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Can you vary an enterprise agreement during COVID-19?

The FWC has provided general information about the variation process.
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Can you vary an enterprise agreement during COVID-19?

Can you vary an enterprise agreement during COVID-19?

6 April 2020

As COVID-19 continues to wreak havoc, some businesses are considering varying their enterprise agreements to introduce additional flexibility in the workplace.

The Fair Work Commission has provided general information about the variation process.

Who can agree to a variation?

An employer and its employees who are covered by the enterprise agreement. Any variation must be approved by the majority of employees who vote for the variation.

Where agreement cannot be reached, enterprise agreements that have passed their nominal period may also be terminated upon application by the employer to the Fair Work Commission and will be subject to an assessment by the Fair Work Commission as to whether it is in the public interest and otherwise appropriate in all the circumstances.

What pre-approval steps must be taken?

Before employees vote on a variation to their agreement, the employer must take some of the same steps as required to make a new enterprise agreement. This includes that the employees must have been given access to a copy of the variation for seven days before they vote.

When must the application for approval be made?

An application to approve the variation of an agreement must be lodged within 14 days of the vote using the relevant form. For more information about forms and application requirements see Vary an agreement on their website.

Note: During the COVID-19 pandemic, the Fair Work Commission may consider waiving the requirement for an application to be accompanied by a properly witnessed statutory declaration.

When does the variation commence operation?

The variation will operate from the date specified by the Commission as part of the approval decision.

What does the Commission consider when approving a variation?

The requirements for varying an agreement are similar to those for approving a new agreement, including that the agreement as varied must pass the better off overall test (the BOOT).

What if the varied agreement does not pass the BOOT?

The Fair Work Act allows for the approval of an agreement that does not pass the BOOT if, because of exceptional circumstances, approval of the agreement would not be contrary to the public interest.

An example of a case in which the Commission may be satisfied exceptional circumstances exist is where the agreement is part of a reasonable strategy to deal with a short-term crisis in, and to assist in the revival of, the enterprise of an employer covered by the agreement.

It is untested whether the ‘exceptional circumstances’ provisions also apply to variations to agreements. Consequently, the Commission will convene a full bench to determine the issue when the first COVID-19 motivated application to vary an enterprise agreement is made. Information will be updated at that time.

Can I use individual flexibility arrangements instead of varying my agreement?

Potentially yes. Enterprise agreements must provide for individual flexibility arrangements (IFAs) to be made.

An IFA is a written agreement used by an employer and employee to change the effect of certain clauses in the enterprise agreement. IFAs can be used to make alternative arrangements that suit the needs of the employer and an employee. Depending upon what changes the enterprise agreement allows an IFA to make, this might include changes to regular rosters and working hours.

However, an IFA must leave the employee better off overall than they would be under the agreement. Consequently, an IFA is likely to be less effective than varying an enterprise agreement as a way of dealing with the impact of COVID-19 in the workplace.

Varying an enterprise agreement can be a reasonably involved process but worthwhile if you have the support of your employees and the viability of the business is at stake.  For businesses qualifying for the JobKeeper Payment Subsidy, it would be worthwhile waiting to examine the detail of that legislation before embarking on the process of seeking to vary an enterprise agreement.

Further information

For more information refer to the Contact us page on the Commission’s website or call the Commission Helpline on 1300 799 675.

The Enterprise agreements benchbook can also assist parties varying enterprise agreements.

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