Enterprise agreements. There are a lot of rumours and myths surrounding them.
Here is the no BS version of what they are:
What Are They?
With regards to the Fair Work Act 2009, an enterprise agreement is an agreement on certain employment conditions between an employer and their employee(s).
Enterprise Agreements can be between:
a) An employer and group of employees;
b) More than one employer and group of employees;
c) One of more employers and one of more unions for a genuine new enterprise (Greenfields Agreement)
Modern Awards v Enterprise Agreements
A Modern Award covers specific employees within a particular industry.
An Enterprise Agreement covers employees of a particular employer(s).
Enterprise Agreements can bundle a number of different Modern Awards that apply to a workplace into the one document. Once the Enterprise Agreement has been approved, the Modern Award(s) no longer apply.
However, the wages and conditions cannot make an employee ‘worse off’ when compared to the relevant Modern Award.
Do You Really Need One?
This is probably the most important part of the whole Enterprise Agreement process. If you aren’t 100% sure that your business needs one, then don’t start the process.
Having an enterprise agreement will lock you into the terms and conditions until another one takes its place or it is terminated.
An enterprise agreement is ideal if your business is going to experience growth during the agreement’s lifetime.
Having one will simplify the process of paying your staff by taking away any confusion that exists with the Modern Award system.
What Do You Want It To Achieve?
Now that you have decided that your business does need an enterprise agreement, the next step is to decide what you want it to achieve.
A well-written enterprise agreement can deliver wage increases along with the ever elusive productivity improvements. They can establish frameworks for dispute resolution and consultation that go beyond the basic clauses in the modern awards.
Enterprise agreements can also provide some stability for your staff by showing them what their wages with any annual increase whilst the agreement is in force, along with any productivity bonuses.
Drafting The Agreement
Ideally, it would make sense to have a draft agreement ready for negotiation as soon as you send out the notice of representational rights.
Keep in mind that the draft you start with could be completely different to the one that is sent out to vote. Though having one pre-prepared will save time and give both sides something to work from.
As with most things that a business does, it needs to be able to afford the proposed pay increases, if any are proposed.
It won’t do anyone any good to propose 6% annual increases for the next four years, if the company will have to downsize to pay for it.
For your first agreement, it might be wise to seek the advice of your accountant or bank manager if annual increases are proposed.
Once you have decided that you want to negotiate an agreement with your staff, you as the employer must notify your employees as soon as practicable and within 14 days of the start of negotiations, of their right to be represented during the negotiations.
This notification should be given to all of the employees who would be covered by the agreement and are employed at notification time.
As per the Fair Work Commission website, the following are bargaining representatives:
- an employer who would be covered by the agreement
- any union who has a member that would be covered by the agreement (unless the member has specified in writing that he or she does not wish to be represented by the union)
- any union that has applied for a low paid authorisation that relates to the agreement
- any person specified in writing as their bargaining representative by either an employer or employee who would be covered by the agreement.
Good Faith Bargaining
The Fair Work Act 2009, does specify some requirements that must be met, for the bargaining agents to be bargaining in good faith.
(1) The following are the good faith bargaining requirements that a bargaining representative for a proposed enterprise agreement must meet:
(a) attending, and participating in, meetings at reasonable times;
(b) disclosing relevant information (other than confidential or commercially sensitive information) in a timely manner;
(c) responding to proposals made by other bargaining representatives for the agreement in a timely manner;
(d) giving genuine consideration to the proposals of other bargaining representatives for the agreement, and giving reasons for the bargaining representative’s responses to those proposals;
(e) refraining from capricious or unfair conduct that undermines freedom of association or collective bargaining;
(f) recognising and bargaining with the other bargaining representatives for the agreement.
Before you get into a panic thinking that this means you have to agree with every proposal put before you, s228(2) comes to your rescue.
(2) The good faith bargaining requirements do not require:
(a) a bargaining representative to make concessions during bargaining for the agreement; or
(b) a bargaining representative to reach agreement on the terms that are to be included in the agreement.
What Does This Mean?
What this really means is that if you, as the company bargaining rep, are presented with demands/requests during negotiations, you don’t have to agree to them.
This means that the next time you hear a CEO, ‘expert’ or whoever complaining about an unworkable enterprise agreement, they agreed to it of their own free will.
The company reps could go to the meeting(s) and say no to everything the employee reps put on the table. As long as they met the requirements of a – f above, they would be bargaining in good faith.
How Does This Work In The Real World?
For those of us who live in the real world, what it means is that if your business isn’t able to, or you are not willing to accept proposals put forward, you don’t have to agree to them.
How you do that is up to you, though you should make sure that s228(1) a-f are followed.
Will this lead to a protected action ballot?
You are the only one who can answer that.
Keeping in mind that it will depend on the level of engagement within your company, how much trust there is, and if there is any outside agitation.
How Do You Say No?
The way that you say no to proposals is up to you.
Though when you do, the very next thing I would be doing would be sending out a company newsletter to your employees letting them know why.
Because the last thing that you want to happen are the employee reps to agitate your employees to the point of them wanting to take protected industrial action.
