Developments in collective bargaining during 2022 and their implications for the future

Abstract

2022 saw a slight increase in the willingness of unions to use or prepare to use industrial action as part of collective bargaining. However, pay rises for employees covered by enterprise agreements generally lagged those received by the broader workforce. Employees on average saw a significant cut in their real wages. Towards the end of 2022, the recently elected Albanese government made several changes to the bargaining provisions contained in the Fair Work Act 2010 (the FW Act) with the explicit goal of increasing the pace of wage rises. By increasing union bargaining power, it is likely that these amendments will eventually lead to a higher rate of wage growth than would otherwise be the case, though a number of factors may limit likely size of any such effect.

Introduction

2022 saw a slight increase in the rate of nominal wage growth, but not enough to prevent average wages falling in real terms. Towards the end of the year, the Federal Parliament passed legislation which included the most significant set of changes made to the rules governing bargaining since the passage of the original Fair Work Act in 2009. These changes are explicitly designed to increase the rate of wage growth. These new provisions will increase union bargaining power, at least at the margin, and are likely to lead to a higher rate of wage growth than would otherwise be the case. However, there are a number of factors that might limit their impact, including the approach taken by the Fair Work Commission (FWC), the willingness of employers to bargain on an industry basis, and the extent to which unions have the membership base to take full advantage of the opportunities provided to them by the legislation.

Incidence and coverage of collective agreements

There has been a steady decline in the coverage of collective agreements in recent years, from a historical peak of 43.5% of all employees in 2010 to 35.1% in 2021 (Department of Employment and Workplace Relations, 2022). Moreover, many of the agreements that cover employees were negotiated several years ago and are well past their nominal expiry date. According to the Federal Minister ‘only around 15 per cent of employees are covered by an agreement that is in date’ (Burke, 2022). Some of the reasons for the decline in agreement coverage were discussed in a previous article on reviving Australia's system of enterprise bargaining (Hamberger, 2020). The Federal Department's Workplace Agreements Database suggests that this decline may have – at least temporarily – bottomed out with a slight increase in the number of employees covered by current Federal agreements between the December quarter 2022 (1.87 million) and the December quarter 2021 (1.65 million) (Department of Employment and Workplace Relations, 2023). However, this might represent nothing more than a slight bounce back from a particularly marked fall due to the pandemic in 2020.

Wage outcomes

As measured by the Australian Bureau of Statistics’ wage price index, the annual rate of wages growth increased through 2022 from 2.4% in the March quarter to 3.3% in the December quarter. This latter figure represented the fastest rate of annual wage growth recorded by the index since 2012. Wages grew significantly faster in the private sector (3.6%) than in the public sector (2.5%) (Australian Bureau of Statistics (ABS), 2023a).

However, this increase in nominal wages must be seen in the context of a very substantial increase in prices for goods and services over the same period – with the Consumer Price Index rising by 7.8% between the December Quarter 2021 and the December Quarter 2022 (ABS, 2023b). In other words, 2022 saw a very significant fall in average real wages (Jericho and Stanford, 2023). This occurred at a time when the labour market was extremely tight, with unemployment hitting a low of 3.5% in December 2022 (ABS, 2023c).

The ABS noted that its data indicate that wage growth was primarily driven by jobs covered by individual arrangements rather than those covered by enterprise agreements (ABS, 2023a).

In mid-2022, the FWC began to issue regular enterprise agreement statistical reports. These reports are published fortnightly and give a more detailed and up to date picture of what is happening with enterprise bargaining than the Department of Employment and Workplace Relations’ quarterly enterprise bargaining reports. The reports use information collected from the FWC's case management system and application material to derive an average annualised wage increase (AAWI) for agreements lodged with the FWC. They also include a range of other data in relation to lodged enterprise agreements as well as other bargaining data (Fair Work Commission, 2022a).

The data included in the reports generally commence in July 2022. They do suggest a slight increase in the rate of wage rises included in enterprise agreements from mid- to late-2022. In particular, the AAWI reported for 2–15 and 16–29 July 2022 (when weighted for number of employees covered) averaged 3.0%, while that for 3–16 and 17–30 December averaged 3.5%.

