How to start the process of negotiating an Enterprise Agreement
Starting the process for negotiating an Enterprise Agreement can be fraught with traps and unwanted surprises. Here are 5 key items to address before you commence the process.
Your labour cost is probably, if not definitely, one of the biggest operating expenses of your business. So, treat the Enterprise Agreement as a most important commercial contract for the business over the next three to four years.
Consult with a broad range of stakeholders – involve your operational and finance teams as well as your HR team and decide precisely what you need to achieve from the agreement. Line up business strategy with the Enterprise Agreement strategy. Draw up a detailed list of both your preferred and your minimum acceptable outcomes.
Depending on your circumstances, there may be quite a deal of bargaining. Unions often deliver ambit claims knowing that they will sacrifice many of them to gain agreement in relation to their most important demands. You need to consider whether you should take that approach or not. A major determining factor in this respect can be whether a union is likely to be involved.
It is important to consider the logistics of your Enterprise Agreement. Who will constitute the bargaining committee for the business? Where will negotiation meetings be held and how often? Who in finance and operations will support the bargaining committee and provide information as required? How long do you plan for it to take?
There are very detailed processes for bargaining and approval of Enterprise Agreements in the Fair Work Act and the Fair Work Regulations.
Get the process right from the outset; the Notice of Employee Representational Rights (NERR) is key. Get the form right, get the scope right and ensure you have complied with the requirements of the Act. Understand the procedural requirements of all the steps – commencing and conducting the negotiations or bargaining and also the approval process. Every box will need to be ticked if the EA is to be approved.
Communicating the plans with the employees is very important for a successful enterprise bargaining. Do not allow a vacuum as it will be filled and more likely to end up with union involvement or if the union is already involved, it will likely make your dealings with the union more difficult than they need to be.
A satisfactory outcome is more likely to be achieved if the employer takes the lead and does not allow the union to set the agenda.
Regular open engagement with employees about the bargaining process from the outset will assist in getting your proposed EA over the line. It is an agreement between employer and all employees so be ready to involve the employees in the process using a well thought out communication strategy.
5. Compliance Check
The Act has strict requirements for agreement content. Carry out a full compliance check on any drafts. Ensure that the proposed EA:
meets the ‘better off overall test’ (BOOT) does not contain non-permitted or prohibited matters; and contains all mandatory clauses.
This will save delay, heartache and undertakings when it goes to the Fair Work Commission for approval.
Careful planning around each of these factors and involving your legal advisers at an early stage to check compliance issues, will make the enterprise bargaining shorter, more productive and yield a better result for the business.
This is so, especially given the Commission’s new processes for approval. Enterprise Agreements are now reviewed by legally qualified staff prior to being referred to a member of the Commission. These legally qualified reviewers do an almost line by line review of the proposed EA against the relevant comparator Award.
This process, while intended to standardise approval processes has recently resulted in a significant increase in the proportion of Enterprise Agreements (that have been voted on and agreed by the workforce) failing at the last approval hurdle. An increasing number are being withdrawn or dismissed. Those which are not, more often than ever, require undertakings (often significant and multiple) in order to gain the Commission’s approval.
Just because an Enterprise Agreement is in similar terms as was approved by the Commission before, does not mean that it will be approved again. The table below tells this story:
Now that it is more difficult to get an Enterprise Agreement approved by the Fair Work Commission, it is more important than ever to involve your legal advisers in the process from the outset. This will help minimise procedural errors and maximise the prospect that any agreement voted up by your workers is not declined by the Commission for technical reasons.
For help and advice regarding enterprise bargaining and employment law or work health and safety issues, call the team at McKays.