Is now the time to make an enterprise agreement?

May 29, 2023

Less than two weeks[1] from now, significant changes to the enterprise bargaining provisions in the Fair Work Act 2009 (Cth) (Fair Work Act) will commence.

There is a common sentiment and theme to the enquiries among employers as this date grows nearer: “Is now the time to be making an enterprise agreement?”.

The short answer is — maybe. But it depends.

The good news is that there’s a much better question to ask, with a clear answer.

“Should we be reviewing our industrial strategy?”

Absolutely.

What happens on 6 June 2023?

The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) (SJBP Amendment Act) was enacted in December 2022 and made wide-sweeping changes to the Fair Work Act scheduled to commence from that time and on rolling dates throughout 2023.

A list of the operative dates of major changes introduced by the SJBP Amendment Act is available here.

Amid the changes commencing on 6 June 2023 are those to enterprise bargaining, including significantly expanded circumstances in which multi-enterprise bargaining — that is, enterprise agreements that cover two or more employers[2] — is available.

Single-enterprise agreements versus multi-enterprise agreements – pre 6 June 2023

Although currently employers have the option of making either a single or multi-enterprise agreement, at a practical level most enterprise agreements are ‘single-enterprise’ agreements that are expressed to cover a single employer. In limited circumstances, two or more employers are currently also permitted to come together and bargain for an agreement as though they are, in effect, a single employer[3].

The Fair Work Act contains additional provisions allowing for multi-enterprise bargaining in ‘low-paid’ sectors or professions where, historically, they have had difficulty in accessing the benefits of collective bargaining. However, the Fair Work Commission (FWC) is required to authorise the bargaining and before doing so, must take into account numerous factors and be satisfied it is in the public interest. This ‘low paid bargaining stream’ has had very little traction since the time the Fair Work Act commenced.

Until 6 June 2023, the Fair Work Act does not permit protected industrial action to be taken in support of a multi-enterprise agreement.

Single-enterprise agreements versus multi-enterprise agreements – post 6 June 2023

The new laws significantly expand the circumstances in which multi-enterprise bargaining is available. From 6 June 2023, there will be three streams of multi-enterprise bargaining. Ai Group members are able to access a detailed summary of each stream via the below links:

Supported bargaining replaces low-paid bargaining and can be authorised where the FWC is satisfied that it’s appropriate for employers to bargain together, having regard to matters including the pay and conditions within the relevant sector and whether the employers have clearly identifiable interests. Industries to which supported bargaining is directed include aged care, disability care and early childhood education and care.
Single interest bargaining can be authorised where the FWC is satisfied of certain matters including that the employers are either franchisees or have clearly identifiable common interests and it is not contrary to the public interest for the employers to bargain together and
Cooperative workplace bargaining, where two or more employers voluntarily agree to bargain together.

Protected industrial action will be permitted to be taken in the ‘supported bargaining’ and ‘single interest employer’ streams.

What this means for employers

For employers, this means that from 6 June 2023:

there will be significantly greater opportunities to be pulled into enterprise bargaining with other employers by unions, regardless of whether the employer has consented to this;
employers may face a situation where their terms and conditions are no longer determined at an enterprise level and are instead generated at an industry level and
once supported bargaining and single-interest employer agreements start being made, new employers may be roped into agreements where the majority of their employees support this. In many instances, this will be able to occur regardless of whether the employer has consented to this (with some protections on roping-in for employers with fewer than 20 employees as well as employers of all sizes who have an existing in-term single enterprise agreement).

Why some employers are asking whether now is the time to make an agreement

Unquestionably, come 6 June 2023, employers who have a single-enterprise agreement still within its nominal operating term (of up to four years) will enjoy a level of insulation from unwanted multi-enterprise bargaining that is not available to employers operating on a modern award (or even, an expired enterprise agreement).

For completeness, unless specified otherwise below, having an in-term multi-enterprise agreement can also operate as protection from unwanted multi-enterprise bargaining. (However, this article focuses on the option of single-enterprise agreements as they tend to be the far more common option pursued by employers).

There are two points at which an employer may be drawn into multi-enterprise bargaining by a union, for a single interest employer or supported bargaining agreement.

The first is at the time a union applies to the FWC to request it to authorise bargaining in relation to the initial making of the multi-enterprise agreement (the ‘authorisation stage’).

The second point in time is after a single interest or supported multi-enterprise agreement has been made and a union applies to the FWC to vary the coverage clause of the agreement to include one or more additional employers (the ‘agreement variation stage’).

Significance of having a single enterprise agreement at the ‘authorisation stage’

Supported bargaining

The FWC is required to authorise supported bargaining but — with only one narrow exception[4] — is prevented from doing so in relation to an employee who is already covered by a single-enterprise agreement that has not passed its nominal expiry date.

Single interest bargaining

If a union initiates single interest bargaining not consented to by an employer, the FWC must refuse to authorise it if the employer:

is covered by an enterprise agreement that has not passed its nominal expiry date or
has agreed with a union (or unions) in writing to bargain for a proposed single-enterprise agreement that would cover the same (or substantially the same) group of employees.

The FWC will also have the discretion to refuse to authorise a non-consenting employer being added to the authorisation if:

the employer is bargaining in good faith for a proposed enterprise agreement that will cover the employer and the relevant employees or substantially the same group as the relevant employees;
the employer and the relevant employees have a history of effectively bargaining in relation to one or more enterprise agreements that have covered the employer and the relevant employees or substantially the same group as the relevant employees and
on the day that the FWC will make the authorisation, less than nine months have passed since the most recent nominal expiry date of an agreement referred to above.

