AGREEMENTS On 6 December 2023 Dead for Good!

By Chris Delaney, ASIAL Workplace Relations Advisor

Provisions of the Secure Jobs and Better Pay legislation amended the Fair Work Act 2009 (the FW Act) bringing to an end Enterprise Agreements known as “Zombie Agreements”.

A Zombie Agreement is an industrial instrument (an agreement) between an employer and its employees entered into before the commencement of the FW Act in 2009.

Employers need to establish if they have a “Zombie Agreement” so that they can develop an appropriate strategy for their business moving forward. Signs that an agreement is a Zombie Agreement include:

• the agreement was made prior to 2010;

• the agreement is called a “collective agreement” or “workplace agreement” or “Australian Workplace Agreement”; or

• the agreement refers to the Workplace Relations Act 1996 (Cth), the Office of the Employment Advocate, the Workplace Authority, the Australian Industrial Relations Commission, or the Australian Fair Pay Commission.

Although well past their nominal expiry date, these agreements were able to remain lawful until varied or terminated by the parties, provided that the base rate in the agreement did not fall below the base rate in the applicable modern award.

Many of these agreements have rates of pay and conditions far less favourable than those in modern awards, including flat rates of pay, no overtime or penalty rates. It is highly unlikely that some would pass a Better Off Overall Test (BOOT) today.

Many security industry employers have contracts with clients based on prices enabled by the Zombie Agreement. Unless the security provider can renegotiate the contract with the client few will be able to service their contracts without making a loss.

Sunsetting

The sunset period commenced on 7 December 2022 and will cease on 6 December 2023 when all remaining “Zombie Agreements” will automatically terminate, unless that period is extended following an application to the FWC.

Employers are required to give at least 6 months written notice to employees that the Enterprise Agreement will terminate in accordance with the FW Act. Therefore, employees must be advised in writing no later than 6 June 2023 that the agreement will cease to operate or that the employer will be seeking an extension.

It will be necessary for those security providers with Zombie Agreements to ensure their clients understand that costs will increase and where contracts are without escalation clauses renegotiation will be necessary.

Employers may seek an extension of up to 4 years by applying to the Fair Work Commission (FWC). However, to grant an extension the FWC needs to be satisfied either that bargaining for a new agreement has commenced, or that the Zombie Agreement would leave employees better off overall than the relevant modern award.

We do not yet know all of the factors that the FWC will consider when approving an extension to a Zombie Agreement. However, the FWC is required to publish its reasons and we believe that as applications are made and determined, we will be able to provide members with more detailed information on the FWC’s decision-making process.

If you want the Zombie Agreement to continue you must apply for an extension on or before 6 December 2023. The Commission will decide whether or not to grant the extension.

You must include a copy of the Zombie Agreement with your extension application.

Your application must specify whether bargaining is occurring for a new agreement or whether the employee/s are better off overall if the Zombie Agreement continued to apply than if the relevant modern award applied.

So, if you do not want the agreement to apply after 7 December 2023, you don’t have to do anything. The agreement will automatically terminate and you must then apply Modern award conditions and rates of pay to employees.

WHAT WILL BE THE EFFECT OF THESE CHANGES ON EMPLOYERS?

As stated earlier many of these agreements have provided security employers with commercial advantages when it comes to pricing contracts. And many clients have awarded contracts on price. This model is likely to change dramatically for both the security provider and the client.

It will be necessary for those security providers with Zombie Agreements to ensure their clients understand that costs will increase and where contracts are without escalation clauses renegotiation will be necessary.

Apart from the sunsetting of Zombie Agreements the changes to the FW Act offer more opportunities for employees and their representatives to commence bargaining for new Enterprise Agreements, including MultiEmployer Agreements.

The changes to the FW Act may also encourage employers, employees and unions to commence negotiations for a replacement enterprise agreement, with bargaining commencing before the Zombie terminates.

WHAT SHOULD EMPLOYERS WITH A ZOMBIE AGREEMENT DO?

Check the pay and conditions in the Agreement against the relevant Modern Award to determine whether your business will operate cost effectively after December 2023.

Decide if it may be better to commence bargaining for a replacement agreement now instead of waiting, remembering that Award rates of pay will increase on 1 July 2023 and bargaining for Multi-Employer Agreements will likely commence no later than June 2023.

Alternatively if you decide that employees are better off overall under the Zombie Agreement in comparison to the modern award, make an application for an extension.

Notify employees in writing before 6 June 2023 that their Zombie Agreement will terminate unless an application for extension is made.

The changes to the FW Act passed by federal parliament in December 2022 are the most significant in the last 20 years and the full effects will not be known until the Fair Work Commission determines cases that come before it seeking interpretations, decisions and determinations.

Realising that there can be no question that wages have not kept pace with cost of living increases and inflation, we can only expect that there will be significant pressure on employers to negotiate increases in wages and guarantees of job security. This has already commenced, with some larger security providers completing enterprise agreement negotiations.

ASIAL will continue to provide information to members in a timely manner, often through First Alert eNewsletters. Further information in the form of webcasts, podcasts and bulletins can be found on ASIAL’s website.

If you have any concerns or questions contact ASIAL’s Workplace Relations Advisor ir@asial.com.au.

Note: The information provided above is for convenient reference only. ASIAL and Chris Delaney & Associates Pty Ltd provide this information on the basis that it is not intended to be relied upon in any cases, as the circumstances in each matter are specific. Accordingly, we provide this information for general reference only, but we advise you to take no action without prior reference to a workplace relations specialist.