Industrial disputes

The FWC enterprise agreements data reports show that the number of applications for protected action ballot orders (PABOs) in 2022 (765) was 24% higher than the average of the previous 5 years (618). While industrial action does not always follow from an application for a PABO, such applications signify a willingness to prepare for such action as part of enterprise bargaining.

During the year ended December 2022, the ABS recorded 189 industrial disputes with a total of 197,000 working days lost (ABS, 2023d). While this represents a far lower level of industrial disputation than was common throughout the 20th century, it is nevertheless the highest number of working days lost since 2012. The number of working days lost in the June quarter 2022 was the highest quarterly figure since the June quarter 2004.

In summary, 2022 saw a small increase in the use of industrial action as a tactic by trade unions; however, pay increases in collective agreements on average slightly lagged those received by the general workforce (with some limited evidence that the gap might have narrowed or closed towards the end of the year). Employees on average saw the value of their wages fall significantly in real terms over the course of the year.

The secure jobs, better pay legislation

The most important development in relation to collective bargaining that occurred in 2022 was the passage in December of the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (the SJBP Act) introduced by the recently elected Albanese government. This included the most significant set of changes made to the rules governing bargaining since the passage of the original Fair Work Act in 2009. While some of these changes took effect immediately, others were given a commencement date of 6 June 2023.

The Minister, in his Second Reading Speech on the Bill, was quite explicit in saying that the legislation was designed to increase the rate of wage growth. He described the legislation as reflecting a ‘choice to get wages moving and end the era of deliberate wage stagnation’ (Burke, 2022).

The SJBP Act made a wide range of amendments to the FW Act. However, the key ones relating to bargaining were as follows:

Increased scope for the FWC to arbitrate bargaining disputes.

Changes to the process for initiating bargaining.

Enhanced access to multi-employer bargaining.

Changes to the termination of agreements.

Changes to the requirements for agreements to be approved.

Increased scope for the Fair Work Commission to arbitrate bargaining disputes

When it was first enacted, the FW Act continued the approach taken by the Workplace Relations Act 1996 (the WR Act) introduced by the previous Coalition Government by largely confining the arbitration of pay and conditions to the award safety net or where there was mutual consent of the parties to arbitration (most notably under dispute settlement procedures in enterprise agreements.)

The main exception was in cases where protected industrial action had been terminated by the FWC. In practice, protected industrial action was rarely terminated unless it was causing significant economic harm or was damaging the interests of the broader community (rather than the parties directly involved in enterprise bargaining.) Where industrial action had been terminated the Commission could make an ‘industrial action related workplace determination’ settling the issues in dispute between the parties and in effect arbitrating the equivalent to an enterprise agreement. These provisions were rarely invoked and only 11 such determinations were made between 2010 and 2022.

The original FW Act was based on the principle that it was generally up to the parties to decide whether to make an enterprise agreement. Under certain limited circumstances, an employer could be required to bargain for an agreement (in particular, when a majority support determination (MSD) had been issued by the FWC). However, while the parties were required to bargain ‘in good faith’, the ‘Good Faith Bargaining Requirements’ (GFBR) did not in themselves require that the parties reach an agreement.

That principle has been significantly altered by the amendments made by the SJBP Act. The new intractable bargaining provisions included in that legislation significantly increase the scope for the Commission to make an arbitrated settlement where one of the parties has resisted finalising an enterprise agreement.

Under the SJBP Act, once the FWC is satisfied that there is no reasonable prospect of the bargaining parties reaching an agreement the FWC may make an ‘intractable bargaining declaration’. Before doing so, it must be satisfied that the applicant participated in a conciliation process in the Commission, there is no reasonable prospect of agreement being reached if the FWC does not make the declaration and it is reasonable in all the circumstances to make the declaration, taking into account the views of all the bargaining representatives for the agreement. The FWC must be also satisfied either that the parties have been bargaining for at least 9 months or 9 months have elapsed since a previous agreement expired. While the Commission can give the parties a further chance to try and reach an agreement after making a declaration, if the parties are still at loggerheads, it must make an intractable workplace determination to resolve any matters on which agreement has not been reached. In other words, if parties engaged in bargaining fail to reach an agreement after 9 months, the Commission can impose an arbitrated outcome, which then has a similar legal effect to an agreement. This process is available both for single-enterprise bargaining and multi-enterprise bargaining (with the exception of the ‘cooperative agreements’ stream discussed below). Importantly, once a declaration has been made protected industrial action is no longer available.

