BEERG Perspective - New Australian Labor Law

Introduction

EU Member State governments must transpose the Minimum Wage Directive into national law by the end of 2024. One of the provisions of the Directive is that governments should take measures to ensure that collective bargaining coverage hits 80% of the workforce. Unions and some commentators argue that the only way this can be done is through a return to sectoral collective bargaining. But, as a recent UNI Europa paper admitted, employers do not want to go there.

Given employer reluctance, the only way there will be a return to sectoral bargaining is if governments legislate to force employers into such bargaining structures, whether they wish to be involved or not. One country that has recently just done that is Australia. Not a European country, obviously, but still one that is situated firmly in the “Western” industrial relations tradition.

The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022, HERE is a wide-ranging piece of legislation that covers more than just collective bargaining, but it is the sectoral collective bargaining provisions in the Act that this article considers. The law was adopted by the Labor government earlier this year and is now being rolled-out on a phased basis. June 6 last saw its provisions on multi-employer bargaining come into force.

The law gives a pivotal role to the Fair Work Commission (FWC). The FWC is a government appointed body that oversees labour relations and can set legally binding labour standards. It is now empowered to authorise the creation of sectoral bargaining structures and to impose settlements in the event of a breakdown in bargaining.

Union Membership

Australian unions are hoping that the new legislation will give a boost to their membership numbers. They badly need such a boost. According to data compiled for the The Australian Financial Review by the Australian Bureau of Statistics union membership in the private sector has shrunk to a record low of 8%  after a loss of more than 176,000 members over the past six years. The data shows 779,700 private sector employees were members of a union in their main job in 2022 compared to 956,200 in 2016 – a decline of 176,500 or 20% . The proportion of public sector employees who are union members has dropped from 38.8%  in 2016 to 33.7%  last year. The nurses’ union has the highest union membership with 322,065 members.

Australian Council of Trade Unions (ACTU) president Michele O’Neil told the Financial Review the drop in membership was the consequence of anti-union laws and suggested the government’s recent changes would help grow membership.

“After a relentless decade-long campaign of constant attacks on working people, anti-union legislation, discouragement of collective action and suppression of worker’s rights by successive conservative governments, it’s not surprising that union density has continued to decline,” she said. With the much-needed change in Australia’s workplace laws the ACTU is focused on lifting wages and improving working conditions for working people.

While the new law certainly boosts unions’ bargaining power, save for the construction industry which is excluded, whether it will increase membership numbers is another matter for reasons we will look at later.

Sectoral Bargaining

The possibility to create multi-employer/sectoral bargaining structures is a major feature of the new law. In some circumstances, employers can be forced into such bargaining structures whether they wish to or not and may find themselves negotiating alongside business competitors.

Further, once the structures are in place, then if bargaining breaks down and an agreement cannot be reached, the FWC can impose legally binding pay and working conditions on the parties. Whether such forced participation in bargaining structures that can potentially end in binding arbitrated pay settlements can be called “free collective bargaining” is a moot point. Unions will not care about that if the new structures “deliver” pay hikes and better working conditions or their members.

Under the new law, there are three different “streams” of sectoral bargaining that can be put in place.

• Co-operative Workplace Agreements
• Supported Bargaining Authorisations
• Single Interest Employer Authorisations

Applications to set up multi-employer bargaining structures under streams 2 and 3 must be approved by the FWC. The United Workers Union launched the first request for multi-employer bargaining on the day the law came into force to cover Early Childcare Workers (i.e., daycare centres). See HERE  

Co-operative Workplace Agreements (CWAs)

These are voluntary multi-enterprise agreements which the parties on both sides have agreed to negotiate with one another. Such arrangements can be found in many countries. Nothing new to see here.

Supported Bargaining Authorisations (SBAs)

The FWC is required to make a Supported Bargaining Authorisation if it is satisfied that it is appropriate for the relevant employers and employees to bargain together when considering: 

• the prevailing pay and conditions in the relevant industry/sector, including whether low rates of pay prevail in the industry or sector. 
• whether the employers have clearly identifiable common interests (which may include geographic location, the nature of the enterprises to which the agreement will relate, the terms and conditions of employment in those enterprises, and whether they are substantially funded, directly or indirectly, by the Commonwealth, a State or a Territory). 
• whether the likely number of bargaining representatives is manageable, and, 
• any other matters the Commission considers appropriate. The Commission will also need to be satisfied that at least some of the employees are represented by a registered employee organisation (a union).

Alternatively, the Commission is required to make a supported bargaining authorisation if an application has been made and the employees specified in the application are employees in an industry, occupation or sector declared by the Minister. 

The Minister may make a declaration in relation to a particular industry, occupation or sector to facilitate entry into the supported bargaining stream. If this occurs, the Commission is not required to consider the factors outlined above.

