About agreement making

Enterprise agreements are collective agreements made at an enterprise level between employers and their employees. They cover the terms and conditions of employment of the employees involved.

The terms of an enterprise agreement must not be less beneficial to an employee than the National Employment Standards and overall must be better than the relevant modern award.

For an agreement to pass the better off overall test the Fair Work Commission (the Commission) must be satisfied that each award covered employee and each prospective award covered employee would be better off overall under the agreement than if the relevant modern award applied.

The Fair Work Commission can:

  • assist in the process of making such agreements
  • deal with disputes arising under the terms of agreements
  • assess and approve agreements.

There are three types of agreements:

  • single-enterprise agreement
  • multi-enterprise agreements—covering more than one business or enterprise
  • greenfields agreements—covering new enterprises.

This guide deals with single-enterprise agreements—those agreements involving an existing enterprise or business and its employees. A single enterprise may also involve two or more employers cooperating in what is essentially a single enterprise (such as a joint venture).

The guide is intended to make it easier for employees and employers to understand how agreements are made and approved, but should not be seen as a substitute for the relevant legislative provisions. In case of doubt, independent advice should be sought.

What can & cannot be included

There are a number of terms that may be included in an enterprise agreement.

These include terms relating to:

  • rates of pay
  • penalty rates and overtime
  • allowances
  • standard hours
  • personal and annual leave
  • deductions from wages for any purpose that is authorised by the employee
  • any matters pertaining to the relationship between the employer and the employees
  • matters pertaining to the relationship between the employer and employee organisations covered by the agreement and
  • how the agreement will operate.

Mandatory terms

There are some terms that must be included in all agreements.

  • a dispute resolution term that allows disputes under the agreement and the National Employment Standards to be brought before an independent person including the Fair Work Commission and for an employee to elect to appoint a representative for the purpose of the dispute procedure
  • a flexibility term that allows an employee and his or her employer to agree to an individual arrangement varying the effect of the enterprise agreement
  • a consultation term that requires employers to consult with employees if there are major changes to the business
  • a nominal expiry date which is the particular date when the agreement will expire; it must be within 4 years of when the Fair Work Commission approves the agreement
  • a coverage term that explains who the agreement covers—e.g. all employees of a particular employer.

While the nominal expiry date and coverage term are determined by the parties, there are examples of dispute resolution and model flexibility and consultation terms on the Fair Work Commission website that can be included in your new enterprise agreement.

Do you want to download model terms?

  • Sched 2.2—Model flexibility term   Word (29kb), PDF  (76kb)
  • Sched 2.3—Model consultation term   Word (29kb), PDF  (80kb)
  • Sched 6.1—Model term for dealing with disputes for enterprise agreements
    Word   (28kb),  PDF  (76kb)

Unlawful and objectionable terms

There are certain terms that cannot be included in an enterprise agreement.

These are called unlawful or objectionable terms and include:

  • discriminatory terms
  • a term that would enable an employee or employer to 'opt out' of coverage of the agreement
  • terms that breach the general protections provisions in Part 3-1 of the Fair Work Act 2009 (the Act)
  • terms that require a bargaining services fee to be paid
  • terms inconsistent with the unfair dismissal provisions in the Act
  • terms that modify the law relating to industrial action in Part 3-3 of the Act,
  • terms relating to right of entry which are not in accordance with Part 3-4 of the Act.

First steps

Notifying employees of their representational rights

Once the employer and employees decide they want to negotiate an agreement, the employer must give all employees who will be covered by the agreement a copy of the Notice of Employee Representational Rights (as in Schedule 2.1 of the Fair Work Regulations 2009). The notice must be issued as soon as possible and within 14 days of deciding to negotiate.

The notice must contain only the content prescribed by the Regulations and no other content except that which the Regulations require the employer to insert or omit. The notice also explains that an employee has the right to be represented by a person or an organisation in agreement negotiations but, in certain circumstances, must make such an authorisation in writing.

Authorisation is required in writing if the employee:

  • wants to be their own bargaining representative
  • wants to appoint a person (other than their union) as their bargaining representative.

An employee who is a union member has that union as their default bargaining representative—provided that union is entitled to represent the industrial interests of the employee for work to be performed under the agreement.

Find out more:

  • Download Schedule 2.1—Notice of employee representational rights
    Word (28kb), PDF (97kb)

How is the notice provided to employees?

The notice may be given to the employees in any one of a number of ways including:

  • personally handing the notice to the employee
  • mailing the notice to the employee's residential address by pre-paid post
  • emailing the notice to the employee's work email address
  • posting the notice on the employer's intranet and then emailing a link to the notice to the employee's work email address
  • faxing the notice to the employee's work fax number.

How long do the employees have to reply?

There is no time limit for how long an employee can take to reply to the employer. If they do not want to nominate a bargaining representative they do not have to do so.

If an employee chooses to reply they must do so in writing. They should specify the person they wish to act as their bargaining representative and sign and date the document. They must provide a copyof the document to the employer.

