DECEMBER 2008:

• Introduction
• Centralised Administration
• Minimum Entitlements of Employment
• Modern Awards
• Collective Bargaining
• Transmission of Business
• Unfair Dismissal
• Workplace Rights and Responsibilities
• Conclusion

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Introduction

It has been 12 months in the making but the Rudd Government has now presented its Fair Work Bill (Bill) containing the election promise to re-write the workplace relations landscape. There are not many surprises in the Bill and employers will be aware from previous bulletins of the primary features and changes.

The Bill, upon commencement, will repeal the Workplace Relations Act 1996 (Act) and become the Fair Work Act.

The Bill is significantly simpler, smaller and easier to follow than WorkChoices. However, as the legislation has been rewritten from scratch, there are a myriad of new terms, concepts and acronyms which will now become part of the vernacular. We have covered the major ones in the following summary.

Principally, this Bill sets up the basic structures of Labor’s new system: Fair Work Australia, the National Employment Standard and Modern Awards. Most of the other provisions largely reflect the law as it currently stands with some minor amendments. There has been a lot of media attention on the good faith bargaining provisions and union right of entry, but these provisions reflect the way the law stood from 1988 to 2006 so there is certianly nothing radical or unexpected in their drafting.

The best news is that employers have over 12 months to digest the changes before the majority of the provisions start to operate. The Bill will be examined by a Senate Enquiry and is expected to be passed through Parliament (provided it garners the support of the Independent Senators) in March 2009.

 

 

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Centralised Administration

The Bill creates a central empire, Fair Work Australia (FWA), for ensuring compliance with provisions of the Bill once they come into operation and for dealing with disputes and advice. 

FWA will be separated into a number of divisions and will perform a myriad of functions which are currently undertaken by the Australian Industrial Relations Commission (AIRC), the Workplace Authority, the ABCC and the Workplace Ombudsman among others.  These functions will include dealing with inspection and compliance, advisory services, unfair dismissal claims, disputes, modern awards and the approval and registration of enterprise agreements.

There will be a Fair Work Ombudsman to whom employees will be able to make complaints in relation to wages and conditions.  The powers of the inspectors of the Ombudsman’s office will be increased under the Bill. Inspectors will have the power to issue Compliance Notices (instead of Breach Notices) which, once issued, will only be reviewable by a court.

When suspected breaches are brought to an employer’s attention by the inspectors, employers have the option to make written undertakings which if not complied with can be enforced by court order.

FWA will also be designed to work as an advisory service to both employers and employees to assist them in understanding their rights, entitlements and obligations under the law and in particular the National Employment Standards.

It will also have an arm which will in many respects mirror the current role played by the AIRC. This arm will mediate and arbitrate on unfair dismissal claims, industrial disputes and other applications available under the Bill.

FWA will have the discretion to decide whether lawyers and paid agents have standing to make applications and submissions on behalf of employers and employees in relation to any matter. When deciding whether permission is given, FWA will have regard to whether the involvement of lawyers and paid agents would enable the matter to be dealt with more efficiently, taking into account the complexity of the matter and fairness to the persons involved.

 

 

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Minimum Entitlements of Employment

National Employment Standards

The National Employment Standards are due to commence operation on 1 January 2010.

1. Maximum Weekly Hours:
   
   Authorised leave and absence will be treated as hours worked.  The maximum remains at 38 hours per week plus reasonable additional hours.  In calculating the average hours of work for award/agreement free employees, the hours may be averaged over 26 weeks (compared to the current 52 weeks).
2. Requests for Flexible Working Arrangements:
   
   Parents who had the responsibility for the care of a child under school age, who have completed 12 months continuous service, may make a written request for flexible working arrangements.
   
   The employer must respond to the request within 21 days, and may refuse the request only on reasonable business grounds (providing reasons). Disputes about this matter may be referred to FWA for advice and assistance.
3. Parental Leave and Related Entitlements:
   
   Like the provisions under the current Act, employees will be entitled to 12 months unpaid parental leave, however the Bill permits employees to request an extension of their unpaid parental leave for up to 12 months, potentially doubling the current entitlement.
   
