July Update, we let our clients know that enterprise agreement
"opt-out" clauses are not a safe bet, but that there are
alternative ways to reward and engage employees covered by
enterprise agreements (EAs). Since that update,
Fair Work Australia (FWA) has put an end to the
potential for opt-out clauses in a five-member full bench decision,
CFMEU v Queensland Bulk Handling  FWAFB 7551. Now,
not only are "opt-out" causes not a safe bet, they are
unlikely to ever be approved without significant changes to the
Fair Work Act 2009. However, the CFMEU v QBH decision does
not stop an employer from exploring the alternative ways of
managing essential employees described in our July Update.
The CFMEU v QBH decision centred on whether a clause
that allowed individual employees to opt-out resulted in the group
of employees covered by the EA not being "fairly chosen".
Where an EA does not cover every employee, a finding that the
covered group is "fairly chosen" is required before it
can be approved and start operating. FWA found the opt-out
provision led to the group of covered employees not being fairly
chosen, and the EA was not approved as a result. There were
three reasons for its decision:
FWA said if the group of employees covered by the EA could
change throughout its life due to exercise of the opt-out option,
it would affect the integrity of other Fair Work Act mechanisms
such as termination and variation of an interm EA (which require
approval of the majority of covered employees).
FWA said an opt-out clause could lead to a situation in which
an EA covered only one employee. This is a surprising conclusion
given that FWA decisions do not establish that an EA covering only
one employee is necessarily contrary to the Fair Work Act, and a
recent government review suggested that a change to legislation
would be needed to introduce that limitation (see our
August Update under "Other Changes").
FWA said that establishment of a flexible framework of
enterprise conditions would only be legitimate under the Fair Work
Act where minimum statutory protections afforded by Individual
Flexibility Arrangements (IFAs) were used. Where
an employee opts out of EA coverage, he or she would no longer have
Where does this leave employers?
Differentiation between EA-covered employees can still be
achieved. Any EA will apply differently to different employees,
even if only because employees occupy different classifications
within the EA. Building on this, an EA could require only that
certain conditions must be applied to all employees, leaving other
conditions to be met in other individualised ways. IFAs are
cumbersome, but if the EA is not overly prescriptive (while still
meeting the "better-off-overall-test"
(BOOT)), there will be less need to require an IFA
in order to alter particular conditions. We outline some of these
approaches in our
Another FWA full bench decision this month, Solar
Systems  FWAFB 6397, has overturned an overly-strict
application of the BOOT, meaning that there is wider scope to
explore EA provisions that enable conditions to be tailored to the
situation of an individual, even before an IFA has to be
Expert assistance should be sought whenever the terms of an
enterprise agreement are being negotiated to ensure that the
approved agreement operates as intended.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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