The potential impact of the Fair Work Amendment (Secure Jobs,Better Pay) Act 2022 on collective bargaining in Australia: Reviewing the new multi-employer bargaining provisions and other measures to promote bargaining

Commencing bargaining for single-enterprise agreements

Several high-profile disputes have highlighted the ability of employers to refuse to engage in collective bargaining under the FW Act in the face of employee and union demands to negotiate. These include the Australian Manufacturing Workers Union's efforts to obtain the first enterprise agreements for workers at high-tech production firms like Cochlear and ResMed (see Forsyth and Ellem, 2018). While the Cochlear example centred on the ability of employers to exploit weaknesses in the legislation's good faith bargaining provisions and the absence of any requirement to conclude an agreement, the tactics adopted by ResMed were aimed at never having to negotiate at all. This included various forms of obstruction (including through litigation) to prevent the union from utilising the only mechanism available to compel an employer to commence bargaining: the majority support determination (MSD) process. These provisions enable a union (or other employee bargaining representative) to obtain an MSD from the FWC, requiring a reluctant employer to bargain, where it can be shown that a majority of the relevant employees want to bargain (FW Act, sections 236-237). However, establishing the required majority through a vote or petition of employees can be very challenging, especially in larger workplaces with many thousands of staff. In the absence of an MSD, an employer can simply ignore union demands to negotiate a replacement enterprise agreement once the current one expires.

This dynamic could be seen at play in the higher education sector in 2022, with several institutions refusing to enter into talks initiated by the National Tertiary Education Union (NTEU). The union lifted its pay claim for university agreements from 12% over 3 years to 15% in response to rising inflation (Workplace Express, 2022a). It secured good outcomes at some institutions, in particular the agreement struck at Western Sydney University which included up to two work-from-home days per week for professional staff and a ground-breaking provision enabling casual employees to apply for 150 new full-time equivalent academic roles (Hare and Marin-Guzman, 2022). Elsewhere, the NTEU led industrial action campaigns to progress its bargaining claims: for example, staff at the University of Sydney engaged in repeated strikes from May 2022 (Hare, 2022) which had not resulted in an agreement by year's end. Bargaining did not even start at RMIT University during 2022, with management providing staff a 2% administrative pay increase while the union sent a petition to the Chancellor, Peggy O’Neal AO, urging the immediate commencement of negotiations (NTEU, 2022). This action suggests that the NTEU did not consider it could obtain the evidence of majority support among the university's ∼ 6000 employees needed for an MSD. To address this very type of situation, the SJSP Act inserted a new provision in the FW Act (section 173(2A)) enabling a bargaining representative for a single-enterprise agreement to simply request that an employer bargain for a replacement agreement. Where the request is made within 5 years of the nominal expiry date of the agreement to be replaced, the employer must then negotiate, without a union or other bargaining representative any longer requiring an MSD. This change should assist in achieving the government's policy goal of removing unnecessary limits on access to collective bargaining (Parliament of the Commonwealth of Australia, 2022: 134). However, the difficulties discussed above in respect of obtaining a first collective agreement at an enterprise – illustrated by the ResMed and Cochlear disputes – remain (see e.g. Cooper and Ellem, 2012).

