Here’s what HR needs to know about the impending industry-based bargaining changes.
If employers and HR professionals are feeling confused by the impending bargaining-related changes to the Fair Work Act, it’s with good reason. How those changes will play out is not immediately apparent with their scope to be shaped in the first instance by the Fair Work Commission (FWC).
The Amending Act includes 13 new civil penalty provisions levelled at employers, producing an even stronger individual rights regime.
But in the long term, it’s the bargaining-related changes that will have the most profound impact.
The Australian reported on 8 December that “IR laws top CEO concerns.” Those concerns stem from the likely shift away from enterprise bargaining and towards terms and conditions of employment being set along industry lines.
The laws are aimed at employers who are able to compete on price through favourable labour arrangements. Protecting that competitive position will be harder in a framework that can result in employers being “roped” into industry terms without their consent, and without any negotiation.
Bargaining to increase wages
The new bargaining laws are also aimed at getting wages up. For many employers who are also dealing with other inflationary pressures, margins will be eroded.
Enterprise bargaining was introduced in the 1990s as part of a range of micro-economic reforms to curb inflation, amongst other things.
Centralised Award-based wage outcomes were the handbrake, and enterprise bargaining was the answer. Today, enterprise bargaining is now seen as the handbrake with a return to more centralised (industry-based) outcomes as the answer. We have come full circle.
The existing bargaining laws have given rise to many and varied complaints from employers – chief among them being the ‘death by a thousand cuts’ ability of unions to inflict damaging industrial action with limited legislative circuit breakers.
Ironically, this dynamic was most keenly felt by larger organisations with capital at risk. Such employers have become leaders in the price they pay for labour. Smaller, lower-target employers have been able to attract labour on lesser terms and conditions and avoid enterprise bargaining, or have been better able to reach deals on favourable terms.
Under the new laws, smaller employers will become a bigger target and more vulnerable to industry-wide agreements. Indeed, we predict that multi-enterprise agreements in time will cover thousands of employers (particularly those with more than 20 staff but who are not large household names) who have to date stayed out of the enterprise bargaining system.
These agreements will form the new minimum standards for those employers rather than the modern Award system.
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10 implications for employers
Below are ten implications for workplace bargaining arising from the Amending Act. Our focus here is on the changes that have strategic impact rather than the process-related changes, such as those to the ‘better off overall’ test or requirements to secure genuine employee agreements.
1. There are three streams covering ‘multi-employer agreements’. Two of the three, the ‘supported bargaining agreement’ and the ‘single-interest employer agreement’ will change the workplace bargaining landscape.
It is only a matter of time before the new streams bite, and when they do they will bite hard. Supported bargaining is ostensibly aimed at the low-paid sectors which replaces and expands on the current low-paid bargaining stream.
Single Interest employer bargaining provides an alternative means of multi-employer bargaining which replaces and expands the current single interest regime.A third stream, ‘Cooperative workplaces’, replaces the current, and seldom used, ‘multi-enterprise agreements’ made with the agreement of multiple employers.
2. That change to industry-based terms will arise because of the capacity of unions to ‘rope in’ employers to such agreements, which will be made along industry lines. In many cases there will be no negotiation and the terms will already be set. In turn, the new system creates unprecedented scale efficiencies for unions.
3. The ability of employers to resist these agreements will depend on the preferences of their employees and their ability to convince the FWC otherwise, based on various legal tests including one which examines whether there are ‘common interests’ and (only for the single-interest stream) a reasonably comparable position as between employers based on their ‘operations and business activities’.
4. It follows that the FWC will have a profound impact on the scope of industry-based agreements in the same way it has done in respect of industry-based Modern Awards.
5. The prospect of arbitration to resolve ‘intractable bargaining disputes’ involving such agreements at the outset will also see the FWC shape the content of such agreements.
6. A single-enterprise agreement (being the most common type of agreement made today) affords some protection against multi-employer agreements.
For this reason, many employers will want to renew their current single agreements or make a first single agreement. But, where a union is involved and influential in the workplace, the employer will be at the mercy of union desires for a multi-employer agreement.
So unions will seek a premium from employers for the making of a single-enterprise agreement where the alternative for an employer (a multi) is less attractive.
7. Where a multi-enterprise agreement exists, and an employer is facing a ‘roping-in’ application to bind it, obvious challenges arise where the existing terms (such as hours of work and rostering) are different to the multi-employer agreement.
8. The prospect of rivalry between unions and employers seeking to distinguish themselves from others in an industry (arguing no ‘common interests’ or reasonable comparability exists) will give rise to multiple processes involving multiple unions and employers. In turn, the bargaining equation will get more complex and require a deeper skill set.
9. For established and larger enterprises, a multi-employer agreement may be attractive, particularly where the company seeks a level playing field of terms and conditions to take labour out of the competition equation. But how two or more leading employers could do this, who might have very different terms and conditions albeit with similar rates of pay, is another point of complexity, as is the possible intersection with competition laws.
10. For these reasons and more, this legislation has galvanised the interest of boards and the C-suite. Workplace strategy will again become centre stage.
The implications of these changes will be felt by employers that both have a history of enterprise bargaining in their business and those that do not.
Some businesses that have prided themselves on building strong engagement models will be challenged by a new wave of collectivism. An understanding of the new laws and their deeper implications will be vital for HR, who will likely face the new industrial relations frontier.
Chris Gardner and Michael Tamvakologos are Partners at Seyfarth Shaw where they advise on employment and workplace relations law. They have been recognised as market leading practitioners in The Legal 500, Doyle’s Guide, Best Lawyers and Chambers Asia-Pacific.