The sun will set on zombie agreements

One of the changes to the Fair Work Act 2009 (Cth) (FW Act) by the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Amendment Act) is the sunsetting of ‘zombie agreements.’ All zombie agreements will automatically terminate on 7 December 2023, unless the Fair Work Commission (FWC) approves an extension of the nominal expiry of the zombie agreement.

What is a ‘zombie agreement’?

A ‘zombie agreement’ is a term given to certain types of workplace agreements made prior to the commencement of the FW Act as well as other transitional agreements which were agreed prior to 2009 or between 1 July 2009 and 31 December 2009.

Unlike enterprise agreements made under the FW Act, zombie agreements were not compared against a modern award and often contain provisions which are less favourable to employees than if an enterprise agreement were entered into under the current industrial legislation.

A non-exhaustive list of zombie agreements has been published by the FWC here.

What if an organisation has a zombie agreement?

Zombie agreements will automatically terminate on 7 December 2023.

However, an employee, employer or union representing one or more of the employees may apply to the FWC seeking to extend the operation of the zombie agreement for up to four years.

Whether the FWC will grant an extension to a zombie agreement will depend on the specific type of zombie agreement and the individual circumstances, but generally, the party applying for the extension will need to satisfy the FWC that employees are better off overall under the zombie agreement than the applicable modern award.

If an application for an extension of a zombie agreement is not made to the FWC by 6 June 2023, or an application is not approved by the FWC, or another enterprise agreement is not approved, the modern award will apply.

On or before 6 June 2023, employers covered by a ‘zombie agreement’ must give notice to all employees covered by the agreement that:

• the employee is covered by a zombie agreement;
• the zombie agreement will terminate on 7 December 2023 unless an application for an extension is made; and
• the sunsetting process commenced on 7 December 2022.

Employers who fail to notify employees of the sunsetting of a zombie agreement may be subject to penalties of up to $16,500 per breach for individuals or $82,500 per breach for companies.

Take home messages

For employers with zombie agreements, the effect of the Amendment Act on the terms and conditions provided to employees must be considered and compared against the applicable modern award to ascertain any less favourable terms.

We recommend employers take proactive steps to comply with the requirements of these amendments. As a first step, employers should notify employees in writing before 6 June 2023 that the zombie agreement will terminate unless an application for an extension of the zombie agreement is made to the FWC.

From there, we recommend employers compare the zombie agreement against the modern award and then consider whether to:

• make an application for extension to the FWC;
• commence negotiations for an enterprise agreement; or
• implement other processes, such as individual flexibility agreements or employment contracts.

Importantly, employers should be proactive in this process to reduce costs and ensure they are not subject to penalties under the FW Act.

Please contact Lincoln Smith on +61 8 8210 1203 or lsmith@normans.com.au, Thomas Tagirara on +61 8 8217 1337 or ttagirara@normans.com.au or Annabelle Narayan on +61 8 8210 1292 or anarayan@normans.com.au for further information.