An enterprise agreement is a binding instrument made between an employer and employees – or, in the case of a greenfields agreement, between an employer and relevant unions – that governs terms and conditions of employment.

Applications for enterprise agreement approvals are the second most common type of application lodged with the Commission. As well as assessing and approving agreements, the Commission assists parties with the process of making agreements, and with resolving disputes that arise during bargaining or under agreements already in operation.

Approval of enterprise agreements

Before approving an enterprise agreement, the Commission must be satisfied that it meets criteria set out in the Fair Work Act, including the ‘better off overall test’ (BOOT). This test requires that each employee covered by the agreement will be better off overall than under the relevant modern award.

The Commission must also be satisfied that required pre-approval steps have been taken, that the group of employees covered by the agreement was fairly chosen, and that the agreement:

• has been genuinely agreed to by the relevant employees
• was adequately explained to employees
• does not contain terms that exclude or have the effect of excluding the NES or a provision of the NES
• does not include any unlawful terms or designated outworker terms
• specifies a date as its nominal expiry date (not more than four years after the date of Commission approval)
• provides a dispute settlement procedure
• includes a flexibility clause and a consultation clause.

Significant decision – when is a genuine new enterprise established?

The West Gate Tunnel Project is a major Victorian infrastructure project being undertaken in partnership between the Victorian Government and one of the world’s largest toll-road operators, Transurban. The joint venture partners sought to negotiate and make two greenfields agreements. While they were negotiating, the joint venture partners and several of their subcontractors undertook design work, geological testing, service relocations and other works.

They applied to the Commission for approval of the greenfields agreements despite union opposition. As the enterprise to which the agreements related had been established by the time the application was made, the Commission decided that the agreements did not relate to a genuine new enterprise, and so it could not be approve the agreements

The decision in Applications by CPB Contractors Pty Ltd & John Holland Pty Ltd is at [2019] FWC 1122.

Performance overview

In 2018–19:

• 4,932 applications for approval of an enterprise agreement were lodged
• 5,370 agreements were finalised, of which 88 per cent (4,709) were approved, 2 per cent (85) were refused and 11 per cent (576) were withdrawn
• of the applications that were approved, 66 per cent (3,097) were approved with an undertaking.

Information and tools provided by the Commission to assist parties making an enterprise agreement continued to be highly utilised, including:

• comprehensive online enterprise agreement benchbook
• step-by-step guide to making compliant single-enterprise agreements
• 10 tips for agreement making to assist with compliance about process
• online automated date calculator that provides dates that comply with all legislative requirements
• online automated NERR generator that provides parties with a compliant Notice for their specific circumstances
• legislative checklist about varying single- enterprise agreements
• weekly Bulletin and Quarterly Practitioner Update on case law to subscribers (including guidance on specific matters that result in common mistakes, such as model terms for NES precedence clauses)

In 2018–19, the website received:

• 1,050,918 page views regarding enterprise agreements and 33,665 downloads of the enterprise agreements benchbook
• 9,656 downloads of the step-by-step guide to making a single-enterprise agreement
• 11,466 page views or downloads of the Guide: Notice of Employee Representational Rights
• 3,467 downloads of the single-enterprise agreement legislative checklist
• 10,318 page views of the single-enterprise agreement date calculator, which assists parties in understanding whether they have met legislative timeframes.

Performance discussion

The number of applications for approval of an enterprise agreement decreased slightly in 2018–19 as shown in Table 17.

Table 17: Enterprise agreements – applications lodged and finalised

Finalisation of matters

In 2018–19, a total of 5,370 enterprise agreements were finalised, 9 per cent more than were lodged as shown in Table 17. This demonstrates the Commission’s improved performance in dealing with agreement applications in 2018–19 and reflects the Commission’s successful efforts to substantially reduce the backlog of agreements during the reporting cycle.

