How long does an enterprise agreement last?

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Enterprise Agreements (otherwise known as Enterprise Bargaining Agreements) , can seem  complex in the beginning, but often it is simpler and more efficient in the long term. As each Enterprise Agreement can be tailored to meet the needs of a business, they allow for flexibility by varying the terms of Modern Awards so that you and your employees benefit from the arrangement. If your business is considering entering into an Enterprise Agreement, you should seek legal advice to ensure the terms of your Enterprise Agreement pass the ‘better off overall test’ (BOOT) assessed by the Fair Work Commission.

What is an Enterprise Agreement?

An Enterprise Agreement (Agreement) is a negotiated agreement between employers and employees which establishes greater flexibility and fair working conditions within a workplace. In the process of creating an Enterprise Agreement, employers must act in good faith and in the interests of current and future employees. This means that the terms and conditions prescribed in the Agreement must go beyond such conditions as set out in a Modern Award (Award) or the National Employment Standards (NES). An Enterprise Agreement replaces an Award entirely, however, similar terms (as set out in the Award) can be included in the Agreement.

Key points to remember

  •   Enterprise Agreements are very important as they define the minimum terms of employment between an employer and their employees;
  •   Enterprise Agreements help mitigate future risks and potential disputes between employer and employees as it clearly sets out workers entitlements;
  •   Enterprise Agreements provide clarity for employers and employees to better understand their working arrangements and expectations. This can provide employees with more flexible working conditions, which in return benefits employee retention overall;
  •   Make sure you seek legal advice as each Enterprise Agreement requires customisation.

History of Enterprise Agreements

Dating back to 1991, Enterprise Agreements were first introduced in the Australian Industrial Relations system under the Prices and Incomes Accord (Mark VII). By 1993 (Mark VII), the process of enterprise bargaining was in full swing as negotiations focussed on altering centralised wage-fixing and offering parties flexible agreements that suited their needs more effectively than what was covered under a Modern Award. Through the reform brought on by the Fair Work Act in 2009 (Cth), various types of collective and individual workplace agreements that existed were replaced by Enterprise Agreements to singularise workplace agreements. Since then, workplaces either undergo negotiations to enter into Enterprise Agreements or follow what is prescribed in the specified Modern Awards.

What is Enterprise Bargaining?

Enterprise Bargaining, otherwise commonly known as the Enterprise Bargaining process, is where employees and their bargaining representatives negotiate with employers with the goal of settling on terms and conditions which will make up the Enterprise Agreement. . Enterprise Bargaining is a meticulous and lengthy process and the negotiations involved in the creation of these Agreements are complex.

What is the difference between a modern award and an enterprise agreement?

The main difference between a Modern Award and an Enterprise Agreement is that an Enterprise Agreement can be tailored to meet the needs of a business, whereas Modern Awards encapsulate general protections that are unique to the industry. This is the main difference between a Modern Award and an Enterprise Agreement, as the operation and functionality remain similar. Hence, like Modern Awards, Enterprise Agreements set out minimum entitlements and employment conditions in which an enterprise follows in their operations. Therefore, it is important to consider what employer and employee representational rights are being enabled under the Award or in an Enterprise Agreement.

Is an enterprise agreement a contract?

An Enterprise Agreement, in its simplest form, is an agreement. However, the enforceability of this agreement can unintentionally create contractual obligations imposed on the parties if referred to in the contract of employment. In Gramotnev v Queensland University of Technology [2015] QCA 127, the Queensland Court of Appeal found that terms and conditions prescribed in Enterprise Agreements are said to be incorporated in the employment contract where this is indicated in the contract of employment to be contractually binding.

Why would an employee agree to an enterprise agreement?

There are many unique factors as to why an employee may agree to an enterprise agreement. The main reason that is commonly shared amongst employees is that an Enterprise Agreement reflects the overall interests of the majority and surpasses benefits offered under a Modern Award. The process of an Enterprise Agreement passing the Fair Work Commission’s assessment and the BOOT, safeguards employees by ensuring that bargaining powers within the agreement surpass assured certainties held by the National Employment Standards. Additionally, Enterprise Agreements offer employees the ability to clearly understand terms and conditions within their employment more explicitly and often in a more simplistic form. This removes any ambiguity as employees do not have to interpret and apply complex Modern Awards. However, the overall reasoning as to why an employee may agree to entering into an Enterprise Agreement is that it reflects their interests.

What is the purpose of an enterprise agreement?

