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Written By:  David Potts, Esq. (Co-written by  Sam Troutman)

Kells The Lawyers

Sydney, Australia

Prior to the introduction of the Fair Work Act 2009 (the Act) the Rudd government in its 'Forward with Fairness' policy statement declared that under the new workplace legislation employers and employees would be 'free to reach agreement on whatever matters suit them' (1). This was met with general approval; for the most part the case law on legislation restricting content is overly complex and unclear. When the draft bill of the Act was released it was quickly realized that this policy statement was not going to be met.

This article will provide an overview of the Act's treatment of the content allowed in enterprise agreements and consider the implications for employers negotiating enterprise agreements with their employees.

'Matters Pertaining'
The Act creates four categories of content; permitted matters, non-permitted matters, mandatory terms and unlawful terms.

Mandatory terms
Mandatory terms are terms that must be included in an enterprise agreement. These include a term providing for the creation of individual flexibility agreements and a 'consultation term', requiring employers to consult employees before initiating any 'major workplace changes likely to have an effect on the employees' (2).

If a mandatory term is not included in an enterprise agreement, Fair Work will not approve the agreement until the term is included.

Unlawful terms
Unlawful terms are terms which are not allowed to be included in the enterprise agreement. Section 194 outlines theses and include discriminatory terms, terms that would prevent the application of the various employee protections in the Act and terms that would confer a right of entry to a union official to the workplace.

Fair Work will not approve an enterprise agreement which includes an unlawful term.

Permitted matters and 'non permitted' matters
Section 172 provides that 'permitted matters' are:

1. 'matters pertaining' to the relationship between an employer that will be covered by the agreement and that employer's employees who will be covered by the agreement;

2. 'matters pertaining' to the relationship between the employer or employers, and the employee organisation or employee organisations, that will be covered by the agreement;

3. deductions from wages for any purpose authorised by an employee who will be covered by the agreement;

4. how the agreement will operate.

If a matter meets the 'matters pertaining' criteria in section 172 it is a 'permitted matter'. If a matter is included in an enterprise agreement and the matter does not meet the 'matters pertaining' criteria, but is not an unlawful term either, it is known as a 'non-permitted matter'.

A permitted matter is enforceable through Fair Work; a non-permitted matter, whilst not fatal to the agreement, is not enforceable.

Impact on parties to collective bargaining
The result of the restrictions on the content of enterprise agreements for parties to collective bargaining can be narrowed to a common problem; uncertainty.

To be a 'matter pertaining' a matter must have a 'direct and not merely consequential impact on the employment relationship'(3). This definition of 'matters pertaining' does not provide much guidance on what will be a permitted matter under the Act and what will fall into the category of 'non-permitted matters'. This is compounded by the approach of Fair Work to identifying 'non-permitted matters'. Fair Work only have an obligation to ensure mandatory matters are included and unlawful matters excluded from an enterprise agreement before approving it. They do not have an obligation to identify 'non-permitted matters'

Despite this, the complex case law was noted as being 'well known' by the recent Fair Work Act Review, who added that any necessary refinement could be attended to by the courts and Fair Work (4).

The result is that parties to collective bargaining who decide to include a term which may be on the cusp of meeting the 'permitted matters' requirements cannot be certain of whether the term can be enforced until its inclusion is brought to the attention of Fair Work and a ruling made. This would usually happen when the term is at the centre of a dispute regarding whether it is a permitted or non-permitted matter.

Kells expert workplace law team can provide advice to employers and employee bargaining representatives on matters that can be included as enforceable content within an enterprise bargaining agreement and matters that fall into the category of 'unlawful terms' or 'non-permitted matters'.

Avoid uncertainty; contact David Potts, Accredited Specialist in Workplace law, on (02) 4221 9311.

For more information about Kells The Lawyers, please visit or the International Society of Primerus Law Firms.


1. Forward with Fairness: Labor's Plan for Fairer and More Productive Australian Workplaces
2. Fair Work Act 2009 (Cth), s205
3. Electrolux Home Products Pty Ltd v Australian Workers Union (2004) 209 ALR 116.
4. McCalum R, Moore M & Edwards J, Towards more productive and equitable workplaces: An evaluation of the Fair Work Legislation (2012), 159.