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A practical guide to good faith bargaining for employers

Good faith bargaining is a central feature of the agreement-making framework under the Fair Work Act 2009 . According to the government, the aim of the proposed good faith bargaining requirements is to ensure that bargaining representatives “act in an appropriate and productive manner when working towards a collective agreement” (House of Representatives, Explanatory Memorandum to the Fair Work Act 2009 (Cth), (EM) pxxxviii). Under the Act, Fair Work Australia (FWA) is empowered to issue bargaining orders to ensure compliance with the requirements.

The government has suggested that the Act’s good faith bargaining requirements are “generally self-explanatory” (EM, p 149). Despite this assertion, the issue of precisely how employers will comply with the requirements has been the subject of intense debate. The purpose of this article is to provide employers with some guidance on what good faith bargaining is likely to require of them in practical terms.

What are the requirements of good faith bargaining?

The Act introduces “good faith bargaining requirements” and gives FWA the power to make orders to ensure compliance with those requirements. The requirements, which apply to bargaining representatives, are as follows:

• attending, and participating in, meetings at reasonable times
• disclosing relevant information (other than confidential or commercially sensitive information) in a timely manner
• responding to proposals made by other bargaining representatives for the agreement in a timely manner
• giving genuine consideration to the proposals of other bargaining representatives, and reasons for responses to those proposals, and
• refraining from capricious or unfair conduct that undermines freedom of association or collective bargaining.

The government has described this as an “exhaustive list”, which means that employers will not be compelled to meet any additional requirements (EM, p xxxviii). However, given the broad nature of the last requirement — refraining from capricious or unfair conduct that undermines freedom of association or collective bargaining — it appears that the list potentially captures any conduct which is capable of being characterised by FWA as demonstrating “good faith”.

The Act also specifies that the obligations will not require bargaining representatives to make concessions during bargaining or to reach agreement on proposed terms.

What does this mean in practice?

The government has noted that the concept of good faith bargaining is not new to Australian workplace law, pointing out that it was a feature of the former Federal Industrial Relations Act 1988. It has suggested that, for this reason, many businesses will be familiar with the concept of good faith bargaining, and so the uncertainty that might otherwise arise upon its introduction will be reduced (EM p xxxix).

However, it is apparent from a number of submissions to the Inquiry of the Senate Education, Employment and Workplace Relations Committee into the Act that there is confusion and concern regarding how the good faith bargaining requirements will translate in practice. Each element is examined in detail below.

Meeting attendance and participation

Under the Act, employers are required to attend, and participate in, meetings at reasonable times. The provision makes clear that merely turning up to a meeting will not be enough. Employers must also “participate”, by engaging in some degree of dialogue with employees or unions during meetings.

In its Submission to the Senate Committee Inquiry, the National Farmers’ Federation expressed concern that this provision could be interpreted in ways which detrimentally impact farmers who are “tied to windows of opportunity for shearing periods, harvests, and a myriad of other seasonal restrictions” and are often situated in remote locations, making physical attendance at meetings difficult.

In practice, such concerns may not eventuate. Of note, the requirement under the Act differs from the equivalent requirement under the good faith bargaining provisions in s 42B(2)(b) of the Industrial Relations Act 1979 (WA) which stipulates that parties must meet “at reasonable times, intervals and places for the purpose of conducting face-to-face bargaining”.

The absence of any such reference to face-to-face meetings in the Act, or to “reasonable places”, suggests that meetings via teleconference facilities or other similar means may suffice, particularly where employers are located in remote locations.

Furthermore, for employers, like farmers, who are subject to seasonal demands, it seems likely that, if a bargaining order was sought, such demands would be taken into account by FWA in its consideration of what constitutes “reasonable times” for meetings.

Disclosing relevant information

The second requirement — to disclose relevant information (other than confidential or commercially sensitive information) in a timely manner — has been the subject of considerable controversy. Recognising this controversy, the Senate Committee has recommended this requirement as an area for future review on how good faith bargaining provisions are working.

On the one hand, employers and employer groups, like the Motor Trades Association of Australia Industrial Council, have expressed concern that the requirement could be misused by parties to seek detailed financial and other information. Interestingly, there is no requirement for information to be “necessary”, as there is under the Western Australian and South Australian legislation, it must simply be “relevant”.

On the other hand, unions have argued that the confidential or commercially sensitive information exception goes too far and that it is easy for an employer to assert that any relevant information is confidential or commercially sensitive. They say that the exception threatens to make the obligation to exchange information completely redundant and, accordingly, that it should be narrowed to “genuinely confidential” material.

The terms “confidential information” and “commercially sensitive information” are not defined in the Act  and neither term has a settled legal meaning. Instead, precise meanings vary according to context and, for this reason, some pieces of legislation adopt specific definitions when these terms are used.

