Permitted content

Under the Fair Work Act 2009 (Cth) (FW Act), enterprise agreements may be made which deal with permitted matters:

  • matters pertaining to the relationship between an employer that will be covered by the agreement and that employer’s employees who will be covered by the agreement;
  • matters pertaining to the relationship between the employer or employers, and the employee organisation or employee organisations that will be covered by the agreement;
  • deductions from wages for any purpose authorised by an employee who will be covered by the agreement; or
  • how the agreement will operate.

Item 2 expands the range of matters which can make up an enterprise agreement - largely regarding the relationship between an employer and a union – that were often historically included in agreements but became prohibited under WorkChoices. As a result, they were often the subject of side agreements or MoUs during the WorkChoices years except where this was prohibited by the Construction Code.

The law in this area is not settled and has been the subject of many test cases eg the High Court decision in Electrolux and following cases, as recent as Sydney Ferries in May 2009. The ongoing inclusion of the ‘matters pertaining’ test will allow argument about the boundaries between matters that are permitted and prohibited to avoid uncertainty and litigation.

A difficult reality of the FW Act for construction employers is that unions are provided with the capacity to take protected industrial action in order to advance claims for provisions that are beneficial to unions – claims which are nothing to do with the relationship between the employer and its employees.

Unlawful terms

Unlawful terms are quite different from non permitted matters. They are akin to WorkChoices prohibited content.

Master Builders Australia was disappointed1 that during the Government’s consideration of Senate proposed amendments, the Government rejected the regulation of independent contractors as an unlawful term. Under the FW Act, terms relating to conditions or requirements about engaging independent contractors may appropriately be included in enterprise agreements. The union view is that they legitimately relate to employees’ job security. We expect to see the return of the commonly used pre-WorkChoices clause that no contractor could be engaged on terms less favourable than those offered to employees. This could mean that an employer was required to pay the contractor’s normal hourly rate at a level at least comparable with that of an employee undertaking similar work.

Non permitted matters can appear in agreements

Despite a non-permitted term being ineffective, the inclusion of a term that is not about a permitted matter does not affect the validity of an enterprise agreement. In registering agreements, FWA will not assess the content of an agreement, except to determine whether the agreement contravenes the NES or contains unlawful terms.

Mandatory clauses

Two clauses must be included in every enterprise agreement - a flexibility term and a consultation term. The flexibility clause must enable an employee and the employer to reach an arrangement varying the effect of the agreement for that employee ‘in order to meet the genuine needs of the employee and employer’.

A flexibility term permits certain terms of the enterprise agreement – the classic AWA trade-off of overtime, penalty rates, allowances and leave loading arrangements for when work is performed - to be varied by an individual flexibility arrangement. The flexibility term must not make the individual flexibility arrangement subject to the consent or approval of a third party (a union or a majority of employees) in an enterprise. However, the disadvantage for employers is that this cannot be made a condition of an employee accepting employment and employees can withdraw their agreement for any reason on 28 days’ notice.

A consultation term requires the employer to consult with employees about major workplace change that is likely to have a significant effect on the employees. Unions can demand consultation terms in agreements requiring that their approval be gained or that a majority of employees approve the workplace change before it is introduced.