Why make an agreement?
The Fair Work Act 2009 (the Act) allows for employers and their employees to make enterprise agreements covering one or more workplaces to deal with:
- matters to the employment relationship (e.g. wages, hours of work, overtime, penalty rates, etc)
- matters pertaining to the relationship between the employer and the relevant union (eg union delegate rights, etc).
While in operation, enterprise agreements usually override awards and can lead to improved productivity and efficiency by tailoring terms and conditions to suit the needs of the enterprise.
Which employers can make an enterprise agreement?
Enterprise agreements can only be made by those employers who fall within the definition of national system employer as per the Act. These employers include:
- constitutional corporations;
- employers who carry out activities in the ACT ,the NT and VIC and employ people in connection with the activity in that territory;
- the Commonwealth and Commonwealth authorities, and;
- employers who employ flight crew officers, maritime employees or waterside workers.
To find out what a constitutional corporation is, contact CCIWA’s Employee Relations Advice Centre on (08) 9365 7660 or email firstname.lastname@example.org. If you are unsure whether your company is a constitutional corporation, you may require legal advice.
What are the options?
Employers can make one or more of the following agreements with their employees:
- Single enterprise agreements: made by a single enterprise and its employees to cover all or part of the business.
- Multi-enterprise agreements: two or more employers agree to bargain for a single enterprise agreement.
- Greenfields agreements: agreement made by a genuine new enterprise (either as a single or multi-enterprise agreement) with a relevant union(s) where it has not employed any of the persons necessary for operating the enterprise.
- Low paid bargaining agreements: made when unions seek a low paid bargaining order from the Fair Work Commission (FWC), in industries where employees are paid the minimum safety net and there is no history of enterprise bargaining.
Enterprise agreements can apply to a ‘single business’ or a separate operational, organisational or geographical part of a business. Employees who work in that business or part of the business cannot be excluded unless it is ‘reasonable’ to exclude them.
The agreement, once approved by a valid majority of employees, and the Fair Work Commission (the FWC) will apply to all employees including those who voted against the agreement.
How can bargaining for an enterprise agreement be initiated?
Bargaining for a proposed enterprise agreement may be initiated in several ways. This can be through:
- the employer initiating bargaining or agreeing to bargain
- a majority support determination by the FWC that a majority of employees who will be covered by the proposed agreement want to bargain with the employer
- a scope order by the FWC that bargaining for an agreement is not proceeding efficiently or fairly because it will not cover appropriate employees and consequently additional employees should be included in the scope for a proposed agreement
- a low paid determination by the FWC for the purpose of making a multi-enterprise agreement for employees who are substantially paid minimum safety net terms and conditions where there has not been a history of enterprise bargaining.
Upon initiation of bargaining, the employer must take all reasonable steps to give notice of the right to be represented by a bargaining representative:
- to each employee who will be covered by the proposed agreement, and;
- who is employed at that time.
The employer must give this notice as soon as practicable, but no later than 14 days after initiation of bargaining.
Who is a bargaining representative for a proposed enterprise agreement?
When negotiating for a proposed enterprise agreement, the bargaining representatives are:
- an employer that will be covered by the agreement
- an employee organisation (i.e. a union) is a bargaining representative of an employee who will be covered by the agreement, provided that
- the employee is a member of that organisation, and
- the employee has not appointed another person as his or her bargaining representative or revoked the union’s status.
- any person who is appointed in writing by an employee who will be covered by the agreement is a bargaining representative for that employee, and;
- any person who is appointed in writing by an employer who will be covered by the agreement is a bargaining representative for employer.
What is good faith bargaining?
When bargaining for an enterprise agreement, bargaining representatives must bargain ‘in good faith.’ Bargaining representatives must meet the following good faith bargaining requirements for a proposed enterprise agreement:
- attending and participating in meetings at reasonable times
- disclosing relevant information (other than confidential or commercial sensitive information) in a timely manner
- responding to proposals by other bargaining representatives for the agreement in a timely manner
- giving genuine consideration to the proposals of other bargaining representatives for the agreement, and giving reasons for the bargaining representatives response to those proposals
- refraining from capricious or unfair conduct that undermines freedom of association or collective bargaining
- recognising and bargaining with the other bargaining representatives for the agreement.
