On 22 March 2012, a Full Bench of Fair Work Australia upheld bargaining orders made against Endeavour Coal. Endeavour Coal was involved in negotiations for an Enterprise Agreement (EA) with APESMA, the union representing its staff employees. APESMA had previously gained a majority support determination which required bargaining to commence.
Endeavour Coal preferred not to negotiate an EA with its staff employees, and wanted to continue engaging them on common law employment contracts. However, after it was required to commence bargaining, Endeavour Coal participated in the bargaining process and responded to APESMA's proposals as required by the Fair Work Act.
Despite this compliance, a Commissioner decided that Endeavour Coal had not bargained in good faith and made three bargaining orders.
The first order required Endeavour Coal to provide APESMA with a list of the subject matter it would be prepared to include in an EA, to identify what aspects of APESMA's proposal could be agreed, to advise what changes should be made to APESMA's proposal to make it acceptable and to propose terms of an EA that Endeavour Coal would be prepared to enter into.
The second order prevented Endeavour Coal from changing the terms of its standard employment contract for staff or altering existing terms of staff employment contracts outside of the bargaining process.
The third order required Endeavour Coal to disclose information regarding its remuneration structures and pay bands for staff at the mine.
Endeavour Coal appealed the decision to a Full Bench.
What did the full bench find?
The Full Bench decided the first two orders were properly made – but not the third (requiring disclosure of confidential information).
In reaching its decision to uphold the first two orders, the Full Bench considered Australian and international decisions (particularly in New Zealand and Canada where there is an obligation on bargaining parties to conclude a collective agreement unless there are 'reasonable grounds' for not doing so). However the Fair Work Act specifically provides that parties are not required to make concessions during bargaining or reach agreement on terms to be included in an agreement.
Despite this express qualification, the Full Bench decided that the scheme in the Fair Work Act requires bargaining parties (whether they are willing parties or not) to approach bargaining on the basis that they are required to attempt to conclude an Enterprise Agreement.
It said that even though Endeavour Coal had complied with formal requirements (by participating in meetings and responding to proposals) it had not demonstrated a genuine endeavour to negotiate an agreement with APESMA. In reaching this conclusion, the Full Bench referred specifically to the fact that Endeavour Coal had not put any proposal of its own about the terms of an EA which would be acceptable to it.
Why is it important?
This decision represents a decisive shift in Fair Work Australia's approach to the obligations of employers who would prefer not to make an EA with employees but who have been forced to enter into negotiations by a majority support determination.
Endeavour Coal was ordered to advise APESMA of a proposal for an EA which would be acceptable to it. Having done so, it would of course be open to APESMA to agree to it.
This would not in itself conclude an EA, which could only occur if Endeavour Coal put the proposal to the employees for approval and it was then supported by a majority of the employees. However, if a proposal is made by an employer and then accepted by the bargaining representatives, it would be very difficult for the employer to resist putting the proposal to employees to see whether it was approved. Failing to do so might itself be regarded as bargaining in bad faith, and further orders could be made.
The requirement that an employer advise bargaining representatives of a proposal which would be acceptable to it, in circumstances where the employer may not wish to make a proposal at all, appears to be inconsistent with the specific statement in the Fair Work Act that parties cannot be required to make concessions. For an employer who does not wish to make an EA on any terms, the making of any proposal is a 'concession'.
The order preventing Endeavour Coal from continuing normal communication and negotiation with staff (not all of whom may have supported the bargaining process) is also significant – and goes beyond any previous order made by Fair Work Australia. Similar orders have been made in other countries, but Fair Work Australia has previously resisted making orders which prevent normal communication and negotiation between employers and their employees during the bargaining process as long as the employer acts consistently.
How should employers respond?
The decision may be appealed, and eventually the High Court may have to decide whether the decision is beyond the scope of the bargaining requirements in the Fair Work Act. However, unless and until that occurs, employers who have been forced to bargain by a majority support determination will have to be very careful about how they approach the good faith bargaining requirements.
In particular, it may not be enough for an employer to attend meetings and respond diligently to proposals made by bargaining representatives – the employer may have to actually make a proposal for terms to be included in an EA, or have strong business reasons justifying its decision not to do so.
Want more information?
Click here for the decision – Endeavour Coal Pty Ltd v Association of Professional Engineers, Scientists, and Managers, Australia (Collieries' Staff Division)  FWAFB 1891.
Or contact any of the people listed on this update.