In Short:
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Enterprise agreements can override modern awards if employees are better off overall.
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Three main types: single enterprise, multi-enterprise, and greenfields agreements.
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Agreements must contain certain terms like dispute resolution, consultation rights, and an expiry date.
Tips for Businesses:
When negotiating an enterprise agreement, make sure employees understand the terms before voting. A single enterprise agreement could offer cost and administrative benefits, but avoid including unlawful terms, such as discriminatory clauses or those that limit employees’ unfair dismissal rights. Always ensure compliance with legal requirements to avoid complications.
Table of Contents
- Australia’s Employment Law Framework
- Who Can Make an Enterprise Agreement?
- What Are the Benefits of Enterprise Agreements?
- Types of Enterprise Agreements
- What Do Enterprise Agreements Contain?
- How is an Enterprise Agreement Approved?
- What is Good Faith Bargaining?
- What Happens When an Enterprise Agreement Expires?
- Key Takeaways
- Frequently Asked Questions
An enterprise agreement is an agreement that an employer and a group of employees have negotiated that covers the terms and conditions of employment. This type of agreement sets out the employment conditions for employees, including pay rates, hours of work, overtime and penalty rate entitlements and breaks during work hours. This article provides a comprehensive overview of Australia’s enterprise agreement regime, detailing the process from creation to expiration.
Australia’s Employment Law Framework
To understand how enterprise agreements operate in Australia, examining how they fit into the broader employment law framework is essential. This framework includes the following tiers.
| Tier 1 | The national minimum wage is currently $21.38 per hour or $812.60 per 38-hour workweek. |
| Tier 2 | The National Employment Standards (NES) are the minimum employment standards for all workers under Australia’s national workplace relations system. |
| Tier 3 | Modern awards are industrial instruments that cover a specific industry or occupation. Industry-specific awards provide minimum employment standards. An enterprise agreement can override the terms of a modern award. However, each employee must be left ‘better off overall’ under than enterprise agreement than their coverage under any relevant award. |
| Tier 4 | Enterprise agreements are collective agreements that employers negotiate with a group of employees. |
Who Can Make an Enterprise Agreement?
An enterprise agreement is made between one or more employers and a group of employees. Therefore, an enterprise agreement cannot be made with an individual employee.
Continue reading this article below the formWhat Are the Benefits of Enterprise Agreements?
Enterprise agreements may be beneficial to both employers and employees. For example, employers can save time and administrative costs on interpreting and applying complex modern awards. At the same time, employees are better off overall than they would have been under any relevant modern award.
Types of Enterprise Agreements
There are three critical types of enterprise agreements that employers and employees can enter into.
| Single Enterprise Agreements | Single enterprise agreements are made between one or more employers that share a single interest and a group of employees. For example, a single interest may include a joint venture between two companies, and a single enterprise agreement requires a determination by the Fair Work Commission (FWC) to confirm that the relevant entities are single-interest employers. |
| Multi-Enterprise Agreements | Multi-enterprise agreements are made between two or more employers and the employees of those different enterprises. Multi-enterprise agreements are separate from single enterprise agreements as they do not require a determination by the FWC in respect of a single interest. |
| Greenfields Agreements | Greenfields agreements are a specific type of enterprise agreement that is only available to new enterprises and is made before any employees are employed. A greenfield agreement can be either a single enterprise or a multi-enterprise agreement. |
What Do Enterprise Agreements Contain?
More broadly, employment law regulates the contents of an enterprise agreement. However, an enterprise agreement may include terms relating to the following employment conditions and entitlements:
- rates of pay;
- penalty rates and payment for overtime;
- allowances and other work-related payments;
- hours of work, including start and finish times;
- annual and personal leave provisions; and
- any terms relevant to the operation of the agreement,
Some key terms are mandatory inclusions in an enterprise agreement, including:
- a coverage term that explains who is covered under the enterprise agreement;
- an expiry date no longer than four years from the date the FWC approved the enterprise agreement;
- a dispute resolution procedure that empowers the FWC, or an independent third party, to settle any disputes relating to the NES or terms of a modern award;
- a term that allows for an individual employee to enter into an individual flexibility agreement (IFA) with their employer; and
- a term that requires employers to consult their employees in the event of any significant changes to the workplace and provides employees with the ability to seek representation in this consultation process.
The law prohibits specific unlawful terms from inclusion in enterprise agreements. Accordingly, an enterprise agreement must not contain terms that:
- are discriminatory;
- place limitations on the application of any unfair dismissal rights under the Fair Work Act 2009 (Cth) (the Act); and
- are not consistent with the general protections, industrial action and right of entry provisions under the Act.
How is an Enterprise Agreement Approved?
In the first instance, an enterprise agreement is negotiated between the employers, the employees and their bargaining representatives. A bargaining representative may include a specific employer, employee, or trade union representative under the agreement. Bargaining representatives are appointed to negotiate on behalf of the relevant party.
Employers must then follow a pre-vote procedure, explaining the enterprise agreement’s terms to the relevant employees. Employers must ensure:
- their explanation is clear;
- their employees have adequate notice under the Act; and
- they provide access to relevant documentation ahead of the vote.
Once this is completed, employers have a right under the Act to request their employees vote on the proposed enterprise agreement. In the seven days before this vote takes place, employers must provide employees with a copy of the proposed enterprise agreement and any related material.
If a majority of employees vote in favour of the agreement, the employer must take the proposed enterprise agreement to the FWC for approval. When determining the approval of the proposed enterprise agreement, the FWC will determine whether:
- the employees genuinely agreed to the proposed enterprise agreement;
- all relevant employees ‘better off overall’ under the proposed enterprise than they would have been under any relevant modern award;
- the agreement has a nominal expiry date;
- the agreement contains any unlawful terms;
- the agreement contains flexibility, consultation and dispute resolution clauses; and
- the parties observed good faith bargaining obligations in creating the agreement.
What is Good Faith Bargaining?
Good faith bargaining refers to how the parties involved in an enterprise agreement behave during the negotiation process. This includes:
- participating in meetings;
- disclosing all necessary information that is relevant to the enterprise agreement;
- employers providing genuine responses to proposals made by employees; and
- employers not preventing employees from joining a union or bargaining collectively.
However, it is essential to note that good faith bargaining only requires the parties to make concessions during the negotiation process or reach an agreement when a party does not agree with specific terms that are being proposed.
What Happens When an Enterprise Agreement Expires?
The Act allows enterprise agreements to continue operation after they have reached their nominal expiry dates. At this point, they may also be replaced by a new enterprise agreement, or the parties to an enterprise agreement may apply to the FWC for the agreement to be terminated.
As an employer, understand your essential employment obligations with this free LegalVision factsheet.
Key Takeaways
An enterprise agreement is an agreement that an employer and a group of employees have negotiated that covers the terms and conditions of employment. Enterprise agreements play a vital role in shaping the employment landscape in Australia, providing customised employment conditions that benefit both employers and employees.
If you require further assistance with an enterprise agreement, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755, or visit our membership page.
Frequently Asked Questions
An enterprise agreement is an agreement that an employer and a group of employees have negotiated that covers the terms and conditions of employment.
An enterprise agreement cannot diminish employee entitlements per the NES.
An enterprise agreement typically has a nominal expiry date no longer than four years from the date it is approved by the Fair Work Commission. However, the agreement continues to operate beyond this date until it is either replaced by a new agreement or terminated by the FWC.
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