Is an enterprise agreement the answer?

Wouldn’t it be great if you could simplify compliance with modern awards and related matters?

If you could tailor content to your workplace?

If you could have everyone on the same terms of employment?

Guess what – you can do all of those things and more in an enterprise agreement.

What is an enterprise agreement?

An enterprise agreement is an agreement made between an employer and a group of employees on wages and conditions of employment for that group of employees.

They can be made with all or some employees in a particular enterprise and have to be approved by the Fair Work Commission.

They can incorporate modern awards that have application to the group of employees or they can exclude those modern awards, totally replacing them.

How are they made?

The process starts with the issue of a Notice of Representational Rights which informs the employees concerned that their employer wants to make an enterprise agreement and that they have the right to be represented in negotiation of that agreement.

Employees nominate one or more people to represent them and they can nominate themselves if they wish to.

If an employee is a member of a union, the union has default bargaining rights unless that employee nominates someone else as their bargaining representative.

The employer and employee representatives then develop a draft agreement and, when it has got to stage where there is a reasonable level of confidence that people are OK with it, a vote of employees is organised.

If a majority of the employees who vote, vote in favour of it, it is approved subject to certification by the Fair Work Commission.

What happens at the Fair Work Commission?

A copy of the signed agreement together with an Application to Approve an Enterprise Agreement (Form F16) and a Statutory Declaration (Form F17) and various other documents are filed with the Fair Work Commission.

The Commissioner who deals with it is then primarily concerned with the following questions:

1. Whether the Agreement satisfies the Better Off Overall Test i.e. employees are better off under the Agreement than they would be under the relevant modern award(s).
2. Whether the group of people covered by the agreement does not unfairly exclude other employees and
3. Whether the Agreement has been fairly made i.e. the correct process has been followed, people have been properly consulted, prescribed timelines observed and people have been properly informed about the effects of making the Agreement on their wages and terms of employment before they voted on it

If the Commissioner has any concerns, an undertaking might be required or submissions might be invited for consideration.

Once the Commissioner can answer “yes” to the 3 questions noted above, the Agreement can be formally approved and legally takes effect from 7 days after the date of that approval.

Reasons for doing an enterprise agreement

There are a variety of very good reasons that might apply depending on the particular award coverage and the circumstances of the business. These include:

1. Simplification: modern awards try to cover whole industries or particular occupations across multiple industries and we often find that much of the content in modern awards has little or any relevance to particular businesses. So we can trim it back to what is relevant.
2. Flexibility: all modern awards have Individual Flexibility Clauses which allow some flexibility with existing employees in a limited range of matters and Facilitative Provisions which also allow some room for negotiation on some things. However, they won’t necessarily provide the sorts of flexibilities that employees might want and the employer is happy to offer and that can be addressed through an enterprise agreement.
3. Customisation: modern awards are largely a one size fits all approach and we know that one size doesn’t fit all. For example, classification structures in modern awards are often difficult to apply to a particular business because they lack definition or they just don’t make sense. In most cases, they were developed decades ago and really don’t take account of technological and other changes to the way we work and the skills that we use today. If you pay people sufficiently above award, you can make your own structure that makes sense for your business and your people.
4. Fairness: some modern awards have specific provisions which are just unfair for employer and employees. For example, modern awards which have Industry Specific Redundancy provisions allow an employee who resigns after at least one year’s service to receive a redundancy payment of up to 8 weeks while an employee who is retrenched after more than 5 years’ service gets less under the modern award than they would under the National Employment Standards that apply to most other employees. With an enterprise agreement, you can put everyone on the same footing with things like that.
5. Protection: for some businesses, having an enterprise agreement of your own offers protection from coercion to enter into an enterprise agreement with a union which would force you to pay your workers at major project rates on all of the work that you do. That can make your business uncompetitive for other work. If you are in such an industry and have a non-unionised workforce who are happy to be that way, your own enterprise agreement can help you to get the right balance in paying higher rates on major project work and at lower levels on other work. Equally, a head contactor on a major project would likely want your business to have an enterprise agreement so as to avoid industrial relations disruptions to the project. All enterprise agreements are published on the Fair Work Commission’s website and you can use that to publicly demonstrate your employer value proposition to prospective employees because it is locked in by law.

Conclusions

The process for making an enterprise agreement is complicated and the Fair Work Commission’s approach to them is complex. Additionally, individual Commissioners can have their own way of dealing with them.

That means that you do need professional assistance in developing and implementing one and we can assist with that. Equally, if any of the scenarios described above fit your business situation, it can be a very worthwhile exercise that can deliver real positive change in workplace flexibility, fairness
and employee engagement.

If any of this is of interest to you, take advantage of our free first consultation to explore your options and how we can help.