Table 18: Enterprise agreements – finalisation of matters

Table 19 sets out the number of agreements approved with and without undertakings over the past four reporting periods. Figure 5 shows that in 2018–19 there was an increase in the proportion of agreements approved with undertakings and a corresponding decrease in those approved without undertakings.

Table 19: Enterprise agreements – agreements approved, with and without undertakings

Figure 5: Enterprise agreements – agreements approved with and without undertakings

Timeliness discussion

The making and approval of agreements involves some complexity. The Commission is required to ensure that each agreement and approval application complies with the requirements of the Fair Work Act. Additionally, from time to time, decisions of the Commission, the Federal Court of Australia and the High Court of Australia clarify how the Fair Work Act is to be applied by Members in approving applications for enterprise agreements. This can mean that following such a decision, approval applications are required to include additional information before a Member can be satisfied that they should be approved.

From late 2016 enterprise agreement applications have been determined by Members with the assistance of an administrative ‘agreement triage’ process. The triage process involves a consistent and comprehensive analysis of approval applications. The analysis includes completion of a checklist which sets out the various statutory requirements and may involve modelling and analysis that compares entitlements between the agreement and the modern award based on anticipated rosters.

At all times the judgment as to whether an agreement should be approved, or whether an undertaking should be sought or accepted, remains with the Member who is dealing with the application. However, the triage process assists Members to exercise their function in a consistent and rigorous way.

Consistency in decision-making is an important element of access to justice. Broadly speaking, tribunal decision makers should reach consistent decisions on cases with common facts and circumstances, within the parameters of the discretion conferred upon them by the legislation.

Rigour in the decision-making process is important. The consequences of failing to identify either a technical or a substantive defect in the agreement making process or the agreement itself are significant. An agreement invalidly approved exposes all parties to it to a collateral attack in the courts, creating uncertainty as to whether the agreement is a legal nullity.

Since 2017, most agreement applications have been assessed as not including the required information or otherwise deficient at the time of lodgment. As illustrated in Figure 5, around two-thirds of agreements have required undertakings before they can be approved. Additionally many more were assessed as being incomplete, requiring follow up as the Member did not have adequate information to be satisfied that the agreement could be validly approved, or the application had technical defects, such as an agreement not having been correctly signed that delayed the approval process.

The additional work created by the significant increase in applications assessed as incomplete or non-compliant, together with the factors listed below, created a substantial backlog which caused a decline in timeliness:

• an almost threefold increase in applications to vary agreements as a result of changes to the Tendering and Performance of Building Work 2016 Building Code 2016
• a significant spike in approval applications lodged in December 2017
• a significant spike in applications to terminate agreements
• the impact of administering a large number of applications which had been held in abeyance pending passage of the Fair Work Amendment (Repeal of 4 Yearly Reviews and other measures) Bill 2017.

Whilst it has taken some time for the backlog to be resolved, this has now been achieved. The Commission is confident that the recent improvement in timeliness performance can be sustained.

The Commission took decisive action during 2018–19 to improve timeliness, and to assist parties to lodge complete and compliant applications for approval. Recent measures have included:

• streamlining communication by sending correspondence seeking further information or requesting undertakings directly from the relevant Member’s Chambers
• focusing resources on ‘simple applications’ to encourage parties to lodge complete and compliant applications
• publishing a guide to assist parties to make compliant agreement applications, including practical information on how to resolve common mistakes
• increasing resources allocated to assessing agreement applications
• establishing a user group comprising of the employers and organisations that lodged, or were associated with lodging, a substantial number of agreement applications in 2018
• closely monitoring and reporting on performance.

The Commission continues to be focused on improving our performance and will continue to explore opportunities to achieve this in 2019–20.

Changes to the statutory framework

Schedule 2 to the Amending Act commenced on 12 December 2018.