Initial authorisation and variations to authorisations

Once the FWC authorises supported or single interest bargaining, a union can apply to the FWC to add additional employers to the authorisation who are proposed to be covered by the multi-enterprise agreement. The protection to an employer from being subsequently roped into an authorisation operates the same way as for the initial authorisation outlined above.

Significance of having a single enterprise agreement at the ‘agreement variation stage’

Supported bargaining

The FWC is prevented from making a variation to a supported bargaining agreement to cover a new employer if the employees the supported bargaining agreement would cover are already covered by an enterprise agreement that has not passed its nominal expiry date.

Single interest bargaining

As at the authorisation stage, the requirements for the FWC to approve the variation will not be met where the employer is covered by an in-term enterprise agreement or has already agreed in writing to bargain for a proposed single-enterprise agreement that would cover the same (or substantially the same) group of employees.

The FWC will also have discretion to refuse the variation where bargaining is underway to replace an agreement that expired less than nine months previously and the employer and relevant employees have a history of bargaining effectively.

Summary – protection from multi-enterprise bargaining as a consequence of having an in-term enterprise agreement

In short — subject to the anti-avoidance rule — an employer covered by an in-term enterprise agreement cannot be roped into single interest or supported bargaining by a union.

In the case of single interest bargaining, employers may also have some level of protection from being in the process of bargaining for a single-enterprise agreement.

It is understandable then why many employers may be asking whether the time to make an enterprise agreement is now.

As we explain below, the answer is maybe. But it depends on a range of factors.

How to decide whether making an enterprise agreement right now is best for your workplace

A good starting point is to consider the arrangements you currently have in place — and why.

For employers who already have a single-enterprise agreement that may be nearing or have passed its nominal expiry date, a decision to seek to negotiate a new singe-enterprise agreement may be far more straightforward than for employers who have traditionally operated on modern awards. Ai Group members considering making an enterprise agreement for the first time may be interested in our member-only Introduction to enterprise agreements that outlines the key steps involved as well as some of the benefits and disadvantages to employers of having an enterprise agreement.

Employers who have a ‘zombie’ agreement (made before 1 January 2010) should be considering whether it is appropriate to make a new enterprise agreement before the automatic sunsetting of that agreement in December 2023.

Ai Group’s member advice and recent blog outline some of the key considerations for employers who fall into this category.

For employers who have never had an enterprise agreement and perhaps even those who have had one for many years but no longer see the benefits of continuing to bargain, the considerations for and against bargaining for a new enterprise agreement may be more nuanced.

The decision to bargain may be influenced by:

whether the employer operates in an industry susceptible to multi-enterprise bargaining and if so, the positives and negatives of multi-enterprise bargaining in the specific context of its workplace;
the capacity of the employer to bargain, including its operational position and internal resourcing to support negotiations;
typical wages and other terms and conditions in the industry or sector;
any difficulties in the current industrial framework and whether these may be improved or exacerbated by bargaining;
whether the workforce wishes to bargain for an agreement or is happy with some other existing arrangement;
the potential impact of bargaining (or not bargaining) on an employer’s competitive position;
the risk of protected industrial action in the context of business disruption and impact on suppliers and customers and
the level of union engagement with your workforce.

There are other changes to bargaining that commence on 6 June 2023 which may increase the uncertainty surrounding bargaining — at least in the immediate term

There are numerous other changes to the Fair Work Act set to commence at the same time as the changes to multi-employer bargaining.

These include changes to the Better Off Overall Test (BOOT) and new requirements for obtaining approval of agreement by the Commission.

These include:

employees who vote on an agreement having a sufficient interest in the terms of the agreement and are sufficiently representative of the coverage of the agreement;
the process for having an enterprise agreement approved by your workforce, including operation of the new Statement of Principles on Genuine Agreement;
industrial action and
intractable bargaining disputes and arbitration.

Ai Group members can access a members-only Guide to the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022, to read more about those changes.

While some of these changes were intended to make the process of obtaining approval for an agreement simpler, employers will need to grapple with what the changed requirement of the Act will now require or permit. There will undoubtedly be some initial complexity and difficulties as the new laws are tested.

What should employers be doing if they’re not making an enterprise agreement?

There are a range of enterprise-specific considerations regarding the suitability of making an agreement (and specifically, a single-enterprise agreement).

Employers’ interests are likely to be best served by undertaking a careful and informed evaluation of the potential benefits and pitfalls of bargaining, within the context of their broader industrial and corporate strategy.

A myopic sprint towards a single-enterprise agreement runs the risk of not only falling foul of ‘anti-avoidance’ provisions but of failing to capitalise on other opportunities and timing considerations presented within the broader Fair Work Act bargaining overhaul.

For some employers, the best answer may be to commence single-enterprise bargaining.

But the universal answer for almost ALL employers is that it’s time to revisit your industrial strategy to ensure optimal and informed decision making.

For additional advice and assistance, Ai Group members can contact the Ai Group Workplace Advice Line on 1300 55 66 77.

[1] The changes are expressed to commence on the earlier of 6 June 2023 or a day to be proclaimed. As at the time of writing there has been no proclamation, so it appears the commencement date will be 6 June 2023.

[2] Employers in a joint venture or common enterprise, or who are related bodies corporate, can currently make – and will be able to continue to make – a single-enterprise agreement (ie. as though they are “one” employer).

[3] The Fair Work Act currently permits two or more employers that are not ‘single interest employers’, but have a close connection, to seek a single interest employer authorisation (for example franchisees) to commence bargaining for a single interest employer agreement. Alternatively, employers that are declared by the Minister to be a single interest employer (for example schools and public health service providers) may also bargain together for a single interest employer agreement.

[4] The exception is where the FWC is satisfied that an employer’s main intention in making a single-enterprise agreement was to avoid being roped into a supported bargaining authorisation. This is known as an “anti-avoidance” provision.