The new world of intractable bargaining – does the old adage of ‘no pain, no gain’ still apply? - Kingston Reid

The new world of intractable bargaining – does the old adage of ‘no pain, no gain’ still apply?

Around eight months have passed since the introduction of the intractable bargaining provisions into the Fair Work Act 2009 (Cth). These provisions create a process for the Fair Work Commission (FWC) to arbitrate enterprise bargaining disputes, and to facilitate the making of enterprise agreements, in circumstances where bargaining has become ‘intractable’ (the trusty Macquarie Dictionary says this means: “hard to deal with”).

So how did we get here? Where to from here? And what does this all mean?

How did we get here?

On 6 June 2023, the intractable bargaining provisions replaced the old schemes of issuing ‘serious breach declarations’ and ‘bargaining related workplace determinations’.

Under the old schemes, the FWC could make ‘serious breach declarations’ (i.e. where there were serious and sustained contraventions of a good faith bargaining order that significantly undermined the bargaining process), which then gave the FWC scope to make ‘bargaining related workplace determinations’ if negotiations remained unfruitful.

The language in the old schemes (think “serious and sustained”, “significantly undermined”, “exhausted all other reasonable alternatives to reach agreement” and “agreement… will not be reached”) created a high bar for applicants to meet in order to satisfy the FWC that a ‘serious breach declaration’ should be made.

The upshot is that the old schemes were not used and the FWC was never called on to make a ‘serious breach declaration’.

However, under the current intractable bargaining scheme, the new standard of ‘reasonableness’ significantly lowers the bar for employees, unions and employers to request the FWC’s intervention in making bargaining determinations.

The current law

The current intractable bargaining scheme is similar to its predecessor in that a ‘declaration’ comes first.

The FWC may grant an ‘intractable bargaining declaration’ in relation to a single or multi-enterprise agreement (excluding greenfield agreements), which then allows it to arbitrate a bargaining dispute, with the arbitrated outcome being an ‘intractable bargaining workplace determination’.

The FWC may grant an ‘intractable bargaining declaration’ if:

  • an application has been made (noting that an application cannot be made until the later of 9 months after the nominal expiry date of a previous enterprise agreement or after 9 months of bargaining has elapsed);
  • the FWC has dealt with the dispute under section 240 of the FW Act and the applicant participated in the process – section 240 allows the FWC to “deal with” a bargaining dispute upon application by a bargaining representative through mediation, conciliation, the making or recommendations or opinions, or arbitration (if consent to do so is provided);
  • there are no reasonable prosects of the relevant enterprise agreement being reached if the FWC does not make a declaration; and
  • it is reasonable to make the declaration, taking into account the views of all parties.

Notably, since the introduction of the intractable bargaining provisions in June 2023, it has been largely employers (not employees and unions) that have applied for ‘intractable bargaining declaration’.

Presumably, these employers found negotiations with union to be ‘intractable’ and then sought the FWC’s assistance in arbitrating a deal with more restrained wage and condition improvements (given the FWC must take into account the interests of all parties and the terms of an applicable enterprise agreement when making a determination).

It appears that the Greens and the Labour government have caught wind of this.

Further proposed changes – ‘no lose deals’ for Unions and employees 

Part 2 of the Closing Loopholes bill could be passed any day now.

The federal Government has signalled that it intends to accept an amendment proposed by the Greens to the intractable bargaining provisions, which provide that if an ‘intractable bargaining declaration’ is made, then any ‘intractable bargaining workplace determination’ made by the FWC cannot result in any term in the determination being ‘less favourable’ for an employee or any union than the terms of an applicable enterprise agreement.

Effectively, the proposed changes mean that once the FWC is arbitrating an intractable bargaining dispute, employees and unions cannot lose – they get to keep everything they currently have, and the FWC can only make a determination that improves upon those conditions.

The Coalition highlighted their concerns in a dissenting report included within the Senate Education and Employment Legislation Committee’s report following its inquiry in respect of the Fair Work Legislation Amendment (Closing Loopholes No. 2) Bill 2023 (published on 1 February 2024, reiterating the Victorian Labor Treasurer’s comments that the:

“… no less favourable test… removes the incentive for unions to reach an agreement as they know that they will be no worse off on a clause by clause basis as against a current enterprise agreement. The amendment also seems at odds with how bargaining works – that is, that it’s a package and during the course of bargaining trades offs are considered and made”.  

If introduced, the ‘no less favourable’ test returns us to a version of centralised wage fixing – akin to that of the 1980s and prior, where the Australian Industrial Relations Commission (the predecessor to the current FWC) had the power to arbitrate disputes which were notified by a union and as history showed, largely only resulted in improved conditions for employees and unions.

In the meantime, the FWC continues to grapple with the new intractable bargaining scheme introduced in 2023. Just this week, a Full Bench of the FWC held in United Firefighters Union of Australia v Fire Rescue Victoria (trading as FRV) [2024] FWCFB 43 that ‘agreed’ terms are those where there is a meeting of the minds or consensus, and terms that were acceded to during bargaining, but subject to a conditional reservation (i.e. approvals etc), are not ‘agreed’ terms, and parties should be able to resile from terms that were not definitely ‘agreed’.

Perhaps the only deviation from returning to 1980s industrial relations is that the crippling industry wide stoppages that were a feature of that period are unlikely to occur with these changes – because why would a union seek to take industrial action at all given the way the deck has now been stacked in their favour? They don’t need to convince their members of the virtues of taking industrial action to further their bargaining interests, and the corresponding loss of pay that results from taking protected industrial action during bargaining. Instead, they can look to the FWC and realise all of the gain, with none of the pain.

Quick takeaways

  • Easier access to arbitrated bargaining outcomes means that employers need to revise their approach to bargaining and the traditional strategies that they may have used (where the threat of an arbitrated outcome was never very likely). This requires a renewed consideration of things like an employer’s internal communication strategy with employees, the timing around which an organisation will commence bargaining, and when to use the FWC’s s.240 bargaining dispute provisions.
  • That said, applying for an intractable bargaining declaration does not automatically result in arbitration before the FWC. Instead, it could put pressure on the parties to come to the table and negotiate a deal. This was the case when Virgin Australia Airlines Pty Ltd made an application. The Australian Licenced Aircraft Engineers Association filed a statement that said “one matter remains unresolved” in bargaining (maximum redundancy payments). This prompted Virgin to put a revised agreement to the vote (presumably with the redundancy issue resolved) and they withdrew their application.

For further Kingston Reid commentary in relation to the making of the first intractable bargaining declaration under the current intractable bargaining scheme, please click here.

 

Michael Mead
Partner
+61 2 9169 8428
[email protected]
Jia Pan Xiao
Senior Associate
+61 2 9169 8430
[email protected]