06 Nov 2010

The Fair Work Act - Enterprise agreements and good faith bargaining

Changes to agreement-making and enterprise bargaining are among the most critical and important changes in the Fair Work Act, because they fundamentally alter the framework for negotiations, says Glen Bartlett.

The Fair Work Act - Enterprise agreements and good faith bargaining
Glen Bartlett, Partner, Workplace Relations

Changes to agreement-making and enterprise bargaining are among the most critical and important changes in the Fair Work Act, because they fundamentally alter the framework for negotiations.

The statutory agreement you can make under Fair Work is an enterprise agreement. Enterprise agreements can either be single enterprise agreements, or multi-enterprise agreements.

Single enterprise agreements, which are directly between an employer and its employees, will be the most common type.

Multi-enterprise agreements are much rarer and involve more than one unrelated employer and more than one business.

Whatever the type of enterprise agreement you make, it must contain a number of terms including a term allowing the employer and an employee to vary its effect by making an individual flexibility agreement.

This is designed to facilitate specific tailoring of agreements between the employer and individual employees.

The types of matters that you can include in an enterprise agreement have also been expanded, many of them relating to the relationship that pertains to the employer and employee relationship and now also matters pertaining to the union and employer relationship.

So how do you start bargaining for a new agreement?

Under the Fair Work Act, there are three ways to begin bargaining:

  • an employer and employee representatives may agree to bargain
  • the employer may initiate bargaining
  • or the employees' bargaining representatives may begin bargaining 
  • if they have the support of the majority of employees and have obtained a Majority Support Determination from Fair Work Australia.

Once bargaining is underway, the employer must notify employees in the prescribed form about their right to appoint a bargaining representative and who can act on their behalf throughout the bargaining process.

The parties must also bargain in good faith, but what does this mean?

The key thing to understand is that good faith bargaining does not mean that parties have to reach agreement or make concessions.

It means that they have to act in certain ways, such as

  • attending and participating in meetings at reasonable times;
  • responding to proposals in a timely manner; and
  • genuinely considering proposals and providing reasons for responses.

What happens if these aren't followed?

A bargaining representative may apply for bargaining orders to Fair Work Australia.

The first bargaining orders have already been issued by Fair Work Australia - in one case the employer was ordered to stop its ballot of employees, and also had to meet with the union four times over a two-week period.

These bargaining orders must be taken seriously, because breaching them can lead to a fine of up to $33,000 and other court orders.

If further breaches of bargaining occur, Fair Work Australia could even arbitrate your enterprise agreement.

During the process, bargaining representatives can also apply to Fair Work Australia, including to ask it to determine the scope of the agreement, to decide whether there are too many bargaining representatives for the agreement, or even for general help to facilitate bargaining.

The end of the process is getting approval for your agreement from Fair Work Australia. The new regime has quite a few technical aspects, and it's important to comply with all requirements to ensure you get that approval.

As you can see, it's really important that you understand these changes, especially your obligation to bargain in good faith, because you may now need to appear before FWA on any one of a number applications relating to this new enterprise bargaining process.

It is very important for employers to take legal and strategic advice and ensure your responsible managers have attended appropriate training to deal with these fundamental changes.

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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.