The industrial relations environment at Streets Minto site is anything but sweet, as the Unions are running campaigns encouraging consumers to boycott the brand over what it says are a proposed 46% cut to wages. Unilever, the multinational corporation which owns the Streets brand denies this allegation, maintaining that there is “absolutely no truth to these claims”.
So what exactly is going on? In August 2017, Unilever made an application to the Fair Work Commission (FWC) to terminate its current enterprise agreement at its Minto site. This decision was made following sixteen months of negotiations between Unilever and the AMWU, where the parties reached an in-principle agreement that was ultimately voted down by employees. Unilever states that its Streets ice cream factory in Minto is the most expensive factory to run in the world, and that it is currently almost 30 per cent cheaper to import a Magnum Classic ice cream made in Europe than to make the same ice cream in Minto, even when the cost of 16,000 kilometres of frozen transport is factored into the equation.
According to its press release on the matter, Unilever is seeking flexibility in its enterprise agreement which will allow it to be competitive. The restrictions it cites as restricting competitiveness include:
- Minimum manning levels to operate production lines that can render an entire line inoperable when 1-2 employees are on leave or on a break.
- Restrictions to the employment of casual, fixed term and seasonal staff (including duration of employment, ability to train and allocate to different parts of the production process) meaning that at times there are more staff than needed at the factory, yet a line still can’t be run because those staff can’t be trained and allocated where needed.
- Permanent staff are not allowed to move around the factory to work on different parts of the production process even if they are appropriately trained.
Source: Unilever press release, available at https://www.unilever.com.au/news/press-releases/2017/Unilever-calls-on-union-to-work-constructively-to-secure-Streets-factory-future.html
With respect to wages, Unilever states that it will preserve a range of benefits under the existing enterprise agreement – including rates of pay – until 30 April 2018 (or earlier if a new agreement is reached), while the business continues to negotiate with employees and the AMWU in an attempt to reach a mutually agreeable solution.
If an agreement is not reached, the business is likely to act rationally and simply offshore these Australian manufacturing jobs. While it will be difficult for the Unions to sustain their boycott campaign to a degree significant enough to counter the allure of the impulse ice-cream purchase, any effect that the campaign may have on Unilever’s profitability will mean the company has less money to satisfy its wage bill. However, the reputational damage caused by a boycott campaign may be translated into industrial pressure by the Unions in their battle to preserve the status quo in Minto.
All this action at Streets may have got you thinking – how can a party to an enterprise agreement seek to terminate that agreement? An enterprise agreement struck by a business during a boom may provide for terms that are no longer viable as the business faces a downturn, or new competition. Likewise, Unions or employees may be of the view that they are entitled to a “better deal” where there is an upturn in business, or where their performance has quantifiably improved.
Essentially, there are two ways that an enterprise agreement can be terminated:
- By genuine agreement of the parties, and approval of the FWC.
- By one party to the enterprise agreement successfully applying to the FWC after the nominal expiry date of the agreement.
Termination by agreement
The parties to an enterprise agreement may agree to terminate it at any time during the term of the agreement. This requires employees to participate in a formal vote, and for a majority to agree that the agreement should be terminated.
This is most likely to occur where a business can successfully convince its employees that termination of the enterprise agreement is the best way employees can avoid job losses, or that employees will be able to achieve better career progression or performance-based incentives once restrictive terms in an enterprise agreement are set aside.
The process to follow would be for an application to be made to the FWC to approve the termination of the agreement within 14 days of the employee vote. If the FWC is satisfied that genuine agreement has been reached, then it should approve the termination.
Termination by unilateral application to the FWC
This is the path that Unilever has chosen to take. Indeed, termination by application of one of the parties is the more well-trodden path (when compared to termination by mutual agreement of the parties), as many terms of enterprise agreements are often perceived by all parties as a zero-sum game.
Once the nominal expiry date of the enterprise agreement has passed, a party to the agreement may make an application to the FWC for the termination of the agreement. Under section 226 of the Fair Work Act 2009 (Cth), the FWC must terminate the agreement if is:
- satisfied that it is not contrary to the public interest to do so, and
- considers it appropriate to terminate the agreement.
In determining the ‘appropriateness’ of terminating the agreement, the FWC will consider all the circumstances, including:
- the views of the employees, each employer, and each Union covered by the agreement; and
- the circumstances of the employees, employers, and Unions including the likely effect the termination will have on each of them.
Applying to terminate an enterprise agreement without the agreement of the other party (or parties) is a strong move that can provide powerful leverage in industrial negotiations. Recent decisions by the FWC seem to indicate that it is not as difficult as it used to be for such applications to succeed. Where attempts at mutual interest bargaining, and constructively and collaboratively resolving disputes have failed, a business may be left with little other option but to make such an application, or else face the real prospect of closing its doors.
For strategic advice regarding enterprise agreement negotiations, please contact our HR Consulting team.
This article was written by Michelle Blewett, Senior HR Advisor at Workforce Guardian and used here with permission.