There does not appear to be any requirements that a majority of employees in each of the individual employers included in an SBA order support the bargaining request. It seems that it is sufficient that a union(s) have some members in the sector to be covered.

Interestingly, despite the government’s comments that the SBA stream is intended to operate only in relation to workers in lower paid industries, there is no such restriction expressed in the legislation – the FWC is only required to consider the pay and conditions in the relevant industry or sector. Further, the fact that unions do not need to show majority support in individual employers for the proposed bargaining arrangements could lead to them looking at this as preferable to SIEAs.

Single Interest Employer Authorisations (SIEAs) 

From 6 June 2023 the FWC must make a SIEA (on application by a registered union) in certain circumstances, which compels multiple employers to bargain together for a multi-enterprise agreement in the ‘single-interest employer stream’. This is the stream that is likely to be of most interest to European and other trade unions because it hands unions considerable bargaining leverage. 

Once a SIEA is made all relevant employers are caught in the stream because they are prohibited from bargaining for any other kind of agreement while the SIEA remains in operation. Generally, a SIEA will cease to operate 12 months after it is made, but this timeline can be extended by the FWC.

The statutory requirements that need to be met before the FWC can issue an SIEA are as follows:

1. Union representation: At least some (but not all) of the employees to be covered by the proposed multi-enterprise agreement must be represented by a union.
2. Majority support: A ‘majority’ of each employer’s employees to be covered by the proposed agreement must support it. The FWC decide if such support exists by using any method it considers appropriate.  It is likely that unions will present the FWC with petitions signed by employees. The FWC is under no obligation to show such petitions to the employer(s). It is worth noting that those signing the petition do not have to be union members, just employees in the business.
3. Common interest test: The FWC must be satisfied that the employers have clearly identifiable common interests – which includes considerations as to geographical location, regulatory regime, and the nature of employment, but is otherwise open ended.
4. Reasonably comparable test: The operations and business activities of each employer must be reasonably comparable with those of the other employers to be covered by the agreement. 
5. Public interest level: The FWC must determine that the authorisation is not contrary to the public interest. The process does not need to be shown to be consistent with the public interest, only that it is not inconsistent.
6. No existing agreement: The employer and the employees to be covered by the proposed agreement must not already be covered by an enterprise agreement that has not passed its expiry date at the time the FWC makes the authorisation.
7. No written agreement with union to bargain: The employer must not have agreed in writing, with a relevant union, to bargain for a proposed single-enterprise agreement that would cover the employer and the employees.
8. Not a small business: The employer must have at least 20 employees, which can include part-time and regular casual employees.

If all requirements are met a SIEA must be granted. Clearly, some of these tests are purely objective, such as 6, 7, and 8. But tests 3 and 4 are matters of interpretation and likely to be robustly contested. Once a SIEA agreement has been approved, a union can apply to the Commission to join non-consenting employers where a majority of employees want to be covered, provided the relevant criteria are met.

Intractable Bargaining

Under the new legislation, if the parties in a multi-employer bargaining unit, cannot reach agreement they can apply to the FWC for an “intractable bargaining declaration” which opens the door to the FWC ultimately being able to issue an “intractable bargaining determination” which sets the terms and conditions for the bargaining unit. Essentially, binding arbitration by another name. 

Is what is being done in Australia really “free collective bargaining” where the outcome of negotiations is normally decided by the economic strength of the parties? Or is it government determination of terms and conditions through the FWC? We might call it “political bargaining” instead of “collective bargaining”, with the law rather than the ability to call a strike giving the unions leverage at the negotiating table.

Back to Union Membership

Will this new system lead to a growth in union membership? Maybe, but then why would anyone join a union and pay their subscription if they are going to benefit anyway? Is this not what happens in France where only 8% of the workforce are unions members but 98% of the workforce have their terms and conditions set by union-management agreements, made legally binding by government erga omnes provisions? 

Australian unions are aware of this and have already raised the issue of “bargaining fees”, an obligation on non-members to pay a levy to the unions for the benefits they derive from the unions’ efforts on their behalf.

Exportable?

Could the Australian legislation provide a template for other countries where the future of collective bargaining is under discussion? The introduction of such legislation requires the wholehearted backing of the government, and the coalition nature of European politics is unlikely to deliver such backing. There is a unique relationship between the unions and the government in Australia that is not found in European countries, even in the UK. 

But what is happening in Australia is worth watching.  For a “flavour” of the debate around labour relations in Australia, see HERE 

Acknowledgement:

Many thanks to my Asia-Pacific colleague, Michelle Swinden for her help in putting this piece together. If you company is interested in what is happening in the Asia-Pacific region email Michelle. She can provide details on our HR Policy Global Network there. Also, thanks to Adam Salter at Jones Day for pointing out the mistakes in earlier drafts – Tom Hayes.