Enterprise Agreements

All workplace relations systems in Australia provide for the making of enterprise agreements. These are agreements made between groups of employees and multiple employers about the terms on which employment is to occur – including rates of pay, hours of work, superannuation and overtime arrangements. Enterprise agreements are also known as ‘industrial agreements’ or ‘collective bargaining agreements’. This page deals with enterprise agreements under the Fair Work Act 2009 and under state and territory law.

State or federal law?

Depending on which state or territory a person is employed in and how they are employed (e.g. as a casual employee, full-time employee or a contractor), they may be covered by either the national workplace relations laws that are set out in the Fair Work Act 2009, or by the workplace relations laws of their state or territory. 

Enterprise agreements under the Fair Work Act

Under the Fair Work Act 2009, an enterprise agreement is an agreement that sets out the conditions of employment that apply to employees of one or more businesses. An enterprise agreement effectively builds on the minimum conditions of employment that are contained in an award (or several awards) that applies. An enterprise agreement can also cover employees who would otherwise not be subject to the terms of an award.                                                                           

An enterprise agreement cannot be made with only one employee.

There are different kinds of enterprise agreements. A “Greenfields agreement” is an enterprise agreement that is made with respect to a new business venture that is starting up and where the employees who will work on the venture have not yet been employed. If an enterprise agreement is made by one employer or multiple employers who are related, the enterprise agreement is known as a “single-enterprise agreement”.  Enterprise agreements made by multiple employers that are unrelated are known as “multi-enterprise agreements”. 

Employees can only be covered by one enterprise agreement at any given time.

How enterprise agreements are made

When offering employment subject to an enterprise agreement (other than a Greenfields agreement), employers must give employees notice that they are entitled to have the agreement negotiated by a union or other bargaining representative. If this occurs, the enterprise agreement will be negotiated, and all parties must participate in good faith. 

After bargaining, the employees are given a copy of the agreement and are asked to vote on it. The agreement comes into effect when a majority of the employees sign it.  If the agreement is a multi-enterprise agreement and a majority of the employees of each employer do not approve of it, it will only apply to those employers of whom a majority of employees did approve of it.

The Fair Work Commission, which administers the national workplace relations system, must then approve the enterprise agreements. An enterprise agreement must pass a “better off overall test” before it can be approved. This test requires that employees must be better off under the agreement than they would be under the applicable award/s.

Terms that may be included in enterprise agreements

Under section 172 the Fair Work Act 2009, an enterprise agreement must only contain “permitted matters”, which includes matters relating to the relationship between the employers and employee organisations, deductions from wages, and how the agreement will operate. If both a modern award and an enterprise agreement apply to an employee’s employment, the enterprise agreement will override the provisions of the award.  

An enterprise agreement can supplement the National Employment Standards, which is a set of 10 minimum standards of employment that apply to employees. However, it cannot provide less protection than is provided under those standards. Enterprise agreements must also include a ‘flexibility term’, which allows employees to negotiate the enterprise agreement with their employer and enter into an individual flexibility arrangement that applies only to them.

If an employee is covered by both an enterprise agreement and a modern award, the base rate of pay under the enterprise agreement must be at least equal to that under the modern award. The agreement must also nominate an expiry date, which must be at most four years after the Fair Work Commission approves the agreement. Finally, there are certain terms that must not be included in an enterprise agreement, such as terms that are discriminatory.

If a term of an enterprise agreement is breached, the employer may be required to pay a fine of 60 penalty units. The employee may also be compensated financially for the breach.

State and territory enterprise agreements

Employees who are not covered by the national workplace relations system may be covered by an enterprise agreement made under their state or territory laws. For example, in New South Wales, an enterprise agreement can be approved by the Industrial Relations Commission after being agreed between the employers and employees to whom it will apply. However, enterprise agreements are less common under the state and territory industrial relations laws.  

The rules for what can be included in a state enterprise agreement is much less prescriptive than under the national system. The industrial relations bodies of each state and territory generally maintain a register of enterprise agreements for that jurisdiction.

If you require legal advice or representation in any legal matter, please contact Go To Court Lawyers.