What’s an enterprise agreement and does my business need one?

Enterprise agreemens are an increasingly common feature of Australia’s industrial relations landscape. But what exactly is an enterprise agreement?

Enterprise agreements are an increasingly common feature of Australia’s industrial relations landscape. But what exactly is an enterprise agreement? An enterprise agreement is a legally binding document that sets out the terms and conditions of employment for the employer(s) and employees covered by the agreement, for a nominal period of up to 4 years.

Generally speaking, employees who might be covered by an enterprise agreement will be covered by a modern award that determines the terms and conditions of their employment. An enterprise agreement replaces the award conditions (although enterprise agreements can also apply to non-award covered employees).

Do I need to have an enterprise agreement in my business?

There is no requirement for an employer to agree to bargain for an enterprise agreement with its employees (unless ordered by the Fair Work Commission to bargain, in limited circumstances). The decision to bargain for an enterprise agreement will often be driven by commercial considerations such as:

  • flexibility in determining terms and conditions of employment relevant to your business;
  • ease of payroll administration—for example, by rolling allowances, penalties and overtime rates into one hourly rate;
  • setting terms and conditions that are clear and easy for the employer and employees to understand;
  • securing the benefit of a guaranteed period of protection from industrial action in relation to employment terms and conditions.

How does this affect you?

An employer who has agreed to bargain for an enterprise agreement (or been ordered to by the Fair Work Commission to bargain) must comply with a number of requirements. Those include:

  • ensuring that the enterprise agreement includes mandatory terms, only covers permitted matters, and does not include unlawful terms;
  • advising employees of their right to be represented in negotiations;
  • if not all employees in the enterprise will be covered by the agreement—ensuring that the class of employees who will be covered has been fairly chosen;
  • bargaining in good faith with employee representatives (this is a mutual obligation);
  • once an agreement is reached, putting the agreement to all employees who will be covered for a vote;
  • ensuring the enterprise agreement is registered with the Fair Work Commission once it is approved by employees.

Any enterprise agreement must also pass the “better off overall test” before it can be approved by the Fair Work Commission. What should you do? If you are considering entering into an enterprise agreement with your employees, or need assistance negotiating or applying for approval of an enterprise agreement, contact our specialist employment, industrial relations and safety team.

Jennifer Wyborn — Partner — Employment, Industrial Relations & Safety
(02) 6279 4328
jennifer.wyborn@mvlawyers.com.au

Nathan Moy — Lawyer — Employment, Industrial Relations & Safety
(02) 6279 4366
nathan.moy@mvlawyers.com.au