Enterprise Agreements

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Fair Work Act 2009

The Fair Work Act 2009 (FW Act) brought about some significant changes to blanket agreements. From 1 July 2009, all the existing various forms of collective agreements were replaced by the “enterprise agreement”.


Enterprise agreements

An enterprise agreement is a registered instrument which sets out the terms and conditions of employment between a group of employees and one or more employers.

All enterprise agreements must be assessed and registered by Fair Work Australia (FWA) before they can become enforceable. The purpose of registration is for FWA to ensure that the agreement complies with the FW Act requirements and is fair to all parties.

There are three types of enterprise agreements:

  • Single enterprise agreements – made between a group of current employees and a single employer (or more than one single interest employer);
  • Multi-enterprise agreements – made between a group of current employees and 2 or more employers who conduct the same types of business and want to offer unified working conditions to their combined employees; and
  • Greenfields agreements – applies to situations where a new business is proposed, and is made between union(s) who cover the prospective industry, and one or more prospective employers.


Good faith bargaining

Enterprise agreement negotiations (or bargaining) take place between two „bargaining representatives‟. Employees must be immediately notified of their right to a bargaining representative.

Bargaining representatives could consist of an employer and a trade union, or perhaps a group of employers and a group of employee representatives. Each party is required to act in good faith.

The FW Act sets out the following good faith requirements that bargaining representatives must meet:

  • attending and participating in meetings at reasonable times
  • disclosing relevant information (other than confidential or commercially sensitive information) in a timely manner
  • responding to proposals made by other bargaining representatives for the agreement in a timely manner
  • giving genuine consideration to the proposals made by other bargaining representatives, and giving reasons for any responses to those proposals
  • not behaving in a capricious or unfair way that undermines freedom of association or collective bargaining
  • recognising and bargaining with the other bargaining representatives for the agreement.

Good faith bargaining does not been that one side must make concessions or that an agreement must be reached. It simply requires that the process is fair and genuine.


Mandatory terms of an enterprise agreement

The following are compulsory terms that the FW Act provides must be included in an enterprise agreement:

  • A nominal expiry date for the agreement which is no longer than four years from the date Fair Work Australia approves the agreement;
  • A dispute settlement procedure, which must authorise either Fair Work Australia or someone else that is independent of those covered by the agreement to settle disputes about any matters under the agreement in relation to terms of a modern award or the National Employment Standards;
  • A flexibility term that allows for the making of individual flexibility arrangements (IFAs) for the purpose of meeting the genuine needs of the employer and employees. These are arrangements between an employer and an individual employee that vary the operation of the enterprise agreement in relation to the employee;
  • A consultation term, which requires the employer to consult their employees about any major workplace changes that are likely to have a significant effect on them and allows the employees to have representation in that consultation.

In addition, the agreement must be in writing and state the parties who are covered by the agreement.


Enterprise agreements and the National Employment Standards (“NES”)

Enterprise agreements must comply with the minimum standards under the FW Act. These are as follows:

  • Maximum weekly hours of work
  • Requests for flexible work arrangements
  • Parental leave and related entitlements
  • Annual leave
  • Personal/cares leave and compassionate leave
  • Community service leave
  • Long service leave
  • Public holidays
  • Notice of termination and redundancy pay
  • The right to be provided with the Fair Work Information Statement

There must be no term within an enterprise agreement that undermines or detrimentally alters any of these minimum standards.


Enterprise agreements and the Better Off Overall Test (“BOOT”)

Before an enterprise agreement can be registered, it must pass the BOOT test. This test is to ensure that the employee is better off overall under the enterprise agreement than they would be under their relevant award and NES.

This means that where some entitlements are reduced or eliminated, the employee must be compensated in other ways (such as above award wages) that leave them in an overall better off position. The compensation need not necessarily be financial – it could be consist more favourable working arrangements or incentives.


Approving an enterprise agreement

Once a draft agreement has been prepared, the employer(s) must put the agreement to a vote by all employees who will be covered by it. A vote cannot occur less than 21 days after employees were informed of their right to a bargaining representative.

Before voting can occur, the employer(s) must ensure that the terms of the agreement are properly explained to the employees taking into account the employee‟s circumstances and level of understanding. Employees must be provided with a copy of the agreement and other relevant material within the 7 day period before voting.

A single-enterprise agreement passes the vote when a majority of affected employees vote in favour of it. A multi-enterprise agreement is the same, however if the employees of a particular employer do not vote in favor, the agreement must be altered to remove that employer and their employees from the agreement.

A Greenfields agreement achieves its equivalent of a successful vote when it has been signed by the employer(s) and the relevant employee organisation(s).

The agreement must then be submitted to FWA for registration.


Things to consider when determining the content of an enterprise agreement

When negotiating terms and conditions contained in an enterprise agreement, employers should have regard to the following considerations:

  • The needs/concerns of the employees (for example, including performance incentives or more flexible working arrangements);
  • The needs/concerns of the business (for example, practicalities with rostering, financial circumstances);
  • How many employees should be covered by the agreement (for example, whether certain employees would be better suited under individual employment agreements);
  • How the business might change in the future (for example, expanding into other industries, or even extending hours of operation in the future).



An enterprise agreement can be complicated and requires the approval of both employees and FWA. If an agreement does not adequately meet the minimum standards contained in the FW Act, FWA will refuse to register it, resulting in unnecessary time and expense for all parties.

If you have any queries or require any advice in relation to enterprise agreements, or any other employment law matter please contact Tony Pattinson at Ferguson Cannon Lawyers.

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Category: Employment Law, Fact Finders, General, Industrial Relations

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