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About enterprise bargaining and agreements

Discuss about the Report for Enterprise Bargaining under Fair Works Act, 2009.

Employment relations have evolved overtime and have become fairer towards employees. In Australia, the trade unions became visible after the industrial revolution in 1860’s and 70’s. The transition of various trade and labor acts throughout the 19th century, legalize the collective negotiation for employees so as to negotiate with employers for wages and workplace conditions [1].  Enterprise bargaining is valuable workplace tool which helps in creating flexible enterprises with higher productivity levels. With the increased productivity levels, the workers can earn higher wages and even employers can earn higher profits [2]. The process of collective bargaining and agreement making forms a crucial part of Australian industrial relations. The trade unions were able to gain their rights after the legalization related to collective bargaining and negotiation. Enterprise bargaining agreements were introduced in Australia in 1991 and became popular during 1990’s [3]. Before 2009 there was a demand for new workplace practices for the improvement of the productivity of employees which led to the implementation of the Fair work act. The Fair Work Act in 2009 made the enterprise agreements more simple and flexible. This act aimed at making employment relations simple, safe and more productive.

This paper will critically analyze the impact of Fair Work Act 2009 on enterprise bargaining and agreements. This paper provides the detailed overview of Fair Work Act 2009 in regard to enterprise bargaining and its key aspects. This paper also provides the factors provided by the Fair Work Act which have been favorable for enterprise bargaining. This paper highlights the key arguments related to the process of enterprise bargaining. This paper evaluates if there exists a relationship between enterprise bargaining and productivity growth. The new workplace system was being created by Fair Work Act from 1st July 2009, with an aim to increase productivity through enterprise bargaining .

The enterprise bargaining refers to the negotiation between employees and individual organizations regarding wages and workplace conditions.  After negotiation, the employers and employees, through trade unions, enter into enterprise agreements. Enterprise bargaining is a process which aims at creating an equitable and fair work culture. The fair work act 2009 replaced the various types of individual workplace agreements with a single agreement known as “Enterprise Agreement”.  This Enterprise agreement is an agreement to which one or more national system employers enter with their employees through collective bargaining [4].  The Act has clearly established the rules and regulations regarding the process of enterprise bargaining. These agreements are related to wages, workplace conditions, and employment terms and could include anything which is lawful. The enterprise agreements usually constitute:-

Enterprise bargaining under the present Fair Work Act 2009

Terms and conditions underlying the relationship between employer and employees.

The deductions from wages which are being authorized by the employees.

Bray, M., Waring, P. & Cooper, R. (2011). Employment Relations: Theory and Practice. Sydney: McGraw-Hill.

The date of validity which is usually 4 years from the approval of Fair Work Commission.

In case of dispute, the method to be adopted for dispute resolution.

These Enterprise agreements can be three types: - Single enterprise agreement, Multi enterprise agreement and Greenfields agreements. The Single enterprise agreement is between single employers and its employees and multi enterprise agreement is made between two or more employers and their employees [5] .The Greenfields agreement is between new enterprise of employer and its employees and it can be single or multi enterprise agreement.  These enterprise agreements are preferred by employers as well as employees as they effectively replace awards and are flexible in nature.  As per the opinion of corporate, the industry awards were quite complex and it was cumbersome for them to calculate different terms for each and every employee.  Thus enterprise agreement is being preferred by employees due to higher wage rates and also being liked by the employer as it is easy and simple to implement.

These agreements are being proposed through collective discussion of employers, employees and their bargaining representatives. Once the enterprise agreement is being drafted it is being approved by the Fair Work Commission. The Enterprise agreement cannot include anything which is unlawful in nature such as any term which is in contravention to the protections provisions provided by Fair Work Act 2009.  In case of unlawful content it would be rejected by the Fair Work Commission.

Bamber, G., Lansbury, R. D. and  Wailes, N. (2010). International & Comparative Employment Relations: Globalisation and Change, Fifth Edition. Crow Nest, NSW : Allen & Unwin. 

