This chapter and the two chapters ('Protection for your rights at work' and 'Occupational health and safety') should be read together when considering the law covering the rights, entitlements and obligations of employees in Victoria.

Contributor

Beth Stewart

Solicitor, Lander & Rogers

Enterprise agreements

Last updated

1 July 2020

Since 1 July 2009, statutory agreements can be made under the FW Act. These are known as enterprise agreements. 

Types of enterprise agreements

Under section 172 of the FW Act, there are two types of enterprise agreements:

  1. single enterprise agreements; and
  2. multi-enterprise agreements.

Single enterprise agreements

There are two types of single enterprise agreements:

  1. agreements between an employer and existing employees
  2. greenfields agreements.

Employer and existing employees 

A single enterprise agreement can be made between an employer and employees who are employed at the time the agreement is made.

In these agreements, ‘the employer’ can actually be two or more employers that are ‘single-interest’ employers. Single-interest employers are employers that are in a joint venture or common enterprise or are related corporations. They can also be employers that are authorised to be single-interest employers by the FWC (e.g. franchisees or other employers where the federal Minister for Employment, Skills, Small and Family Business has made a declaration).

Greenfields agreements

A greenfields agreement is a single enterprise agreement that is made in relation to a new enterprise of an employer before any employees are employed. The parties to a greenfields agreement are the employer and one or more relevant employee associations (usually trade unions).

Multi-enterprise agreements

Multi-enterprise agreements can be made in two ways. First, a multi-enterprise agreement can be made between two or more employers that are not single-interest employers and employees who are employed at the time the agreement is made. 

Second, a multi-enterprise agreement can be made for a genuine new enterprise (a greenfields agreement) between two or more employers (that are not all single-interest employers) and one or more relevant employee associations (usually trade unions).

Approval procedures for enterprise agreements

Better off overall test

Since 1 July 2009, enterprise agreements have needed to pass the ‘better off overall test’ (BOOT) to be approved by the FWC.

Agreements made before 27 March 2006 and between 28 March 2008 and 30 June 2009 were subject to the ‘no disadvantage test’ before being approved. 

Section 193 of the FW Act provides that a non-greenfields agreement passes the BOOT if the FWC is satisfied that each employee would be better off overall if the agreement applied to them than if the relevant modern award was applied. 

If an enterprise agreement does not pass the BOOT, the FWC can accept an undertaking from the employer to remedy the deficiencies.

Approval by the parties to the agreement

There are different approval procedures for each type of enterprise agreement (s 182 FW Act):

  • For a single enterprise agreement (that is not a greenfields agreement): the agreement is made when the majority of employees cast a valid vote in favour of approving the agreement.
  • For a multi-enterprise agreement (that is not a greenfields agreement): the agreement is made when the majority of employees of at least one of the employers cast a vote in favour of approving the agreement.
  • For a greenfields agreement: the agreement is made when it is signed by the employer and each employee association (usually a trade union) that is expressed to be covered by the agreement.

An employer must take reasonable steps before the agreement is voted on to ensure:

  • the employees have had access to the written agreement;
  • the employees are advised of how, when and where the vote will take place; and
  • the terms and effect of the agreement have been explained to the employees (s 180 FW Act).

It is unlawful to engage or threaten to engage in any action with the intention of coercing a person to, or not to, make an enterprise agreement, or to approve or vary or terminate such an agreement. 

Approval by the Fair Work Commmission

Enterprise agreements come into force only once they have been approved by the FWC. Before approving an enterprise agreement, the FWC must be satisfied of a number of matters, including:

  • that the pre-approval steps have been taken;
  • that the agreement passes the BOOT, or if it fails the BOOT, it should be otherwise approved (see ‘Better off overall test’, above);
  • that the agreement does not contravene section 55 of the FW Act, including that the agreement does not seek to exclude any provisions of the NES (s 186(2)(c)) or contain any unlawful terms or designated outworker terms;
  • that the agreement includes an expiry date of not more than four years after the FWC approves the agreement and a dispute resolution clause (s 186);
  • that the employees to be covered were fairly chosen;
  • that the agreement provides for dispute settlement; 
  • if the agreement is not a greenfields agreement, that the employees genuinely consented to the agreement (s 186(2)(a)).

Content of enterprise agreements under the Fair Work Act

The content of an enterprise agreement is mostly a matter for the parties. However, the FW Act requires, permits and prohibits some content. Under section 55 of the FW Act, an enterprise agreement cannot exclude the NES or any provision of the NES (see ‘National Employment Standards’, above). Part 2-2 of the FW Act allows enterprise agreements to deal with some matters in the NES.

