Awards, enterprise agreements and dispute resolution (VCE Business Management Unit 3)
“Workplace relations under the Fair Work Act 2009 - the National Employment Standards, modern awards, enterprise agreements, and the role of the Fair Work Commission - and methods of dispute resolution including negotiation, mediation, conciliation and arbitration”
Australian workplace relations run under the Fair Work Act 2009. The safety net has three layers - the National Employment Standards (ten minimum entitlements that cannot be reduced), modern awards (industry-wide minimums made by the Fair Work Commission), and enterprise agreements (workplace-level deals that must pass the better-off-overall test against the award). The Fair Work Commission makes awards, sets the minimum wage, approves agreements and resolves disputes. The four dispute-resolution methods escalate from negotiation (parties decide) through mediation and conciliation (a third party assists) to arbitration (a binding imposed decision). Resolve disputes at the lowest level that protects the relationship, reserving arbitration for deadlock.
Jump to a section
What this dot point is asking
VCAA wants you to know the Australian workplace-relations framework under the Fair Work Act 2009 - the National Employment Standards, modern awards, enterprise agreements and the role of the Fair Work Commission - and the four methods of resolving workplace disputes (negotiation, mediation, conciliation, arbitration). Section A questions commonly test the award-versus-agreement distinction or a single dispute-resolution method; Section B case studies often require you to advise a scenario business on how a pay or conditions dispute should be resolved.
The answer
The Fair Work Act 2009 framework
Australia's national workplace-relations system is governed by the Fair Work Act 2009 (Cth). It establishes a single national system for most private-sector employees and sets out the safety net, the instruments and the institutions.
The safety net has three layers, from the floor up.
- National Employment Standards (NES). Ten minimum entitlements that apply to all national-system employees and cannot be reduced - including maximum weekly hours, leave (annual, personal/carer's, parental, long service via state law), public holidays, notice of termination and redundancy pay, and the right to request flexible work.
- Modern awards. Industry- or occupation-wide minimums that sit above the NES.
- Enterprise agreements. Workplace-level agreements that sit above the relevant award.
Modern awards
A modern award is a legal instrument that sets minimum pay rates and conditions (ordinary hours, penalty and overtime rates, allowances, leave loadings, classifications) for an entire industry or occupation. Awards are made and varied by the Fair Work Commission.
Examples: the General Retail Industry Award covers most retail employees; the Hospitality Industry (General) Award covers cafes, restaurants and hotels.
An award applies where there is no enterprise agreement in place. It is the minimum safety net for that sector.
Enterprise agreements
An enterprise agreement is a collective agreement negotiated at the workplace level between an employer and its employees (frequently with union representation) that sets terms tailored to that business. Once approved, it replaces the relevant award for the covered employees.
Key features.
- Better-off-overall test (BOOT). Before approving an agreement, the Fair Work Commission must be satisfied that each covered employee is better off overall than they would be under the relevant award. An agreement can trade some conditions for others but cannot leave employees worse off overall.
- Bargaining in good faith. The parties must bargain genuinely (meeting, sharing information, considering proposals), though they are not forced to reach agreement.
- Approval and lifespan. Employees vote to approve; the Commission then formally approves. Agreements have a nominal expiry (commonly up to four years) after which they are renegotiated.
Example: Woolworths and Coles each operate large enterprise agreements (negotiated with the SDA) covering their store workforces, providing conditions tailored above the General Retail Industry Award.
The role of the Fair Work Commission
The Fair Work Commission is the national workplace-relations tribunal. Its roles.
- Makes and varies modern awards.
- Sets the national minimum wage through its annual wage review.
- Approves enterprise agreements, applying the better-off-overall test.
- Resolves disputes referred to it (including through conciliation and, where empowered, arbitration).
- Hears unfair-dismissal and general-protections claims.
Methods of dispute resolution
Workplace disputes (over pay, conditions, rosters, restructure) can be resolved through four escalating methods.
| Method | Who decides | Binding | When appropriate |
|---|---|---|---|
| Negotiation | The parties themselves | Only if they agree | First step; relationship intact; issue not entrenched |
| Mediation | The parties, helped by a neutral facilitator | Only if they agree | Communication has broken down but positions are not fixed |
| Conciliation | The parties, helped by a third party who advises and suggests solutions | Only if they agree | A more active third party is needed; common at the Fair Work Commission |
| Arbitration | An independent arbitrator (often the Commission) | Yes, binding | The parties cannot agree and a final decision is needed |
The methods escalate. Negotiation keeps full control with the parties; arbitration removes it entirely by imposing a binding outcome. Mediation and conciliation sit in between - a third party assists, but the parties retain the decision unless they agree to a settlement.
The test the Fair Work Commission applies before approving an enterprise agreement. Each covered employee must be better off overall under the agreement than under the relevant modern award. It allows trade-offs between conditions but prevents an agreement from leaving employees worse off in total.
"A large Australian retailer is renegotiating its enterprise agreement, and the union and employer cannot agree on penalty rates. Recommend how the dispute should be approached. (8 marks)"
Plan. Walk the escalation from negotiation to arbitration, applying the framework.
Context. The retailer operates under an enterprise agreement negotiated with the SDA that sits above the General Retail Industry Award. The dispute is over penalty rates - a core condition affecting take-home pay.
Step 1 - negotiation. The parties should first negotiate directly and in good faith, sharing data (the business's cost position, the employees' cost-of-living pressure) and seeking a package that passes the better-off-overall test against the award.
Step 2 - mediation or conciliation. If direct negotiation stalls, a neutral third party (often the Fair Work Commission acting in a conciliation role) can help the parties communicate and propose options without imposing a decision. This preserves the ongoing relationship the business depends on.
