About enterprise bargaining

'Enterprise agreements' (or enterprise bargaining agreements) are agreements made at an enterprise level between employers and employees about terms and conditions of employment.

'Enterprise bargaining' is the name given to the voluntary process of negotiation between management and employees or their representatives (usually unions), the purpose of which is to reach agreement regarding terms and conditions of employment. These are known as 'enterprise agreements'.

To become legally enforceable, agreements need to be approved, by affected employees and by the Fair Work Commission. (For approval by the Fair Work Commission the agreement must pass the ‘better off overall test’(BOOT). Passing the BOOT demonstrates that employees will be better off for being covered by the enterprise agreement instead of remaining covered by the underlying award. Once approved enterprise agreements may fully replace the award provisions or, the terms of the agreement can allow for the Agreement to incorporate or be read in conjunction with the underlying award.

What is the process?

Commencement of bargaining and good faith bargaining

Bargaining under the Fair Work Act 2009 usually commences when the employer initiates bargaining with the employees or their representatives, which in the public sector is usually a relevant union. The employer must provide the employees with a notice of representational rights within 14 days of initiating bargaining, advising them of their rights to be nominate a representative to bargain on their behalf if they so choose.

The Fair Work Act 2009 sets down a number of requirements for the conduct of good faith bargaining, these include:

• Attending and participating in meetings at reasonable times
• Disclosing relevant information in a timely manner
• Responding to proposals made by other bargaining representatives in a timely fashion
• Giving genuine consideration to proposals and reasons for representatives responses to proposals
• Refraining from capricious of unfair conduct that undermines freedom of association or collective bargaining
• Recognising and bargaining with the other representatives for an agreement.

Failure to abide by the above principles exposes a bargaining representative to orders from the Fair Work Commission. However these requirements do not require bargaining representatives to make concessions or reach agreement.

Once the bargaining is concluded and agreement is reached between the employer and the employees, normally represented by a union, steps can be taken that will lead to the approval and lodgement of the agreement.

Limited protection for industrial action in the course of negotiations

The Fair Work Act 2009 (Cth) (FW Act) protects employees' rights to take protected industrial action during the course of negotiating an agreement, but only if the nominal expiry date of the current agreement has past and genuine attempts to reach a new agreement have been made.

Certain steps and notice periods, including the approval of the industrial action by ballot, are required to obtain such protection. Industrial action which is not protected because the abovementioned prerequisites have not been met exposes participants to statutory and common law legal action.

Role of the Fair Work Commission in bargaining

Where agreement cannot be reached the parties to enterprise bargaining negotiations can request the assistance of the Fair Work Commission by making an application under section 240 of the FW Act to resolve a bargaining dispute. Under section 240, the Fair Work Commission can only arbitrate the dispute if parties agree to arbitration. For this reason, this assistance is normally limited to conciliation to assist the parties in coming to agreement.

If bargaining parties have been bargaining for at least 9 months and have tried but have not been able to resolve a bargaining dispute by utilising section 240, either party may apply for an Intractable Bargaining Declaration.

Following an Intractable Bargaining Declaration, the Fair Work Commission will specify a post declaration negotiation period. If bargaining parties cannot be settled within the post negotiation period, the Fair Work Commission must make an intractable bargaining workplace determination.

When making an intractable bargaining workplace determination the Fair Work Commission decides the terms and conditions of employment that could not be agreed between bargaining representatives. The determination also replaces what would otherwise have been the enterprise agreement, and so also contains all other agreed terms and mandatory terms.

Approval of an enterprise agreement by employees

Once agreement is reached with the nominated representatives employers must take reasonable steps to ensure that every person whose employment will be subject to the proposed agreement has the proposed agreement in writing or has access to the proposed agreement at least seven days before any approval is given. The employer must also take reasonable steps to explain the terms of the agreement and the effect of those terms to the relevant employees.

Once employees have had at least seven days to consider the agreement (and any incorporated materials) the employer may request the employees approve the agreement by voting on it. If the majority of employees vote in favour of the agreement the employer must apply to the Fair Work Commission for formal approval within 14 days of the vote being taken.

Simple agreements are usually approved by the Fair Work Commission within about 20 days. More complex agreements may take about 45 days.

Approval of an enterprise agreement by the Fair Work Commission.

To attain approval of an enterprise agreement FWA must be satisfied that the procedural elements briefly mentioned above have been complied with and that the agreement passes the “better off overall test.” This test considers the effect of the agreement against the relevant underpinning modern award to ensure each employee would better off than they would have been had the terms of the modern award applied.

Operational period

An enterprise agreement commences on approval by the Fair Work Commission and must include a nominal expiry date which cannot be more than four years after the day on which the agreement was approved by Fair Work Commission..

Public health sector agreements are usually drafted with a view to a four-year duration. Ann enterprise agreement will also however remain in force after the nominal expiry date of the agreement until it is replaced by another agreement.