The resurgence of bargaining 09: getting the agreement approved

Once your employees have approved the enterprise agreement, you must apply to the Fair Work Commission (FWC) to have it approved within 14 days, unless you are given a further period by the FWC. In determining whether to approve your agreement, the FWC will ask itself a number of following questions, including:

• has the agreement been genuinely agreed to by the employees covered by it?
• does it appropriately interact with the National Employment Standards (NES) as set out in the Fair Work Act 2009 (Cth) (FW Act)?
• does it pass the better off overall test (BOOT)?

If the answer to all these questions are "yes", the FWC must approve the agreement. Let's take a look at these questions in more detail.

Genuine agreement

Section 188 of the FW Act sets out what the FWC will consider when determining whether an enterprise agreement has been genuinely agreed to by employees.

First, the statement of principles on genuine agreement published by the FWC must be taken into account. This is a recent amendment introduced into the FW Act by the Secure Jobs, Better Pay legislation, and involves an examination of the steps taken to:

• inform employees of the existence of the bargaining process and their right to be represented during that process;
• provide employees with a reasonable opportunity to consider a proposed enterprise agreement;
• explain the effect of the terms of that proposed enterprise agreement; and
• provide employees with a reasonable opportunity to vote on the proposed enterprise agreement.

Practically, satisfying the FWC of these steps should not be an issue, provided the employer complies with all the procedural requirements set out in the FW Act around bargaining, which we have discussed in previous articles in this series.

In relation to the requirement to explain the effect of the terms of the proposed, in our previous article, we noted the importance of considering employees from culturally and linguistically diverse backgrounds, as well as young employees, who may also be casual employees. It will be necessary for an employer to show that those cohorts of employees have adequately had the effect of the proposed agreement explained to them. Whilst what will be reasonable will always depend on the specific circumstances of an enterprise, common actions taken includes preparing certain information translated or prepared in a different language and holding information sessions for specific cohorts of employees that are tailored to their needs.

Second, the FWC must be satisfied that the employees who were asked to vote on the agreement have a sufficient interest in its terms and are sufficiently representative of the employees who will be bound by its terms. This is also a recent addition thanks to Secure Jobs, Better Pay and as such, there is no guidance on how the FWC will interpret this requirement. However, the statement of principles on genuine agreement suggests it will include consideration of whether the employees entitled to vote represent the full range of classifications, types and locations of employment and industries and occupations which the agreement intends to cover. If the FWC cannot be satisfied, it must not approve the agreement.

The sufficient interest test is likely to come into sharp focus if and when multi-enterprise agreements come before the FWC, as it will be important for it to be satisfied that any agreement which proports to cover a large number of employees over various workplaces is fit for purpose. For single enterprise agreements however, this will likely be satisfied if all employees who are proposed to be covered by the agreement are given the opportunity to vote. In this regard, it is important to note that the sufficient interest test is only concerned with the cohort of employees "requested to approve the agreement by voting for it", not the cohort who actually cast a valid vote.

NES interaction

Because they act as a safety net, the FWC will not approve any terms of an enterprise agreement that provide for entitlements that are below what are set out in the NES. Agreements are however able to:

• provide for entitlements above that which are set out in the NES (for example, 6 weeks annual leave, instead of 4); and
• provide for terms that are incidental to the NES entitlements (for example, how annual leave may be taken).

Generally, NES compliance is not an issue in bargaining, as all parties are aware of the minimum entitlements afforded by the NES such that they not usually bargained below.

Passing the BOOT

The mysterious BOOT has been the subject of much confusion and subsequent consideration by the FWC. The terms of section 193 of the FW Act state what needs to be shown to for an agreement to pass the BOOT.

There are two common myths about the BOOT that should be busted:

• that when analysing a proposed agreement, the FWC compares it against any previous enterprise agreement in force; and
• that to pass the BOOT, every single term in an enterprise agreement must provide for terms that are more beneficial to the employee.

In relation to the first myth, clause 193 of the FW Act makes it clear that the BOOT will be passed "if the FWC is satisfied, as at the test time, that each award covered employee, and each reasonably foreseeable employee, for the agreement would be better off overall if the agreement applied to the employee than if the relevant award applied to the employee."

In relation to the second myth, there is significant case law which supports the conclusion that rather than a line-by-line analysis, the test is an overall assessment of the advantages and disadvantages of the agreement against the relevant award. However, the 2016 Full Bench decision of Hart v Coles somewhat muddied the waters on this point, by holding that if any individual employees or potential employees were found to not be better off, undertakings (which are discussed below) would need to be entered into. Practically, this required employers to provide analysis as part of the approval process around every possible circumstance for each employee and prospective employee, and how they would be better off overall. As could be imagined, this was incredibly onerous and led to significant delays in the approval process as the FWC attempted to satisfy itself that every actual and possible employee would be better off under the proposed agreement.

This position is now codified in section 193A of the FW Act, which aims to provide clarity as to how the BOOT is applied and makes clear that the circumstances of any prospective employees must be reasonably foreseeable at the time the application for approval was made.

Finally, one provision in section 193A that is worth noting is (4), which requires the FWC, when applying the BOOT to "give primary consideration to a common view (if any) relating to whether the agreement" passes the BOOT expressed by the employer and the bargaining representatives. Practically, this places primacy on consensus and seeks to encourage such a position being reached during bargaining. Whilst this is a new provision inserted in the FW Act, and there is limited decisions setting out the weight the FWC places such an agreement, it suggests that if such consensus can be reached, it may act as an "express lane" through the FWC.

Despite the clarity on the BOOT provided by section 193A, undertaking the modelling that proves it is satisfied can be a time consuming process and it may be beneficial for employers to seek legal assistance in undertaking this task to ensure it is done right the first time to avoid unnecessary delays.

The concept of undertakings

Where the FWC has concerns that the answer to any of the questions set out at the start of this article may be no, it may seek to approve an agreement with undertakings as provided for in sections 190 and 191 of the FW Act. Practically speaking, undertakings amend the content of an agreement made during bargaining without the need for a re-vote. Whilst undertakings can be made on almost any matter in an agreement, they must not cause financial detriment to any employee or result in substantial changes to its contents. If the FWC considers that any changes necessary to approve the agreement would result in these outcomes, it will not approve it.

For this reason, it is important to strive to have your agreement approved without the need for undertakings to be considered. Having said that, undertakings are not uncommon to address minor defects in a voted up agreement.

When it comes to the FWC approval process, preparation is the key. Whilst your agreement is being voted on, employers should start working on the documentation needed to apply to have it approved.

The FWC has set itself the goal of approving 50% of simply applications within 10 working days and 95% in 20 working days. By following the steps set out in this article series, you will be in a good position to have your agreement implemented as soon as possible.