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Individual Flexibility Agreement (Award Covered)

Version 1.0 Updated 19 Sep 2017
Contract Manage

Who can use this agreement?

This agreement can only be used by National System Employers.

 

Commentary

What is an Individual Flexibility Agreement?

An Individual Flexibility Agreement (or 'Flexibility Agreement') is a useful tool for employers who have award-covered employees, and whose employment is not covered by another industrial instrument (eg enterprise or collective agreement).

Flexibility provisions within Modern Awards allow employers and an individual employee to enter into an arrangement, whereby certain terms of the Award are modified to meet the individual circumstances of the employment relationship. Before considering using a Flexibility Agreement, employers must:

  • ensure that no other industrial instrument applies; and
  • consider which Modern Award is the most appropriate instrument in relation to that employee’s employment. The Coverage and Classification provisions of the Award will assist in determining whether a particular Award is the correct instrument. Whilst only one Award will apply to an employee's employment, it is possible that multiple Awards may cover an employer's business.


How do Flexibility Agreements work?

Flexibility provisions in Awards specify that an employer and employee may vary the application of a number of terms of the Award if they enter into a Flexibility Agreement concerning those terms (for example, hours of work, overtime, penalty rates etc). An employer and employee can only agree to vary the terms of the Award that are specified in the flexibility clause of the applicable Award.

As each award contains different clauses which may be altered, it is important that the flexibility provision in the relevant Award is properly analysed when entering into a Flexibility Agreement with an employee.

How do I vary the effect of terms of the award by using a Flexibility Agreement?

Within the Workplace Flexibility Agreement, Workplace users can identify the terms of the award of which they wish to vary the effect. Once doing so, the Flexibility Agreement will need to identify, with sufficient detail, how the effect of that particular Award term is being modified by the Flexibility Agreement. For example, it will be necessary to show that a particular entitlement has been removed, altered, or even increased.

In addition, Workplace users must ensure that the Flexibility Agreement results in the employee’s terms and conditions of employment being better off overall than if the Flexibility Agreement didn’t apply. Therefore, users must also ensure that the Flexibility Agreement identifies in sufficient detail, how the Agreement ensures the employee is better off overall, as compared to the Award. For example, it will be necessary to show what benefits or entitlements an employee will receive (such as an increase in their wage) for entering into the Flexibility Agreement.

How do I implement a Flexibility Agreement?

Attached to the front of the Flexibility Agreement is a Proposal Form, which should accompany the Flexibility Agreement given to employees for consideration. As stated in the proposal, employees should be given ample time to consider the terms of the Flexibility Agreement, and to request clarification if they are unsure of any terms.

Workplace users should ensure that employees who may have difficulties understanding the terms of the Flexibility Agreement are given access to the agreement in terms that they can understand. This may include engaging an interpreter where the employee has language difficulties. Employers should ensure that they document all reasonable attempts to accommodate individual employee circumstances.

In addition, if a proposed Flexibility Agreement will cover a person under 18 years of age, they are required to also have a parent or guardian sign the Flexibility Agreement.

It is important that the employee is not put under any pressure or duress to sign the Flexibility Agreement, as this could result in the Flexibility Agreement being declared invalid, or even a penalty being imposed. The signing of the agreement must not be contingent on any other person signing the Flexibility Agreement.

An employer cannot enter into a Flexibility Agreement with a prospective employee. A Flexibility Agreement can only be agreed upon after a person has commenced employment with the employer.

Duration of the Flexibility Agreement

Whilst a Flexibility Agreement has an indefinite term, the following events will cause the cessation of the Flexibility Agreement:

  • The employer and employee agree in writing to terminate the Flexibility Agreement;
  • Either the employee or employer unilaterally terminate the Flexibility Agreement, by giving the other 13 weeks' written notice of termination; or
  • The award no longer applies to the employee’s employment. This will occur, for example, if a new enterprise agreement comes into operation and applies to the employee, or if an employee has a guarantee of annual earnings that exceeds the high income threshold. As the award no longer applies, the Flexibility Agreement also ceases to apply.


Other relevant factors to consider

Whilst the Individual Flexibility Agreement is a useful tool for Workplace users, care should be taken in implementation. In particular, given the vast range of awards, there may be other requirements in the award which a Flexibility Agreement is required to address. Regard should be had to the particular award’s flexibility clause when drafting a specific Flexibility Agreement.

Furthermore, the Flexibility Agreement, which is essentially an extension of the relevant award, does not regulate all the terms and conditions of employment of the employee subject to the agreement. It is recommended that all employees are still provided with a letter of offer or contract of employment which will operate alongside the award and the Flexibility Agreement.

Employers should ensure that the contract of employment, the award, the Flexibility Agreement, and the National Employment Standards (NES) do not conflict with each other. If unsure of the interaction between each of these instruments, it is recommended that you seek further advice.

Flexibility varies the effect of award terms, it does not vary the award. Although there is little case law on Individual Flexibility Agreements, at least one case emphasises that the Flexibility Agreement varies the effect of the award terms, it does not go as far as varying the award. For example, a Flexibility Arrangement cannot, according to current case law, go as far as allowing the employer and the employee to agree that the employee will commence their shift early (at a time that would attract a penalty rate) and forfeit the penalty rate in exchange for the employee leaving early to attend to family commitments. Employers may wish to seek advice on the use of Flexibility Agreement in circumstances where the trade off does not improve the financial outcome for the employee.

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