'Enterprise agreements' (or enterprise bargaining agreements) are agreements made at an enterprise level between employers and employees about terms and conditions of employment.

'Enterprise bargaining' is the name given to the voluntary process of negotiation between management and employees or their representatives (usually unions), the purpose of which is to reach agreement regarding terms and conditions of employment. These are known as 'enterprise agreements'.

To become legally enforceable, agreements need to be approved, by affected employees and by Fair Work Commission (FWC) by passing the ‘better off overall test’ against the underlying award.  Once approved agreements fully replace the award provisions the terms of the agreement can allow for the Agreement to incorporate or be read in conjunction with the underlying award.

What is the process?

Commencement of bargaining and good faith bargaining

Bargaining under the Fair Work Act 2009 usually commences when the employer initiates bargaining with the employees or their representatives, which in the public sector is usually a relevant union. The employer must provide the employees with a notice of representational rights within 14 days of initiating bargaining, advising them of their rights to be nominate a representative to bargain on their behalf if they so choose.

The Fair Work Act 2009 sets down a number of requirements for the conduct of bargaining, these include:

  • Attending and participating in meetings at reasonable times
  • Disclosing relevant information in a timely manner
  • Responding to proposals made by other bargaining representatives in a timely fashion
  • Giving genuine consideration to proposals and reasons for representatives responses to proposals
  • Refraining from capricious of unfair conduct that undermines freedom of association or collective bargaining
  • Recognising and bargaining with the other representatives for an agreement.

Failure to abide by the above principles exposes a bargaining representative to orders from FWA. However these requirements do not require bargaining representatives to make concessions or reach agreement.

Once the bargaining is concluded and agreement is reached between the employer and the employees, normally represented by a union, steps can be taken that will lead to the approval and lodgement of the agreement.

Limited protection for industrial action in the course of negotiations

The Fair Work Act 2009 protects employees' rights to take protected industrial action during the course of negotiating an agreement, but only if the nominal expiry date of the current agreement has past and genuine attempts to reach a new agreement have been made. 

Certain steps and notice periods, including the approval of the industrial action by secret ballot, are required to obtain such protection. Industrial action which is not protected because the abovementioned prerequisites have not been met exposes participants to statutory and common law legal action.

Role of Fair Work Australia in bargaining

Where agreement cannot be reached the parties to enterprise bargaining negotiations can request the assistance of Fair Work Australia (FWA) to help them reach agreement. This assistance is normally limited to conciliation to assist the parties in coming to agreement.

FWA is empowered only to arbitrate a bargaining dispute where FWA have suspended or terminated protected action, for example because the industrial action is endangering community health/welfare or damaging the Australian economy.  Suspension or termination of protected action can only obtained after submissions to FWA and if granted ends the bargaining representatives' right to engage in protected industrial action.

Approval of an enterprise agreement by employees

Once agreement is reached with the nominated representatives employers must take reasonable steps to ensure that every person whose employment will be subject to the proposed agreement has the proposed agreement in writing or has access to the proposed agreement at least seven days before any approval is given. The employer must also take reasonable steps to explain the terms of the agreement and the effect of those terms to the relevant employees.

Once employees have had at least seven days to consider the agreement (and any incorporated materials) the employer may request the employees approve the agreement by voting on it. And within 14 days of the vote being taken either the employer or the nominated employee representatives may apply to FWA for formal approval of the agreement.

Approval of an enterprise agreement by Fair Work Australia

To attain approval of an enterprise agreement FWA must be satisfied that the procedural elements briefly mentioned above have been complied with and that the agreement passes the “better off overall test.” This test considers the effect of the agreement against the relevant modern award to ensure each employee would better off than they would have been had the terms of the modern award applied.

Operational period

An enterprise agreement commences on approval by FWA and must include a nominal expiry date which cannot be more than four years after the day on which the agreement was approved by FWA.  However, an enterprise agreement will remain in force after the nominal expiry date of the agreement until it is replaced by another agreement.

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