Dealing with Zombie Agreements: Options and Implications for Employers

Dealing with Zombie Agreements: Options and Implications for Employers

Zombie agreements have been a contentious issue in Australian industrial relations for many years.

The term ‘zombie agreement’ is used to describe transitional instruments that have passed their nominal expiry date but remain preserved in law made during the WorkChoices era and the bridging period before the introduction of the Fair Work Act 2009.

All zombie agreements commenced the “sunsetting” process from 7 December 2022 and will automatically sunset (terminate) on 7 December 2023 unless the Fair Work Commission approves an extension. Employers covered by a zombie agreement with still covered employees must notify employees in writing by 6 June 2023 that the agreement will be terminated.

Why are they terminating?

These agreements were created under a different legislative framework, and as a result, they often include pay and conditions that are less favourable when compared to the more up-to-date Modern Awards or Enterprise Agreements that comply with current legislation.

Zombie agreements often contained loaded rates, including National Employment Standard (NES) entitlements that have been “rolled in” to an hourly rate. This can include entitlements such as casual loading, penalty rates, annual leave, sick leave, or redundancy entitlements. These rates could potentially be particularly problematic for employers and employees when the agreements are finally terminated, given their makeup.

In December 2023, these loaded rates may need to be adjusted by those impacted by the changes to account for the full value of these entitlements as part of the process.

What options are available?

Some options available to Employers can include:

Option 1: Apply to the Fair Work Commission to extend the agreement

An Employer covered by a Zombie Agreement may apply to the Fair Work Commission before 6 December 2023 to extend the agreement for up to an additional 4 years.

Option 2: Negotiation of a New Enterprise Agreement

Some employers with zombie agreements may wish to negotiate a new enterprise agreement with their employees. This involves bargaining with employees and their representatives to reach an agreement on pay and conditions.

Option 3: Conversion to a Modern Award

Employers with zombie agreements can alternately choose to simply convert to the relevant modern award.

This option can be advantageous for employers who want to simplify their payroll while still ensuring that their employees receive fair pay and conditions.

In conclusion, zombie agreements are a complex issue that can have significant implications for both employers and employees. Employers affected by this change should seek advice from a workplace relations specialist before taking any further steps. Doing so can mean the difference between making uninformed decisions that can lead to costly mistakes and making well-informed choices that can help mitigate risk.

Workforce Advisory is working through this process with a number of Employers, including consulting with their Employees.

For queries about zombie agreements, enterprise bargaining process, or other employment questions, please contact Dean Cameron at Workforce Advisory Lawyers – We Know Employment Law on 1300 WAL LAW, 0417 622 178 or via email to dean.cameron@workforceadvisory.com.au

Disclaimer: This information is provided as general advice on workplace relations and employment law. It does not constitute legal advice, and it is always advisable to seek further information regarding specific workplace issues. Liability limited by a scheme approved under professional standards legislation.

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