Scope orders and bargaining – The importance of employers taking the lead

• considering their strategy on scope in advance of bargaining for a new enterprise agreement, and
• taking the lead in setting scope at the commencement of bargaining.

What is a scope order?

Where a disagreement over the scope (or coverage) of a proposed agreement arises, a bargaining representative can apply to FWA for an order that specifies who the proposed agreement is to cover. Relevantly, FWA can only make a scope order where satisfied that bargaining would be more ‘fair and efficient’ if the order were made.

A scope order will not necessarily prevent bargaining for an agreement of a different scope. However, it:

• may trigger an obligation on the employer to issue notices of employee representational rights where the scope of the proposed agreement has been ‘altered (ie extended, narrowed or otherwise changed; eg from national coverage to various state based agreements or vice-versa)’, and
• will require FWA to consider whether approval of the agreement would undermine good faith bargaining. Although this provision has yet to be interpreted by FWA, the likely effect is that the agreement will not be approved unless:
  • its scope matches the scope specified in the order, or
  • all bargaining representatives have agreed to adopt a different scope.

How does an employer take the lead on scope?

Under the Act, there are three ways that bargaining can commence:¹

• where the employer initiates bargaining
• where the employer agrees to bargain, following an approach by a union or employee for example, or
• where the employer refuses to bargain and a bargaining representative successfully applies to FWA for a majority support determination.

Only the first option allows the employer to control the negotiations by setting the scope of the agreement.

Why is it important for employers to set the scope at commencement of bargaining?

Prior to the commencement of the Act, it was common for employers, unions and employees to delay negotiating scope where immediate consensus on the issue was not reached. ‘Shelving’ such a dispute was often seen as a preferable alternative to delaying negotiations on the substance of the agreement.

FWA decisions to date have shown that ‘shelving’ these disputes under the Act is generally an undesirable tactic. Rather, taking control of the negotiations and setting scope at commencement is important for a number of reasons:

• once set, it is likely that the only way to change the scope in the absence of the consent of all bargaining representatives is through a scope order
• the bargaining representative wanting to change the scope must establish that the ‘new’ scope would be more ‘fair and efficient’. On this basis, the applicant for a scope order is (arguably) at a distinct disadvantage, and
• setting the scope in a particular way may enable the employer to successfully oppose an application for a protected action ballot and potentially prevent protected industrial action.²

What have we seen so far?

Decisions of FWA to date establish the complexity of issues relating to the scope of a proposed agreement and demonstrate the importance of planning ahead to ensure that an employer is well placed to defend³ an application for a scope order. For example, FWA has found that:

• scope must be identified at the commencement of bargaining such that the employees to be covered by the agreement are ascertainable⁴
• scope can be the subject of bargaining⁵
• a scope order has been refused where the order would have disadvantaged employees who would have been excluded from the scope of the agreement⁶
• a scope order has been made where negotiations for one national agreement, rather than a number of state agreements, was found to be more ‘fair and efficient’⁷
• a scope order has been made to exclude senior management from an agreement for reasons including that the agreement otherwise had the capacity to result in conflicts of interest and senior management would likely have had specific claims not common to the remainder of employees,⁸ and
• the opinions of employees as to the preferred scope of the agreement are relevant considerations but should not be given priority over other relevant considerations.⁹

What lies ahead?

We now have three significant Full Bench decisions which have considered the operation of the unique concept of a ‘scope order’ within the bargaining regime introduced by the Act. It is fair to say that the complexity inherent in understanding the ‘place’ of a scope order (or negotiations around scope) in the context of a highly regulated bargaining regime has not been resolved by recent FWA decisions.

However, the FWA decisions do provide sufficient guidance for employers entering into negotiations for a new enterprise agreement to devise a strategy to protect their preferred ‘scope’ from the outset. There can be no doubt that unions understand the utility of the ‘scope order’ option in altering (or protecting) the ‘status quo’ around the coverage of the proposed enterprise agreement. Accordingly, employers need to be prepared to meet such a challenge and will be best placed to do so by getting on the front foot at the commencement of bargaining.

This article was written by Paul Burns, Partner and Rohan Doyle, Solicitor, Melbourne.

Endnotes

1. Ford Motor Company of Australia Limited v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia and others [2009] FWAFB 1240 (Ford).
2. Ford.
3. Whilst an employer can also make an application for a scope order, there will be no need to do so if the employer has set the scope at commencement of bargaining.
4. Ford, although note that Stuartholme School and ors v Independent Education Union of Australia [2010] FWAFB 1714 (Stuartholme) questioned the breadth of this proposition.
5. Stuartholme.
6. Clarence Coal Pty Limited [2009] FWA 462.
7. Wattyl Australia Pty Ltd v Liquor, Hospitality and Miscellaneous Union; Liquor, Hospitality and Miscellaneous Union v Wattyl Australia Pty Ltd and WP Crowhurst Pty Limited [2010] FWA 2587.
8. United Firefighters’ Union of Australia v Metropolitan Fire & Emergency Services Board [2010] FWAFB 3009 (MFB).
9. MFB.

More information

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