Fair Work Australia’s Influence in the EnterpriseBargaining ProcessResearch Report – Fair Work Australia Research Partnership30 September 2012Anthony ForsythAssociate Professor, Graduate School of Business and Law, RMIT UniversityPeter GahanProfessor, Department of Management and Marketing, University of MelbourneJohn HoweAssociate Professor, Melbourne Law School, University of MelbourneIngrid LandauResearch Fellow, Melbourne Law School, University of Melbourne

ContentsAcknowledgementsList of abbreviationsEXECUTIVE SUMMARY .i1INTRODUCTION . 11.12Structure of the report . 4BACKGROUND . 62.1The FW Act bargaining reforms in historical perspective. 62.1.1Enterprise bargaining under the Industrial Relations Act 1998 and the1993 reform legislation. 62.1.2The bargaining framework under the Workplace Relations Act 1996 . 82.1.3Bargaining under the Work Choices reforms . 92.1.4Good faith bargaining in state industrial relations systems .102.2Overview of the Fair Work Act bargaining provisions .112.2.1345Other relevant provisions of the Fair Work Act .132.3Early assessments of the FW Act bargaining regime.142.4Conclusion .18METHODOLOGY . 193.1DEEWR’s Workplace Agreement Database .203.2FWA’s case management data.213.3Published decisions and orders .223.4Interviews.223.5Limitations .24AN OVERVIEW OF AGREEMENT-MAKING UNDER THE FAIR WORK ACT . 264.1The number of enterprise agreements lodged .264.2The number of employees covered by enterprise agreements.284.3Impact of the Fair Work Act on the incidence of bargaining .31THE ROLE OF FAIR WORK AUSTRALIA IN RESOLVING BARGAINING DISPUTESUNDER PART 2-4 OF THE FAIR WORK ACT: AN OVERVIEW . 345.1Trends in the number of applications made .345.2Detailed analysis of applications made under Part 2-4 of the FW Act .38

5.2.1Majority support determinations .395.2.2Scope orders .435.2.3Bargaining orders .455.2.4FWA assistance in resolving bargaining disputes .495.2.5Low-paid authorisations.546 GETTING PARTIES TO THE TABLE: ARE MAJORITY SUPPORT DETERMINATIONSWORKING?.556.1 The legislative framework .556.2 Determining whether an employer has not already agreed to bargain or initiatedbargaining .576.3The time at which majority support is to be tested .586.4Evidence of majority support .606.4.1Petitions, surveys, ballots and other evidence of majority support .606.4.2When will FWA arrange for a secret ballot? .626.4.3Measures taken by FWA relating to the conduct of ballots and other meansof establishing majority support .666.5Other bases for employer challenges to MSD applications .676.6 Determining whether the group of employees to be covered has been ‘fairlychosen’.696.7When will FWA revoke a majority support determination? .706.8Assessing the impact of the MSD provisions.706.9Conclusion .737 WHO IS TO BE COVERED BY THE AGREEMENT? RESOLVING DISPUTES OVERSCOPE .747.1The legislative framework .747.2FWA’s application of the jurisdictional prerequisites in s.238 .767.3The MFB Case .787.4Promoting the fair and efficient conduct of bargaining .797.5 Interaction of scope orders and other mechanisms available under Part 2-4 ofthe FW Act.817.6Impact of the scope order provisions .817.7Conclusion .83

