Enterprise agreements – key considerations for employers

Anyone who has been through the enterprise bargaining process will appreciate just how onerous the procedural steps and mandatory requirements set out in Part 2-4 of the Fair Work Act 2009 (the Act) can be.

What is an enterprise agreement?

An enterprise agreement is made at an enterprise level between employers and employees, and any union(s) that may represent the employees, about the terms and conditions of employment.

Once an organisation decides to enter into an enterprise agreement with its employees there are some fundamental steps the employer must follow during the bargaining process. A number of these steps have deadlines imposed by the Act and failure to meet these can result in the agreement being rejected by the Fair Work Commission (the Commission).

Enterprise bargaining steps

Notify employees of their representational rights

Within 14 days of the employer and employees deciding to negotiate an agreement, the employer must provide all employees to be covered by the agreement with a copy of the Notice of Employee Representational Rights (in Schedule 2.1 of the Fair Work Regulations 2009).

The notice explains that an employee has the right to be represented in the bargaining process by a person or an organisation.

Any employees who are a union member will have their union as their default bargaining representative provided that union is entitled to represent the industrial interests of the employee for work to be performed under the agreement.

If an employee wants to be their own bargaining representative, or wishes to appoint another person (other than their union),then the employee must provide the employer with a signed and dated document which names the nominated person.

There is no time limit for how long an employee can take to reply to their employer and employees are under no obligation to nominate a bargaining representative if they do not want one.

Bargaining

Bargaining is the process by which the employer and employees negotiate the terms and conditions of an agreement.

Bargaining begins once the Notice of Employee Representational Rights has been given to the employees. This is known as the notification time.

Preparing for the employee vote

Once the negotiations have finished, there must be a vote of all the employees who will be covered by the agreement. Voting is not mandatory and there is no prescribed method for voting, meaning employees may be asked to vote by ballot, electronically or by other means.

The vote cannot be held until at least 21 days after the last Notice of Employee Representational Rights is provided to employees.

All information must be provided to the employees 7 days before the vote. This is called the access period. Before the access period commences, the employer must take all reasonable steps to inform the employees of the time and place where the vote will occur and the voting method that will be used.

During the access period the employees must be given, or have access to a written version of the agreement, and everything that is incorporated into the agreement by reference, such as the terms from a relevant award.

The Commission is particularly strict in applying the good faith bargaining provisions of the Act.

Because the employer may have employees from culturally different or non-English speaking backgrounds or young employees, the employer must explain the agreementto the employees in a manner which ensures they understand the terms of the enterprise agreement and the effect of those terms. This could be done via a meeting with the employees or by correspondence.

The employer cannot rely on a union or other bargaining representative to explain the terms of the agreement to employees. This is an obligation under the Act the employer must satisfy.

Once the vote has been held, an agreement will be made if a majority of employees who cast a valid vote approve the agreement. If a majority of employees vote against the agreement, then the parties must return to the bargaining stage.

Lodging the enterprise agreement

If an agreement is made, the employer and at least one representative of employees covered by the agreement must sign and date the agreement. The agreement, along with a range of other documents must be lodged with the Commission within 14 days of the successful vote.

How does the Commission approve the agreement?

The Commission will check the agreement meets certain provisions in the Act and will review each clause in the agreement to ensure it passes the better off overall test. To achieve this, the Commission must be satisfied that each award-covered employee and each prospective award-covered employee would be better off overall under the agreement than if the relevant modern award applied.

Hearings

Should the Commission have any questions relating to the agreement, the employer, employee representatives and the union may be asked to attend a hearing.

The Commission must approve the agreement if it meets the requirements of ss186 and 187 of the Act.

Lessons for Employers

In many cases, the enterprise bargaining process can take several months before the parties reach an agreed position. One of the main reasons for this is because the parties cannot agree on the key issues to be negotiated.

Therefore, before commencing bargaining, employers may wish to develop a strategy for the bargaining process itself that considers:

• What does the employer want to achieve?
• What is the employer prepared to concede?
• What tactics can the employer employ to achieve the desired end result?

Prior to bargaining, employers could ask their employees to identify what are their concerns with the terms and conditions of employment.

By doing this, the employer can commence bargaining knowing which areas to focus on during negotiations.

Further, once bargaining commences, the employer could try to reach agreement with the bargaining representatives on a bargaining framework so all parties focus on the agreed timeframes.

Links and further references

Cases

• Union representation – Appeal by Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union Re: Inghams Enterprises Pty Ltd [2011] FWAFB 6106.
• Notice of representational rights – Benmax Pty Ltd Plumbing and Mechanical Services Canberra Collective Agreement 2009-2012 [2010] FWA 3503.
• Appointing a bargaining representative – Safety Glass Pty Ltd t/a Melbourne Safety Glass [2009] FWA 1156.
• Good faith bargaining – Finance Sector Union of Australia [2010] FWA 2690.

Legislation

Fair Work Act 2009 (Cth)

Fair Work Regulations 2009 (Cth)

Further information

If you would like further information about enterprise bargaining, contact us for a confidential and obligation-free discussion:

Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

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