Protected Industrial Action
The opportunity to take protected industrial action is one of the interesting bits of the Fair Work Act.
Whether you agree with it or not, it is part of the Fair Work Act and something that businesses have to deal with.
So, what is protected industrial action, and how does it differ from unprotected industrial action?
What Is It?
The Fair Work Commission says the following about protected industrial action
Industrial action can be taken by employees or employers.
Employees may go on strike (refusing to attend or perform work) or impose work bans (refusing to perform one or more of their normal duties).
Employers may lock out their employees (refusing to allow them to work).
Protected & unprotected industrial action
Protected industrial action can occur after a list of proposed actions has been authorised by the Commission, then approved by a majority of voters in a workplace ballot process.
This is done as part of the bargaining for a new workplace agreement.
Unprotected industrial action is industrial action that has not been authorised by the Commission.
Once a final draft has been agreed upon, there are a few more steps that need to be taken before an application for approval can be lodged with FWC.
As the employer, you must ensure that a) the terms of the agreement, and the effect of those terms, are explained to the employees; and b) the explanation is provided in an appropriate manner (e.g. appropriate for young employees or employees from culturally diverse backgrounds).
The draft agreement must be endorsed by the employees by voting on it.
The vote cannot occur until a minimum of 21 days have passed since the employees were given their notice of representational rights.
During the 7 day period prior to the vote taking place, the employees must be given a copy of the agreement, and any other material incorporated by reference in the agreement. The employer must also notify employees of the time and place at which the vote will occur and the voting method that will be used.
For single-enterprise agreements (excluding greenfields agreements), the agreement is made when a majority of the employees of the employer, or each employer, who cast a valid vote, endorse the agreement.
Fair Work Commission
Once the agreement has been endorsed, an application can be made to the Fair Work Commission for the agreement to be approved.
To do this, a bargaining representative for the agreement must apply to the Fair Work Commission for approval of the agreement. The application must be lodged with the Commission within 14 days of the agreement being made or within such further period as the Commission allows.
The application must be accompanied by; a signed copy of the agreement and any declarations that are required by the Fair Work Australia Rules 2010 or regulations to accompany the application.
There are additional factors that FWC will take into consideration before approving an Enterprise Agreement, such as unlawful content and flexibility and consultation clauses.
For an Enterprise Agreement to be approved by the Fair Work Commission, it must pass the Better Off Overall Test (BOOT).
Let’s say you want to avoid the confusion of when to pay penalty rates, you could roll those rates into the standard hourly or annualised salary.
For example, your staff have a standard rate of $27.00 per hour for a 38 hr week Monday to Friday, working an additional Saturday a month for 6 hrs.
Their normal weekly wage would be $1026.00 rising to $1323.00 when working the additional Saturday.
The new agreed wage could be $27.86 per hour flat rate, which would bring their weekly wage up to $1100.50.
To pass BOOT, the employee would need to get a wage over the 4 week period which is equal to or better than $4401.00 ($1026.00 x 3 + $1323). Over a 4 week period on the new rate, the employee would earn $4402.00.
This means that they are better off, and the rolled up rate would be acceptable.
An Enterprise Agreement cannot include unlawful content.
Some examples are:
- A discriminatory term
- An objectionable term
- A term that would enable an employee or employer to ‘opt out’ of coverage of the agreement
- A term that confers an entitlement or remedy in relation to unfair dismissal before the employee has completed the minimum employment period
- A term that excludes, or modifies, the application of unfair dismissal provisions in a way that is detrimental to, or in relation to, a person
- A term that is inconsistent with the industrial action provisions
- A term that provides for an entitlement to right of entry that is not in accordance with Part 3-4 of theFair Work Act 2009, or,
- A term that provides for the exercise of a State or Territory OHS right other than in accordance with Part 3-4 (which deals with right of entry).
From 01 January 2014, an enterprise agreement cannot include a term that requires superannuation contributions for default fund employees to be made to a superannuation fund, unless that fund:
- Offers a MySuper product
- Is an exempt public sector scheme, or
- Is a fund of which a relevant employee is a defined benefit member.
While the Fair Work Act says that an enterprise agreement cannot have a nominal expiry date of more than 4 years from the day it was approved by the Fair Work Commission. The enterprise agreement will remain in force until it is superseded by a new enterprise agreement, or an application for it’s termination has been approved.
For an Enterprise Agreement to be approved the FWC must be satisfied that:
- the agreement has been made with the genuine agreement of those involved
- the agreement passes the better off overall test and does not include any unlawful terms or designated outworker terms
- the group of employees covered by the agreement was fairly chosen
- the agreement specifies a date as its nominal expiry date (not more than four years after the date of Commission approval)
- the agreement provides a dispute settlement procedure
- the agreement includes a flexibility clause and a consultation clause.
The Fair Work Commission may approve an Enterprise Agreement that does not meet the requirements of the Fair Work Act 2009, if the employer agrees to enter into certain undertakings that will alleviate the concerns.
The views of each bargaining representative will be sought, and once the FWC is satisfied that the effect of accepting the undertaking is not likely to cause financial detriment to any employee and result in substantial changes to the agreement, it may be approved.