   The Bill also introduces concepts of: a “safe job”, which a pregnant female employee may request to be transferred to, and where no safe job exists, the employee will be entitled to “paid no safe job leave”, and also the ”employee couple” who may take up to 24 months’ parental leave (aggregated between them).
4. Annual Leave:
   
   The current entitlement to four weeks of paid annual leave remains, with shift workers being entitled to five weeks paid annual leave.
   
   The Bill permits all employees to cash out annual leave, with agreement with their employer, provided they retain four weeks of annual leave entitlement after the cashing out. This replaces the requirement for such a request to be contained in a Workplace Agreement.
5. Personal/Carer’s Leave and Compassionate Leave:
   
   Paid personal/carer’s leave may be cashed out provided there is a term in a modern award or enterprise agreement applicable to the employee which permits the cashing out, and provided that 15 days of paid leave remains after the cashing out.
6. Community Service Leave:
   
   This includes jury service and voluntary emergency services.
   
   An employee who is on jury service is entitled to be paid by their employer their base rate of pay for their ordinary hours worked, for the first 10 days of absence.
7. Long Service Leave:
   
   The Bill preserves the status quo in relation to long service leave, by drawing on current state and territory legislation and awards and agreements.  The Bill’s explanatory memoranda states that the Government is working with state and territory governments to develop nationally consistent long service leave entitlements, to be contained in the NES.
8. Public holidays.
   
   Employers may make reasonable requests for employees to work on public holidays.
9. Notice of Termination and Redundancy Pay:
   
   The Bill includes an entitlement to redundancy pay that is in accordance with the entitlements currently found in Federal awards.
   
   Redundancy pay may not be payable if the employer obtains “other acceptable employment” for the employee or cannot pay the amount, in which case the employer can apply to FWA to pay a lower amount of redundancy pay (which may be nil) that FWA considers appropriate.
10. Fair Work Information Statement:
    
    The statement will be published by FWA and will contain information regarding the NES, modern awards, agreement making, freedom of association, the role of FWA, and the role of the Fair Work Ombudsman.
    
    The Fair Work Information Statement must be provided to each employee as soon as practicable after the employee starts employment.
11. Miscellaneous
    
    The Bill states that an employee is not entitled to take or accrue any leave whilst the employee is absent from work receiving workers’ compensation benefits, unless the relevant workers’ compensation legislation permits the worker to do so.

 

 

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Modern Awards

Once established by the AIRC, FWA will have the power to make, vary and revoke modern awards.

A modern award will cover employees, employers and organisations if the award is expressed to cover them. A modern award or enterprise agreement must not exclude the NES, however they may include terms that are incidental to the operation of the NES or that supplement the NES, but only if they are not detrimental to an employee in any respect when compared to the NES.

A modern award will not apply to an employee if there is an enterprise agreement that also applies to the employee.

Modern awards must contain a “flexibility term” to enable employers and employees to agree on arrangements to vary the effect of the award in order to meet the genuine needs of their specific employment relationship.

In addition, Modern awards will not apply to those employees earning over $100,000 per annum.  This remuneration cap will be calculated by using a "guarantee of annual earnings".  A high income earner will be defined in the Regulations, but it is proposed that the amount will be $100,000 subject to indexation from 27 August 2007.

The earnings used to calculate this amount do not include:

• payments which cannot be determined in advance (some examples are: commissions, incentive based payments and bonuses and overtime, unless the payment is guaranteed), and
• compulsory superannuation contributions.

To satisfy the requirements of the legislation the guarantee will need to be in writing and agreed to by the employee within 14 days of an employee commencing employment and the employer will be required to notify the employee in writing that a modern award will not apply to them.
The Award Modernisation process is currently being undertaken by the AIRC on an industry by industry basis and for those who may be interested, some draft modern awards are available on the AIRC website.