The main objective of Fair Work Act 2009 was to promote productivity as well as fairness by placing emphasis on enterprise bargaining [6]. The Work Choices restricted collective bargaining and limited the enterprise agreements but Fair Work Act recognized the benefits being offered by

enterprise bargaining. This act aimed at making employers more responsible towards their employees by encouraging enterprise agreement. This act makes enterprise bargaining and agreements favorable for both employers as well as employees. This enterprise bargaining have led to higher wages as compared to the awards. The enterprise bargaining makes employer flexible and simple to operate which results in increased productivity. Fair Work Act has been developed around collective bargaining and enterprise agreements.  The employees have gained in terms of higher wages after the implementation of this act[7]. The employers have realized that they cannot avoid negotiation and enterprise agreements anymore due to strict enforcement of this act.

The Arguments which favors enterprise bargaining under present Fair Work Act 2009 can be broadly classified as below:-

The act provides one enterprise agreement and it also provides enforceable right to employees for collective bargaining and agreement [8]. On 1st July 2009 all types of existing individual workplace agreements were being replaced by one enterprise agreement. In case employers are ready for enterprise agreement then employees can contact Fair Work commission (FWC). This act has made FWC responsible for handing disputes related to enterprise bargaining.

Though the act scraps all statutory individual contracts but an employer and employee can enter into individual flexibility arrangement so as to meet the employee’s genuine needs. In case employee wants flexible working hours to look after his family, the same can be done through individual flexibility agreement.

In case the enterprise agreement has to be withdrawn then employee’s agreement is required. Employers don’t have the power to withdraw from agreement without the agreement of employees.

The Act provides rights to both employer and employee to appoint a bargaining representative for negotiations. Thus both the parties can negotiate effectively by appointing representatives.

The employers are required to mention the employees covered under enterprise agreement for example they can choose workers. The enterprise agreement is applicable to all categories of employees as mentioned in agreement as they cannot opt out of it.

The Act facilitates equality bargaining so as to serve the interests of female employees. With the increased female workforce it is important to have equality bargaining (Baird & Williamson, 2009). The act has made the bargaining environment more women friendly.

The act provides permit the unions to hold discussion meeting with workers, thus, making it easier for employees to access union for the purpose of collective bargaining.[9]

The Fair work Act, 2009, has expanded the scope of enterprise agreement by expanding permitted matters to be included. [10]

This Act has encouraged the collective bargaining among low paid employees through the low paid bargaining stream. Historically, these workers never engaged in collective bargaining and enterprise agreement. [11]

All the enterprise agreements must be approved by Fair Works Commission. The authority approves this agreement only if: - it does not contain any unlawful term, the employees have genuinely agreed to the same and it meets national employment standards. [12]

In order to facilitate bargaining process, Fair Work Australia plays a supervisory role to ensure good faith in collective bargaining. The act lays down the requirements related to good faith bargaining which is required to be followed during the negotiation for the enterprise agreement. These requirements relate to the process of negotiation. [13]

FWC provides for Majority Support Determination which provides rights to both employers and employees to start negotiation related to proposed enterprise agreement. In case majority of employees agree to the agreement but employer refuses then FWC can intervene to make Majority Support Determination. [14]

The Fair Work Act 2009 have retained the industrial relations safety net and provided the new modern awards to ensure occupational safety. The Act requires the employers to meet the minimum standards as per National Employment Standards so as to ensure employees are in a position to bargain for better work conditions. 

However, there are certain arguments present under Fair Work Act, 2009 which criticize the process of enterprise bargaining. These criticisms are as below:-

Fair Work Act, 2009 has been able to improve the wages of the employees but the act has not led to any improvement in productivity. As per employers the act provides too much power to employees due to which they had been able to negotiate wage increase without any commitment to productivity improvement [15]. As per employer there had been limited scope of enterprise agreement under Fair Work Act 2009 and it does not support clauses for productivity and competitiveness.

Fair work act have made the union more powerful due to which employers are not in a position to bargain fairly. The employers fear that their production process may suffer due to the union strike due to which they are not able to negotiate effectively.

The review of Fair Work Act 2009 suggests that the act has not been able to make any significant contribution to the decreasing productivity. Rather with the increase in wages has led to increase in cost and have hampered the economic competitiveness [16].

The act does nothing for employees of small businesses and provides no recommendations for same. Thus these employees remain out of enterprise bargaining process.

The Fair Work Act 2009 have increased the regulations for employers which makes them difficult to compete economically and reduces the bargaining power of employers.

