Enterprise bargaining is the process by which an employer and their employees — usually through bargaining representatives — negotiate the terms and conditions of employment that will apply across the workplace. The end product is an enterprise agreement: a legally approved instrument that sits alongside the Fair Work Act 2009 (Cth) and can tailor pay and conditions to a specific business in ways a standard industry award cannot.
For most small-to-medium businesses, the concept surfaces in one of two situations: you want to customise employment arrangements beyond the relevant modern award, or your workforce has asked to bargain collectively and you need to understand your obligations. This article explains what enterprise bargaining is, what kinds of agreements it produces, how the process works, the approval hurdles, and where things typically go wrong.
What enterprise bargaining is — and is not
Enterprise bargaining is collective negotiation at the enterprise level. It is not the same as setting an individual employment contract, and it does not replace the National Employment Standards (NES), which are the minimum entitlements guaranteed to every national system employee regardless of any agreement. An enterprise agreement can provide better conditions than the NES; it cannot provide less.
The process is also distinct from individual flexibility arrangements (IFAs), which are bilateral arrangements made under an enterprise agreement between an employer and a single employee. Enterprise bargaining is a collective exercise — it binds the employer and all employees (and future employees) in the specified classifications or work types.
Enterprise bargaining in Australia is governed by Part 2-4 of the Fair Work Act 2009 (Cth), most recently amended in significant ways by the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth), with further changes under the Closing Loopholes legislation. Many of those changes took effect from 6 June 2023 onwards.
Types of enterprise agreements
There are two broad categories of enterprise agreement under the Fair Work Act 2009 (Cth): single enterprise agreements and multi-enterprise agreements. The category matters because the bargaining rules, approval pathway, and practical uses differ.
Single enterprise agreements
A single enterprise agreement is made between one employer (or a single-interest group of employers, such as certain franchisees) and their employees. This is the most common type used by Australian businesses, and the one most SMBs will encounter. Employees in a single enterprise agreement bargain directly with their employer, and if the agreement is approved it covers the employees and classifications set out in it.
Multi-enterprise agreements
From 6 June 2023, the Secure Jobs, Better Pay amendments created three types of multi-enterprise agreement:
- Supported bargaining agreements — replaced the old low-paid bargaining stream. They are designed to help employers and employees who may find single-enterprise bargaining difficult, typically because of the size or structure of the enterprise or the nature of the industry. The Fair Work Commission can authorise supported bargaining on application.
- Single interest employer agreements — allow two or more employers (that are certain franchisees, or that share common interests) to bargain together and be covered by the same agreement.
- Cooperative workplace agreements — allow employers who have agreed to bargain together (where they are not covered by a supported bargaining authorisation or single interest authorisation) to make a multi-enterprise agreement.
Greenfields agreements
A greenfields agreement is a special type of enterprise agreement made before a new enterprise has taken on any employees. It is negotiated between the employer (or employers) and one or more relevant unions. Because there are no employees yet, the union or unions stand in as bargaining representatives. If the parties cannot reach agreement within the notified negotiation period of six months, the employer may apply to the Fair Work Commission to approve the agreement. Greenfields agreements cannot be made under the supported bargaining stream.
How the bargaining process works
Enterprise bargaining follows a structured sequence. Understanding each step helps employers avoid procedural errors that can delay or invalidate an agreement.
Starting bargaining
Bargaining begins when an employer agrees to bargain, or when a majority support determination or bargaining order requires them to. An employer must also notify employees of their right to be represented by a bargaining representative. That notice — commonly called a notice of employee representational rights — must be issued as soon as practicable after bargaining begins, and in the form prescribed by the Fair Work Regulations.
Employees may appoint a union or any other person as their bargaining representative. If an employee does not appoint a representative, a union that has at least one member in the proposed coverage may act as a default bargaining representative for that member.
Good faith bargaining
All bargaining representatives — employers, employees, and their representatives — must comply with the good faith bargaining requirements set out in s 228 of the Fair Work Act 2009 (Cth). Those requirements include:
- attending and participating in meetings at reasonable times
- disclosing relevant information (other than confidential or commercially sensitive information) in a timely manner
- responding to proposals made by other bargaining representatives in a timely manner
- giving genuine consideration to proposals and providing reasons for responses
- refraining from capricious or unfair conduct that undermines freedom of association or collective bargaining
- recognising and bargaining with other bargaining representatives for the agreement
Importantly, good faith bargaining does not require a bargaining representative to make concessions or reach agreement.
If a bargaining representative is not complying with these requirements, another representative can apply to the Fair Work Commission for a bargaining order compelling compliance.
When bargaining stalls: intractable bargaining
If parties cannot resolve a bargaining dispute after a sustained period of negotiations, any bargaining representative can apply to the Fair Work Commission for an intractable bargaining declaration. If the Commission makes such a declaration and the dispute remains unresolved, it can ultimately make an intractable bargaining workplace determination — effectively setting the terms of the agreement on the parties' behalf. This is a last resort. A Full Bench of the Commission makes workplace determinations, and the resulting instrument must still pass the better off overall test.
