The role and benefits of interest-based bargaining

With bargaining usually commencing with the exchange of logs of claims, parties often default to a positional bargaining approach characterised by adversarial, concessional bargaining. Positional bargaining is based on fixed, opposing viewpoints (positions) and tends to result in compromise that does not satisfy the true interests of the parties or no agreement at all. It’s this approach which has contributed to the perception that enterprise agreement bargaining is slow, inefficient and costly. Arguably more important, given the value of promoting positive and productive relationships in the workplace, is the deteriorating impact that the transactional approach of positional bargaining can have on relationships between employers, employees, and unions.

To avoid the pitfalls of purely positional bargaining, parties should utilise an interest-based bargaining (IBB) approach.

What is interest-based bargaining?

IBB involves exploring the deeper interests underlying parties’ positions stated in their log of claims to identify potential trade-offs and win-win opportunities across issues and interests. Interests include the needs, desires, concerns, and fears important to the party making a claim. There are often many interests behind any one position, if parties focus on identifying those interests, they will increase their ability to develop win-win solutions. 

Identifying interests requires a conscious and deliberate effort by the parties as interests are often less tangible than positions and are often not publicly revealed. A key approach to determining interests is asking "Why?" Why do you want that? Why do you need that? Why are you concerned? However, its vital to be clear that these questions are to understand their interests better, not to challenge them or to gain a competitive advantage. Parties should also take the time to consider and understand their own interests underlying their log of claims to allow them to proactively communicate those interests during bargaining. Ensuring that a bargaining team has the appropriate insight into underlying interests is vital to successful IBB. 

A mutual understanding of interests helps parties to work together cooperatively to try to determine the best ways to meet those interests. Where a claim does not adequately meet the interests of one or more parties, bargaining parties can undertake "brainstorming". By listing all the options anyone can think of without criticising or dismissing anything initially, parties can come up with creative new ideas for meeting interests. In this way, IBB can facilitate win-win outcomes, giving each side as much of their interests as possible, and enough, at a minimum that they see the outcome as a win, rather than a loss.

The benefits of adopting an interest-based bargaining approach

The central benefit of an IBB approach is the ability to generate ideas which help the parties reach agreement. By focusing on solutions which satisfy parties’ interests, bargaining becomes more efficient and effective, reducing the time and costs and helping to craft a better agreement which the parties will be subject to for years to come.

A corollary of engaging in a bargaining style which involves the in-depth understanding of parties’ interests and the collaborative generation of ideas is that parties are likely to meet their mandatory good faith bargaining requirements imposed by section 228 of the Fair Work Act 2009 (Cth) (FWA). This ensures that parties don’t contravene the FWA and helps prevent the involvement of the Fair Work Commission in bargaining.

Rather than an antagonistic positional approach, IBB helps make negotiation a collaborative value-creating process. In particular, value is derived from the quality of the ongoing relationship, and the shared commitment to success of the enterprise through an understanding of shared interests and the mutual value of cooperation. In doing so, bargaining can become a tool to strengthen, not just preserve, the relationship between employer and employees.

Being candid about the interests underlying positions may also help prevent industrial action. Generating more ideas can move parties from entrenched positions, alleviating the stagnation of bargaining that often leads to industrial action. By gaining a deeper understanding of the reasons behind a position, employees can better understand the likelihood of industrial action being an effective tool and of their interests being met in some form without industrial action. Both of which help prevent unnecessary or ineffective industrial action.

An illustrative example

Big Factory Pty Ltd are bargaining with employees and their union for an enterprise agreement. The business has been busy over the past few years and appears to be financially healthy. Employees have not received a pay rise since a year before their previous agreement expired, which is now two and half years ago. The employee log of claims includes a claim for an immediate pay rise and subsequent pay rises each year of the agreement. The employees believe the business can afford it and that recent success has been in large part due to the employees’ hard work. The employer’s log of claims includes a claim for the maintenance of existing pay rates until a year of the agreement has elapsed with subsequent yearly increases. The employer believes that as employees are paid above award, they are financially secure.  

