In a decision reported as a 'significant win for business', the Full Bench of the Fair Work Commission (FWC) terminated 12 Aurizon (and its related companies') enterprise agreements which had passed their nominal expiry date.  In doing so, the Full Bench has significantly altered the FWC's approach to the termination of expired agreements. While the decision has been welcomed by a number of employers, unions have already lodged an appeal to the Federal Court.

What does this mean?

The decision substantially resets the playing field in relation to the termination of expired enterprise agreements.  The FWC has historically been very reluctant to terminate expired enterprise agreements in any circumstances where that was resisted by employees, particularly where bargaining was still proceeding.  This decision recognises that enterprise agreements are intended to have a limited term, and that as long as negotiating parties have made a reasonable attempt to negotiate a replacement, termination is likely to be an available option.  The decision provides for a more viable termination option for employers constrained by restrictive agreements and stalled negotiations.  However, it is important to note that Aurizon's specific circumstances were integral to its success, particularly the unusual enterprise agreement terms it inherited during privatisation.  An application to overturn the decision has been filed in the Federal Court and it is understood the parties are seeking an urgent hearing.

What was the background?

Aurizon – formerly QR National Limited until privatisation by the Queensland Government in 2010 – is Australia’s largest rail freight operator, with more than 6000 employees around Australia.  During the privatisation process, the Queensland Government required QR National to insert a number of provisions into existing enterprise agreements, including a 'no forced redundancies' clause. Because of the history of the agreements, they also contained a number of other generous entitlements for employees (described as 'legacy' provisions), some of which included:

  1. free rail travel for employees, dependents and partners, even though Aurizon did not operate passenger services (it had been run by QR);
  2. work demarcations that caused employees to be idle for large portions of their shifts;
  3. rostering restrictions which made it difficult to alter shift lengths and start times despite variable rail schedules; and
  4. recruitment limitations which required all vacant positions to be internally advertised before going to the open market.

Aurizon objected to the 'legacy provisions' it inherited from QR National on the basis that they were unusually restrictive and impacted its capacity to compete with its direct competitors.  The 12 agreements nominally expired on 31 December 2013 and negotiations commenced in April 2013. By June 2013, Aurizon filed a bargaining dispute and the FWC facilitated a number of conferences. By March 2014, Deputy President Asbury (who had been assisting in negotiations) issued a statement confirming that the parties were effectively deadlocked.  By May 2014, Aurizon filed an application to terminate the existing agreements.

What was the FWC's approach before Aurizon?

Under section 226 of the Fair Work Act (FW Act), the FWC must terminate an enterprise agreement after its nominal expiry date if the FWC is satisfied that:

  1. it is not contrary to the public interest to do so; and
  2. it is appropriate to terminate the agreement in all the circumstances, including:
    1. the views of the employees, employers and unions covered by it; and
    2. the likely effect termination would have on them.

Before Aurizon, the FWC was reluctant to terminate expired agreements while negotiations for replacement agreements were ongoing because termination would inappropriately alter the status quo of the parties' bargaining power (the Tahmoor Coal decision).

What has the Full Bench decided?

The Full Bench disagreed with the reasoning in Tahmoor Coal, finding that it will not always be inappropriate to terminate an expired enterprise agreement while bargaining is ongoing.

The Full Bench also strongly disagreed with the earlier interpretation the FW Act's objectives. It said that the objects do not indicate that productive workplaces are to be exclusively or primarily achieved by enterprise-level bargaining. According to the Full Bench, the termination of an existing agreement that no longer or never has delivered productivity benefits might better support the productivity objects of the FW Act.

The Full Bench accepted that termination would disturb the current bargaining position. However, it considered that bargaining would continue, complete with the bargaining tools under the FW Act (including the protected industrial action provisions) and the protection of the safety net terms and conditions of employment under relevant modern awards.

Despite opposition from the majority of Aurizon's 6000 employees, the Full Bench decided that it was appropriate to terminate the expired agreements for the following reasons:

  1. despite extensive efforts to reach agreement, bargaining was firmly deadlocked;
  2. some of the restrictive terms of the existing enterprise agreements were made in exceptional circumstances during the privatisation process (and had been intended to come to an end 18 months prior);
  3. many of the work practices under the agreements were 'clearly inefficient and out of step with the needs of a flexible and productive enterprise that can adopt to changing economic and competitive environments';
  4. Aurizon provided undertakings to maintain entitlements (including wages, allowances, redundancy and superannuation rates) for six months after termination.

The Full Bench ordered that the existing enterprise agreements be terminated from 18 May 2015.

Want more information?

A link to the decision is here.