Last updated 27 June 2022

An enterprise agreement can be made between an employer and a group of employees. Under the Fair Work Act 2009 (Cth) (Fair Work Act), trade unions can apply to the Fair Work Commission (FWC) to be covered by an enterprise agreement. Where the majority of employees in a workplace wish to bargain with their employer, the employer will be required to bargain with them pursuant to the Act’s provisions.

An agreement is made when a majority of the relevant employees cast a valid vote in favour of an agreement.

To become effective, an enterprise agreement under the Fair Work Act must be submitted to and approved by the FWC. The FWC assesses the agreement against a ‘better off overall’ test as mentioned above.

Unions can play an important role in the enterprise bargaining process. If a group of employees or even one employee belongs to a union and would like that union to assist them in the bargaining process, the Fair Work Act requires an employer to recognise the union as a bargaining representative for those purposes.

There are some detailed and complex provisions that relate to the process of bargaining and the various orders that can be obtained if the parties’ negotiations are unsuccessful, including an application for a secret ballot to enable employees to take protected industrial action in support of their collective position. These provisions are beyond the scope of this chapter.

Enterprise agreements will be either single enterprise or multiple enterprise agreements made between two or more employers who agree to bargain together. A greenfields agreement (i.e. an agreement made between an employer and a union in respect of a site for which there are currently no employees) is permitted under the Fair Work Act.

The benefit of an enterprise agreement for a workplace is that it will last for a specified period of time and will cover every employee whose classification is covered by that agreement, including new employees who start work after the date of the agreement.

Under an enterprise agreement, an employer can agree with a union or its employees to trade off award terms that they consider to be unhelpful or inflexible in terms of the business. However, no trade off can be enforced unless there is some satisfactory compensatory condition included in the agreement to compensate for that.

Once an agreement has passed the ‘better off overall’ test, it will take precedence over the terms of any award or any private employment contract to the extent that there is a discrepancy, particularly if that discrepancy is against the interests of the employee. Should the private contract contain a discrepancy that is in favour of the employee, that term will prevail.