Under the previous WorkChoices regime, the unilateral termination of expired collective agreements by employers was relatively straightforward. In contrast to that position, Fair Work Australia has recently outlined its broad discretion to determine when termination should occur in accordance with the provisions of the Fair Work Act 2009 (the Act).
In the case of Tahmoor Coal Pty Ltd v CFMEU  FWA 6468, Tahmoor Coal (a subsidiary of Xstrata) applied to Fair Work Australia (FWA) to terminate two 2006 agreements relating to an underground mine and a washery. These agreements respectively expired in April 2009 and April 2008. This case provides a useful examination of FWA’s new obligation to assess the “appropriateness” of terminating an expired collective agreement, as prescribed in s.226 of the Act.
Negotiations for replacement agreements had been occurring with the CFMEU for approximately 18 months, including 60 bargaining meetings. The CFMEU had previously taken protected strike action (to which the company responded by locking out employees) and had unsuccessfully sought good faith bargaining orders.
In seeking termination of the existing expired agreements, Tahmoor argued that the provisions of the agreements constrained productivity “to a material degree”, including the impositions of:
- minimum staffing requirements;
- limitations on use of contractors;
- retrenchment and re-hiring based on employee seniority;
- restrictions on shift arrangements and work hours; and
- dispute resolution provisions requiring the status quo to be maintained.
FWA Vice President Michael Lawler recognised Tahmoor’s interest in “seeking to unlock the productivity benefits” by removing the “constraints” imposed by the agreements. However he also recognised the employees’ interests in retaining the job security provided by the agreements, particularly in a “notoriously cyclical” industry.
In the first FWA decision to address the s.226 appropriateness test, Vice President Lawler noted that the fact that the new legislation includes such a test is of “particular significance”, and results in authorities determined under the old legislation being of “limited assistance in determining whether the termination of an expired agreement is ‘appropriate’”. When assessing whether termination of an expired agreement is appropriate, Lawler indicated the FWA will take into account factors including:
- the views of the employees, employer(s) and employee organisations covered by the agreement;
- the circumstances of the employees, employer(s) and employee organisations, particularly the effect of termination upon them;
benefits of terminating the agreement;
- any detrimental effect caused by termination of the agreement;
- the objects of the Fair Work Act, especially the productivity and good faith collective bargaining objectives; and
- whether termination of the agreement will enhance or reduce the prospects of bargaining for a new agreement.
Vice President Lawler was of the opinion that termination of an agreement resulting in a party becoming “disproportionately” worse off would indicate that the termination was inappropriate. Where bargaining for a new agreement is occurring, Vice President Lawler stated that
“generally speaking, it will not be appropriate to terminate an agreement that has passed its nominal expiry date if bargaining for a replacement agreement is ongoing such that there remains a reasonable prospect that bargaining … will result in a new agreement. This will be so even where the bargaining has become protracted because a party is advancing claims for changes that are particularly unpalatable to the other party.”
It was held that “it will generally be inappropriate for FWA to interfere in the bargaining process so as to substantially alter the status quo in relation to the balance of bargaining between the parties”. Importantly, it was found that Tahmoor’s employees had enjoyed the benefit of the conditions provided for in the agreements for years prior to the particular agreements at issue, and that termination of the agreements would increase management’s prerogative at the expense of the CFMEU’s ability to represent its members’ interests.
Accordingly, Vice President Lawler found that terminating the expired agreements would “alter the status quo in a fundamental way”, and refused the application.
What should employers do in the future?
If you are considering applying to terminate an expired agreement, it is now important to ensure that termination does not adversely impact an ongoing bargaining process. If possible, the termination should be supported by both employer and its employees (and their representatives). Where an employee group can allege they will be disadvantaged by the termination, FWA’s approval of the application may be difficult to obtain. In such circumstances, employers should also consider the further pursuit of good faith bargaining.
Employers considering termination of an existing collective agreement, or otherwise preparing a collective agreement, should contact a member of our workplace relations team should they require assistance.
Phone: 61 3 9602 9744
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