Aurizon, previously a government owned entity, operates in the rail industry. The company had been bargaining in relation to numerous enterprise agreements. Part of the company’s bargaining platform was to be relieved of onerous restrictions on management, many of which were legacies of its public sector origins. The changes were resisted and the bargaining became intractable.

In an effort to overcome the legacy arrangements, Aurizon applied to the Fair Work Commission to terminate the agreements.

Upon application, the Commission is required to terminate an enterprise agreement if satisfied that terminating the agreement is:

  • not contrary to the public interest; and
  • appropriate in the circumstances, taking into account the views of the parties and each employee organisation as well as the circumstances of the parties and organisations including the likely effect the termination will have upon each of them.

Termination typically alters employees’ conditions of employment. It ends the legal obligation to apply the terms of the relevant enterprise agreements. Instead, the applicable modern award and the national employment standards will apply.

Accordingly, termination of an enterprise agreement during bargaining can fundamentally alter the leverage of the parties, particularly where an agreement prevents work practices sought by the employer and the modern award does not. While employees can continue to press their bargaining claims and take industrial action, the employer may proceed to implement change not precluded by the modern award and the NES.

In an important and carefully reasoned decision, the Full Bench ordered that 12 agreements were to be terminated (Aurizon Operations Limited; Aurizon Network Pty Ltd; Australian Eastern Railroad Pty Ltd [2015] FWCFB 540). The decision recalibrates the statutory test and displaces the tribunal’s previous reluctance to end existing agreements during bargaining.

Not contrary to the public interest

Over recent years, it has been increasingly difficult to satisfy the Fair Work Commission that terminating an enterprise agreement is not contrary to public interest.

The often cited decision of Vice President Lawler in Re Tahmoor Coal Pty Ltd [2010] FWA 6468 stated that the objects outlined in the Act suggest that one of the effects of termination to be considered is whether termination will “enhance or reduce the prospects of the parties concluding a new agreement through bargaining.” Lawler VP put emphasis on promoting productivity to be achieved through collective bargaining in good faith rather than by other means such as termination of an expired agreement. This approach, as evidenced by numerous cases adopting it, has resulted in many unsuccessful applications to have agreements terminated, with the Commission unwilling to interrupt the bargaining process.

The Full Bench in Aurizon has expressly rejected this approach stating:

there is nothing in those provisions [dealing with the objects of the Act], when read harmoniously, that would suggest that the emphasis on promoting productivity… is primarily to be achieved through collective bargaining in good faith… rather than by other means, such as termination of an expired agreement.

In determining whether termination of the agreement was contrary to public interest, the Full Bench considered:

  • the impact that termination of the agreement would have on bargaining;
  • that a set of safety net conditions would apply to the applicable employees upon termination of the agreements;
  • that the union would still have access under the Fair Work Act 2009 (Cth) to bargaining tools, including industrial action;
  • that the parties would be required to continue bargaining in good faith;
  • that most of the clauses that would be removed are not commonly present in enterprise agreements; and
  • given Aurizon’s previous status as a government body, it was pressured to include additional restrictive terms upon privatisation.

The Full Bench was also of the view that termination of the previous agreement, effectively diminishing terms and conditions for employees, was not contrary to the public interest and was envisaged by legislation.

Appropriate in all the circumstances

Whether it is appropriate in all the circumstances, taking into account the views of the relevant groups, will depend upon all the surrounding circumstances.

The Full Bench found that the impact upon employees being made redundant as a result of the termination of the agreements was not a definitive factor as to whether termination was appropriate.

The relevance of the diminution in terms and conditions for employees if the agreements were terminated was outweighed by factors including the anti-competitive nature of the current agreements and the bargaining stalemate.

Other factors taken into account by the Full Bench included that the termination of the agreement will not impact upon future bargaining given the availability of other mechanisms in the Fair Work Act 2009 (Cth) such as industrial action, and the fact that Aurizon had made an undertaking to honour certain entitlements that were present under the agreement, despite it being questionable as to whether such an undertaking is legally enforceable.

This decision focuses the attention of bargaining participants on where it should be, the future, not tied to the past.