Terminating enterprise agreement can unfairly benefit employers

Enterprise agreements remain in operation after their nominal expiry date unless they are replaced by a new agreement or terminated under section 225 of the Fair Work Act.

The Fair Work Commission’s 2015 decision to terminate 12 nominally expired enterprise agreements covering Aurizon and its employees fundamentally reinterpreted the circumstances under which unilateral requests for termination had to be granted – allowing employers to pursue terminations of expired agreements during ongoing enterprise negotiations as a bargaining tactic.

The study, to be published in the Australian Journal of Labour Law, sought to analyse the impact of this decision, which was followed by increased applications to terminate expired enterprise agreements.

The authors conducted the most comprehensive analysis of section 225 decisions to date, examining 1,805 publicly available rulings over 11 years to explore to what extent the applications were contentious.

“Some claim that the Aurizon decision precipitated an increase in managerial assertiveness, while others view it as a sign of a broken bargaining system. But we found that only a small minority of applications were controversial, with other economic and regulatory developments inflating the figures,” said lead author Dr Alex Veen, Senior Lecturer in Work and Organisational Studies at the University of Sydney Business School.

“42 percent of applications were for agreements that no longer covered any employees. The rate of contested terminations — where an application was opposed by an employee, union, or employer — has further remained relatively stable over time, and only 1.3 percent of all employer-initiated applications were made in the context of ongoing enterprise bargaining negotiations.

“This number, however, does not reflect the likely significant ‘shadow effect’ that currently exists, with some employers using the threat of termination to an agreement to gain a bargaining advantage.”

Dr Veen said although the termination of an enterprise agreement can be a mechanism to progress stalled negotiations, it is far from a straightforward process.

His analysis suggests there are three aspects of the termination process to consider:

1. The Fair Work Commission plays an underappreciated and cushioning role in the process
2. Termination applications take time, and their outcomes can be unpredictable and contested
3. Termination will likely have a serious long-term impact on employee morale and a business’ workplace relations.

“The potential adverse consequence on morale and productivity suggests that, for most employers, initiating a termination application during negotiations will be a measure of last resort,” Dr Veen said.

“Nonetheless, the ability to terminate nominally expired agreements in such instances heavily favours employers over employees in the bargaining process — with employers effectively wielding the threat to materially reduce conditions of employment, and in most instances, the income and living standards of employees.

“As some of the high-profile disputes have highlighted, there is a need to address this within the architecture of the Fair Work Act.”