Enterprise Agreements: Specific Explanations Needed

Explaining terms and conditions to staff

Once again the FWC has baulked at approving agreements where it was not convinced the employers had taken all reasonable steps to explain the proposed deals to the employees. And surprisingly, in one case, the agreement was a roll-over with long term employees involved who were familiar with previous agreements.

The approach taken in these matters was that there was no evidence of what was explained to employees in respect to some “substantive terms that required a proper explanation”. Quoting heavily from previous full bench decisions, the FWC decided that having found reasonable steps were not taken, the agreement of the employees to the deals could not be genuine.

The case law on this aspect of agreement-making is complex but at its heart it makes the point that it is not about requiring perfection, but rather, reasonable steps must include a proper explanation of substantive terms of any proposed agreement. The FWC used expressions such as “not trifling, insignificant or inconsequential” to describe agreement terms which it said needed to be explained in some detail, to ensure all reasonable steps were taken to enable employees to make an informed decision.

There are two arms to this challenge; firstly, the employer needs to ascertain the substantive matters in an agreement and secondly, provide fulsome explanations and keep evidence of that for the approval process. And where an agreement is being renewed, it is important to discuss both any substantial changes from the existing agreement to the proposed new one, as well as the differences to the underpinning award(s).

One way to capture explanations and ensure these different aspects of the process are covered is to prepare a Plain English Summary of the proposed agreement. Such a document can be both explanatory of specific items and contrast with either an old agreement, the award or both as needed. And, subject to no issues about English comprehension in the workforce, it is a permanent record to submit to the FWC that reasonable steps were taken and consent informed.

Master Builders’ Association of New South Wales, The [2021] FWC 1267 (9 March 2021)

VSL Australia Pty Ltd T/A VSL Australia Pty Ltd [2021] FWC 1315 (10 March 2021)