What employers should know about zombie agreement extensions

Employers need to remain vigilant ahead of zombie agreements being phased out come December.

A zombie agreement is an agreement made before the commencement of the Fair Work Act 2009 (FW Act). It continues to operate as it has not been terminated or replaced by another agreement.

From 7 December 2023, the government’s Secure Jobs, Better Pay legislation will sunset zombie agreements.

However, 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.

In a blog post, Colin Biggers & Paisley partner Megan Kavanagh highlights key takeaways from the matters, giving employers insight into the factors the commission considers when granting such an extension.

Speaking about the decision of Application by ISS Health Services Pty Ltd [2023] FWCFB 12 (7 July 2023), Ms Kavanagh highlighted how the FWC bench extended a 2004 agreement after determining that it offered “significantly” better pay than the relevant award and negotiations for a replacement deal were already underway.

“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,” Ms Kavanagh wrote.

Meanwhile, a different outcome was seen in the 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).

The application concerned two senior managers covered y individual zombie Australian workplace agreements.

Ms Kavanagh explained that in this matter, the FWC bench clarified that joint applications for extension would 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,” she said, explaining that some of the factors that led to dismiss the applications included:

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.

“These decisions shed light on the circumstances which will warrant an extension under the Secure Jobs changes,” Ms Kavanagh said.

“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.”