New Model Terms for Enterprise Agreements: Key Changes for Employers

| March 25, 2025

Fair Work Commission’s Model Term Reforms Now in Effect

On 20 February 2025, the Fair Work Commission (FWC) released its long-awaited decision following a comprehensive review of model terms in Enterprise Agreements (EAs). These changes, mandated by the Closing Loopholes Act and its 2024 amendment, introduce significant legal updates that employers must be aware of.

From 26 February 2025, all new EAs must include updated model clauses relating to:

• Individual Flexibility Arrangements (IFAs)
• Consultation on Workplace Change
• Dispute Resolution
• Copied State Instruments

For any EA created after this date, these revised model terms will either need to be explicitly included or will be automatically applied if compliant versions are absent.

What Are Model Terms in Enterprise Agreements?

Model terms are standardised clauses developed by the FWC to ensure consistency and legal compliance in enterprise agreements. Their primary purpose is to safeguard employee rights and streamline employer obligations across key areas of industrial relations.

If an EA does not contain compliant terms in any of the required areas, the model term applies by default, ensuring the agreement still meets the minimum legal standard under the Fair Work Act 2009 (Cth).

Key Amendments and Their Impact

The “Closing Loopholes Act,” officially known as the Fair Work Legislation Amendment (Closing Loopholes) Act 2023, and its subsequent amendment, the Closing Loopholes No. 2 Act 2024 required the FWC to review existing model terms to enhancing protections for workers and strengthening enforcement mechanisms against non-compliance.  

Revised Model Terms 

The revised model terms detailed in the FWC’s decision issued on 20 February 2025 include: 

1. Individual Flexibility Arrangements (IFA)  

The individual flexibility arrangements (IFA) model term now requires employers to provide a written proposal before an agreement is made. If an employee has limited English skills, the employer must take reasonable steps to ensure they understand the terms. IFAs can now only be entered into after employment begins, preventing pre-employment agreements that may disadvantage employees.

Employees also have the right to request a meeting to discuss the IFA, which the employer must grant. In terms of termination, an IFA can still be ended by mutual agreement at any time, but now must have a fixed 28-day written notice period for unilateral termination, rather than the previous vague “no more than 28 days” requirement. 

2. Consultation on Workplace Change 

The consultation on workplace change model term has been revised to clarify when the duty to consult arises. Consultation is now required once a definite decision has been made about a major workplace change or changes to rosters and ordinary hours of work, rather than at the proposal stage. Employers must now provide reasons or justification for the change and must genuinely consider employee feedback before proceeding.

Employees can also nominate a representative, and employers are required to recognize their role in discussions. Additionally, employers must now communicate the outcome of the consultation process to both employees and their representatives. 

3. Dispute Resolution 

The dispute resolution model term retains the requirement that disputes should first be resolved at the workplace level before being escalated. However, employees can now advise their employer of a representative rather than formally appointing one, making the process less bureaucratic. If a dispute remains unresolved, either party can refer it to the FWC, which will act as the independent dispute resolution body, as required under Section 186(6) of the Fair Work Act 2009.

A new Clause 6 empowers the FWC to intervene early in exceptional circumstances, such as:

• Urgent or significant disputes
• Situations requiring interim relief (e.g., to prevent adverse action)
• Cases where one party delays or avoids workplace-level resolution
• Jurisdictional complexities or impracticality of resolving the matter internally

4. Copied State Instruments 

For employees transferring from a State public sector employer to a national system employer, copied State instruments sometimes lack a dispute resolution procedure. The FWC has confirmed that in such cases, the model dispute resolution clause will automatically apply. This ensures no employee is left without a pathway to resolve disputes and removes ambiguity for employers managing transitions from State to Federal systems.

What Should Employers Do Now?

With these revised model terms now in effect, employers negotiating enterprise agreements must act promptly to ensure legal compliance. Here are some recommended steps:

Review and Update Templates
Ensure all EA templates reflect the revised model terms. If you’re using existing wording, compare it against the FWC’s new clauses to confirm compliance.

Seek Legal Advice
Because non-compliance can result in the FWC refusing to approve your agreement, it is essential to seek expert guidance. A small drafting error can delay approval or lead to unintended legal obligations.

Prepare for Consultation and Training
Train HR teams and decision-makers on the new requirements—particularly those managing IFAs and employee consultations. Understanding when and how to apply the updated terms is critical to avoiding disputes and procedural errors.

Final Thoughts

The introduction of new model terms for enterprise agreements marks a notable shift in employer obligations under Australia’s evolving industrial relations framework. These changes reflect a broader policy push for greater employee protections and procedural transparency.

Employers who are well-prepared by reviewing agreements, training staff, and updating processes will avoid unnecessary risk and ensure compliance during bargaining and beyond.

At IRiQ Law, we specialise in supporting employers through enterprise agreement negotiations, ensuring every term is compliant, strategic, and fit-for-purpose. If you’re planning to commence bargaining or need support reviewing your agreements under the new model term requirements, contact us for expert legal advice tailored to your business.