Multi-employer bargaining in the single-interest employer bargaining stream

The evolution of fissured business structures such as labour hire and outsourcing has enabled lead firms that ultimately control the cost of labour to distance themselves from having to engage in collective bargaining with unions. ³ This phenomenon can be seen in the Australian aviation sector, where the national carrier Qantas still negotiates with many unions but has increasingly engaged in outsourcing and other strategies to avoid bargaining. Negotiations for new enterprise agreements took place across many areas of Qantas's operations in 2022. These negotiations occurred in the context of the airline seeking to resume domestic and international travel services following the disruption of the COVID-19 pandemic. In May 2021, Qantas had announced a wage freeze of 2% per annum to apply for the first 2 years of any subsequent enterprise agreements, as part of a COVID-19 recovery plan (Workplace Express, 2021a). In January 2022, the airline applied to the FWC for termination of its agreement covering international cabin crew (Workplace Express, 2022b) which ultimately resulted in these workers voting up a new agreement they had previously rejected by a 97% majority (Workplace Express, 2021b). The Flight Attendants’ Association of Australia (FAAA) maintained that workers had little option but to support the new agreement, incorporating the two-year wage freeze and much greater rostering flexibility for the airline, given the termination application would have seen workers forced onto the much lower wages and conditions in the applicable award (Workplace Express, 2022c; see also Raynes and Stanford, 2022). ⁴ In a mid-year update to the market, Qantas indicated that its 19,000 agreement-covered employees would receive $5000 payments subject to eligibility conditions, including entering into new deals with the wage freeze and remaining with the company until mid-2023 (Workplace Express, 2022d; see also Workplace Express, 2022e, noting the airline had already offered employees a retention incentive of ∼ $5000 in share rights). By July, Qantas was the subject of considerable public anger as reports of travel delays, lost baggage, and poor service standards mounted. For unions and some observers, these problems were attributable to the airline having made 9000 staff redundant during the pandemic (Taylor, 2022). ⁵

Disruptions to services were compounded by the threat of, and the taking of, protected industrial action by employees during negotiations for new agreements covering licensed engineers, domestic cabin crew, and baggage handlers employed by outsourced service provider Dnata (Baird, 2022; O'Mallon, 2022; Workplace Express, 2022f). In early September, the TWU called off its planned industrial action after reaching an agreement with Dnata which provided for 17% pay increases over 4 years and pathways to more secure roles for casuals and part-timers (Workplace Express, 2022g). However, the union also criticised the low-cost business model adopted by Qantas through its outsourcing of ground services to Dnata and other providers including Swissport and Menzies, claiming this not only drove down workers’ pay and conditions but also safety standards (Workplace Express, 2022h). Concerns about the impact of outsourcing were also raised by the FAAA, which alleged a new agreement for domestic cabin crew employed by labour hire company Maurice Alexander Management was only voted up under threats that the business would close down without it (Workplace Express, 2022i). Similarly, the Australian and International Pilots Association contended that Qantas forced short-haul pilots into accepting an agreement variation applying existing fatigue management rules to longer flights on new aircraft. Qantas denied any threat of outsourcing was made but admitted that if the pilots had ‘not been able to provide us with the working arrangements needed to get a return on our investment, another entity within the Qantas group that was able to do this would have done the flying’ (Workplace Express, 2022j).

The extensive use of outsourcing arrangements across its supply chain made Qantas a ‘textbook case’ for the multi-employer bargaining reforms proposed by the Labor Government in the wake of the Jobs and Skills Summit. This was the view articulated by former TWU national secretary and Labor Senator Tony Sheldon in mid-September, adding that Qantas CEO Alan Joyce had ‘figured out that if you don’t want to pay your workers the agreed-upon rate in your enterprise agreement, you can just outsource the work or, better yet, you set up your own shelf company to undercut your existing staff’ (Workplace Express, 2022k). The TWU argued before the Senate Committee inquiry into the SJBP Bill that a solution was needed to the ‘flawed [FW Act] system’ which had ‘allowed the airline to transfer roughly half of its directly hired workforce onto lower paying, insecure jobs’ at 17 of its own subsidiaries and 21 external labour hire companies (The Senate, 2022: 30). The problem at the core of these concerns was that the FW Act generally only enabled employees and unions to obtain an enterprise agreement with the direct employer of a group of employees. In the Qantas scenario, unions instead wanted the ability to bargain for one agreement covering any of the multiple businesses across which the workforce has been splintered – and to compel the airline to be a party to those negotiations as the lead firm ultimately determining labour costs across its operations.