However, good faith bargaining requirements do not require:
- a bargaining representative to make concessions during bargaining for the agreement
- a bargaining representative to reach agreement on the terms that are to be included in the agreement.
In circumstances where one or more of the bargaining representatives for the agreement have not met or are not meeting the good faith bargaining requirements, an application may be made to FWC for a bargaining order.
When is industrial action protected?
The Act allows employees to take protected industrial action for the purpose of supporting their claims. However, before protected industrial action can be commenced there are a number of requirements which must be met. These include:
- that the industrial action is not in relation to a proposed Greenfields or multi-enterprise agreement
- that the person(s) organising the industrial action is genuinely trying to reach agreement
- that the industrial action meets notice requirements
- any orders for industrial action relating to the agreement or a matter arising out of bargaining for the agreement are complied with
- that no industrial action or organising of industrial action take place before an enterprise agreement has passed its nominal expiry date
- there is no suspension or termination order in operation relating to industrial action.
When is an enterprise agreement approved?
An employer may request employees to vote on a proposed agreement, subject to:
- the vote being conducted at least 21 days after the notice of employee’s representational rights was provided to the last employee, and
- at least 7 clear days prior to the vote employees who will be covered by the agreement were given a copy of, or access to, the proposed agreement.
An agreement is made when a majority of those employees who cast a valid vote approve the agreement.
What is the FWC’s role in bargaining/agreements?
Bargaining representatives for proposed enterprise agreements may involve the FWC in order to facilitate bargaining. This may involve a bargaining representative making an application to the FWC:
- for a bargaining order if one or more of the bargaining representatives are not bargaining in good faith
- for a majority support determination to initiate bargaining where the majority of employees that will be covered by an agreement want to bargain with the employer
- for a scope order when a bargaining representative has concerns that bargaining for the agreement is not proceeding efficiently or fairly, and the reason for this is that the bargaining representative considers that the agreement will not cover appropriate employees, or will cover employees that it is not appropriate for the agreement to cover;
- to deal with a unresolved dispute about the proposed agreement (either by conciliation or by agreement arbitration).
FWC approval of an enterprise agreement
If an enterprise agreement is made, a bargaining representative for the agreement must apply to the FWC for approval of the agreement. This application must be accompanied by a signed copy of the agreement and any required declarations that are required.
This application must be made within 14 days after the agreement is made.
In determining whether to approve an enterprise agreement, some of the matters that the FWC must consider is whether the agreement:
- meets or exceeds to provisions prescribed by the National Employment Standards (NES)
- passes the Better Off Overall Test (BOOT). This test ensures that the employees are better off compared to the relevant award on an overall basis
- includes the required content, or contains any unlawful or non permitted matters
- the requirements for making an agreement have been met.
Employers should refer the article Content of Enterprise Agreements for more information on what content should and shouldn’t be included in order for the agreement to be approved by the FWC.
Where an agreement does not meet the requirements of the Act, the FWC must fail the agreement unless it believes that:
- its concerns can be rectified by accepting an undertaking by the employer to correct a deficiency
- it is in public interest to approve the agreement (e.g. as part of a strategy to deal with a short term crisis).
The FWC may also make a workplace determination (an arbitrated decision establishing terms and conditions of employment) where:
- protected industrial action is terminated and the bargaining representatives have not settled all of the matters in relation to the proposed agreement within a 21-day period (or 42 days if extended by the FWC)
- a serious breach determination is made and the bargaining representatives have not settled all of the matters in relation to the proposed agreement within a 21-day period (or longer if extended by FWC)
- the parties negotiating for a low paid multi-enterprise agreement consent to a determination
- on application by a party for a low paid multi-enterprise agreement where the parties are genuinely unable to reach agreement and it is in the public interest to make a determination.
Need to know more?
Whilst enterprise agreements can provide substantial benefits for employers, the requirements for making an agreement are complex. There are a number of serious implications where agreement making is not properly carried out. CCIWA encourages employers to seek assistance when attempting to create an enterprise agreement. For further information, contact the Employee Relations Advice Centre on (08) 9365 7660 or email email@example.com