'There will probably be quite a few businesses who would love to get an extension,' says lawyer, offering tips for HR
Halloween may be over but there is one month left until “zombie agreements” will be automatically terminated, unless an application for an extension is sent to the Fair Work Commission.
“Zombie agreements” refer to industrial instruments or agreements made before the reforms to Australia’s industrial relations system – the introduction of the Fair Work Act – took place on Jan. 1, 2010, Lachlan Chuong, associate at DMAW Lawyers explained.
“They refer to these agreements which were made between employers and their employees,” he told HRD Australia. “And the way the legislation worked was those agreements would not only bind the employees and the employers who entered into them but they would also be legally binding on commencing future employees of the business.”
And as for why they are so-called zombie agreements, it relates to the nature of the agreement, Chuong said.
“The terms of the agreement refer to the fact that even though these agreements often had an expiry date on them, the way the legislation worked meant that once that expiry date came and [went], these agreements would still be legally binding,” he said. “Unless a party to one of the agreements essentially applied to the Fair Work Commission…to terminate it or the Commission itself, for whatever reason, decided to terminate it.
“So you're left with a situation where you have these agreements which have gone past their expiry date, so like a zombie, they're sort of dead. But because no one did anything about them, they're not actually dead, they’re still binding.”
Chuong described the situations in which these agreements may be in place.
“In my experience, you saw them more so in businesses where there wasn't very significant union representation, because often the unions would bring an application to get rid of them,” he said. “Some examples where I've seen them are hospitality, small to medium-sized businesses and also horticulture was another common area.”
On Dec. 7, 2023, zombie agreements will “sunset” (terminate) automatically.
“[For] anyone who was still covered by a zombie agreement, the automatic assumption is that they will revert to being covered by the equivalent industry or occupational awards, whichever Modern Award will apply,” Chuong said.
But there is one caveat: Parties to a zombie agreement can apply to the Fair Work Commission for an extension of up to four years, he said.
“There will probably be quite a few businesses in this position who would love to get an extension of their zombie agreement, because financially it might make sense given that they might not have to pay certain allowances or the hours of work might be better under the zombie agreement,” he said.
“But there are certain criteria that must be satisfied if the Commission would grant an extension. So the main one is that the employer has to show that the zombie agreement actually provides more favourable terms and conditions to the employees compared to the applicable Modern Award. And that's going to be quite a high threshold in most situations for the employer to satisfy.”
Employers had until June 6 this year to provide a written notice to employees letting them know that the zombie agreement would automatically terminate, unless an application is sent to the FWC for an extension. Employers who want an extension must do so by December 7 2023.
So now is the time for employers to compare and analyse what the terms and conditions were under the agreement, compared to those under the applicable Modern Award that would take place as of December this year, Chuong said. This could also mean seeking legal advice.
“The awards can contain very different requirements such as…days and hours of work that employees can work, penalty rates, allowances, et cetera,” Chuong said.
From there, employers can figure out the next step they want to take.
“Whether that’s to make one of these applications to the Fair Work Commission to extend the life of the zombie agreement,” he said.
“Whether they should initiate enterprise bargaining under the terms of the Fair Work Act as it is to get a replacement agreement. Or whether it is just a number of individual employees who need different arrangements, in which case the business might consider putting in place individual flexibility arrangements on a case-by-case basis.”
