Enterprise agreements are customised agreements that meet the needs of a particular enterprise. These are made between employers and employees and usually address the terms and conditions of employment. Enterprise agreements can be made between one or more employers and two or more employees with their chosen representatives. They cover a broad range of matters such as employment conditions, rates of pay and dispute resolution procedures. No unlawful content can be included in these agreements like discriminatory or objectionable terms.
Collective Bargaining has been a feature of the employment relationship since the industrial revolution. It has also been a political battleground throughout the western world: the political right, led by industry, have argued for deregulation, providing greater freedoms for employers to bargain directly with their workforce; the political left, led by unions, have fought to maintain and improve a safety net of standards for their workers. The incentive to participate in bargaining for all parties has always been provided by the prospect of improving their position.
Here in Australia, the debate reached fever pitch in 2005 with the Coalition’s Work Choices reforms, leading to one of the biggest and most important High Court decisions in modern times. The Federal Government successfully wrestled control of the bulk of industrial relations law away from the states, in order to provide employers with a virtually unfettered freedom to bargain directly with individual employees. For the Liberal government, this was a legal success but a political disaster, contributing to their landslide loss at the 2007 election.
The ALP’s subsequent enactment, the Fair Work Act 2009 (Cth), restored significant regulation to agreement making. The Act included the National Employment Standards, reintroducing a meaningful statutory ‘safety net’ for national system employment. These standards cannot be contracted out of, or bargained away, by employers. Enterprise Bargaining Agreements (EBAs), as well as Individual Flexibility Agreements (IFAs) are now also subject to the ‘Better Off Overall Test’ (‘BOOT’). An EBA will not be approved by the Fair Work Commission unless they are satisfied that the employees are better off overall under the agreement, than they would be under the relevant modern award.
However, this has led to many employers questioning whether there are any remaining benefits to the Enterprise Bargaining Process. If employers are stuck with the National Employment Standards, and if every agreement results in employees being better off, does this mean that an agreement is required to make the employer worse off? Where is the ‘bargain’ in this? What is the incentive for employers to participate?
Fair Work Act 2009 requires a more creative approach now for bargaining, but with a proactive and careful approach it is still possible for enterprise agreements to be hugely beneficial.
What are the benefits?
Possible outcomes of successful bargaining can include things like:
- A simplification of the complex Modern Award provisions, which reduces cost, improves compliance, and aids employees in achieving a proper understanding of workplace rights
- More flexible hours and rosters to meet the exact operational requirements
- Improved talent retention, due to the ability to direct resources appropriately to the target employees
- Broader job classifications and classifications
- Achievement of efficiency gains such as new production targets or a reduction in waste
- Better client satisfaction
- Improved procedures for handling employee grievances on workplace issues.
Enterprise agreements can be very useful for employers that operate under more than one award. They enable a business to define its own classification structures, rather than limiting staff movement according to award coverage or the complex system of classifications across multiple awards. This makes compliance easier. The vast majority of workplace disputes concerning underpayment are due to the generalised nature of modern award classifications. It can be difficult for employers and employees to exactly correlate the very general award classifications to the very specific roles performed in the business. A well drafted agreement removes this hurdle.
The follow-on effects from this simplification can be a reduction in payroll administration time and cost, as well as a reduction in compliance risk. Furthermore, as the employees are actually engaged in the bargaining and approval process, agreements are likely to identify issues that can be addressed and will speak to long-term employee commitment to the organisation.
Best practice enterprise bargaining should see employers and employees work cooperatively in good faith. However, the employer taking a proactive role is key. Developing the agreement also allows employers to remain on the front foot: instigating and negotiating at a time that suits them, unlike when a union seeks an agreement and the organisation is not prepared or has limited resources to invest in the process.
The FWC plays a pivotal role at all stages: providing information on the process, assessing and approving finalised agreements and dealing with disputes that may occur over the terms.
The first stage is the bargaining process. Representatives of the company and the employees will meet and discuss the scope and terms of the potential agreement. At the end of this stage, a proposed agreement should be ready for the FWC approval process
- Employer completes pre-approval process
- Explain terms
The employer must ensure that the terms of the agreement are explained to all employees in an appropriate manner
- Notice and voting process
A majority of employees who will be covered by the proposed agreement must approve it through a vote
- A successful vote
Depending on the type of proposed agreement, there are different criteria for a successful vote
- Agreement content
The employer must ensure that the proposed agreement does not contain unlawful content, such as discriminatory and objectionable terms, terms that would enable an employee to ‘opt out’ of the agreement and terms that modify or exclude the application of unfair dismissal provisions in a detrimental way
- Applying to the Commission for approval
A bargaining representative for the agreement must apply to the Commission for approval in an approved format, usually within 14 days of the agreement being made. The Commission will then assess the agreement and make a decision