8HOW THE PARTIES BARGAIN: THE NATURE AND REACH OF THE GOOD FAITHBARGAINING OBLIGATIONS . 848.1FWA’s general approach to the GFB obligations .868.2FWA’s approach to the jurisdictional requirements in s.229 .878.3 The requirement that bargaining has commenced, or certain orders are inoperation .908.4Ensuring adequate participation in the bargaining process .908.5Disclosing relevant information .928.6FWA’s approach to specific bargaining tactics.948.6.1Unacceptable bargaining tactics .958.6.2Acceptable bargaining tactics . 1058.7Is it reasonable in the circumstances to make a bargaining order? . 1108.8Limitations on the capacity of FWA to make bargaining orders . 1108.9 What types of bargaining orders has FWA made to remedy breaches of the GFBrequirements? . 1118.10Assessing the impact of the good faith bargaining requirements . 1138.10.1Facilitating bargaining by regulating the bargaining process. 1148.10.2Limitations of the GFB requirements . 1188.11Conclusion . 1219 FACILITATING BARGAINING AND THE MAKING OF AGREEMENTS BY ASSISTINGPARTIES TO RESOLVE BARGAINING DISPUTES . 1239.1The legislative framework . 1239.2Who uses section 240? . 1249.3The importance of section 240 . 1269.4Why do parties seek FWA’s assistance under section 240? . 1289.4.1For assistance to resolve remaining issues in dispute towards the end ofthe bargaining process or where bargaining has reached an impasse . 1289.4.2To diffuse hostilities and promote more reasonable bargaining behaviour .1309.4.3As an ‘exit strategy’ and means of saving face where bargaining hasbecome intractable. 1319.4.4To demonstrate that all efforts are being made to progress bargaining . 1329.4.5To escalate a dispute to those with greater authority . 133

9.4.6Where no other option is available . 1349.5When doesn’t section 240 help? . 1349.6Views on what makes for effective conciliation . 1359.7The scope for arbitration . 1389.8Levels of awareness and understanding of section 240 . 1409.9Conclusion . 14010 PROMOTING BARGAINING AMONG WORKERS HISTORICALLY EXCLUDED:ARE THE LOW-PAID BARGAINING PROVISIONS WORKING? . 14210.1The legislative framework . 14310.2The application of the low-paid bargaining provisions by FWA. 14410.3Assessing the impact of the low paid bargaining provisions . 14710.4Conclusion . 15111 KEY FINDINGS AND CONCLUSIONS . 15211.1 Macro-level trends in bargaining. 15311.2 The role of FWA in resolving bargaining disputes . 15311.2.1Majority support determinations . 15411.2.2Scope orders . 15511.2.3Bargaining orders . 15611.2.4FWA’s role in resolving bargaining disputes. 15611.2.5Low-paid authorisations. 15711.3 Further observations and discussion. 15711.3.1‘Shadow effects’ of Part 2-4 of the FW Act . 15711.3.2Agreement-making and collective bargaining in the non-union sector. 15811.3.3New versus mature bargainers . 15811.3.4The role of FWA in the process of bargaining . 15911.3.5The panel system . 16011.3.6The role of FWA in providing information and education. 16111.4 Areas for further research . 162REFERENCES . 164

AcknowledgementsThe research team would like to thank the following individuals and organisations for theirassistance in the conduct of this research project and the preparation of this report: Fair Work Australia, and in particular Karen Taylor, Miranda Pointon and staff in theCMS & Reporting Team;the employer, union and employee bargaining representatives who kindly agreed toparticipate in our interviews; andTessa Dermody, Coordinator of the Centre for Employment and Labour Relations Lawat the Melbourne Law School, who helped with the final formatting and editing of thereport.The Chief Investigators (Professor Gahan, and Associate Professors Forsyth and Howe) wouldalso like to record our gratitude to our Research Fellow, Ingrid Landau, for her outstandingwork throughout this project.Finally, the research team gratefully acknowledges the funding provided by Fair Work Australiafor this research ( 72,575 GST exclusive).

List of abbreviationsABSAustralian Bureau of StatisticsACTUAustralian Council of Trade UnionsAIRCAustralian Industrial Relations CommissionAMIEUAustralasian Meat Industry Employees’ UnionAMWUAustralian Manufacturing Workers’ UnionANFAustralian Nursing FederationANZSICAustralian and New Zealand Standard Industry ClassificationAPESMAAssociation of Professional Engineers, Scientists and Managers AustraliaASUAustralian Services UnionAWUAustralian Workers’ UnionAWAAustralian Workplace AgreementCFMEUConstruction, Forestry, Mining and Energy UnionDEEWRDepartment of Education, Employment and Workplace RelationsFWAFair Work AustraliaGFBGood Faith BargainingHSUAHealth Services Union of AustraliaLHMULiquor, Hospitality and Miscellaneous Workers’ UnionMFBMetropolitan Fire and Emergency Services BoardMSDMajority Support DeterminationMUAMaritime Union of AustraliaNUWNational Union of WorkersSDAShop, Distributive and Allied Employees’ AssociationTWUTransport Workers’ UnionWADWorkplace Agreements Database