It remains to be seen how often the Commission will arbitrate under these provisions. The Minister, in his second reading speech, said that the provisions were designed to provide ‘a strong incentive for good-faith negotiations, reduce the time for enterprise agreements to be finalised and allow for quicker resolution of intractable disputes’ (Burke, 2022).

The Act specifies that intractable workplace determinations must be made by a Full Bench, which indicates an expectation that they will be relatively uncommon. The factors the FWC must consider in deciding the terms of an intractable bargaining determination have only been slightly modified to those that previously applied to workplace determinations under the FW Act. They are the merits of the case, the interests of the employers and employees who will be covered by the determination, the significance to those employers and employees of any arrangements or benefits in an enterprise agreement that previously applied to any of the employers in respect of any of the employees (a new provision which is presumably designed to discourage the FWC from making changes to existing working arrangements or conditions of employment), the public interest, how productivity might be improved in the enterprise or enterprises concerned, the extent to which the conduct of the bargaining representatives during the negotiations was reasonable, whether the bargaining representatives complied with the GFBRs and incentives to continue to bargain at a later time. A previous factor applying to low-paid determinations, ensuring that employers can remain competitive, has been repealed.

The provisions may increase pressure on employers who might otherwise be reluctant to make an agreement (or renew an old agreement) to do so. On the other hand, they could lead to some parties taking a harder line in negotiations in the hope that they might achieve a goal in arbitration that they are unable to obtain through bargaining. In practice, most parties (including the Commission itself) will wish to avoid lengthy and expensive arbitration proceedings and the making of an intractable bargaining declaration will generally encourage the parties to compromise. Unions in particular will lose the option of taking protected industrial action once a declaration is made. As a result, it is likely that many if not most declarations will lead to agreements being finalised rather resulting in arbitration.

Changes to the process of initiating bargaining

The original FW Act did not make it easy for unions to initiate bargaining for an enterprise agreement with an unwilling employer. The main mechanism available to unions in these circumstances was to persuade the FWC to make a MSD. ¹ This involved the FWC determining that most employees who would be covered by a proposed single-enterprise agreement wanted to bargain with their employer. An average of 101 applications in a year was made for an MSD in the 5 years to 2022 (Fair Work Commission, 2022a, 2022b). Not all such applications led to an MSD being made but often previously reluctant employers facing such an application would agree to bargain rather than waiting for a formal determination. Once an MSD is made the employer is bound by the GFBR.

The SJBP Act removes the requirement for unions to obtain an MSD to initiate bargaining in certain circumstances. A union may now initiate bargaining without the need for an MSD where the proposed agreement would replace an existing enterprise agreement whose term has expired no more than 5 years previously. This allows unions to commence bargaining for a replacement agreement with a reluctant employer even where they lack majority support amongst the employees who would be covered by the proposed agreement. When combined with the increased scope for the arbitration of intractable bargaining disputes, this change will place more pressure on employers to renegotiate expired agreements.

Changes to the termination of agreements

Under the original FW Act the FWC had a broad discretion to grant applications to terminate enterprise agreements whose nominal term had expired. The FWC had to terminate an agreement (when asked to do so by an employer, employee or union covered by the agreement) if it was satisfied that termination would not be contrary to the public interest and would be appropriate, having regard to the views of all the relevant parties and their circumstances, including the effect that the termination would have on each of them. Prior to the Full Bench decision in Re Aurizon Operations Limited [2015] FWCFB 540 (Aurizon),

individual members of the Commission had been reluctant to grant requests from employers to terminate expired agreements during negotiations for their replacement as it was considered that this would reduce the prospects of the parties making a new agreement and deliver an undue advantage to the employer (Re Tahmoor Coal Pty Ltd [2010] FWA 6468). In Aurizon, the Full Bench granted an application by the employer to terminate 12 enterprise agreements during a stalemate in bargaining for new replacement agreements. Amongst the factors that influenced the Full Bench in that case were that the expired agreements contained several conditions that were impeding productivity and that the employer had given undertakings to maintain certain terms and conditions of employment for a period of 6 months or until new agreements were negotiated.

