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IR Reform Series: EA Terminations

IR Reform Series: EA Terminations

Published: 06 Sep 2022

IR Reform Series: EA Terminations
Written by
Luis Izzo
Luis Izzo
Managing Director - Sydney Workplace

IR Reform Series: EA Terminations

Published: 06 Sep 2022

The Federal Government has announced it will reform provisions of the Fair Work Act which allow enterprise agreements (EAs) to be terminated by employers without employee agreement when the EAs have passed their nominal expiry date.

The likely reforms will make it more difficult to terminate EAs without consent of the workforce. 

Why is the Government seeking to reform how EAs can be terminated?

Over the past 7-8 years, employers have increasingly sought to use the ability to terminate EAs as leverage in protracted bargaining disputes with unions.

The practice expanded following the decision in Aurizon Network Pty Ltd [2015] FWCFB 540, where the Fair Work Commission (FWC) confirmed a broad capability to terminate EAs, unless the terminations were contrary to the public interest.

The threat of terminations can carry real consequences for employees. EAs tend to have higher rates of pay than the underlying award and usually confer other protections or benefits that don’t form part of the award-safety net. Technically speaking, a workforce’s terms and conditions can revert to a significantly inferior position after an EA has been terminated unless undertakings are given to maintain key conditions. 

Although in most termination cases, employers have given undertakings to maintain key conditions (such as pay), the mere threat of an EA-termination causes major ripples through a bargaining campaign and has been quite effective at finally bringing opposing sides to a compromise.

Unions argue that the ability to radically change a workforce’s terms and conditions overnight should not be part of our regulatory system.

What are businesses worried about?

EA terminations are not lightly threatened. They usually arise after years of protracted bargaining and industrial action. 

Given that the thresholds for stopping industrial action are very high under the Fair Work Act, the loss of an ability to terminate EAs could see bargaining deadlocks remain almost indefinitely. 

The primary concern of major businesses with significant industrial disputation is that the loss of EA-terminations means the loss of a circuit-breaker. 

Additionally, for some businesses, EA terms can sometimes build to such an extent over time that the EAs no longer work or fit the modern operations of the business. In these cases, it can be very difficult to ‘reset’ the underlying terms applicable to the workforce if the existing industrial instruments cannot be terminated. 

What is the likely outcome of reform?

It is inevitable that the ability to terminate EAs will be limited by the upcoming reforms. 

At the very least, it is likely that EAs will still be able to be terminated without employee consent where:
  • the EA is no longer utilised (that is, it no longer covers any employees) or
  • a business can demonstrate its very existence is likely to be extinguished unless the EA terms are terminated.
Employer groups are arguing to extend this scope to other circumstances that might also be considered fair and reasonable. For instance, discretion could be conferred on the FWC to grant a termination application where it is considered ‘fair’ having regard to all the circumstances.

If employer groups do not succeed and the ability to terminate EAs is narrowed substantially so that there is no means of finally breaking protracted industrial deadlocks, then the business community may need to look at other solutions. These could include:
  • lowering the threshold to terminate or suspend industrial action (an unlikely outcome)
  • increasing the role of the FWC to mediate bargaining disputes or
  • increasing the scope for the FWC to arbitrate outstanding matters in dispute, that is, to impose a bargaining outcome on the parties.
Each of these options carry different benefits and drawbacks. 

ҹis working closely with the Australian Chamber of Commerce and Industry, Australian Business Industrial and Business NSW and providing input to Government to promote an ultimate industrial landscape whereby protracted industrial action and bargaining stalemates can be resolved in a manner that is fair for employees and contributes to a productive economy. 


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