Australia: Enterprise Agreements – What’s In and What’s Out

Workplace Relations Bulletin: December 2014

It is estimated that more than one third of Australia's workforce is covered by an Enterprise Agreement, with another third covered by a Modern Award. These statistics reflect the fact that Enterprise Agreements can provide many businesses with greater flexibility, freedom from restrictive Award conditions and, among other benefits, industrial peace and harmony at least for the duration of the Agreement. This is not to suggest that achieving quality Enterprise Agreements is something easily achieved, and determining what can (or should) be included in an Enterprise Agreement can itself at times be difficult for employers.

The Fair Work Act 2009 (Cth) provides that there are some provisions which are mandatory and must be included in all Enterprise Agreements. Such required matters include a Nominal Expiry Date, a Disputes Resolution clause, Individual Flexibility clause and a Consultation clause. Whilst wages, hours of work, penalties, allowances and breaks are all important matters which can be and often are negotiated between the parties as part of an Enterprise Agreement, other matters such as wage increases linked to productivity gains, the engagement of labour hire or introduction or increase of casual staff can sometimes create conflict during the negotiation process.

Many productivity improvements are achieved through Enterprise Agreements, despite union resistance to such provisions. It may even be said that unions and employees understand that any wage increase needs to be off-set against some form of productivity improvement. In this regard, we note that the Federal Government is currently considering the introduction of a Bill which will require the Fair Work Commission to specifically consider whether a proposed Agreement contains productivity improvements before giving an Agreement it's approval. (This is intended to also extend to Orders for protected industrial action). Recent statistics show that the average wage increase in Enterprise Agreements was 3.3% in the June quarter 2014, down from 3.6% at the end of 2013. If these averages were coupled with genuine productivity improvements, businesses could achieve real and substantial productivity increases (or genuine savings).

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.

Terms of Enterprise Agreements which deal with the utilisation of casual staff are permissible, on the basis that casuals would be part of the group of employees to be covered by the Enterprise Agreement, and so long as the Agreement does not restrict the engagement of casuals. However the engagement of labour hire employees can at times create issues. The issue of labour hire employees initially arose in 2004 with the High Court's decision in Electrolux, where it was held that an Enterprise Agreement could only contain matters which related to the employment relationship. Terms covering labour hire employees would not "pertain" to the employment relationship, given that the relevant employment relationship is between the worker and the host employer. Although over time, and with various legislative changes, the issue has taken a back seat with many agreements being approved with labour hire clauses, including some "pattern agreements".

Nonetheless, recently employers have successfully used union requests for labour hire clauses in Enterprise Agreements as a defence to applications for the right to take protected industrial action. In one case, Commissioner Bull of the Fair Work Commission found that clauses which provided for labour hire employee ratios and restricted the engagement of labour hire employees were not "allowable matters" i.e. it was a provision that could not be included in an Enterprise Agreement. Consequently, it was decided that the union was not genuinely seeking to negotiate the agreement and therefore was ineligible to engage in protected industrial action.

One matter which the Commission has uniformly confirmed cannot be included in Enterprise Agreements is the ability for employees to "opt out" of the Agreement through the use of Individual Flexibility Agreements (IFAs). The difficulty for the employers who had negotiated, drafted, explained and held votes on Agreements that contain these kinds of provisions is that such a flaw can be fatal to the Agreement, resulting in substantial costs being thrown away. Additionally, there are any number of examples of cases where non-compliance with the Fair Work Act's restrictive and specific timeframes for "notification" to employees regarding the commencement of enterprise bargaining, explanation of the content of proposed Agreements and voting documentation have resulted in otherwise compliant Enterprise Agreements being rejected and employers having to start again.

Creating Enterprise Agreements can be extremely time consuming for businesses and the drafting and checking of such Agreements (and the associated documentation) is a highly specialised skill which our Workplace Relations Team possesses. For assistance in preparing for enterprise bargaining or in the direct negotiations of an Agreement, in the task of ensuring that the terms sought to be negotiated are both fair and permissible under the Fair Work Act and so as to avoid your Enterprise Agreement being rejected at the final hurdle, contact one of our dedicated Workplace Relations Team members.

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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