Fair Work Legislation Amendment Act 2022 – Implications for employers

Effective 7 December 2022, several changes have been made, with more adjustments planned for implementation throughout 2023. It’s vital that employers familiarise and understand these existing and upcoming changes.

Below we explore a major change that has taken effect from 7 December 2022 - the termination of enterprise agreements.

Termination of enterprise agreements (EA) after the nominal expiry date

The Act (section 226) has changed the rules surrounding the termination of an EA after its expiry date.

Previously, where EA agreements had expired, they remained in operation until one party – the employer or the employee – applied to the Fair Work Commission (FWC) to terminate the agreement. Acting in the public interest, the FWC would allow for the termination.

It was perceived that, in a minor number of occurrences, employers could use this as a loophole to terminate the (often better paying) EAs during new EA negotiations. This was viewed as a bargaining tool against employees and Unions, given that, on termination, the employment conditions would revert to the basic underlying Award.

The newly introduced changes aim to close this potential loophole, as the FWC can now terminate an EA (following its expiry) if any of the following conditions are satisfied:

• The continued operation of the agreement is unfair to the employees it covers
• The agreement doesn’t, or is unlikely to, cover any employees
• All the following:
  • The continued operation of the agreement poses a significant threat to the viability of the business
  • Terminating the agreement is expected to reduce the risk of termination of employment due to redundancy, insolvency or bankruptcy
  • If the agreement has terms about termination entitlements, the employer or employers it covers guarantees the termination entitlements to the Commission.

This change is designed to protect employees by ensuring good faith enterprise agreement negotiations.

Considering the dynamic nature of business strategies and operations, it’s imperative that employers regularly assess their employment agreements (if applicable) to ensure compliance with fair treatment of employees.

Shared from BDO