Bargaining

Once the notice of employee representational rights has been given to the employees bargaining for the enterprise agreement can begin.

Bargaining is the process by which one or more employers and employees negotiate the terms and conditions which make an agreement.

Either side may be represented in the process by a bargaining representative.

When does bargaining begin?

Bargaining on a proposed enterprise agreement begins when:

  • the employer agrees to bargaining or initiates bargaining, or
  • when a majority support determination comes into operation, or
  • a scope order comes into operation or a low-paid authorisation that specifies the employer comes into operation.

This is known as the notification time.

The Fair Work Commission can issue the following types of orders upon application if certain legislative provisions are met:

Majority support determination—the Fair Work Commission can issue a determination if it is satisfied that the majority of the employees who will be covered by a proposed agreement want to bargain.

Scope order—the Commission can issue an order specifying the employer or employers, and the employees, who will be covered by the proposed agreement.

Low-paid authorisation—the Commission can authorise a bargaining process for a single enterprise agreement in circumstances where low-paid workers employed by different employers would not ordinarily have access to enterprise bargaining.

Further information—see sections 236 to 246 of the Fair Work Act 2009 or go to the Bargaining & workplace determinations page of the Fair Work Commission website.

Bargaining representatives

The following are bargaining representatives:

  • an employer who would be covered by the agreement
  • any union who is entitled to represent the interests of the employee in relation to the work that will be performed under the proposed agreement (unless the member has specified in writing that he or she does not wish to be represented by the union)
  • any union that has applied for a low paid authorisation that relates to the agreement
  • any person specified in writing as their bargaining representative by either an employer or employee who would be covered by the agreement.

Good faith bargaining

Those involved in the bargaining process, including bargaining representatives, are required to bargain in good faith.

The following are the good faith bargaining requirements that a bargaining representative for a proposed enterprise agreement must meet:

  • attending, and participating in, meetings at reasonable times
  • disclosing relevant information, that is not confidential or commercially sensitive, in a timely manner
  • responding to proposals made by other bargaining representatives in a timely manner
  • giving genuine consideration to the proposals of other bargaining representatives and giving reasons for the responses to those proposals
  • refraining from capricious or unfair conduct that undermines freedom of association or collective bargaining
  • recognising and bargaining with the other bargaining representatives for the agreement.

The good faith bargaining requirements do not require bargaining representatives to:

  • make concessions during bargaining, or
  • reach an agreement on the terms to be included.

Voting on the proposed agreement

Once the employer and employees have finished negotiating the agreement, a vote must be conducted. All the employees who will be covered by the agreement can vote for it.

The vote cannot be held until at least 21 days after the last notice of employee representational rights is provided to employees.

There is no prescribed method for voting. An employer can ask their employees to vote by ballot, electronically or by other means.

Employees on AWAs or ITEAs who want to be covered by an enterprise agreement must secure conditional termination agreements before they can take part in the bargaining process.

Informing employees of the proposed enterprise agreement

The access period

The access period begins 7 days before the vote. This is the period in which all information must be provided to the employees.

Before the start of the access period the employer must take all reasonable steps to inform the employees of the time and place where the vote will occur and the voting method that will be used.

During the access period the employees must be given, or have access to:

  • the written text of the agreement, and
  • everything incorporated into the agreement by reference, such as the terms from a relevant award.

Explaining the terms of the agreement

The employer must explain the agreement in an appropriate manner to the employees. This means the explanation must be provided in a manner which ensures the employee understands the terms of the enterprise agreement and the effect of those terms. This could involve a meeting or correspondence.

When determining what an appropriate manner involves, the employer should take into account:

  • employees from culturally and linguistically diverse backgrounds
  • young employees, and
  • employees who did not have a bargaining representative.

The results of the vote

An agreement is made when a majority of employees who cast a valid vote approve the agreement.

The employer and at least one representative of employees covered by the agreement must then sign and date the enterprise agreement. Each person signing the agreement must include their full name and address and indicate in what capacity they are signing the agreement (such as the employer or an employee representative).

If the vote reveals that a majority of employees disapprove of the agreement, the parties return to the bargaining stage but there is no requirement to again provide to employees the Notice of Representational Rights.

 

Better off overall test

Before approving an enterprise agreement, the Fair Work Commission must ensure the agreement passes the better off overall test.

The Commission must be satisfied that each award covered employee and each prospective award covered employee would be better off overall under the agreement than if the relevant modern award applied.

The better off overall test is outlined in the Fair Work Act 2009 and applies to agreements made on or after 1 January 2010.

Agreement approval

Lodging the agreement

Within 14 days of the successful vote, a bargaining representative must lodge the enterprise agreement, conditional terminations and forms to the Fair Work Commission for approval.

The agreement can be sent to the Fair Work Commission by email, electronic lodgment (e-Filing), fax, post or hand delivery. For non-electronic submissions there must be at least 3 copies of the agreement and an additional copy for each bargaining representative.

copy should be kept of the agreement, conditional terminations and all forms.

