In the recent decision of CFMMEU v C&H Acquisition Pty Ltd  (‘CFMMEU’) the Full Bench of the Fair Work Commission (FWC) provided clarification on the approval process for enterprise agreements, particularly in relation to undertakings. Enterprise agreements are negotiated by employers, employees and unions and set out the terms and conditions of the employment. It is a requirement that all enterprise agreements be approved by the FWC. To approve the agreement, the FWC must be satisfied that the terms are not unlawful and do not contravene the National Employment Standards. In addition, the agreement must pass the Better Off Overall Test (“BOOT”). This test requires the FWC to determine whether the employee is better off overall under the enterprise agreement. Where an enterprise agreement does not meet these requirements, the FWC can accept an undertaking to address the failures.
In recent years, significantly less applications have been made, and 54% of submitted applications are approved with undertakings. The FWC can only accept an undertaking if satisfied that the undertaking will not be financially detrimental to employees and will not create substantial changes to the agreement. In CFMMEU the FWC emphasised that the individual circumstances of each case will be considered when determining whether undertakings are likely to result in substantial changes. Importantly, the FWC clarified that it is concerned with the substantive impact of the changes, rather than the quantity.
Thorough planning and drafting of the enterprise agreement increases the chances of approval without any undertakings. Contact M+E for further information or assistance with drafting an enterprise agreement.