A greenfield agreement is a type of employment contract that's becoming increasingly popular in the tech industry. It's a unique arrangement where an employer offers a employee a significant amount of equity in the company in exchange for a lower salary.
The idea behind a greenfield agreement is to give employees a stake in the company's future growth and success. This can be a win-win for both parties, as employees get to share in the company's profits and the employer gets to attract top talent.
In a greenfield agreement, the employee typically receives a lower salary, but they also get to keep a larger portion of the equity they're granted. This can be a more attractive option for employees who are willing to take on more risk and are confident in the company's potential for growth.
The amount of equity granted in a greenfield agreement can vary widely depending on the company and the employee. Some companies may offer a larger percentage of equity upfront, while others may offer more equity over time as the company grows and becomes more successful.
Discover more: Lower of Cost or Market
Agreement Basics
A Greenfield agreement is a great way to customize pay and conditions for your new employees, especially if your business has unique circumstances that can't be covered by the Modern Award.
It's essential to consider whether you need flexibility for your employees' pay and conditions, as this will determine whether a Greenfield agreement is worth the effort.
If you require flexibility, a Greenfield agreement is a good option, allowing you to tailor the terms and conditions to suit your business needs.
For another approach, see: Medigap Pre Existing Conditions
Enterprise Agreements
An enterprise agreement is a type of agreement that can be made between an employer and a union or unions representing employees.
To be eligible for an enterprise agreement, the employer must be establishing a genuine new enterprise, which can include a new business, activity, or undertaking.
The employer must not have employed any of the people necessary for the normal conduct of the enterprise before making the agreement.
A relevant union is one that is entitled to represent the industrial interests of one or more of the employees who will be covered by the agreement.
The Commission must be satisfied that the relevant union(s) will represent the industrial interests of a majority of employees before approving an enterprise agreement.
If an employer has already employed people who will be necessary for the normal conduct of the enterprise, they cannot make a greenfields agreement.
Here are the key rules for a greenfields agreement:
- The business must be a genuine new enterprise.
- No one can be officially employed to assist in the operation of the enterprise before the agreement is made.
- Work must not have gone beyond 'preparatory work' before the greenfields agreement is made.
- The association bargaining with the employer must be relevant to the industry of the business.
Requirements
To be eligible for a greenfields agreement, your business must meet the requirements of the Fair Work Act.
You must be a genuinely new enterprise, which means you can't resurrect a former business.
The enterprise must currently not employ anyone, which means employees can only start working after the commencement of the agreement. In fact, the Commission found that if a person is employed before the agreement is made, the employer cannot make a greenfields agreement.
A greenfields agreement must be made with an employee association that covers the industry that the business is in.
In addition to these requirements, your business must meet the requirements of an enterprise agreement, including terms regarding dispute resolution and an expiry date for the agreement.
On a similar theme: Epfo under Process Means
Agreement Rules
A greenfields agreement requires a genuine new enterprise, which means the business can't be one that already exists. This is a key rule under the Fair Work Act 2009 (Cth).
To qualify, the business must not have officially employed anyone to assist in its operation before the agreement is made. Employing someone before the agreement would mean the business is not a genuine new enterprise.
Preparatory work is okay, but anything beyond that would disqualify the business from a greenfields agreement. This means that if work has already started on the new enterprise, it may not meet the "genuine new enterprise" requirement.
Here are the key rules summarized:
- The business must be a genuine new enterprise.
- No one can be officially employed before the agreement is made.
- Work must not have gone beyond preparatory work.
- The association bargaining with the business must be relevant to its industry.
Notified Negotiation Period
The notified negotiation period is a crucial aspect of greenfields agreements. This period is 6 months long and starts on a specified day.
To begin the negotiation period, the employer must give written notice to each union that is a bargaining representative for the agreement. This notice must specify the start date of the negotiation period.
The specified day must be later than the day the employer gave the notice to the union, if only one union is involved. If multiple unions are bargaining representatives, the specified day must be later than the last day the employer gave notice to any of those unions.
Here's a summary of the rules for determining the specified day:
Rules of Agreement
To qualify for a greenfields agreement, a business must meet certain criteria.
A business is considered a genuine new enterprise if it's a new business, activity, or undertaking that doesn't already exist.
Employers must not have officially employed anyone to assist in the operation of the enterprise before the agreement is made.
Work cannot go beyond preparatory work before the greenfields agreement is made, or it won't satisfy the genuine new enterprise component.
The association the business is bargaining with must be relevant to the industry of the business.
For another approach, see: Greenfields (dairy Company)
Here are the specific requirements for a greenfields agreement:
- The business is a new enterprise.
- No one is officially employed to assist in the operation of the enterprise before the agreement is made.
- Work has not gone beyond preparatory work.
- The association is relevant to the industry of the business.
If a greenfields agreement has a notified negotiation period, certain provisions of the Fair Work Act don't apply after the negotiation period ends.
Fair Work Commission
The Fair Work Commission plays a crucial role in determining whether a greenfields agreement meets the requirements of the Act.
Commissioner Harper-Greenwell approved the Agreement in 2020, but the RTBU appealed the decision to the Full Bench of the FWC.
The Full Bench upheld the original decision, finding that the Agreement related to a 'genuine new enterprise'.
Justice Bromberg later found that Busways was not a 'genuine new enterprise' due to several key factors.
- The totality of the services to be provided by Busways were substantially the same as those provided by the STA.
- Most of the plant and equipment would remain owned by TfNSW, as was the case with the STA.
- The proposed workforce was essentially, if not wholly, the same as the STA.
- The change from a not-for-profit to a for-profit organisation was not an essential characteristic.
The Full Bench of the FWC also considered the definition of a 'genuine new enterprise', with Justice Snaden J finding that it requires an enterprise that is both 'genuine' and 'new'.
Frequently Asked Questions
What is a greenfield contract?
A greenfield contract is a type of agreement for a new business that hasn't yet hired employees. It's created by employers when starting a genuine new business or project.
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