Abbott Government looks to lift productivity through Fair Work Amendment (Bargaining Processes) Bill

By: John Tuck (Partner) & Anthony Forsyth (Consultant)

Submitted by Firm:
Corrs Chambers Westgarth
Firm Contacts:
John Tuck
Article Type:
Legal Update

On 27 November 2014, the Government introduced the Fair Work Amendment (Bargaining Processes) Bill 2014 (Amendment Bill) into federal Parliament.

The Amendment Bill implements elements of the Coalition’s 2013 “Policy to Improve the Fair Work Laws” aimed at promoting “harmonious, sensible and productive enterprise bargaining”.[1]

In particular, the Amendment Bill seeks to incorporate “workplace productivity” as a requirement of the processes for bargaining and the taking of protected industrial action under the Fair Work Act 2009 (Cth) (FW Act).

Current bargaining framework and reasons for legislative change

Under the FW Act presently, while there are numerous requirements of which the Fair Work Commission (FWC) must be satisfied before approving an enterprise agreement (primarily, the better off overall test), none of these requirements relate to improving productivity under the proposed agreement.

There are also various statutory pre-conditions for the issuing by the FWC of a protected action ballot order (PABO) facilitating a secret ballot of employees on proposed protected action in support of bargaining claims. One of the main requirements is that the applicant for a PABO is “genuinely trying to reach an agreement” with the employer (FW Act, section 443(1)(b)), although no guidance is provided to the FWC in determining that issue.

Introducing the Amendment Bill into Parliament, The Hon Christopher Pyne MP criticised the existing framework for enterprise bargaining, arguing that the FW Act allows industrial action to be taken as a step of “first resort” and in pursuit of “extreme, unreasonable or unrealistic bargaining claims”.[2]

Minister Pyne cited by way of example recent threats of industrial action by the Maritime Union of Australia, in respect of claims to raise the salary of marine engineers by 38% over four years. He told Parliament that similar MUA claims for wage hikes without corresponding productivity benefits had brought Australian ports to a halt in 2010.

The Minister also raised concerns that the FW Act does not currently require “bargaining parties to even think about productivity when they are negotiating a new enterprise agreement”.

The key legislative changes proposed in the Amendment Bill are summarised below.

Additional approval requirement for enterprise agreements

The Amendment Bill would add an additional requirement for the approval of enterprise agreements (other than greenfields agreements) by the FWC – i.e. “that, during bargaining for the agreement, improvements to productivity at the workplace were discussed” (proposed subsection 187(1A)).

The Explanatory Memorandum for the Amendment Bill (EM) indicates that examples of improvements to productivity may include, but are not limited to:

  • the elimination of restrictive or inefficient work practices;
  • initiatives to provide employees with greater responsibilities or additional skills directly translating to improved outcomes; and
  • improvements to the design, efficiency and effectiveness of workplace procedures and practices.

The EM also clarifies that:

  • the new approval requirement does not require that bargaining parties come to an agreement about productivity terms or include such terms in their enterprise agreement – only that discussions about productivity have occurred;
  • the FWC is not required to consider the merits of the discussions on improvements to productivity or whether it would be reasonable to include certain provisions in the final agreement;
  • the new requirement is not intended to modify or delay the current timeframe for FWC consideration and approval of enterprise agreements.

Additional restrictions on protected industrial action

Steps taken to reach agreement and communicate claims

The Amendment Bill would also add, to section 443, a list of non-exhaustive factors that the FWC is required to consider in its assessment of whether an applicant for a PABO is genuinely trying to reach an agreement with an employer. Those factors are:

  • the steps taken by each applicant to try to reach an agreement;
  • the extent to which each applicant has communicated its claims in relation to the agreement;
  • whether each applicant has provided a considered response to proposals made by the employer; and
  • the extent to which bargaining for the agreement has progressed.[3]

The EM clarifies that these new factors guiding the “genuinely trying” test would not require the FWC to establish fixed thresholds that must be met in all PABO applications; nor do they require that bargaining has been exhausted or at an impasse before a PABO can be granted.

The FWC would retain discretion in having regard to all relevant circumstances in the bargaining process, which may include the duration of negotiations prior to the application, the extent of bargaining (e.g. the number of meetings scheduled and held), and the degree of actual communication between the bargaining representatives.

However, if an applicant for a PABO fails to make genuine and reasonable attempts to engage with the employer or to communicate key claims, this could indicate that the ballot application is premature – and that the applicant is not genuinely trying to reach agreement.

Claims that are excessive or adversely affect productivity

A further amendment to section 443 would provide that the FWC must not make a PABO where it is satisfied that the claims of an applicant are:

  • manifestly excessive, having regard to the conditions at the workplace and the industry in which the employer operates; or
  • would have a significant adverse impact on productivity at the workplace.

According to the EM, these new restrictions on access to protected industrial action are aimed at encouraging sensible and realistic bargaining claims, by ensuring that bargaining representatives cannot obtain a PABO in pursuit of claims that are “out of range” or “beyond what is necessary, reasonable, proper or capable of being met by the employer” in light of workplace and industry conditions.

The FWC’s assessment of whether the claims will significantly affect productivity adversely may include weighing up whether a claim “will have a substantial or deleterious effect on the output of the workplace relative to its labour, time or cost inputs”, and depending on its characteristics and capabilities. However, the FWC would not be limited in the matters it may take into consideration in assessing bargaining claims under the proposed amendment.

Implications for employers

The provisions of the Amendment Bill attempt to more closely link the bargaining process with the object of the FW Act to promote productivity in Australian workplaces.

The proposed new requirements for the issuing of PABOs by the FWC could assist employers seeking to thwart or delay attempts by unions to take industrial action at an early stage of negotiations.

The proposed restrictions on enterprise agreement claims provide a disincentive for ambit claims that can frustrate and delay bargaining outcomes. The changes may have the effect of moderating employee demands, although much will depend on the FWC’s interpretation of key terms such as “manifestly excessive” and “significant adverse impact on productivity”.

Next steps

The Amendment Bill is the fourth bill proposing changes to federal workplace relations laws introduced by the Coalition Government since it took office in September 2013. The other bills – the Fair Work Amendment Bill, the Fair Work (Registered Organisations) Bill and the Building and Construction Industry (Improving Productivity) Bill – are all still before the Senate. Another, the Fair Entitlements Guarantee Amendment Bill, is likely to be voted down in the Senate, as cross-bench Senators recently disallowed a regulation intended to have similar effect to that Bill.

It is unlikely that the Amendment Bill will be debated by Parliament until early 2015. Even then, there can be no certainty of its passing into law, given the volatile situation in the Senate and the Government’s continuing difficulty in obtaining support for its legislative program from the cross-bench Senators.



 [1] See the discussion of the Coalition’s Policy in our earlier In Brief.

 [2] Second Reading Speech for the Fair Work Amendment (Bargaining Processes) Bill 2014.

 [3] These factors are based on the principles established in Total Marine Services Pty Ltd v MUA [2009] FWAFB 368.