The government’s industrial relations legislation, to be introduced on Wednesday, would allow businesses affected by COVID to be exempt from the Better Off Overall Test (BOOT) in enterprise agreements.

More broadly, the planned changes would make it easier for agreements to comply with the BOOT and speed up the approval process.

Enterprise bargaining has become sclerotic and addressing this problem is a central part of the government’s industrial relations reform package.

In December 2010 there were 25,197 current federal enterprise agreements covering some 2.6 million employees (23% of the total workforce). By June this year, the number had declined to 10,701, covering just under 2.16 million employees (20.8% of the workforce).

The BOOT considers whether the workers would be better off overall if a proposed agreement applied rather than the relevant award.

Under the current law, the Fair Work Commission (FWC) can approve an agreement that doesn’t comply with the BOOT if there are “exceptional circumstances”. The government proposes the impact of COVID effectively be the exceptional circumstance. The FWC also would have to consider the extent of support for a proposed agreement from employees and employers, and there’s a public interest test. There would be a sunset clause set at two years.

Industrial Relations Minister Christian Porter invoked the name of Paul Keating in arguing for the changes. He said the government aimed to restore Keating’s “vision when he launched the enterprise bargaining framework almost three decades ago”.

Porter said this was for workers and employers to sit down and “agree on ways to increase productivity in exchange for higher wages and better conditions.

"But in reality, the system has been slowly choked by increased technicality, complexity and regulation, leaving it almost unrecognisable today – so much so that many employers no longer even attempt to get agreements across the line,” Porter said.

The government says application of the BOOT has become complicated because the FWC has increasingly taken into account “hypothetical” working arrangements unlikely to arise. This has led to long delays in approvals.

Apart from the COVID exemption, the changes the legislation proposes for the BOOT would

• remove the requirement for the FWC to consider patterns or kinds of work that are not reasonably foreseeable

• replace the requirements for assessing whether an agreement is “genuinely agreed” (for example, the requirement for employers to explain every clause to their workers even when the new agreement is largely unchanged) by a test that considers the substance of the agreement

• require the FWC to determine applications within 21 days (the median approval time in 2018/19 was 122 days), or explain the exceptional circumstances preventing this

• require the FWC to take into account the views of the employer and employees on the BOOT (including non-monetary benefits)

• restrict intervention at the approval stage to employees and bargaining representatives unless the FWC is satisfied exceptional circumstances exist for why a non-bargaining representative should be heard

• allow a new franchisee employer to join an agreement (e.g. McDonald’s, KFC) by only requiring that franchisee’s employees to vote, rather than everyone already covered by the agreement.

In other changes, existing agreements made before the Fair Work Act of 2009 will end in July 2022, and the government will initiate a review of the low paid bargaining provisions.

Porter said both unions and employers knew the present enterprise bargaining system was broken and wanted it fixed.

“The government recognises the BOOT’s importance as a key safeguard for workers,” he said.

“But a situation cannot be allowed to continue where the Fair Work Commission considers completely unlikely hypothetical situations.

"Similarly, the bargaining system has become grindingly slow due to the ability of third parties who were not involved in the initial bargaining process to object to agreements being made in the commission.

"Given that many industries are still reeling from the impacts of the pandemic, it is also makes good sense for the FWC to be able to consider agreements that don’t meet the BOOT if there is genuine agreement between all parties, and where doing so would be in the public interest.”