What effect do awards and enterprise agreements have on the employment relationship?

Authored by Catherine Dow, Lawyer and Anthony Forsyth, Consultant, Corrs Chambers Westgarth. Updated by the LexisNexis Legal Writer team.

The Fair Work Act 2009 (Cth) (FW Act) provides for the making of "modern awards" and various types of "enterprise agreements". Collectively, awards and agreements can conveniently be referred to as “industrial instruments”.

Contracts of employment may provide for terms and conditions that are about the same topic as an applicable industrial instrument (eg concerning leave entitlements or rates of pay). They cannot, however, lawfully derogate from an employee’s entitlements under a relevant industrial instrument, although they can lawfully replicate, improve upon or aggregate such entitlements.

As a general rule, contracts of employment do not automatically incorporate terms and conditions from applicable industrial instruments. Such terms can be incorporated into an employment contract inadvertently as a consequence of clauses that have that effect due to drafting errors or intentionally through agreement.

How is an employment contract interpreted in light of an applicable award/statutory agreement?

The contract of employment of any employee to whom an industrial instrument applies will operate subject to the terms and conditions set out in that instrument. This means that it is not possible lawfully to contract on terms that are less advantageous to the employee than the terms of the relevant industrial instrument — see Visscher v Honourable President Justice Giudice.