The rise and demise of zombie agreements

Picture of woman signing contract

Pre-reform workplace agreements (or "zombie" agreements as they are otherwise known) are a relic of a time long since passed.

While the exact number of current zombie agreements is unknown, it is estimated that there are still hundreds, if not thousands, of these types of agreements still in existence.

Under the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) all remaining zombie agreements will automatically terminate (or "sunset") on 7 December 2023, unless an extension is granted.

The move will have significant implications for employers and employees alike. Below, we examine the history of zombie agreements, why they are so controversial and what will happen when these types of agreements are terminated.

What is a zombie agreement?

A zombie agreement is an industrial instrument (an agreement) between an employer and its employees entered into before the commencement of the Fair Work Act 2009 (Cth) (Fair Work Act).

Zombie agreements are similar to modern-day enterprise agreements but popular at a time when it was easier to have an agreement approved by the independent workplace umpire.

Often dating back decades, these types of agreements have earned the moniker "zombie" because they were made under long since repealed legislation and yet continue to have life under the Fair Work Act.

How do I know if I have a zombie agreement?

The most common types of zombie agreements are collective agreements, workplace agreements, and Australian workplace agreements (AWA) made under the Workplace Relations Act 1996 (Cth).

Indicators of whether an agreement is a zombie agreement include:

  • the name of the agreement containing the words "collective agreement" or "workplace agreement";
  • the agreement is dated 2009 or earlier; or
  • the agreement references the Workplace Relations Act 1996 (Cth), the Office of the Employment Advocate, the Workplace Authority, the Australian Industrial Relations Commission, or the Australian Fair Pay Commission.

Not all zombie agreements are publicly available, and it is often difficult to obtain records about when an agreement was approved. When the Workplace Authority was replaced by the Fair Work Commission and the Fair Work Ombudsman in 2009, its records were distributed across the two agencies, which means there is no central location for information about zombie agreements.

The Fair Work Commission has published a list of the possible zombie agreements in its database.

If you are unsure, your legal advisor can assist with confirming whether you have a zombie agreement.

Why are zombie agreements controversial?

Most zombie agreements contain terms and conditions of employment that are considered much less favourable to employees compared with modern awards and enterprise agreements.

When the Fair Work Commission is asked to approve an enterprise agreement, it must compare the terms of the proposed agreement with the modern award that would otherwise apply to the employee. This is to ensure that the employee is better off overall under the enterprise agreement.

This is a point-in-time assessment, meaning that once the Fair Work Commission has approved an enterprise agreement, it does not need to be continuously updated to reflect any changes to modern awards. The same is true of zombie agreements.

A modern award is another type of industrial instrument that provides the minimum terms and conditions of employment for most employees in Australia. These include:

  • rates of pay,
  • penalty rates,
  • overtime rates,
  • allowances, and
  • rostering requirements.

Disadvantages of zombie agreements

Modern awards are continuously updated to reflect contemporary attitudes and standards. Conversely, zombie agreements are not updated. Therefore the older a zombie agreement is, the less likely it reflects modern day expectations about employment conditions.

It is not uncommon, for example, for zombie agreements to include:

  • low or no penalty and overtime rates,
  • lower rates for casual loading, and
  • no requirement to consult about major workplace changes.

It would be practically impossible for an enterprise agreement to be approved in 2022 that did not contain these requirements.

Does this mean employees covered by a zombie agreement are being underpaid?

No. Zombie agreements, like enterprise agreements, remain in force until they are terminated or replaced by a new agreement.

The Fair Work Act (and its subordinate legislation) contains minimal safety nets for zombie agreements. The "base rate of pay" in a zombie agreement must not fall below the base rate of pay in the modern award that would otherwise apply to the employee.

However, the base rate of pay is calculated without reference to any penalty rates, overtime rates, or allowances, which is the reason that even though the base rate of pay may be the same, employees covered by zombie agreements are usually (but not always) remunerated at lower rates than their modern award-covered counterparts.

While this no doubt creates issues of fairness, as far as the law is concerned, zombie agreements pass muster. Even though no longer popular, they remain in use until 7 December 2023 (unless extended).

What will happen to zombie agreements in the future?

Under the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth), all zombie agreements will automatically terminate on 7 December 2023. The Act provides a mechanism for employers to apply to the Fair Work Commission to seek an extension of the termination for up to four years.

This means that employers and employees still covered by those agreements will automatically revert to being covered by a modern award. For employers who have never been covered by a modern award, this will represent a significant change to their employment arrangements.

What should I do if I have a zombie agreement?

You must let your employees who are still covered by a zombie agreement know that the agreement will automatically terminate on 7 December 2023 unless an extension is granted.

This notification must be provided in writing before 7 June 2023.

You do not need to provide a similar notification to new employees who commence after 7 June 2023, and the zombie agreement will still apply to their employment until 7 December 2023.

On 7 December 2023, the modern award (or awards) which covers your business will automatically replace the zombie agreement without any further action from you. You will not be sent any formal notification of this occurring.

These modern awards often contain very different requirements, and some require employees to be notified of things like their classification level, and days and hours of work.

For this reason, it is critically important that you understand the requirements of the modern award.

It is also necessary to assign each employee a classification level under the modern award which aligns with their role.

Your legal advisor can assist you with determining which modern award will apply to your business, the differences between a zombie agreement and the modern award, and how to classify employees.

Where can I find more information about zombie agreements?

Because zombie agreements are mostly unique, there are very few resources available to assist employers to understand their legal obligations.

Lander & Rogers has expertise in helping employers understand and comply with industrial instruments, and to assist with long-term industrial relations strategic planning.

For advice and assistance, contact a member of our Workplace Relations & Safety team.

Image by Romain Dancre on Unsplash.

All information on this site is of a general nature only and is not intended to be relied upon as, nor to be a substitute for, specific legal professional advice. No responsibility for the loss occasioned to any person acting on or refraining from action as a result of any material published can be accepted.

Key contacts

Calum Woods

Senior Associate