Over the past decades, the global industrial sector has been faced with numerous challenges that arise between employers and employees. Therefore, regulating the industrial sector was necessary to ensure a smooth operation and dispute resolution. As a result, the Fair Work Act 2009 was formed to establish a conducive work environment through National Employment Standards, Modern Awards, and minimum wage determinations (Commonwealth Consolidated Acts, n.d). These types of settlements have been referred to as enterprise agreements. While modern awards refer to legal documents that indicate employment conditions and minimum pay rates, enterprise agreement refers to all the collective agreements between employer and employeee. It is estimated that around 50% of all the employees in Australia are in enterprise agreement with their employers (Bailey, Macdonald, & Whitehouse, 2011). In this regard, this paper is going to examine enterprise agreement by discussing what it entails to form an enterprise. It is also going to discuss some of the legal requirements and the institutions that are involved in making an enterprise agreement. Finally, it is going to conclude by highlighting some of the advantages and disadvantages associated with centralized and decentralized enterprise agreement.
What does the process of enterprise bargaining involve?
To formulate an effective enterprise agreement, there are various activities that the employer and the employee need to engage as discussed below.
Notification of employees
One of the activities that entail the formation of an enterprise bargaining is the notification of employees of their representational rights, 14 days before the day of negotiation (Creighton & Forsyth, 2012). It is mandatory that the employer should issue all the employees who are expected to be under the coverage of the enterprise bargaining with the right copy of that informs them of their representational rights as stipulated in Schedule 2.1 Fair Work Act of 2009 of Australian (Colosi & Berkeley, 2006). This notice is important because it provides the employee with the relevant explanation on their right to be represented in the enterprise bargaining process by an organization or another individual. For the employees who are represented by a labor union will be represented by their respective union. In Australia, most worker unions represent employees in bargaining processes. However, there are instances where employees prefer to use their representatives during enterprise bargaining. In such instances, it is required that the employee should give the employer with a document with the name of the chosen representative. In Australia, there is no time limit that an employee is required to take to notify the employer with the document of the selected representative.
This refers to the negotiation that takes place between the employer and the employee. Here, the parties involved, particularly the employer and the chosen representative engage one another in discussing the terms and condition of the enterprise bargaining (Heald, 2016). The employer and the representatives who are involved in this process provide a log or a list of clams and demands for deliberations to facilitate the arrival at an appropriate collective bargaining agreement.
Voting by the employees
The making of an enterprise bargaining also entail the process of voting; whereby the employees engage in a voting process against or in support of the new bargaining enterprise (CCH Australia Limited, 2010). After the negotiation process, all the employees who are covered by the collective bargaining should take part in this process. However, engaging in the voting process is not a must for all employees and there is no prescribed procedure for the voting process. The voting is normally carried out 21 days after the employees have received the notice of the right to be represented. In addition, the employees must be provided with all the relevant information one week before the day of voting (Wright, 2017). During this period, it required that the employees must be supplied with a written version that has all terms of the relevant award.
Officiating the collective agreement
After a successful voting process, the employer and the one who represents employees who are included in the agreement officiate agreement (Hor, 2009). After this, the agreement is presented before the Fair Work Commission for approval. This should be done 14 days after the completion of the voting. The Fair Work Commission examines if the agreement meets all requirement of the Fair Work Act 2009 before approving it. The Fair Work Commission will again examine it to determine it its content improves the life of employees. This test is passed when prospective award-covered employees and award-covered employees would be better off once the new collective bargaining is implemented. If the agreement meets all the requirements of the ss 186 and ss 187 of the Fair Work Act 2009, it will be approved.
Here, the Fair Work Commission will invite the employee representative and the employer to come for a hearing.
What are the legal requirements that need to be observed during enterprise bargaining
To formulate an effective enterprise bargaining, there are several legal requirements that the employer needs observe and adhere to as discussed below.