Applications by employers to terminate enterprise agreements even after Aurizon during bargaining were relatively rare. A recent analysis found that only 1.3% of termination applications by employers that resulted in a decision by the FWC occurred in the context of bargaining (Veen et al., 2022). There is, however, no doubt that even the threat of such an application could act as a significant lever assisting an employer during negotiations for a replacement agreement. For example, around 85 % of Qantas long haul cabin crew voted to accept a proposed agreement in mid-March 2022 that 97% had voted to reject only 3 months earlier. The main change in circumstances between the two votes was that Qantas had applied after the first vote to terminate the employees’ existing enterprise agreement (Workplace Express, 2022).

The SJBP Act significantly recast the relevant provisions to make it very unlikely that applications by employers such as the one in Aurizon could be successful in the future. In particular, the legislation has been amended to provide that the FWC must terminate an enterprise agreement that has passed its nominal expiry date, on application, if satisfied that it is appropriate in all the circumstances and the continued operation of the agreement would be unfair to employees covered by the agreement, or the agreement does not, and is not likely to, cover any employees, or the continued operation of the agreement would pose a significant threat to the viability of the employer's business. In deciding whether to terminate an agreement, the FWC must have regarded to whether bargaining for a proposed replacement agreement is occurring and whether the termination would adversely affect the employees’ bargaining position.

Enhanced access to multi-employer bargaining

The Minister stated in his Second Reading Speech ‘Bargaining at the enterprise level delivers strong productivity benefits and is intended to remain the primary and preferred type of agreement making… For employees and employers that have not been able to access the benefits of enterprise level bargaining, these reforms will provide flexible options for reaching agreements at the multi-employer level’ (Burke, 2022). Clearly, it is the goal of the Government to extend coverage of multi-employer agreements to those employees and employers who have not been able to make agreements at the enterprise level (rather than replace enterprise bargaining for those who have been able to make enterprise agreements). This, it is hoped, will improve wage outcomes for employees who have been excluded from enterprise bargaining.

There are at least two broad reasons why multi-employer bargaining might lead to higher wages than a system solely based on enterprise bargaining.

The first one is a matter of logistics. Enterprise bargaining makes heavy demands on union resources – particularly where individual unions have relatively low rates of membership spread across many employers. Certainly, many small workplaces and the increasing fragmentation of work make enterprise-level bargaining across the whole economy unrealistic (Pennington, 2018). It is much more efficient from a union perspective if it can bargain with a single body representing many employers. This is most practical where a majority of employers belong to a single industry association. However, while this was frequently the case in the period before the establishment of the centralised wage fixing system in 1983 (when industry bargaining was common in Australia), it is likely far fewer employers now belong to industry associations.

The second reason is that multi-employer bargaining can assist in taking wages (as well as labour costs more broadly) out of competition. An employer facing a wage demand at the enterprise level must consider the risk that it will end up with higher labour costs that will make it less competitive than its rivals in the market. Conversely, if it can be confident that all its competitors will experience the same increase in labour costs, this greatly reduces the incentive to resist wage demands (or push for increases in productivity offsets). Any increase in labour costs can be passed on in the form of higher prices without reducing competitiveness. The key is that all potential competitors experience the same increase in labour costs.

There are now three main avenues to make multi-employer agreements: single-interest bargaining, supported bargaining and cooperative workplace agreements.

