Fines of up to $82,500 threaten employers in a dramatic industrial instrument clean-up. With the mandated sunsetting of zombie agreements on 7 Dec 2023, the Albanese government is showing it is serious about modernising all Australian workplaces.

A zombie agreement can be an agreement that was made collectively (e.g. an Enterprise Agreement) or individually employee (e.g. an Australian Workplace Agreement), before modern awards commenced on 1 January 2010.

Zombie agreements have a bad reputation amongst both industry and employee advocates, as they can result in employees being “ripped off”. Penalties, loadings and overtime rates in modern awards do not have to be paid to employees covered by a zombie agreement, so in some cases zombie agreements have seen employees being paid less than an applicable modern award.

With recent changes to IR laws, zombie agreements will automatically terminate on 7 December 2023 (unless an extension is granted by the Fair Work Commission). Without a new enterprise agreement being bargained before the zombie agreement is terminated, employee terms and conditions will automatically be governed by the applicable modern award.

What must employers 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 granted; 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 fines of up to $82,500 per breach.

What should employers do?

Employers should first review all current collective and individual agreements and establish whether there are any zombie agreements in their industrial instrument portfolio.

An employer covered by a zombie agreement should then consider the applicable modern awards and undertake a gap analysis of terms and conditions, as well as assess against operational and business requirements. This will then enable the employer to make a strategic decision as to the best course of action, including whether to apply for an extension, commence enterprise bargaining, or reverting to the award.

For further advice or strategic assistance with zombie agreements, enterprise bargaining or strategic industrial relations, please contact us today!