Prior to the commencement of the amendments, the Commission had no capacity to approve enterprise agreements where there had been certain errors in the agreement making process under the Fair Work Act. Such errors include minor defects in the content or form of the Notice of Employee Representational Rights and failure to take certain pre-approval steps. Non-compliance with such requirements was commonly the reason why applicants withdrew approval applications (794 approval applications were withdrawn in 2017–18).

The amendments introduced a new s.188(2) of the Fair Work Act that allows the Commission to find an agreement has been ‘genuinely agreed’ to despite certain minor procedural or technical errors, if the Commission is satisfied that:

• the agreement would have been genuinely agreed to but for those errors
• the employees covered by the agreement were not likely to have been disadvantaged by the errors.

On passage of the Amending Act, the President of the Commission convened a Full Bench to provide parties with guidance as to the proper construction of the new s.188(2). The Full Bench issued its decision on 16 January 2019.

The amendments have led to a significant reduction in the number of applications that need to be withdrawn or are not approved, particularly those that are withdrawn less than 35 days after lodgment (which suggests they were withdrawn due to a technical error). The overall proportion of application withdrawals has dropped from around 17 per cent of lodgments in the six-month period from July to December 2018 to 5 per cent in the period from January to June 2019.

Timeliness

The Commission amended its portfolio budget statement target for 2018–19 to refer to the approval of agreements without undertakings. The Commission finalised agreements without undertakings in a median time of 30 days (including single-enterprise, greenfields and multi-enterprise agreements), as shown in table 20.

Table 20: Enterprise agreements – timeliness, performance against PBS target

The median represents the middle of a distribution of values arranged such that half of the values are above the median and half are below. The median is commonly used to measure the properties of datasets as it is less affected by outliers than the mean, such as complicated and contested agreements that can take an unusually long time to approve. It is therefore a better representation of the time it takes most agreements to be approved, than the mean.

Additional benchmarks are reported against, providing further information about the time taken to approve applications that are complete and compliant at lodgement (described as ‘simple’ agreements) and applications that are assessed as requiring additional information and/or potential defects (described as ‘complex’ agreements). Complex agreements take longer to process because multiple interactions between the Commission and the parties are usually required in order to determine such applications.

Table 21 provides a breakdown of timeliness in approving single-enterprise, greenfields and multi-enterprise agreements separately, with and without undertakings.

Table 21: Enterprise agreements – timeliness, approval of agreements with and without undertakings

The decline in performance in the reporting period reflects the impact of a backlog from the previous reporting period that was not resolved until the latter part of the 2018-19 financial year.

Figures 6 and 7 show the Commission’s performance against the internal timeliness benchmarks in 2018–19.

Figure 6: Enterprise agreements – timeliness, finalisation of simple applications

Figure 7: Enterprise agreements – timeliness, finalisation of complex applications

IMPORTANT UPDATE

The Commission’s performance against its timeliness benchmarks improved
significantly between 9 February and 8 September 2019, as shown in Figures 8
and 9.

Figure 8: Enterprise agreements – timeliness, finalisation of simple applications 9 February to 8 September 2019

Figure 9: Enterprise agreements – timeliness, finalisation of complex applications 9 February to 8 September 2019

The Commission has successfully addressed the decline in timeliness for approving agreements which was reported in last year’s Annual Report. This decline had been primarily caused by the increase in applications assessed as non-compliant or incomplete.

From a peak of 2,063 applications in January 2019, the number of matters on hand has reduced to less than 550 applications.

Based on performance in the last seven months, compliant and complete applications are being approved within a median of 17 days from lodgment*. Similarly, all applications, simple and complex, are being approved in a median of 34 days from lodgment*.

_{*Based on matters lodged and finalised for the seven-month period 9 February 2019 – 8 September 2019.}

In focus – engaging with agreements parties

In 2018–19 the Commission established an Agreements User Group (AUG). The AUG comprises 31 large employers, peak bodies, employer organisations and unions who were involved in the greatest number of agreement approval applications in 2018.