Accordingly, the exception is likely to be the subject of disagreement between employers and unions and, ultimately, it will be for FWA to determine on a case-by-case basis whether particular information falls within the exception (having first determined that it is “relevant”).

Although it will be open to employers to argue that particular information is not relevant or that it is confidential or commercially sensitive, an employer wishing to avoid a bargaining order made by FWA would be advised to do so only if they genuinely believe, or have received legal advice, that this is the case. Employers should also bear in mind that this requirement — like the other good faith bargaining requirements — is mutual, so that adopting a cooperative approach will be in their interest if they are seeking information in return.

Responding to proposals

The third good faith bargaining requirement involves responding to the proposals of other bargaining representatives in a timely manner. The Act does not require that such responses be in writing, but in the interest of good record-keeping and to avoid any dispute over whether a response was provided, written responses are advisable.

The legislation does not provide any guidance regarding the meaning of “timely” and, as with much of the good faith bargaining regime, this will be affected by the particular circumstances. One simple approach for employers wishing to comply with this requirement is to inform the other bargaining representative of their proposed response time frame immediately after receiving a proposal. This will encourage cooperation and will give the employees or union an opportunity to oppose the proposed time frame if they do not regard it as “timely”.

Genuinely considering proposals

The fourth good faith bargaining requirement involves genuinely considering the proposals of other bargaining representatives and providing reasons for responses. Neither the Act nor EM provides any guidance on the meaning of “genuine consideration”. However, in practical terms, employers will be able to demonstrate such genuine consideration through the reasons for responses they provide.

Clearly, if an employer agrees to a proposal, there would not be any allegation that they failed to genuinely consider the proposal. However, where a proposal is rejected, employers will need to demonstrate that they nevertheless gave the proposal genuine consideration by providing substantive reasons for their decision.

In its Submission to the Senate Committee Inquiry, the Australian Chamber of Commerce and Industry (ACCI) expressed concern that the requirement to give reasons would be used as a “harassing tactic” by unions to require employers “to detail in writing every single demand and proposal”. It has suggested that unions may tender a detailed set of submissions outlining their enterprise bargaining proposals and that, if the employer flatly rejected the submission or addressed only parts of it, a union could use this as the basis for obtaining a bargaining order.

ACCI has called on the government to remove the need to give reasons and limit the requirement to just giving genuine consideration. However, in the absence of giving reasons, it is not clear how employers would demonstrate that genuine consideration had been given.

Refraining from capricious or unfair conduct

The final good faith bargaining requirement — refraining from capricious or unfair conduct that undermines freedom of association or collective bargaining — appears to operate as a “catch all”, capturing employer conduct that would not otherwise fall within the Act’s good faith bargaining requirements. The government has indicated that this requirement “is intended to cover a broad range of conduct”. It suggests that conduct may be capricious or unfair if an employer:

• fails to recognise a bargaining representative
• does not permit an employee who is a bargaining representative to attend meetings or discuss matters relating to the terms of the proposed agreement with fellow employees
• dismisses or engages in detrimental conduct towards an employee because he/she is a bargaining representative or participating in bargaining, or
• prevents an employee from appointing his/her own representative.

However, these are just some examples and there are likely to be many other kinds of conduct that could be regarded by FWA as “capricious or unfair”.

Not required to make concessions or reach agreement

Although employers (and employees and unions) are required under the Act to bargain in good faith, the Act clarifies that bargaining representatives are not required to make concessions during bargaining or to reach agreement on proposed terms. In this way, the government has endeavoured to distinguish between procedure and content.

However, this distinction may not be as clear as the government would like. For example, ACCI has expressed concern that the good faith bargaining requirements will “prejudice employers unnecessarily” and effectively require them to make concessions or sign up to an agreement.

Maintaining the distinction between procedure and content will be a very real challenge for employers. It is possible that bargaining representatives (on either side) may exploit the provisions to wage a campaign of attrition in the hope that the other party will eventually give in to proposed terms.

Ultimately, it will be for FWA to ensure that this does not occur. However, employers can protect themselves from this outcome by being very clear on their procedural obligations under the Act and ensuring those obligations are met. For many employers, this will mean devoting additional resources to agreement negotiations than has been necessary in the past.

Conclusion

It is anticipated that the government’s good faith bargaining requirements will take effect on 1 July 2009. Despite the government’s claim that these requirements are “generally self-explanatory”, there is much uncertainty regarding how they will operate in practice and much will depend on FWA’s interpretation. Nevertheless, this article has endeavoured to offer some guidance to employers on the kind of conduct that is likely to be expected of them when the requirements take effect. 

By Joydeep Hor, Managing Partner and Louise Keats, Senior Associate, Harmers Workplace Lawyers

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