We expect to continue to see increased scrutiny of enterprise agreements by the Fair Work Commission and Federal Court this year.
In 2017, the Full Bench of the FWC and the Federal Court quashed a number of decisions granting the approval of enterprise agreements, for reasons including that:
- the employer had failed to take all reasonable steps to notify the employees of the time and place at which the vote to approve the agreement would occur and of the voting method which would be used (eg CFMEU v Australian Mining Supplies Company Pty Ltd [2017] FWCFB 2236)
- the agreement did not pass the BOOT (eg CFMEU v Kaefer Integrated Services Pty Ltd [2017] FWCFB 5630, CFMEU v TR Construction Services Pty Ltd [2017] FWCFB 1928, CFMEU v Concrete Constructions (WA) Pty Ltd [2017] FWCFB 3912 and United Voice - Queensland Branch v MSS Security Pty Limited T/A MSS Security Pty Limited [2017] FWCFB 651). In CFMEU v Concrete Constructions (WA) Pty Ltd, the employer sought to address the BOOT deficiencies by way of undertakings. This attempt was rejected by the Full Bench, which stated that an undertaking accepted after an agreement has been approved is not given any legal effect by the FW Act
- the undertaking proffered by the employer was not capable of addressing the FWC's concern that the agreement did not pass the BOOT (eg SDA v Beechworth Bakery [2017] FWCFB 1664)
- in breach of section 55 of the FW Act, the enterprise agreement contained provisions which contravened the National Employment Standards (CFMEU v CSRP Pty Ltd [2017] FWCFB 2101). In this case, whilst the Full Bench noted it would be open for it to do nothing and allow section 56 of the FW Act, which states that a term of an enterprise agreement has no effect to the extent that it contravenes section 55, to have operational effect, the Full Bench asserted that it was not desirable "to allow an agreement to continue operating with provisions of doubtful legal efficacy" and that employees "deserve to understand their rights and obligations under the Agreement without recourse to a lawyer or the legal niceties of s. 56"
- the employer failed to serve a copy of the application for approval of the agreement and the employer's statutory declaration on each employee organisation that was, at any time, a bargaining representative in relation to the enterprise agreement (NUW v Sigma Company Limited T/A Sigma Healthcare [2017] FWCFB 3892)
- the two-year old agreement covering more than 1,000 mine services workers was not adequately explained to the three workers who agreed to it (see CFMEU v One Key Workforce Pty Ltd [2017] FCA 1266, which quashed the approval granted by the FWC on 30 October 2015. The employer is appealing this decision); and
- a union was denied procedural fairness. Communications between the FWC and the employer on material facts in dispute were not disclosed to a union that was not a bargaining representative for the proposed agreement but had opposed the approval of the agreement and had been invited to make submissions on substantive issues (see United Voice v Broadspectrum (Australia) Pty Ltd T/A Broadspectrum [2017] FWCFB 871. The matter was remitted to Deputy President Kovacic, who declined to approve the agreement in March 2017 on the basis that it was not genuinely agreed. In August 2017, the Full Bench declined to grant the employer permission to appeal. The Federal Court is set to review the Full Bench decision in March 2018).
The tendency of the Full Bench or the Federal Court to quash historical decisions to approve enterprise agreements increases uncertainty for all parties.
In 2017, we saw greater scrutiny of enterprise agreements which had otherwise been agreed to by employees and unions. This manifested in a number of ways, including employers being forced back to the bargaining table because of minor procedural defects in Notices of Employee Representational Rights, as well as employers being asked to give undertakings in respect of matters which had been included in predecessor agreements.
This theme will continue in 2018, and employers will need to ensure they keep up to date with any amendments to the relevant modern award arising from the four yearly review.
Most employers will now have the Notice issue well in check. However, it is other requirements for approval, such as ensuring the agreement and the effect of it are adequately explained to employees, which may present a new frontier of challenge. Is it sufficient to simply issue a Memo explaining the changes, or is something more required?
We also recommend that employers focus more attention on what is included in the forms for approval of an enterprise agreement. We are seeing a trend in the FWC of it requesting additional information after the agreement is lodged for approval. Including more information upfront in support of why the proposed agreement passes the BOOT may help secure quicker approval.
Employers with loaded up rates in their enterprise agreements should also be aware that a Full Bench of the FWC has been appointed to consider how the BOOT should be applied. The FWC invited submissions and a hearing was held on 15 November 2017. The matter has been adjourned, so watch this space.
The most recent report published by the Department of Employment (Trends in Federal Enterprise Bargaining September 2017) shows a decline in the number of private sector agreements, while coverage in the public sector has not changed significantly.
Declining union density, increasing scrutiny of the BOOT and an ever increasing safety net of terms and conditions in modern awards may well lead to this trend continuing.
It remains the case however that many large employers want the security of an in-term enterprise agreement because employees are unable to take protected industrial action. But at what cost?
More and more we are seeing employers take on the challenge of attempting to drive organisational transformation through an enterprise agreement strategy. Where such change is unable to be achieved, this may well lay the platform for an employer to consider an application to terminate the existing enterprise agreement. This is likely to remain a feature of bargaining in the future for some employers.
