Contracting Out of an Enterprise Agreement

Apr 3rd, 2022

Image copyright: Daria Nepriakhina

When an enterprise agreement no longer serves the best interests of an employer and its employees, it may be time to consider contracting out of the agreement. While this decision is not one to be taken lightly, it can have significant benefits for both parties involved.

Before we discuss the process of contracting out of an enterprise agreement, let`s first define what it is. An enterprise agreement is a legally binding agreement between an employer and its employees that sets out the terms and conditions of employment. It covers everything from wages and bonuses to hours of work and leave entitlements.

Now, why would an employer want to contract out of an agreement that has already been negotiated and agreed upon? There are a few reasons. Firstly, an enterprise agreement may become outdated as the business evolves or if new laws and regulations come into play. Secondly, the negotiation process of an enterprise agreement can be lengthy and costly, and an employer may want to avoid this process altogether. Lastly, an employer may want to have more flexibility in their employment arrangements, which cannot be achieved under the current agreement.

To contract out of an enterprise agreement, an employer must ensure that they have met all the legal requirements set out by the Fair Work Act 2009. Firstly, they must provide employees with at least 21 days written notice before the agreement can be terminated. Secondly, they must hold a vote among employees to approve the termination of the agreement. The vote must be conducted in a fair and transparent manner, and a majority of employees must vote in favor of the termination.

Once the agreement has been terminated, the employer is no longer bound by its terms and conditions. However, it`s important to note that employees are still entitled to minimum standards set out in the National Employment Standards (NES) and any applicable modern awards.

Contracting out of an enterprise agreement is not a decision to be taken lightly. Employers should carefully consider the potential benefits and drawbacks before taking this step. It`s also important to involve employees in the decision-making process and to ensure that their rights and entitlements are protected throughout the process.

In conclusion, while contracting out of an enterprise agreement may seem like a daunting process, it can have significant benefits for employers looking for more flexibility in their employment arrangements. However, it`s important to ensure that all legal requirements are met, and that employees are consulted and involved in the decision-making process.


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