 

 

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Collective Bargaining

Introduction of good faith bargaining

The Bill will require employers to inform employees of their right to be represented at the commencement of bargaining.  If a majority of the employees wish to collectively bargain, an employer will be required to bargain with them and their representative (usually a Union).

During agreement making where representatives are failing to bargain in good faith, FWA will be empowered to make orders, however such orders will not force bargaining representatives to make concessions or sign up to an agreement. 

FWA will have the power to make workplace determinations if it believes there have been serious and sustained breaches of bargaining orders and those breaches have seriously undermined bargaining for the agreement.

Less regulation regarding the content of agreements

The matters that can be included in an agreement is expanded to include:

• matters pertaining to the relationship between the employer(s) and employees to be covered by the agreement;
• matters pertaining to the relationship between the employer(s) and employee organisation(s) to be covered by the agreement;
• deductions from salary for any purpose authorised by the employees who will be covered by the agreement (e.g. salary sacrifice, union fees);
• how the agreement will operate.

There is no concept of ‘prohibited content’ in the Bill.  As long as a matter meets the content rule then it can be included in an agreement.

Enterprise agreements will be required to include an individual flexibility arrangement and consultation clause where major change is considered.

To approve an agreement FWA must be satisfied it includes a procedure that requires FWA or another person independent from all parties to the agreement to settle disputes about any matter in the agreement.

Agreements will have a notional expiry date of no later than four years after the date of operation. 

The creation of a single stream of agreement making

Under the Bill there will be no distinction between union and non-union agreements.

A union who represents workers and was the bargaining representative for a proposed agreement may notify FWA in writing it wants to be covered by the agreement.  When a union is covered it will be able to enforce the terms of the agreement.

Greenfield agreements can still be made, however a union or unions (that is eligible to represent the workers) must be a party.

A streamlined process for the approval of agreements

Under the Bill all enterprise agreements must be lodged with FWA for approval before the commence operation, and will commence operation 7 days after it is approved.  FWA will ensure that:

• there is genuine agreement;
• the group of employees covered by the agreement was fairly chosen;
• the agreement passes the ‘Better Off Overall Test’ (BOOT);
• the agreement contains a nominal expiry date and dispute settlement clause;
• no terms of the agreement contravene the NES; and
• the agreement does not contain unlawful content.

FWA will apply the BOOT to ensure that each employee covered by the agreement is better off overall in comparison to the relevant modern award.

The introduction of FWA facilitated bargaining for the low paid

Under the Bill, FWA will be able to facilitate multiple employer bargaining for low paid employees.

 

 

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Transmission of Business

The Transmission of Business rules are some of the most surprising in the new Bill.

Currently, upon a “transmission of business”, workplace agreements and other arrangements transmit for 12 months to the new employer.  The most significant change is that pursuant to the Bill, these agreements and arrangements will transfer from the old employer to the new employer and apply for an indefinite period of time.

For the purposes of the Bill, a “transfer of business” occurs when a worker’s employment is terminated by the old employer, and the worker becomes employed by the new employer within 3 months, to do the same or substantially the same job and:

1. some of the assets of the old employer (or old employer’s associated entity) transfer to the new employer (or new employer’s associated entity) that are used in connection with the transferring work; or
2. the old employer outsources work to the new employer; or
3. the new employer ceases to outsource work to the old employer and instead hires the transferring employees directly; or
4. the new employer is an associated entity of the old employer.

Enterprise agreements that have been approved by FWA, workplace determinations and modern awards that cover a named employer are all “transferable instruments” for the purposes of the Bill.  After a transfer occurs the new employer and the transferring employees will be bound by the transferable instrument.

Transferable instruments may also apply to a new employee of the new employer who commences after the transfer.

FWA has the power to vary transferable instruments and make orders that they not apply to new employers.

New employers must also honour guaranteed annual earnings of high income employees.  This includes, where an employee is entitled to non-monetary benefits under an annual earnings guarantee provided by his or her old employer, and it is not practicable for the new employer to provide those benefits, then the employee will be entitled to the monetary equivalent of the agreed value of those benefits.

