Trying hard or hardly trying – What does it take to bargain "in good faith"?

Association of Professional Engineers, Scientists and Managers, Australia v Peabody Energy Australia Coal Pty Ltd [2015] FWCFB 1451 (3 March 2015)

WHAT YOU NEED TO KNOW

• A Full Bench of the Fair Work Commission (FWC) has taken the rare step of granting bargaining orders.
• Bargaining orders can be made where a bargaining representative (for either the employer or employees) for a proposed enterprise agreement is not meeting their statutory good faith bargaining obligations.
• In this case, the orders require the employer to:
  • meet with the union to discuss the union's revised proposed enterprise agreement;
  • put forward a "genuine proposal" for an agreement of its own; and
  • disclose relevant salary information to the union (which the employer had argued was confidential and therefore should not be disclosed).

WHAT YOU NEED TO DO

• Take stock and remind yourself of what your obligation to bargain in good faith requires. While the exact requirements will depend on the circumstances, in general terms, you will have to:
  • Meet, in person, with the union to discuss their proposals. Correspondence by email or letter may not be sufficient to show that you are giving genuine consideration to their proposals.
  • Give real and genuine consideration to proposals put forward by the union, and explain your position. Be prepared to state the matters to which you may be prepared to accept in an enterprise agreement.
  • Ensure that, if asked, you disclose relevant information. You are not required to disclose confidential or commercially sensitive information, however figures such as salary bands or ranges may not be considered confidential, and may have to be disclosed.
• Recognise that the obligation to bargain in good faith can be quite onerous and requires that you deal with the substance of union proposals and not simply dismiss them without due consideration.
• Ensure that you keep an "open mind" as to the prospect of ultimately reaching agreement with a union or unions and bear in mind that sitting mute and merely rejecting proposals or terms which are being advance for your consideration may mean that you are not complying with your good faith bargaining obligations.

Enterprise bargaining and good faith

Good faith obligations
The Fair Work Act 2009 (Cth) (FW Act) requires that those who are engaged in bargaining for an enterprise agreement must do so in "good faith". The aim of this requirement is to facilitate agreement making and assist bargaining representatives to bargain effectively.

Section 228 of the FW Act obliges a bargaining representative for a proposed enterprise agreement to meet "good faith bargaining requirements". Those requirements are set out as a list of six behaviours:

• attending, and participating in, meetings at reasonable times;
• disclosing relevant information (other than confidential or commercially sensitive information) in a timely manner;
• responding to proposals made by other bargaining representatives for the agreement in a timely manner;
• 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;
• refraining from capricious or unfair conduct that undermines freedom of association or collective bargaining; and
• recognising and bargaining with the other bargaining representatives for the agreement.

The FW Act specifically states that the good faith requirements do not require a party to make concessions or to actually reach an agreement.

Bargaining orders
If one or more of the bargaining representatives for the agreement have not met, or are not meeting, the good faith bargaining requirements (and assuming the other statutory prerequisites are met), the FWC may make a "bargaining order", requiring the bargaining representatives to do or not do certain things so as to meet their good faith obligations.

What does it mean to bargain in "good faith"?

In Association of Professional Engineers, Scientists and Managers, Australia v Peabody Energy Australia Coal Pty Ltd [2015] FWCFB 1451, the Full Bench reaffirmed that to bargain in good faith requires bargaining representatives to give genuine consideration to proposals put forward by the other side.

Background to the case
This case arose out of an attempt by the union to bargain for a new enterprise agreement at one of the employer's coal mine sites in regional New South Wales covering salaried staff (deputies, on shift staff and technical services and engineering staff). Those employees are currently employed on individual employment contracts.

When the union first sought to make an enterprise agreement, the employer indicated that it did not wish to bargain for an enterprise agreement to cover the relevant employees.

The union then sought and obtained a majority support determination on 6 December 2013.

In January 2014, the employer and the union first met and at that meeting, the union put forward a draft agreement.

There was a second meeting on 13 February 2014, at which the employer advised the union that it had no interest in having both staff employment contracts and an enterprise agreement.

The union then put forward a second draft agreement on 9 March 2014.

The employer put forward a draft agreement in March 2014, which included a clause which would terminate all the existing contractual arrangements and contained rates of pay which were significantly less than the actual rates being paid to staff.

There were then some further meetings during which some of the issues discussed included rates of pay and redundancy.

The union wrote to the employer on 24 April 2014 stating that, in its view, the employer had failed to put a genuine bargaining position and was not bargaining in good faith.

By 30 May 2014, no agreement having been reached, the union had made an application to the FWC for good faith bargaining orders. A conciliation conference was conducted, but still no agreement was reached between the parties.

The union provided a third draft agreement on 27 June 2014.

This draft responded to concerns raised by the company during negotiations and abandoned some of the union's earlier claims, including the claim for a pay increase.

The employer replied in writing on 4 July 2014, rejecting the draft and stating that it did not think there would be any benefit from further meetings.

Between January 2014 and July 2014, the parties had held some 10 meetings. The union had also requested that the employer provide information around salary ranges but the employer had refused to provide the information.

First instance decision
SDP Hamberger refused the union's application for bargaining orders.

The union submitted that the employer was just engaging in surface bargaining and its proposals were not genuine. Therefore, said the union, the employer had not bargained in good faith.

The Senior Deputy President disagreed.

His Honour said that the employer was taking a "hard" position during bargaining, but that it was entitled to take that position and that did not mean it had failed to meet the good faith bargaining requirements.

SDP Hamberger also decided that the company was under no obligation to disclose information about employees' salaries to the union and so it had not breached its good faith bargaining obligations in that respect.