The Fair Work Act 2009
The Fair Work Act 2009 is the most important legal requirement in the Australian industrial relation because it covers the majority of workplaces in Australia. This Act forms the basic foundation for all regulations and standards for employment in Australia, therefore, it governs all aspects of Australia’s workplace relation (Piekolla & Snellman, 2005). The Fair Work Act is also known as the national workplace relations system as it provides a framework that is balanced to ensure productivity in the workplace and to contribute to the social inclusion and economic prosperity of Australia. In this regard, during the formation of an enterprise bargaining because it does the following:
- Highlights the terms and condition of employment,
- Highlights the rights and responsibilities of employers, employee, and the organization with regards to the employment,
- Gives employers and employees a safety net of fairness within the workplace,
- Contains provisions for complying with and enforcement of the Act,
National Employment Standards
During the formation of an enterprise bargaining, the employer and the employee should take into consideration the national employment standards (Van Guys & Schulten, 2015). The national employment standards require that the employer should provide particular minimum conditions while hiring employees. It provides a safety net and protects the employee from being taken advantage of by the employer. The National Employment Standards provides ten conditions, for example, the maximum number of hours in a week that an employee is expected to work. During the formation of a collective bargaining, both the employer and the employee should negotiate a flexible working arrangement to ensure that the maximum number of working hours are met. The national employment standards also highlight other requirements that should be taken into consideration by the employer such as parental and annual leave, public holiday and notice of employment termination.
Workplace Relations Amendment (Work Choices) Act 2005
Another important legal requirement that should be observed during the formation of a collective bargaining is the workplace relations amendment act of the year 2005. The Work choices Act of 2005 is an upgraded version of the Workplace relations Act 1996. The 2005 Act contains the terms and conditions of the workplace. It also contains the rights of the employees that should be accounted for in the new enterprise agreement (Barry & You, 2017). The 2005 act provides for the rates of pay, classification of employees, allowances, and penalty rates. In this regard, the employee and the representatives who are present at the bargaining table are required to take into consideration all the clauses of the Workplace Relations Amendment 2005 and adhere to them during the bargaining process.
Australian Workplace Agreements (AWAs)
The employer and the representatives of the employees also have to observe the Australian workplace agreement. This is a formalized agreement that is made by the employee and the employers within the Australian federal system. This legal requirement contains the terms and conditions of employment between the employee and the employer. The terms and conditions highlighted in the AWA differ from one state to another; however, they are all aimed at establishing a safety net to ensure an effective working relationship between the employer and the employees.
What organizations and institutions need to be consulted and/or applied to in the process of enterprise bargaining?
Fair Work Commission
One of the institutions that need to be consulted during the enterprise bargaining process is the Fair Work Commission. The Fair Work Commission is a self-determining tribunal for workplace relations that have a wide range of functions regarding matters of the workplace (Jackson & Muellenborn, 2012). The employer and the representative of the employees who are covered under the collective bargaining agreement should consult with the Fair Work Commission because of the following reasons. Firstly, the Fair Work Commission establishes a safety net concerning the minimum terms and conditions within the workplace. Secondly, the Fair Work Commission regulates and enforces provisions related to employment terms and conditions, minimum wages, dispute resolution, and industrial action (Bendix, 2000). The Fair Work Commission creates a federal system that regulates what a group of employees can engage in during industrial action. For example, during an industrial action, the two antagonizing parties have issues to present to the courts of law.
The Fair Work Commission provides the procedures to be followed during these activities. Every state in Australia has the discretion to present their industrial relation powers to the Commonwealth. However, when a state chooses to refer the powers that they possess to a national or a centralized relation system, all the employees of the involved state are well-covered by the Fair Work Act. Thirdly, the Fair Work Commission also set the national industrial policies and regulates that award system. These include activities such as determining award entitlements and minimum pay. In addition to this, there is the Fair Work Ombudsman who assists contractors, employers, and employees to understand their rights and responsibilities within the labor industry.
Australian Council of Trade unions
Another important organization that should be taken into consideration during the formation of a collective bargaining is the Australian Council of Trade Union. The Australian Council of Trade Unions consists of many trade unions that represent different groups of employees in the country. It is made up of forty-nine trade unions and nine trade and labor councils that represent employees in Australia. The council of trade unions protects the rights of all employees from all trade unions that are affiliated to the organization, therefore, it is important for the representative who engages in the collective bargaining process to consult with the council of trade unions (Southy, 2015).
Australian Industrial Relations Commission
Those who are involved in the preparation of the collective bargaining agreement need to involve the Australian Industrial Relations Commission. This is a national body that deals with the issues that emerge within the labor industry. It also closely related functions to the organizations and institutions that have already been mentioned above. This organization also play the role of setting terms and conditions regarding employment. It also takes part in the setting of minimum wage for employees by ensuring that the minimum wage is sufficient for the employer and the employee (Bray, Waring, & Cooper, 2011).