These new transfer of business provisions are set to have profound effect on many business sale agreements, as well as on large businesses who have numerous employing entities and who currently transfer employees between these entities without having to give regard to transmission of business provisions.

 

 

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Unfair Dismissal

The Bill has maintained the same features contained in the current Act regarding what is considered unfair dismissal, however a ‘genuine redundancy’ provision in the Bill has replaced the ‘operational reasons’ exemption in the Act.

A person is unfairly dismissed if FWA is satisfied that a person has been dismissed; the dismissal was harsh, unjust or unreasonable; the dismissal was not consistent with the Small Business Code and was not a case of genuine redundancy.

When considering whether a dismissal has been harsh, unjust or unreasonable, the Bill provides an additional factor to consider, and that is, whether or not there was an unreasonable refusal by the employer to allow the employee to have a support person present.

The unfair dismissal provisions are intended to come into force on 1 July 2009.
Protection from unfair dismissal will apply to:

• employees who have been employed for more than 12 months if employed by a small business employer;
• employees who have been employed for more than 6 months with an employer who is not a small business employer; and
• an employee who earns less than the high income threshold (initially $100.000).

Small Business:

• The Bill has abolished the 100 employees exemption contained in the Act
• The Bill establishes a ‘Small Business Dismissal Code’ which is to apply to businesses with less than 15 employees. The Code sets out circumstances when summary dismissal is justified and provides a checklist for employers to follow to ensure the dismissal is fair to both employees and employers.

Role of FWA in unfair dismissal applications:

• Bill requires that an application for unfair dismissal must be made, except in exceptional circumstances, within 7 days after the dismissal took effect.
• A lawyer or paid agent can appear only with the permission of FWA.
• The Bill prescribes that FWA must not grant permission to appeal a decision unless FWA considers it is in the public interest to do so.
• FWA can also grant an appeal on the grounds that there has been a significant error of fact.

Instances where unfair dismissal provisions will not be available to employees:

• the employee was employed for less than 12 months by a small business employer;
• the employee was employed for less than 6 months where the employer employed more than 15 employees;
• where the employee earns more than the high income threshold and they are not covered by an enterprise agreement or a modern award; and
• in the case of genuine redundancy.

 

 

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Workplace Rights and Responsibilities

In relation to rights and responsibilities, the Bill mirrors much of the current legislation but there are some important changes.

One of the most important new provisions relates to a general protection against what is called adverse action. 

Adverse action on the part of an employer includes dismissing an employee, altering the position of an employee, injuring the employee in his/her employment or discriminating against an employee.

Employers, employees or unions, must not take adverse action against another person because that other person has a workplace right, or proposes to exercise a workplace right. 

Secondly, a person must not take adverse action against another person (the second person) because a third person has exercised or proposes to exercise a workplace right for the second person’s benefit, or for the benefit of a class of persons to which the second person belongs.  A workplace right includes the following:

1. the entitlement to or the benefit of a role or responsibility under a workplace law, workplace instrument or order made by an industrial body; or
2. the ability to initiate or participate in a process of proceedings under a workplace law or workplace instrument; or
3. the ability to make a complaint or enquiry to:
   
   
   1. a person or body having the capacity under a workplace law to seek compliance with that law or a workplace instrument; or
   2. if the person is an employee in relation to his or her employment. 

For example, such workplace rights could be asserted through:

1. conferences conducted by the FWA;
2. court proceedings;
3. protected industrial action;
4. making, varying or terminating an enterprise agreement;
5. agreeing to cash out paid annual leave;
6. making a request for flexible working arrangements, or
7. any other proceedings dealing with workplace law. 

This is a very broad new avenue for relief available to employees and is also extended to prospective employees.  A prospective employee is taken to have the workplace rights he or she would have had if he or she were already employed.  

