Time is running out for Zombie agreements – employees must be given notice by 6 June 2023
As discussed in our previous article here, one of the key features of the Federal Government’s suite of reforms to the Fair Work Act 2009 (Cth) (Act) is the sunsetting of all “zombie agreements”. That term refers to those industrial agreements that were made prior to the commencement of the Act, or during the bridging period. Collective Agreements and Australian Workplace Agreements are examples of zombie agreements.
All zombie agreements will automatically terminate on 7 December 2023, unless the Fair Work Commission (FWC) decides to extend the agreement’s operation (which it can do for up to 4 years). In the absence of such an extension, on and from 7 December 2023, zombie agreements will cease to operate and the employees who were previously covered by the agreement will transition to the modern award that covers their employment. If a new enterprise agreement is made to replace the zombie agreement, that agreement will cover the employees from the date of approval.
Businesses should promptly conduct a review of their employment arrangements and identify whether any employees are covered by a zombie agreement.
If a zombie agreement is identified, written notice must be given to all employees who are covered by the agreement advising them that the agreement will terminate on 7 December 2023 unless it is extended by the FWC. Employees must receive the notice by no later than 6 June 2023. A business which fails to comply with this requirement will commit a breach of the Act and may be exposed to having to pay civil penalties.
Any application to the FWC to keep a zombie agreement on foot after 7 December 2023 must be lodged prior to that date. Businesses should take the opportunity now to consider whether it would be in the business’ commercial interests for an application to be made, by comparing the terms and conditions that apply under the agreement with those that apply under the applicable award(s).
Even if it would be financially and practically desirable for a zombie agreement to continue in operation, certain criteria must be satisfied before the FWC will grant an extension. Relevantly, the agreement must provide more favourable terms and conditions for the employees who are covered by it than the terms and conditions provided for in the applicable award(s). This requirement is likely to be difficult to satisfy if the agreement contains terms and conditions commercially beneficial to the employer.
This article provides general commentary only. It is not legal advice. Before acting on the basis of any material contained in this article, seek professional advice.
Co-author: Lachlan Chuong