A recent Full Federal Court decision relating to the termination of enterprise agreements has increased options available to employers involved in protracted bargaining negotiations.

On 3 September 2015, the Full Federal Court upheld a decision by a Full Bench of the Fair Work Commission (Commission) to terminate 12 enterprise agreements (Agreements), under s 225 of the Fair Work Act 2009 (FW Act): Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Aurizon Operations Ltd [2015] FCAFC 126.

This decision opens a new door for employers involved in drawn out enterprise bargaining. Employers may seek termination of an enterprise agreement that has passed its nominal expiry date, thus reverting employees’ conditions to (likely less favourable) terms of the relevant Award and offering the employer a stronger position at the bargaining table.

BACKGROUND

Aurizon was previously known as QR National Limited, and was owned by the Queensland Government before being privatised. As a condition of the privatisation, the Queensland Government required QR National Limited to guarantee terms and conditions of employment.

Aurizon considered that many terms of the Agreements were restrictive and inefficient, and placed it at a significant disadvantage against its competitors. These terms included no forced redundancies, free rail travel for employees and their families, restrictions on rostering employees and limitations on implementing drug and alcohol testing.

Bargaining for new agreements commenced before the nominal expiry date of 31 December 2013, but was unsuccessful. On 12 May 2014, Aurizon filed its application to terminate the Agreements under s 225 of the FW Act.

THE COMMISSION’S DECISION

The Commission found it was not against the public interest to terminate the Agreements, rejecting the approach taken in previous Commission decisions (including Re Tahmoor Coal Pty Ltd (2010) 204 IR 243), finding instead that:

  • there was no basis to conclude that allowing an agreement to continue operation past its nominal expiry date would more effectively promote the objectives of the FW Act (such as bargaining in good faith) than terminating that enterprise agreement
  • the termination of an enterprise agreement that has passed its nominal expiry date and bargaining in good faith are not inherently inconsistent concepts – depending on the circumstances, an enterprise agreement may not deliver any productivity benefits and it might be the case that terminating the enterprise agreement better supports good faith bargaining and the delivery of productivity benefits.

The Commission also emphasised that while the termination of an enterprise agreement would alter the bargaining positions of the parties involved, collective bargaining would remain open to them and be subject to the good faith requirements in the FW Act.

While the Commission noted that the termination of the Agreements would result in a reduction of employees’ terms and conditions, and that this was not an ‘insignificant matter’, ultimately, it could not be expected that the Agreements would continue ‘in perpetuity’ after the Agreements had passed their nominal expiry date.

THE FULL FEDERAL COURT DECISION

On appeal, the unions submitted that the Commission had made jurisdictional errors in approving the termination of the Agreements, in particular by misconceiving whether it would be in the public interest to do so. A second ground of appeal related to whether the Commission erred in failing to take into consideration the effect that terminating the Agreements would have on undertakings provided by Aurizon under the Queensland Competition Act 1997 (QC Act).

However, the Full Federal Court agreed with the Commission’s decision and dismissed the unions’ appeal, finding that:

  • there is no indication in the FW Act that the mere continual existence of a previously negotiated enterprise agreement of itself promotes collective bargaining, and hence should continue to operate during bargaining
  • it was ‘most unlikely’ that there should be a ‘predisposition’ against terminating an enterprise agreement when collective bargaining is taking place.

Regarding the second ground of appeal, the Full Federal Court found that the Commission was not bound to take into account the effect that terminating the Agreements would have on Aurizon’s undertakings under the QC Act.

IMPLICATIONS FOR EMPLOYERS

Employers have traditionally assumed that it is extremely difficult to unilaterally obtain an order from the Commission to terminate an enterprise agreement that had passed its nominal expiry date, in circumstances where termination would provide the employer with a stronger position during bargaining negotiations for a new agreement.

This decision is quite novel, given the peculiar facts of the privatisation, the ‘legacy’ provisions under the existing Agreements and the limited nature of the unions’ appeal.

However, the Full Federal Court’s decision has confirmed it is not a requirement in the public interest that bargaining for a new agreement should occur within the context of an existing and nominally expired enterprise agreement.  Unless the Full Federal Court’s decision is successfully appealed to the High Court, it can be expected that employers will consider such applications more often during protracted bargaining disputes, as a way of leveraging a favourable outcome.