Decision overturned by the Full Bench
On appeal, the Full Bench, comprised of Justice Alan Boulton, Senior Deputy President Lea Drake and Commissioner Ian Cambridge, allowed the appeal and overturned SDP Hamberger's decision.

The Full Bench did not take issue with any of the employer's conduct prior to the union presenting its offer on 27 June 2014.

However, the Full Bench said that the draft agreement put to the employer by the union on 27 June date was potentially a "game changer" because in that proposal, the union had conceded many of the matters the employer had raised as matters of concern during the negotiations.

The Full Bench went on to find that in the circumstances, the good faith bargaining requirements required the employer to do more than just write back to the union, reject the proposal and say that it did not see any benefit in holding further meetings.

The employer at least had an obligation to:

• meet and discuss the proposal; and
• to explain in such meeting or meetings whether the proposal or a modified form of it might be acceptable.

Importantly, the Full Bench noted that the employer was not obliged to accept the proposed agreement.

The Full Bench also found that SDP Hamberger had erred in his finding on whether the employer was required to disclose relevant salary information.

This was because the information sought by the union was information about the spread of salaries across bands or ranges. It was not information regarding the salary of particular employees and so there were no privacy consideration. Further, the employer had also, in any event, prepared the relevant consent forms for staff but had not distributed the forms.

For these reasons, the Full Bench found that "in certain respects" the employer had failed to meet the good faith bargaining requirements in section 228 of the Act and that SDP Hamberger had erred in finding otherwise.

What can an employer be ordered to do?

The legislation and previous decisions
On its face, the FW Act gives the FWC considerable scope to craft a bargaining order.

However in Endeavour Coal Pty Ltd v APESMA [2012] FCA 764 (19 July 2012) (Endeavour Coal), Justice Flick found that the FWC had made orders which were beyond its power because they trespassed into the area of requiring the employer to accept certain subject matters as part of any final agreement.

The bargaining orders made in this case
Having found that the Senior Deputy President was in error, the Full Bench was keen not to delay matters.

The Full Bench also noted that the failure identified were relatively straightforward and that they envisaged that any orders required would be limited.

Therefore, rather than referring the matter back to single member to grant bargaining orders, the Full Bench determined the application for bargaining orders itself.

The Full Bench made orders requiring the employer to:

• meet with the union to discuss the union's proposal;
• put forward a "genuine proposal" of its own; and
• provide the union with information about:
  • the bottom and top salaries for each classification to be covered by the proposed enterprise agreement; and
  • the spread of salaries across the paybands or salary ranges.

The Full Bench specifically stated that the order requiring the employer to put forward a "genuine proposal" of its own was not beyond jurisdiction because it might, "in a practical way", assist in facilitating further bargaining.

The Full Bench declined to grant two other orders sought by the union, namely:

• An order that the employer respond "in a genuine manner" because it would not impose a clear and meaningful obligation to identify the action needed to be taken in compliance with the order; and
• An order that the employer undertake not to change any of the relevant employees' terms and conditions because it would be unreasonable to make such an order.

Lessons for employers

An employer faced with an application for bargaining orders may need to demonstrate:

• that the particular steps and matters referred to in s 228(1) of the FW Act have been satisfied; and
• that it is not "surface bargaining" such that the overall conduct of the employer in the bargaining process is not of such a nature as to warrant a finding that it is not bargaining in good faith.

This case therefore serves as an important reminder to employers that the behaviours listed in s 228(1) of the Act are minimum standard of conduct that must be met during bargaining.

The requirement to actually meet with the union to discuss a new proposal, rather than just correspond and reject the proposal, was given particular importance in this case.

The Full Bench in this case did not need to consider whether the employer's general approach through the bargaining process could of itself amount to a failure to bargain in good faith.

The Full Bench did note however, that the threshold for finding that an employer's conduct as a whole shows a lack of good faith is quite high: the Commission would need to be satisfied on the evidence "that the approach of the company demonstrated that it was not open to persuasion about, or that it was not prepared to consider the possibility of, making an enterprise agreement".

While this decision shows that bargaining in good faith can require an employer to genuinely engage with the terms of a union's proposal, nothing in the decision changes the position that bargaining hard, and bargaining in good faith, are not always mutually exclusive.

Moreover, the Full Bench made clear that the employer had no obligation to accept a revised draft agreement.

The Full Bench affirmed that the obligations set out in section 228(1) must be understood having regard to section 228(2), which states that the obligations do not require a party to make concessions during bargaining or to reach agreement on the terms that are to be included in the agreement.

Finally, employers should be aware that they could be required to put forward and state specifically those matters that they may be prepared to accept in an enterprise agreement.

MAKING THE CASE: Insights from Geoff Giudice

The reintroduction of the good faith bargaining provisions in 2009 was the cause of a good deal of apprehension among employers, and to some extent unions as well, that the Commission might become more involved in the bargaining process. It is likely that this apprehension has had an effect on bargaining behaviour. Whether it has or not the fact remains that the Commission has made very few good faith bargaining orders in the 5 years the Fair Work Act has been operating. The Peabody decision shows, however, that the Commission is still prepared to make an order if the evidence suggests that a party is not bargaining in a genuine fashion. Leaving aside the facts of this case, a party which wants to avoid reaching an agreement at any cost clearly runs the risk of having orders made against it, but except in that extreme case it may be difficult to discern the point at which hard bargaining becomes lack of good faith. It will be interesting to see whether the Peabody decision leads to an increase in the use of the good faith bargaining provisions.