The AUG is a consultative forum that enables frequent users to provide feedback to the Commission on our processes and input into future initiatives. Two meetings have been held so far in 2019 chaired by the President and the Practice Leader for Agreements, Deputy President Masson.

At the first meeting the President discussed the impact of the recently passed Amending Act while the second meeting included a demonstration of the proposed smart forms for agreement approval applications which will be released later in 2019.

Arising from the research behind the Making Compliant Agreement Applications guide released in February 2019, members of the AUG were also provided with tailored information regarding common issues in agreement approval applications in their sector.

Significant decision – can a Minister give evidence during consideration of an agreement?

The Metropolitan and Fire and Emergency Services Board (MFESB) applied for approval of the Metropolitan Fire and Emergency Services Board, United Firefighters Union of Australia, Operational Staff Agreement 2016.

The Minister for Small and Family Business, the Workplace and Deregulation (the Minister) submitted that the agreement contained discriminatory and objectionable terms for part-time employees and employees entitled to flexible working arrangements. The Minister filed submissions and evidentiary material in objection to approval of the agreement. The MFESB and the United Firefighters Union of Australia (UFU) raised objections to the Minister’s material.

The Commission considered whether the Minister should be allowed to present evidence. The UFU opposed the Minister giving evidence and argued that the material sought to be relied upon by the Minister was of little relevance. The MFESB argued that the Minister’s materials were of little value in the context of this proceeding. However, it did not object to the Commission receiving it.

The Commission decided that it could not determine, at that time, whether the material was ultimately relevant. This would be determined in light of all of the evidence and after the full argument on the issues at the scheduled hearing.

The decision in Application by the Metropolitan Fire and Emergency Services Board is at [2018] FWC 3942.

Variation of enterprise agreements

The Commission may vary an agreement before its nominal expiry date if a majority of affected employees cast a valid vote to approve the variation and an application is lodged with the Commission under s.210 of the Fair Work Act. The variation has no effect unless it is approved by the Commission.

The Commission may also vary an enterprise agreement under s.217 of the Fair Work Act to remove an ambiguity or uncertainty, on application by any of the following:

• one or more of the employers covered by the agreement
• an employee covered by the agreement
• an employee organisation covered by the agreement.

The Commission must also review an enterprise agreement that is referred by the Australian Human Rights Commission under s.46PW of the Australian Human Rights Commission Act 1986 (which deals with discriminatory industrial instruments).

In 2018–19, 89 per cent of applications to vary agreements were made under s.210 of the Fair Work Act, as shown in Table 22. The number of applications made under s.210 returned to the levels seen in 2016–17 and 2015–16 after a significant increase of 174 per cent in 2017–18. The increase was mainly due to a large number of applications to vary agreements in the construction sector in order to comply with the Code for the tendering and performance of building work 2016, which commenced in December 2016.

Table 22: Applications to vary enterprise agreements – applications lodged and finalised

Termination of enterprise agreements

Under the Fair Work Act, an enterprise agreement continues to operate after its nominal expiry date until it is replaced by a new agreement or the Commission terminates the agreement on application. The process required to terminate an agreement depends on whether termination is sought before or after the agreement’s nominal expiry date.

An employer and its employees may agree to terminate an enterprise agreement. Termination is agreed through a vote of employees covered by the agreement – a majority of employees who cast a valid vote must agree to the termination.

If an enterprise agreement has passed its nominal expiry date, any of the employers, employees or unions covered by the agreement may apply to the Commission for the termination of the agreement.

If the Commission decides to terminate an enterprise agreement under these provisions, the termination operates from the day specified in the Commission’s decision.

Table 23 shows the numbers of applications to terminate an agreement that were lodged and finalised in 2018–19. The majority of applications lodged (54 per cent) were made after the agreement’s expiry date, under s.225 of the Fair Work Act. The number of applications in 2018–19 decreased by 7 per cent after a 30 per cent increase in 2017–18.

Table 23: Applications to terminate enterprise agreements – applications lodged and finalised