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Good Faith Bargaining Gets Teeth :: 2012 Recent Developments

Posted 10 April 2012

Just saying no to a bargaining representative is not hard bargaining; it is not bargaining at all. It is therefore not bargaining in "good faith." A bargaining representative is under an obligation to present alternative proposals. Simply "going through the motions," or surface and sham bargaining is contrary not permitted.

A recent full bench decision said all this and more, it has seen Australia's national employment umpire move away from the long-standing position that Australian employment law does not compel parties to reach an agreement when negotiating workplace conditions. The reasoning behind this was that such an approach would involve the Tribunal (or Commission as it then was known) requiring a negotiating party to make concessions, and that was something a former Full Bench considered beyond the power of the Tribunal to do. The authority for this position was the case commonly known as Asahi.1 That has now all changed. At the end of March 2012, Fair Work Australia determined that the Fair Work Act 2009 (the Act) does not work in the same way as the legislation under which Asahi was decided.

The case in question was an appeal by Endeavour Coal Pty Ltd (the Company) against an earlier decision in which a Commissioner decided that the Company was not bargaining with the Association of Professional Engineers, Scientists and Managers, Australia (Collieries’ Staff Division) (APESMA) in good faith. As a consequence the Commissioner made orders compelling the Company to bargain in a certain way to meet the good faith requirements.

The essence of APESMA's argument was that, "Good faith bargaining imposes an obligation on an employer to make reasonable efforts to make an enterprise agreement. Good faith bargaining means the parties must bargain in a manner intended to conclude an agreement."2 The Commissioner agreed with this argument and interpretation of the Act and accordingly made a number of orders. The Company appealed that decision and the orders.

The requirement to bargain in "good faith" is contained in section 228 of the Fair Work Act 2009 (the Act). If a party is not bargaining in good faith it is open for the other party to bring an application to Fair Work Australia (FWA) for bargaining orders requiring the party which is not negotiating in good faith to do so. Additionally, FWA has the power to fine individuals $6,600 and a body corporate $33,000 for breach of a bargaining order (s 233 and Part 4-1 of the Act).

Section 228 reads as follows:

  1. The following are the good faith bargaining requirements that a bargaining representative for a proposed enterprise agreement must meet:
    1. attending, and participating in, meetings at reasonable times;
    2. disclosing relevant information (other than confidential or commercially sensitive information) in a timely manner;
    3. responding to proposals made by other bargaining representatives for the agreement in a timely manner;
    4. giving genuine consideration to the proposals of other bargaining representatives for the agreement, and giving reasons for the bargaining representative’s responses to those proposals;
    5. refraining from capricious or unfair conduct that undermines freedom of association or collective bargaining;
    6. recognising and bargaining with the other bargaining representatives for the agreement.
  2. The good faith bargaining requirements do not require:
    1. a bargaining representative to make concessions during bargaining for the agreement; or
    2. a bargaining representative to reach agreement on the terms that are to be included in the agreement.

The Full Bench gave the following interpretation of what is required of the bargaining parties under section 128 and Part 2-4 of the Act:

The objects of the Act and Part 2-4 support an interpretation of s.228 as requiring parties to approach bargaining on the basis that they are to attempt to conclude an enterprise agreement. The object of the Act as set out in s.3 includes reference to: "achieving productivity and fairness through an emphasis on enterprise-level collective bargaining underpinned by simple good faith bargaining obligations..." Good faith bargaining is intended to bring about enterprise agreements and the parties are under an obligation to try and conclude an agreement. The objects of Part 2-4 (which contains s.228) support this view. Subsection 171(b) states that one of the objects of the Part is to: "enable FWA to facilitate good faith bargaining and the making of enterprise agreements, including through (i) making bargaining orders..." In general the legislative scheme might be described as one which seeks to promote agreement making but which does not compel parties to make concessions or to reach agreement. There is nothing inconsistent about encouraging parties to make agreements - and imposing an obligation upon them to try to do so - but at the same time not compelling parties to make concessions in bargaining. An agreement remains what the name implies.

The Full Bench found that it was important in this case that the Company had initially sought to avoid bargaining with the employees' representative (APESMA) and that there was a majority support determination in place (an order from FWA that required the Company to recognise the will of its employees to bargain for a collective agreement and to negotiate with them for one). The Full Bench held:

Where a majority support determination is made, there is an expectation that the employer will recognise the wishes of its employees to bargain collectively for an agreement, and enter into negotiations in an endeavour to reach an agreement. Where this does not happen, a bargaining order may be sought to ensure that the obligation to bargain is fulfilled. The main question in the present case concerns whether the Company was meeting its obligation to bargain in good faith. This involved a consideration as to whether there was a real or serious endeavour being made by the Company to negotiate an agreement, having regard to the finding by FWA that a majority of its staff employees want to bargain for an agreement. If the conduct of an employer in engaging in the bargaining process is a mere sham or pretence, such as going through the motions of bargaining without any real intention to enter into an agreement, then this would be contrary to the good faith bargaining requirements. In particular, such conduct might involve a failure to give genuine consideration to the proposals of other parties (s.228(1)(d)) or it might constitute capricious or unfair conduct that undermines freedom of association or collective bargaining (s.228(1)(e)). Such conduct might also amount to a failure to recognise and "bargain" with other parties (s.228(1)(f)).