What an agreement should contain

Under the FW Act, an enterprise agreement should contain:

  • A nominal expiry date. This is the date after which the agreement may be replaced by a new agreement. Under the FW Act (s 186(5)), the date may be specified in the agreement but must – other than for agreements failing the BOOT but approved on the basis of special circumstances – be no later than four years after the date the agreement was approved by the FWC. If no date is specified in a collective agreement, then the nominal expiry date is four years from the date it is approved by the FWC. For agreements failing the BOOT but approved on the basis of special circumstances, the nominal expiry date is the earlier of the date in the agreement or two years after the day on which the FWC approved the agreement (s 189).
  • A dispute settlement procedure that deals with disputes about any matters arising under the agreement and in relation to the NES (s 186(6)).
  • Minimum entitlements. Although not required to be part of a workplace agreement, the NES provides minimum entitlements to employees and cannot be excluded by an enterprise agreement (s 55). The minimum entitlements of employees can be improved in an enterprise agreement.
  • A flexibility term. Under section 202 of the FW Act, an enterprise agreement must contain a flexibility term that allows an employee and an employer to agree to an arrangement varying the effect of the enterprise agreement in order to meet the genuine needs of the employee and employer. The flexibility term must require the employer to ensure that the employee is better off overall under the proposed flexibility arrangement. If the enterprise agreement does not contain a flexibility term, then the model flexibility term prescribed by the regulations will be taken as a term of the enterprise agreement.
  • A consultation term. An enterprise agreement must contain a consultation term that requires an employer to consult with employees about major workplace change that is likely to have a significant effect on employees (s 205). If the enterprise agreement does not contain a consultation term, then the model consultation term prescribed by the regulations will be taken as a term of the enterprise agreement.

What an agreement may contain

The content of an enterprise agreement is substantially in the hands of the parties. For matters to be included in an enterprise agreement under the FW Act, they must fall within one of the following categories:

  • matters relating to the relationship between the employer(s) and the employees;
  • matters relating to the relationship between the employer(s) and the relevant union(s);
  • deductions from wages authorised by the employee; and
  • how agreements will operate.

See section 172(1) of the FW Act.

What an agreement must not contain

An enterprise agreement made under the FW Act must not contain any unlawful terms (s 186(4) FW Act). Unlawful terms are defined in section 194 of the FW Act to include:

  • discriminatory terms: these are terms that discriminate on the basis of an employee’s race, colour, sex, sexual preference, age, physical or mental disability, marital status, family or carer’s responsibilities, pregnancy, religion, political opinion, national extraction or social origin;
  • objectionable terms: these are terms that require or permit conduct that is in breach of the ‘general protections’ contained in the FW Act (see Chapter 11.6: Protection for your rights at work);
  • terms that provide a method whereby an employer or employee may elect to not be covered by the agreement;
  • terms that confer additional rights on an employee to claim unfair dismissal within the
    mini­mum employment period
    or exclude or detrimentally modify an employee’s unfair dismissal rights (for a definition of ‘unfair dismissal’, see Chapter 11.6: Protection for your rights at work);
  • objectionable emergency management terms (s 195A);
  • terms that are inconsistent with employees’ or employers’ rights in relation to industrial action;
  • terms that modify union officials’ rights of entry into workplaces.

Operation of enterprise agreements under the Fair Work Act

When enterprise agreements come into force

Under the FW Act (s 54), an enterprise agreement comes into operation seven days after it is approved by the FWC, or at a later date specified in the agreement (s 54).

Expiry dates of enterprise agreements

Under section 186(5) of the FW Act, an enterprise agreement’s expiry date must be no later than four years from the date the agreement was approved by the FWC. 

If no expiry date is specified in an enterprise agreement, then the expiry date is four years from the date the agreement was approved by the FWC.

Enterprise agreements continue to operate after their expiry date until they are terminated or replaced.

Industrial action

Note that an extensive discussion of the law of industrial action is beyond the scope of this chapter.

What is industrial action?

‘Industrial action’ is a broad term covering a range of activities engaged in by the parties to an industrial dispute. Most frequently, the term is used to describe the actions of employees and their unions to disrupt work. 

Employee’s industrial action may take the form of strikes, a refusal to work as directed by the employer, the imposition of a ban on certain activities, or some other limitation or restriction on work performed. 

On the employer side, industrial action usually takes the form of what is known as a ‘lockout’, which is action that prevents (or locks out) the employees from performing their work and receiving their usual remuneration.

Industrial action is dealt with by the FW Act (ch 3 pt 3–3). 

Protected industrial action

The FW Act prescribes requirements for industrial action to be protected industrial action. The FW Act’s requirements include the holding of a protected action ballot to determine whether employees wish to engage in particular protected industrial action for a proposed enterprise agreement. No action lies against a party taking protected industrial action unless the action involves personal injury, wilful and reckless damage to property, or the unlawful taking, keeping or use of property (s 415).

In certain circumstances, the FWC can suspend or terminate protected industrial action. An application to terminate industrial action can be made on several grounds, including that the industrial action is causing significant economic harm to a third party (s 426) or is causing significant damage to the Australian economy (s 424(1)(d)).

Unlawful industrial action

Industrial action that does not meet the require­ments of Part 3–3 of the FW Act is not protected and is unlawful. In those circumstances, the FWC has the power to order that industrial action ceases (s 418). Also, those who participate in such action may be subject to civil liability, including damages and injunctions.

Industrial action and enterprise agreements

Since 1993, the law has permitted and accepted that coercion in the form of lawful industrial action may occur when enterprise agreements are being negotiated. To that end, industrial action by employers, employees and unions are permitted and protected by the FW Act if the action is applied towards the making and supporting of claims for a new enterprise agreement. 

Therefore, it is not unlawful to engage in protected industrial action. However, industrial action will only be protected if the procedures for protected industrial action in the FW Act are complied with (see ch 3 pt 3–3 FW Act).

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