Extension Granted to Zombie Agreement: Key Takeaways for Employers

In brief - Zombie agreements will soon be buried for good, unless an extension is warranted to grant those meeting specific criteria extra life. 

The Government's Secure Jobs, Better Pay legislation will sunset Zombie agreements from 7 December 2023. Zombie agreements are those lingering Work Choices-era agreements (pre-2009) that have long passed their nominal expiry date.

Two recent Fair Work Commission (FWC) decisions clarified the circumstances under which the FWC might make a ruling to extend the life of a zombie agreement, with one decision granting an extension of almost 18 months and the other denying the application outright. 

This article provides a brief summary of the cases and highlights key takeaways, including the factors the Commission considers when granting an extension to a Zombie agreement.

Summary of the Case 

In the decision of Application by ISS Health Services Pty Ltd [2023] FWCFB 12 (7 July 2023), the FWC four member bench led by President Hatcher extended the 2004 agreement after determining that it offered "significantly" better pay than the relevant award and negotiations for a replacement deal were already underway.  

Factors Considered by the Commission

The Commission considered several factors in deciding to grant the extension:

1. Bargaining Initiation: The Commission assessed whether the application was made at or after the "notification time" for a proposed enterprise agreement and whether bargaining for the proposed new deal was already occurring. The bench found that these requirements were met, as evidenced by the agreement issuer's initiation of bargaining and communications with the relevant union.

2. Coverage and Complexity: The Commission established that the proposed new agreement would cover the same group of employees as the existing agreement, with preliminary communications and a formal bargaining meeting scheduled. The bench recognised the complexity involved in bargaining for this particular replacement agreement, where the existing instrument applied to multiple sites, diverse classifications, and pay rates linked to a specific industrial instrument.

3. Balance of Conditions: The Commission acknowledged that the existing agreement provided significantly better pay to employees than the relevant awards. The union's consultation with its members and their strong support for the extension based on improved remuneration were also taken into account.

What if the employer and employees covered make a joint application? 

In the separate decision of Application by Northern Inland Credit Union Limited and Kathy Beavan, Application by Northern Inland Credit Union Limited and Anna Lise Clark [2023] FWCFB 120 (6 July 2023), concerning two senior managers covered by individual zombie Australian Workplace Agreements, the FWC full bench clarified that joint applications for extension will not be granted simply because both the employer and employees covered by the agreement seek it. 

Rather, it held that the primary determinant is the relevance of the existing agreement and its terms to the present roles and entitlements of the employees. 

Various factors led the bench to dismiss the applications, including: 

1. The fact that the agreements were "substantially obsolete" and did not reflect the current roles of the employees covered; 

2. The automatic sunsetting of the zombie agreements would not mean employees were actually worse off where there was no evidence the employer would take advantage of the expiration to alter the employees' conditions to their detriment; and

3. The terms of agreements could easily be reproduced as conditions of new employment contracts, and would not involve any complexity. 

Key Takeaways for Employers

1. Strategic Bargaining: Employers with Zombie agreements should consider initiating bargaining for a replacement agreement promptly. Demonstrating an active engagement in negotiations can strengthen the case for an extension.

2. Employee Consultation: To increase the chances of success, employers should consult with employees to ensure that they support an extension application. Engaging with relevant union or employee representatives may provide additional credibility to the request.

3. Reasonable Extension Period: The Commission has discretion in granting the extension period. Employers should propose a period that is reasonably necessary for negotiating a replacement agreement. A longer extension may be viewed as encouraging delays in bargaining.

4. Relevancy of Agreement: Employers should consider the benefit that an extension would actually serve to it and its employees, particularly where the terms and conditions of the agreement are obsolete.

5. Alternative Remedies: If bargaining difficulties arise during the renegotiation process, parties can seek FWC assistance under section 240 of the Fair Work Act 2009 (Cth), or explore the option of an intractable bargaining declaration. Employers should be aware of these alternatives and their potential impact on the negotiation process.

Conclusion

These decisions shed light on the circumstances which will warrant an extension under the Secure Jobs changes. Employers facing the sunsetting of their agreements on December 7 should immediately review their bargaining strategy and consider commencing negotiations for a new deal and determine whether they may need to apply to extend the life of their Zombie agreement.