The SJBP Act did expand the capacity of unions to bargain for an agreement covering two or more employers through a new Single Interest Employer Bargaining stream. However, there are many conditions and limitations on access to this stream that are likely to limit its practical effectiveness. To obtain an authorisation from the FWC to bargain for a ‘single interest employer agreement’, a union or other employee bargaining representative must apply under section 248 of the FW Act and must meet the many requirements set out in section 249. These include, in circumstances where the relevant employers have not consented to the authorisation, demonstrating that a majority of employees at each of those employers want to bargain for the proposed multi-employer agreement; and that none of several exclusions applies (e.g. employers with < 20 employees are excluded, as are employers already covered by a single-enterprise agreement that has not passed its nominal expiry date). In addition, it must be shown that the various employers who would be covered by the authorisation to bargain for the proposed multi-employer agreement have clearly identifiable common interests considering factors such as their location, any relevant regulatory regime under which they operate, and the nature of the various enterprises (including their employment conditions).

This common interest’s test (which also includes a public interest test) is the provision most likely to hamper the ability of aviation unions to utilise the Single Interest Employer Bargaining stream to contest Qantas-style fissuring. For example, following the airline's outsourcing of ground services, there are multiple labour hire providers employing the workforce, across various locations around Australia, with differing employment conditions (although all serving the overall objective of reducing labour costs for the airline). It is not therefore clear that the common interests test would be met, although a union's ability to bring Qantas into one agreement along with these external companies may be bolstered by the airline having retained some direct employees performing the same types of work at some Australian ports (rather than fully outsourcing it). Whether the SJBP Act delivers on its promise of opening up access to multi-employer bargaining will have to await the outcome of any union test cases brought after these provisions commenced on 6 June 2023.

Agreement-making – small cohort voting and ‘Zombie’ agreements

One of the core assumptions underpinning the collective bargaining provisions of the FW Act is that collective bargaining allows for agreements that leave workers better off than they would be under the award safety net, a requirement reflected in the ‘Better Off Overall Test’ for agreement approvals. In this way, agreement-making is concerned with boosting workers’ wages and conditions, while enabling employers to have the benefit of greater flexibility and productivity. However, in practice, aspects of the FW Act agreement-making regime have facilitated wage suppression, with the conditions of some workers falling substantially below the award safety net. Agreements have been made under the FW Act that in reality have not left workers better off overall, and a considerable number of agreements that pre-date the FW Act (or were made in the transition to the FW Act) have been allowed to continue in operation as the so-called ‘Zombie’ agreements.

When the FW Act was enacted, the continued operation of most pre-FW Act agreements (both at Federal and State levels) was facilitated through transitional legislation accompanying the Act (see Stewart, 2009: 45). One such agreement was the Staff Services Pty Ltd Certified Agreement 2000 (‘Staff Services Agreement’), certified by the Australian Industrial Relations Commission and made between Staff Services Pty Ltd and its employees in late 1999. Staff Services Pty Ltd was part of the Mantle Group of companies which operate hospitality venues in Brisbane and Sydney. ⁶ When Staff Services Pty Ltd ceased to exist, the agreement transferred to another company in the Mantle group and in the intervening decades covered hundreds of workers. Employees covered by the agreement received base rates of pay in accordance with the relevant award as the wage rates in the agreement had long since fallen below the safety net. ⁷ However, the main effect of the agreement was to remove the liability on the employer to pay penalty rates for work that is common in hospitality: work at unsociable hours, weekends or public holidays, and overtime.

In late December 2020, an employee covered by the Staff Services Agreement brought an application to the FWC seeking to terminate the agreement, an outcome which would have the effect of restoring the penalty rates otherwise payable under the award. While the application ultimately failed on jurisdictional grounds, it alerted Mantle Group to the possibility that the agreement could be terminated. In April 2021, four managerial employees accepted transfers of their employment to another Mantle group company, Hot Wok Food Makers Pty Ltd (Hot Wok). Hot Wok then made an agreement with those four employees and a fifth casual employee and obtained FWC approval of the agreement. The Hot Wok agreement included rates of pay that were marginally above award rates, provided no pay rises over the life of the agreement, and allowed workers voluntarily to ‘request’ to work overtime or shifts without being paid penalty rates. Hot Wok then sought and obtained an order from the FWC that employees covered by the Staff Services agreement whose employment transferred to Hot Wok would be covered by the Hot Wok agreement. ⁸ Over 2021–2022, those persons offered work at Hot Wok were expected to execute a ‘voluntary hours’ agreement before commencing employment, which had the effect that they would not be paid overtime or penalty rates. The machinations in this saga were revealed in a series of cases before the FWC considering termination of the Staff Services Agreement and challenging approval of the Hot Wok agreement.

