Written by Australian Business Lawyers & Advisors 

Who should read this? 

If you:

  • are negotiating an enterprise agreement
  • are a business currently operating with enterprise agreements.

 

What has changed? 

On 20 February 2025, the Fair Work Commission (the Commission) issued a decision in relation to new model terms for enterprise agreements.

The new model terms will operate from 25 February 2025, and include the following:

  • a model flexibility term
  • a model consultation term
  • a model term dealing with disputes for enterprise agreements.

 

What are model terms and when do they apply? 

The model terms are not minimum standards to be met in enterprise agreements. Instead they act as “best practice” terms which are taken to be terms of an enterprise agreement, if the agreement fails to include a compliant term of that nature.

When an enterprise agreement is made, or negotiated, it is open to parties to formulate a flexibility term, consultation term or disputes term that departs from the model terms. The terms must satisfy the minimum requirement of the Fair Work Act 2009 (the FW Act). 

 

What do the changes mean? 

The model terms were originally prescribed in the Fair Work Regulations 2009 (the FW Regulations) and as such were essentially drafted by the relevant Minister. 

This changed following amendments to the FW Act by the Closing Loopholes No.2 Act 2024. This was intended to replace the existing model terms in the FW Regulations with a requirement that the Commission determine the model terms. 

 

What are some key differences between the old and new model terms? 

The changes to the model terms should not have a substantive impact on existing enterprise agreements or agreements in negotiation. 

Updates in the new model terms largely reflect model terms that are already in existence in current modern awards:  

 

Model Flexibility Term for Enterprise Agreements

  • The individual flexibility arrangement must be genuinely agreed to without coercion or duress
  • It may only be entered into once the employee has commenced employment with the employer
  • If the employer wishes to initiate the making of this arrangement they are to provide the employee with a written proposal and ensure that employees with limited understanding of written English are able to understand the proposal 
  • If the employer proposes the arrangement, the employer must meet with the employee to discuss the arrangement should the employee request the meeting
  • The arrangement must describe how the arrangement can be terminated
  • If disputes arise concerning the matters dealt with in the arrangement, the parties may use the dispute settlement process.

 

Model Consultation Term for Enterprise Agreements

  • Specifies that it only applies to a major change that is likely to have a significant impact on employees to which the enterprise agreement applies 
  • The employer must notify the relevant employees and their representatives of the decision to introduce the change
  • The employer should take reasonable steps to communicate the outcome of the consultation process. 

 

Disputes Term for Enterprise Agreements 

  • The parties to a dispute are outlined and may include the following: an employee or employees covered by the enterprise agreement, employer and employers covered by the agreement or a relevant employee organisation.
  • The Commission now has discretion to deal with a dispute even if the parties have not complied with the requirement to engage in discussions at the workplace. 

Interestingly, the Commission has also given extensive thought about the operation of the model consultation clause. In particular, whether the trigger for the consultation obligation to major workplace change should remain when a “definite decision” has been made, or whether the ‘trigger’ for consultation should be at an earlier point e.g. when it is ‘proposing’ such a change. The Commission, whilst having retained the former, has hinted that it would give further detailed and extended consideration to this issue later this year. 

Any changes to the ‘trigger point’ of consultation will have significant consequences for employers. We will provide updates as this develops. 

 

Read the decision

Model terms for enterprise agreements and copied State instruments