Employers undermining collective bargaining
It is generally recognised that, barring highly specialised and
remunerated individuals, who are in the minority, employees are in a stronger
bargaining position when they bargain collectively:
Without access to collective bargaining, employees bargaining
alone are unlikely to be able to bargain on an equal footing with their
employer (this is obviously not applicable to high net worth individuals).
Some employers prefer to bargain with individual employees for this very
reason, because doing so distorts the power balance between the two parties in
favour of the employer. This is evidenced by some employers' support for
statutory individual agreements, known as Australian Workplace Agreements (AWAs).
Enshrining this imbalance was the cornerstone of the Coalition's WorkChoices
With the introduction of the Fair Work Act 2009 (FWA, the Act),
the former Labor Government set in place provisions which instead promote
collective bargaining, the fundamental purpose of which is to minimise the
power imbalance between employers and employees during negotiations about wages
This is so that both sides have the incentive to compromise.
Ten years after the WorkChoices era, the Australian economy has changed
substantially. We have weathered the storm of the Global Financial Crisis but
we are not immune to the impacts of it. Economic power and wealth has
concentrated and inequality has grown to 70 year highs. Wages growth is at historic
lows of just 1.9 per cent per annum.
In the post-GFC era, mergers, use of subsidiaries, outsourcing,
offshoring, labour hire, franchising, competitive tendering, contracting out
and the use of short term visa workers are all business strategies regularly
used by corporations.
Although AWAs are no longer allowed under the FWA, some employers are
exploiting weaknesses in the Act in order to thwart collective bargaining, 'searching
for opportunities to bargain with employees in circumstances when they are in
the weakest bargaining position.'
The FWA only provides for collective bargaining in the form of
enterprise bargaining. This was done to place enterprise bargaining at the
centre of the process of preventing the distortions that flow from a substantial
power imbalance between employers and individual employees.
This chapter looks at evidence of a variety of practices that
effectively re-open the debate about how to effectively provide collective
bargaining in the context of our twenty-first century economy.
Small cohorts of workers signing agreements
The FWA requires that the FWC be satisfied that groups of employees
negotiating an agreement were fairly chosen, and that agreements are genuinely
agreed to by employees.
Examples provided to the committee call into question the effectiveness of
In practice, employees can be significantly disadvantaged by employers
who secure agreements with selectively chosen groups of employees who are not
representative of their wider workforce.
In some cases the use of strategic voting cohorts is elegant in its
simplicity. When a company or project is set up, only a small number of workers
are employed. These may in some cases be management workers only. They vote on
an agreement, and the agreement is made. If the FWC is satisfied that the
agreement was made through a fairly chosen group of employees, the agreement is
The process is far from simple in practice, however, and there is little
clarity around how voting cohorts are to be selected fairly. Despite the fact
that the FWA was designed to promote collective bargaining, recent court
decisions have endorsed the view that the commission should not 'withhold
approval of an agreement on the basis that it would undermine collective bargaining.'
A submission from the Construction, Forestry, Mining and Energy Union
(CFMEU) describes the case of CFMEU v. John Holland Pty Ltd, where the
Federal Court rejected an appeal against a decision to approve an agreement
made by a voting cohort of just three employees. The agreement had the capacity
to cover a wide‑ranging workforce—workers under 10 different
be employed in future:
The Court...did not exclude the possibility that it may not be
fair for an enterprise agreement made with three existing employees to cover a
wide range of other classifications and jobs in which they may have no
conceivable interest, or that the group thereby constituted may not be fairly
This case paved the way for other employers to avoid bargaining with
employees by securing agreements with small cohorts before applying them to a
broader workforce, and this loophole is being used with increasing impunity.
Despite the FW Act requirements in relation to bargaining and
agreement approval, there are also examples of employees not receiving notices
of employee representation rights or a copy of the proposed agreement, or in
some cases, not even being given an opportunity to vote on an agreement, let
alone be involved in a negotiation process.