The protection against adverse action also applies to independent contactors.  A principal who has entered into a contract for services with an independent contractor cannot terminate the contract or injure, alter or prejudice the position of the independent contractor because that person has asserted a workplace right.  This has important consequences for industries such as construction and transport where there are large numbers of independent contractors. 

Another new concept is the prohibition against exercising undue influence or pressure.  The Bill prohibits an employer exerting undue influence or undue pressure on an employee in relation to decisions affecting their terms and conditions of employment.  Similarly, the Bill makes it unlawful to make a misrepresentation about the workplace rights of another person or the exercise or the effect of an exercise of a workplace right by another person.  This includes representations that are knowingly or recklessly made. 

For all applications involving adverse action the onus of proof will be reversed and the party against whom the allegation is made will have to prove that the reason for the action did not include one of the reasons creating the unlawful grounds. 

Independent Contractors

The Bill contains a division dealing with sham arrangements in relation to independent contractors.    Currently, this is dealt with largely by the Independent Contractors Act 2006.  The Bill appears to cover the types of arrangements already outlawed by that Act.  For example, it will be an offence to misrepresent employment as an independent contracting arrangement.  It will also be an offence to make misrepresentations to independent contractors in order to entice an individual to enter the contract for services.  Given these are civil penalty provisions employers will need to take extra care when designing independent contracting arrangements.

Industrial relations

There is a lot more detail in the Bill than currently exists regarding the industrial activities of unions and workers.  There is a general prohibition protecting an employee’s freedom of association but there is also an expanded definition of what it means to engage in industrial activity.  Employers are prohibited from taking adverse action against employees for engaging in this activity. 

Industrial activity includes:

1. being a member of a union;
2. establishing a union;
3. organising or promoting lawful activities for or on behalf of a union;
4. encouraging or participating in lawful activities on behalf of a union;
5. complying with a lawful request made by a union;
6. representing or advancing the views, claims or interests of a union; or
7. seeking to be represented. 

In addition, industrial activity for which an employer is not able to take adverse action against an employee also includes when employees take part in unlawful activities organised by industrial associations, or complies with unlawful requests made by a union or takes part in industrial action.  As is currently the case, parties are prohibited from coercing people to organise or to take action, be involved in industrial activity, or make misrepresentations about a person’s obligation to engage in industrial activity.

The Bill also reflects the general prohibition against the discrimination of people on certain grounds.  It includes the exception of when action is taken because of the inherent requirements of a particular position.  It will also be unlawful to take adverse action against an employee because of their temporary absence from work because of illness or injury.  Currently this protection only exists on termination of employment or through the anti-discrimination legislation. 

Industrial Action

While the proposed provisions do not differ greatly from those contained in the current legislation, there are some new terms that we will need to get used to. 

Employee claim action is industrial action for a proposed enterprise agreement that is being taken for the purpose of supporting or advancing claims in relation to the agreement.  In order to take industrial action in these circumstances employees will still need to apply for a secret ballot from FWA and be successful in obtaining a vote in favour of taking industrial action. 

Further, industrial action must not be taken in support of pattern bargaining.  However, the Bill does give unions and employers significant flexibility when it comes to this area.  For example, the exception to a prohibition on pattern bargaining is that it will not be pattern bargaining if the union is genuinely trying to reach an agreement with that employer.  For the purposes of determining what is “genuine” the Bill looks at whether the union is demonstrating a preparedness to bargain taking into account the individual circumstances of the employer.  The Bill also inserts a requirement for parties to generally try and reach an agreement.  This must occur before any protected industrial action is proposed.  Once a secret ballot has been successfully held, as is currently the case, unions will be required to give an employer three working days notice of the intention to take industrial action. 

The Bill also introduces the concept of employer response action and employee response action.  Employee response action is action that is organised or engaged in response to industrial action by an employer such as a lockout.  Employer response action means action that is engaged or organised by an employer as a response to industrial action taken by employees.  If an employer engages in employer response action, the employer may refuse to make payments to the employees for the period of the action.

