Under the Fair Work Act 2009 (Cth) (FW
Act), enterprise agreements may be made which deal with
matters pertaining to the relationship between an employer that
will be covered by the agreement and that employer's employees
who will be covered by the agreement;
matters pertaining to the relationship between the employer or
employers, and the employee organisation or employee organisations
that will be covered by the agreement;
deductions from wages for any purpose authorised by an employee
who will be covered by the agreement; or
how the agreement will operate.
Item 2 expands the range of matters which can make up an
enterprise agreement - largely regarding the relationship between
an employer and a union – that were often historically
included in agreements but became prohibited under
WorkChoices. As a result, they were often the subject of side
agreements or MoUs during the WorkChoices years except where this
was prohibited by the Construction Code.
The law in this area is not settled and has been the subject of
many test cases eg the High Court decision in Electrolux
and following cases, as recent as Sydney Ferries in May
2009. The ongoing inclusion of the 'matters
pertaining' test will allow argument about the boundaries
between matters that are permitted and prohibited to avoid
uncertainty and litigation.
A difficult reality of the FW Act for construction employers is
that unions are provided with the capacity to take protected
industrial action in order to advance claims for provisions that
are beneficial to unions – claims which are nothing to do
with the relationship between the employer and its employees.
Unlawful terms are quite different from non permitted matters.
They are akin to WorkChoices prohibited content.
Master Builders Australia was disappointed1 that
during the Government's consideration of Senate proposed
amendments, the Government rejected the regulation of independent
contractors as an unlawful term. Under the FW Act, terms
relating to conditions or requirements about engaging independent
contractors may appropriately be included in enterprise
agreements. The union view is that they legitimately relate
to employees' job security. We expect to see the return of the
commonly used pre-WorkChoices clause that no contractor could be
engaged on terms less favourable than those offered to
employees. This could mean that an employer was required to
pay the contractor's normal hourly rate at a level at least
comparable with that of an employee undertaking similar work.
Non Permitted Matters Can Appear In Agreements
Despite a non-permitted term being ineffective, the inclusion of
a term that is not about a permitted matter does not affect the
validity of an enterprise agreement. In registering
agreements, FWA will not assess the content of an agreement, except
to determine whether the agreement contravenes the NES or contains
Two clauses must be included in every enterprise agreement - a
flexibility term and a consultation term. The flexibility
clause must enable an employee and the employer to reach an
arrangement varying the effect of the agreement for that employee
'in order to meet the genuine needs of the employee and
A flexibility term permits certain terms of the enterprise
agreement – the classic AWA trade-off of overtime,
penalty rates, allowances and leave loading arrangements for when
work is performed - to be varied by an individual flexibility
arrangement. The flexibility term must not make the
individual flexibility arrangement subject to the consent or
approval of a third party (a union or a majority of employees) in
an enterprise. However, the disadvantage for employers is
that this cannot be made a condition of an employee accepting
employment and employees can withdraw their agreement for any
reason on 28 days' notice.
A consultation term requires the employer to consult with
employees about major workplace change that is likely to have a
significant effect on the employees. Unions can demand
consultation terms in agreements requiring that their approval be
gained or that a majority of employees approve the workplace change
before it is introduced.
1. Richard Calver, The Fair Work Bill –
Agreement Making in the New System, Australian Construction Law
Newsletter #125 March/April 2009
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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