Among the reform measures expected to be debated at the Federal Government’s Jobs and Skills Summit in September 2022 are proposals to expand the coverage of enterprise agreements across the Australian workforce.

The Minister for Employment and Workplace Relations has clearly expressed a view that the current system of enterprise bargaining regulated by the Fair Work Act 2009 (Cth) (FW Act) is ‘broken’, as evidenced by the decline in workforce coverage by enterprise agreements. This is seen to have a particularly adverse effect on gender pay equity, given most award-dependent workers are women. Only 2% of workers covered by agreements are employed by small business, and bargained outcomes are higher for men than for women on average.

One reform measure expected is a change to the power granted to the Fair Work Commission (FWC) to terminate expired enterprise agreements.

Under section 226 of the FW Act, a person covered by an enterprise agreement (i.e any one of the employees covered, their employer and a union party) that has passed its nominal expiry date can apply to the FWC for the agreement to be terminated. The FWC must do this if satisfied that it is not contrary to the public interest to do so and where it is appropriate in the circumstances. The FWC must consider the views and circumstances of all persons covered by the agreement, including the likely effect that termination will have on each of them.

An increasing number of section 226 applications are being made by employers that are dissatisfied with progress in bargaining for a new enterprise agreement. A section 226 order would afford the employer leverage in those negotiations if employees were moved from the existing agreement to the underlying award.

The Minister wants to restrict section 226 orders to situations where businesses are facing imminent collapse and terminating the agreement will ensure the ongoing employment of the affected workers.

The approach of the FWC to section 226 in its current form is to place weight on the impact of restrictive provisions in the enterprise agreement sought to be terminated, and evidence that termination of the agreement may result in improvements in productivity and efficiency and/or the financial or trading position of the employer. However, the FWC will also take into account the impact of any termination upon the bargaining dynamic, including the impact upon the bargaining positions and options then available to the parties.

Relevant considerations relating to the appropriateness of the termination of an enterprise agreement may include:

• the length of time since the agreement expired;
• how many employees would be affected by proposed termination, in terms of reduced terms and conditions of employment; and
• whether there would be proper industrial standards for employees in the event of termination.