5 minute read
INDUSTRIAL RELATIONS
Enterprise Agreements in 2021 – does your company need one?
Adrian Ziccone Senior Employment & Industrial Relations Advisor
The MBV Employment and Industrial Relations team consistently receives inquires on enterprise agreements. We assist members with a broad range of enterprise agreement questions, including whether a company must have one, the benefits and disadvantages of implementing one, and the process involved in making one. We explore these questions and more below.
What are enterprise agreements?
An enterprise agreement (commonly referred to as ‘EA’ or ‘EBA’) is an industrial instrument made at the enterprise level that provides for the minimum terms and conditions of employment for a period of up to four years from the date of approval. An enterprise agreement is likely to have clauses that specify minimum wages, allowances, penalty rates and leave entitlements, among other things. Generally, an enterprise agreement will be made between the employees and the employer, provided that a majority of employees covered by the agreement agree by voting for it. In some enterprise agreements, the relevant union may also be a party to the agreement.
Does my business need to have an enterprise agreement?
No. There is no requirement to have an enterprise agreement. We understand that some companies may face pressure to have an enterprise agreement. These practices are illegal. The Fair Work Act 2009 (Cth) (‘FW Act’) prevents a person (including an industrial association or business) from discriminating against an employer because that employer has, or does not have, an enterprise agreement with its employees. Similarly, the FW Act prevents a person from taking action, or threatening action, against a person with the intent to coerce the person to engage or not engage a particular contractor for any reason. This may be because the contractor has, or does not have, an enterprise agreement. While there may be industrial and organisational reasons why you may want to have an enterprise agreement, there are no legal requirements for you to have one. It is perfectly lawful for a business to engage employees in accordance with the applicable modern award.
Whether a company decides to have an enterprise agreement may depend on several factors. These include the company’s size, strategy, objectives and composition of the workforce. To assist in decision
making, we have outlined some of the advantages and disadvantages of making an enterprise agreement (see table):
The process — in brief
The process to make an enterprise can be complex. There are strict legal processes and timeframes that must be followed under the FW Act. If these steps aren’t followed, the Fair Work Commission cannot approve the enterprise agreement. The first step generally involves providing your employees with a notice of employee representational rights (NERR), which notifies employees that they can appoint a representative. This must be done within 14 days of commencing bargaining. The bargaining process can take some time. Once you have agreed on the employment terms and conditions, you can provide employees with the relevant documents, including a draft enterprise agreement and schedule the vote. At least seven clear days before the vote, you must: • Provide employees with access to the enterprise agreement, as well as any incorporated material; and • Notify employees of the time, place and method of voting. Note that the vote cannot occur until 21 clear days have passed since the last employee to be covered received the NERR. Before the vote, you must take time to explain the terms of the enterprise agreement and their effect on employees. Suppose you have employees with particular circumstances and needs (e.g. employees from non-English speaking backgrounds, young employees and employees who don’t have a bargaining representative). In that case, you must take reasonable steps to ensure that the explanation is provided in an appropriate manner. You must conduct the vote at the same time, place and method previously specified to employees. If a majority of employees vote-up the enterprise agreement, it must be lodged to the Fair Work Commission within 14 days, alongside other paperwork.
Pros Further detail
A tailored instrument
An enterprise agreement allows the terms and conditions of employment to be moulded to best suit the circumstances and interests of the company and its employees. Certainty An enterprise agreement provides clear guidance for the terms and conditions of employment for a set period. Locked in for the nominal period (up to four years) For the nominal period, the employer has certainty that no further claims will be made. No new enterprise agreement can be implemented until the existing agreement passes its nominal expiry date.
Cons Further detail
More expensive rates of pay and entitlements For approval, an enterprise agreement must pass the better off overall test (BOOT). This means that an enterprise agreement must treat employees more beneficially than the applicable Modern Award. In short, an enterprise agreement must have better terms and conditions than those in the Modern Award.
Start a cycle of enterprise agreements
Time consuming and can be costly to make and approve an enterprise agreement Generally, a company that has an enterprise agreement will replace it with another enterprise agreement after its nominal expiry date. In this way, you are likely to start a process where you continually have new enterprise agreements every few years. It can take time to bargain for, draft, make and file an enterprise agreement for approval. This process can take several months and requires you to undertake a number of steps.
How can MBV assist you?
The process to make an enterprise agreement can be difficult. If this is something you would like to consider, the MBV Employment and Industrial Relations team can help. We can assist you with drafting a proposed enterprise agreement, following the procedural requirements and filing it for approval with the Fair Work Commission. For further information, you can contact the Employment and Industrial Relations team on (03) 9411 4555.
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