The Amending Act will change the FW Act in many important respects and impact the way that employers manage both individual and collective employment issues.

In addition, on 28 November 2022 Parliament passed the Anti-Discrimination and Human Rights Legislation Amendment (Respect at Work) Act 2022 (Cth) implementing a variety of reforms arising from Sex Discrimination Commissioner Jenkins’ Respect@Work: National Inquiry into Sexual Harassment in the Workplace (2020) Report.

In a series of articles, the Workplace Team at Moray & Agnew will explore the key changes these new laws will bring about and their practical implications for Australian employers.

This first instalment starts our analysis with an explanation of how the Amending Act will alter bargaining and enterprise agreement processes.

What do you need to do now?

Most of these changes are now in effect. The changes regarding enterprise agreement pre-approval requirements and the Better Off Overall Test (BOOT), however, will commence on a later day to be fixed by Proclamation or from 7 June 2023, being six months and one day from when the Amending Act received the Royal Assent, (whichever occurs first).

Given some of these significant changes may be implemented quickly, we recommend that employers conduct an audit of their existing workplace instruments to determine whether any ‘zombie’ agreements may still be in operation, or to otherwise identify whether bargaining may soon commence (for example, if a current enterprise agreement’s nominal expiry date is imminent). This will equip employers with the knowledge needed to develop a proactive strategy for responding to the changes and for guiding any upcoming bargaining.

What’s changing?

Initiating Bargaining

The Amending Act seeks to stimulate enterprise bargaining by making the process of initiating bargaining for replacement single-enterprise agreements easier for employees and their bargaining representatives.

Specifically, employee bargaining representatives will be given the power to initiate bargaining for such agreements (other than greenfields agreements) by providing written notice to the employer, provided that:

• the existing enterprise agreement passed its nominal expiry date within the preceding five years
• the existing enterprise agreement did not cause a single interest employer authorisation cease to be in operation, and
• the replacement agreement will cover the same or substantially the same group of employees as the existing agreement.

This will mean that many employers who might have been able to resist bargaining in the past will soon have less opportunity to do so.

Enterprise Agreement Pre-Approval Requirements

The Amending Act also attempts to simplify pre-approval requirements for enterprise agreements by removing perceived complexity and prescriptive administrative rules.

This is to encourage enterprise bargaining and reduce the rate of enterprise agreements being rejected by the Fair Work Commission (FWC) on minor or technical grounds.

Of note:

• the strict requirement that an employer must take all reasonable steps to provide employees with a copy of or access to the enterprise agreement during a seven day ‘access period’ before the voting process will be removed
• the strict requirement to issue a prescribed notice of employee representational rights (NERR) will be removed for enterprise agreements other than single-enterprise agreements
• certain minor and technical errors in an enterprise agreement’s pre-approval processes can be disregarded by the FWC if it is satisfied that employees will not be disadvantaged, and
• the broad requirement that an enterprise agreement must be genuinely agreed will be retained, but the FWC will be required to take into account as part of its deliberations a guiding statement of principles which will reflect many of the current pre-approval requirements that are being removed from the FW Act.

To reduce perceived abuse to collective bargaining processes, the Amending Act will also require that, for there to have been ‘genuine agreement’ to an enterprise agreement, the FWC will need to be satisfied that the employees who were asked to vote to approve it have a sufficient interest in the terms of the enterprise agreement and are sufficiently representative of the employees it is expressed to cover.

Better Off Overall Test

The Better Off Overall Test (BOOT) will also be overhauled with the aim of addressing concerns about current workability, and making it more simple, flexible and fair.

The Amending Act will clarify that the BOOT requires the FWC to undertake a global rather than line-by-line assessment of whether each employee concerned would be better off under the agreement than the relevant modern award. The FWC will also be required to give consideration to any views on whether the agreement passes the BOOT that are expressed by employers, employees and bargaining representatives, and will give primary consideration to any common view held by bargaining representatives where the agreement is not a greenfields agreement.

If the FWC has concerns that an enterprise agreement does not meet the BOOT, it will be able to directly amend or excise a term of the enterprise agreement to resolve such concerns after seeking the views of the relevant employer(s), employees and bargaining representatives.

