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Enterprise Agreements

Written by James Stevens

Founder and CEO of the GTC Legal Group.

Depending on which State or Territory you are employed in and how you are employed (e.g. as a casual employee, full-time employee or a contractor), you will be covered by either the national workplace relations laws, or your State or Territory’s workplace relations laws.  All workplace relations systems in Australia provide for the making of enterprise agreements.  They are also often referred to as industrial agreements.

All workplace relations systems in Australia provide for the making of enterprise agreements.

What is an enterprise agreement?

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

An enterprise agreement cannot be made with only one employee.  There are different kinds of enterprise agreements.  A “Greenfields agreement” is the term used to describe an enterprise agreement which 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 who are unrelated are known as “multi-enterprise agreements”.  Employees can only be covered by one enterprise agreement at a particular time with regard to their employment with the one employer.  A list of enterprise agreements made under the national workplace laws can be found here.

How an enterprise agreement is made

For enterprise agreements other than Greenfields agreements, prior to making the agreement, the employers making the agreement must give their employees notice of their right to have the agreement negotiated by a bargaining representative such as a union.  There may be multiple bargaining representatives depending on the employees to be covered by the agreement.  The enterprise agreement will then be bargained, in which case 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 is made 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 of 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 under the applicable award(s).

Terms that may be contained in enterprise agreements

Under section 172 the Fair Work Act 2009, an enterprise agreement must only contain “permitted matters”, which includes deductions from wages, matters relating to the relationship between the employers and employee organisations, 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 are a set of 10 minimum standards of employment that apply to employees.  For example, an enterprise agreement can apply for your hours of work to be averaged.  However, it cannot provide less than what those standards provide.  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.  It must also nominate an expiry date, which must be at most 4 years after the Fair Work Commission approves the agreement.  Finally, certain terms cannot be included in an enterprise agreement, such as terms which are discriminatory.

If a term of the enterprise agreement is breached the employer may be required to pay a fine of 60 penalty units.  You 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.  The States and Territories generally have fewer enterprise agreements.  For example, in NSW an enterprise agreement can be approved by the Industrial Relations Commission after being agreed between the employers and employees to whom it will apply.  The rules for what can be included in an 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.

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