What is an Enterprise Agreement?
An enterprise agreement is an agreement that sets out the minimum terms and conditions of your employment. If an agreement is in place, the Modern Award that applies to your workplace will not apply to your employment. Importantly, if your workplace has an agreement, it cannot offer less benefits than the minimum benefits provided for by the Award. In other words, an enterprise agreement must offer conditions of employment that are better than the conditions in the Award. The agreement can refer to a range of terms and conditions of employment, such as working hours, leave entitlements and redundancy. Furthermore, there are a range different types of agreements.
To further understand what an enterprise agreement is and what terms can be included, see here.
How can an enterprise agreement form part of the employment contract?
The employment contract can expressly include the terms of your enterprise agreement. Therefore making its terms contractual and thus enforceable. Alternatively, the employment contract can expressly excluded the agreement.
1. Expressly Excluded:
Your employment contract can expressly exclude the enterprise agreement. This means the agreement is not part of the terms of the employment contract. Thus, the terms and conditions in the agreement will not be enforceable.
For example, “The terms and conditions in [enterprise agreement] do not form part of the terms and conditions of your employment“. This is an express exclusion.
2. Expressly Included:
If your employment contract makes express reference to an enterprise agreement, its terms or conditions, it may form part of your contract.
It is important to note that an express reference to the agreement does not mean the whole agreement will form part of the contract. It may just be one part of the agreement that forms part of your employment contract.
For example:
A new employee is presented with an employment contract and an enterprise agreement. The employment contract has a term around redundancy. The employment contract says, “The employee agrees that all terms regarding redundancy payments are as set out in the enterprise agreement”. Therefore, the terms around redundancy in the agreement will form part of the employment contract due to the express reference to it. However, the other terms in the agreement might not.
It is likely that an enterprise agreement forms part of your contract if:
(1) Words like ‘comply with [enterprise agreement]’ and ‘abide by’ are used in the contract,
(2) The terms in the agreement are ‘duties’ that apply to both the employee and employer,
(3) The terms in the agreement are clear and not descriptive or aspirational,
(4) The employee was required to ‘sign off’ as having read and agreed to the agreement,
(5) The terms in the agreement are not unfair.
If all these factors exist, the agreement may form part of your contract.
Effect of enterprise agreement forming part of employment contract?
The effect of the agreement forming part of the contract is that the employee and employer must abide by them. After all, they now form part of the employment contract. Referring to the example above, if agreement term around redundancy is part of the contract, the employer must comply by the term if the employees position becomes redundant. This means that any benefits in the agreement now form part of the employment benefits.
Key Takeaways:
An enterprise agreement can form part of your employment contract. But, this is not an automatic finding. Things such as express reference to the agreement, words such as ‘comply’ or ‘abide’, clear terms, fair terms and signing the agreement all point to the fact an agreement may form part of the employment contract.