As now, it will be unlawful to take industrial action before the nominal expiry date of an enterprise agreement.  If the union or employees do engage in industrial action prior to the nominal expiry date of an enterprise agreement, the employer or any other affected person may make an application to the Federal Court or Federal Magistrates Court to either grant an injunction or to make any other orders available under the Act. 

FWA will also have a similar power to that currently exercised by the AIRC and must make an order to stop unlawful industrial action if it appears that it is happening, threatened or being organised.  This provision is in almost identical terms to the current Section 496 orders.  In addition, FWA is also able to order industrial action by non-national system employees to stop.  This means that FWA can exercise jurisdiction over those workers not currently covered by the national system.  Contravening such an order is a civil penalty provision, and it appears there is no barrier to an employer going directly to the Court in order to obtain an injunction. 

The Bill introduces the concept of a partial work ban that may be engaged in by employees, and clearly details the very restricted circumstances in which an employer may deduct wages from an employee for participating in a partial work ban.  As with the current legislation, a minimum four hour deduction of wages for unlawful industrial action will still apply.  This means that it is mandatory to deduct four hours pay from employee’s pay when they take industrial action which is less than four hours in duration. 

Right of Entry

While there has been a lot of discussion of the right of entry provisions in the Bill, for most employers there will be very little change.  The proposed right of entry provisions largely reflect those that already exist under the law.  That is, union officials will be able to enter premises in one of three circumstances.  Firstly, to hold discussions, secondly, to inspect documents where a breach is suspected, and thirdly for OH&S purposes. 

The right of entry to inspect suspected breaches of the law or industrial instruments, only applies where that union official has a member within the workplace whose industrial interest the union is entitled to represent.  The union official must give 24 hours notice in writing and must reasonably suspect that the employer has breached legislation or a provision of an enterprise agreement or award.  While investigating the suspected contravention, the union official may require the employer to produce documents for inspection that are relevant to the contravention and are kept on the premises or are accessible by computer.  Currently, this only applies to members of the union which the official is representing.  While the union official in question must have a union member at the workplace, the right of inspection of documents have been extended to non-members as well. 

The second type of right of entry, to enter and hold discussions with employees has been extended to workplaces where a union official may have no members.  A union official may enter premises to hold discussions with people who perform work on the premises whose interest the union is entitled to represent and to wish to participate in those discussions.  As with the previous type of entry, a union official will have to give at least 24 hours notice of their intention to enter.  Further, if requested they must produce their right of entry permit for inspection by the occupier or the employer. 

The Bill also contains detail about where the discussions between union members and union officials may be held to better clarify the parties’ positions with respect to what is reasonable and what is not.  For example, an employer cannot require a union official coming in to hold discussions in a room or area which is not fit for the purpose of conducting interviews or holding discussions. 

The final type of right of entry is that for occupational health and safety purposes.  As with the current legislation, the Bill leaves the regulation of this right of entry to State or Territory OH&S law.  However, as is presently the case, a union official must not exercise a State or Territory OH&S law unless they have a Federal Permit issued under the Fair Work Bill.  If they do, permit holders will be able to enter premises without notice to inspect a suspected breach of occupational health and safety regulation. 

The Bill also makes it an offence to make a misrepresentation about right of entry provisions or the ability of a union official to enter a particular workplace.  FWA is given the power to deal with disputes that arise out of right of entry and to make decisions about who is a fit and proper person to hold a right of entry permit.  The Bill proposes a reasonable amount of flexibility for FWA in this regard, giving it a scope of different penalties that can be imposed upon permit holders who misuse their powers.  For example, union officials will be exposed to losing their permit for up to five years if they have had FWA take action against them on two prior occasions.  There are also very detailed provisions about the qualifications of union officials in order to qualify for an entry permit.

 

 

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Conclusion

The Bill makes good the Federal Government’s promise to legislate a new Federal industrial system.  The Bill covers approx 85% of all persons employed in Australia. No business in Australia can afford to ignore this key reform which was a fundamental electoral tenet of the Rudd Labor Government.