The purpose of an Enterprise Agreement is to give employers and employees the freedom to bargain for greater working conditions, flexibility and wages. This process must ensure that the terms and conditions prescribed in the agreement extend beyond a Modern Award or the NES to safeguard the interests of the majority. In doing this, the Fair Work Act 2009 (Cth) specifies negotiating standards, mandatory terms and requirements in which the Fair Work Commission will review in the approval process. Overall, an Enterprise Agreement allows employers and employees to collectively formulate an agreement that is unique to their interests.

Do you need an Enterprise Agreement?

Ultimately, there is no legislative requirement imposed on employers to enter into negotiations for an Enterprise Agreement with employees or a union if that is not desired. The application of the Modern Award will continually apply until an Enterprise Agreement is approved by the Fair Work Commission and the coverage of the Award no longer applies. Many businesses seek to implement an Enterprise Agreement as it offers both employers and employees the ability to enter into more flexible arrangements that provide greater benefits than what is offered in the Modern Awards. Notably, Modern Awards are complex and examining their application to each employee can be time-consuming. Enterprise Agreements remove this administrative cost factor as employers are able to focus their time and resources on running their business rather than spending time administratively assessing each employee’s allowances and penalties. Overall, Enterprise Agreements, although not required, are beneficial.

What are the types of Enterprise Agreements?

Under the Fair Work Act 2009 (Cth) there are three approaches in which an Enterprise Agreement can come into effect. The following Enterprise Agreements that can be made are:

      Greenfield agreements;

      Single-enterprise agreements; and

      Multi-enterprise agreement.

Before entering into negotiations to establish an Enterprise Agreement, it is important to determine which type of agreement is most appropriate for your business.

Greenfield agreement       

A Greenfields Agreement is an agreement that is created by a new enterprise before an employee is employed by the business to whom will be covered by the agreement. The key features of a Greenfield Agreement is that this type of enterprise agreement is only available to new enterprises and that an employer needs to undergo negotiations with a union before any employees are officially employed. This means that at the creation of a Greenfield Agreement, negotiations between an employer and the specific employee association are what determines the employment conditions.

Single-enterprise agreement 

A Single-Enterprise Agreement is an agreement that is made between a single employer (or two or more single interest employers) and employees who are employed at the time the agreement is created and who will be covered by the agreement. This type of agreement is commonly used by employers where a single interest is involved or where a joint venture involves parties to collaborate to accomplish the task or project collectively.

Multi-enterprise agreement

A Multi-Enterprise Agreement is an agreement that is made between two or more employers and employees who are employed at the time the agreement is created and who will be covered by the agreement. These agreements differ from single-enterprise agreements as employers do not need to prove to have a single interest in the bargaining process. This type of agreement is commonly relied upon by employers who are engaged in projects where multiple organisations are involved in the process of executing a project.

How is an Enterprise Agreement made?

The Fair Work Act 2009 (Cth) sets out a simple and fair framework that assists employers and employees to bargain in good faith when drafting an Enterprise Agreement. In the process of drafting an Enterprise Agreement, employers and employees involved in the process must negotiate terms and conditions that collectively promote and protect the interests of those who would be covered by the Agreement.

The following list contains key terms that must be included (but is not limited to this list) in the Enterprise Agreement:

  1. The period in which the Agreement will be in effect.
  2. A dispute settlement procedure that authorises either the Fair Work Commission or an independent party to those covered by the Agreement to settle the dispute about matters that may arise concerning terms of a Modern Award or the National Employment Standards.
  3. A flexibility term that allows for employers and employees to make individual flexibility arrangements for the purpose of meeting their genuine needs and the ability to vary business operations.
  4. A consultation term which requires an employer to consult their employees covered by the Agreement of any major workplace changes that would likely have a significant impact on them. If the Agreement fails to have a consultation term, the model consultation term as set out in the Fair Work Regulations 2009 (Cth) will be applied.

Once an Enterprise Agreement is formulated, it is then assessed by the Fair Work Commission for consideration as to whether the Agreement passes the BOOT. In this assessment, the Fair Work Commission assesses the terms and conditions within the Agreement against the prospective Modern Award and National Employment Standards to determine whether the majority of the employees intended to be covered by the Agreement would be better off. In the Commission’s assessment, a determination will be made and if approved the date of approval will become the effective date in which the Agreement was contracted into by the parties.

What happens if you are unable to reach an Agreement?

