Industrious Conversations: Implications of the expansion of multi-employer bargaining

Stephen Woodbury:

Hello and welcome to Ashurst Legal Outlook and the sixth episode in our new series, bringing you insights into industrial relations developments in Australia from our leading Employment team at Ashurst. My name is Stephen Woodbury and I'm a partner in the Employment team in Sydney. Today we'll be focusing on one of the significant amendments to the Fair Work Act, introduced by the Secure Jobs Better Pay Act, being the single interest employer authorisation bargaining stream, a bit of a mouthful, which we'll also refer to as multi-employer bargaining for simplicity today.

To take us through it, I'm joined today to discuss that topic by Tamara Lutvey, a partner in the Employment team in Brisbane. Hi Tamara, welcome to the show.

Tamara Lutvey:

Thanks so much, Stephen. It's great to be here.

Stephen Woodbury:

So Tamara, can you just start by telling us what brought about this change?

Tamara Lutvey:

Absolutely, and as you mentioned it's all a bit of a mouthful, so we'll try to simplify that for our listeners today. So the introduction of this new stream was a significant amendment that was brought about by the Secure Jobs Better Pay Act, which was said to be aimed at addressing perceived shortcomings in the legal framework related to collective bargaining. It is also said to be generating wage growth.
Now, while there was a single interest stream prior to the introduction of the Act, it was pretty narrow previously and it only applied to franchisees or where there was a ministerial declaration. So the amendments have really significantly widened the ability for employers and for bargaining representatives to make an application for a multi-employer enterprise agreement, which effectively allows two or more employers to be covered by the same agreement.

Now many employers were pretty understandably concerned about how this new bargaining stream would operate, and we'll get to the reasons why that was the case shortly. But the good news is that so far at least, there seems to have been a pretty low level of uptake by unions seeking to pursue multi-employer bargaining.

Stephen Woodbury:

Tamara, just drilling down a bit into that, the authorisations are made through the Fair Work Commission. What exactly does the Fair Work Commission need to consider when it's looking to make a multi-employer bargaining authorisation?

Tamara Lutvey:

There's a few things that the Commission needs to consider before it will make an authorisation. Those criteria are set out in the Act and they include firstly that at least some of the employees proposed to be covered are actually represented by a union. It then needs to consider whether the employers and the unions have had an opportunity to express their views about whether they want to be covered by a single interest bargaining agreement. The next test is whether employers have clearly identifiable common interests, and we'll come back to talk about that shortly, and in making the authorisation, they have to be satisfied that that wouldn't be contrary to the public interest.

Where those two final limbs that I mentioned are met, the Commission must then be further satisfied that the operations and business activities of the employers are reasonably comparable with the other employers that will be the subject of the multi-employer authorisation. In addition to all of that, the application, if it's made by two or more employers, it has to be that they've agreed to bargain together and that none of those employers have been coerced or threatened about having to bargain together. They also mustn't have applied for a different single employer authorisation.

If the application is made by the union, each employer must have either consented to the application or the majority of the employees must want to bargain for the multi-enterprise agreement. There are a few other requirements if there's an application by a union and they include that the employer must have at least 20 employees, the employer must not be awaiting a decision or named in another single interest employer authorisation, they mustn't be covered by an enterprise agreement that hasn't yet passed its nominal term (that's a really important consideration which we'll come back to talk about a bit later), and there must be no written agreement between the employer and the union to bargain for an enterprise agreement.

Stephen Woodbury:

So Tamara just running through all of those criteria, it's a bit exhausting. One of the interesting features of this legislation is that when the Commission comes to consider applications, there are instances where the criteria is deemed to be satisfied from the outset. Is that the case?

Tamara Lutvey:

Yes, that's right. There's actually a rebuttable presumption if you've got more than 50 employees. If the employer has 50 or more employees, that then places the onus on the employer to demonstrate why the requirements shouldn't be satisfied.

Stephen Woodbury:

So I'd imagine many of our listeners within organisations satisfy that rebuttable presumption being employers of 50 or more employees, which leads to a further consideration and interest from everyone, which is whether or not there's been any judicial consideration as to when two or more employers will have a clearly identifiable common interest.

Now we know from the criteria in the Act that matters such as geographical location, regulatory regime, the nature of relevant enterprises and the terms and conditions of employment in those enterprises may be relevant to determining common interest. We also know that the test involves considering whether the employers have joint, shared, related, or like characteristics, qualities, undertakings, or concerns – a bit of a mouthful again – but they're the words from the legislation that will impact or influence them in relation to bargaining for an enterprise agreement. But do we know anything more about how this test will be applied, Tamara?