Step 3 - arbitration as a last resort. If conciliation fails and the dispute is intractable, the matter may be arbitrated, with the Commission making a binding decision. Arbitration guarantees a resolution but removes control from both parties and can damage the relationship.
Evaluation. The escalating approach protects the relationship for as long as possible (negotiation and conciliation), reserving binding arbitration for genuine deadlock. Any agreement reached must still satisfy the better-off-overall test before the Commission will approve it.
Verdict. Recommend negotiation first, conciliation through the Fair Work Commission if needed, and arbitration only as a last resort - the sequence that resolves the dispute at the lowest cost to the ongoing employment relationship.
- Confusing awards and enterprise agreements
- An award is an industry-wide minimum set by the Commission; an enterprise agreement is a workplace-level deal negotiated by the parties that must leave employees better off overall.
- Forgetting the National Employment Standards floor
- The NES applies to all national-system employees and cannot be reduced by an award or agreement.
- Treating mediation and arbitration as the same
- Mediation is non-binding facilitation; arbitration is a binding imposed decision. Conciliation sits between - a third party advises and suggests but does not decide.
- Saying the Fair Work Commission "sets all wages"
- It sets the national minimum wage and makes awards, but enterprise agreements are negotiated by the parties and only approved by the Commission.
- Skipping the better-off-overall test
- It is the key safeguard the Commission applies to enterprise agreements.
Examples in context
Example 1. Enterprise agreement bargaining (Woolworths and the SDA). Woolworths negotiates a large enterprise agreement with the Shop, Distributive and Allied Employees Association covering its store workforce. The agreement provides pay and conditions tailored above the General Retail Industry Award, and must satisfy the Fair Work Commission's better-off-overall test before approval. It illustrates collective workplace-level bargaining sitting above the award safety net.
Example 2. Conciliation and arbitration at the Fair Work Commission. When workplace disputes (over restructure, rosters or pay) cannot be resolved directly, parties frequently use the Fair Work Commission's conciliation process, where a member helps them reach agreement. Where conciliation fails and the Commission is empowered to do so, the matter can proceed to arbitration with a binding decision. Major airline and logistics disputes have followed this escalation path.
Try this
Q1. Distinguish between a modern award and an enterprise agreement. [2 marks]
- Cue. An award is an industry-wide minimum set by the Fair Work Commission; an enterprise agreement is a workplace-level deal negotiated by the parties that must leave employees better off overall than the award.
Q2. Explain the role of the Fair Work Commission in the workplace-relations system. [3 marks]
- Cue. Makes and varies modern awards, sets the national minimum wage, approves enterprise agreements (applying the better-off-overall test), and resolves disputes through conciliation and arbitration.
Q3. Compare mediation and arbitration as methods of resolving a workplace dispute, and recommend when each is appropriate. [4 marks]
- Cue. Mediation is non-binding facilitation that keeps the decision with the parties and protects the relationship; arbitration is a binding imposed decision that guarantees a resolution but removes control. Use mediation while a settlement is possible; reserve arbitration for genuine deadlock.
Exam-style questions
Questions in the style of VCAA exam questions on this dot point, each with a worked answer. They are written by ExamExplained unless tagged "Past paper"; the year shows the paper a question is modelled on.
Practice6 marksDistinguish between a modern award and an enterprise agreement. Explain the role of the Fair Work Commission in relation to each.Show worked answer →
A 6-mark answer needs both instruments, the distinction, and the Fair Work Commission's role.
- Modern award
- An industry- or occupation-wide legal instrument setting minimum pay rates and conditions (hours, penalty rates, allowances, leave loadings) for employees in that sector. Awards are made and varied by the Fair Work Commission and sit above the National Employment Standards as the safety net. Examples: the General Retail Industry Award, the Hospitality Industry Award.
- Enterprise agreement
- A collective agreement negotiated at the workplace level between an employer and its employees (often with union involvement) that sets terms tailored to that business. It replaces the relevant award for those employees but must leave them better off overall than the award.
- The distinction
- An award is an industry-wide minimum safety net set by the Commission; an enterprise agreement is a workplace-level deal negotiated by the parties. Agreements can provide more than the award but never less overall.
- Role of the Fair Work Commission
- The Commission makes and varies modern awards, approves enterprise agreements (applying the better-off-overall test against the relevant award), sets the national minimum wage through its annual review, and resolves disputes. Markers reward the clear award-v-agreement distinction, the better-off-overall test, and the Commission's making/approval/dispute roles.
Practice5 marksCompare two methods of dispute resolution a business could use to resolve a workplace conflict.Show worked answer →
A 5-mark answer needs two methods, the contrast and an evaluation.
- Mediation
- An independent third party (the mediator) helps the disputing parties communicate and reach their own agreement. The mediator facilitates but does not decide. Non-binding unless the parties agree to a settlement. Preserves the relationship and keeps control with the parties.
- Arbitration
- An independent third party (the arbitrator, often the Fair Work Commission in workplace matters) hears both sides and makes a binding decision the parties must follow. Faster to a final outcome where the parties cannot agree, but removes control from them and can damage the relationship.
- The comparison
- Mediation keeps the decision with the parties and protects the relationship but may not resolve the dispute if positions are entrenched. Arbitration guarantees a resolution but is imposed, binding and can harm the ongoing relationship. Negotiation (direct, between the parties) and conciliation (a third party who advises and suggests but does not decide) sit between them.
Markers reward (1) two methods defined, (2) the binding-v-non-binding and control contrast, (3) an evaluation of when each is appropriate.