Changes to Enterprise Bargaining – Genuine Agreement Requirement

This is the third article in Gadens’ series regarding the key workplace changes that commence from 6 June 2023, the article below takes a deep dive into changes to the enterprise bargaining process outlined in our previous piece.

Employers will encounter changes to the enterprise bargaining process which started on 6 June 2023, which employers may find challenging to navigate. This article explains the changes and guides employers to meet the requirement in sections 180 and 188 of the Fair Work Act 2009 (Cth) (FW Act) for an enterprise agreement to have ‘been genuinely agreed to by the employees covered by the agreement’.

The following background contextualises the changes:

• Before an enterprise agreement can commence, it must receive approval from the Fair Work Commission (FWC).
• The FW Act establishes specific requirements that the FWC must be satisfied of before it can approve an agreement, one of which requires that an enterprise agreement must have been ‘genuinely agreed’ by the employees covered by the agreement.[1]
• On 26 March 2023, the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) introduced a principles-based approach to determine the genuine agreement requirement.[2]
• On 12 May 2023, the FWC issued its Statement of Principles on Genuine Agreement in Enterprise Bargaining (Statement of Principles) following consultation with unions, industry regulators and legal bodies in February 2023.[3] This document offers guidance to employers on how they can meet the genuine agreement requirements.

Requirement 1: Informing employees of their right to be represented

Step 1: Issue a Notice of Employee Representational Rights

Employees have a right to be represented throughout the bargaining process, and it is largely the responsibility of employers to ensure that employees are aware of this right. This obligation can be most easily satisfied by providing employees with a Notice of Employee Representational Rights (NERR), a concise one-page document that should be distributed to all employees to be covered by the relevant agreement within 14 days of the commencement of the bargaining process.

Step 2: Do not mislead employees about their rights

Broadly speaking, employers must not mislead employees regarding their rights to be represented in the bargaining process. Employers must also not mislead employees about the role of an employee organisation (i.e. union) as their default bargaining representative, or another representative of their choice. Employers can ‘mislead’ through words, actions or otherwise, so it is important that employers act honestly in their communications throughout the bargaining process. However, under the Good Faith Bargaining provisions, employers are not required to disclose information that is confidential or commercially sensitive.

Requirement 2: Providing a reasonable opportunity to consider

Step 3: Give employees a full copy of the agreement at least 7 calendar days before voting commences

In order for an agreement to receive approval from the FWC, a majority of employees who cast a valid vote must vote in favour of it. To facilitate a compliant voting process, employers are responsible for providing employees with a complete copy of the agreement, along with any other incorporated materials, at least 7 calendar days prior to the commencement of voting. These materials can be delivered to employees in physical form or transmitted electronically, but in any event, the relevant employees must have a reasonable opportunity to access and read the material for the entire period from the time the material is provided until voting closes. For example, if the employer provided a link to an electronic version of the proposed agreement and supporting documentation, but the link was valid for only a portion of the access period, this could raise a significant issue in satisfying the genuine agreement requirement.

Step 4: Give employees a reasonable opportunity to access and read the material

The Statement of Principles additionally emphasises the importance of providing employees with a ‘reasonable opportunity to access and read the material’ during the access period. While the exact obligation imposed here is not entirely clear, it is advisable to proactively allocate specific time for employees to thoroughly review the materials. By setting aside allocated time for employees to engage with the materials, employers can demonstrate their commitment to facilitating an informed decision-making process. This may be more problematic for workplaces running different shift patterns, as multiple information sessions may be required across different shifts.

Requirement 3: Explaining terms and their effect

Step 5: Explain the enterprise agreement entitlements in writing

Where a replacement agreement is proposed, employers should provide a written explanation highlighting the disparities in entitlements between the proposed agreement and the existing agreement, along with any variations to award provisions when the applicable award has been varied since the existing agreement commenced. This explanatory document must be made readily available to all employees covered by the agreement. While ‘trivial differences’ between the replacement agreement and existing agreement (and award, if applicable) do not need to be explained, it is advisable for employers to disclose all material proposed changes to improve the prospects of approval. Where there it is no existing agreement, employers should provide a written explanation of the entitlements in the proposed agreement in contrast to the relevant underpinning award/s.

