In what represented the first COVID-19 related application, on Thursday (2 April 2020) a full bench of the Fair Work Commission (FWC) approved the variation of an enterprise agreement to remove a 3% wage increase due this year.

CVSG Electrical’s application to vary its 2017 enterprise agreement was the first application heard by the FWC in response to the COVID-19 crisis. The variation was approved by 80 per cent of employees covered by the agreement.

The variation sought to stop the wage increase provided for in the agreement from occurring on the 2020 anniversary and remove the 2020 pay rates from the agreement.

The employer provided an explanatory memorandum with its application that the variation is “proposed due to the drastic impact of the coronavirus pandemic” and is aimed at “preserving job security and sustainability”.

The employer also provided evidence of other serious economic pressures, aside from wage expenditure, impacting its business as a result of the pandemic. These included the weakening of the Australia dollar, supply chain constraints from China and an expected 50 percent drop in tenders over the next few months.

The CEPU opposed the variation on the basis that the FWC could not be satisfied that the variation was genuinely agreed to by the employees covered by the agreement.

The CEPU argued that the Australian Government’s JobKeeper announcement changed the background to the employees voting up the variation. It contended that in light of the JobKeeper announcement the employer had alternative options available that were not available when the variation was voted up.

Further the CEPU argued the JobKeeper payment would “significantly redress” the impact of COVID-19 and “therefore the rationale for removing the 2020 wage increase from the agreement no longer exists or is substantially reduced”.

However, the full bench was not persuaded that there were reasonable grounds for believing the employees did not genuinely agree to the variation.

“In our opinion, the question of whether employees have genuinely agreed to an agreement or its variation must be considered at the time they gave their agreement, taking into account the circumstances at that time,” the full bench said.

The bench also raised the point that it is not yet known whether the employer would be eligible for the JobKeeper payment and whether it would ameliorate the employer’s financial and operational situation. It also noted that the wage subsidy would only last for six months, compared to the variation to remove the wage increase applying for a 12-month period.

The FWC found the agreement variation would pass the better off overall test with pay and conditions being well above the 2010 Electrical, Electronic and Communications Contracting Award.

The company also confirmed it had applied for the JobKeeper payment and made a commitment at the hearing to pay employees the scheduled wage increase under the enterprise agreement, including back pay, if it was eligible for the wage subsidy.

Implications for AMMA members

This decision will be of strong interest to all employers seeking to make important workplace changes in response to COVID-19.

In a ‘normal’ pre-COVID-19 industrial environment, it would be practically unheard of for an employer to obtain a variation to an enterprise agreement where there was union opposition to that variation, and within 16 days.

This outcome speaks to the serious and unprecedented circumstances facing Australian businesses (and their employees), and shows the FWC is treating these applications very seriously and bringing them through an expedited approvals process.

AMMA is presenting assisting many members who require variations on enterprise agreement terms made in overwhelmingly different economic circumstances and with much brighter commercial forward-planning.

Our specialist consulting team is assisting resources employers to adapt their employee relations strategies to these difficult times, including through:

  • Strategies for dealing with reductions in company work available including implementing revised/reduced working hours and stand downs;
  • Planning and implementing business re-organisations to deal with travel restrictions;
  • Assisting in planning and implementing reductions in workforce numbers, and
  • Variations of employment contracts to deal with changed economic conditions.

In addition, AMMA is providing on-site operational HR and employee relations support, where human resources management personnel are experiencing difficulty or delays moving through state / territory border controls.

To discuss how AMMA can assist you, contact a member of our Consulting team.