Understanding the Pros and Cons of an Enterprise Bargaining Agreement

Written by Andrew Bland, Principal of BlandsLaw

An Enterprise Bargaining Agreement (“EBA”) is an agreement that has been approved by Fair Work Australia between an employer and its employees. The EBA is binding on the parties to the agreement for the period specified (typically between two to four years).

EBAs set out conditions of employment for a group of employees. Such agreements override any Award provisions, however must comply with the National Employment Standards (NES) and must result in the employees being Better Off Overall than if they were being paid strictly according to the Award (aka the “BOOT” test).

The EBA Process

The steps for negotiation and approval of the EBA are as follows:

1. Conduct the BOOT analysis: for each employee, their conditions of employment and pay rates contained in the EBA must satisfy the Better Off Overall Test (BOOT) when compared to the Modern Award.
2. Prepare the EBA so it can be presented to staff.
3. Provide formal notice to employees that you intend to commence the bargaining process. At the same time, the union should be notified.
4. Arrange and conduct bargaining meetings, making amendments to draft EBA as required.
5. Arrange for voting on EBA (ensuring notice and other timeframes are complied with). Approval requires majority agreement.
6. Lodge EBA with the Fair Work Commission (FWC).
7. Respond to any requests from FWC.
8. Approval by FWC.

What are the advantages of an EBA?

For employers, the EBA can provide a much simpler system for remunerating its employees when compared to the strict application of the relevant modern award(s). In many workplaces, there is more than one award that applies to its employees, but even where there is not the case the interpretation and application of a modern award can be complex and time-consuming for employers. An EBA can streamline this process by incorporating overtime, penalty rates, allowances and other award entitlements into a base rate payable to employees according to their classification level under the award. It also means that for all new employees you simply provide them with a copy of the EBA, and there is no need for an individual employment contract.

The negotiation of an EBA provides the opportunity to tailor the agreement to the specific needs of the business. This process also ensures transparency and results in an agreement between the parties as to what to expect from each other. There is also protection from industrial action during the nominal life of the EBA.

For employees, there is an assurance that the terms of the EBA put them in a position that is “Better Off Overall” than if they were paid strictly according to the relevant modern award. Fair Work Australia will not approve an EBA unless the BOOT is satisfied, which places the employee in a better position as a result of the EBA.

The bargaining process of an EBA also provides employees with the opportunity to join together and to collectively bargain on the terms of the agreement, often with the benefit of union representation. This can be a much more powerful process than an individual employee attempting to negotiate terms one on one with the employer.

What are the disadvantages of an EBA?

For employers, the main disadvantage is the time and cost required to negotiate the EBA and to go through the approval process with Fair Work Australia. There is a strict process and timeframe that must be followed and any failure to follow these can result in rejection of the EBA.

For employees, there are generally not a lot of disadvantages to being a party to an EBA. If an employee wants to be represented by the union then they are required to pay union fees which, over time, can amount to a significant amount of money. Further, in order to be approved an EBA requires a majority (not unanimous) vote. If an employee does not agree with the union or with the majority vote then they do not have any options other than to be subject to the agreement.

Conclusion

Although EBAs take some time and effort to set up, they can be a valuable tool that benefits both the employer and the employee. This is particularly beneficial for the employer who is able to manage its operations in a more streamlined and efficient way, without constant uncertainty as to whether or not it is meeting its legal obligations under the applicable award(s).