Enterprise Agreement Approval  Are You Sure You Have Got It Right?

How recent Full Bench and Federal Court Decisions are Shaping Enterprise Agreement Approval Processes

Since the commencement of the Fair Work Act 2009, the approach to assessing and approving enterprise agreements by the Fair Work Commission has evolved as the implementation of the legislation has been tried and tested through various legal challenges. From our perspective, in recent times the most notable impacts to approval practices have occurred following the Full Bench's decision in Hart v Coles Supermarkets Australia Pty Ltd and Bi-Lo Pty Limited [2016] FWCFB 2887. Put simply, this decision identified the need to examine the effect an agreement has on every employee in determining whether the agreement meets the ‘better off overall’ test.

The Fair Work Commission no longer relies on an employer’s ‘say so’ that all employees will be better off - as declared in the lodgement forms - and are examining the potential impact of an agreement against every classification within it with increased rigour. From our recent experience, this sometimes includes applying scenarios around implementation that the employer might never have foreseen. As a result, we are seeing an increased requirement for undertakings and a longer approval period.

Even employers who have traditionally paid well over award rates of pay are finding themselves caught in this situation by virtue of little utilised classifications (usually at the lower levels) that do not provide as generous rate of pay as the more regularly utilised levels do. This issue is even occurring with agreements made by the Australian Public Service (particularly following the commencement of the APS Enterprise Award 2015). The APS is an industry that has been operating under enterprise agreements for so long that the assumed gap between minimum award rates and agreement rates had seemingly resulted in such a buffer being created that assessments against the award ceased to be relevant for employees and management alike. Failing to test this assumption  particularly in workforces which include shift work and unsociable hours  can prove problematic in being able to demonstrate all staff would be better off overall.

More recently, following the decision in One Key Workforce Pty Ltd v CFMEU [2018] FCAFC 77, the Fair Work Commission is also requiring employers to not only describe the steps taken to explain the agreement to employees, but are also requesting employers to provide information specifically detailing what employees were told when the employer explained the agreement to them and requesting copies of any documentation provided. They are also requesting how the differences between any relevant award and the agreement were established and explained through this process.

The critical message coming from the One Key Workforce Pty Ltd v CFMEU [2018] case impacting Fair Work approval requirements is the finding that the original approving Commissioner “fell into jurisdictional error by failing to have regard to the content and terms of the explanation One Key Workforce purportedly provided the employees before they cast their votes. In addition, the Commissioner’s decision was affected by jurisdictional error because he failed to appreciate that, in determining whether the relevant employees had genuinely agreed to the Agreement he needed to consider whether they were likely to have understood its terms and effect.”

So, what does this mean for employers navigating through bargaining and approval processes?

1. Don’t make assumptions that all staff will be better off overall. At the beginning of every negotiation, pay careful attention to the relevant Award as it would otherwise apply to staff at every classification and working pattern permissible under your proposed agreement;
2. During the access period prior to holding the ballot, ensure every staff member is provided with clear information regarding the impact the agreement will have when compared with their current terms and conditions and the relevant award.
3. Document everything.

If unsure, you can seek advice and assistance from HBA Consulting on (02) 6247 4490 or by email gary.champion@hbaconsulting.com.au