed at dispute resolution and 9 months must have passed since negotiations started or since an Agreement’s nominal expiry date, whichever was later).
  2. Further expanded ‘powers’. The Commission can also now ‘step in’ to ‘fix’ minor errors in Agreements that have been submitted for approval by unilaterally amending any terms which don’t satisfy the BOOT test albeit only at the Agreement ‘approval’ stage. Likewise, the Commission can issue specific bargaining orders where parties to enterprise bargaining are not seen to be engaging in bargaining in ‘good faith’.

Next steps: What does all of this mean for employers and what steps should you take?

To minimise any unintended consequences that may result from these changes we recommend that employers consider whether from a strategic perspective it is a good time to bargain for a new or replacement Agreement. In doing so employers should:

  1. Assess your options. If your business isn’t covered by an EA consider whether now is a good time. Often when new and ‘untested’ industrial reforms are introduced a ‘wait and see’ approach is best.
  2. Be prepared. Unions have little to no barriers to initiate Agreements that have nominally expired within the past 5 years. Prepare ahead of time so as not to be caught off guard.
  3. Revisit your ‘people strategy’. If you aren’t sure what a people strategy is, then get in touch! As an employer aligning your people strategy with your bargaining strategy is critical to mitigate risk.
  4. Consolidate Agreements. If applicable, given the resource-intensive nature of bargaining consider consolidating multiple Agreements where appropriate to simplify compliance risk and reduce your bargaining costs in the long-term.
  5. Speak to the experts. Now more than ever it’s critical to ensure that you ‘get it right’ when it comes to all workplace compliance matters and bargaining is no exception. If you don’t, the reputational and cost fallout can be significant!

How can Nellers HR help?

Nellers have a range of products and services that can assist your business in preparing for and responding to a range of workplace matters. We are available to provide a personalised service with advice and strategies that are specifically tailored to suit your business and operational needs.

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