Multiple attempts were made by employees to terminate the Staff Services Agreement, with one application finally being successful in May 2022 (Application by Henry Thom [2022] FWCA 1543). In this decision, Commissioner Hunt noted (ibid at [32–33; 42]) that ‘For more than two decades, the Employer has had the benefit to it, and to it only in depriving employees of payment of penalty rates for work performed at night, on weekends and on public holidays’, the effect of which, on the employees concerned being ‘staggering’, and a ‘disgrace’ and involving losses for some employees of up to $26 per hour.

The legally sanctioned removal of penalty rates from workers subsequently engaged by Hot Wok was ended when approval of the Hot Wok agreement was overturned by a Full Bench of the FWC in January 2023 (United Workers’ Union v Hot Wok Food Makers [2023] FWCFB 4). By this time, the agreement had been in operation for 18 months and its wage rates had already fallen below the award. The Full Bench found that the agreement should not have been approved because it failed the Better Off Overall Test (BOOT), and because four of the five employees requested to approve it were managerial employees who were not covered by it. However, the problems with the approval of the agreement were only revealed through the persistence of the United Workers’ Union who funded expensive litigation in the face of repeated efforts by Mantle to preserve the operation of the agreement, including action in the Federal Court.

The Staff Services Agreement is an example of a ‘Zombie’ agreement, with data published by the FWC suggesting that around 104,000 pre-FW Act agreements remained in operation as of April 2023 (FWC, 2023). While it is unclear how many of these agreements impact workers’ wages and conditions as detrimentally as the Staff Services Agreement, it is likely that a good proportion of them have that effect. Under the changes introduced by the SJBP Act, all pre-FW Act agreements remaining in operation on 6 December 2023 will automatically terminate at that date, unless their operation has been extended by the FWC. The grounds for extension of the operation of an agreement require that covered employees be better off under that agreement than they would be under the relevant award (ensuring workers are not disadvantaged by the change), and all such agreements must cease operation by 6 December 2027 at the latest. ⁹

While the termination of Zombie agreements will resolve the problem of substandard agreements which predate the FW Act, the problem with agreements like the Hot Wok Agreement that should not have been approved either because they failed the BOOT (see e.g. Hart v Coles Supermarkets Australia Pty Ltd [2015] FWCFB 7090); and/or were approved by a small group of employees with no interest in the terms of the agreement (see e.g. Thiess Pty Ltd v Construction, Forestry, Mining and Energy Union [2018] FWCFB 2505; Chaudhuri and Sarina, 2018) is more challenging. The changes effected by the SJBP Act to the agreement-making provisions of the FW Act assist in two ways.

First, the SJBP Act shifts most of the rules for seeking employee approval of an agreement out of the FW Act and into a legislative instrument created by the FWC called the ‘statement of principles on genuine agreement’. ¹⁰ The instrument provides useful guidance for employers concerning the process of making an agreement, and for the first time requires the ballot of employees to approve a proposed agreement to be conducted as a secret ballot, rather than permitting show of hands or email balloting which had previously been the case.