Single-interest bargaining

Single-interest agreements under the original FW Act were single-enterprise agreements made by two or more employers where these employers were either a joint venture or a common enterprise, related bodies corporate or named in a single-interest employer authorisation. These authorisations could only be made by the FWC where the relevant employers had agreed to bargain together and were franchisees of the same franchisor or were related bodies corporate of the same franchisor or where a Ministerial declaration had been made. The Minister could make a declaration if requested to do so by two or more employers that they could bargain together for a single agreement. In deciding whether to make such a declaration the Minister was required to consider several matters, including whether the employers had previously bargained together and the extent to which the relevant employers operated collaboratively rather than competitively.

Since they were enacted, these provisions have only been used sparingly. For example, in 2022, the FWC only made single-interest authorisations in relation to public health providers in Victoria and Catholic schools in Tasmania and Queensland. In each case, these were based on Ministerial declarations.

Under the SJBP Act, two or more employers who are engaged in a joint venture or common enterprise or are related bodies corporate are defined as related employers and may make a single-enterprise agreement.

The provisions for Ministerial declarations have been repealed. In their place are new provisions for the FWC to make single-interest employer authorisations in relation to a proposed multi-enterprise agreement. Such authorisations can only be made if at least some of the employees are represented by a union.

The relevant provisions of the Bill were subject to extensive negotiation and amendment in Parliament and the final provisions that were enacted are quite tortuous. However, in general they provide that the FWC may make a single-interest employer authorisation where it finds that two or more employers have clearly identifiable common interests. In considering such applications, the FWC may have regard to factors such as geographical location, regulatory regime, the nature of the affected enterprises, and the terms and conditions of employment in those enterprises. If an employer that would be covered by the proposed agreement has at least 50 employees, this is presumed to be the case unless the contrary is proved.

In addition, for an employer to be covered by an authorisation, it must either have agreed to the application or have at least 20 employees, most of its employees must want to bargain for the agreement, and the employer must not be covered by an existing in-term agreement or have a written agreement with a union to negotiate a new single-enterprise agreement.

If these conditions are met, the FWC must make the authorisation, unless it considers that to do so would be contrary to the public interest.

A single-interest employer authorisation cannot be made if it would cover employees in relation to general building and construction work.

Once an authorisation is in place the only kind of enterprise agreement that can be made by the employer is a single-interest employer agreement.

Unions that have obtained single-interest employer authorisations can pursue multi-employer agreements with the employers covered, including by taking protected action. If agreement cannot be reached there may be scope for arbitration by the FWC. Moreover, unions can apply to the FWC to extend single-interest agreements to other employers with the same common interests as those covered by the agreement. While such an extension must be supported by the employees the employer need not consent. The tests for approval are similar to those that must be met to obtain a single-interest employer authorisation.

Cooperative workplace agreements

Under the original FW Act, there was a general ability for two or more employers to make a multi-enterprise agreement. Like single-interest agreements, this was a consensual bargaining stream with unions unable to take protected industrial action. Multi-enterprise agreements constituted only around 1% of agreements approved by the FWC. For example, in 2021–2022, there were 42 applications to the FWC to approve multi-enterprise agreements compared to 4083 applications to approve single-enterprise agreements (FWC, 2022b). This suggests a general lack of interest in making multi-enterprise agreements on the part of most employers. An examination of the multi-enterprise agreements that were approved by the Commission in 2022 indicates that most involved a small number of closely related employers (often part of the same group) though there were agreements covering a significant number of employers in the Victorian health sector and independent schools in NSW and the ACT.

This stream is retained by the SJBP Act with the relevant multi-enterprise agreements renamed as cooperative workplace agreements. At least some employees involved in bargaining must be represented by a union, and cooperative workplace agreements must be approved by a majority vote of employees of each employer. Businesses can choose to opt-in to an existing agreement with the support of a majority vote of employees. Protected industrial action is not available under the cooperative workplace bargaining stream and conciliation and arbitration of bargaining disputes by the FWC can only occur with the consent of all parties.

