Enterprise agreements

5,287

Applications lodged

4,639

Applications finalised

An enterprise agreement is a binding instrument made between an employer and employees—or, in the case of a greenfields agreement, between an employer and relevant unions—that governs terms and conditions of employment.

Applications for enterprise agreement approvals are the second most common type of application lodged with the Commission As well as assessing and approving agreements, the Commission assists parties with the process of making agreements, and with resolving disputes that arise during bargaining or under agreements already in operation.

Approval of enterprise agreements

Approval of enterprise agreements

Before approving an enterprise agreement, the Commission must be satisfied that it meets criteria set out in the Fair Work Act, including the ‘better off overall test’ (BOOT). This test requires that each employee covered by the agreement will be better off overall than under the relevant modern award.

The Commission must also be satisfied that required pre-approval steps have been taken, that the group of employees covered by the agreement was fairly chosen, and that the agreement:

  • has been genuinely agreed to by the relevant employees
  • was adequately explained to employees
  • does not contain terms which exclude or have the effect of excluding the NES or a provision of the NES
  • does not include any unlawful terms or designated outworker terms
  • specifies a date as its nominal expiry date (not more than four years after the date of Commission approval)
  • provides a dispute settlement procedure
  • includes a flexibility clause and a consultation clause.

Performance overview

In 2017–18:

  • 5,287 applications for approval of an enterprise agreement were lodged
  • 4,639 agreements were finalised, of which 82 per cent (3,803) were approved, less than 1 per cent (42) were refused and 17 per cent (794) were withdrawn
  • of the applications that were approved, 68 per cent (2,568) were approved with an undertaking.

Information and tools to assist parties making an enterprise agreement continued to be popular. In 2017–18, the website received:

  • 978,121 page views regarding enterprise agreements and 12,130 downloads of the enterprise agreements benchbook
  • 12,981 downloads of the step by step guide to making a single enterprise agreement
  • 5,530 downloads of Guide: Notice of Employee Representational Rights
  • 7,921 downloads of the single enterprise agreement legislative checklist
  • 7,015 page views of the single enterprise agreement date calculator, which assists parties in understanding whether they have met legislative timeframes.

Performance discussion

The number of applications for approval of an enterprise agreement decreased by 7 per cent, to 5,287 in 2017–18 from 5,698 in 2016–17, as shown in Table 17.

Table 17: Enterprise agreements—applications lodged and finalised
  No. lodged No. finalised
Matter type 2017–18 2016–17 2015–16 2014–15 2017–18 2016–17 2015–16 2014–15
FWA s.185—Single-enterprise 5,102 5,474 5,238 5,449 4,476 5,391 5,153 5,523
FWA s.185—Greenfields 149 177 258 407 128 173 262 418
FWA s.185—Multi-enterprise 36 47 33 66 35 42 34 64
Total 5,287 5,698 5,529 5,922 4,639 5,606 5,449 6,005

FWA = Fair Work Act

Note: The number of applications finalised does not equal the number of applications lodged in the financial year because some applications are finalised outside the year in which they are lodged.

Finalisation of matters

In 2017–18, a total of 4,639 enterprise agreements were finalised, as shown in Table 17, of which 96 per cent were single enterprise agreements, consistent with the proportion in 2016–17.

A total of 17 per cent of all finalised applications in 2017–18 were withdrawn, an increase from 13 per cent in 2016–17 and 11 per cent in 2015–16, as shown in Table 18.

Of the matters finalised in 2017–18, 82 per cent of enterprise agreements were approved.

Table 18: Enterprise agreements—finalisation of matters
  No. approved No. dismissed No. withdrawn
Matter type 2017–18 2016–17 2015–16 2014–15 2017–18 2016–17 2015–16 2014–15 2017–18 2016–17 2015–16 2014–15
FWA s.185—Single-enterprise 3,658 4,663 4,523 5,027 42 39 48 114 776 689 582 382
FWA s.185—Greenfields 118 162 252 399 0 0 1 2 10 11 9 17
FWA s.185—Multi-enterprise 27 33 26 55 0 0 4 1 8 9 4 8
Total 3,803 4,858 4,801 5,481 42 39 53 117 794 709 595 407

FWA = Fair Work Act

Table 19 sets out the numbers of agreements approved with and without undertakings over the past four reporting periods.

