Enterprise Bargaining Agreements, formally known as Enterprise Agreements under the Fair Work Act 2009, are legally binding collective agreements between an employer and its employees at a collaborative level. Enterprise Agreements set the terms and conditions of employment for employees within a business, whether in totality or in relation to a specific ‘class’ of employees.

By default, employees in particular industries are typically covered by a relevant Modern Award, which provides minimum terms and conditions of employment in addition to the National Employment Standards in the Fair Work Act 2009. If an Enterprise Agreement applies to particular employees in a business, the conditions of a Modern Award cease to cover those employees. However, Enterprise Agreements cannot be used to contract out of the minimum entitlements provided in the National Employment Standards and must provide conditions to the employees that result in the employees being ‘better off overall’ under the Enterprise Agreement as opposed to the Modern Award.

It is important to note that more than one Modern Award may apply to the one employer, as their employees of differing classifications may be covered by different Modern Awards. On the other hand, an employer can choose which of its employees its Enterprise Agreement applies to, including all of them. Enterprise Agreements could prove to be an untapped source of potential for your business, as they can enable you to flexibly set your terms and conditions of employment for a period of up to 4 years from the date of approval. Enterprise Agreements can be tailored towards the specific needs of your business, increase clarity of often vague employment terms such as wage rates and increases, and eliminate the need for individual employment contracts. Employees can also be assured that they will benefit from the Enterprise Agreement as they will always be put in a position that is better off overall compared to the relevant Modern Award. Proactively entering into an Enterprise Agreement may also safeguard your business against being made to enter into supported bargaining, which is the process that replaced low-paid bargaining from 6 June 2023, whereby the Fair Work Commission can require your business to enter into bargaining with other employers related by location, business type or funding source, for an Enterprise Agreement intended to cover your employees and the employees of those other employers.

These benefits can result in a more streamlined and productive business with improved employee satisfaction – for example, by clearly outlining scheduled wage increases over the next 4 years and setting internal procedures. Greater team morale can lead to greater accomplishments.

When Can, or Must You Bargain for an Enterprise Agreement?

Enterprise Agreements cannot be enacted solely on the part of the employer, nor solely on the part of the employees or their bargaining representative(s). Rather, a bargaining process must occur prior to any applications for enterprise bargaining agreement approval with the Fair Work Commission.
Employers may voluntarily choose to initiate or agree with employees to bargain for an Enterprise Agreement.

Alternatively, a bargaining representative of an employee covered by a proposed single-Enterprise Agreement may apply to the Fair Work Commission for a majority support determination. A majority support determination may be made if:

  • The majority of employees want to bargain,
  • The employer has not yet agreed to or initiated bargaining,
  • The group of employees who will be covered was fairly chosen, and
  • It is reasonable in all the circumstances to make the determination.

Recent changes to the Fair Work Act 2009 have increased the power of unions to bargain for an Enterprise Agreement in the absence of a majority support determination by allowing a representative of an employee covered by a proposed single-Enterprise Agreement to request in writing for the employer to bargain. This can be done if:

  • The proposed agreement will replace an earlier single-Enterprise Agreement that has passed its nominal expiry date, and
  • A single interest employer authorisation did not cease to be in operation because of the making of the earlier agreement, and
  • No more than 5 years have passed since the nominal expiry date, and
  • The proposed agreement will cover the same, or substantially the same, group of employees as the earlier agreement.

The employer can choose whether to accept or decline this request. Declining the request may allow the bargaining representative to make an application to the Fair Work Commission for an order that requires the employer to enter into the bargaining process (a bargaining order) on the grounds that one or more bargaining representatives are not bargaining in good faith and/or the process is not efficient or fair because there are multiple representatives.

Steps to Enact an Enterprise Bargaining Agreement

The process of enacting an Enterprise Agreement can be a major source of frustration for many employers. The Fair Work Commission requires a stringent process to be followed involving proper bargaining practices with employees, genuine employee agreement to the Enterprise Agreement’s terms, and various non-negotiable deadlines that have the potential to defeat an employer’s efforts to successfully enact an Enterprise Agreement.

Initiating the bargaining process involves notifying all affected employees that bargaining has commenced. Employees must also be given a Notice of Representational Rights that allows them to elect a bargaining representative to negotiate with the employer on their behalf. By default, the relevant union will serve as the bargaining representative unless voluntarily replaced. Each employee may (but does not have to) elect their own choice of bargaining representative, which may result in multiple bargaining representatives, who are entitled to their individual views and need not always agree with other representatives.

