Registering enterprise agreements and BOOT — some issues

Analysis

Registering enterprise agreements and BOOT — some issues

This article covers some issues relating to the registering of enterprise agreements with Fair Work Australia and, in particular, the application of the BOOT.

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This article covers some issues relating to the registering of enterprise agreements with Fair Work Australia (FWA) and, in particular, the application of the BOOT.
 
The agreement-making regime under the Fair Work Act 2009 has operated for a sufficient period of time to enable some analysis of those matters that have created difficulty for employers.
 
While areas of the agreement-making process are subject to abstruse legal arguments (such as protected industrial action and protected action ballot orders), areas regarding the terms of an agreement and their scrutiny under the better off overall test (BOOT) have been clarified in many respects after determinations by FWA.
 
This article provides some examples of terms of an enterprise agreement tested before FWA when seeking approval of the agreement.
 
Approving an enterprise agreement
 
Under s186 of the Act, FWA must approve an enterprise agreement if:
  • employees genuinely agree (s188 of the Act)
  • the agreement passes the BOOT, meaning each employee under the agreement would be better off if it came into effect compared with the applicable modern award (agreement may not pass the BOOT but can be approved by FWA if not contrary to the public interest (s189
  • the agreement does not breach the National Employment Standards (NES) (s55)
  • FWA is satisfied that the group of employees covered by the agreement was fairly chosen
  • the agreement does not have unlawful terms
  • the agreement contains a flexibility arrangement, consultation and dispute resolution provision
  • the agreement specifies a date as its nominal expiry date, and the date is not more than four years (two years in special circumstances) after the day FWA approves the agreement.
 
There are additional requirements for approval of agreements that cover shift workers, pieceworkers, school-based apprentices and trainees, and outworkers.
 
Terms of an agreement
 
Enterprise agreements may contain provisions about matters pertaining to the relationship between the employer and union(s), provisions for deductions from wages and how the agreement will operate, but not unlawful terms.
 
Unlawful terms
 
An enterprise agreement cannot contain unlawful terms that are:
  • discriminatory terms
  • terms providing unfair dismissal rights during the minimum employment period or excluding unfair dismissal rights after the minimum employment period
  • terms inconsistent with the industrial action, right of entry provisions or general protections provisions
  • bargaining agents’ fees.
 
Terms regarding union disputes, consultation clauses
 
Enterprise agreements must include a term providing a procedure for settling disputes about matters arising out of the enterprise agreement and in relation to the NES.
 
An enterprise agreement may also provide a procedure for settling other disputes at a workplace. An enterprise agreement may also contain a clause that means unions must be informed of proposed major changes at the workplace.
 
The inclusion of such provisions in an enterprise agreement have been determined as appropriate by FWA.
 
Cashing out annual leave
 
Initially, the validity of a term of an agreement that allowed cashing out of annual leave was questioned by FWA, despite the provisions of s93 of the Act.
 
The reason for not approving such a term in an agreement was it was thought the term contravened any modern award that did not contain a cashing out of annual leave provision. This created difficulties because the overwhelming majority of modern awards do not provide for cashing out of annual leave.
 
As a consequence of a Full Bench decision, FWA will approve a cashing out of annual leave provision in an enterprise agreement provided the terms meet the requirements of s93(2) (ie balance must be at least 4 weeks, each cashing out must be the subject of written agreement, and there must be no discounting of the payment).
 
Cashing out long service leave
 
Because cashing out of long service leave was a common provision in both individual and collective agreements made under WorkChoices, some employers were unable to renew their enterprise agreement where a term enabled the cashing out of long service leave in a jurisdiction that prohibited this under the relevant long service leave legislation.
 
A term in an enterprise agreement that enables cashing out of long service leave is invalid where it is contrary to the relevant state or territory statute. For example, cashing out of long service leave is permitted under the relevant South Australian, Queensland (under certain circumstances), Western Australian and Tasmanian legislation, but is prohibited under New South Wales, Victoria, Northern Territory and the Australian Capital Territory legislation.
 
Deduction of recruitment costs
 
FWA refused to allow an agreement clause that would have enabled the employer to deduct recruitment costs from employees’ pay packets if they resigned soon after commencement of their employment. 
 
The clause failed the BOOT because it contravened s253(1) of the Act, which provides that a term of an enterprise agreement permitting or requiring deductions or payments to be made has no effect if it benefits the employer and is unreasonable in the circumstances.
 
Source: Paul Munro, IR Consultant.
 
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