The Fair Work Ombudsman is a regulatory body who is concerned with providing advice related to national workforce system and implements laws related to the workplace [17]. The responsibilities of FWO include:-

Providing information related to the Australia’s national workplace relations system.

To ensure the compliance of workplace laws and nations standards.

To educate people about their work rights and obligations.

To develop harmonious and productive workplace relationship.

To conduct workplace audits to ensure the compliance of workplace laws.

To investigate the complaints related to workplace aspects such as under payment or delayed payment of wages.

FWO acts as a workplace regulator which exists to ensure the smooth functioning of business as it addresses the barriers to employment relations [18]. The FWO maintains a strong relationship with trade unions, employers and businesses for effective workplace management.

The Fair Work commission is a workplace relations tribunal which carries out the range of administrative functions to ensure smooth employment relations [19].

The functions of fair work commission include:-

Setting of industrial awards, minimum wages and work conditions requirements.

Facilitating enterprise bargaining and agreements. It also facilitates good faith in bargaining.

Intervening and resolving the industrial disputes.

Facilitating and resolving bargaining disputes.

Resolving the disputes relating to the enterprise agreements.

Disputes relating the protections provided by Fair Work Act 2009.

It acts as a workplace authority which facilitates the provisions as mentioned in Fair Work Act 2009. The commission facilitates employees, employers, trade unions and employer associations in enterprise bargaining and enterprise agreement. FWC plays an important role in developing harmonious work relationship between employers and employees. It provides assistance related to issues covered by Fair Works Act, 2009.

The Enterprise bargaining when initially gained popularity in 1990’s was seen as a stimulant to the productivity growth. It is a widespread belief that enterprise bargaining has favorable effects on productivity.  Even government believed that with the increase in wages the worker would be motivated to work efficiently. However, there was no evidence to prove that the enterprise bargaining increased productivity levels. As per the data from Business Longitudinal study, which studied different firms for three years, it was found that the individual firms having simple production function registered a higher productivity with enterprise agreements in place [20].

Despite these findings, it is very difficult to establish any direct relationship between enterprise bargaining and productivity growth. Numerous economists believe that there is no relationship between enterprise bargaining and productivity growth. Some economists believe that individual contracts increase productivity but it is evidence from New Zealand wherein the system of individual contract hampered the productivity during 1990’s [21]. On the Contrary, Western Australia recorded higher labour productivity after it repealed workplace agreements. Thus it can be said that there is no direct relationship exist between enterprise bargaining and productivity growth. Many academicians argue that there is a link between enterprise bargaining and productivity growth, though the research have not been able to establish any relationship.

The Fair Work Act 2009 was implemented with an aim to increase productivity and employment fairness through collective bargaining. Though the economists believe there is no relationship between legislation and productivity but there are linkages between industrial deregulation and productivity (McCallum, Moore & Edwards, 2012). It is being presumed that lesser the regulations result in higher productivity. Though the Fair Work Act aims at reducing the regulations but still it is being criticized for hampering productivity. The government has received various recommendations to amend Fair Work Act so as to improve productivity. But the fact is productivity is dependent on enterprise bargaining. Australia has multi factor production system which has faced stagnant productivity from last few years [22].

These multiple factors influence productivity and the productivity is being affected by different factors at different times. Hence it is will be unfair to relate productivity to a single factor. Thus it would be unfair to blame Fair Work Act for the movements of productivity.

In order to increase productivity following steps can be taken:-

The FWA and Fair work Ombudsman should run a campaign to increase awareness about the measures which should be adopted by the businesses to increase productivity. As productivity is dependent on multiple factors hence overall recommendations should be made to improve productivity.

The employers should indulge in productivity bargaining by introducing productivity clause in enterprise bargaining. The enterprise bargaining should focus on boosting productivity which will benefit both employees and employers.

Conclusion

Before 2009 there was a constant demand for fair and equitable employment laws and the Fair Work Act was implemented in order to create fairness in employment relations. Enterprise bargaining is considered to be beneficial for workers and productivity and hence this Act formed to encourage enterprise bargaining. The Fair Work Act 2009 has significantly improved the enterprise bargaining in Australia and led to an increase in wages of workers. This act has been an effective legislation which has improved the overall working conditions of the workers. The act has improved the safety and has provided multiple protections to employees. The act has been appreciated by employers too as it has made the business operations simple and flexible. However, this act is being criticized for hampering productivity as it provides the limited scope for employers to bargain for productivity. It has been established by the researchers that there is no linkage between enterprise bargaining and productivity growth. In order to resolve the productivity problem of Australia, alternate steps should be taken. Enterprise bargaining has its own benefits and it has improved the workplace relations in Australia after the implementation Fair Work Act 2016.

