A Full Bench of the Fair Work Commission recently overturned a decision to terminate an enterprise agreement because the evidentiary findings did not support the single member’s conclusion that negotiations had reached an impasse.

The Fair Work Act 2009 sets a high bar for the unilateral termination of an expired enterprise agreement which the Full Bench found was not met in Deputy President Abbey Beaumont’s decision in Australian Workers’ Union v Alcoa of Australia Limited [2019] FWCFB 4247.

The Full Bench, comprising Deputy Presidents Gostencnik and Colman and Commissioner McKenna, ordered the application for termination of an Alcoa of Australia Limited enterprise agreement be remitted back to Deputy Beaumont for redetermination.

Background: Concessions made under threat of termination

AREEA member Alcoa of Australia Limited (Alcoa), operates one of the largest bauxite mining, alumina refining and alumina smelting systems in the world with two mines, three refineries, two port facilities and three farmland operations in Western Australia.

On 12 March 2018, Alcoa filed a s225 application to terminate The Alcoa World Alumina Australia WA Operations AWU Enterprise Agreement 2014, which covers around 1,530 employees in Western Australia. The agreement nominally expired on 31 March 2017 and covered the Australian Workers’ Union (AWU).

If successful in its application, the employees covered by the agreement would revert to the Aluminum Industry Award 2010.

Alcoa submitted the terms and conditions of the agreement were outdated and imposed restrictions, inefficiencies and unnecessary and unreasonable costs on its business. Alcoa also claimed the agreement did not afford the required flexibility to adjust operations in order to benefit from prevailing economic and operational requirements or respond to changing market conditions.

In September 2018, Deputy President Beaumont heard the application to terminate Alcoa’s agreement after 20 months of protracted bargaining with the AWU, which included more than 50 days of protected industrial action during August and September 2018.

Deputy President Beaumont considered evidence from both Alcoa and the AWU on the status of bargaining to consider whether negotiations were at an impasse.

An important consideration was the concessions made by the AWU.  The AWU had made concessions on changes sought by Alcoa after Alcoa had applied to terminate the agreement. Alcoa considered these concessions to be conditional on the FWC making a decision to terminate the agreement and believed that these concessions would not apply were the parties to continue to bargain in the absence of a termination decision being made.

The Deputy President considered the period of protracted bargaining along with the timing, conditional character and context in which the concessions were made in coming to her decision.  With respect to the matters to be taken into account under s226 of the Fair Work Act, the Deputy President made the decision that it was appropriate in all the circumstances that the agreement be terminated.

The agreement was terminated effective 7 January 2019 with an undertaking that Alcoa maintain current pay and conditions for six months.

Appeal decision: Full Bench backs AWU

The AWU appealed the single member decision which was heard by a Full Bench of the Fair Work Commission.

The Full Bench granted permission to appeal and upheld the appeal on two grounds.

The first ground of appeal was the finding by the Deputy President that bargaining was at an impasse. The Full Bench found that Deputy President Beaumont erred in concluding that bargaining had reached an impasse based on the evidence that the concessions would likely not be withdrawn if the agreement was terminated.  The Full Bench concluded that it would be difficult to say whether the concessions would be withdrawn if the agreement were terminated.

The second ground of appeal was based on the conclusion by the Deputy President that there was an unwillingness by the AWU to work with Alcoa to address the key issues in bargaining.  Alcoa claimed the AWU concessions were only made during proceedings rather than bargaining. The Deputy President’s conclusion that the concessions would likely remain on the bargaining table even where the agreement was terminated was inconsistent with her finding that the AWU had been unwilling to bargain.

Based on the evidence, the Full Bench found that the concessions would likely not be withdrawn if the agreement was terminated and that the AWU, in making the concessions, was more willing to bargain than it had represented to be. The Full Bench found the conclusion that bargaining was at an impasse was not supported by the evidentiary findings and Deputy President Beaumont “mistook the facts and failed to take into account a relevant consideration.”

Implications for employers

In any application to terminate an enterprise agreement after the nominal expiry date, an employer must satisfy the FWC that the termination is not contrary to the public interest and that it is appropriate to terminate taking into account the views and circumstances of the parties covered by the agreement (s 226 of the Fair Work Act).

While in this case the Full Bench decision to uphold the AWU’s appeal was based on errors in the evidentiary findings by the Deputy President, the matter once again demonstrates the critical importance of the strength of the evidence supporting the conclusion that terminating an agreement is the final and only option available to an employer after protracted bargaining efforts.

This Full Bench appeal decision is also particularly interesting given the political context.

One of the Australian Labor Party’s key workplace policies for the upcoming 18 May Federal Election, and a prominent feature of the ACTU’s “Change the Rules” campaign, is to prevent employers from unilaterally applying for the termination of enterprise agreements during bargaining.

Referring to termination of agreements as a “nuclear option”, Shadow Minister for Workplace Relations Brendan O’Connor has said that if Labor is elected it would “change the law in order to redress the imbalance in bargaining power between workers, their unions, and employers”. Mr O’Connor has confirmed that termination of agreements would only be possible under ALP Government policy if agreed to by all parties to the agreement.

AREEA’s strong position is that it is appropriate for the Fair Work Act to allow any of the employers, employees and employee organisations covered by an agreement to make an application to terminate the agreement if the nominal expiry date has passed.

This mechanism, subject to a very high bar, creates an important circuit-breaker where enterprise bargaining has become particularly protracted and no resolution is in sight.

The ability for employers or employees to apply to the independent tribunal for termination of an enterprise agreement has been a feature of enterprise bargaining since the mid-1990s, and AREEA will continue to advocate for its retention regardless of which party forms government after May 18.

AREEA’s experienced team of workplace relations consultants are available for advice on applications to termination agreements, enterprise bargaining and other industrial relations strategies which allow businesses to remain competitive in challenging market conditions. For more information contact your local AREEA office.