Multi-enterprise agreement myths: employment law update

By Mark Dunphy, Piers Mitchem and Iona Goodwin

Most readers know that in December 2022, amendments to the Fair Work Act 2009 (Cth) (Fair Work Act) ushered in a wave of significant industrial relations (IR) reforms. In assisting our clients come to grips with these new laws, we have come across a number of common ‘myths’ about multi-enterprise agreements (MEA).

Three myths that we encounter are that:

1. an MEA is the only kind of agreement that can be made under the IR reforms;
2. there is no way to avoid being compelled to bargain for (or being joined to an existing) MEA; and
3. Australia’s competition laws impose limits on multi-enterprise bargaining, because this type of bargaining might limit competition by establishing identical wages and employment conditions among competitors.

This article does not address the supported bargaining stream or the cooperative workplaces bargaining stream. It only deals with the single interest bargaining stream, where employers with common interests can choose to – or in some instances be forced to – bargain together for an MEA. It is thought these agreements will be particularly used in industries such as mining, or in certain manufacturing sectors.

More than one kind of agreement

Bargaining for an MEA is not the only way an employer can make an enterprise agreement. Employers who are not named in or bargaining for an MEA will still be able to bargain directly with their own workforce for a single enterprise agreement.

Compulsion to bargain

It’s worth noting that employees and employers in the on-site general building and construction industry are excluded from the MEA bargaining stream. Furthermore, a small employer - one with fewer than 20 employees – cannot be forced into an MEA.

For those employers not excluded, there are two ways an employer (the Employer) and their employees can be compelled to bargain for or join an MEA. These are:

• the Employer is named in a ‘single interest employer authorisation’ issued by the Fair Work Commission (FWC) which would require the Employer to bargain with the relevant employees, their union(s) and other named employers, for an MEA; or
• via a variation of an existing MEA that adds the Employer and the relevant employees as parties to that MEA (Variation).

However, the FWC will only be able to approve one of the above applications where all the following conditions are met:

• There is no ‘in term’ enterprise agreement already covering the relevant employees. Having an enterprise agreement in place that has not passed its nominal expiry date will, at the very least, delay any MEA/Variation application.
• The Employer hasn’t already agreed in writing with a union/s to bargain for a single enterprise agreement that would cover the relevant employees (or substantially the same group as the relevant employees).
• A majority of the relevant employees (who are identified in the application) are in favour of the MEA or Variation being made.
• The Employer and the other employers who would also be covered share clearly identifiable common interests and have operations and business activities that are reasonably comparable to one another. These two terms are discussed below.
• The FWC is satisfied that granting the application would not be against the public interest.

The terms common interests and reasonably comparable operations and business activities are not comprehensively defined and there is considerable uncertainty regarding what these terms will mean in practice. It seems these conditions are more likely to be satisfied where the relevant employers are engaged in similar industries, are of similar sizes (in terms of turnover and personnel) and/or are located in the same geographical area. These criteria however aren’t exhaustive, nor are they determinative. Ultimately it will be up to the FWC to decide in each case what these terms mean, and how they would apply.

If all the above conditions are satisfied, the FWC will still have discretion to reject the application if it is satisfied that:

• the Employer is already bargaining in good faith for a proposed enterprise agreement that will cover the relevant employees (or substantially the same group of employees identified in the application); and
• the Employer and those employees have a history of effectively bargaining for enterprise agreements; and
• (on the day that the FWC would have approved the MEA/Variation) the relevant enterprise agreement passed its nominal expiry date less than 9 months ago.

In these circumstances, Employers with a history of bargaining regularly and effectively with their workforce may be able to avoid being pulled into an MEA.

The way forward

While the factors set out above seem to illustrate that those employers with an ‘in term’ enterprise agreement and/or who are already bargaining for a single enterprise agreement and have a history of such bargaining stand the best chance of resisting being roped into an MEA, much about these reforms remains be seen.

Further, due to the uncertainty about the meaning of common interests and reasonably comparable operations and business activities, it is impossible to say at this stage whether MEAs/Variations will be limited to small numbers of employers, or whether they will extend to entire industries or sectors.

It is therefore inevitable that these reforms will result in litigation. The resulting decisions of the FWC and courts will clarify many of the questions that have already been raised. It is also probable that Parliament will pass further laws to clarify the IR reforms and ensure they are workable, including after the mandatory review into the operation of the IR reforms which must commence within two years.

Competition laws

While it is likely that the IR reforms will have some anti-competitive effects, federal competition laws contain a carve out that excludes anything done in relation to employee pay, conditions of employment and hours of work. Enterprise agreements are also considered to have ‘statutory force’ (they are legal instruments made under the Fair Work Act) and so are not the types of ‘private’ or contractual arrangements that the competition laws can regulate.

This means that enterprise agreements (including those covering multiple employers who are competitors) lie beyond the reach of competition laws as well as the ACCC’s jurisdiction to regulate anti-competitive behaviour.