To make a single-enterprise agreement, these documents should be lodged with the Fair Work Commission:

  • the agreement
  • any conditional terminations of AWAs or ITEAs
  • Form F16—completed by the applicant (whoever is lodging the forms)
  • Form F17—completed by the employer
  • Form F18—completed by the employee bargaining representative/s.

Note: The forms should all be lodged at the same time by the same person. Eligible unions can apply to be covered by an enterprise agreement. (See Form F18.)

A list of agreement applications can be viewed on the Fair Work Commission website.
 

Accessing and completing the forms

The forms are available:

  • at the Fair Work Commission's public counters
  • on the Fair Work Commission website at www.fwc.gov.au (look under Quick links)
  • by phoning the Fair Work Commission on 1300 799 675.

There may be multiple forms required if there is more than one employee bargaining representative or more than one union. (See forms F17 and F18.)

A Fair Work Commission matter number is an internal file number and will be completed by the office upon receipt of the application.

F17 and F18 are statutory declarations and can only be witnessed by people authorised under theStatutory Declarations Act 1959 including a legal or medical practitioner, a Justice of the Peace, a notary public, a police officer, a minister of religion, a pharmacist or full time teacher. For further information on statutory declarations go to the Fact sheets & guides section.

What happens if there is already an agreement in place?

If the new enterprise agreement is completely replacing an existing collective agreement the employer and employees should consider whether they want to terminate the old agreement. Terminating the old agreement is recommended. It can help ensure there is no confusion as to which rights and entitlements apply.

Note: If an agreement has passed its nominal expiry date it will cease to have effect once the new agreement comes into operation. (There is therefore no need to terminate the old agreement.)

A collective agreement can be terminated by agreement or unilaterally in the public interest.

To terminate a collective agreement, the employer must lodge either:

  • the F28 form—If the old agreement was made prior to 1 July 2009, or
  • the F24 form—If the old agreement was made after 1 July 2009

The forms are available from the Fair Work Commission website: www.fwc.gov.au. (Look in Quick links.)

Termination by agreement

The employer and employees can agree to terminate the collective or enterprise agreement at any time.

The most common method of proving all parties have agreed to the termination is by ballot. The employer must give the employees a reasonable opportunity to decide whether they want to terminate the agreement and inform the employees of where, when and how the vote will take place.

This ballot may be held simultaneously with the ballot to vote for a new enterprise agreement.

A successful ballot is when a majority of employees who cast a valid vote approve the termination.

Within 14 days of a successful ballot the documents should be lodged with the Commission.

When filling in the form the applicant must include:

  • the agreement identification number in the title of the agreement
  • the F28 form—tick Subdivision C of Division 7 of Part 2-4, or
  • the F24 form—place the date of the ballot in question 6.

The Fair Work Commission must terminate the agreement if it is satisfied that:

  • the employees had a reasonable opportunity to decide
  • a majority of employees genuinely agree to terminate the agreement, and
  • it is appropriate to terminate the agreement given the views of the relevant union.

What happens after the enterprise agreement is lodged?

To approve an enterprise agreement the Fair Work Commission must check the agreement against certain provisions in the Act. These include that:

  • the agreement has been made with the genuine agreement of those involved
  • the group of employees covered by the agreement was fairly chosen
  • the agreement specifies a date as its nominal expiry date (not more than four years after the date of Fair Work Commission approval)
  • the agreement provides a dispute settlement procedure
  • the agreement includes a flexibility clause and a consultation clause.

Hearings

The Fair Work Commission may ask the employer, employee representatives and the union to attend a hearing if there are any questions relating to the approval of the agreement.

The Fair Work Commission can approve an agreement without a hearing.

How can I check progress?

To check on the progress of an agreement that has been lodged with the Fair Work Commission, call 1300 799 675.

What if there are problems during bargaining or the parties cannot reach agreement?

The Fair Work Commission has a wide variety of powers to assist employers and employees to reach agreement if there are problems during bargaining.

There are many avenues available including:

  • dispute resolution
  • majority support orders
  • bargaining disputes
  • bargaining orders
  • workplace determinations
  • protected action ballots.

For further information go to the Bargaining disputes page of the Agreements section on the Fair Work Commission website.

Employees on AWAs or ITEAs

Employees on Australian Workplace Agreements (AWAs) or individual transitional employment agreements (ITEAs) can take part in negotiations, vote or have an enterprise agreement apply to them in certain circumstances:

  • the individual agreement has passed its nominal expiry date
  • an application has been made to conditionally terminate the agreement
  • an order has been issued terminating the agreement.

Conditional termination of an agreement means that the AWA or ITEA remains in force until an enterprise agreement commences. In other words, the termination is conditional upon the commencement of a particular enterprise agreement.

Both the employee and the employer must agree to and sign a conditional termination if the termination is taking place before the nominal expiry date of the AWA or ITEA. If the termination is taking place after the nominal expiry date, the termination can be undertaken by either the employee or the employer without the other's signature.

Further information

Please contact the Fair Work Commission on:

Updated time

Last updated

20 March 2014