Second, the SJBP Act introduces the requirement that the FWC cannot be satisfied that the employees requested to approve the agreement have genuinely agreed to it unless those employees have a sufficient interest in the agreement; and are sufficiently representative of the employees that the agreement is expressed to cover (s 188(2)). This change will ensure that at the approval stage, the FWC undertakes an appropriate inquiry to ensure that the employees who vote on the agreement are employees whose pay and conditions will be governed by the agreement and that the employees represent the range of different employee classifications covered by the agreement. These provisions should combine to prevent approval of agreements created between employers and small groups of unrepresentative workers. However, the changes are prospective in nature, meaning that agreements which have already been approved by the FWC since 2009 despite failings in this respect will remain in operation unless challenged by a union or an employee with enough time and financial resources.

Intractable disputes

Two long-running industrial disputes that played out across 2022 demonstrated how the industrial power of unions had been restricted under the FW Act through provisions which made it difficult to take genuinely impactful industrial action (see McCrystal, 2019), and the failure of the FW Act to provide an alternative for the resolution of disputes which were essentially intractable.

By November 2022, negotiations with three unions (CFMMEU, AMOU and AIMPE) for a replacement agreement at Svitzer to cover its tugboat operations at 17 ports had been underway for 3 years and negotiators remained at loggerheads. Svitzer was seeking changes to provisions governing the engagement and deployment of staff, while the unions sought to resist the casualisation of the workforce (Workplace Express, 2022l). The dispute had involved hundreds of notified instances of union-protected industrial action, with the unions deploying a strategy of intense but low-level industrial action designed to avoid FWC intervention after 48 h stoppages had been suspended by the FWC in February (Svitzer Australia Pty Ltd v AMOU [2022] FWC 493). Svitzer deployed two strategies in response to the union action.

First, in early 2022 Svitzer initiated proceedings in the FWC seeking an order terminating the existing enterprise agreement which had expired in 2019 (Workplace Express, 2022m). Since the 2015 decisions of the FWC and the Federal Court in the Aurizon litigation (Re Aurizon Operations Ltd (2015) 249 IR 55, affirmed in CEPU v Aurizon Operations Ltd (2015) 233 FCR 301) held that the existence of active bargaining for a replacement agreement was no impediment to termination of the existing agreement, employer threats to seek termination of agreements had emerged as a bargaining tactic. This is because agreement termination removes the floor of pre-negotiated pay and conditions in the existing enterprise agreement, leaving workers negotiating by reference only to the award safety net, a significant advantage for employers (see McCrystal, 2018; Pennington, 2020). In an address to the Australian Industry Group on 8 August 2022, Minister Burke referred to the termination provisions as ‘not fit for purpose’ and Svitzer's termination application as a ‘rort’ (Burke, 2022b).

Second, using the Qantas playbook from its global shutdown in 2011 (see Forsyth and Stewart, 2013), in November Svitzer notified a lockout of employees, hoping to trigger FWC intervention leading to arbitration of the dispute. The effect of the lockout would be to shut down its port operations in five Australian States, causing massive disruption to global supply chains in the lead-up to Christmas. The FWC did intervene, but only suspended industrial action at Svitzer for six months, sending the parties back to the bargaining table (Re Svitzer Australia Pty Ltd [2022] FWCFB 209). Commenting on the proposed lockout on 2GB radio, Minister Burke observed that he wanted ‘the umpire to be able to make decisions on protracted disputes’; and referred to the need for intervention in ‘long protracted’ matters (Karp, 2022b).

In a similar vein, a year-long dispute at Sydney Trains also involved extensive industrial action, including an employer lockout and threats of agreement termination. Lengthy negotiations for a replacement agreement had involved months of low-level industrial action by RTBU members who were attempting to avoid a repeat of 2018 when employee-protected action had been suspended due to the economic threat it posed to the Sydney economy (Sydney Trains; NSW Trains [2018] FWC 632). While simultaneously seeking FWC orders to suspend or terminate employee-protected action, in February 2022 management of Sydney Trains effectively locked out their workforce, shutting down the network for 24 h alleging safety concerns arising out of employee industrial action (McCrystal, 2022). This failed to resolve the dispute which dragged on across 2022 with train services routinely impacted by low-level RTBU action, and included a failed bid in the FWC by Sydney Trains and the State of NSW to terminate the action in July 2022 (The State of NSW & Ors v RTBU [2022] FWC 1746). Matters escalated further the day before the Federal Government's Jobs and Skills Summit, when in a Press Conference NSW Premier Dominic Perrottet threatened to ‘tear up’ the existing enterprise agreement if a deal was not done that day (Rabe and O'Sullivan, 2022). Shortly thereafter, Minister Burke wrote to the FWC raising his concerns about the use of agreement termination to ‘tip the scales’ in bargaining and highlighting the intention of the Federal Government to ‘crack down on the practice’ (Rabe et al., 2022).