Table 19: Enterprise agreements—agreements approved, with and without undertakings
  No. approved without undertakings No. approved with undertakings
Matter type 2017–18 2016–17 2015–16 2014–15 2017–18 2016–17 2015–16 2014–15
FWA s.185—Single enterprise 1,159 2,701 2,890 3,433 2,499 1,962 1,633 1,594
FWA s.185—Greenfields 71 128 221 351 47 33 31 48
FWA s.185—Multi-enterprise 5 20 15 29 22 13 11 26
Total 1,235 2,849 3,126 3,813 2,568 2,008 1,675 1,668

FWA = Fair Work Act

Of the total agreements approved each year, the proportion of agreements approved with undertakings has risen steadily, from 30 per cent in 2014–15, to 35 per cent in 2015–16 and 41 per cent in 2016–17. In 2017–18, of the 3,803 that were approved, a higher proportion of agreements were approved with undertakings (68 per cent) than without (32 per cent). Figure 6 illustrates trends in agreement approvals, with and without undertakings, for each six month period from July 2013.

Figure 6: Enterprise agreements—agreements approved with and without undertakings

Figure 6: Enterprise agreements—agreements approved with and without undertakings

Timeliness

In 2017–18 the Commission took longer to deal with applications for approval of agreements than in previous years. As shown in Table 20, in 2017–18 the Commission did not meet its portfolio budget statement target of a median of 32 days, with a median time to finalise all agreement approvals of 76 days.

Table 20: Enterprise agreements—timeliness, finalisation of all applications
    Time to approve agreement (median days)
Matter type PBS target (median days)1 2017–18 2016–17 2015–16 2014–15
FWA s.185—Approval of enterprise agreement 32 76 32 18 21

FWA = Fair Work Act

1 Target from the 2017–18 Employment Portfolio Budget Statements, measuring the time taken to finalise all agreement approval applications, including those that were approved with and without undertakings and those that were dismissed or withdrawn.

As shown in Table 21, in 2017–18 single enterprise and greenfields agreements were approved without undertakings in a median of 32 days. Where an undertaking was required, the median time for approval was 93 days for single enterprise agreements and 54 days for greenfields agreements. Single enterprise and greenfields agreements make up a total of 99 per cent (3,776) of all agreements approved in 2017–18, as shown in Table 18.

Table 21: Enterprise agreements—timeliness, approval of agreements with and without undertakings
    Time to approve without undertakings (median days) Time to approve with undertakings (median days)
Matter type Proportion of agreement approvals 2017–18 2016–17 2015–16 2014–15 2017–18 2016–17 2015–16 2014–15
FWA s.185 - Single enterprise 96% 32 15 15 17 93 48 27 31
FWA s.185 - Greenfields 3% 32 13 11 13 54 43 21 26
FWAs.185 - Multi-enterprise 1% 69 22 21 31 115 101 28 42

FWA = Fair Work Act

The Commission’s performance against the timeliness benchmark of 50 per cent of agreements finalised within three weeks, 90 per cent within eight weeks, and 100 per cent within 12 weeks, similarly declined, as shown in tables 22 and 23 and illustrated in Figure 6.

Table 22: Enterprise agreements—timeliness, approval of agreements
  Percentage of matters finalised
  Within 3 weeks Within 8 weeks Within 12 weeks
Matter type 2017–18 2016–17 Pre‑

benchmark
2017–18 2016–17 Pre-

benchmark
2017–18 2016–17 Pre-

benchmark
Benchmark1 50 50 N/A 90 90 N/A 100 100 N/A
FWA s.185—Agreement approval 13 37 58 36 81 82 52 95 90

FWA = Fair Work Act, N/A = not applicable

1 Benchmark set by the President.

Table 23: Enterprise agreements—timeliness, finalisation of single enterprise agreements with and without undertakings
  Percentage of matters finalised
  Within 3 weeks Within 8 weeks Within 12 weeks
Process 2017–18 2016–17 2015–16 2014–15 2017–18 2016–17 2015–16 2014–15 2017–18 2016–17 2015–16 2014–15
Benchmark1 50 50 50 50 90 90 90 90 100 100 100 100
Approved without undertakings 33 58 68 61 60 93 98 96 73 99 100 99
Approved with undertakings 4 9 40 32 25 67 90 81 43 91 98 94

FWA = Fair Work Act

1Benchmark set by the President.

Timeliness discussion

The decline in the Commission’s timeliness performance is attributable to a number of factors. The key contributor is the significant increase in applications identified as potentially not meeting the statutory requirements, indicated by the incidence of agreements requiring undertakings nearly tripling since 2013, as illustrated in Figure 6.

The Commission has adopted an increasingly rigorous approach to processing agreement approvals. Under an administrative triage process, all applications are analysed by a team of administrative staff using a checklist developed by senior Members. While staff undertake a preliminary analysis, the relevant statutory tests are applied by Members in determining whether to approve the agreement.

Where, on the face of the agreement and other information before the Commission, all of the statutory requirements are not met, the matter may be dealt with in a number of ways—the applicant may withdraw the application; the Commission may dismiss the application; or the Commission may approve the agreement with undertakings. Accepting an undertaking to address a deficiency in an agreement may avoid the more costly and time-consuming process of re-commencing bargaining.