Tamara Lutvey:

We do. There is some judicial consideration by the Full Bench of the Fair Work Commission, but it's subject to a Federal Court appeal. So it's still all a bit of a watch this space, I'm afraid at this point. A Full Bench of the Fair Work Commission recently decided an application involving APESMA and several coal mining companies. APESMA was successful in obtaining a single interest employer authorisation to bargain for a multi-enterprise agreement covering Peabody Energy, Ulan Coal, and Whitehaven Coal. But in that matter, the Full Bench refused to include a fourth employer, Delta Coal, and it was satisfied that Delta Coal had unique business activities and operational focus, which was materially different to those of the other employers.

Stephen Woodbury:

So this decision got quite a bit of interest at the time when it was handed down, not just because it was the first one, but also because of this distinction between the different employing entities. So Tamara, can you take us through how the Full Bench applied that common interest test?

Tamara Lutvey:

Yes, absolutely. So first, thinking about the terms and conditions of employment, the Full Bench held that the terms and conditions of employment are actually just tools to identify an employer's goals and that they are not interests in and of themselves. On that basis, the Full Bench considered that it was irrelevant whether the specific terms and conditions of employment varied across the organisations as it's the intentions or the requirements of the employers that must be examined.

All of the respondent employers, except for Delta Coal, reported challenges in attracting and retaining employees due to the remote location of their workplaces from well-serviced residential areas and appealing to lifestyle factors. On this basis, the Full Bench was satisfied that there was a common interest between those employers on this limb.

Secondly, turning to the nature of the enterprises, the Full Bench found that the differences in specific interests among employers don't necessarily negate a finding that there are in fact common interests. It further held that employers must adduce evidence to establish that their interests in relation to bargaining for an agreement which covers the employees is different to one or more of the employers because of the identified specific interests.

So in this matter, each of the employers employed employees at specific black coal mines and Delta and Ulan operated those mines, Peabody held a mining lease and Whitehaven had an indirect interest. So while it was argued that their interest differed due to the operational roles and distinct company structures, the Commission found that Peabody, Whitehaven and Ulan had failed to adduce evidence to demonstrate that their interests in relation to bargaining were actually different to one or more of the others because of the specific interests identified, and that is because it didn't operate a mine or because of its developmental and exploration activities.

Further, while the Full Bench accepted that there will be circumstances in which the commercial purpose of the employer is relevant to bargaining, the employer is required to show that the commercial interests and activities have meaningfully influenced employment conditions for the employees to date in that the pay and core conditions of the employer's employees was reduced or altered in any way at that time or at another time because of the employer's operations.

In this case, the Full Bench found that all of the employers, except for Delta Coal, did not provide evidence establishing that their commercial interests and activities had meaningfully influenced the employment conditions for the employees to date. In relation to Delta, the Full Bench accepted that its commercial purpose was relevant to bargaining because unlike the other employers, it was not subject to the same cost and price pressures arising from selling coal on the competitive international market.

Finally, all of those employers, as I mentioned, were employees in the black coal mining industry and were based in New South Wales. So while geographic location alone does not create a common interest, this coupled with the shared regulatory environment and compliance with New South Wales safety and mining legislation, supported a finding of common interest in this case.

So as a result, the Commission found that Ulan, Whitehaven and Peabody had not proven a lack of common interest in bargaining for a multi-employer enterprise agreement. The Full Bench further found that the black coal industry significantly affects both the New South Wales and Australian economies contributing to national and state gross product, employment and government revenues, and on that basis, the Commission was also satisfied that it wasn't contrary to the public interest to make the authorisation.

Stephen Woodbury:

Thanks, Tamara. That analysis that you've just gone through shows that the Full Bench placed great primacy on the evidence that was called by each of the parties and obviously particularly Delta Coal. It showed that the devil is in the detail. Are there any other matters that the Full Bench relied upon to lead to Delta Coal's exclusion from the authorisation?

Tamara Lutvey:

Yes, absolutely. It was a very long decision for anyone that cares to read it. But the Full Bench was satisfied that Delta Coal's mining operation existed for a completely different purpose to the other employers as it was mining coal and supplying coal to a domestic power station owned by the same parent company. That distinct commercial purpose carried significant weight as it impacted how Delta Coal conducted its business activities, and the Commission concluded that Delta Coal's operations and its business activities were not reasonably comparable to the other employers.

Stephen Woodbury:

That's a really important point because where the rebuttable presumption applies, each employer has to satisfy the Commission that their operations and the business activities are not reasonably comparable with the other employers that will be covered by the agreement.

In this particular case, as Tamara's outlined, the Full Bench held that by reference to the ordinary meaning of these terms, 'operations' means how the employer operates in terms of its industrial activity, work, and production processes, so in the case that we are looking at, mining. The 'business activities' means what that employer does in terms of the goods and services it provides or sells or its trading activities. Again, in this case it's coal mining activity, for sale on either the international or domestic market, which was actually a key distinction, and 'comparable' means sufficiently similar, but does not need to be identical. So that's an important consideration when one comes to look at how they might approach these authorisations.

So as part of this process, an employer will be required to conduct a comparative exercise identifying both the differences and similarities between the employers' operations and business activities as borne out on the evidence to determine whether the differences are enough to displace the presumption.