This institution also plays an important role in the formation of an enterprise bargaining agreement, for instance, it engages in the certification of a collective bargaining agreement. Before an enterprise agreement is lodged, the Australian Industrial Relations Commission goes through the content of the agreement between the employer and the employee representatives to determine if it complies with the Fair Work Act 2009 (CCH Australia Limited, 2010). Finally, the Australian Industrial Relations Commission should also be considered by those engaged in the formation of a collective agreement because it registers trade unions. It also demarcates the disputes that emerge between unions as well as the unfair dismissal of agreement applications.
What advantages and disadvantages are said to be associated with centralized bargaining, as exemplified in the settlement of modern awards?
As already alluded in the discussion above there are numerous benefits and shortcomings that come along with the centralized bargaining as illustrated in the settlement of modern awards as discussed below:
Advantages of centralized bargaining
- The adoption of a centralized bargaining as demonstrated in the settlement of modern awards is that it focuses on the specific employment conditions (Pittard & Naughton, 2010). Here, the needs of the employees are taken care of, for example, the working hours, allowances, holidays, and annual leaves.
- The use of a centralized bargaining provides room for formulating and implementing innovative terms and conditions for employment, for example, the adoption of the performance pay and non-cash employment benefits.
- The adoption of modern awards allows employers to reward employers without setting precedents for employees who are not involved in the negotiation process.
- This method also positions the employer and the employee in a better bargaining position to arrive at a more work friendly agreement.
Disadvantages of centralized bargaining
- The centralized mode of bargaining is pro-employee because it gives the employee the opportunity to make demands that may be against the wishes of the employer or the union that represents the employee (Louduon, McPhail, & Wilkinson, 2009). It gives an employee a window to reject enterprise agreements or awards that were agreed on initially during the hiring process.
- The use of a centralized method of bargaining is resource intensive and time-consuming because the use of modern awards will require that each of the employees involved to go through, discuss and the documents for compiling the agreement.
- What advantages and disadvantages are said to be associated with decentralized bargaining, as exemplified in the settlement of enterprise agreements?
Advantages of decentralized bargaining
- The use of a decentralized bargaining as demonstrated in enterprise agreements is beneficial because it is employee-oriented. The proponents of decentralized bargaining state that this method enables employees to fight for their rights as one unit (Jackson, Leopold, & Tuck, 1993). This is because by remaining united in the trade union, the employees have a common voice through their union representatives who champion for their rights as stipulated in the agreement.
- Another advantage of decentralized bargaining as illustrated in the settlement of modern awards is that it protects the employer from the malpractices of employees (Colling & Terry, 2010). The terms and conditions contained in the agreement bind the employee and the employer together and ensures a smooth working relationship.
- Decentralized bargaining prevents employees from going on unnecessary strikes because there are representatives who will act on their behalf in case of any dissatisfaction. This prevents the employer from the loss of valuable working hours.
Disadvantages of decentralized bargaining
- Decentralized bargaining is prone to inequality because in some cases, employees or the employer get less of what they deserve in an enterprise bargaining (Mourell, & Cameron, 2009). For example, when the employee representative is weak, the employer will win at the bargaining table.
- Decentralized bargaining is costly and time-consuming (Bray & Underhill, 2009). A lot of time is taken in the process, for example, to notify employees of their rights to be represented, the voting process, and the lodging of the agreement after a successful voting (Sharma, 2016).
- A decentralized bargaining can cause a gap between the employees and the employer. For example, during collapsed talks, the situation at hand may escalate instead of being solved, leading to a lack of motivation to work, and hence productivity.
In summary, the Fair Work Act 2009 to ensure a safe and favorable working conditions for employees and their employers. The establishment of the Fair Work Act 2009 provides a proper guideline for employees and employers to enter into a bargaining arrangement that brings about settlements and ensures the improvement of the terms and conditions of employment. The process of enterprise bargaining entails several activities. For example, the notification of employees of their representational rights, 14 days before the day of negotiation. There is also the bargaining process, where the parties involved, particularly the employer and the chosen representative engage one another in discussing the terms and condition of the enterprise bargaining. It is then concluded with the voting and the lodging process. The major legal requirements that need to be observed during enterprise bargaining are The Fair Work Act 2009, National Employment Standards, and Workplace Relations Amendment. Similarly, the institutions that need to be consulted are Fair Work Commission, Australian Council of Trade unions, and Australian Industrial Relations Commission. Centralized bargaining has its strengths and weaknesses. For instance, it enables employees to fight for their rights as one unit; however, it is prone to inequality. Similarly, the centralized bargaining provides room for formulating and implementing innovative terms and conditions of employment, but it is resource intensive and time-consuming.
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