Proposed major changes to have substantial impact on Australian employers
The Government are working through amendments to the Closing the Loopholes Bill
(containing the third round of industrial reforms) and a late Greens amendment was proposed yesterday which appears to have Government support.
As many clients know, the first tranche of reforms introduced “intractable bargaining” arbitration
into the Fair Work Act. These reforms had the effect that bargaining disputes which had no reasonable prospect of being resolved could be referred to the Fair Work Commission (FWC) for arbitration - resulting in a workplace determination being imposed on the parties in lieu of an enterprise agreement.
There were a lot of mixed employer views about solving long running bargaining disputes through arbitration, but many employers saw this as a sensible approach rather than relying on strikes and lock outs; let the independent umpire decide.
The proposed amendments
With the ink not yet dry on these changes, a Greens proposal (which appears to have Government support) proposes to change how arbitration will work. The effect of their proposed amendments will likely make arbitration one sided and heavily restrict the Commission’s ability to arbitrate the merit of any bargaining dispute.
The proposed amendment (section 270A) provides that in any arbitration of a bargaining dispute, any disputed term that relates to a term in an existing enterprise agreement applicable to the parties (eg. terms about hours of work, shifts, rosters etc) cannot be changed in the arbitration to make the term less favourable to the employees or a union than the existing enterprise agreement. The only exception to this requirement relates to wage increases, which are exempt from the operation of section 270A.
Rather than viewing any bargaining as a whole, the Commission must ensure each term it arbitrates (on a term-by-term basis) is either as favourable or more favourable for employees and any relevant union bargaining representative.
This means that the FWC will only be adding conditions and wages to an existing enterprise agreement. It will not have the power to reform EA terms in any way that removes prescriptive provisions for an employer, regardless of the merit of such reforms.
How will this affect employers?
Under the proposed reform, if an employer has an existing enterprise agreement and “needs” to change something in it to run efficiently the only way to achieve this will be either:
- culturally (that is, convincing the workforce); or
- by buying the change out (once unions understand the one-sided nature of any arbitration, the price to buy out such conditions will also likely escalate).
This reinforces the criticality of developing progressive workplace culture within which bargaining occurs. Absent this, it will fundamentally change bargaining strategy considerations for employers.
The proposed amendment distorts the utility of arbitration as a moderating force, which it can be when there is a level playing field for both parties and an independent industrial umpire that is empowered to arbitrate bargaining disputes on merit. With a level playing field, the threat of arbitration (both parties having something to lose) usually drives compromise and an agreed outcome.
The effect of these reforms will transition all risk of arbitration to the employer, significantly affecting the bargaining dynamic.
Where to from here?
The proposed amendment is not yet law. The Bill will need to be passed by the Senate, which is expected to consider the Bill in early 2024.
We will continue to communicate in detail all proposed amendments shortly and in the meantime please contact us at email@example.com
if you need clarification on how this will impact your business.