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Australia – “Good Faith Bargaining” Under Section 228, As Illustrated By Monty Python.

29 July, 2012

 

Legal News & Analysis – Asia Pacific – Australia – Labour & Employment

 

Endeavour Coal Pty Limited v Association Of Professional Engineers, Scientists and Managers, Australia [2012] FCA 764

 

In brief

 

  • The Federal Court has partly upheld an application by Endeavour Coal Pty Limited to overturn good faith bargaining orders made by a Full Bench of Fair Work Australia (Full Bench). Justice Flick found that whilst the Full Bench correctly interpreted the requirements of good faith bargaining under section 228 of the Fair Work Act 2009 (Cth) (FW Act), it acted beyond power in making a number of orders.
  • In his Honour's decision, Justice Flick considered the operation of section 228 and bargaining in the context of the FW Act. In doing so, his Honour referred to the exchange between Brian and the street merchant in Monty Python's Life of Brian as an illustration of the process of "bargaining".

 

Background

 

Endeavour Coal Pty Ltd (Endeavour Coal) had been bargaining with APESMA for a proposed enterprise agreement to cover staff employees at one of its mining operations. Staff had not previously been covered by an enterprise agreement.

 

Over 10 bargaining meetings were held between August 2010 and August 2011 during which there was significant disagreement about a number of issues including the incorporation of a standard form contract of employment in the agreement, the dispute resolution procedure and individual flexibility provisions. Endeavour Coal responded to all proposals from the union with reasons. It did not, however, put any positive proposals of its own toward an agreement on the basis that its preference was to not have staff employees covered by an enterprise agreement.

 

On 19 August 2011 the union made application to Fair Work Australia (FWA) for bargaining orders against Endeavour Coal on the basis that Endeavour Coal was acting in breach of the good faith bargaining requirements and were undermining the collective bargaining process, in part, by not putting forward positive proposals toward an agreement.

 

At first instance, Commissioner Roberts held that Endeavour Coal was not bargaining in good faith and issued orders that included a requirement that Endeavour Coal propose subject matters and terms that it would be prepared to include in an enterprise agreement.

 

Endeavour appealed the decision to a Full Bench of FWA. The Full Bench found that there was a legitimate basis for the making of all but one of the orders originally made. In arriving at its decision, the Full Bench stated that: "

 

(G)ood faith bargaining is intended to bring about enterprise agreements and the parties are under an obligation to try and conclude an agreement".

 

It was held that providing a formal indication of issues and proposals was an important element of the bargaining process. Endeavour Coal was found, in this sense, not to have made any substantive contribution to the bargaining process. This, it was found, amounted to a breach of the good faith bargaining requirement to give genuine consideration to proposals and to refrain from conduct which undermined the collective bargaining process: Endeavour Coal Pty Ltd v Association Of Professional Engineers, Scientists and Managers, Australia (Collieries' Staff Division) [2012] FWAFB 1891.

 

Federal Court finds that the Full Bench of FWA correctly interpreted the good faith bargaining requirements contained in section 228 of the FW Act

 

Endeavour Coal sought a judicial review of the decision of the Full Bench. Justice Flick of the Federal Court handed down his decision on 19 July 2012.

 

Justice Flick noted that the good faith bargaining requirements in the process of negotiating and making an enterprise agreement were fundamental to the correct construction and application of section 228 of the FW Act.

 

Importantly, the Federal Court accepted the Full Bench's construction of section 228 to the effect that the good faith bargaining requirements require all bargaining representatives to approach their task in good faith, and with a view to reaching agreement. In this regard, Justice Flick referred to the exchange between Brian and the Beard Seller in Monty Python's Life of Brian who haggled about the price of an artificial beard (at the same time as Brian was being educated about the process of haggling). Needless to say, but in that exchange, they arrived at a bargain.

 

Justice Flick stated that bargaining under the FW Act involves a process of "give and take". At some stage during the enterprise bargaining process, there may also come a time when the good faith bargaining requirements required the proffering of a counter-proposal (although this was not seen to be a necessary requirement in each case).

 

Bargaining representatives must genuinely participate in the bargaining process

 

Justice Flick held that a party who participates in bargaining must genuinely participate in the bargaining process, and must keep an open mind as to the prospect of ultimately reaching agreement. If an employer simply sits mute and merely rejects proposals of terms which are being advanced for its consideration, it might fail to meet the requirements in section 228. In other words, a party cannot merely reject offers and proposals without doing anything further.

 

However, Justice Flick stated that it is neither possible nor prudent to exhaustively define what conduct will constitute compliance with the good faith bargaining requirements or devise a set course which all bargaining must follow. The conditions which are called for will vary from case to case.

 

Justice Flick also indicated that an employer is not required to put self-interest to one side or make concessions during bargaining or reach agreement on the terms that are to be included in the agreement. Subject to meeting the good faith bargaining requirements, the manner in which an employer approaches bargaining is largely a matter for it to determine.

 

Further, it is to be noted that section 228(1) does not require "bargaining" to proceed until an "enterprise agreement" is ultimately reached. It is possible that the process will be exhausted and an impasse reached without an agreement being made.

 

Federal Court finds that Orders of Full Bench of FWA went beyond power

 

Although the Full Bench's interpretation of section 228 was accepted by Justice Flick, the Federal Court found that the Orders made by the Full Bench went beyond power, as they required Endeavour Coal to make concessions during bargaining. Justice Flick noted that section 228(2) reinforces the objective of Part 2-4 (as stated in section 171(b)) of the FW Act, namely, the facilitation of the making an enterprise agreement rather than imposing an agreement upon an unwilling participant in the bargaining process.

 

A key Order of the Full Bench, which the Federal Court found went beyond power, required that Endeavour Coal:

 

a) provide a list of subject matter that it would be prepared to include in an enterprise agreement;

b) tell the union what aspects of the union's draft agreement could be agreed;

c) tell the union what changes could be made to the union's draft agreement to make it an agreement which Endeavour Coal would make; and

d) propose terms of an agreement that it would be prepared to enter into.

 

The Federal Court found that this order went beyond the requirements of section 228 and also required Endeavour Coal to make concessions about matters to be included in an enterprise agreement. Order 1 sought to remove from the bargaining table both "subject matter" and "terms" and thereby sought to confine the scope of bargaining process to what remained. For these reasons, it breached section 228(2). The only Order which the Federal Court upheld was to the effect that Endeavour Coal would not vary the standard terms contained in staff contracts. This Order was considered as valid on the basis that it sought to preserve the integrity of the bargaining process.

 

Lessons for employers

 

  1. Employers should keep an open mind about reaching agreement during the bargaining process. Given the Federal Court's interpretation of section 228, consideration will need to be given to advancing positions rather than only listening and rejecting the proposals put forward by another bargaining representative.
  2. Employers should determine a clear bargaining position which allows for some flexibility in the way in which it considers and responds to proposals.
  3. In the event that an application is made against an employer seeking bargaining orders and an employer is found to have not complied with section 228, any orders which may be made cannot require the employer to make a concession or agree on terms to be included in an enterprise agreement. They also cannot operate to confine the bargaining process and deny the freedom of an employer to "give and take" or put back onto the bargaining table matters which may have been discussed at an earlier stage.

 

 

For further information, please contact:

 

Stephen Woodbury, Partner, Ashurst

stephen.woodbury@ashurst.com 

 

Michael Tamvakologos, Partner, Ashurst

michael.tamvakologos@ashurst.com

 

Bilal Rauf, Ashurst

bilal.rauf@ashurst.com

 

Anna Reoch, Ashurst

anna.reoch@ashurst.com

 

 

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