Given the high-profile context of these disputes, and the interventions of Minister Burke, it was no surprise that the SJPB Act included provisions dealing with agreement termination and intractable disputes. The SJBP Act introduced a new provision governing unilateral applications to terminate enterprise agreements. Section 226 now allows for termination of an agreement other than by consent only where no employees are covered by the agreement; the employees would be better off if the agreement were terminated; or where the continued operation of the agreement poses a significant threat to the viability of the employer's business, and the termination would be likely to reduce the potential for employees covered by the agreement to lose their job. The effect of this change is effectively to remove agreement termination as a credible threat in collective bargaining, and to ensure that agreement status quo is preserved during negotiations unless that would otherwise threaten the ongoing business viability of the employer.

One element common to the Svitzer and Sydney Trains disputes was the use of low-level industrial action campaigns by unions which were designed to remain below the statutory threshold for FWC intervention. This approach reflects concern from these unions that arbitration by the FWC might not deliver favourable outcomes. It also illustrates how some unions may avoid taking more impactful industrial action that could potentially have a greater impact at the bargaining table to avoid arbitration and losing control of the outcome of bargaining. The employers in the disputes, by contrast, actively sought FWC intervention either by trying to provoke the termination of their own industrial action (Svitzer) or seeking to have the union's action terminated (Sydney Trains). This contrasts starkly with more traditional narratives suggesting employers avoid arbitration and unions prefer it.

The solution to the intractable dispute problem could have involved removing the restrictions and limitations on protected industrial action, making it easier for workers to exercise collective power through enhanced recognition and protection of the right to strike. However, instead, the SJBP Act enhanced access to arbitration along with encouragement for the earlier resolution of disputes.

The SJBP Act introduced a new compulsory conciliation requirement as a prerequisite to protected industrial action, adding to the already complex and voluminous restrictions on the right to strike. The SJBP Act also introduced intractable dispute determinations, which provide access to arbitration for those disputes deemed to be incapable of resolution. The intractable dispute provision empowers the FWC to make an intractable bargaining declaration (leading to arbitration of the matters remaining in dispute) provided that 9 months have passed since the letter of the passing of the nominal expiry date of an existing agreement, or the commencement of bargaining. The FWC must already have been involved with the dispute through mediation or conciliation under s 240; there must be no reasonable prospect of an agreement being reached without the declaration; and it must be reasonable to make the declaration in the circumstances and taking into account the views of all BRs (FW Act, section 235). Significantly, the provision is not linked to industrial action, allowing arbitration for a wider range of disputes and without needing to show fault on either side or the presence of otherwise ‘damaging’ protected industrial action.

In introducing the intractable dispute determination provisions, the Labor Government has firmly come down on the side of arbitration to resolve long-running disputes, rejecting enhanced self-determination for workers through proper recognition of the right of workers to strike. In the context where strike action by workers remains politically sensitive, the choice is not surprising. How the intractable dispute provisions will impact bargaining campaigns will depend on how parties view the likely outcome of arbitration, and the readiness of the FWC to make determinations. It seems clear from union conduct in both the Svitzer and Sydney Trains disputes that some unions do not believe that arbitration will favour their positions. The impact on this of efforts by Minister Burke to ‘rebalance’ the FWC after a long period of Coalition appointments perceived to be overwhelmingly pro-employer also remains to be seen (Workplace Express, 2022n).