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Home | Blog | Termination of Enterprise Agreements

Introduction

Enterprise Bargaining is a process, where Union representatives and/ or bargaining representatives negotiate with employees in order to set out the pay and conditions for employers generally for periods of three to five years.

Underlying the Enterprise Agreement is an award, which sets out the minimum conditions for the industry. However, if the current agreement is terminated the employer has the ability to remove any benefits which are in the Enterprise Agreement unless they are also contained in the Award or the Fair Work Act.

Historically the Fair Work Commission has been reluctant to terminate agreements. Vice President Lawler in the matter of Tahmoor Coal Pty Ltd (2010) FWA 6468 stated that it was generally inappropriate for Fair Work to terminate agreements. In this judgment he recognised the shift in power that this would cause. He stated that the Commission must be satisfied that it was in the public interest to terminate an agreement, but also that it was appropriate.

Furthermore, his Honour states that it will generally not be appropriate to terminate an expired agreement which is ongoing and there remains a reasonable prospect of success, even where the process has become protracted.

Aurizon Decision

The Full Bench in Aurizon Operations Limited: Aurizon Network Pty Ltd v Australian Eastern Railroad Pty Ltd [2015] FWCFB 540 came to the view that it was not necessarily inappropriate to terminate an enterprise agreement during the bargaining period.

The Full Bench stated that there is nothing inherently inconsistent between the termination of an enterprise agreement that has passed its nominal expiry date and the process of collective bargaining in good faith.

A significant factor in the Aurizon decision was their move to give undertakings to maintain the wages and allowances for employees covered by the agreements for a six month period.

The Full Bench, however, did comment that it was not an insignificant matter that the termination of an agreement would lead to a diminution of terms and conditions. They also state that it remains incumbent on employers to show why terminating an agreement is not against the public interest and is appropriate, having regard to the views of employees, employer(s) and Unions covered by the agreement.

Subsequent Decisions

A number of subsequent decisions have confirmed the Aurizon decision, including Griffin Coal Mining Company Pty Ltd [2016] FWCFB 4620 (Griffin Coal) and Murdoch University [2017] FWCA 4472 (Murdoch University), where the agreements were terminated. Again, the existence of undertakings to maintain a number of benefits and conditions in the agreement for six months was a significant factor in these discussions.

In subsequent decisions the capacity of the employers to improve their financial circumstances and the existence of ‘protracted bargaining’ were factors that played a significant role in making those decisions.

Conclusion

It should be noted that the employee representatives and Unions still have scope to challenge the termination of Enterprise Agreements. The statements that the court made in Aurizon, Griffin Coal and Murdoch University and other relevant cases demonstrate that if an employer applies to terminate an agreement they may not necessarily be successful. Each case will need to be assessed on its own facts.

If an employer seeks to terminate an agreement where bargaining is not protracted, the employer’s application may fail.

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