One of the central tenets of collective bargaining (particularly since the Fair Work Act replaced WorkChoices) has been the ability of a workforce to build upon its existing conditions when negotiating a new agreement. But there are a series of loopholes in this process — and more employers, in more industries, are starting to exploit them.

The most common tactic is employers applying to terminate existing agreements during negotiations. Agreements have a nominal expiry date, after which the conditions continue to apply until it is terminated or replaced. Traditionally, these agreements stay in place while a replacement is being negotiated between the workforce and the business. But if a workforce won’t accept a new set of conditions, an employer can unilaterally apply to terminate the agreement, and, if successful, employees have to negotiate a new agreement on the basis of award minimums, rather than the usually far more generous provisions of the current agreement. 

The Fair Work Act states that the Fair Work Commission must terminate an expired agreement on application from a party to that agreement if the FWC is satisfied that it would not be contrary to the public interest, and it considers it appropriate, taking into account the views and circumstances of the parties covered by the agreement and the likely effect the termination would have on each of them.

The number of applications to terminate agreements across industries has exploded in recent years. The FWC annual report for 2015-16 states that it received 311 applications to terminate nominally expired agreements. This was up from 161 the year before, and 99 the year before that. The commission does not record how many such applications are successful, but in recent cases where employers have sought to improve their bargaining position by terminating an existing agreement, unions have argued it is contrary to the public interest to imbalance employer-employee relationships in this way. They have invariably been unsuccessful.

But it wasn’t always the case. University of Sydney law school associate professor Shae McCrystal told Crikey this ability stems from a single case.

“The recent upswing in use of the termination provisions goes back to a decision regarding a company called Aurizon,” she said. “They had an agreement that was subject to several public sector legacy provisions, which they felt made them less competitive — Aurizon was no longer operating in the public sector environment —  so they asked the FWC to terminate the agreement, wanting to start again with the relevant award as the basis for negotiation.

“The union argued that this fundamentally altered the balance against employees, because it greatly lowered the base from which they could negotiate, and thus went against one of the objects of the fair work act, which is to promote collective bargaining.”

Until Aurizon, this argument had been successful; single commissioners had denied employer applications to terminate agreements as opposed to the objects of the act.

However, this time that argument “was rejected by the commission and subsequently by the Federal Court who found that there is no basis in the Fair Work Act to read the agreement termination provisions as subject to a presumption in favour of the maintenance of existing collective agreements”.

So this interpretation of the public interest in Aurizon really opened the floodgates in terms of employers unilaterally asking the FWC to terminate existing agreements to lower the negotiating basis for Employers.

Of course, laws develop, and the argument flows that if the ability to terminate agreements exists in the act, there should be scope for terminations to proceed. But the Aurizon decision has made unclear just what would prevent the commission from terminating an agreement during negotiations.

“What’s not clear is what the commission would view as contrary to the public interest,”said McCrystal. “But it is a powerful bargaining lever. It is also not clear when the circumstances of the parties would make it inappropriate to terminate.”

Peter Fray

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