The end is nigh… for zombie agreements

By Aaron Dearden and Iona Goodwin

In December 2022 amendments launching a wave of industrial relations (IR) reforms were passed by the Parliament. One aspect of the IR reforms involved the sunsetting of so-called ‘zombie’ agreements. In this article, we discuss what you must do and what you should do to prepare for the termination of zombie agreements.

What is a zombie agreement?

A zombie agreement can be an agreement that was made collectively between an employer and a group of employees or between an employer and an individual employee (for example, an Australian Workplace Agreement).

These are agreements made before modern awards commenced on 1 January 2010. In some cases, zombie agreements have allowed employers to pay employees less than employees would be paid under an otherwise applicable modern award. This is because penalties, loadings, and overtime rates that are payable under modern awards do not have to be paid to employees covered by a zombie agreement.

Termination

Zombie agreements will automatically terminate on 7 December 2023, unless an application is made to, and granted by, the Fair Work Commission to extend the agreement. The maximum period of extension is four years.

Unless a new enterprise agreement is made to cover the employer and relevant employees before the zombie agreement is terminated, employees will be covered by the applicable modern award once the zombie agreement terminates.

What must you do?

By 6 June 2023, employers covered by a zombie agreement must give each employee who is covered by a zombie agreement a notice telling the employee that:

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

Employers failing to issue notices telling employees about the termination of their zombie agreement will be exposed to pecuniary penalties.

The Fair Work Commission has published a list of zombie agreements targeted for termination at the end of the year. However, the Commission warns that its list is not a complete list of zombie agreements. It does not have records of individual agreements or complete records for collective agreements made between 2006 and 2009.

What should you do?

An employer covered by a zombie agreement should consider the terms of otherwise applicable modern awards and map those terms and conditions to its operations and the needs of the businesses.

It may be that an application for an extension of the zombie agreement is appropriate or maybe the time is right to commence bargaining for an enterprise agreement.

Businesses are facing a barrage of changes in the IR space, with more changes to come with a second tranche of IR reforms promised and other changes, like privacy law reform to come.

Hall & Wilcox’s Employment & Workplace Relations team is well-placed to help our clients navigate these changes.