Supported bargaining

The original FW Act included a scheme allowing multi-employer agreements where the FWC had issued a low-paid authorisation. There were several criteria to which the FWC was to have regard in deciding whether to issue such an authorisation, including whether granting the authorisation would assist low-paid employees who had not had access to collective bargaining or who faced substantial difficulty bargaining at the enterprise level. If the parties were unable to reach agreement, there was scope for the FWC to arbitrate an outcome though it had to be satisfied that doing so would promote productivity and efficiency in the enterprises concerned would promote bargaining in the future for an enterprise agreement. Protected action was not available for low-paid bargaining.

The low-paid bargaining provisions never really worked. There were only a handful of applications, with poor results from a union perspective.

The first application, made by United Voice and the Australian Workers’ Union of Employees, Queensland, covering residential aged care workers, and enrolled nurses in the aged care sector in Western Australia, was granted by a Full Bench of Fair Work Australia (as the FWC was then named). However, the Full Bench excluded employees already covered by enterprise agreements from the authorisation ([2011] FWAFB 2633).

The decision, according to United Voice, locked out from any future industry bargaining two-thirds of the 60,000 residential aged care workers covered by its application, as they worked for the larger employers, who already had (enterprise) agreements. This appears to have discouraged the unions from pursuing the matter any further. (Workplace Express, 2011)

In 2013, the FWC rejected an application by the Australian Nurses Federation for a low-paid authorisation to enable it to pursue a multi-employer agreement for practice nurses in private sector general practice clinics and medical centres. The Commission found that most of the nurses covered by the application were not low paid. It also found that the ANF's approach to bargaining was not consistent with a willingness to negotiate a package of benefits relating to the particular needs of each enterprise. The Commission noted that the preferred approach under the FW Act was enterprise bargaining and that the ANF had not sought to utilise other forms of assistance under the legislation for enterprise-level collective bargaining. It found that multi-employer bargaining was less likely to identify improvements in productivity and service delivery than enterprise bargaining and that multi-employer bargaining covering several hundred general practice employees was likely to be unmanageable ([2013] FWC 511).

A third application, for five private sector security companies in the ACT, was also rejected by the FWC. It found there was no evidence that the employees had been unable to access collective bargaining. At least two employers covered by the application had made enterprise agreements and there was no evidence that employees at the other companies had been denied access to collective bargaining ([2014] FWC 6441).

The SJBP Act replaces the concept of low-paid authorisations with that of ‘supported bargaining’. The Second Reading Speech to the Bill describes the provisions as removing barriers to access the existing low-paid bargaining stream, with the intention of ‘closing the gender pay gap and improving wages and conditions in sectors such as community services, cleaning, and early childhood education and care, which have not been able to successfully bargain at the enterprise level. Unnecessary hurdles to entry in the current low-paid stream will be replaced by a broad discretion for the Fair Work Commission to consider the prevailing rates of pay in the industry, including whether workers in the industry or sector are low paid.’ (Burke, 2022)

Whether the new provisions will be more effective from a union perspective remains to be seen. They no longer make any reference to assisting low-paid employees who have not historically had the benefits of collective bargaining. They also remove the object of assisting employees and employers to identify improvements to productivity and service delivery through bargaining that considers the specific needs of individual enterprises. Now the objects of the relevant provisions are to assist and encourage those employees and employers who require support to bargain, and to address constraints on the ability of those employees and their employers to bargain at the enterprise level, including constraints relating to a lack of skills, resources, bargaining strength or previous bargaining experience.

The test for when the FWC must make a supported bargaining authorisation is less stringent than the equivalent test to make a low-paid authorisation. Under the new provisions, the FWC must make a supported bargaining authorisation in relation to a proposed multi-enterprise agreement if it is satisfied that it is appropriate for the employers and employees to bargain together having regard to:

The prevailing pay and conditions within the relevant industry or sector (including whether low rates of pay prevail in the industry or sector);

Whether the employers have clearly identifiable common interests;

Whether the likely number of bargaining representatives for the agreement would be consistent with a manageable collective bargaining process; and

Any other matters the FWC considers appropriate.

Reluctance on the part of the FWC to grant authorisations might be overcome (or side-stepped) by a new provision granting the Minister power to declare an industry, occupation or sector in effect one that should be covered by a supported bargaining authorisation.