In doing so, employers are circumventing collective bargaining by
excluding unions from the process and are seeking to make unilateral decisions
on industrial relations in their workplace. As United Voice submitted:
The now established practice of making agreements with a very
small number of employees is fundamentally about excluding unions from the
agreement making process and utilising the fact that for the duration of an
agreement no bargaining can take place... In United Voice's view, many of these
types of agreements are being made to assist labour hire competitively tender
for work. This obviously undermines the basis of collective agreement making
envisaged under the Act while also providing labour hire with the ability to
represent to potential users of its services that it can provide terms and
conditions that cannot be disturbed by any form of collective action.
Several examples are cited below.
In Maritime Union of Australia v Toll Energy Logistics, Maurice
Blackburn Lawyers reports that an enterprise agreement was passed by only seven
employees and without the union's knowledge:
The union challenged the approval on the basis that this was
an attempt to manipulate the agreement making process as employees were not
fairly chosen and the agreement was not genuinely agreed to. Rejecting the
appeal, the Full Bench held that in the absence of a suggestion that employees
were not employed for bona fide business reasons, there is nothing improper
about the use of a small voting cohort to approve broader enterprise
There is a growing number of such cases before the FWC. These agreements, signed
by unrepresentative cohorts of workers, are disproportionately favourable to
the employer and come at great cost to affected employees. The Australian
Workers' Union summed up the practice:
[A] handful of people in one state are voting for agreements
that apply in other states in which they do not work at all, not in the lead-up
to the agreement, not when the agreement is made and not when the agreement is
live either. We are seeing a number of those sorts of agreements done, national
agreements that are voted on by—and this is my term—three men and a dog out the
back of Bourke. They then become national agreements and severely undercut our
established market rates of pay and conditions.
In one example provided by United Voice, Broadspectrum Australia Pty Ltd
submitted an enterprise agreement—the JBU Agreement—to the FWC for approval in
July 2016. The agreement applied to correctional employees within the company's
'Justice Business Unit...in the Commonwealth of Australia', but did not specify a
particular workforce. At the time the agreement was made, Broadspectrum was not
engaged in any private correctional work in Australia—the company sought to put
an enterprise agreement in place before any prospective workforce began
Similar practices are rampant in the oil and gas industries,
manufacturing, metal construction and civil construction, the AWU reports.
Agreements reached with small cohorts, the union explains, are used purely to
undercut established rates of pay, whether it be in a particular industry or a
The AWU cited the example of cleaning and catering workers employed by
Sodexo in Bass Strait:
Sodexo had been Esso's offshore caterer in Bass Strait for
about 15 years. These are the people who do the cooking and cleaning and
household maintenance, for want of a better term, on Esso's offshore oilrigs
and gas rigs in Bass Strait. They had been the contractor for 15 years. They
had always bargained with their workforce. They had bargained with the union.
They, the old contractor, had come to us last year and said: 'We need to
tighten the belt. Esso are looking to cut costs.'
In August 2016, these workers were told that their contract would not be
renewed. Instead, the contract was to be awarded to another company, ESS, which
would employ a new workforce under an enterprise agreement which had been
signed by just six workers, all of whom were based in a different state:
It was a stunning scenario for the 110 Sodexo workers, many
of whom had worked offshore for decades, and virtually all of whom had based
their lives in the Gippsland region in order to be close to work. They were
given a little over one month's notice of the change and their impending
redundancies. They were told they could apply for jobs with ESS, but if
successful, would not be working in Bass Strait. To be considered for a job
with ESS they would have to relocate their home base to Western Australia at their
own expense. This was despite the fact that many of these people had worked for
ESS in Bass Strait when the company held the contract for some years before
Sodexo took over. They were known as a good workforce; efficient and
experienced with a track record of supplying top standard services.
AWU believes the companies concerned gamed the Fair Work system, because
the ESS enterprise agreement, which enabled them to win the contract, was
signed earlier, by a small cohort of workers in Western Australia:
ESS had done an agreement some four months before they won
the contract, an agreement with six employees in WA to cover South Australia
and Victoria. Those six employees had not worked in South Australia and
Victoria either before or when the agreement was made or since then, and yet
this agreement, which applies only in South Australia and Victoria, was 'bargained'—which
is really, 'Here's a document; we want you to support it'—in Western Australia.
