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A cartoon depicting enterprise bargaining as a scale, with an oversized employer on one side with a united workforce as the balance.

National

Enterprise bargaining: a quick guide

January 19, 2024

If you haven’t been involved in enterprise bargaining before, here’s what it’s all about.  

Australian industrial relations and workplace rights is governed by the Fair Work Act. Through the National Employment Standards and relevant Modern Awards, the Fair Work Act sets the baseline standards of all work in Australia. The Act provides for employees at a workplace to band together to collectively improve the pay and conditions of these minimum standards through enterprise bargaining.

Enterprise Agreements provide legally enforceable terms and conditions of employment, for those employees covered.

Collective bargaining by unionised workers over decades has delivered pay and conditions for mining and energy workers well above legal minimums – that’s why some employers do everything they can to avoid genuine bargaining.

What is enterprise bargaining?

An enterprise agreement is negotiated between an employer and the workers who would be covered under that agreement and must be approved by a majority vote of those workers before coming into effect.

In workplaces without a union presence, enterprise agreements typically provide pay and conditions minimally above legal Award and NES requirements.

In workplaces with a union presence, the union is automatically their members’ bargaining representative. Union bargaining representatives do not represent non-members in bargaining – however, they are prevented by law from making agreements that only cover union members.

This means that pay and conditions achieved by union members through bargaining flow to non-union members and lead to the ‘free-rider’ effect.

High union density is the surest way to achieve strong outcomes in bargaining – so people who sit on the sidelines and take pay rises without paying union dues are letting down themselves as well as their workmates.

The bargaining process

Often, employers of workplaces with a union presence will initiate bargaining upon formal request. If they refuse, it may be necessary to seek a Majority Support Determination, meaning the employer is compelled to begin bargaining if it can be demonstrated that a majority of workers who would be covered support it.

Once the process has been initiated, employers are required to issue workers with a notice of their representational rights. This explains that workers are able to appoint bargaining representatives, and that Union members will be automatically represented by Union bargaining representatives unless they nominate an alternative.

Bargaining representatives will then meet with workers and discuss their concerns, as well as priorities for conditions they hope to achieve through bargaining. The representative will then use this to develop a log of claims, which they will try to achieve through bargaining with the employer.

Good faith bargaining

The Fair Work Act requires the bargaining parties – the employer and worker representatives – to bargain in good faith with one another in order to reach a satisfactory compromise. This means that both sides must genuinely consider all proposals, give reasons for their responses, and behave in a way that is consistent and fair.

This does not mean they must make concessions or agree with others about the terms of the agreement, they simply have to be transparent about their reasoning and desired outcome.

If a bargaining representative’s behaviour indicates that they are not negotiating in good faith, they may face consequences for failing to bargain in good faith.

Protected industrial action

The only time when either party can take protected industrial action is during bargaining.

Either side may apply to the Fair Work Commission in order to take protected industrial action. For workers, this may take the form of a strike, a ban, limitation or restriction on the performance of work, or other change to the regular performance of duties. For more information on protected industrial action, read Considering Going on Strike?

Proposed enterprise bargaining agreements

Once an employer is satisfied with the proposed agreement, they will offer it to the affected workers to vote on. An offer requires that majority of voters respond in favour in order to be sent to the Fair Work Commission for approval.

Union bargaining representatives encourage members to vote ‘yes’ or ‘no’, depending on whether they believe the document reflects members’ priorities or whether more can be achieved. If workers vote no, the employer must come back to the table to continue bargaining.  

The Union cannot approve Enterprise Bargaining Agreements. Agreements only become valid if a majority of members vote in favour and the Fair Work Commission approves them.

The Fair Work Commission and BOOT

Once an agreement has been voted up, the employer submits it to the Fair Work Commission to assess if it complies with a range of requirements. At this stage the commission applies the Better-Off Overall Test, or BOOT, wherein the proposed agreement is compared to the relevant Award to ensure that it is not below the standard set in the Award.

The test is not an item-by-item comparison, but rather assesses the terms and conditions as a whole against the Award, hence Better Off Overall. This means that some conditions can be below the Award and still pass the test, if the benefits are made up by other conditions surpassing the Award.

Intractable Bargaining

If after nine months of bargaining a satisfactory agreement has not been reached, bargaining representatives may seek an Intractable Bargaining Declaration from the Fair Work Commission. If the Commission finds that the circumstances are reasonable and there is no prospect of an agreement being reached, they may issue the declaration.

The Commission may elect a negotiation period in which it will hold conciliation conferences and assist the parties to try and reach a mutually agreeable solution. If the dispute still cannot be resolved, then the full bench of the Commission must issue an intractable bargaining determination wherein they decide the terms and conditions of employment that could not be agreed on by the bargaining representatives.

This determination must include any terms that have been agreed to by the parties, and replaces the enterprise agreement that would have been made if the parties had reached a satisfactory compromise.

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