A Full Bench of the Fair Work Commission (Commission) ordered that 12 expired enterprise agreements covering three companies forming part of the Aurizon group of companies and its employees be terminated, even though bargaining for replacement enterprise agreements was underway.

Background

In April 2013, Aurizon commenced negotiations with a number of unions for new enterprise agreements. The nominal expiry date for the enterprise agreements that were in place at that time was 31 December 2013.

During the bargaining process, Aurizon had been seeking the removal of a number of terms which it claimed were overly onerous and uncompetitive, for example:

  • no forced redundancies;
  • free or discounted rail travel for employees, dependents and partners;
  • a requirement to advertise most roles internally;
  • limited capacity to conduct drug and alcohol testing;
  • inconsistent entitlements across the workforce; and
  • inflexible rostering arrangements.

These terms were the legacy of the privatization of QR National in 2010 (which  later became Aurizon). At the time of the privatization, the Queensland Government guaranteed employees’ terms and conditions of employment in enterprise agreements for the life of those agreements and provided employment guarantees for two additional years. The two year extension of the terms and conditions had ended by the time that the enterprise agreements passed their nominal expiry date.

During bargaining, the unions refused to agree to the removal of the legacy terms and by the time of the hearing of Aurizon’s application to terminate the existing enterprise agreements, Aurizon and the unions had reached a bargaining stalemate.

Decision

The Full Bench of the Commission held that the expired enterprise agreements should be terminated.

Under Section 226 of Fair Work Act 2009 (Cth) (FW Act) the Commission is required to terminate an expired enterprise agreement if it:

  • is satisfied that it is not contrary to the public interest to do so; and
  • considers that it is appropriate to terminate the agreement taking into account all the circumstances, including:
    • the views of the employees, employer and unions covered by the agreement; and
    • the circumstances of the employees, the employer and unions covered by the agreement, including the likely effect that the termination will have on each of them.

In considering whether the expired enterprise agreements could be terminated under the FW Act, the Full Bench observed that there is no basis for concluding that the continuing operation of an expired enterprise agreement will be any more effective in promoting the objects of the FW Act, ie in promoting good faith bargaining, than if the agreement was terminated. In fact, the Commission considered that continuing the operation of an expired enterprise agreement may impede the objects of the FW Act rather than promote good faith bargaining.

Was termination of the expired enterprise agreements contrary to the public interest?

After finding that the expired enterprise agreements could be terminated under the FW Act while bargaining for replacement agreements was underway, the Full Bench proceeded to consider whether the termination of the expired enterprise agreements was contrary to the public interest.

The unions submitted that the reduction, or loss of, entitlements as a result of termination of the expired enterprise agreements led to the conclusion that termination was contrary to the public interest. They also submitted that termination would undermine bargaining and deliver a “tremendous advantage to Aurizon in their negotiations because Aurizon would be able to negotiate from a very low base and be very likely to achieve significant advantages…”

The Full Bench acknowledged that while termination of the expired enterprise agreements would disturb the current bargaining positions of the parties, this did not run counter to providing a fair framework for collective bargaining. The unions and the employees would still “have available to them the full arsenal of tools under the [FW] Act to exert legitimate industrial pressure on Aurizon to bargain and to reach agreement.

The Full Bench stated that a significant factor in finding that the termination of the expired enterprise agreements was not contrary to the public interest was the exceptional circumstances in which the expired agreements were made, and the onerous employment guarantees that QR National (now Aurizon) was required to offer.

The Full Bench noted that a number of the provisions which Aurizon was seeking to remove or vary were not commonly found in enterprise agreements, and that these provisions limited Aurizon’s ability to make changes to its business in response to what was a competitive market environment, particularly in relation to managing its labour resource needs.

Was it appropriate to terminate the expired enterprise agreements in the circumstances?

The Full Bench went on to consider the wider circumstances in the matter, particularly the views of employees covered by the expired enterprise agreements and Aurizon, the circumstances of the parties and the impact that termination would have on each of them.

The Full Bench noted that the unions and a substantial number of employees did not support the termination of the expired enterprise agreements and that the termination would result in a diminution of the terms and conditions of employment that many employees enjoyed. Nonetheless, the Full Bench considered undertakings given by Aurizon to the employees, which in effect preserved core terms and conditions of employment applicable to employees, including wages and allowances. The Full Bench considered that the undertakings went some way to assuaging the concerns that employees and unions had regarding a loss of entitlements. Furthermore, the Full Bench considered that even after the termination of the expired enterprise agreements, “[b]argaining for new agreements will continue. Protected action would still be available. The assistance of the Commission would still be available.

The Full Bench was also persuaded by its consideration of the peculiar history arising from the privatisation of Aurizon and the “work practices that seem… to be clearly inefficient and out of step with the needs of a flexible and productive enterprise that can adopt to changing economic and competitive environments.”

The Full Bench held that “…the economic imperative in such a situation is for employers to look for improvements and efficiencies that can be implemented and which do not impose unfairness on employees.” On this basis, the Full Bench held that, ultimately, it would be in the interests of employees as well as Aurizon if the business could enhance its competitive position and compete more effectively for new market opportunities.

In all of the circumstances, the Full Bench was satisfied that it was appropriate to terminate the expired enterprise agreements.

Bottom line for employers

  • This is a significant decision which provides clear authority that enterprise agreements that have passed their nominal expiry date may be terminated regardless of whether bargaining for new agreements is underway.
  • While this may be seen as a “win” for employers who find themselves hamstrung during negotiations that extend past the nominal expiry date of an existing enterprise agreement, it is important to appreciate that there are significant threshold questions when terminating an agreement. The termination must not be contrary to the public interest and appropriate in the circumstances.
  • It will be easier for an employer to successfully apply to terminate an expired enterprise agreement without the consent of employees and unions party to the agreement in circumstances where the parties covered by the expired agreement will be safeguarded in other ways (eg by insertion of additional entitlements into an employee’s employment contract).

Note

The Rail, Tram and Bus Union appealed this decision. The appeal was heard by the Federal Court on 21 May 2015, with the Court reserving its decision.

Immediately after the hearing, Aurizon gave effect to the Full Bench of the Fair Work Commission’s original decision and terminated the 12 expired enterprise agreements, moving 3,500 employees onto the Rail Industry Award 2010.