Enterprise Agreements

An enterprise agreement (sometimes referred to as an enterprise bargaining agreement or EBA) is a collective employment agreement between one or more national system employers, whichever of their employees are specified in the agreement and any union representing those employees. An ‘enterprise’ means any kind of business, activity, project or undertaking.

The Fair Work Act 2009 (Cth) (‘FWA’) sets out the requirements of an enterprise agreement as it relates to employees in the private sector. The agreement must cover at least two employees. Despite this, they must also contain flexibility terms that permit employers and individual workers to vary the agreement to suit their needs.

What does an enterprise agreement deal with?

An enterprise agreement can only deal with:

  • matters pertaining to the relations between each employer that will be covered by the agreement and its employees;
  • matters pertaining to the relations between each employer and any union covered by the agreement;
  • deductions from wages authorised by an employee;
  • matters relating to the operation of the agreement.

Why have an enterprise agreement?

Whilst modern awards cover matters such as minimum pay and conditions, the benefit of an enterprise agreement is that it can cover specific arrangements for a particular enterprise.

Who is covered by an enterprise agreement?

An enterprise agreement covers employers and employees who fall within its scope, including employees who are hired after the agreement was originally made. An agreement also covers registered unions that have applied to the Fair Work Commission (‘FWC’) to be covered or that have been involved in the making of a ‘greenfields agreement’.

Types of enterprise agreements

There are two main types of enterprise agreements.

Single-enterprise agreements

These can be made by a single employer or two or more employers as long as they are related corporations, or conduct a joint venture or common enterprise, or have obtained a ‘single interest employer authorisation’ from the FWC. There can be more than one agreement within a single enterprise that covers different groups of employees.

Multi-enterprise agreements

These are agreements made by two or more employers that cannot establish a ‘single interest’ in any way outlined above.

For both single-enterprise agreements and multi-enterprise agreements, a ‘greenfields agreement’ can be made for a ‘genuine new enterprise’.

A ‘genuine new enterprise’ can cover a new business, activity or project commenced by an existing employer. Such an agreement can only be made with one or more relevant employee organisations (eg, a union) as opposed to the employees on their own.

What is the ‘better off overall test’ (BOOT)?

The ‘better off overall test’ requires the FWC be satisfied that each award-covered employee will be better off overall under the enterprise agreement than they would be if the relevant award only, applied.

Where an enterprise agreement fails the BOOT, the FWC can still approve it if there are ‘exceptional circumstances’ and its approval would not be contrary to public interest.

What terms must be included in an enterprise agreement?

There are four main mandatory inclusions for an enterprise agreement.

Duration and expiry

An enterprise agreement must specify a ‘nominal expiry date’. Under the FWA, enterprise agreements generally have a maximum term of four years.

Dispute settlement

An enterprise agreement must contain a ‘dispute settlement procedure’ that authorises the FWC or some other independent person to settle disputes about the agreement.

Flexibility

An enterprise agreement must have a ‘flexibility term’ to allow for ‘individual flexibility arrangements’ to be made.

Consultation

An enterprise agreement must have a consultation term. The effect of this is that employers must consult with their employees (and/or any relevant union) in relation to major workplace changes that are likely to have a significant effect on them.

Can enterprise agreements be varied?

Yes. Enterprise agreements can be varied at any time where employers and employees covered by the agreement agree to the variation.

Employers must give employees access to the proposed variation and explain it to them. The variation must be approved by the majority of the employees and then be lodged with the FWC for approval. The FWC must be satisfied of a number of matters before it approves a variation, including whether the varied agreement passes the ‘better off overall test’. The FWC can refuse the variation on ‘serious public interest grounds.

How is an enterprise agreement terminated?

Enterprise agreements can be terminated in a number of ways including:

  • Once an enterprise agreement has passed its nominal expiry date, the parties to the agreement can negotiate a replacement agreement; or
  • The agreement can be terminated by mutual consent between the parties; or
  • The parties can wait until an enterprise agreement has reached its expiry date and apply to the FWC to have it terminated.

The FWC must be satisfied that it would not be contrary to the public interest to terminate the agreement.

What if there is an enterprise agreement and a modern award that exists?

Generally, a modern award will not apply where a registered enterprise agreement exists.

However, the base pay rate in a registered enterprise agreement cannot be less than that in a modern award. Further, the NES will still apply, as will any terms about outworkers that are stipulated in an award.

What if there is an enterprise agreement and an employment contract that exists?

An employment contract cannot allow an employer to exercise a power that is inconsistent with an enterprise agreement. Further, where a condition of an employment contract is less favourable than those in an enterprise agreement, the enterprise agreement will override the contract.

What happens if an enterprise agreement is unregistered?

Where an enterprise agreement is not registered, it may not be legally enforceable.

If however, the unregistered agreement is formalised as a deed or the terms of the agreement incorporated into an employment contract, these documents may then become legally enforceable.

What about public sector employees?

In Queensland, the Industrial Relations Act 2016 (‘IRA’) applies to state public sector employers and local councils.

The IRA allows for enterprise agreements to be registered that may override or exclude the operation of state awards. These industrial agreements are referred to under the IRA as certified agreements which are made between an employer and unions or groups of employees.