Unpacking the Fair Work Commission Statement of Principles on Genuine Agreement which appears to replace technicality with uncertainty
From 6 June 2023, the process for approval of agreements was set to become clearer and move away from the prescriptive steps that employers must currently follow.
Following consultation with key stakeholders, the Fair Work Commission (FWC) has now released the final version of its Statement of Principles on Genuine Agreement in enterprise bargaining (Statement of Principles).
- Is it clear? Not necessarily – Technicality may be replaced with uncertainty about interpretation.
- Is it less prescriptive? Maybe – New steps and considerations could potentially be applied in a prescriptive way.
There are new obligations that employers must endeavour to satisfy in order to meet the genuine agreement test.
The Statement of Principles essentially codifies and condenses to a single document a number of the tests and considerations that have, until now, been expressly stated in the FW Act or developed by the FWC and Federal Courts in previous cases.
It marks a key milestone in the FWC’s preparation for numerous bargaining-related amendments to the Fair Work Act 2009 (Cth) (FW Act) (refresh your memory with Kingston Reid’s Secure Jobs, Better Pay Act Overview).
How will the Statement of Principles change enterprise agreement approval applications?
Informing employees of their right to be represented by a bargaining representative
What is clear: Employers may be able to continue to meet this requirement by issuing a Notice of Employee Representational Rights.
What is uncertain: There is a new provision which provides that employers should not mislead employees (by words, action or otherwise) as to their rights to be represented or the role of an employee organisation as the default bargaining representative.
- There is no clarification on whether this is subjective or objective.
- There is no express statement as to intention.
- The terms “by words, action or otherwise” are uncertain and may be disputed.
Providing employees with a reasonable opportunity to consider a proposed enterprise agreement
What is clear: Employers will be able to continue to meet this requirement by providing employees with a copy of the agreement and the material incorporated by reference for 7 full calendar days before the voting starts (or such other reasonable period agreed with an employee organisation – as distinct from any bargaining representative). This can be a hard copy, an electronic copy or a combination of both.
What is uncertain: There is a new provision which provides that employers can only do so provided that employees have a reasonable opportunity to access and read the material during the whole of the period from the time the material is provided until completion of the voting process.
Explaining to employees the terms of a proposed enterprise agreement and their effect
What is clear: Employers will be able to continue to meet this requirement by taking all reasonable steps to explain the terms of a proposed enterprise agreement, and the effect of those terms, to employees employed at the time who will be covered by the agreement. This should include at a minimum explaining to employees how the proposed agreement will alter their existing minimum entitlements and other terms and conditions of employment.
What is uncertain: This is set as a minimum requirement. When is “more” going to be required?
- There are new requirements which provide for what might “generally be sufficient”. This leaves it open as to when, and in what circumstances, it would not be sufficient.
- It will generally be sufficient to explain the differences in entitlements and other terms and conditions between the proposed agreement and any applicable modern award provisions that have been varied since a predecessor agreement was made (including award variations that have not yet come into effect). There is no reference to the timeframe for new variations to come into effect or what might otherwise be reasonable.
- There are new provisions which set out that there is usually no need to explain “trivial differences” between the proposed agreement and an existing enterprise agreement or modern award that have no effect on employees’ entitlements or obligations. Disputes will arise around what makes it trivial and the extent to which an employer was required to explain a “triviality”.
- There is a provision which provides that section 180(5) will generally not be satisfied if the employer makes an incorrect representation or misleads employees (by words, action or otherwise) about a “significant term” of the proposed enterprise agreement or its effect. All the same issues arise about what makes something “misleading” but there is a question about what is deemed to be “incorrect” about a “significant term”.
- Where oral explanations are given, there must now be a written record or summary of the oral explanation. Additionally, employees should have a reasonable opportunity to attend the oral explanation. There will likely be disputation over what a “reasonable opportunity” is and over what percentage of the employee voting group this applies to (for example, where employees are on leave throughout the relevant period).
Providing employees with a reasonable opportunity to vote on a proposed agreement in a free and informed manner, including by informing the employees of the time, place and method for the vote
What is clear: Employers will be able to continue to meet this requirement by ensuring employees are informed of the time, place and method for the vote at least 7 full calendar days before the day the vote commences (or such other reasonable period agreed with an employee organisation – as distinct from any bargaining representative).
What is uncertain: The method and period of voting should provide all employees entitled to vote with a fair and reasonable opportunity to cast a vote. Who and what determines whether the method and period make it fair and reasonable will likely be put to employers in challenging an approval application.
Other matters considered relevant
What is clear: The matters which the FWC may take into account in determining whether employees have sufficient interest in the terms of an enterprise agreement and whether those employees are sufficiently representative.
What is uncertain: When the following matters will be appropriate to take into account.
- The inference that an enterprise agreement should not be a safety net agreement for employees but rather, a paid rates agreement so that employees are not going backwards in enterprise agreement provisions and have a “sufficient interest”.
- The inference that the employee voting group for an enterprise agreement must cover:
- the full range of classifications in the enterprise agreement;
- the full range of types of employment contemplated (e.g. full time, part time, casual etc);
- the full range of geographic locations the enterprise agreement covers; and
- the full range of industries and occupations the enterprise agreement covers.
- The starting position that an enterprise agreement has not been genuinely agreed unless it was the product of an “authentic exercise”. What makes it “authentic” and, according to who, will be the subject of dispute upon an application for approval.
- The “significant weight” attributed to an employee organisation having “concerns that the agreement was not genuinely agreed to by the employees”. An area of dispute will likely be around the basis of those concerns – specifically, whether they need to be reasonable and in good faith.
Getting ready for the Statement of Principles
It remains to be seen how the Statement of Principles will ultimately be used by employee organisations or applied by the FWC in enterprise agreement approval applications that come before it.
Irrespective of this, employers should:
- be ready to engage with the Statement of Principles as effectively as possible;
- be prepared for a lengthy and more complicated approach to bargaining (and more importantly, approval processes); and
- consider approaches to bargaining.
If your business requires advice or assistance relating to enterprise bargaining, please reach out to the team at Kingston Reid.