05 Nov 2009

Changing terrain: developments in good faith bargaining under the Fair Work Act

by Joe Catanzariti

Good faith bargaining relates to the method, not the outcome, of the agreement.

One of the major changes brought in by the Fair Work Act 2009 (Cth) is that bargaining for an enterprise agreement must be in "good faith". The interpretation of the provisions has been awaited with interest and several rulings have been made by Fair Work Australia.

Legislative requirement of good faith bargaining

The "good faith bargaining requirements" set out in section 228(1) of the Fair Work Act relate to method or process in the bargaining and negotiations for an enterprise agreement, and include:

  • attending meetings at reasonable times and participating in such meetings;
  • disclosing relevant information in a timely manner; but there is no obligation to provide confidential or commercially sensitive information;
  • responding in a timely manner to proposals made by other bargaining representatives;
  • genuinely considering these proposals and giving reasons when responding to proposals;
  • refraining from capricious or unfair conduct that undermines freedom of association or collective bargaining;
  • recognising and bargaining with the other bargaining representatives for the agreement.

Section 228 (2) further elaborates on what good faith bargaining does not require:

"(a) a bargaining representative to make concessions during bargaining for the agreement; or
(b) a bargaining representative to reach agreement on the terms that are to be included in the agreement."

Overall, then, good faith bargaining relates to the method, not the outcome, of the agreement.

Decisions of Fair Work Australia on good faith bargaining

This concept of good faith bargaining, not surprisingly, has been the subject of decisions by Fair Work Australia since the Act commenced on 1 July 2009. We look at three recent decisions and rulings of interest below.

National Union of Workers v Defries Pty Ltd [2009] FWA 88, 18 August 2009 (Commissioner Whelan)

Unfair conduct which undermined freedom of association and collective bargaining was engaged in when the employer proceeded to circulate a draft agreement to the employees for their vote, without prior notification to the union, without giving the union and employees an opportunity to propose any amendments and without responding to union proposals about the agreement’s content.

The employer proposed to distribute a document to employees for vote on 3 August 2009, then declined to discuss the union’s claim from 11 days earlier (24 July) and did not schedule meetings before 3 August. The employer was held to have failed to participate in meetings (contrary to section 228(1)(a)). Commissioner Whelan stated that "'Participation’ in a meeting the purpose of which is to negotiate a proposed enterprise agreement … suggests a sharing of information and views and a willingness to discuss matters about which the other bargaining representative wishes to bargain."

Australian Municipal, Administrative, Clerical and Services Union v Queensland Tertiary Admissions Centre Ltd (QTAC) [2009] FWA 53, 29 July 2009 (Richards SDP)

Negotiations for an enterprise agreement finished after the commencement of the Fair Work Act and QTAC did not include the union in meetings and discussion about the proposed agreement even when the agreement had not been settled. Fair Work Australia ruled that there was conduct which was unfair and undermined freedom of association and collective bargaining.

There was also breach of the good faith bargaining requirement to recognise the union, but there was no refusal or failure to attend meetings because no meetings had been scheduled.

Alphington Aged Care and Sisters of St Joseph Health Care Services (Vic) t/a as Mary McKillop Aged Care [2009] FWA 301, 17 September 2009 (Commissioner Whelan)

In the context of refusing applications to approve enterprise agreements made by Alphington Aged Care and Mary McKillop Aged Care (and which were opposed by the Australian Nursing Federation), Fair Work Australia held that:

  • "The employers in this case appear to have been under the misapprehension that they could be both bargaining with the union, through their bargaining representative and seeking to make an agreement as they described it ‘directly with their employees’ on the other. This probably derives from the distinction between a ‘union collective agreement’ and an ‘employee collective agreement’ which existed under the Workplace Relations Act. Those distinctions no longer apply. Where an employer seeks to make an agreement with its employees and some of those employees are members of a union, unless the employees appoint another bargaining representative, the union will be recognised by the Act as their bargaining representative."
  • Bargaining in good faith requires recognition of and bargaining with the union which has status as a bargaining representative.
  • Good faith bargaining is breached where an agreement is put to the vote by an employer without notifying the union that it intended to do so, ‘particularly, as occurred in this case, where bargaining is underway with the union, to not notify the union that bargaining is at an end – which a decision to put an agreement to the vote clearly implies – undermines the process of good faith collective bargaining which the objects of the Act support."

Implications of good faith bargaining principles … so far

There is sometimes difficulty in the particular and often complicated factual circumstances in deciding whether or not there has been compliance with the good faith bargaining provisions which are now contained in the Fair Work Act 2009. Decisions will continue to emerge and the boundaries of the legislative requirements will be further fleshed out and interpreted by Fair Work Australia.

At this stage it is clear that:

  • to by-pass a union and go directly to the employees to vote on an agreement breaches good faith requirements;
  • it is not an option to negotiate directly with some employees and also with the union when the "default" position is that union members have the union as their bargaining representative unless they appoint another representative; and
  • participation in meetings suggests that information and views are to be shared and that there is a willingness to discuss matters about which the other bargaining representative wishes to bargain.

Employers uncertain as to whether their or the bargaining representatives’ conduct might not comply with good faith bargaining requirements should seek legal advice. This is also important in order to avoid jeopardising the approval of the negotiated enterprise agreement when it is submitted for Fair Work Australia approval, and to avoid being subject to a bargaining order of Fair Work Australia.

Thanks to Marilyn Pittard for her help in writing this article.

This article was written when Joe was a partner at Clayton Utz and does not necessarily reflect his views as Vice-President of the Fair Work Commission.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.