Modern awards continue to be the industry based minimum employment standards that apply to all employers and employees in a particular sector. Despite rationalisation of awards and arguably a smoother system of interpretation, many employers still find them to be complex documents which can lead to unfavourable outcomes, including underpayment claims if the wrong classification and penalty is applied.
Enterprise bargaining agreements (EBA) between an employer and its employees can provide one comprehensive cover-all document, referencing the need to review multiple modern awards that cover employees in a workplace. An EBA can also enable organisations to tailor specific clauses that aim to bring productivity and efficiency to their operations.
There are now more employees in Australia covered by awards rather than EBAs, which was not always the case. The swing away from EBAs may have been due to the increased complexity and technical application by the Fair Work Commission (FWC) of the Better Off Over All Test (BOOT) applied to every EA when it applies for approval.
The BOOT test requires that the FWC be satisfied that each employee would be better off under the EBA than they would be than under the Award. This cumbersome process requires the FWC to apply a line by line approach which often leads to undertakings being provided by parties and long lead times from lodgement to approval. Currently, there are 2.16 million workers employed under EBAs as opposed to 2.6 million at peak coverage in 2014.
In the current recovery from the COVID-19 crisis, industrial relations reform has been touted as a way that the Australian economy can propel back from recessionary levels. The Prime Minister has offered an olive branch to the businesses and the union movement to “put down their weapons” and work together to forge a better way for Australia to revamp the employment laws. The Government has set up working groups involving government, union and business leaders, to debate industrial relations legislation changes and award simplification.
With the Government’s promise to use industrial relations as a way of forging a way through the COVID-19 recovery, now is the time for all employers to stay informed of possible legislative changes and review their employer obligations, regardless of their industry.
5 considerations for reviewing your EBA:
1. Job Security - Employees will be keen to see clauses surrounding job security for nominal wage outcomes.
2. Short Agreements – Consider modest pay increases to be agreed upon on a “quick rollover” basis. Wait for more economic certainty for a longer-term agreement.
3. MOUs or Informal Agreements – One-year deals to roll-over EBAs without using the FWC system to lodge an agreement for approval.
4. Enterprise Agreement Variations – Employers may be keen to vary EBAs where they are already paying comfortably above award rates and not able to afford any pay increases because of changes in their economic situation.
5. Enterprise Agreement Terminations – Employers may want to consider this option if variations are not feasible.
When reviewing your enterprise bargaining agreement, make sure you comply with the procedural requirements under the Act. If your EBA is rejected by the FWC due to procedural errors or non-compliance with relevant awards, you may have to repeat the bargaining and voting process. This can be expensive, disruptive and damaging to your trust within the workplace.
For industrial relations support and practical assistance with enterprise bargaining, please contact us today.