Reports suggest that only one of the six workers who signed the new,
considerably inferior agreement might have started working at the Bass Strait
site in subsequent months. Not one of the six had worked in, or made a
commitment to work in Bass Strait previously.
The agreement nonetheless passed the FWC's 'better off overall' (BOOT) test,
even though ESS had undercut established pay and conditions by signing an
agreement with workers who would not actually be working in Bass Strait.
In most contracting situations, the new contractor will 'pick up' the
workforce, or a significant portion of the workforce, of the old contractor.
ESS managed to avoid any transmission-of-business commitments under the FWA
when it won the contract, and achieved this by making clear that existing
Sodexo employees—including those who had performed the work for years under
various contractors—would not be invited to apply for jobs with ESS:
So people who had worked in that job for successive
contractors—ironically including ESS, before Sodexo—all lost their jobs. They
were not even welcome to apply. They were told that if they wanted a job with
ESS they might try to find them something as a lollipop lady in northern
Queensland—that is a literal example—or as a canteen attendant in northern
Western Australia. That too is a real example. A hundred and 10 people, all of
whom lived within an hour of the Longford Heliport, from where they embarked to
Bass Strait, all lost their jobs—not on merit. They were told that they could
not even bother to apply. And that is because ESS wanted to escape any
transmission-of-business commitments on an agreement that quite frankly was
shonky, an agreement that was done in Western Australia that does not apply in
Western Australia; it only applies in South Australia and Victoria.
The committee discussed this case with representatives of the ExxonMobil
Group of Companies, which includes Esso Australia, who explained that switching
contracts from one contractor to another is not unusual. According to these
representatives, the practice is geared towards efficiency:
I think it is very unfortunate if people lost their jobs in
this process, but our role is to make sure that we are providing reliable and
affordable energy out of Bass Strait. I do know that Sodexo is a very large
organisation and I would expect that they have looked at providing jobs
elsewhere for those people who were displaced.
Company representatives further highlighted the need to continually
review operations in the interest of providing cost-effective services to
I would like to reflect back on the business that we are in.
Part of that business is maintaining the supply of energy to Australia. We are
the largest domestic supplier of gas in Australia. We are running a refinery in
Australia. We are providing oil from the Bass Strait operations to our local
refinery in Australia. As part of the running of that business, we are very
mindful of the needs of all Australians. Part of the process of running those
businesses is making sure that they remain profitable. We currently have three
platforms in Bass Strait that are shut in because they do not make any money.
These are shut in because we have not been able to reduce our operating costs
to the extent that we can maintain a profitable business.
Esso Australia confirmed that the company made an approximate 20 or 30
per cent saving by switching contracts, or around $6 million. Company
representatives could not say precisely how many people lost their jobs in the
process, suggesting it might have been 50 or 60. The AWU informed the
committee that the number of workers who lost their jobs was in fact 110:
110 people who had never been complained about, who were
model employees, who their employer was happy with, some of whom had worked
there for up to 40 years, lost their jobs and their livelihoods because of a
change of contractor and because the new contractor wanted to avoid
transmission of business and because the client did not take any sort of
pastoral care notions around this new contracted workforce. They had dollar signs
in mind and went out and achieved them. Esso did as the client, and ESS did as
the contractor who came in. That means that 110 people were unemployed. They
had been loyal. They had been productive. They had never had any complaints
about their work performance for years. A group of 10-, 20-, 30- and 40-year
employees, through no fault of their own, lose their jobs and have no ability
to get those jobs back.
Nor were the fly-in-fly-out workers who replaced those who lost their
jobs significantly better off.
The committee understands that the new contractor pays wages which are some $40
000 lower per annum, on average, for the same cleaning and kitchen work. The company
secured the enterprise agreement setting out those significantly lower wages by
using a handful of workers—based in Western Australia—instead of the actual
workforce performing the work in Bass Strait.
Noting Esso Australia's estimated $6 million savings on cleaning and
kitchen work, the committee sought advice on Esso's executive wage bill for
2016. The executive wage bill for 2016 exceeded $12 million.
In fact, the committee heard that Esso Australia's executive employees
may have enjoyed a wage increase in 2016:
In the current cycle, that [increase] varied depending on
people's careers from zero to probably two per cent.
