In March 2016, the Fair Work Commission (Senior Deputy President Hamberger) expressed a view regarding the weight to be placed on the current economic climate in deciding whether to terminate an enterprise agreement (EA) that has passed its expiry date.

The Commission made an order approving Peabody Coal's application to terminate an EA that applied to Peabody's coal handling and preparation plants (CHPPs) at Coppabella and Moorvale Mines. The CFMEU and the ETU both objected to the application.

The Commisison stated that termination of the EA would facilitate the negotiation of a new agreement that better reflects the current state of the coal mining industry, and would provide incentives for improved productivity.

The Commission made the decision to terminate the EA because:

  • the EA was negotiated in a different state of the coal mining industry
  • the EA was well past its nominal expiry date and the parties had been negotiating the terms of a new EA for some time.
  • the termination would have no significant effect on anyone other than the parties immediately involved
  • the EA was negotiated by a previous employer to suit its circumstances at the time; Peabody Coal inherited the EA when it in sourced the operations of the two CHPPs.

What does this mean for you?

It is still early days. The Commission's decision is almost certain to be the subject of an appeal by the CFMEU and/or the ETU to the Full Bench of the Commission and it will take some time for this process to occur.

Ultimately, we may have some clarity regarding the weight to be placed on current economic climate as a basis for terminating an EA. In saying that, there are some nuances in the case that potentially limit the impact of this decision - for example, the fact that the EA was transferred to Peabody following a decision to in source the work.

I recently shared a post about the challenges of relying on termination of an EA as a strategy for EA negotiations. https://www.linkedin.com/pulse/5-reasons-why-seeking-terminate-your-companys-option-rely-taumalolo. The matters to consider in assessing termination as a strategy continue to apply -

  1. Any strategy seeking to terminate an EA is a medium to long term approach – requiring the bargaining process to demonstrate that the outcome cannot be achieved through bargaining; and taking into account time taken for cases to proceed through the Commission. 
  2. Even if you think there are some good arguments in favour of termination, litigation is uncertain and will cost the organisation, in terms of internal resource allocation and legal costs. 
  3. Last and certainly not least - do the benefits of a potential successful outcome outweigh the impact on employees and company culture?

Does this decision change your EA strategy?