New model terms for enterprise agreements: what employers need to know

The Closing Loopholes Act No.1 and No.2 has brought sweeping changes to Australian employment law, including key updates on casual conversion and the right to disconnect. Another important change arising from the Closing Loopholes Act No.2, was the requirement of the Fair Work Commission (FWC) to make new model terms for enterprise agreements. Starting in February 2025, the FWC introduced new model terms for enterprise agreements designed to modernise workplace practices and standardise provisions across all enterprise agreements. The new model terms include:

• a flexibility term;
• a consultation term;
• a term about dealing with disputes; and
• a term for settling disputes about matters arising under a copied State instrument for a transferring employee.

The flexibility term, consultation term and term about dealing with disputes, are existing model terms which the FWC has now updated, and the term for settling disputes about matters arising under a copied State instrument for a transferring employee is a brand-new term.

Here, our experts explain these new model terms and the requirement for them to be included in all new enterprise agreements.

1. Flexibility Term for enterprise agreements

The Flexibility Term enables employers and employees to enter into Individual Flexibility Arrangements (IFA) to vary certain terms of their enterprise agreement, such as arrangements for when work is performed, overtime rates, penalty rates, allowances, and leave loading. The purpose of an IFA is to meet the genuine needs of both the employee and employer. This flexibility helps businesses adapt to changing needs while accommodating employee circumstances.

However, there are strict requirements which must be met before parties can enter into an IFA:

• the IFA must result in the employee being better off overall;
• be voluntarily and genuinely agreed to by the employer and employee;
• not entered into under coercion;
• the IFA must require the employer to ensure that the agreement may be terminated by either party providing 28 days’ notice or by the parties at any time by agreement; and
• the agreement must be in writing.

Failure to follow these steps can lead to disputes.

2. Consultation Term for enterprise agreements

The Consultation Term requires employers to engage with employees about major workplace change that is likely to have a significant effect on them or a change to their regular roster or ordinary hours of work. Employers must inform employees of such change and provide a chance for employees to give feedback, ensuring that the process is genuinely consultative. The term also allows for employees to be represented during the consultation process.

For employers, this term emphasises the importance of transparency and communication. Consulting employees before changes are made not only helps avoid conflicts but also fosters a culture of collaboration. Taking employee feedback into account can lead to smoother transitions and improved workplace morale.

3. Dispute Resolution Term for enterprise agreements

The Dispute Resolution Term outlines the process for resolving disputes between employers and employees regarding the enterprise agreement. The process involves two steps:

a) Internal resolution: disputes are first addressed at the workplace level between the employee and their supervisor or management.

b) External resolution: if unresolved, the dispute can be referred to the FWC for mediation or arbitration.

4. Dispute settlement for copied state instruments

This term applies to transferring employees under a State instrument and provides a clear dispute resolution process for settling disputes arising under the instrument.

The process begins with the parties involved – the employer, the employee, and potentially an employee organisation – attempting to resolve the dispute at the workplace level through direct discussions. If the issue remains unresolved, the matter can be referred to the FWC.

The FWC will then address the dispute in two stages: first, they will attempt to resolve the issue through methods like mediation, conciliation, or making recommendations. If those efforts are unsuccessful, the FWC may move to arbitration and make a binding decision. The FWC also has the authority to grant interim relief if needed, and its decisions can be appealed by the aggrieved party.

Why do these terms matter?

While businesses may decide to use their own flexibility, consultation or dispute resolution terms for inclusion within an enterprise agreement during the drafting and negotiation process, if such clauses are less beneficial or non-complaint with the FWC terms, or the enterprise agreement is completely silent on such terms, then the FWC’s model terms will automatically be inserted into the enterprise agreement during the FWC approval process.

The effect of these model clauses promotes consistency across all enterprise agreements, and strengths employees’ rights.

The new model terms came into effect on 26 February 2025.

How should employers prepare for these new model terms?

• Update their practices to be in line with the new terms.
• Consult employees whenever significant changes are planned.
• Document IFAs and follow the dispute resolution processes.

How Citation HR can help

Legislative changes can often be daunting, and that’s where having a team of workplace relations experts can make all the difference. Citation HR can help your business navigate these new model terms and ensure your enterprise agreements are compliant. Leaning on our 24/7 HR Advice team and our Citation HR Software which is fully equipped with legally compliant templates, as well as other documents and policies, are just some of the ways you can easily to manage this new process.

If any of the information in this article has raised any concerns about modern awards or enterprise agreements for your business or you have another workplace matter you need assistance with, please contact our team.

About our author

Tasha Najmudeen is a Workplace Relations Consultant at Citation Group. She has an interest in all things legislation and ER/IR related and regularly provides advice on workplace matters to find solutions for clients.