Big Factory and the union try to find a middle ground between their two positions, discussing different compromises such as a lower immediate or a higher but delayed raise. However, any delay in an immediate pay rise leaves employees feeling that the company is choosing not reward workers when it can afford to, while any raise before one-year leaves Big Factory feeling that employees are entitled and damaging the business with unreasonable demands. This causes negotiations to stagnate and prompts discussions about possible industrial action.

After adopting a IBB approach, the employees identify their interest in seeking an immediate pay rise as a need to address the significant rise in cost of living coupled with a slower than expected reprieve from high interest rates. Employees provide information about their average cost of living in comparison to their wages and information about the rates of home ownership with a mortgage among employees. This information demonstrates that employees would face significant long term financial hardship if they don’t receive a pay raise for a year.

The employer identifies their interest in seeking to delay a pay rise as a desire to maintain capital for reinvestment into a planned expansion which would increase productivity and revenue. The employer provides information about recent revenue increases, the costs of a pay rise and planned expansion, and projected revenue increases. This information demonstrates that current revenue is insufficient to fund significant employee entitlement increases but that projected revenue will be sufficient.

By understanding each other’s interests, the parties are able to generate additional proposals to try and meet the interests of employer and employees. One proposal is that Big Factory partners with local businesses to subsidise essential products for employees, addressing cost of living concerns at a lower expense than pay rises. An additional proposal is that the agreement provide for increased shift lengths, offering employees the opportunity to earn more while generating proportionate revenue. The final proposal is that employees receive a full pay rise after one year which is backdated to the beginning of the agreement, allowing employees to receive the full amount they would with an immediate raise while also facilitating the employer’s expansion.

After agreeing on a delayed, retrospective pay rise and concluding bargaining, the relationship between the parties is strengthened through the recognition of the value each party brings to the relationship and the sacrifices each made for the benefit of the other and the mutual benefit of the relationship. 

Protecting confidential information

Positional bargaining is often characterised by a level of distrust in disclosing information to avoid ceding any advantage in the attempt to ‘win’ the negotiation. Conversely, an IBB approach necessitates information sharing which is vital to communicating the underlying interest and to building trust in the legitimacy of positions put forward on the basis of those interests. However, IBB brings with it concerns of disclosure of sensitive information such as financial information. To address these concerns, there are steps that can be taken to protect sensitive information while facilitating effective IBB.

If there are concerns about specific information to be provided during bargaining, it should be shared only with bargaining representatives in closed door meetings and not in any communications with the broader employee cohort. It’s important to be clear about the extent to which any information provided can be shared outside of the meeting. For instance, financial specifics may be given in a meeting on the basis that representatives only share the trends and their impressions with employees, not the specifics. It’s also important to be clear about the extent (if any) to which notes or other recordings can be made of the information being shared. In instances of highly sensitive information, the parties may enter into a formal agreement to maintain confidentiality.

Data can often be generalised to provide insight without revealing specific information which can be useful to support interests without compromising confidentiality. Crafting data specifically for bargaining can also mean that its unique to that bargaining context, this can provide insight into any breaches of confidentiality as the origin of the information is known to be a bargaining party. While this doesn’t prevent the breach, it does provide insight into any breaches of confidentiality, allowing a party to adapt its approach going forward.

Getting started on IBB

Adopting an IBB approach requires a cohesive effort by a bargaining team to ensure interests are understood and communicated, and that the work is done to generate ideas that best meet the parties’ interests.

This means that the whole bargaining team must understand how and why an IBB approach is being used and their role within it. For this reason, it’s important to have a leader that is experienced at IBB that can educate and guide those involved in bargaining to most effectively implement IBB. While IBB is best implemented from the beginning of bargaining, it's never too late to adopt an IBB approach.