Terminating expired enterprise agreements is no longer taboo!

A recent Fair Work Commission (the Commission) Full Bench decision has challenged the principles previously established by the Commission for terminating enterprise agreements.  

Background

Aurizon Operations Limited, Aurizon Network Pty Ltd and Australian Eastern Railroad Pty Ltd (collectively, Aurizon), made separate applications to terminate several expired enterprise agreements (the Expired Agreements).

Aurizon argued the Expired Agreements should be terminated due to the "market in which it operates, changes that have occurred consequent upon its privatisation, the history of the enterprise agreements, the changes to the agreements sought by the parties during bargaining, and in particular the changes sought by Aurizon, the history of negotiations for new agreements, the importance of particular provisions of the agreements to employees, the operation of particular provisions in the workplace context and the impact on employees of the removal of particular provisions and of the termination of the relevant agreements that apply to the employees." Aurizon led extensive evidence, including expert evidence to support its application.   

Facts

Aurizon is the private entity successor to Queensland Rail (QR), a government corporation.  Aurizon provides rail based freight transport and infrastructure services throughout Queensland and other states. 

As part of the sale and privatisation of QR, the then Queensland government issued a directive requiring enterprise agreements being negotiated by QR at that time to maintain a number of employment guarantees. Aurizon submitted that the guarantees within the Expired Agreements gave it's competitors a "significant labour cost and productivity advantage". 

It further argued the Expired Agreements enshrined demarcation of work and imposed operational restrictions and efficiencies which included a "no forced redundancy clause" resulting in, at the time of the hearing, approximately 69 employees who were in "transit" - that is employees who were not engaged in any productive work and were unlikely to be redeployed. 

The unions challenged the applications and argued that the "provisions are necessary so that employees have certainty about their hours of work… in an environment where employees already worked varying shifts and uncertain patterns".

The parties had attempted to bargain for new agreements and conferences had been facilitated by the Commission.  Bargaining was protracted with little or no progress made on any substantive issues and there appeared to be no real prospect of agreement being reached. 

Additionally, Aurizon had given undertakings to its employees covered by the Expired Agreements, maintaining a number of entitlements which existed in the Expired Agreements.  The undertakings would operate for 6 months from the termination of the Expired Agreements unless certain events happened, including the making of a new agreement before the 6 months expired.  Payments made to employees pursuant to the undertakings were intended to satisfy all wages and allowances payable under the award, the National Employment Standards (the NES) or contracts of employment and would be absorbed against any payment or benefit payable under the award, the NES or contacts of employment.

The Decision

Under the Fair Work Act 2009, where applications are made to set aside Expired Agreements, the Commission must set them aside if:

1.  it is not contrary to the public interest; and

2.  the Commission considers it is appropriate to do so, having regard to all the circumstances and  
     including the views of employees, the employer and unions covered by the agreement and the
     likely effect that the termination will have on each of them. 

Not contrary to the public interest

The Full Bench found that:

"...there is no statutory imperative that the promotion and delivery of productivity benefits at an enterprise level is primarily or exclusively to be achieved through enterprise bargaining in good faith rather than by other means… 

The statute also mandates that on application by the person covered, an agreement that has passed its nominal expiry date must be terminated if the circumstances identified in s. 226 exist. Productivity benefits might also be delivered by terminating an agreement that has passed its nominal expiry date. Such benefits might be delivered through a combination of both means."

The Full Bench found it was not contrary to the public interest to terminate the Expired Agreements.  Even though it may disturb the bargaining positions of the parties, it is not counter to the object of a fair framework for collective bargaining and facilitating good faith bargaining.  None of the parties indicated they would not pursue new agreements nor would cease bargaining if the Expired Agreements were terminated.  

Further, the fact the termination of the Expired Agreements would result in an alteration to the terms and condition of employment is not, of itself, contrary to the public interest.   The Expired Agreements have clauses which are not common in enterprise agreements, precluding effective utilisation of labour and unreasonably constraining Aurizon's capacity to deploy and redeploy labour in response to needs and demands for its services.  The Full Bench held that freeing itself of the restrictive provisions, job security would be enhanced and Aurizon's competitive position improved.  

Appropriateness to terminate the Expired Agreements 

The Full Bench further found that:

• the stalemate in the current enterprise bargaining negotiations and  the change in bargaining strength must be viewed in the context of the legacy clauses such as no forced redundancy being imposed on Aurizon by the Queensland government as a cost of the privatisation transaction through the Expired Agreements; 

• even though the preponderance of employees and the unions do not support the termination of the Expired Agreements, Aurizon gave undertakings to maintain the core terms and conditions of employment for a period of time following the termination of the Expired Agreements; and 

• the prospect of a reduction in terms and conditions of employment of employees covered by the Expired Agreements is not such a significant a factor so as to outweigh terminating the Expired Agreements.

Lessons

Although there were a number of unique factors in this matter, the Commission has now made it clear the view that there is no longer a predisposition against the termination of expired enterprise agreements, even where there may be a reduction in conditions following a return to the modern award until a new agreement is made.

The unions have lodged an appeal of  this decision which has now been heard by the Full Court of the Federal Court of Australia.  A decision has not yet been handed down. 

While the Commission's decision provides an impetus for employers to consider applying to terminate their expired agreements, particularly if negotiations have been at a stalemate for a significant period of time, if the Federal Court overturns the decision and adopts the earlier principles, the ability to terminate the Agreement will again become very difficult.

We will keep you apprised as this matter develops. 

If you would like to know more information, please contact National Workplace Lawyers on  +61 2 9233 3989. 

National Workplace Lawyers

Note — this is for information purposes only and does not purport to be comprehensive or to render legal advice.