Asked whether any of these employees experienced a $40 000-per-year wage
cut in that same year, company representatives confirmed that they did not.
It would appear that kitchen and cleaning staff bore the brunt of the
efficiencies required to save $6 million.
Those cleaners and kitchen workers—whose number the company they were
contracted to work for was unsure of—lost their jobs and their livelihoods so
that Esso Australia could boost profits. The workers who replaced them
performed the same work for on average $40 000 less per year, their salaries
set under an agreement signed by a handful of workers in WA—workers not
actually working at the site in Bass Strait. The company secured a 20–30 per
cent cut in staffing expenditure by using a small cohort of workers based
elsewhere to secure an enterprise agreement. And every bit of this was legal.
In the committee's view, 'legal' does not necessarily translate to 'ethical'.
Businesses will always look for efficiencies, but there have to be limits on
how these can be found. In this case those efficiencies were paid for by
kitchen workers and cleaners while executive wages rose—there is something
profoundly unsettling about this. As long as the law allows it, there will
always be corporations who look to squeeze every possible dollar out of
workers, who view every dollar paid to staff as an assault against their bottom
line. The committee urges the Government to take a long, hard look at the FWA,
and recognise that the Act is failing in its objective of protecting ordinary
That the impacted workers were never in a position to bargain
collectively with ExxonMobil who were the ultimate decision makers underscores
the limitations of a collective bargaining model that restricts bargaining to
the enterprise level between those directly employed and their employer. The
evidence received about the flexibility of companies to organise their
workforce to achieve business objectives in relation to efficiency and cost
control demonstrates that enterprise bargaining is too limiting as the only
form of collective bargaining available to the workers. Without a seat at the
table these workers are at a significant and unfair disadvantage. The
exclusions of other forms of collective bargaining beyond enterprise bargaining
puts workers' wages and conditions in competition for a race to the bottom in
the name of efficiency and cost reductions in a range of circumstances not
considered when the FWA was introduced.
It is the committee's view that collective bargaining should be open to
workers and corporations at the level which allows the workers to negotiate
directly with the point of economic power in the same way that Exxon "bargained"
with contractors, playing them off against each other, workers and their
representatives should be able to bargain in a real sense with the purchaser of
their labour. In commerce a range of labour supply relationships exist beyond
traditional direct employment. Outsourcing with competitive contracting gives
rise to serious and potentially negative consequences for workers' wages and
conditions and the FWA should be amended to expand the scope of collective
bargaining coverage and corporate responsibility to workers beyond direct
The committee would like to thank ExxonMobil Australia Group of
Companies for readily engaging with this inquiry, and notes that the company
appears to have complied with the law throughout. Corporations are not obliged
to turn a blind eye to opportunities available to them under the law—it is
clearly the law that is lacking.
It is the committee's view that the FWA must be amended to ensure that
workers are protected in situations where a company replaces one provider of
contract labour with another. These workers, who will often have worked on the
site for many years, are not a supplementary workforce; they have all the
features of employees and must be protected under the Act.
Use of subsidiaries for agreement approval
The committee heard evidence concerning a number of companies which had
allegedly set up new subsidiaries with the purpose of using small numbers of
employees to secure enterprise agreements.
Australian Institute of Marine and Power Engineers (AIMPE) recounted its
experience with an operator in the offshore oil and gas sector, MMA Offshore
The MMA originally stood for Mermaid Marine Australia. They
have two wholly owned subsidiaries: MMA Vessel Operations Pty Ltd and MMA
Offshore Logistics Pty Ltd. The case study will identify for you that certain
employees in one of the subsidiaries were asked to vote on an enterprise
agreement even though they did not realise that their employment had been
transferred to another subsidiary of the group. The intention, it appears to
us, was that the enterprise agreement that had been approved by a small subset
was then to be applied to a larger group by changing contractual arrangements
between the various subsidiaries of the larger parent group.
AIMPE was contacted by MMA employee members who had heard that an
agreement was being voted on, but had not been given the opportunity to vote.