What an enterprise agreement must include
Before the Fair Work Commission will approve an enterprise agreement, it must contain certain mandatory terms. These are:
- A nominal expiry date — no more than four years after the day the Fair Work Commission approves the agreement
- A dispute settlement term — setting out a procedure for resolving disputes about matters under the agreement and in relation to the NES, which must allow an independent party (including the Fair Work Commission itself) to resolve disputes, and must allow for employee representation
- A flexibility term — allowing the employer and individual employees to make an individual flexibility arrangement to vary the agreement's terms to meet their genuine needs
- A consultation term — requiring the employer to consult employees about major workplace changes likely to have a significant effect on them, and about changes to their regular roster or ordinary hours of work, with employees allowed to be represented in that consultation
An agreement that is missing any of these terms will not be approved by the Commission.
The Better Off Overall Test (BOOT)
The Better Off Overall Test — commonly called the BOOT — is the central approval gateway for enterprise agreements. Before the Fair Work Commission can approve a single enterprise agreement or most multi-enterprise agreements, it must be satisfied that each award-covered employee and each prospective award-covered employee under the agreement is better off overall than they would be under the relevant modern award.
The BOOT is a global assessment, not a line-by-line comparison. The Commission weighs the terms that are more beneficial against those that are less beneficial, taking into account all reasonably foreseeable employees. Under changes introduced by the Secure Jobs, Better Pay amendments:
- The Commission may amend an agreement after it is lodged if, in the Commission's view, it does not pass the BOOT.
- The Commission can reconsider an approved agreement if relevant circumstances were not properly considered at the time of approval, or if circumstances have changed.
- When assessing whether the BOOT is passed, the Commission must give primary consideration to any common view held by bargaining representatives about whether the agreement passes the test.
An agreement that does not pass the BOOT will generally not be approved, though the Commission retains a limited discretion to approve in the public interest in certain circumstances.
Common misconceptions
"An enterprise agreement replaces the award entirely." An enterprise agreement displaces the relevant modern award while it is in operation, but the award is not extinguished. If the agreement is terminated or expires and is not replaced, the award springs back into operation. Throughout the life of the agreement, the NES continues to apply as a minimum floor.
"The nominal expiry date is when the agreement ends." An enterprise agreement does not automatically terminate when its nominal expiry date is reached. It continues in force until it is either replaced by a new enterprise agreement or formally terminated by the Fair Work Commission. This means an old agreement with outdated conditions can bind a workplace long after the expiry date on its face.
"Employers can refuse to bargain." An employer can decline to bargain unless certain triggers apply — such as a majority support determination (where the majority of employees want to bargain), or an existing obligation arising from a bargaining order. Refusing to bargain when legally required to do so exposes an employer to bargaining orders from the Fair Work Commission.
"Individual contracts are enough." An individual employment contract cannot provide for conditions below those in any applicable enterprise agreement, modern award, or the NES. If an enterprise agreement applies in your workplace, it sets a floor that individual contracts must respect.
Where employers typically go wrong
Enterprise bargaining errors tend to cluster around a handful of recurring problems:
- Failing to issue the notice of employee representational rights on time or in the prescribed form. This is a procedural prerequisite and omissions can delay the approval process.
- Drafting an agreement that does not pass the BOOT. This often happens when conditions seem competitive on face value but leave specific employee cohorts — such as part-time workers, or employees who work frequent overtime — worse off under the agreement than under the award.
- Omitting a mandatory term (dispute resolution, flexibility, consultation, or the nominal expiry date), which will prevent Commission approval.
- Misunderstanding the expiry date and allowing an outdated agreement to govern the workplace rather than renegotiating as conditions and the business evolve.
- Not keeping records of the bargaining process, which can make it difficult to demonstrate genuine agreement or good faith compliance if challenged.
How Artificer Legal can help
Enterprise bargaining involves both procedural compliance and substantive drafting skill. Getting either wrong can result in the Commission refusing to approve the agreement, industrial disputes, or conditions that are unworkable in practice.
A lawyer experienced in employment and industrial law will typically assist by:
- Advising whether your business is obliged to bargain, and on what timeline
- Issuing the notice of employee representational rights in the correct form and at the correct time
- Drafting the agreement — including all mandatory terms, industry-appropriate pay rates, and operational flexibilities — and checking each provision against the relevant modern award to ensure the BOOT is met
- Representing you in bargaining sessions or Commission proceedings, including responding to bargaining orders or applications for intractable bargaining declarations
- Advising on the structure of multi-enterprise arrangements if you operate as a franchisor or across multiple related entities
- Managing the Commission approval process, including responding to queries from the Commission about mandatory terms or BOOT compliance
Enterprise agreements can deliver genuine flexibility and workforce stability when they are done well. The complexity lies in the interplay between the Fair Work Act 2009 (Cth), the applicable modern award, and the specific operational needs of your business — a combination that benefits from specialist advice.
Key takeaways
Enterprise bargaining is the process of negotiating an enterprise agreement under the Fair Work Act 2009 (Cth). A few points are worth keeping in mind:
- Enterprise agreements can provide better conditions than the relevant modern award but cannot undercut the National Employment Standards.
- There are several types of agreement — single enterprise, multi-enterprise (supported bargaining, single interest employer, and cooperative workplace), and greenfields — each suited to different circumstances.
- Good faith bargaining obligations apply to all bargaining representatives; the Fair Work Commission can enforce compliance through bargaining orders.
- Every enterprise agreement must include a dispute settlement term, a flexibility term, a consultation term, and a nominal expiry date of no more than four years from approval.
- The BOOT is the primary gateway for Commission approval: the agreement must leave each award-covered employee better off overall than under the relevant modern award.
- An agreement does not end at its nominal expiry date — it continues until formally replaced or terminated.