There are many instances where parties may be unable to reach an agreement on the terms and conditions of a proposed Enterprise Agreement. If this occurs, a bargaining representative can request for the Fair Work Commission’s assistance in initiating industrial action to make workplace determinations and prescribe terms and conditions suited to whom the Agreement is covering. Additionally, employees can initiate action during the bargaining process of the proposed Enterprise Agreement to assist with the negotiation of terms. Overall, drafting an Enterprise Agreement can be complex. As there are varying and competing interests at play, negotiating terms to meet the overall benefit of the majority can be difficult.

Who can be a Bargaining Representative?

Employers and employees can appoint any person as a bargaining representative for a proposed agreement. The following list of people can be bargaining representatives for a proposed enterprise agreement:

      an employer or employee that is to be covered by an agreement;

      a representative appointed by an employer or employee; or

      a union member who is, by default, an employee.

A Bargaining Representative entitles a person with the ability to bargain for terms and conditions in an agreement, and depending on the type of agreement, apply to the Fair Work Commission for orders and determinations related to the agreement itself. Additionally, the main purpose of a bargaining representative is to represent the interests of those intended to be covered by the agreement.

What is the scope of an Enterprise Agreement?

There are several components that make up the scope of an Enterprise Agreement. The terms and conditions within an agreement are crucial in establishing the scope of the relationship between an employer and employee, and how the agreement will operate.

An Enterprise agreement must contain the following terms and conditions that cover the following matters:

      The terms about the relationship between an employer and the employees covered by the Agreement.

      The terms about any wage deductions, entitlements or matters related to the general operations of the business (i.e. meal-breaks, allowances, accruals, etc.).

      How the Agreement will operate and who is covered by the Agreement. 

When drafting an Enterprise Agreement, it is also important to consider what cannot be included in the terms and conditions of the Agreement. In the Fair Work Commission’s review, an Enterprise Agreement will not be approved if unlawful content is included in the Agreement’s terms and conditions. When drafting the Agreement, the terms and conditions interested to be entered by the parties must be of the intention of acting in ‘good faith’ to the Agreement and for the betterment of all employees and employers who will be covered.

The scope of an Enterprise Agreement is what itself becomes the matter for bargaining, which ultimately focuses on guarding against unfairness in the organisation and operational relationship between all parties covered by the agreement.

What happens when an enterprise bargaining agreement expires?

When an Enterprise Bargaining Agreement expires the Agreement itself continues to operate after the nominal expiry date until such Agreement is replaced or terminated by the Fair Work Commission. The operational effect of this means that the terms and conditions contained in an Enterprise Agreement continue to apply even after the nominal expiry date.

It is important to note that the enforceability of this agreement remains and the terms specified continue to have effect. As the agreement continues to operate, the provisions that outline the National Employment Standards will apply where terms within an agreement are less than what is permitted under the National Employment Standards. Therefore, when an Enterprise Agreement expires, it is best to review the terms and conditions contained in the Agreement to ensure that operationally the Enterprise Agreement addresses workplace complaints and meets the desired needs of those covered by the agreement.

Can an employer terminate an enterprise agreement?

Both employers and employees can terminate an Enterprise Agreement by request. For an employer to terminate an Enterprise Agreement, in their application to the Fair Work Commission, the employer must satisfy that the decision to terminate the Enterprise Agreement is not contrary to public interest and is an appropriate decision in consideration of all circumstances. The decision to terminate an Enterprise Agreement occurs only when it is approved by the Commission.

Are enterprise agreements legally enforceable?

Enterprise Agreements are legally enforceable as it is a legislated process of negotiation. Once an agreement is approved by the Fair Work Commission as it satisfies the requirements under the Fair Work Act 2009 (Cth).. Enterprise Agreements provide security to those covered by the Agreement as it ensures that the agreed terms and conditions have full effect and the intentions of the parties are carried out in good faith to the Agreement.

Legal advice

If you are considering entering an Enterprise Agreement, you should seek legal advice. Legal Kitz business specialists can assist with ensuring that your Enterprise Agreement is drafted so that you may avoid disputes from vague terminology or missing essential clauses for the operation of the Enterprise Agreement.

Click here to book a FREE consultation with one of our highly experienced solicitors today or contact us at info@legalkitz.com.au or by calling 1300 988 954.

The above information has been collected from relevant government websites and is subject to change. For the latest information regarding new or amended legislation, please refer to state and federal government websites.

 

 

[1] Gramotnev v Queensland University of Technology [2015] QCA 127. 

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