Employees who were part of the same group had effectively been split into two
groups, with a small subset of employees assigned to a new corporate entity
established for the purpose of avoiding further enterprise negotiations and
instead quickly securing an agreement:
Mermaid Marine has circumvented the two ballots of its
seafarers rejecting its proposed Agreements by corporate malfeasance. By
selecting a very small group (five seafarers) employed by a wholly-owned
subsidiary, it has defied the views of its broader workforce.
The committee invited the company to address these allegations, but the
invitation was declined.
The Victorian Private Sector Branch of the Australian Services Union
(ASU) discussed the case of Dnata Australia, a ground handling company owned by
the Emirates Group. The company had reportedly set up a subsidiary company,
Airport Handling Services Australia Pty Ltd (AHSA), in order to bid for work
using this new entity and have enterprise agreements voted on by only two
Only 2 people are employed by AHSA and only 2 people voted to
approve the AHSA proposed agreement. Evidence gathered by the ASU casts doubt
as to whether the 2 employees are genuine employees or have been 'fairly chosen'
to vote on the proposed agreement. For example employees have been told by
senior management that as there is currently no work associated with AHSA the
two employees are not being paid.
Dnata's intention, the ASU submitted, was through AHSA to use workers to
perform the same work for inferior wages secured under the new agreement.
The committee approached Dnata regarding these allegations. Dnata
submitted that AHSA had been established:
...to provide another entity in the market to successfully
retain current client airlines should dAS [Dnata Australia Services Pty Ltd] be
unsuccessful in retaining those client airlines, and/or to attract new client
airlines that dAS would not otherwise be able to effectively compete for.
Dnata added that there was nothing unusual about this in industry terms,
confirming that the AHSA enterprise agreement had 'been set up as a different
operating model to the current dAS employment terms and conditions.
The committee explored this further with Dnata at a public hearing. The
company outlined the reasons for its business strategy:
This organisation is facing a stark reality: Dnata is unable
to match on price as a result of our uncompetitive cost base...something has to
To address its 'uncompetitive cost base', the company decided to
maintain its existing dAS business, along with its workers and their existing
pay and conditions. The new subsidiary, AHSA, is intended to as a more
The committee asked Dnata to confirm how many are employed by AHSA, and
was told that the new company employed two workers as of the date of the
hearing, 18 May 2017. Both, Dnata confirmed, are senior employees with many
years' experience and are commensurately paid at a very high level.
These two AHSA employees, the committee put to Dnata, were not
representative of those who were yet to be employed, and who would be employed
at various classifications—most of them not senior. Dnata did not offer a view
on whether this was a fair way to select a cohort of employees to secure an
agreement, offering instead that its approach complied with the provisions of
The committee notes that AHSA's application to the FWC had been
withdrawn in the days preceding the committee's public hearing, and that Dnata's
intention was to re-negotiate the agreement with new employees. Asked whether
Dnata would recognise the union as being a negotiating body for the new
agreement, company representatives replied:
If that is a provision under the act, then we would comply
with the provisions under the act.
Submissions also noted that employers are increasingly seeking to
negotiate with casual workers, who are in a relatively weaker bargaining
position, to secure agreements.
One such strategy involves using voting cohorts to rubberstamp
agreements with wider application. The Australian Manufacturing Workers' Union
provided several examples of this. In McDermott Australia Pty Ltd v AWU,
AMWU , a full bench decision of the FWC allowed casual workers the
company had on the books to approve an agreement even though they were not
performing any work at the time:
The FWC Full Bench considered that the words "employees
employed at the time" referred to in the Act, include any casuals who were
on the payroll and engaged to perform casual work. The Full Bench also reasoned
that it would have resulted in disenfranchisement to not allow the casual
employees a vote on an agreement that might regulate their terms and conditions
of employment. The FWC Full Bench did not consider that there was anything
unusual about a business choosing not to engage any permanent employees for the
four years the enterprise agreement was to operate.
This case shows that employers can avoid entering into Greenfields
agreements by engaging casual workers without protection from unfair dismissal.
What protection from unfair dismissal exists for casuals generally requires
enforcement through court. A casual employee is highly unlikely to pursue court
action against a former employer whilst looking for a new job.
