Collective agreements

This commentary provides information on the making of collective agreements under the Fair Work Act. The continued operation of pre-1/1/2010 agreements is also discussed.

This commentary provides information on the making of collective agreements under the Fair Work Act.
New collective agreements
The Fair Work Act does not provide for the negotiation or approval of agreements with individual employees. Enterprise agreements must be made through collective bargaining, although there is no distinction between union and non-union collective agreements.
Agreements are required to have a nominal expiry date no later than 4 years after the date of operation.
Approval of majority of employees
Whether it is a union or a non-union agreement, each agreement will need the support of a majority of employees at the workplace.
Bargaining rules
Employers are required to inform employees of their right to choose their bargaining representatives and are required to provide statements to employees with this information.
Good faith bargaining is enshrined in the legislation. Under Fair Work, if a majority employees wish to collectively bargain, the employer is required to bargain with them.
Consequently, parties need to attend and participate in meetings at reasonable times and disclose information in a timely manner.
An employee’s bargaining representative is able to apply to the Fair Work Commission for an order which will require the employer to bargain in good faith and not to refuse to enter into discussions with employees about a collective agreement.
Rules about content
The previous notion of 'prohibited content' under the WorkChoices system is not retained under Fair Work regime. This means that generally the content of agreements are a matter for the parties to decide as long as it relates to the employment relationship and is not unlawful content such as discriminatory clauses.
In other words, matters pertaining to the relationship between the employer or employers and employees, and the employer(s) and  employee organisation or employee organisations, can be covered by agreements.
The Fair Work Commission tests each agreement to ensure that employees are 'better off overall' compared to relevant awards and legislation — this is know as the BOOT (better off overall test). This assessment takes into account modern award conditions and the National Employment Standards (NES) in effect from 1 January 2010. Minimum wage provisions in awards or the National Minimum Wage override less generous provisions in an enterprise agreement. This means that where minimum award rates increase during the life of an agreement to above the agreement rates, employers will have to make up any difference. Also, the NES automatically overrides any condition in an enterprise agreement that is less generous.
Dispute procedure
An agreement must contain a dispute procedure which provides for Fair Work Commission or another independent person to settle disputes about any matter arising under the agreement or the NES, and must allow for the representation of employees.
Flexibility clause
An agreement is required to include an individual flexibility arrangement and a consultation clause where major change is being considered. Unlike awards, there is no limit on the provisions in the agreement which can be subject to the flexibility term.
If an enterprise agreement doesn’t contain a flexibility term, a model flexibility term in the Fair Work Regulations is taken to be a term of the agreement. The flexibility arrangement is similar to that under a modern award, ie the terms of the agreement that may be varied, genuine agreement between the parties is required, the agreement must be in writing and signed by both parties and be capable of termination on 28 days notice or by agreement.
NES and legislation override
An agreement cannot include provisions which are inconsistent with the NES or which attempt to contract outside the provisions of the Act, discriminatory provisions and provisions which breach OHS laws.
Once approved by the majority of employees, agreements need to be filed with, and assessed by the Fair Work Commission. Statutory declarations by the parties setting out details of the agreement must also be lodged. FWC assesses the agreement in relation to unlawful content, mandatory content, whether it complies with the NES and to apply the BOOT.
The decision to approve is made on the documents as filed and there is no formal hearing.
The agreement will commence 7 days after approval.
A copy of the flexibility agreement must be given to the individual employee and a copy must be kept by the employer as part of the time and wage record requirements under the Act.
Pre-1/1/2010 agreements
An agreement made prior to Fair Work Act commencing will continue to operate until terminated or replaced by a new agreement. Examples of such an agreement include a pre-reform certified agreement, a preserved state agreement, a union and non-union collective agreement, and an individual agreement such as an Australian Workplace Agreement (AWA) and an Individual Transitional Employment Agreement (ITEA).
However, it is important to note that all pre-Fair Work agreements are subject to the NES, and the relevant modern award rates of pay. Other terms of a modern award do not apply to an existing agreement. Once a pre-Fair Work agreement has passed its nominal expiry date, either party may terminate the agreement.
Sample documentation
For an extensive library of policies, agreements, forms, correspondence and checklists, designed to make human resources (HR) management easy for your business see our HR Advance website.


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