AREEA employee relations lawyer Lindsay Carroll outlines two recent Fair Work Commission (FWC) decisions upholding the right of coal sector employers to terminate enterprise agreements, demonstrating alternatives to traditional negotiations for replacement agreements.

ALTHOUGH in both matters it was not disputed that the likely effect of terminating the enterprise agreements would result in employees receiving less favourable conditions of employment, the Commission found it was not contrary to the public interest to terminate the enterprise agreements, and appropriate in all of the circumstances.

Criteria for terminating an enterprise agreement

The legal prerequisites to successfully apply to terminate an enterprise agreement are that:

• the enterprise agreement must have passed its nominal expiry dates; and
• on application, the FWC must terminate if all limbs of the legal test are satisfied.

To succeed in any application to terminate an enterprise agreement after its nominal expiry date, an employer must satisfy the FWC that termination of the enterprise agreement:

• is not contrary to the public interest; and
• appropriate in all of the circumstances.

The decisions

In the decision regarding the termination of the Griffin Coal (Maintenance) Collective Agreement 2012, Griffin Coal’s uncontested evidence was that the enterprise agreement significantly impaired its ability to operate productively and efficiently, and contributed to exorbitant production costs resulting in significant losses to the company over a number of years.

In this decision, the public interest test was construed as ‘the various means to achieve the objects of the Fair Work Act including…flexibility for business, the promotion of productivity and economic growth…balanced against an enforceable guaranteed safety net of the Black Coal Award’. The Commission also considered the public interest in Griffin Coal’s intent to increase the extraction of coal, to re-enter its export market and associated work which, if it came to fruition, would result in increased employment and economic benefit to the community.

In a further decision a Full Bench of the FWC did not grant the CFMEU permission to appeal the decision of a single Commissioner to allow Peabody Energy to terminate the Sedgman Employment Services Pty Ltd Bowen Basin Front Line Employee Enterprise Agreement 2011-2014.

In first instance, the Sedgman Agreement was terminated in acknowledgment that it was inherited by Peabody Energy when it insourced operations at Coppabella and Moorvale coal mines, and that termination would facilitate the negotiation of a new enterprise agreement that would deliver productivity benefits.

Implications for employers

These decisions demonstrate that alternatives to a traditional negotiation for a replacement enterprise agreement do exist under the Fair Work Act 2009 (Cth) and are increasingly available to employers so long as a burning platform and capacity to demonstrate traditional bargaining effort is demonstrated.

AREEA’s experienced team of workplace relations consultants are available for advice on opportunities which may provide the leverage needed to remove uncompetitive terms and conditions of employment, and which allow businesses to remain competitive in challenging, transformed markets.

Contact an AREEA consultant near you.