Once a supported bargaining authorisation is in place an employer can only make a supported bargaining agreement. In addition, a supported bargaining agreement displaces any single-enterprise agreement that was previously in operation (though an authorisation cannot cover employees who are covered by agreements whose nominal term has not expired unless the FWC is satisfied that the employer's main intention in making the agreement was to avoid being specified in the authorisation).

Once a supported bargaining agreement is made a union can apply to extend that agreement to other employers. This can occur either with or without the consent of the employer. The FWC must decide whether the extension is appropriate and may have regard to the same factors used in determining whether to make the authorisation in the first place. The existence of a supported bargaining authorisation allows an application to be made to the FWC for an intractable bargaining declaration.

Changes to agreement approval requirements

In his second reading speech the Minister said:

‘There's consensus that approval requirements for enterprise agreements are onerous, complex and unnecessarily complex.’ (Burke, 2022)

However, while the SJBP Act contained several changes to these requirements, it is unlikely that they will make a significant difference.

In an article on reviving enterprise bargaining (Reviving Australia's system of enterprise bargaining, 2020), Hamberger explained in some detail how the increasingly rigid application of the No Disadvantage Test and the Better Off Overall Test (BOOT) was making it more and more difficult to make agreements that were anything more than ‘add-ons’ to awards. The article contended that the legislation needed to be amended to enable the FWC to have regard to evidence concerning the practical effects of the agreements for the affected employees as well as the preferences of those employees. Moreover, the FWC should be able to consider the effect of the agreement on the employees as a collective rather than insisting that every single employee be made better off.

Rather than adopting this approach, the SJBP Act makes the following changes to the provisions governing the BOOT.

First it now includes a statement that ‘the FWC must undertake a global assessment of whether each employee concerned would be better off having regard to:

The terms of the agreement which would be more beneficial to the employee if the agreement applied to the employee than if the relevant modern award applied to the employee; and

The terms of the agreement which would be less beneficial to the employee if the agreement applied to the employee than if the relevant modern award applied to the employee.’

This is no more than a restatement of the position adopted by the Commission since the passage of the FW Act.

Secondly, it replaces the concept of ‘prospective award covered employees’ with one where the Commission must only have regard to patterns or kinds of work, or types of employment that are ‘reasonably foreseeable’. Again, this does no more than reaffirm the approach already taken by the Full Bench of the FWC. For example, in CFMEU v Concrete Constructions (WA) Pty Ltd 2017 [FWCFB] 3912, the FWC made clear that in assessing whether an agreement passed the BOOT it should only have regard to realistic and not fanciful scenarios.

Thirdly, the amendments state that the FWC must consider any views expressed by those covered by the agreement or any bargaining representative as to whether it passes the BOOT and give ‘primary consideration to a common view if any’ relating to whether the agreement passes the BOOT held by the employer and a union that is a bargaining representative.

The FWC as a matter of procedural fairness already considers any submissions made by the parties to an agreement as to whether it should be approved. It is not clear however what the FWC will make of the requirement to give ‘primary consideration’ to views shared by the employer and the union. It is possible that some members of the FWC will take the approach that they need not make any further enquiry as to whether an agreement passes the BOOT if the agreement has the support of both the employer and the union. However, unlike the suggestion that regard be had to the preferences of the employees in weighing up the benefits or disadvantages of the agreement, the SJBP amendment makes no difference to the test itself. It is likely that the Full Bench of the Commission will still consider that the FWC must independently make its own assessment of the BOOT in which case it is hard to see the amendment making much practical difference.

As well as changes to the BOOT, the SJBP Act also makes changes to some of the procedural requirements for enterprise agreements to be approved. It is not entirely clear what mischief these changes are designed to fix. While there had been a concern prior to December 2018 that the pre-approval requirements had led to a significant proportion of agreements failing to be approved for technical reasons, these problems appear to have been resolved by the introduction in that month of a new provision which allowed the Commission to approve an agreement despite the employer having made ‘minor procedural or technical errors’ with the pre-approval steps, provided the employees had not been disadvantaged by the errors in terms of the underlying objects of the pre-approval steps. The effect of this change was a dramatic fall in the number of applications for approval of agreements being refused or withdrawn, as well as a significant improvement in the FWC's timeliness in approving enterprise agreements. It is now quite rare for an agreement not to be approved because of a procedural failing (Fair Work Commission, 2023a, 2023b).