EXECUTIVE SUMMARYThe Fair Work Act 2009 (Cth) (FW Act) seeks to promote and enable collective bargaining ingood faith at the enterprise level. A key means through which the legislation seeks to do this isby empowering Fair Work Australia (FWA) to oversee bargaining and to ‘facilitate good faithbargaining and the making of enterprise agreements.’1 Part 2-4 of the FW Act provides anumber of mechanisms through which FWA may provide assistance to negotiating parties(through their bargaining representatives), both to initiate and progress bargaining. Theseinclude majority support determinations;2 scope orders;3 and bargaining orders.4 FWA is alsoempowered, in the case of deliberate and serious breaches of bargaining orders, to make aserious breach declaration,5 which provides a basis for the tribunal to issue a bargaining-relatedworkplace determination.6 In addition, FWA may also deal with bargaining disputes whenparties request the tribunal’s assistance, including (where all parties agree) througharbitration;7 and may facilitate multi-employer bargaining for employees who are low-paid andhave not historically had access to collective bargaining.8This study examines the operation of these provisions in Part 2-4 of the FW Act during theirfirst three years of operation: that is, from 1 July 2009 to 30 June 2012. The research wasundertaken through a research partnership between FWA and the three chief investigators, andis intended to provide FWA with empirical data relevant to its reporting requirement under theFW Act: specifically, ‘to review the developments, in Australia, in making enterpriseagreements.’9 The primary aim of the research has been to assess how effective FWA has beenin meeting its statutory obligations under Part 2-4 of the FW Act, to enable and facilitate goodfaith bargaining (GFB). This study has also sought to add to the small but growing body ofempirical work seeking to map and evaluate how the new bargaining rules introduced underthe FW Act are influencing bargaining practices.BackgroundThis report begins by locating the bargaining rules in the FW Act – and the role given to thenational industrial relations tribunal in supervising bargaining – in historical context (Chapters1 and 2). While legislative support for enterprise agreement-making has existed since theearliest enterprise bargaining reforms were introduced at the federal level in Australia in thelate 1980s, the decisive move towards formalised enterprise bargaining under federal law camethrough the Industrial Relations Reform Act 1993 (Cth)(IR Reform Act). These amendments wereintended to facilitate the extension of agreement-making, by providing for two types ofcollective agreements (certified agreements and enterprise flexibility agreements) and by123456789FW Act s.171(b).FW Act ss.236-237.FW Act ss.238-239.FW Act ss.229-231.FW Act ss. 234-235.FW Act Part 2-5, Division 4.FW Act s.240.FW Act Part 2-4, Division 9.FW Act, s.653(1)(a).i