As a general proposition, the Commission takes longer to approve agreements with written undertakings. Before accepting an undertaking, the Commission must:

  • seek the views of each known bargaining representative for the agreement
  • be satisfied that the effect of accepting the undertaking is not likely to cause financial detriment to any employee covered by the agreement, or result in substantial changes to the agreement.

The Commission cannot accept an undertaking unless the effect of accepting it is not likely to result in ‘substantial changes’ to the agreement. Minor changes to an agreement resulting from an undertaking are permissible.

In addition to the increased use of undertakings, factors that adversely affected the timeliness in finalising enterprise agreements in 2017–18 included:

  • an unanticipated, and largely unprecedented, spike in applications to approve agreements—in December 2017, the number of applications lodged was 50 per cent higher than the 2016–17 average
  • an almost threefold increase in applications to vary agreements—602 applications were lodged in 2017–18, compared with 227 in 2016–17 (as set out in Table 24)
  • a 29 per cent increase in the finalisation of applications to terminate agreements—384 applications were finalised in 2017–18, compared with 297 in 2016–17 (as set out in Table 25)
  • evolving case law, including decisions of the Federal Court of Australia, as to how the statutory requirements, including the BOOT and pre-approval steps, are to be applied.
  • the diversion of administrative resources to keep more than 300 agreement applications in abeyance while waiting for the Fair Work Amendment (Repeal of 4 Yearly Reviews and Other Measures) Bill 2017 to be passed.

In 2017–18, the Commission implemented various measures to improve timeliness and to assist parties lodge compliant applications for approval. They included:

  • increasing resources
  • closely monitoring and reporting on performance
  • improving administrative processes and introducing new tools and templates
  • developing and publishing information materials to assist parties to make compliant applications
  • introducing a dedicated email address to receive enquiries on applications lodged more than eight weeks earlier.

By the end of the reporting period, these measures were beginning to have a positive impact. For example, one of the most common defects in agreement approval applications is that the mandated notice of employee representational rights is not in the prescribed form, meaning that the application cannot be approved under the Fair Work Act. In early 2018, the Commission developed an online tool which enabled parties to generate a compliant notice. Since its introduction the incidence of applications lodged with a non‑compliant notice reduced from nearly 20 per cent in June 2017 to less than 5 per cent.

There remains scope for further improvement. In the latter part of the reporting period, we undertook a process to hear directly from employers, unions and employer organisations about their experiences and ideas to improve our agreement-approval processes. This research is generating further ideas to improve case management practices and information resources.

Acknowledging the substantial increase in non-compliant applications, which are more complex and take longer to deal with, on 1 July 2018 the Commission adopted revised timeliness benchmarks for the approval of single-enterprise agreements for the 2018–19 financial year.

For applications that are compliant at lodgment and can be approved without undertakings:

  • 50 per cent are to be finalised within 3 weeks
  • 100 per cent are to be finalised within 8 weeks.

For applications that require undertakings or cannot be approved, contested applications, and applications requiring a hearing:

  • 50 per cent are to be finalised within 10 weeks
  • 100 per cent are to be finalised within 16 weeks.

Significant decision—will every worker be better off overall?

A Full Bench found that every employee or prospective employee covered by a proposed enterprise agreement must meet the ‘better off overall test’ (BOOT) under the proposed agreement compared with the relevant modern award. The proposed agreement will fail the BOOT test if any current or prospective employee would not be better off overall.

The Full Bench was considering how to apply the BOOT to proposed agreements containing ‘loaded rates’—that is, higher hourly rates which are intended to incorporate penalty rates and other financial benefits set out in separate clauses in modern awards. In a proposed agreement containing loaded rates, it is not sufficient if even a very large majority of employees are better off overall.

The BOOT requires an overall assessment. The Commission must identify the terms in the proposed agreement that are both better and worse for an employee and make an overall decision about whether the employee is likely to be better off under the proposed agreement. While this decision is generally mathematical for wages, it is more complex where the proposed clauses concern benefits not directly related to money, benefits accessible at the employee’s choice, or financial benefits which rely on specific events occurring.

You can read the decision in Loaded Rates Agreements at [2018] FWCFB 3610.

Significant decision—when must the Commission approve an agreement?

For an agreement to be approved under the Fair Work Act, the Commission must be satisfied that the group of employees covered by the agreement was ‘fairly chosen’ and that it was ‘genuinely agreed’ to by employees ‘covered by the agreement’. The meaning of these terms was considered in an application to approve an agreement made with three maintenance workers prior to their employer winning a major mining contract.