The FWC will be limited to considering the patterns or kinds of work, or types of employment, that are reasonably foreseeable at the time the BOOT is conducted. However, a BOOT ‘reconsideration process’ will also be introduced by the Amending Act to allow an employer, employee or employee organisation covered by an enterprise agreement to apply to the FWC to have the agreement reassessed against the BOOT if there are material changes to working arrangements after its approval.

Dealing With Errors

Under the Amending Act, the FWC will also be empowered to vary enterprise agreements to correct or amend obvious errors, defects or irregularities.

The FWC will also be able to validate an earlier decision to approve an enterprise agreement or its variation in circumstances where an incorrect version of the document was inadvertently submitted for approval.

Termination of Enterprise Agreements

Currently, there are few matters that needed to be considered by the FWC when determining whether it must terminate an expired enterprise agreement in the absence of agreement between the relevant employees and employers – the FWC only needs to be satisfied:

• that the termination is not contrary to the public interest, and
• it is appropriate taking into account the views of the employees, employers and employee organisations covered by the agreement and their circumstances.

To reduce the scope for employers to use this termination process to unilaterally reduce employees’ terms and conditions of employment, or as a potentially unfair bargaining tactic during negotiations for a replacement agreement, the Amending Act will replace this existing termination regime with new rules that are designed to be more fit-for-purpose and fair.

Specifically, in order to terminate an expired enterprise agreement once the Amending Act commences, the FWC will need to be satisfied that:

• the continued operation of the enterprise agreement would be unfair for the employees covered
• the enterprise agreement does not, and is not likely to, cover any employees, or
• all of the following apply:
  • the continued operation of the enterprise agreement would pose a significant threat to the viability of the relevant business
  • termination would likely reduce the potential for dismissals due to redundancy, insolvency or bankruptcy, and
  • any terms conferring dismissal-related entitlements in a redundancy, insolvency or bankruptcy situation have been preserved by way of the relevant employer/s giving the FWC a ‘guarantee of termination entitlements’, which is essentially an undertaking to still comply with beneficial terms of this nature for an additional specified period despite the termination of the agreement.

The FWC must also consider the views of the employees (unless no employees are covered), each employer and each employee organisation, as well as whether:

• the application was made at or after the notification time for a proposed enterprise agreement that will cover the same, or substantially the same, group of employees
• bargaining for the proposed enterprise agreement is occurring, and
• the termination of the existing agreement would adversely affect the bargaining position of the employees that will be covered by the proposed enterprise agreement.

Finally, the FWC must also be broadly satisfied that termination of the enterprise agreement is otherwise appropriate in all the circumstances, and may have regard to any other matter it considers relevant to its deliberations.

Zombie Agreements

The Amending Act will introduce an automatic sunset period for ‘zombie agreements’, being any remaining pre-FW Act agreements that have been preserved by the FW Act.

While many of these transitional instruments have already been terminated or replaced, those that continue to exist generally contain minimum wage standards that have since been surpassed by the relevant modern awards and which are otherwise not necessarily in keeping with current enterprise agreement expectations.

The automatic sunset period for zombie agreements will be one year from when the Amending Act commences, unless this period is extended for a maximum of four years by way of application to the FWC. Depending on the circumstances though, such extensions may prove difficult to obtain given that the FWC must be satisfied that employees will be better off by remaining covered by that instrument than if they were covered by the applicable modern award, as well as it being otherwise appropriate and reasonable in the circumstances to grant the extension.

Employers covered by a zombie agreement will also be required to notify affected employees within six months of the Amending Act commencing that they are covered by a zombie agreement which will terminate upon expiry of the automatic sunset period unless the default one year period is extended.

We will be discussing the major aspects of these reforms throughout this series, including in relation to pay secrecy, fixed term contracts, prohibiting sexual harassment, changes to flexible work requests and more.

Further information / assistance regarding the issues raised in this article is available from the authors, Elizabeth Radley, Partner, Richelle Farrar, Special Counsel, and Matthew Parker, Senior Associate, or your usual contact at Moray & Agnew.