Employers are finding it harder to successfully negotiate changes to long term (and often expensive) benefits provided by enterprise agreements. In situations where economic circumstances dictate a need to reduce labour costs, cutting or removing long term benefits are often the focus for employers when negotiating enterprise agreements. Similarly the protection of long standing and often hard fought benefits are the focus of unions and employees alike in negotiation.
The Fair Work Act (Cth) 2009 (Act) regulates the bargaining process and outcome in Australia to assist employers and employees to successfully negotiate terms and conditions that are specific to their workplace. The Act imposes obligations on all parties to the bargaining process to bargain in good faith, and sets out a process by which agreements are agreed and approved. The Act also sets out process for addressing and resolving disputes that arise during bargaining. Clear guidelines have been established to enable parties to use industrial action as a tool during the bargaining process.
Changing circumstances have seen a shift in what employers focus on during the negotiation process. Greater flexibility is required to enable business to react more swiftly to changing market needs and impacts. The need for greater flexibility extends also to labour and labour costs. This flexibility is commonly addressed by seeking to remove those terms and conditions contained in enterprise agreements that restrict the employer's ability to change as required. Such terms include for example voluntary redundancy and casual/fixed term conversion to permanent employment. These benefits are often long standing and hard fought.
It is not uncommon for parties to negotiate for an extended period of time, with no outcome. Whilst an agreement remains in force, effectively providing a safety net for employees, there is limited impetus to encourage movement from the current terms and conditions. This is particularly so where employees are being asked to agree to lower wage increases or a reduction in other benefits. A stalemate can ensue.
To break the stalemate employers are increasingly applying to the Fair Work Commission to terminate the relevant agreement. This has the effect of removing the safety net, thereby changing the context of the bargaining. In the absence of the safety net provided by the old agreement, terms and conditions are regulated by the relevant Modern Award and are generally far less generous than an enterprise agreement.
The process to terminate an enterprise agreement is not necessarily straightforward. Termination is a tool that can only be used in specific circumstances; where there is evidence that bargaining has stalled or will fail and where the employer can prove that it needs to make the changes that have stalled the bargaining. Prior to terminating an enterprise agreement the Fair Work Commission must consider a range of factors including the impact that the termination of the agreement will have on the parties, the impact on bargaining and the public interest. It can be a costly and time consuming process.
Despite the difficulties associated with terminating an agreement, employers need to be aware of the benefits that the termination of an enterprise agreement can give them during bargaining. Most importantly, the termination of the agreement will have an immediate impact on the bargaining process and can give employers the advantage.