Good Faith Bargaining in the Fair Work Commission

In this article, we will explore the implications of a recent decision handed down by the Fair Work Commission, namely Association of Professional Engineers, Scientists and Managers Australia v Peabody Energy Australia Coal Pty Ltd (2014) FWC 6061. In this case, the Commission decided to reject the union’s application for good faith bargaining orders, and relied on the previous decision between this union and Endeavour Coal (a subsidiary of BHP Billiton), where it was held that after a majority support determination has been made, a business owner must bargain in a genuine manner, and show a good faith objective or intention to conclude bargaining on an enterprise agreement wherever possible, even if this means that the business must put forward its own proposals for consideration in order to satisfy the requirement of bargaining in good faith.

Under section 228 of the Fair Work Act 2009, a bargaining representative must meet the following requirements when negotiating for a new proposed enterprise agreement:

Attending, and participating in, meetings at reasonable times
Disclosing relevant information (other than confidential and/or sensitive information) in a timely manner
Responding to proposals made by other bargaining representatives for the agreement in a timely manner
Giving genuine consideration to the proposals of other bargaining representatives for the agreement, and giving reasons for the bargaining representatives’ responses to those proposals
Refraining from capricious or unfair conduct that undermines freedom of association or collective bargaining
Recognising and bargaining with the other bargaining representatives for the agreement.

The applicant union in the Peabody Energy Australia case had its application for good faith bargaining orders dismissed by the Commission, and in summary, the Commission determined that businesses are not required to put forward proposals that are likely to be accepted by the bargaining representative, or the workers that the agreement will cover, in order to satisfy the good faith bargaining requirements.

Relevant Facts

In or around late 2013, the applicant union successfully obtained a majority support determination requiring Peabody Energy Australia to commence bargaining for an agreement to cover a variety of its staff working at the Wambo Mine site.

Historically, this company had previously engaged salaried staff on common law contracts unpinned by the Black Coal Mining Industry Award 2010, and they were happy to continue with this arrangement or by having the relevant workers engaged under an enterprise agreement (but not a combination of both). Upon the commencement of bargaining, the company told the applicant union that it was not willing to allow for workers to be engaged under both an enterprise agreement and common law contract, and if they wanted to bargain for a new enterprise agreement, then the company’s position was that it merely reflect the minimum standards within the black coal industry, and continue to provide the company with flexibility to alter working conditions whenever it deems necessary.

The company put forward a proposal to the applicant union during negotiations that was substantially similar with the terms of the Black Coal Mining Industry Award, and the pay rates prescribed in this proposal were allegedly $100,000 less than the workers’ present pay rates, and this was argued by the applicant union as being a sham proposal, because it was not consistent with the existing standards of pay within the black coal industry.

Commission’s Findings

In rejecting the union’s application for orders, the Commission relied heavily on the Endeavour Coal decision by making the distinction that the company’s proposal in this case was genuine because it was capable of being accepted, but did not have to be palatable to the other side.

By holding a strong bargaining position, the company pursued its own interests, but did not necessarily fall foul of making a proposal that could be reasonably described as not being genuine in all the circumstances.

By reference to the good faith bargaining requirement to refrain from capricious or unfair conduct, the applicant union also argued that the company’s proposal to terminate all prior contractual arrangements with staff following application of the new enterprise agreement was unlawful, but the Commission was not swayed by this argument, as it found on evidence that this proposal was not intended to reduce or undermine the terms and conditions of the relevant workers.

What does this mean for business owners?

This case has provided some welcome guidance for business owners in relation to their good faith bargaining obligations, particularly where companies may be required to put forward their own proposals during the bargaining, as per the findings of Endeavour Coal decision.

So long as businesses only put forward a genuine proposal for consideration, the proposal itself need only be palatable to the business, not necessarily to the other side, or workers that will be covered by the proposed agreement. Any suggestion that such a proposal is not genuine would be required to be tested by way of evidence being tendered in the Commission, and a business owner is obviously not obliged to act against his own interests during the bargaining.

The common tactic of proposing terms and conditions under a draft agreement that largely mirror the terms of a relevant modern award does not necessarily mean that the business will be in breach of the good faith bargaining requirements, so long as the staff that will be covered by the proposed agreement are better off overall. It follows then, that a proposal made by the business for staff to be covered pursuant to terms and conditions less favourable than current contractual conditions may still be genuine and capable of acceptance, so long as they do not fall below the requisite standard of the relevant modern award overall.

This case also re-enforces the principle that hard bargaining is an acceptable bargaining approach in Australia, so long as businesses are considerate and responsive to any offers or positions of compromise put forward by the other side in negotiation (whether they ultimately decide to accept these compromising proposals or not).

MKI Legal has substantial experience in the negotiation of enterprise agreements within the mining, aluminium, and manufacturing industries, and in dealing with the relevant trade unions prevalent in these industries, and is able to guide and advise clients on viable strategies prior to the commencement of enterprise negotiations, as well as relevant continuity positions and commercially acceptable positions of compromise, in anticipation of counter offers and ambit claims that may be raised by unions or the workers covered by the proposed agreement during negotiations.

We can assist clients with strategically managing their enterprise negotiations, by not only taking into account the legal requirements of a good faith bargaining, but also by pursuing our bargaining positions that are viable to specific industry needs, and exploring industrial strategies with relevant stakeholders from the requisite trade unions.

Should your business be interested in seeking such advice, then please do not hesitate to contact us to discuss further and see how we can assist.

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