introducing, for the first time in federal law, principles of GFB. However these GFB provisionshad only a very limited impact, due largely to the restrictive interpretation taken by the tribunalto its own powers under the provisions.The Workplace Relations Act 1996 (Cth)(WR Act), introduced by the Howard CoalitionGovernment, consolidated the shift towards enterprise bargaining. However while continuing toprovide for union and non-union collective agreements, this statute also introduced statutoryindividual employment agreements (Australian Workplace Agreements or AWAs), andsignificantly reduced the role and powers of the Australian Industrial Relations Commission(AIRC), including in supervising bargaining. It also removed any capacity of the Commission tomake orders ensuring parties bargained in good faith, or to arbitrate during a bargaining periodon any issue that was in dispute between parties. The Workplace Relations Amendment (WorkChoices) Act 2005 (Cth)(Work Choices) further prioritised AWAs over collective agreements,and further restricted the role and powers of the AIRC during bargaining.A central policy objective underlying the FW Act bargaining reforms was to restore the primaryof collective agreement making in the federal industrial relations system. The statutorycommitment to good faith bargaining, the provision of mechanisms directed at attaining thisobjective, and the reinvigoration of the tribunal’s role in supervising bargaining, all constitutesignificant departures from the bargaining framework found in the former WR Act. At the sametime, however, the FW Act rules do not constitute a wholesale return to any of the bargainingregimes that existed prior to Work Choices. Rather, Part 2-4 of the FW Act introduces a numberof mechanisms and concepts which constitute largely uncharted territory in Australianindustrial relations. It is the operation of these mechanisms that are the major focus of thisreport.MethodologyThis study was conducted over a 15-month period, from July 2011 to September 2012. It drawsupon four principal sources of data:1. the Workplace Agreements Database (WAD) maintained by the CommonwealthDepartment of Education, Employment and Workplace Relations (DEEWR);2. FWA’s own case management data, which enabled an examination of the volume andnature of the tribunal’s work under Part 2-4 of the FW Act during its first three years ofoperation;3. relevant published decisions and orders made by FWA; and4. qualitative evidence assembled from 50 semi-structured interviews conducted betweenFebruary to July 2012 with parties involved in at least one FWA proceeding under Part2-4 of the FW Act. This included 25 union representatives, 23 employer representativesand 2 employees who participated in bargaining as their own bargaining representative.Compilation and analysis of these various forms of evidence has enabled us to maximise theamount of research data available, and to provide a detailed picture of the role and impact of thetribunal under Part 2-4 of the legislation. The methodological limitations of these data sourcesare outlined in Chapter 3.ii

An overview of agreement-making under the FW ActThis report draws upon quantitative data on agreement-making collected and published byDEEWR, as one means of assessing the extent to which the bargaining provisions in Part 2-4 ofthe FW Act have been successful in achieving their policy objective of promoting collectivebargaining. Analysis of this data suggests that a number of general trends in agreement-makingthat existed prior to the introduction of the FW Act have continued since its introduction. Mostnotably, the data showed the clear cyclical pattern in agreement-making as well as a generalupward trend in both the number of agreements current in any quarter and the total number ofemployees covered by these agreements. Moreover, the average size of agreements does notappear to have altered significantly.Nonetheless, our analysis revealed that the FW Act did have some significant impacts on thepattern of agreement-making. First, there is a marked spike in the number of agreementslodged in the June quarter of 2009; that is, immediately prior to the FW Act becoming operative– the largest number recorded in any quarter since 1992. Second, this spike was accounted forby a large increase in the number of non-union agreements, suggesting that many of these werelikely to be associated with a desire to avoid the potential effects of the bargaining provisionscontained in the FW Act. Third, whilst the growth in non-union agreement-making was evident– and can be attributed to legislative reforms that took place – prior to the FW Act, the newlegislation has not been associated with a reversal of this trend. Finally, the FW Act wasassociated with a marked increase in the number of employees covered by collectiveagreements. When taken as a proportion of all employed persons, 21.3% of all employees werecovered by a federally registered collective agreement by March 2012. This compares with 18.8%of all employed persons covered by federally registered collective agreements in the Junequarter 2009. Interestingly, much of this growth in agreement coverage appears to haveoccurred in the private sector.The role of FWA in resolving bargaining disputesBeyond these macro-level trends, the data collected by DEEWR through the WAD does notprovide any insight into the role of FWA in facilitating bargaining or the extent and nature of itswork under Part 2-4 of the FW Act. However we are able to assess this dimension of thetribunal’s work through analysing FWA’s own case management data. This data has beencollected in relation to all applications made under Part 2-4 of the FW Act, from when thelegislation commenced operation on 1 July 2009 until 30 June 2012.Over the first three years of the FW Act’s operation, 1785 applications were lodged seekingsome form of intervention from FWA to assist in resolving disputes that arose at different stagesof the bargaining process. A significant proportion of these applications – 293 or 16.4% of allapplications made – were lodged in the first month after the FW Act came into operation. Theoverwhelming majority of these applications (94%) were made under s.240 (applications forassistance in resolving bargaining disputes). Just as the FW Act was associated with a one-offspike in agreement-making prior to its introduction, these data also suggest that a demand forsuch intervention had ‘stockpiled’ until the FW Act came into operation.Following this initial spike, FWA has faced a relatively stable flow of applications under Part 2-4.Again, in most cases, these applications were seeking assistance to resolve bargaining disputesunder s.240. A number of other, perhaps unsurprising, results emerged from FWA’s caseiii

