In brief - The Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Bill (the Bill) introduced into Parliament on 9 December 2020 proposes significant amendments to the enterprise agreement approval process designed to foster easier and faster enterprise bargaining between employers and employees.

Schedule 3 to the Bill sets out the comprehensive changes to enterprise bargaining and the enterprise agreement approval process in the Fair Work Commission (FWC). According to the introductory statement in the Explanatory Memorandum accompanying the Bill:

"[the] Bill aims to increase the number of Australians covered by enterprise agreements – driving higher wages and productivity in the process – by making agreement making and approval processes easier and faster for employers and employees, while balancing flexibility and fairness".

Key changes introduced by the Bill include:

  • a greater focus on the views of employers and employees via the introduction of a specific requirement that the FWC performs its functions and exercises its powers "in a manner that recognises the outcome of bargaining at the enterprise level";

  • the introduction of a "fair and reasonable opportunity" test for employees to consider whether to approve an enterprise agreement prior to the employee vote, with the former prescriptive tests an employer must meet prior to the commencement of the access period now considered as examples of conduct that would satisfy the fair and reasonable opportunity test;

  • a mandatory requirement that enterprise agreements include a term explaining the interaction between the National Employment Standards (NES) and enterprise agreements (a model NES interaction term has been introduced for this purpose);

  • a limitation on the casual employees eligible to vote on a proposed enterprise agreement to include only those casuals who performed work at any time during the access period for the agreement;

  • a requirement that the FWC approve agreements within 21 working days, so far as practicable. The FWC must provide a written explanation as to the reasons why this timeframe is not practicable where the 21 day timeframe will not be met;

  • significant overhaul of the application of the better off overall test (the BOOT) to require that the FWC:

    • only take into account patterns or kinds of work, or types of employment, that are currently engaged in by award covered employees for the agreement or are reasonably foreseeable, thereby eliminating the current approach in which the FWC considers hypothetical working arrangements or arrangements that are not reasonably foreseeable (eg payments to employees working night shift when the employer does not operate, and has no intention to operate, a night shift);

    • have regard to the overall benefit to employees under the proposed agreement compared to a relevant modern award, with specific reference made to non-monetary benefits; and

    • have regard to the views of employers and employees and their bargaining representatives relating to whether the agreement passes the BOOT;

  • a limitation on the ability of third parties (which will include unions and other employee associations that are not bargaining representatives for the proposed enterprise agreement) to intervene in the FWC's enterprise agreement approval process; and

  • power for the FWC to approve longer-term greenfields agreements relating to the construction of major projects, with a nominal expiry date of up to eight years after the day the agreement comes into operation, provided that for agreements with a nominal term more than four years and up to eight years, the agreement must provide for annual pay increases for the nominal life of the agreement.

In addition, the Bill proposes COVID-specific changes to enterprise agreement approvals which will operate for a limited two year period from the time the Bill passes into law. Under the proposed change, the FWC will be permitted to approve an enterprise agreement which does not pass the BOOT subject to consideration of the following:

  • the views and circumstances of the employees, employer(s) and employee organisation(s) covered by the agreement;

  • the impact of COVID-19 on the employer's business;

  • the extent of employee support for approval of the agreement; and

  • whether approval of the agreement is in the public interest.

Consistent with the limited time period in which the COVID specific provisions will operate, enterprise agreements approved under these provisions will have a limited nominal two year term.
Other administrative changes proposed by the Bill include provisions:

  • allowing franchisees to opt-in to single-enterprise agreements that currently cover a larger group of employers that operate under the franchise model by allowing employees of the new franchisee to vote to vary the existing agreement to extend coverage of the agreement to those employees;

  • ensuring industrial instruments do not transfer in circumstances of a transfer of employment between associated entities where such transfer is at the initiative of the employee;

  • delaying applications to terminate an enterprise agreement that has passed its nominal expiry until at least three months has passed since the nominal expiry date; and

  • terminating agreements approved prior to the commencement of the Fair Work Act and/or during the bridging period prior to the commencement of the current modern award structure (ie pre 1 January 2010) by no later than 1 July 2022.

We will continue to provide updates on the implications of the proposed changes as the Bill passes through Parliament. If you would like specific advice on the implications of the changes for your business, please contact us.

To find out more about the changes proposed by the Bill please click here.

This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2021.