The agreement stated that it covered employees engaged to work ‘in connection with’ the mining project, including preparatory work. The Full Bench decided that, in the context of this clause, it was not necessary for the employer to have won the mining contract for the three employees to be covered by the agreement; it was sufficient that they worked on a project aimed at securing, and preparing for, the mining contract. You can read the decision about what it means to be ‘covered by the agreement’ in Thiess Pty Ltd v Construction, Forestry, Mining and Energy Union at [2017] FWCFB 2459.

The same Full Bench separately considered what it means for a group of employees to be ‘fairly chosen’ and to have ‘genuinely agreed’. The Full Bench decided that merely because the employer only has a small number of employees at the time the agreement is made and the negotiated agreement subsequently covers a much wider range of employees, it does not follow that the process was manipulated or that the employees were not ‘fairly chosen’.

The Full Bench also disagreed with an earlier finding that the employees had not ‘genuinely agreed’ as they did not benefit from voting for the agreement and had no stake or direct interest in the terms and conditions of the majority of employees who would potentially be covered. The employees clearly had an interest in the success of their employer’s business, with the agreement also providing beneficial wage rates and redundancy and rostering arrangements.

You can read the decision about the meaning of ‘fairly chosen’ and ‘genuinely agreed’ in Thiess Pty Ltd v Construction, Forestry, Mining and Energy Union at [2018] FWCFB 2405.

 

Variation of enterprise agreements

The Commission may vary an agreement before its nominal expiry date if a majority of affected employees cast a valid vote to approve the variation and an application is lodged with the Commission under s.210 of the Fair Work Act. The variation has no effect unless it is approved by the Commission.

The Commission may also vary an enterprise agreement under s.217 of the Fair Work Act to remove an ambiguity or uncertainty, on application by any of the following:

  • one or more of the employers covered by the agreement
  • an employee covered by the agreement
  • an employee organisation covered by the agreement.

The Commission must also review an enterprise agreement that is referred by the Australian Human Rights Commission under s.46PW of the Australian Human Rights Commission Act 1986 (which deals with discriminatory industrial instruments).

In 2017–18, 94 per cent of applications to vary agreements were made under s.210 of the Fair Work Act, as shown in Table 24. The number of applications made under s.210 was significantly higher than in previous years, increasing by 174 per cent, to 564 from 206 in 2016–17. The increase was mainly due to a large number of applications to vary agreements in the construction sector in order to comply with the Code for the tendering and performance of building work 2016 (Building Code 2016), which commenced in December 2016.

Table 24: Applications to vary enterprise agreements—applications lodged and finalised
  No. lodged No. finalised
Matter type 2017–18 2016–17 2015–16 2014–15 2017–18 2016–17 2015–16 2014–15
FWA s.210—Application for approval of a variation of an enterprise agreement 564 206 187 208 485 194 186 207
FWA s.217—Application to vary an agreement to remove an ambiguity or uncertainty 38 21 32 38 40 21 34 44
FWA s.218—Variation of an agreement on referral by the Australian Human Rights Commission 0 0 0 0 0 0 0 0
Total 602 227 219 246 525 215 220 251

FWA = Fair Work Act

Note: The number of applications finalised does not equal the number of applications lodged in the financial year because some applications are finalised outside the year in which they are lodged.

Termination of enterprise agreements

Under the Fair Work Act, an enterprise agreement continues to operate after its nominal expiry date until it is replaced by a new agreement or the Commission terminates the agreement on application. The process required to terminate an agreement depends on whether termination is sought before or after the agreement’s nominal expiry date.

An employer and its employees may agree to terminate an enterprise agreement. Termination is agreed through a vote of employees covered by the agreement—a majority of employees who cast a valid vote must agree to the termination.

If an enterprise agreement has passed its nominal expiry date, any of the employers, employees or unions covered by the agreement may apply to the Commission for the termination of the agreement.

If the Commission decides to terminate an enterprise agreement under these provisions, the termination operates from the day specified in the Commission’s decision.

Table 25 shows the numbers of applications to terminate an agreement that were lodged and finalised in 2017–18. The large majority of applications lodged (75 per cent) were made after the agreement’s expiry date, under s.225 of the Fair Work Act. The number of applications in 2017–18 was around 30 per cent higher than in 2016–17 and 2015–16 and more than double the number in 2014–15.

Table 25: Applications to terminate enterprise agreements—applications lodged and finalised
  No. lodged No. finalised
Matter type 2017–18 2016–17 2015–16 2014–15 2017–18 2016–17 2015–16 2014–15
FWA s.222—Application for approval of a termination of an enterprise agreement 130 97 92 91 124 93 92 92
FWA s.225—Application for termination of an enterprise agreement after its nominal expiry date 388 303 311 161 384 297 310 135
Total 518 400 403 252 508 390 402 227

FWA = Fair Work Act

Note: The number of applications finalised does not equal the number of applications lodged in the financial year because some applications are finalised outside the year in which they are lodged.