In the 1980s, labour movement worries about unsustainable wage inflation and business worries about poor productivity finally met up. It produced enterprise bargaining, which freed business from the handcuffs of the award system decided by regular arbitrations – which started with the metal industries and flowed outwards.

That seemed to work for a while, albeit sluggishly – until the Fair Work Act.

The FWA gave us a heavily regulated award system and a heavily regulated over-award enterprise bargaining system.

Enterprise bargaining increasingly struggles to change what's in awards to suit enterprise circumstances.

To get an over-award bargaining agreement approved, in practice, a business will have to satisfy the Fair Work Commission that every employee in every circumstance at every moment is better off under the agreement than under the award.

A recent case before Fair Work involving H&M;, the global Swedish retailer, bells the cat on how enterprise bargaining now operates or, rather, doesn't.

The commissioner's decision contains revealing exposures of how Fair Work perceives its role.

Fair Work examines the minute detail of agreements to test which proposed conditions are better or worse than those in the award that would otherwise apply; and then decides whether the net result of the pluses and minuses is plus.

Fair Work not only delves into the terms of the agreement but also into how it would operate. Effectively, it asks whether the business can guarantee that every decision taken by every manager in every circumstance during the future course of the agreement will leave no single employee worse off at any time.

Jumping through hoops

Fair Work doesn't accept hand-on-heart, not even from a global business like H&M.; A business applicant before Fair Work might have to give a written undertaking that it will not permit this or that obscure or complex situation to occur, however unlikely it appears.

But giving undertakings, no matter how many nor how detailed, will necessarily get you over the line. Just ask H&M.; They gave plenty of undertakings and presented plenty of detail but Fair Work still rejected the agreement.

The H&M; case exposes the substantive hurdles to the promise of enterprise bargaining to unlock your award handcuffs.

For example, H&M; wanted to roster casual employees over a 13-week period with the aim of ensuring no more than 65 per cent of hours were worked on weekends.

H&M; conducted research showing that casual employees were not working more than 51.9 per cent of hours on weekends whereupon the FWC asked the company to give an undertaking that no employee would ever work more than 51.9 per cent of their hours on weekends. Seriously.

H&M; gave the undertaking, no doubt with eyes rolling skyward, but Fair Work still decided that the award condition for meeting the 65 per cent rule over a one or two-week pay period meant employees would be worse off with a 13-week alternative.

H&M;'s agreement fell at this hurdle.

According to the commissioner's decision, the Fair Work Act "provides for an employer and its employees to negotiate an agreement to best suit the employer's business and the employees' needs". This didn't happen.

So, four decades later – there are industry and occupational awards whose minimum wages and conditions are improved every four years in a review of those awards. On top of that, there is over award enterprise bargaining setting actual pay above the minima, reflecting union bargaining power and regional labour market differences.

The regulation of over-award EBAs makes it deliberately difficult to change award conditions to suit the enterprise; and makes it hard to alter existing enterprise agreement conditions, other than by adding to them. While we've solved the wage inflation problem, we haven't solved the productivity problem. The Fair Work Act is standing in the way.

Michael Angwin advises companies on industrial relations.