Now, if you look at the case generally, it is being appealed to the Federal Court as Tamara mentioned, so we'll have to wait and see what happens. But for now, the Full Bench's decision is good law. It's binding on the Fair Work Commission. The Minerals Council, amongst others, has expressed very strong views about the implications of the decision for the principles of enterprise bargaining and on our economy more generally.

Now, Tamara, turning to other features of these provisions which are of concern to many employers, one of these is a possibility of being roped in to a single interest authorisation or agreement. Can you explain how that might occur? It has echoes for those who have been around long enough to remember of the old variations and roping in variations to the old Federal award system – is it akin to that Tamara?

Tamara Lutvey:

Yes, it's a little bit like 'everything old is new again'. So this is really a point of concern for many employers because once a single interest employer authorisation is made, an employer can be roped in either to the authorisation or to the agreement once it's made, without their consent, if the majority of employees want to be covered by the multi-agreement. Obviously that's not ideal because once you've been roped in, especially if it's after the agreement has actually been made, you'd be bound by something that you haven't had an opportunity to have any input into in respect of the bargaining. So it's an area of concern.

Stephen Woodbury:

What's the process by which an employer can be roped in? Do they just get a letter in the mail saying, 'By the way, you're roped in' or how does it work?

Tamara Lutvey:

It's a little bit more formal than that, which is good news. So you can be roped in either through an application by the employer, so you can nominate yourself to be roped in, or by a union. If the employer makes the application, you have to satisfy the Commission that the majority of the employees want to be covered by the multi-agreement and that can be determined in a number of ways, but typically by a vote.

Again, the Commission must consider whether there is a common interest between the employers already covered by the authorisation and the employer seeking to be roped in, and it can't be contrary to the public interest, and then again, they have to be satisfied that the operations and business activities of the employers are reasonably comparable.

Importantly though, you can't be roped in if you're already covered by or are seeking to be covered by another single interest employer authorisation. The Commission will also refuse to join the employer if it's less than nine months since the agreement that previously covered the employer passed its nominal expiry date.

Stephen Woodbury:

It is quite complicated, isn't it, Tamara? And another difficulty that arises is that once you are roped in, it's a bit like a steel trap, it's almost impossible to get out because you can't then bargain for a single enterprise agreement. So it's not like you can go in and then elect, 'Oh, well, I've now been roped in and I'd like to now jump out and start bargaining for a single enterprise agreement.' That's not possible.

But Tamara, are there any defensive strategies that employers can look to use to avoid being roped in or the subject of a single interest employer authorisation?

Tamara Lutvey:

There are certainly some things that you can do to control your own destiny in that way. As I mentioned, one of the factors that the Commission will consider is that you can't be roped in if less than nine months have passed since the nominal expiry date of your most recent enterprise agreement. That's an important consideration to keep in mind, which will feed into the planning and the timing of your enterprise agreement negotiations and whether you want to initiate bargaining for those negotiations before your nominal expiry date passes.

Another defensive strategy would be to ensure that you're bargaining in good faith for a proposed enterprise agreement that will cover the employer and the affected employees, or have some sort of written agreement with a union to bargain for a single enterprise agreement. Of course, a history of having effectively bargained in relation to one or more enterprise agreements that have covered the employer and the affected employees is also going to be a relevant consideration.

Stephen Woodbury:

Thanks, Tamara. They're all really good tips. Some will no doubt be available, others not depending on the circumstances, but equally always good to have those front of mind as you're approaching such a situation, should it arise. Now, do you have any final thoughts for our listeners?

Tamara Lutvey:

With the Federal Court appeal on the horizon, there's still a bit of uncertainty about how all these provisions will ultimately be interpreted. So it's still a bit of a watch this space and while we haven't seen, as I mentioned earlier, a huge uptick in unions seeking multi-employer agreements, that risk still does remain.

So I think that employers still need to be pretty vigilant and conscious about that risk and should be looking to take steps to manage the risk of being roped into a multi-employer authorisation or an agreement, particularly if they think that their operation and business might be particularly at risk of a multi-employer authorisation.

Stephen Woodbury:

Tamara, thanks very much for joining us today. That was incredibly insightful and I'm sure very helpful for all of our listeners.

Tamara Lutvey:

Thank you so much, Stephen. It's a pleasure.

Stephen Woodbury:

Well, thank you for listening to this episode of Ashurst Legal Outlook. To hear more Ashurst podcasts and to ensure you don't miss any future episodes in this series, subscribe now on Apple Podcast, Spotify, or your favourite podcast platform. Also, please do reach out to our Employment team if you'd like to discuss this topic more. It's one that we are following closely and have a keen interest in. We hope you'll join us next time as we continue to explore key developments in industrial relations in Australia and hear insights from other members of our leading Employment team here at Ashurst. Until then, thank you for listening and goodbye for now.

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