How Labour’s planned changes to enterprise agreements will affect your business

Enterprise bargaining is back in a big way, says Joe Murphy, partner employment relations at Piper Alderman lawyers. In case you don’t think this applies to your business, think again, he cautions. Businesses that haven’t had enterprise agreements (EAs) or are currently not bargaining, may well be affected by changes in legislation in the next 24 months when bargaining is set to ramp up.

The first change targeted by the Labour government will be around terminating “zombies”. These are pre-reform agreements that were made under the Workplace Relations Act before the Fair Work Act (FWA) came into operation in 2009. They have been on the union radar for many years as they effectively give agreements perpetual life unless a proactive step is taken by unions, employees or employers to terminate the agreement.

The reason the government wants to dismantle them is that, for example, if an agreement didn’t provide for payment of penalties or payment of overtime, then a business wouldn’t have to pay those under the current modern award arrangement, as long as the company kept up the base rate of pay in line with the modern award.

Secondly, the Labour government is going to create an environment where Fair Work agreements will be much harder to terminate, Murphy says.

“Some employers have used terminating the agreement as leverage in bargaining. When there is a bargaining stalemate, for example, and the employer can’t get agreement and perhaps employees are taking industrial action, the employer as a retaliatory action terminates the agreement,” he says.

Make sure your enterprise agreements are properly set up and best suited to your business.

Another key change is around multi-enterprise bargaining (MEB) and how this is handled could make or break the government, believes Murphy.

The FWA allows for MEB bargaining and agreements – but it is quite limited.

“MEB means that unions can negotiate more broadly than one business at a time,” Murphy says. “They can look at multiple businesses in a particular area and capture them and bargain as a group. Those employees will be able to band together to negotiate and take industrial action together as well.”

How should business prepare for a return to bargaining?

It’s important that you have appropriately trained people in your business. They need to have some enterprise bargaining training and understand a little more “behind the curtain” what bargaining is about and how to properly engage and achieve outcomes during negotiations, Murphy says.

“That means as much about what you give as what you don’t give. Because if you go in and it’s all about the numbers, you can reach bargaining stalemates. Then you will find the Fair Work Commission with its new powers will be able to bring those bargaining stalemates to an end – in a broader range of circumstances – and arbitrate outcomes that you may not be happy with as a business,” Murphy says.

Before you get to the negotiating table, consider the future direction of the business and structure your agreement to support the workforce in the coming years, says Marcus Zeltzer, co-founder of payroll compliance company Yellow Canary.

Bargaining is typically undertaken on the basis of headline rates, “we want 6% for this, etc”, but what is often overlooked is making an assessment of the composition of your workforce, he says.

“Are there likely to be large contract wins that might grow the workforce? Are you going to expand into new markets? Understanding what the model roster looks like – what your demand for labour is likely to be in the coming years – is fundamental to the distribution of hours by the category of employee,” Zeltzer says. “Once you understand what the rosters look like, it has implications for negotiating the rates for those units of time.”

Allocate people and resources from HR and IR to work on preparing for renegotiation of an EA.

Train, research and make sure you are up to date at least six months out from when your enterprise agreement is due to expire. It pays to do a lot of pre-agreement planning so that you are compliant. Understand what you use and what you don’t use in your current agreement so that there aren’t redundant provisions – particularly monetary provisions.

If a business fails to comply with an EA, it can face penalties.

“It’s not like a contract – you might breach it and you can smooth things over. A breach is a breach, and you can be prosecuted,” Murphy says. “I would suggest getting your EA updated now before the new system is in place. At least you may be able to buy yourself some time by putting in place a new two- or three-year agreement now, and not be subject to the new legislation that comes into play imminently.”