management data. First, most of the applications under Part 2-4 were lodged by unions (74.3%).Most were also lodged in Victoria (48.6%), New South Wales (19.8%) and Queensland (14.3%).Applications most frequently came from the following industries: healthcare and social services(26.7%), manufacturing (22.9%), and transport, postal and warehousing (11.5%).As our analysis of the operation of each of the relevant types of applications demonstrates, theprovisions in Part 2-4 of the FW Act are capable of effectively addressing a range of types ofconduct and circumstances in which bargaining disputes arise. Our research strongly suggests,however, that the provisions have proven incapable of addressing situations in which anemployer simply does not wish to enter into an agreement on any terms. This is demonstratedby the fact that in a number of protracted bargaining disputes, a party has lodged applicationsunder several of the available mechanisms under Part 2-4 (and indeed of other parts of thelegislation as well) but, notwithstanding that some or all of these applications have beensuccessful, ‘bargaining’ continues to be frustrated.Majority support determinationsMajority support determinations (MSDs) are a key feature of the bargaining frameworkestablished under the FW Act. An employee bargaining representative may apply to FWA for anMSD where an employer refuses to bargain and it can be demonstrated that a majority of therelevant employees wishes to bargain collectively. The MSD mechanism was introduced toremedy what was perceived to be a serious deficiency in the bargaining framework that existedunder the WR Act: the ability of an employer to refuse to engage in collective bargaining, evenwhere its workforce wished to do so, and the protracted disputes which often arose as aconsequence.Analysis of FWA data indicates that, over the first three years of the provisions operation, 274applications for MSDs were lodged with FWA. The number of MSD applications has fallensteadily during the same period: from 111 in the first year to 96 in the second year, and downagain to 67 in the third year. Based on the 274 MSD applications, FWA has made 78determinations.Analysis of FWA’s published decisions considering the operation of the MSD provisions suggeststhat FWA has taken a relatively flexible and non-legalistic approach to the task of determiningwhether majority support for collective bargaining exists (a pre-condition for making an MSDunder s.237 of the FW Act). Members of the tribunal have also shown initiative in ascertainingthe views of employees where the evidence of majority support provided by the applicant isequivocal. FWA’s refusal to mandate secret ballots as a matter of course appears to have beenparticularly important in ensuring the provisions have practical impact, and are not the subjectof the type of protracted ‘union-busting’ tactics evident in North American labour law systems.The failure of many creative employer strategies seeking to contest applications for MSDs hasfurther reduced the scope for protracted litigation around these provisions.Our interview data supports the conclusion that the MSD provisions have been fairly effective incompelling employers to bargain where a majority of their workers wish to do so. Many of theinterviewees – both employers and unions – expressed the view that the provisions and FWA’spragmatic approach to their interpretation and application have facilitated the commencementof bargaining in many cases. Our interviews revealed that the MSD provisions are also having aniv

important ‘shadow effect’. This effect was observed by both employers and unionrepresentatives across a range of industries. It appears that many employers are now agreeingto bargain without a determination needing to be issued, or even without a bargainingrepresentative having to formally lodge an MSD application.Scope ordersThe scope order provisions of the FW Act provide a mechanism through which FWA mayresolve disputes over the boundaries of the employee constituency for a proposed agreement.The provisions we

ANF Australian Nursing Federation ANZSIC Australian and New Zealand Standard Industry Classification APESMA Association of Professional Engineers, Scientists and Managers Australia ASU Australian Services Union AWU Australian Workers’ Union AWA Australian Workplace Agreem