Articles > Construction

What are enterprise agreements and how do they work?

October 17, 2020   Brigid NelmesPhilip Evangelou

An enterprise agreement sets out the minimum terms and conditions of employment between one or more employers and two or more employees. An enterprise agreement provides an alternative to the applicable Modern Award.

Benefits of an enterprise agreement

An enterprise agreement gives employers and employees the ability to negotiate the terms and conditions of employment for the benefit of both parties. The enterprise agreement does not override the National Employment Standards (NES) and it must be considered to leave employees ‘Better Off Overall’ than they were under the relevant Modern Award by the Fair Work Commission to be approved.

Despite this requirement, a well-negotiated enterprise agreement can be beneficial for both employers and employees.

Benefits for employers

  • Employment conditions more tailored to the needs of the business, such as more flexible working hours
  • Better staff retention
  • Improved productivity 
  • Simplification of the Modern Award provisions to reduce costs, administrative requirements and improve compliance
  • More suitable dispute resolution processes

Benefits for employees

  • More flexible hours, including arrangements for carers, job-sharing, careers breaks 
  • Training and career opportunities 
  • Higher wages, profit-sharing or other performance-related pay options 
  • Improved dispute resolutions processes 

What types of enterprise agreements are there?

There are three types of enterprise agreements:

  1. A single-enterprise agreement: Applies to one business
  2. A multi-enterprise agreement: Applies to a group of businesses
  3. Greenfields Agreement: A single or multi-enterprise agreement for a genuine new enterprise (includes a business, activity, project or undertaking) which has not yet employed anyone. It is negotiated with the relevant unions.

What is included in an enterprise agreement?

An enterprise agreement can contain a wide range of employment terms and conditions. However, when bargaining for an enterprise agreement, the following terms must be included: 

  • A flexibility term: Enables individual flexibility arrangements (IFAs) to be made between employers and individual employees. 
  • A consultation term: Requires employers to consult employees about major workplace changes that will significantly affect them.  
  • A dispute resolution process
  • A nominal expiry date for the agreement (no longer than 4 years from the date of approval) 

How to negotiate an enterprise agreement?

The negotiation process between employers, employees and their representatives can take weeks or even months. 

Step 1: Notify your staff of your intention to negotiate an agreement.

Step 2: Provide employees with the ‘Notice of Employee Representational Rights’ within 14 days of notifying them of your intention to negotiate. This explains the employee’s rights to representation. If employees are members of a union, a union representative will be the default bargaining representative unless they elect to nominate an alternative representative. Employers can represent themselves or seek representation. 

Step 3: Both employers and employees (and their representatives) need to consider and research the needs and interests of the business and employees so that they are informed and prepared for the negotiation.

Step 4: The parties negotiate in good faith for the benefit of the business and the employees. The employer must take reasonable steps to ensure the terms of the agreement are appropriately explained to the employees. This stage may involve several meetings and proposals.

Step 5: The employer gives the employee a copy of the proposed agreement (along with any incorporated material). At the same time, the employer informs the employees of the date of the vote and the voting process. The employer must give employees the proposed agreement at least 7 days before the vote.

Step 6: Employees vote on the proposed agreement. This must be at least 21 days after the Notice of Employee Representation Rights (Step 2) was given.

Step 7: If the agreement is not approved, the parties re-negotiate. 

Step 8: If the agreement is approved by a majority of employees, an application is made within 14 days to the Fair Work Commission to gain approval. 

Key takeaway

Enterprise agreements are a great option to ensure employment conditions are best suited to the needs of the business. They can improve the productivity and efficiency of the business while simultaneously providing wage and flexibility benefits to employees. 

If you would like to speak with our construction lawyers, just contact us via 1300 337 997 or by filling out the contact form.

About Brigid Nelmes

Brigid NelmesBrigid is a legal intern at OpenLegal, working with our legal content team. She is currently completing her Bachelor of Laws and Bachelor of Arts (International Studies) at the University of Technology Sydney. Her interests are in digital/privacy and startup law.

About Philip Evangelou

phillipPhil is a director at OpenLegal. He has over 16 years experience working in private practice and in-house counsel in Sydney and London, giving him expertise in employment law, IP, finance, leases, dispute resolution, insurance and contracts.