Equal work for equal pay
In Queensland's aged care sector, home to arguably the lowest paid
health workers in the state, the Queensland Nurses Union (QNU) reports a
considerable problem with employers seeking to disadvantage groups of workers
by securing enterprise agreements which set out differing rates of pay for
Assistants in Nursing (AiNs) and Personal Care Workers (PCWs)
are the lowest paid of the direct aged care workforce with AiNs generally
receiving marginally more than PCWs. The QNU has consistently argued that any
of these workers who perform nursing duties must be classified as such i.e. an
AiN and paid accordingly... In our experience, employers will engage PCWs to
perform nursing work, often amongst other duties, with the express aim of
keeping wages low.
Essentially, employers push down rates of pay by putting in place
separate agreements for groups of workers who perform the same work. In
practice this means that two, three or more groups of employees can perform the
same work, in the same workplace, for different levels of pay. Gradually, the
employer will then recruit new workers into the cohort covered by the most
That is what Blue Care/Wesley Mission has done in Queensland.
They have two enterprise agreements. One applies to registered nurses, enrolled
nurses and assistants in nursing. The assistants in nursing do the same work as
a personal carers, but personal carers are under a separate enterprise
agreement and get around $1.50 less per hour for the same work. Blue
Care/Wesley Mission made a decision some years ago not to recruit any new
assistants in nursing who are on the higher wages. So every person who has
commenced employment with that organisation in the last few years has been
engaged with the label of personal carer and paid the lower rate of pay. The
only people who remain on the higher rates of pay are those who commenced
employment several years ago.
Workers residing overseas
The Australian Council of Trade Unions (ACTU), describes another 'species
of strategic voting cohort', which involves employers deliberately making
agreements with a small, temporary, start-up workforce consisting of visa
workers who are asked to 'vote' on collective agreements as part of their
sponsorship and employment requirements. These agreements are signed before the
visa workers begin working in Australia, and are then used to lock in
conditions in the company's entire workplace, or even a number of workplaces,
and 'are exploitative by reason of information asymmetry and the economic
dependence of the worker on the offer of work.'
Multiple submitters voiced concerns about operators in the Australian
maritime industry, such as Inco Ships Pty Ltd.
Inco is alleged to have secured an enterprise agreement which covers both
Australian seafarers and foreign seafarers working on 457 visas by using only a
particular cohort—foreign workers—to approve the agreement:
We understand that no bargaining happened in Australia. The
bargaining happened overseas, and approval for the agreement was made overseas...
The agreement Inco is seeking to put in place is one that our members have had
no input into and, as far as we know, certainly has not been negotiated in
This was borne out by evidence from AIMPE. AIMPE submits that Inco's
enterprise agreement was signed by an employee representative residing in
Odessa, Ukraine, while the signing was witnessed by a person residing in the
The Australian Maritime Officers Union (AMOU) described this particular company
as having 'a record of employing foreign seafarers on 457 visas in place of
When negotiations reach impasse
Part 2-4 of the FWA regulates the actions of the parties to facilitate
enterprise bargaining negotiations. There are times when these negotiations do
not end in an agreement. With a decline in the number of workers covered by
and historically low wage growth,
the options available to the parties to bring the collective bargaining process
to a successful end must be considered.
In the long running bargaining dispute between AMWU and Cochlear (AMWU
v Cochlear Limited) Commissioner Cargill analysed the evidence in detail
Cochlear, and the other bargaining representatives, cannot be
required to make concessions during bargaining or reach agreement on terms
which are to be included in an agreement... I accept that Cochlear has taken its
stance in relation to this issue as part of its bargaining strategy. However
frustrating this may be it is not unfair or capricious conduct.
Despite having achieved majority support to commence bargaining, won
good faith bargaining orders against the employer and taking protected
industrial action in support of claims for a new Enterprise Agreement, Cochlear
workers to this day, some five years after the FWC made bargaining orders, do
not have an enterprise agreement.
Part 2-5 of the FWA allows for limited scope for workplace
determinations through arbitrated decisions but this Part of the Act does not
address the need for arbitral powers to resolve intractable bargaining disputes
beyond the limits of the underutilised low paid bargaining stream.
It is the recommendation of the Committee that the Fair Work Commission
be given the power to resolve intractable collective bargaining disputes
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