What are they?
An enterprise agreement sets out the collectively agreed terms and conditions of employment between an employer and a group of employees, normally reached following good faith bargaining negotiations between the employees, their bargaining representatives (often involving a trade union) and the employer.
There are three types of enterprise agreements – single-enterprise, multi-enterprise and greenfields agreements (which can either be a single or multi-enterprise agreement), each of which are discussed below.
Single-enterprise agreements are the most common type of collectively bargained agreement and are normally used where an employer conducting an existing “enterprise” enters into an agreement with its employees – an “enterprise” is broadly defined to include a business, activity, project or undertaking.
An employer may have separate enterprise agreements with different groups of employees, with terms and conditions tailored specifically to that group. However, the groups of employees must be fairly chosen taking into account geographical, operational and organisational characteristics.
Single-enterprise agreements can also be used by “single interest” employers, i.e. employers engaged in joint ventures or another type of common undertaking, e.g. business franchise operators may apply to the Fair Work Commission for an authorisation to make a single-enterprise agreement.
Multi-enterprise agreements are far less common and are made between two or more employers that are not single interest employers.
While parties seeking to negotiate a multi-enterprise agreement are, in theory, subject to good faith bargaining obligations, bargaining orders cannot be obtained from the Fair Work Commission to enforce those obligations. Protected industrial action cannot be taken in pursuit of a multi-enterprise agreement, but employee approval requirements are more onerous than in respect of single-enterprise agreements.
A greenfields agreement may be made for a genuine new enterprise that a single employer or multiple employers are establishing or propose to establish. These types of enterprise agreements must be made with, at least, one trade union and prior to employing any persons covered by the agreement. Any trade union a party to the agreement must be able to represent the majority of the employees who will be covered by it.
Importantly, the Fair Work Act’s good faith bargaining obligations do not, at the moment, apply to negotiating for a greenfields agreement, which does give a trade union involved in the bargaining process considerable leverage. Prospective employers seeking to develop a new project should carefully consider as part of their industrial strategy which trade unions have potential coverage rights and may be more amenable to reaching a greenfields agreement on better and more advantageous terms for its business.
Why make an enterprise agreement?
There are a number of reasons why an employer might consider making an enterprise agreement, namely:
Negotiating for an Enterprise Agreement – what is good faith bargaining?
Enterprise bargaining is the process of negotiation between an employer and its employees (and/or their bargaining representatives) with a view to reaching a collective agreement setting minimum wages and other terms and conditions of employment within an enterprise, i.e. a business, activity, project or undertaking.
It is a fundamental requirement for the negotiations to be consistent with good faith bargaining rules. If bargaining is not conducted in good faith the Fair Work Commission may make bargaining orders in relation to the future conduct of negotiations.
Either the employer or the employees can commence the bargaining process.
If an employee is a member of a trade union, then they will be automatically represented by the union and its officials in the bargaining process.
Both employer and employee bargaining representatives are obliged to bargain in “good faith” in accordance with the following rules:
However, the duty to bargain and negotiate in good faith does not mean that one party must make concessions, during the bargaining process, and nor do the parties have to ultimately reach a consensus on the terms to be included in an enterprise agreement, i.e. conclude a negotiated agreement.
Enterprise Agreements: Content and procedural requirements for approval
The Fair Work Act 2009 (Cth) sets out the good faith bargaining rules and obligations which apply to the parties and their the bargaining representatives when negotiating for an enterprise agreement.
Aside from these important content rules and pre-approval steps, an employer should ensure that the negotiated enterprise agreement reflects current practices in the workplace and adequately supports the future growth and needs of the business.
An enterprise agreement must include mandatory terms dealing with the following:
An enterprise agreement must not include unlawful terms containing content which:
The terms of an enterprise agreement cannot remove the any of minimum conditions in the NES or offer rates of pay less than award minima.
Your enterprise agreement should be what is best for your business.
An employer should consider, at least, the following questions:
All employees who will be covered by the proposed enterprise agreement must have been formally advised of their representational rights.
The agreement cannot be made until at least 21 days after the employees were advised of their representational rights
An employer and its employees may appoint bargaining representatives and must commence bargaining in accordance with the good faith bargaining rules. Industrial & Employment Law Factsheet
The agreement must be voted on by the employees and needs to have a majority of those eligible to vote, vote in favour of accepting the agreement.
All reasonable steps must be taken to notify the employees to be covered by the agreement of the time and place of the vote, and the voting method to be used at least seven days before the voting process commences (which is called the “access period”).
Employees must be given a copy of the agreement and any material which has been incorporated into the agreement by reference along with the opportunity to discuss and have any questioned answered about the agreement.
Approval by the Fair Work Commission
The next step is usually for the employer to apply to the Commission for the approval of the enterprise agreement. This application must be lodged with the Commission within 14 days of the agreement being made by the parties.
An application form and supporting declaration (F16 and F17 forms) are required to be provided by the employer to the Commission.
For information on how to make an enterprise agreement contact Workplace Relations Specialists’ team for advice specific to your business needs.
The contents of this article are not intended to be a complete statement of the law on any subject and should not be used as a substitute for legal advice in specific fact situations. Workplace Relations Specialists cannot accept any liability or responsibility for loss occurring as a result of anyone acting or refraining from acting in reliance on any material contained in this paper.