An Enterprise Agreement is negotiated between employers, employees and bargaining representatives to establish a fair working wage and conditions of employment.
Enterprise Bargaining Agreement (EBA) was an old term prior to the Fair Work Commission (FWC) amending it to Enterprise Agreement. Prior to EBAs were Collective Agreements which were in place before the Fair Work Act 2009.
In this comprehensive guide for employers, we explain what an enterprise agreement is, things included in an enterprise agreement, and how the EBA has evolved over the years. Please note that all the information below is general in nature and if you need further information, consult an employment relations professional.
Latest changes to EBAs
The Secure Jobs Better Pay Act, Closing Loopholes Act and Closing Loopholes No.2 Act are changing how employers and employees bargain and make agreements.
What is an enterprise agreement?
An Enterprise Agreement sets out the minimum terms of employment between one or more employers and their employees or a group of their employees. The Agreement may replace any applicable modern awards to act as the base terms and conditions of employment for those employees who are covered by the EA; or it may incorporate certain terms from the relevant parent Award.
An Enterprise Agreement (EA) gives employers and employees the freedom to bargain for better wages, greater flexibility and working conditions to suit their individual needs above and beyond a Modern Award or the National Employment Standards (NES).
The Fair Work Act 2009 sets out strict rules and guidelines for all parties to follow to ensure the process is fair. This includes guidelines for negotiating, mandatory terms to include, and the requirements to meet the Fair Work Commission’s (FWC) approval standards.
Enterprise Agreements can benefit employers because they can negotiate for more flexible working arrangements provided employees are better off overall. Likewise, employees can bargain for higher wages and extra benefits the applicable Modern Award may not offer.
There are three types of employment agreements:
- Single-Enterprise Agreement: made between one or more single interest employers (employers with shared interests i.e. in a common enterprise, joint venture or related corporations, or who are authorised to be single interest employers by the Fair Work Commission) and employees to be covered by the agreement.
- Multi-Enterprise Agreement: made between one or more employers who may not have a single interest and employees to be covered by the agreement.
- Greenfields Agreement: made in relation to a new enterprise before any employees are hired. This agreement can be a single-enterprise or multi-enterprise agreement and is between employers and employee associations or other bargaining representatives (usually a union).
- Collective Agreements (from 26 August 2024): The two types of collective agreements are:
- Employee-like collective agreement - They are made between a digital labour platform operator and an organisation that can represent employee-like workers
- Road transport collective agreements - They are made between a road transport business and an organisation that can represent regulated road transport contractors
- Employee-like collective agreement - They are made between a digital labour platform operator and an organisation that can represent employee-like workers
An Enterprise Agreement cannot offer overall lesser terms than the Modern Award or national minimum standard.
Single enterprise agreements
Most registered employment agreements are single enterprise agreements. An employer may make single enterprise agreements with its employees. An agreement covers employees when they:
- Are employees at the time the agreement is made.
- Start work for the employer after the agreement is made.
In some cases, 2 or more employers may make a single enterprise agreement. They must be related employers, which means they are one of the following:
- A joint venture or a common enterprise.
- Related body corporate entities.
- Employers that carry on similar business activities under the same franchise and are franchisees of the same franchisor and/or related bodies corporate of the same franchisor.
Multi-enterprise agreements
Two or more employers may make a multi-enterprise agreement. The agreement is only with the people who are:
- Employees at the time the agreement is made AND
- Employees who will be covered by the agreement.
Employers must follow a clear process to make a multi-enterprise agreement.
From 27 February 2024, an employer may transition from a supported bargaining agreement or a single interest employer agreement that has not yet passed its nominal expiry date, to a single enterprise agreement.
Things to include in an enterprise agreement
An Enterprise Agreement covers a range of matters from rates of pay to employment conditions and dispute resolution procedures. The Fair Work Act 2009 requires an Enterprise Agreement to contain the following terms:
- Coverage term that explains who the agreement covers.
- Flexibility term that allows an employer and an employee to agree to vary some specific terms of the agreement with employees to suit through an individual flexibility agreement.
- Consultation term that requires the employer to provide notice and consult with affected employees regarding any major workplace changes.
- Dispute resolution term that allows the FWC or another independent party to settled disputes concerning matters arising under the agreement.
- Nominal expiry date of the agreement no longer than four years from the agreement’s approval date.
In addition to the mandatory terms, an EA can only contain ‘permitted matters’, which includes terms relating to rates of pay, penalty rates, overtime, allowances, standard hours, annual leave, personal/carer’s leave and deductions from wages.
There are certain terms that cannot be included in an EA or EBA, specifically:
- Discriminatory terms, or terms that otherwise breach the general protections of the Act;
- Objectionable terms, for example a term that requires or permits breach of the general protections;
- Terms that are inconsistent with the unfair dismissal provisions of the Act.
- Terms that are inconsistent with the industrial action provisions of the Act.
- Terms that are inconsistent with the right of entry provisions of the Act.
- Terms that are below standards outlined by the NES or Modern Award.
What is the difference between a modern award and an enterprise agreement?
Like awards, enterprises agreements set out minimum entitlements and employment conditions for your business. An enterprise agreement is negotiated within one or more specific businesses, rather than determined by the Fair Work Commission for an entire industry or occupation. But it still needs Fair Work Commission approval before it can come into effect. Generally, when you have an EA the award doesn’t apply, though some agreements do defer to the award or incorporate award provisions.
Enterprise agreements can be tailored to meet the needs of a business or group of businesses and can include provisions regarding various matters, such as rates of pay, employment conditions and dispute resolution processes. The agreement cannot include anything unlawful, for example anything discriminatory. The minimum pay in the agreement still can’t be less than the base rate of pay for the classification under the award, and the National Employment Standards (NES) enshrined in the Fair Work Act will also continue to apply. The employees also need to be “better off overall” than they would have been under the award for the Fair Work Commission to approve the agreement.
Enterprise bargaining process
Employers, employees and their bargaining representatives are involved in the process of bargaining for a proposed enterprise agreement in good faith. Once an employer decides to initiate the bargaining for an EA, they are required to take all reasonable steps to notify any existing employees who will be covered by the EA of their right to be represented throughout the negotiations. Once the notice of employee representational rights has been issued, negotiations can commence.
There are four steps to the bargaining process:
- Notice of Representational Rights.
- Commencement of Good Faith Bargaining.
- Voting and Access Period to the finalised EA.
- Approval by the Fair Work Commission.
Grow your business with Peninsula
Peninsula has worked with thousands of businesses in Australia providing expert advice on employment relations and workplace health and safety. We offer access to resources, tools, documents, and software to all our clients. Contact our team to find out how we can help you.