Enterprise Bargaining

Enterprise bargaining is a cornerstone of the industrial relations system in Australia, enabling employers and employees to negotiate employment conditions tailored to the specific occupation or industry needs. The Fair Work Act 2009 (FWA) is the main legislation that governs enterprise bargaining and creates a framework to foster fairness and productivity in the workplace. This article explores the key principles and procedures, and current trends that impact enterprise bargaining in Australia.

Types of enterprise bargaining agreements

Enterprise bargaining is the term given to the voluntary negotiation process between management and employees and their representatives. The ultimate purpose of such negotiations is to reach an Enterprise bargaining agreement (EBA). EBAs are bargains struck at the enterprise level between employers and workers on their employment terms and conditions. They can take the form of:

• single-enterprise agreements that involve a single employer or multiple employers cooperating in a common enterprise or joint venture
• multi-enterprise agreements that involve multiple non-associated employers who seek to negotiate a common agreement
• greenfields agreements that are made for a new enterprise before any workers are employed

Enterprise bargaining process

An EBA process usually commences with the employer providing the employees with 14 days’ notice and advising them that they have a right to nominate a representative to bargain on their behalf. In fact, during an EBA, both employees and employers usually appoint representatives to negotiate on their behalf. Typically, trade unions represent employees, while employers nominate internal senior leaders or external specialist negotiators to represent the business in the negotiations.

Good faith bargaining

The FWA mandates that all individuals must act in “good faith” while participating in enterprise bargaining. Under that legislation, there are set conduct requirements during the enterprise bargaining to:

• attend and participate in meetings held at reasonable times
• disclose relevant information without delay
• respond to proposals made by the other parties without delay
• give genuine consideration to these proposals and the rationale for any responses to proposals
• refrain from unfair or capricious conduct that undermines collective bargaining and freedom of association
• recognise and bargain with the other representative to reach an agreement.

However, it must be acknowledged that bargaining representatives are not obligated to make concessions or reach agreement during enterprise bargaining. Good faith does not require either party to agree to an unfair bargain simply to reach an agreement. Rather, the requirement for good faith bargaining means both parties must actively participate and consider the other party’s position.

If either party fails to abide by these imperative to negotiate in good faith, the Fair Work Commission (FWC) can step in to make orders. Alternatively, even if both parties do negotiate in good faith, the FWC can still intervene if the parties cannot come to an agreement. 

During enterprise bargaining, either party can make an application for an Intractable Bargaining Declaration (IBD) if they are at a stalemate and cannot reach a resolution. If a IBD is issued, and the parties still cannot resolve their dispute, the FWC can make an Intractable Bargaining Workplace Determination. In essence, this allows the FWC to dictate an agreement when the parties cannot decide on their own. The FWC’s Determination will include any already agreed terms (subject to relevant criteria) and further terms (other than wage increase terms) set by the Commission. Any terms that the Commission sets must be equally or more favourable to employees and unions than the applicable enterprise agreement (subject to relevant rules). This requirement provides an incentive for employers to make agreements and avoid reaching an intractable stalemate, as the outcome will almost certainly favour the employees. When deciding these terms, the FWC must take into account:

• the merits of each party’s position
• the reasonableness and good faith adherence of each representative during the bargaining
• the interests of the employees and employers covered by the determination
• the significance of any benefits or arrangements in an enterprise agreement that applied prior to the determination
• the public interest
• potential improvement in productivity in the relevant enterprise(s) and
• inclusion of incentives to continue bargaining at a later date

If the bargaining concludes successfully, the proposed agreement can be sent to the FWC for approval. To be legally enforceable, an EBA must be approved by both the affected employees and the Fair Work Commission (FWC). The FWC uses the Better Off Overall Test (BOOT) to assess whether the employees’ position is better under the agreement than the underlying award, and complies with the National Employment Standards and other legislative requirements.

Recent developments

There have been recent amendments to the enterprise agreement provisions of the Fair Work Act. The Secure Jobs, Better Pay Act 2022 elevated the FWC’s role in enforcing employee entitlements in the workplace. Several themes emerge from these changes, including the likelihood that the FWC will be a central player in the relationship between businesses and their employees, with unprecedented powers to arbitrate and determine workplace matters, particularly bargaining disputes. The new reforms allow unions and employees to involve the FWC more in enterprise bargaining.

The Go To Court employment law team can provide further advice on the recent changes to the enterprise bargaining process. Please contact our solicitors today on 1300 636 846 for any legal assistance.