Enterprise Agreements – Statement of Principles

Enterprise Agreements – Statement of Principles

From 6 June 2023, Fair Work Commission (“FWC”) Members will be required to take into account a Statement of Principles when determining whether an enterprise agreement has been genuinely agreed to by the employees covered by the agreement.

The Fair Work Act 2009 (Cth) (“the Act”) provides that an enterprise agreement must be approved by the FWC to come into operation.  Section 186 of the Act sets out general requirements for the approval of an enterprise agreement.  These requirements include, if the agreement is not a greenfields agreement, that the FWC is satisfied the agreement has been genuinely agreed to by the employees covered by the agreement.

The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (“Amendment Act”) amends provisions of the Act related to making and approving enterprise agreements.  As a part of the amendments, section 188 of the Act has been amended to require the FWC to make a Statement of Principles for employers on ensuring that employees genuinely agree to an enterprise agreement, which must be taken into account when approving an agreement.

The Statement of Principles is important for employers to understand, as if an agreement is not genuinely agreed, it will not be approved.  Therefore, before submitting an agreement for approval, an employer should themselves be satisfied that the FWC will consider the agreement was genuinely agreed to.

The FWC published the Fair Work (Statement of Principles on Genuine Agreement) Instrument 2023 on 12 May 2023.  The Statement of Principles on Genuine Agreement is at Schedule 1 to the Instrument.

The Statement sets out five Principles that must be taken account.  Below is a summary of each Principle:

  • Whether employees have been informed of bargaining for a proposed enterprise agreement and informed of their right to be represented by a bargaining representative;

Employers must inform their employees of a proposed enterprise agreement and the coverage of the agreement.  This notification should include information about the employees’ rights to be represented in bargaining for the agreement, including by an employee organisation or by another bargaining representative of their choice, and how to exercise those rights.

The notification should be given in such a manner and at such a time that the employees have a reasonable opportunity to be represented in bargaining for the agreement.  If the enterprise agreement is not a greenfield agreement, an employer can satisfy this requirement by giving a notice of employee representational rights in accordance with sections 173 and 174 of the Act.

Employers should not mislead employees about their right to be represented by a bargaining representative or the role of an employee organisation as the default bargaining representative of its members.  This means that employers should not use words, actions, or other means to deceive or manipulate employees regarding their rights to representation.

  • Whether employees have been provided with a reasonable opportunity to consider a proposed enterprise agreement;

To satisfy this requirement, the employer must provide employees who are entitled to vote on the agreement with a full copy of the agreement and any other material incorporated by reference in the agreement, a reasonable time period before the start of the voting process.

A reasonable time period would generally be at least seven (7) full calendar days before the day on which voting starts.  However, this time period can be negotiated and agreed upon with one or more employee organisations acting as bargaining representatives for a significant proportion of the employees covered by the agreement.

Employers can provide the relevant material by giving employees a hard copy, sending the material electronically, or a combination of both methods.  The employer must ensure that employees have a reasonable opportunity to access and read the material during the entire period from the time the material is provided until the completion of the voting process.

  • Whether the terms of a proposed enterprise agreement and their effect have been explained to employees;

The employer must take all reasonable steps to explain the effect of the terms of the proposed agreement to employees, including how it will alter their existing minimum entitlements and other terms and conditions of employment.

The explanation should highlight the differences in entitlements and other terms and conditions between the proposed agreement and any existing agreement or applicable modern award provisions.  However, trivial differences that have no effect on employees’ entitlements or obligations do not need to be explained.

It is important for the employer to provide the explanation in an appropriate manner, taking into account the particular circumstances and needs of the employees.  This may include the location where employees are working, the environment in which work is performed, facilities available to employees at locations of work, and hours of work or rosters which may limit access to relevant facilities or limit the time employees have to consider materials or information.

Employees may be provided with the explanation through various methods, including hard copy, electronic means, or orally.  Regardless of the method used, employees should have a reasonable opportunity to read or attend the explanation.

  • Whether employees have been provided with a reasonable opportunity to vote on a proposed agreement in a free and informed manner, including by informing the employees of the time, place and method for the vote; and

Employers must provide employees with a reasonable opportunity to vote on a proposed enterprise agreement, including a voting process that ensures the privacy of each employee’s vote, and a fair and reasonable method and period of voting.  This may involve using an independent third party to conduct the vote or using a secure electronic voting system.

Employees must also be informed of the time, place, and method of the vote at least seven (7) full calendar days before the voting starts or by a reasonable time agreed with employee organisations.

  • Other matters considered relevant.

When determining the approval of an enterprise agreement, the FWC must also consider whether employees invited to vote have a sufficient interest in the terms of the agreement and whether they are sufficiently representative.  To determine this, the FWC may consider whether the employees entitled to vote are to be paid the rates of pay provided for in the agreement, as well as the extent to which they are employed across classifications, types of employment, geographic locations, industries, and occupations covered by the agreement.

Further, if one or more employee organisations acting as bargaining representatives for a significant proportion of the employees covered by the agreement support the approval of the agreement and do not have concerns that the agreement was not genuinely agreed to by the employees, this will be given significant weight by the FWC.

In determining that the FWC is satisfied that an enterprise agreement has been genuinely agreed to by employees, the FWC must take into account the above Statement of Principles.  The Statement of Principles must also be taken into account when determining whether a variation of an enterprise agreement has been genuinely agreed to. 

In light of recent changes to legislation regarding bargaining and enterprise agreements, it is an imperative that employers are aware of their obligations at law before going into bargaining.  Contact HR Law today to discuss the process for entering into enterprise agreements.

To access the Statement of Principles on Genuine Agreement, click here.

To read the Full Bench Statement, click here.

To access the Amendment Act, click here.

To access the Act, click here.

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