About Us. (2016). Fair Work Commission. Retrieved from:-

https://www.fwc.gov.au/about-us

About Us. (2016). Fair Work Ombudsman. Retrieved from:-

https://www.fairwork.gov.au/about-us/our-vision/strategic-intent

Baird, M., Frino, B. & Williamson, S. (2009) .Paid maternity and paternity leave and the emergence of ‘Equality bargaining’ in Australia: An analysis of Enterprise Agreements, 2003–2007. Australian Bulletin of Labour, 35(4),671-691.

Baird, M. and Williamson, S. (2009). Women, Work and Industrial Relations in 2008. Journal of Industrial Relations, 51(3).

Bray, M., Waring, P. & Cooper, R. (2011). Employment Relations: Theory and Practice. Sydney: McGraw-Hill.

Bamber, G., Lansbury, R. D. and  Wailes, N. (2010). International & Comparative Employment Relations: Globalisation and Change, Fifth Edition. Crow Nest, NSW : Allen & Unwin. 

 Beggs, J.J. & Chapman, B.J. (1987) .Australian strike activity in an international context: 1964–1985. Journal of Industrial Relations, 29(2): 137–49.

Cooper, R. &Ellem, B. (2008). The neo-liberal state, trade unions and collective bargaining in Australia. British Journal of Industrial Relations, 46(3): 532–54.

Cooper, R. and Ellem, B. (2009). Fair Work and the Re-regulation of Collective Bargaining. Australian Journal of Labour Law, 22 (3), 284–305.

Gahan, P. and Pekarek A. (2013). The Rise and Rise of Enterprise Bargaining In Australia : 1991-2011. Labour and Industry, 22(3), 195-222.

Gilson, C. (2013). Enterprise Bargaining In Australia : Canadian Reflections. Labour & Industry. Retrieved from:-

https://www.tandfonline.com/doi/abs/10.1080/10301763.1991.10669097?journalCode=rlab20

Giudice, G. (2012). The review of Fair Work Act and its Implications. Insights, 12. Retrieved from :-

https://insights.unimelb.edu.au/vol12/03_Giudice.html

Lansbury, R.D.  (2009) .Workplace democracy and the global financial crisis: Implications for Australia. Journal of Industrial Relations, 51(5): 599–616.

McCallum, R., Moore, M. and Edwards, J. (2012). Towards More Productive and Equitable Workplaces: An Evaluation of the Fair Work legislation. Report of the Fair Work Act Review, Department of Education, Employment and Workplace Relations, Canberra.

Peetz, D. (2005). Trend analysis of union membership. Australian Journal of Labour Economics, 8(1), 1-24.

Peetz, D. (2006). Brave New Workplace: How Individual Contracts are Changing our Jobs. Sydney: Allen & Unwin.

Section 172 (2016). Fair Work Act, 2009. Retrieved from:-

https://www.austlii.edu.au/au/legis/cth/num_act/fwa2009114/s172.html

Section 228  (2016). Fair Work Act,  2009. Retrieved from :-

https://www.fwc.gov.au/documents/documents/legislation/fw_act/fw_act-01.htm#P3767_354759

Section  229 (2016). Fair Work Act,  2009. Retrieved from :-

https://www.fwc.gov.au/documents/documents/legislation/fw_act/fw_act-01.htm#P3767_354759

Section 230 (2016). Fair Work Act,  2009. Retrieved from :-

https://www.fwc.gov.au/documents/documents/legislation/fw_act/fw_act-01.htm#P3767_354759

Section 235 (2016). Fair Work Act,  2009. Retrieved from :-

https://www.fwc.gov.au/documents/documents/legislation/fw_act/fw_act-01.htm#P3767_354759

Section 484 (2016). Fair Work Act, 2009. Retrieved from:-

https://www.austlii.edu.au/au/legis/cth/consol_act/fwa2009114/s484.html

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