If your business has employees covered by pre-2010 zombie agreements, you have an important deadline approaching on 6 June 2023, and some key options to consider for next steps.

What is a Zombie Agreement?

Zombie agreements are effectively any enterprise agreement made before 1 January 2010 – a range of transitional agreements which were made before the introduction of the Fair Work Act 2009 and Modern Awards.

Zombie agreements were assessed against a ‘no-disadvantage test’ at the time they were made, rather than the current Better Off Overall Test (BOOT). The only ongoing requirement is that the base rates of pay in the zombie agreement are ‘no less’ than the base rates of pay in the relevant modern award.

These agreements have all now passed their nominal expiry date but many continue to operate as they have not been terminated or replaced by a new agreement – hence the term ‘zombie’. This will mostly include collective agreements covering groups of employees, though it may also affect some individual agreements.

How do I know if a Zombie Agreement applies?

If you’re not sure, there is a good chance you do not have zombie agreements in place. Many of these pre-2010 agreements have been replaced by new agreements or the circumstances no longer apply.

The Fair Work Commission (FWC) has published a list of collective agreements which may be affected. If in any doubt, we recommend checking this list and your own records.

Importantly, this list does not include individual agreements. If you have employees on Australian Workplace Agreements (AWAs) or an Individual Transitional Employment Agreements (ITEAs), it is likely you are already aware of this through your payroll or employee records.

What will happen to Zombie Agreements?

As mentioned in our February 2023 article, zombie agreements will automatically ‘sunset’ (terminate) at the end of 6 December 2023 unless an extension is granted by the FWC.

A zombie agreement can be extended on application to the FWC for up to four years – but only if employees are ‘better off overall’ under the zombie agreement (rather than the applicable modern award) or if bargaining for a replacement agreement is underway.

It is important to note this does not mean the zombie agreement can continue to operate indefinitely – it is simply deferring or delaying termination. The zombie agreement will eventually sunset at the end of the extension period.

What do we have to do first?

Employers must notify affected employees by 6 June 2023 that:

1. They are covered by a zombie agreement
2. The agreement will be terminated on 6 December 2023, unless it is extended by application to the FWC.

This deadline is fast approaching and you could be liable for a civil penalty if you do not comply. If zombie agreements apply in your business, the Victorian Chamber’s Workplace Relations Consultants can help you consider how to frame the notification to your employees and what to do before the next deadline on 7 December 2023.

What are my options once my Zombie Agreement sunsets?

As mentioned above, employers and/or employees can apply to extend the zombie agreement. In practice, we expect the two most likely outcomes on 7 December 2023 will be:

• Employees covered by zombie agreements revert to the underlying Award entitlements - the ‘do nothing’ option, or
• Employees and the employer engage in a bargaining process to ‘replace’ the zombie agreement – which may require an application to extend the zombie agreement(s).

The best option may vary depending on your specific circumstances. We recommend carefully considering your options and seeking guidance where appropriate. Our experienced Workplace Relations Consultants are available to provide tailored strategic advice on this question in the lead up to the June and December 2023 deadlines.

Where can I get assistance?

The Secure Jobs, Better Pay Act contains other significant changes to enterprise bargaining. The changes are complex and comprehensive and will impact the way businesses approach bargaining.

The Victorian Chamber’s team of Workplace Relations Consultants are bargaining experts and regularly support members at the bargaining table, behind the scenes, and in the FWC. They are ready to assist your business with the transition away from your zombie agreement. Call 03 8662 5222 for more.