What Is An Enterprise Agreement?

Articles > Employment

How do Enterprise Bargaining Agreement (EBA) advantage employers and employees?

June 23, 2021         openlegal

An enterprise agreement, also called an ‘enterprise bargaining agreement’ or EBA for short, is a fairly recent development in Australia that was introduced in the 1990s. These agreements are governed by the Fair Work Act 2009 (Cth). Not all employment agreements/ contracts will be an EBA because certain minimum requirements need to be met to get such a classification from the Fair Work Commission. There are 3 different kinds of EBAs: single-enterprise agreement; multi-enterprise agreement; and greenfields agreement. The term ‘enterprise’ is very wide and covers any business, activity, project or undertaking. In addition to the mandatory terms that need to form a part of the agreement, there are some terms that cannot be included. Non-compliance with these requirements will lead to a rejection of the EBA by the Fair Work Commission.

Overview: What is an EBA?

An EBA is a specific kind of agreement between an employer and their employee(s) that address various aspects of employment such as the nature of employment, wages, leave, workplace conditions, etc. There are some mandatory provisions that need to be a part of a valid EBA and it also needs to be registered with the Fair Work Commission. A significant aspect to highlight is that the terms of the EBA need to leave the employee in a better position than what the relevant modern award provides. This is called the ‘better off overall’ test. There are some recent judgments that elaborate on different criterias to consider while reaching a conclusion. 

Types of EBA 

Single-enterprise agreement

This kind of agreement is between a single employer and employees that are employed at the time the agreement is made. It will however only cover the employees who are covered by the agreement. For example: A company might have full time and casual employees but the EBA only covers the full time employees. In such a case, the casual employees will have a separate employment agreement so they cannot rely on the EBA provisions.

A single-enterprise agreement can also be made between two or more single interest employers. These are employers with ‘shared interests’. A typical example would be franchisees that conduct business under the same franchise and are also franchisees of the same franchisor.

Multi-enterprise agreement

This type of EBA will be used when two or more employers (who are NOT single interest employers) enter into an agreement with employees that are employed at the time of the agreement. Just like single-enterprise agreement the terms of the agreement will only be applicable to those employees who are covered by the agreement. 

Greenfields agreement

If an employer has not yet employed any employees, then this type of EBA would cover future employees that may be employed. Under a greenfields agreement, there can either be just one employer (single enterprise) or more than one employer (multi-enterprise). This kind of setup is most commonly bargained by a trade union. 

Advantages for employers

  • Better control of the long term budget, as future wages can be accurately predicted. 
  • Lesser chance of disputes with unions, especially industrial disputes, as the union is involved in the process of making the agreement.
  • Rather than having to navigate and figure out modern awards for different kinds of employees, the EBA has the potential to cover all employees. 
  • Having uniform terms for employees can significantly reduce the possibility of friction or a feeling of discrimination among employees. This is because two or more employees with a similar background will not have different wage rates or entitlements.

Advantages for employees

  • The collective bargaining power can really make a difference while negotiating better work conditions and pay. 
  • Wages cannot be lower than the applicable award.
  • Uniformity with peers can improve relations between employees. 
  • Grievances and disputes can be handled in a constructive manner as most EBAs will have detailed procedures to address such issues.  

In Summary

The scope and advantages of an EBA eventually depend on the quality of the agreement. There are over 170,000 enterprise agreements listed on the Fair Work Commission which points to the suitability and sustainability of such agreements. This is of course a lengthy process, however the advantages to both employee and employers makes this a very rewarding outcome. Furthermore, the minimum requirements and excluded terms ensure a well balanced agreement even if the deliberations leading to the final agreement are not very comprehensive.

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