What should HR know about reforms for enterprise agreements and bargaining?

With the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022, the process for terminating an enterprise agreement has changed.

For one, the Fair Work Commission (FWC) has to terminate an enterprise agreement if it is satisfied that one of the following applies:

• the continued operation of the agreement would be unfair for the employees it covers
• the agreement doesn’t, or is unlikely to, cover any employees
• all of the following apply:
  • the continued operation of the agreement poses a significant threat to the viability of the business
  • terminating the agreement is expected to reduce the risk of terminations of employment due to redundancy, insolvency or bankruptcy
  • if the agreement has terms about termination entitlements, the employer or employers it covers
  • guarantees the termination entitlements to the Commission.

The commission also needs to be satisfied that it’s appropriate in all the circumstances to terminate the agreement.

Several employer groups have voiced disappointment about the changes to industrial relations laws.

Additionally, the FWO said that in deciding whether to terminate an agreement, the commission needs to consider the views of the employer or employers, employees or unions it covers. The FWC also needs to consider whether:

• bargaining for a proposed replacement agreement to cover the same or substantially the same employees as the existing agreement is occurring
• the termination would adversely affect the employees’ bargaining position.

Recently, HRD reported on the reforms that directly affect gender equality measures.

‘Zombie agreements’

The government also explained that all agreements made before the Fair Work Act that are still in operation will automatically “sunset” (or terminate) on 7 December 2023 (which is 12 months after these changes commenced). These agreements, commonly known as zombie agreements, include:

• agreement-based transitional instruments
• Division 2B state employment agreements
• enterprise agreements made between 1 July 2009 and 31 December 2009.

The extension of the sunset date may be had if the parties applied to the commission for such a request. The agreement may be extended by up to four years at a time. However, applications need to meet certain conditions. For example, that bargaining is occurring for a proposed replacement agreement or employees would be better off under the zombie agreement.

Accordingly, employers who have employees covered by these agreements need to let them know, in writing, that the agreement will be terminating on 7 December 2023 unless an application for extension is made to the commission.

Commission’s new power

Starting 7 December 2022, the Commission will have the ability to rectify inaccuracies in business agreements either of its own accord or after a submission from an employer, employee or union involved in the agreement. The commission will be responsible for determining how the agreement corrections will be carried out.

Moreover, the FWC will have the power to validate a decision to agree or modify an agreement if an incorrect version was mistakenly submitted for approval. This holds true for approvals given by the commission before, on or after 7 December 2022. The validation method could initiate from the commission’s involvement or after an application.