Step 6: Provide a reasonable opportunity to attend an oral explanation

Employers are obligated to take ‘all reasonable steps’ to effectively communicate and explain the terms of the agreement to employees. This may include providing an oral explanation of the terms on request. To ensure compliance, employers should afford employees a ‘reasonable opportunity’ to attend an oral explanation. For instance, an employer could take time during a toolbox talk to answer questions employees may have in an open, informal context. It is still advisable for employers to maintain a written record of the explanations provided to employees for documentation purposes.

Requirement 4: Reasonable opportunity to vote

Step 7: Inform employees of the time, place and method of the vote 7 calendar days prior

Employers should inform all covered employees of the time, place and method of the vote at least 7 calendar days prior to the vote. It is recommended to provide this notice in writing, either through physical or electronic means. If a significant number of the employees are represented by a union, another reasonable period of notice may be agreed upon.

Step 8: Provide a fair and reasonable opportunity to cast a vote

It is somewhat unclear as to what constitutes ‘fair and reasonable opportunity’ to cast a vote. At a minimum, it involves voting by secret ballot by ensuring the confidentiality and privacy of each employee’s vote, preventing disclosure or discoverability by the employer or other employees. Moreover, employers should make the voting mechanism easy to understand with clear explanation of the process. By ensuring that the voting process is straightforward and transparently explained, employers can eliminate confusion or ambiguity, and allow employees to make a genuine choice. The FWC recommends that employers appoint ballet agents and scrutineers to oversee the ballot process. This ensures proper practices in counting votes, and maintaining secrecy and control over the voting process.[4]

Other Considerations

Whether the employees have sufficient interest in the agreement

The FWC’s approach ensures that employees have a ‘sufficient interest’ in the agreement, leading to actual improvements in their entitlements. In other words, the agreement should not set entitlements below what employees are already receiving, but rather enhance their previous entitlements. Practically speaking, employees are less likely to vote for a proposed agreement that does not improve their entitlements, at least in a monetary sense.

Whether the employees who voted are sufficiently representative

The group of employees participating in the vote should encompass a comprehensive representation of the classifications, types of employment, geographic locations, industries, and occupations covered by the agreement. This inclusive approach ensures that the agreement genuinely represents the range of employees it is intended to cover; implementing a safeguard against the situation where a small group of employees decides on an agreement that is subsequently imposed on a larger group.

Support of employee organisations acting as bargaining representatives

The Statement of Principles makes it clear that the FWC will take the views of any representative union into account to approve a proposed enterprise agreement by affording those views ‘significant weight’. In particular, an agreement that has the support of the relevant union and the union does not express any concerns about genuine agreement it is more likely be approved. This would generally involve the union (or other bargaining representatives) filing a declaration in support of the proposed agreement.

Navigating the enterprise bargaining process can be a significant burden for employers. Failure to comply with requirements imposed by the FW Act could prevent an enterprise agreement from being approved by the FWC. Gadens has extensive experience helping employers navigate the enterprise bargaining process. If you require advice on the above changes, we are well positioned to provide you with tailored industrial relations advice.

To enquire as to how Gadens may be able to assist, please contact Jonathon Hadley in Brisbane by email jonathon.hadley@gadens.com or phone +61 7 3231 1653.

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Authored by:

Jonathon Hadley, Partner
Liam Elliott, Paralegal

[1] Fair Work Act 2009 (Cth) sections 180, 188.

[2] Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) section 188B.

[3] Fair Work (Statement of Principles on Genuine Agreement) Instrument 2023. Available at: <https://www.fwc.gov.au/documents/consultation/fair-work-statement-of-principles-on-genuine-agreement-instrument-2023-05-12.pdf>.

[4] Fair Work Commission, Industrial Action Bench Book: Scrutiny of the Ballet (Web Page, 2023) <https://www.fwc.gov.au/scrutiny-ballot>.