The requirement on the employer to issue a notice of employee representational rights (NERR) is retained but only for single-enterprise agreements. The requirement to explain the terms of the agreement is also retained. However, the current provisions requiring employers to take all reasonable steps, in the 7 days before an agreement is put to the vote, to ensure that the relevant employees are given a copy (or have access to a copy) of the agreement and (associated material) are repealed. So are the provisions requiring employers to take all reasonable steps to notify the relevant employees of the time and place at which the vote will occur and the voting method that will be used. Instead of these provisions, the FWC is to determine whether an agreement has been genuinely agreed to by the employees covered by the agreement by having regard to a statement of principles that the FWC itself is required to make.

These principles were made on 12 May 2023 (Fair Work Commission, 2023b). They add to the need to issue the NERR, requirements that an employer not mislead employees about their right to be represented by a bargaining representative nor the role of a union as the default bargaining representative of its members. The principles provide that the employer must provide the employees with a copy of the agreement (and other related documents) at least 7 full calendar days before voting starts, unless a union acting as a bargaining representative for a significant proportion of the employees has agreed to another (reasonable) time period. The principles clarify the requirements to explain the effect of a proposed enterprise agreement (including explaining the differences in terms and conditions between a proposed replacement agreement and any applicable award provisions that have been varied since the existing agreement was made). They also make clear that differences that will have no effect on the employees’ entitlements or obligations do not need to be explained. The FWC may also have regard to any explanation provided by unions to the employees.

A new provision is added that the FWC cannot be satisfied that an agreement has been genuinely agreed to unless it is satisfied that the employees requested to vote on the agreement have a sufficient interest in the terms of the agreement, and are sufficiently representative, having regard to the employees the agreement is expressed to cover. The legislative note following this provision could suggest that this is intended to do no more than confirm the existing jurisprudence, as determined by the Federal Court in One Key Workforce Pty Ltd v Construction, Forestry, Mining and Energy Union [2018] FCAFC 77, that whether an agreement has been genuinely agreed involves consideration of the authenticity of the agreement of the employees, including whether the employees who voted for the agreement had an informed and genuine understanding of what was being approved However, the FWC's principles on genuine agreement state that the Commission will take into account whether the employees entitled to vote on the agreement are to be paid the rates of pay in the agreement and the extent to which the employees entitled to vote on the agreement are employed across the full range of classifications, types of employment, geographic locations and industries and occupations covered by the agreement. This suggests that it will become more difficult to obtain FWC approval for agreements that cover classifications, types of employment or locations in which no one is currently employed. This could become another ‘technical’ hurdle to the approval of agreements.

Concluding comments

When taken as a whole it is clear that these new provisions will increase union bargaining power, at least at the margin, and are likely therefore to lead to a higher rate of wage growth than would otherwise be the case. There are a number of factors that might however limit their impact. Much will depend on the approach the FWC takes to the powers it has been granted. For example, it may be reluctant to grant permission to bargain on a multi-employer basis or to arbitrate significant pay increases in the case of intractable bargaining disputes. Indeed, it is conceivable that employers may be able to utilise the intractable bargaining provisions in their favour to extract concessions from unions. It will also be interesting to see how willing the FWC is to extend multi-employer agreements to businesses where this is opposed by the employer.

It seems very unlikely that the amendments will lead to a wholesale move away from enterprise and towards industry-based bargaining. For this to occur would require a major change in the willingness of employers to bargain on an industry basis. It really does take two to tango. While unions can (for the first time in 40 years) use industrial action in pursuit of industry-level wage agreements (in certain circumstances), it is hard to see that they have the membership base to take full advantage of this opportunity. Of course most of their membership is focussed in areas that already engage in enterprise bargaining.