Could there be a resurgence to enterprise bargaining in 2021?

23 February 2021

A side close up photo of 2 men shaking hands.

It is an open secret that more and more businesses are breaking the cycle of enterprise bargaining. McDonald’s, Domino’s, and Bunnings after having bargained with their respective workforces over a number of years are all now operating under the modern award system. For the most part, these decisions have been met with relatively little opposition; certainly not enough to reignite negotiations.

Commentators on both sides of the political spectrum have declared enterprise bargaining broken and in urgent need of an overhaul. In the most recent 2019-20 financial year, 3,795 enterprise agreement approval applications were lodged with the Fair Work Commission; down from 4,932 in 2018-19 and 5,287 in 2017-2018.

In an effort to remedy the situation, the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 introduced into Federal Parliament late last year aims to “streamline and improve enterprise agreement making and approval process to encourage participation in collective bargaining”.

While it remains to be seen whether the Bill will be passed in its current form, and indeed has already seen modification since first announced, the measures proposed seem to address a number of longstanding concerns held by businesses.

Changes to pre-approval and voting requirements

The Bill reconceptualises the requirement for employees to be able to make an informed decision prior to being asked to vote to approve an enterprise agreement.

Under current arrangements, employers are required to take often considerable steps to explain the terms of the agreement to employees, even when there may be no matters of particular controversy.

The amendments propose to remedy this by removing the requirement that “all reasonable steps” be taken to explain the terms of the agreement, and instead the requirement will be discharged based on what was “fair and reasonable” in the circumstances.

For this reason, the changes are not likely to erode any existing protection offered by requiring the terms of the agreement to be explained, but opens the door to more modern and practical avenues to facilitate the dissemination of information about a proposed agreement.

Franchise network agreements

One of the most interesting changes introduced by the Bill is for members within the same franchisee network to enter into the same enterprise agreement without each needing to undertake the entire agreement approval process.

Currently, there are two ways in which this may be achieved: a multi-enterprise agreement (that is, an agreement that applies to more than one employer) or an application to vary an existing single-enterprise agreement.

The issue with both of these processes is that any variations to such agreements after their approval, such as to add a new employer, requires the support of all other parties to the agreement despite the changes not otherwise affecting their rights or obligations.

Employers within the same franchise network are likely to have the same or similar operational requirements capable of modification under an enterprise agreement. Rather than requiring each individual employer to enter into a single-enterprise agreement, all of which would be separately subject to the enterprise agreement approval process, or a multi-enterprise agreement, the Bill creates a pathway to extend the coverage of an existing enterprise agreement on application by an eligible employer.

Employers will still need to take “fair and reasonable” steps to explain the terms of the proposed agreement, and employees must still vote by majority to be covered by the agreement, but the new process will not involve assessing the terms of the agreement itself given it would have already been approved.

What this process will look like and how long it may take will ultimately be the deciding factor in its uptake, however if implemented effectively, this should provide a strong incentive for franchise networks to engage in enterprise bargaining.

Increased certainty as to timeframes

Presumably in an effort to counteract a perception about enterprise agreement approvals taking a significant time, the Bill proposes that if the Commission takes more than 21 working days to approve an agreement, it must write to the parties and notify them of the delay.

Is there any reason for a business to engage in enterprise bargaining?

The question as to whether there is value in engaging in enterprise bargaining has an answer as unique to each business as would be its enterprise agreement.

Indeed, this must be answered by reference to the alternative: continuing to operate under the modern award system, and specifically what there is to gain outside of that system. While the current iteration of the ‘better off overall test’ means that this will almost never result in a direct cost saving over the modern award, at least in the short term, there are opportunities to make productivity gains elsewhere.

For instance, instead of bearing the administrative burden associated with applying continuously changing penalty rates and allowances, some enterprise agreements provide that no allowances are payable in exchange for an albeit higher base rate of pay. Maybe your business already voluntarily offers a higher entitlement like extra paid parental leave, and this is able to be formally recognised in exchange for shorter shifts for casual employees.

The combination of these factors is limitless but the starting point is always the same: is there something in the modern award that is limiting productivity and you are prepared to sacrifice something else to remove?

Most of the changes proposed to be introduced under the Bill are centred around making the process simpler and more accessible, particularly for franchisees, rather than completely overhauling the existing framework.

The Coalition has demonstrated a commitment to passing the Bill in some form having abandoned its proposed changes to the ‘better off overall test’ after consultation with the cross-bench, all that remains to be seen is whether the Bill will be passed in its current form, and if it will be enough to reverse the downward trend in enterprise agreement approval applications.