The Full Bench found that the Company never put any proposals of its own in respect to the terms of an enterprise agreement. The Commissioner at first instance took the view that this amounted to an unreasonable refusal by the Company to supply APESMA with information and was contrary to the requirements of s.228(1)(b). The Full Bench recognised that it is a crucial part of the bargaining process that parties disclose such matters in the negotiations. The failure to do so may be found to be contrary to the good faith bargaining requirements in s.228(1) of the Act, and in particular the requirement to "bargain" (s.228(1)(f)) and to refrain from unfair conduct that undermines collective bargaining (s.228(1)(e)).

Orders - were they appropriate?

The Full Bench agreed with the Company that the Commissioner at first instance did not properly articulate that the orders made were "appropriate." In respect of the orders available to the Commissioner the Full Bench noted that:

Whilst FWA is given discretion as to the kinds of bargaining orders to be made, the orders should be directed towards ensuring that the good faith bargaining requirements are met. They should address deficiencies identified in the bargaining process and be tailored to remedy any failure to meet the good faith bargaining requirements. The role of FWA is to facilitate bargaining by making orders dealing with those aspects of the good faith bargaining requirements which have not been met. The orders should be appropriate and practical having regard to the circumstances of the bargaining between the parties. Although the orders might identify further steps to be taken by the parties in the bargaining process and towards making an agreement, they should not be such as to require the parties to go beyond the good faith bargaining requirements and to make concessions or to agree on terms to be included in an agreement (s.228(2)).

The Full Bench considered all the orders made by the Commissioner and found that only the third order should not have been made, in part, on the basis that the information was commercially sensitive.

The orders that the Commissioner made were as follows:

    1. Endeavour Coal Pty Limited is to take the following actions within 14 days:

      a. Provide to APESMA a list of subject matter that Endeavour Coal would be prepared to include in an enterprise agreement applying to employees at Appin Mine in respect of whom a Majority Support Determination was made on 8 July 2010 (‘Staff’);

      b. Tell APESMA what aspects of the latest version of the APESMA proposed enterprise agreement (annexed to the Application), if any, can be agreed;

      c. Tell APESMA what changes to the latest version of the APESMA proposed enterprise agreement should be made to make it an agreement that Endeavour Coal would make;

      d. Propose terms of an enterprise agreement that Endeavour Coal would be prepared to enter into.

    2. Endeavour Coal is not to:

      a. take any further action to unilaterally determine the terms of a new standard contract for Staff; or

      b. alter standard terms contained in Staff contracts of employment;

      outside of the enterprise bargaining process.

    3. Endeavour Coal is required within 14 days to disclose to APESMA the following information (with such information to be disclosed in a manner that does not identify the actual pay of any individual):

      a. How many pay bands apply at Endeavour Coal's Colliery;

      b. What is the minimum dollar figure for each pay band;

      c. Which positions fall into which of the pay bands (positions can be aggregated to the extent necessary to prevent any individual salary being identified);

      d. The current policy or procedure by which the Respondent determines into which pay band a position is placed and where in a pay band an individual is placed (if it is in writing. provide a copy of the policy or procedure);

      e. The current policy or procedure by which the minimum pay point in the pay band is adjusted from time to time;

      f. The quantum and date of the last 4 percentage adjustments applied to each pay band;

      g. Whether the Respondent has any current policy or approach pursuant to which relativities are set in respect of any of the following roles at Appin: P&E and Deputy; Deputy and a Staff member; a Staff member and a Staff member's one-up supervisor. If there is such a policy or approach in respect of any of those comparisons, provide that policy.

    4. Endeavour Coal is to ensure that in future bargaining meetings it is represented by a person who has the capacity to make decisions and give reasons for Endeavour Coal's responses, and in particular that Endeavour Coal ensure that the President Illawarra Coal be present at the next bargaining meeting.

    5. That the parties meet to progress their bargaining within 21 days after Endeavour Coal has taken the steps ordered above.

The Implications of the Decision

Simply put once bargaining has commenced, whether by choice or after the issuance of an order after a majority support determination the parties must genuinely endeavour to reach an agreement. Failure to do so may have serious consequences for the offending party including fines and the possibility of having an arbitrated agreement imposed.

1 Diamond Industrial Australia Pty Limited v Automotive, Food Metals and Engineering Union (1995) 59 IR 385

2 [2012] FWA 13

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