In brief

  • Greenfields agreements can offer some key benefits for businesses looking to start up new projects or operations. However, the requirement of obtaining union agreement before employing any employees who will be covered by the agreement can make these benefits difficult to realise. Given the often time sensitive nature of greenfields negotiations, unions can have maximum leverage. This issue has been recognised by the Federal Government who has sought to at least partly address this issue in the proposed Fair Work Amendment Bill 2014 (Cth) (FWA Bill). 
  • To address this ‘union leverage’ problem, some employers have, over time, moved away from greenfields project agreements and pursued alternative strategies (such as ‘Start-up EAs’) that protect against unprotected industrial action and provide sustainable employment conditions. However, several Full Bench decisions in the Fair Work Commission (FWC) had cast serious doubt on the ability of employers to pursue these options.
  • In a positive development for employers, two key FWC Full Bench authorities in this space have now been overturned. The Full Court of the Federal Court of Australia has, in effect, swept away the approval hurdles articulated in the FWC Full Bench decisions relating to ‘Start-Up EAs’. Accordingly, employers should continue to assess the utility and role of a ‘Start-Up EA’ in deciding upon their preferred form of industrial regulation for new projects and operations.

Greenfields agreements

Greenfields agreements provide an avenue for employers to secure terms and conditions of employment in advance of any people being employed at a new business, activity, project or undertaking. They are particularly popular in the construction industry. The key benefit for employers here is that a greenfields agreement will provide both:

  • certainty in terms of the terms and conditions that apply to an employer’s future workforce (which greatly assists with any requisite tendering process if the deal is done in time), and
  • security from protected industrial action for up to 4 years (again, particularly valuable during the early stages of a project).

In some industries, having this level of certainty and security is a key requirement for tendering for new contracts.

Many employers that have sought to realise these benefits have however been frustrated by the greenfields agreement process, and have found it too difficult to negotiate sustainable greenfields agreements with a relevant union. In some cases, time is of the essence and the ‘window of opportunity’ is not large enough to accommodate for any delay in finalising agreements. Therefore, to obtain the agreement employers need to concede to unwarranted demands resulting in ‘blow-outs’ on terms and conditions, and therefore, overall project costs.

This issue has been recognised by the Federal Government in the most recent FWA Bill where a number of changes have been proposed to the making of greenfields agreements. These include:

  • extending good faith bargaining requirements to the negotiation of greenfields agreements,
  • providing an optional 3 month negotiation timeframe for parties to reach agreement, and
  • empowering the FWC to approve the employer’s version of the agreement if agreement cannot be reached in the 3 month negotiation timeframe (provided certain requirements have been met).

This context is relevant to the recent Full Court of the Federal Court decisions in MI&E Holdings Pty Ltd v CEPU1 (MI&E Holdings case) and CFMEU v John Holland Pty Ltd2(John Holland case).

Full Court decisions

In both the MI&E Holdings and John Holland cases, the relevant employers had pursued an alternative strategy for achieving the level of certainty and security that is available under the greenfields option, that is, the ‘Start-Up EA’ option. This approach involved, for example, engaging a small number of employees and negotiating an agreement with those employees that will eventually cover many more employees (once the project gets off the ground).

The Full Bench of the FWC had previously cast serious doubt as to whether these kinds of arrangements could satisfy approval requirements under the Fair Work Act 2009 (Cth) (FW Act)– in particular, the requirement that the group of employees covered by the agreement be ‘fairly chosen’. However the Full Court of the Federal Court (constituted by Besanko, Buchanan and Barker JJ) confirmed that the FWC Full Benches had misapplied this statutory requirement.

Navigating the legal minefield

Whilst these decisions have given an apparent ‘green light’ to the ‘Start-Up EA’ approach, it is certainly not a strategy for the inexperienced or under prepared. Despite the Full Court decisions, this strategic option will continue to be heavily scrutinised and unions are likely to continue to look for other opportunities to oppose approvals.

Employers wishing to pursue a ‘Start-Up EA’ will need to carefully plan to ensure that all of the FW Act procedural requirements are satisfied and that the legal risks of this approach are effectively managed. It will be particularly important for employers to keep an eye on how the FWC approaches these issues post the John Holland and MI&E Holdings decisions.