After bargaining has commenced, the employer and employees, through their bargaining representative(s) – if any, will engage in negotiations surrounding the Enterprise Agreement’s terms. All parties must bargain in good faith by sharing relevant information without delay, behaving in a fair manner, and providing proper responses to questions from the other side. The Fair Work Commission will focus on the process of genuine negotiation and not on the number of compromises made. In fact, there is no requirement for any party to make concessions during bargaining if requests are genuinely considered.

Employees must have a reasonable opportunity to consider the Enterprise Agreement by receiving an explanation of the meaning of the terms, the effect of the terms, and how the terms of the Enterprise Agreement leave them ‘better off overall’ than under the relevant Award. Employees may be better off overall even if some Award benefits have been reduced, as long as the reductions are balanced out by other benefits in the Enterprise Agreement.

After bargaining concludes, a formal vote must be held. If a majority of employees vote in favour of the Enterprise Agreement, the employer will then be eligible to apply for approval with the Fair Work Commission. Otherwise, the parties may continue to bargain until another vote can be held.

What Does the Fair Work Commission Look for When Approving an Enterprise Bargaining Agreement?

The Fair Work Commission has the final say in whether an Enterprise Agreement is approved or not. The Fair Work Commission expects there to be extensive documentation of how each step above was met by the employer. For example, applications have been rejected due to a failure to notify employees of their representational rights. There are also recorded instances of the strict timing requirements not being met, which have resulted in the related applications being rejected. The Fair Work Commission is also able to reject an application if, after analysis, it deems employees to not be better off overall under the Enterprise Agreement when compared to the relevant Award.

In short, both the contents of the Enterprise Agreement and the collective bargaining procedure must be correct.

What happens after an Enterprise Bargaining Agreement is Enacted?

After an Enterprise Agreement is approved by the Fair Work Commission, it becomes binding on the employer and all employees covered by it. All Enterprise Agreements are required to have a nominal expiry date, meaning the Enterprise Agreement will continue to operate after that date until the Fair Work Commission receives an application from the employer, employee, or employee organisation covered by the Enterprise Agreement to terminate or replace it.

The Enterprise Agreement is required to have a nominal expiry date of no more than 4 years from the date it was approved, meaning employers have flexibility to set a date shorter than 4 years to enable an earlier application to the Fair Work Commission to terminate the Enterprise Agreement without the agreement of the employees.

The Fair Work Commission must terminate an Enterprise Agreement on application under section 225 of the Fair Work Act 2009 in particular circumstances. This includes where the Fair Work Commission is satisfied that the Enterprise Agreement’s continued operation would pose a significant threat to the viability of the business, that the termination would likely reduce certain terminations of employment for employees covered by the Enterprise Agreement, and (if applicable) each employer covered by the Enterprise Agreement has given the Fair Work Commission a guarantee of termination entitlements in relation to the termination of the Enterprise Agreement. These Fair Work Act 2009 provisions serve to ensure flexibility for your business in difficult times.

After the Enterprise Agreement is terminated, the relevant Award (if any) will apply to the employees once again, until a further Enterprise Agreement is enacted.

MV Law’s Expertise in Enterprise Bargaining Agreements

We understand that the process of enacting an Enterprise Agreement can be daunting. In the absence of experienced representatives, enacting a desired Enterprise Agreement may seem like rocket science. The benefits of drafting the Enterprise Agreement and going through the Fair Work Commission’s process may seem like it outweighs the benefits of operating your business in accordance with an Enterprise Agreement.

Alternatively, you may be facing a situation where you are required to negotiate with a bargaining representative but lack the expertise to confidently navigate through this situation to obtain a result that benefits your business.

MV Law’s Employment Law team can assist you across a wide range of Enterprise Agreement-related matters. We can help you draft a complying Enterprise Agreement that is suitable to your business’ unique needs, which saves you the need to go through the legislation by yourself. In addition, we can represent you during the bargaining process and can arrange for compliance with the statutory requirements through preparing relevant communications to employees, holding an educational session to explain the terms and conditions of the proposed Enterprise Agreement to your employees, assisting you to hold an anonymous vote, and lodging the application in the Fair Work Commission on your behalf.

If you are interested in enacting an Enterprise Agreement for your business, please call (02) 6279 4444 to speak to one of our friendly team members, who will refer your matter to our employment team. We look forward to helping you.


Amy Sydney
Special Counsel, Employment Law
MV Law Canberra