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Innovation in Enterprise Agreements: How to stay ahead of the game

12 August 2014

Innovation in Enterprise Agreements: How to stay ahead of the game

Erin Lynch, Senior Associate

Enterprise agreements (in a variety of forms) and their use has ebbed and owed over time, swaying one way or the other depending on the persuasion of the Government of the time. Not only is the use of enterprise agreements, particularly versus the use of statutory or common law individual contracts of employment, a source of debate in Australia, but also the content in enterprise agreements has come under significant scrutiny.

Consequently, clauses in enterprise agreements must evolve and change to reflect varied legislative requirements as well as changing needs in the economy. As such, it is important that, rather than simply “rolling over” employers consider the productivity improvements that can be gained through innovative use of enterprise agreement terms.

As we come to the end of the fifth year since the commencement of the Fair Work Act 2009 (Cth) with many enterprise agreements having a nominal expiry date of not more than four years and the advance release of the Building and Construction Industry (Fair and Lawful Building Sites) Code 2014 it is timely to reflect generally on the use and content of enterprise agreements and look forward to what we expect in the future.

Consistent with this theme the Fair Work Commission is establishing a database of model enterprise agreement clauses adopting one of the themes under the Commission’s Future Directions of “productivity and engaging with industry”, as detailed in Future Directions 2014–15: Continuing the Change Program.

It is important that employers regularly review their enterprise agreements as there can be times where Award conditions may be in fact be more beneficial to employees, as is the current case with a national retailer. Enterprise bargaining negotiations failed between the national retailer and the Shop, Distributive and Allied Employees’ Association, with the union convincing the Fair Work Commission to terminate the retailer’s first ever collective agreement that had a nominal expiry date of September 2012. As a result of the failed negotiations and taking a hard line stance, the retailer must now follow the conditions set out in the Modern Award, giving the retailer less flexibility and control in determining the terms and conditions of employment for employees.

Construction industry clients be aware – building and construction industry (fair and lawful building sites) code 2014

On 17 April 2014, the Minister for Employment, Senator Eric Abetz, published an advance release of the Building and Construction Industry (Fair and Lawful Building Sites) Code 2014 (the “Code”). The Code provides the Commonwealth Government’s expected standards of conduct for all building industry participants that seek to be, or are, involved in Commonwealth funded building work.

The Minister announced that the Code will come into effect when the Building and Construction Industry (Improving Productivity) Bill 2014 commences and has said that enterprise agreements and other “procedures” will no longer be able to contain “restrictive work practices” or “discriminatory provisions”.

Once the Code commences then entities covered by it that have enterprise agreements made after 24 April 2014 that do not meet the Code will not meet the key criteria for eligibility to tender for, and be awarded, Commonwealth funded building work.

For example, clauses and practices that will not be permitted by the new Code include:

  • an agreement or practice that prohibits or limits the employment of casual or daily hire employees;
  • an amount paid that nominally incorporates payment for ordinary time and other matters such as overtime and allowances in one loaded rate;
  • an arrangement or practice whereby employees are selected for redundancy based on length of service alone; and
  • “one in, all in” clauses where, if one person is offered overtime, all the other workers must be offered overtime whether or not there is enough work.

PCS recommends that any employer in the construction industry that intends or may bid at any time for Commonwealth projects or other work, carefully consider the terms of any agreements about which they are bargaining with their employees.

“It is important that employers regularly review their enterprise agreements as there can be times where Award conditions may be in fact more beneficial to employees.”

Beneficial leave provisions

An employer recently had an enterprise agreement approved which allows employees access to six days of compassionate leave per year. The clause is said to recognise that when this type of leave is taken it usually requires employees to travel long distances. The provision of six days’ compassionate leave is three times the statutory standard for compassionate leave.

In addition to the increased flexibility around compassionate leave the enterprise agreement also allows long-serving employees to cash out personal leave if they retain at least 30 days of accrued personal leave. After completing ten years of service an employee will be able to cash out ten days of personal leave and a further five days after 15 years’ service and then every five years thereafter.

With the recognition of domestic violence as a reason for requesting flexible working arrangements we may also see an increase in clauses entitling victims of domestic violence to paid leave. In 2010 a Victorian employer agreed on a groundbreaking clause entitling victims of domestic violence to 20 days’ paid leave each year. Since then Sydney University’s Professor Marian Baird who has undertaken a study says that similar rights had been included in more than 100 agreements or state public service awards covering more than one million workers.1

Increases in pay

The Department of Employment’s “Trends in Federal Enterprise Bargaining”2 report shows that the agreements approved by the Fair Work Commission in the December 2013 and March 2014 quarter paid an average 3.6% increase to employees.

On an industry basis construction (4.7%) and education (3.7%) increased the average and health and community services (3%) and finance and insurance services (3.3%) pushed the private sector average down.

What does this mean for us?

PCS encourages those employers with enterprise agreements or those thinking about adopting an enterprise agreement to use clauses such as the ones described above as a way to have terms and conditions of employment that suit their operation and give employees something more beneficial than the award. Clauses such as the ones discussed above can also be used to attract and retain key staff.

  1. An equality bargaining breakthrough: Paid domestic violence leave Marian Baird, Ludo McFerran and Ingrid Wright, JIR published online 23 January 2014
  2. “Trends in federal enterprise bargaining December quarter 2013”, bargaining




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