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An enterprise agreement must be approved by the Fair Work Commission before it can commence operation.
The approval process includes a point-in-time assessment, which requires that each employee will be better off overall under the enterprise agreement when compared to the relevant modern award.
The objects and the scheme of the Fair Work Act 2009 imply that the requirements for approval of enterprise agreements are to be applied in a practical manner without unnecessary technicalities.[1]
See Fair Work Act ss.186–187
If an application for the approval of enterprise agreement is made and the enterprise agreement meets the requirements in sections 186 and 187 of the Fair Work Act, the Commission must approve the agreement.
See Fair Work Act ss.184 and 187
If an application for the approval of a multi-enterprise agreement is made, and the enterprise agreement meets the requirements in sections 186 and 187 of the Fair Work Act, the Commission must approve the agreement.
See Fair Work Act ss.187(5)–(6)
If an application for the approval of a greenfields agreement is made, and the enterprise agreement meets the requirements in sections 186 and 187 of the Fair Work Act, the Commission must approve the agreement.
Where there are 2 or more unions that will be covered by the agreement, the Commission will consider whether the unions collectively are entitled to represent the industrial interests of a majority of employees who will be covered by the agreement.[2]
If an agreement is made under subsection 182(4) (which deals with a single‑enterprise agreement that is a greenfields agreement), the Commission must be satisfied that the agreement, considered on an overall basis, provides for pay and conditions that are consistent with the prevailing pay and conditions within the relevant industry for equivalent work.
Note: In considering the prevailing pay and conditions within the relevant industry for equivalent work, the Commission may have regard to the prevailing pay and conditions in the relevant geographical area.
| Requirement for approval | Fair Work Act section | Link to related information |
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| Requirements for ALL enterprise agreements | ||
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The Commission must be satisfied that the agreement has been genuinely agreed to by the employees covered by the agreement (This does not apply to a greenfields agreement) |
186(2)(a) and 188 |
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The Commission must be satisfied that the group of employees covered by the agreement was fairly chosen |
186(3) |
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The Commission must be satisfied that the agreement passes the better off overall test |
186(2)(d) |
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The Commission must be satisfied that the agreement specifies a nominal expiry date |
186(5) |
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The Commission must be satisfied that the agreement includes a dispute settlement term |
186(6) |
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The Commission must be satisfied that the agreement does not include any unlawful terms |
186(4) |
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The Commission must be satisfied that the agreement does not include any designated outworker terms |
186(4A) |
Requirement that an enterprise agreement does not include any designated outworker terms |
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The Commission must be satisfied that the enterprise agreement meets the requirements with respect to particular kinds of employees (shiftworkers, pieceworkers, school-based apprentices and school-based trainees and outworkers) |
187(4) |
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Where a scope order is in operation, the Commission must be satisfied that approval of the agreement is not inconsistent with good faith bargaining. |
187(2) |
Where a scope order is in operation – Approval not inconsistent with good faith bargaining |
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Additional requirements for MULTI-ENTERPRISE agreements |
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The Commission must be satisfied that the agreement has been genuinely agreed to by each employer covered by the agreement, and that no person coerced, or threatened to coerce, any of the employers to make the agreement |
186(2)(b) |
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The Commission must be satisfied that if the agreement was not approved by the employees of all of the employers proposed to be covered – then the agreement has been varied so that it only covers those employers whose employees approved the agreement |
187(3) |
Multi-enterprise agreement to be varied if not all employees approve agreement |
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Additional requirements for GREENFIELDS agreements |
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The Commission must be satisfied that the relevant unions that will be covered by the agreement are (taken as a group) entitled to represent the industrial interests of a majority of the employees who will be covered by the agreement, in relation to work to be performed under the agreement |
187(5)(a) |
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The Commission must be satisfied that it is in the public interest to approve the agreement. |
187(5)(b) |
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The Commission must be satisfied that the agreement, considered on an overall basis, provides for pay and conditions that are consistent with the prevailing pay and conditions within the relevant industry for equivalent work. Note: In considering the prevailing pay and conditions within the relevant industry for equivalent work, the Commission may have regard to the prevailing pay and conditions in the relevant geographical area. |
187(6) |
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[1] Re McDonald’s Australia Pty Ltd [2010] FWAFB 4602 (Watson VP, Kaufman SDP, Raffaelli C, 21 July 2010) at para. 13, [(2010) 196 IR 155].
[2] Re Baulderstone Pty Ltd [2011] FWAA 9299 (Ryan C, 23 December 2011) at para. 4.