The long-promised Workplace Relations Amendment (Transition to Forward with Fairness) Bill 2008 has finally been enacted by the Federal Parliament. This follows the tabling of a Senate report that recommended the Bill be adopted and some last moment amendments by the Government. (see Latest Amendments).
The Government says the proposed legislation aims to bring in a new era of workplace relations modelled on the ALP’s election promises in 2007, but employers are entitled to ask to what extent does the detail of the draft law wind the clock back, make the creation of jobs more difficult and take the employment contract out of the hands of the parties.
Background
Before the federal election, the ALP made public its Forward with Fairness document that provided the basis for its industrial relations platform. Employers First™ provided members a detailed analysis of its main provisions at the time. In August 2007, an Implementation Plan was announced that set out the government’s transitional proposals, which featured abolition of Australian Workplace Agreements (AWAs) and prohibition of other statutory individual employment contracts.
The philosophical basis for the ALP program is its objection to agreements being entered into between employers and employees that may exclude mandatory ‘safety net’ provisions prescribed by the government. The government is prepared to tolerate only common law contracts, not agreements protected by statute, and only on the basis that they do not exclude certain statutory terms and conditions. Contrary to most objective indicators, Minister Gillard believes such a heavily regulated system of employment contracts “will be better for productivity and therefore be better at fighting inflation”.
What follows is a short summary of the main provisions of the legislation.
Australian Workplace Agreements
As indicated above, AWAs will be outlawed. This will mean no new AWAs will be able to commence from fourteen days after the commencement date of the legislation. However, existing AWAs will not be abolished. They will continue to their expiry dates “and beyond until the parties … make a decision about how best to manage their employment arrangement”. This adds an element of uncertainty for the AWAs in the system at present, especially in some key Australian industries. The only certainty is that a new or renewed AWA will not be possible. What problems this may present to these parties in the next few years remains unresolved. Minister Gillard announced that new AWAs in the Australian Public Service are already no longer available because of the Rudd Government’s executive decision, as employer, to ban them.
Individual Transitional Employment Agreements (ITEAs)
The legislation creates a new type of industrial instrument to be known as an ITEA. This is designed for those employers who employed anyone on an AWA that was entered into before 1 December 2007 or who may employ a new employee after that date. The ITEA is meant to be an interim statutory agreement containing transitional arrangements for a maximum 2-year period up to 1 January 2020, after which a new industrial relations system will be in operation. That system will be based on a “modernised” (see below) award structure and a new set of National Employment Standards, which will mandate certain job conditions for all employees.
No Disadvantage Test
The Labor Federal Government proposes to reintroduce a ‘no disadvantage test’ for all new collective and individual workplace agreements. This of course requires scrapping the Howard Government’s ‘Fairness Test’, according to which certain agreements had to meet standards of fair compensation for negotiated award conditions. The new test will be applied to:
collective agreements, in which employees are not to receive less when compared with an applicable award and the Australian Fair Pay and Conditions Standard (AFPCS).
the ITEAs, in which employees are not to be ‘disadvantaged’ when compared with an applicable agreement or, if no such agreement can be located, with an applicable award and the AFPCS.
This will in effect mean that the Workplace Authority will decide if an employee’s overall terms and conditions are less than would otherwise be the case under a ‘reference instrument’ such as an award (or if there is no award, an award nominated by the Authority) or relevant collective agreement (in the case of ITEAs).
Agreement Commencement Dates
In the future, new collective agreements and existing ITEAs will commence only after approval from the Workplace Authority Director, who will apply the ‘no disadvantage test’. In the transitional period, however, ITEAs for new employees will start when they are lodged with the Workplace Authority Director (as will employer greenfields agreements and employer/union greenfields agreements). All agreements lodged after the legislation comes into force will have to comply with the ‘no disadvantage test’, meaning that employers will have to compensate those employees who have been working under an agreement that commences on lodgment and then fails the ‘no disadvantage test’.
These new arrangements, which are likely to cause confusion, are meant to overcome the alleged confusion caused by agreements being lodged under the previous government’s system whereby they took effect upon lodgment and then presented employers with ‘complex calculations for expensive compensation payments’.
Termination of Agreements
Collective agreements will be terminable only where the parties agree or where the Australian Industrial Relations Commission (AIRC) approves termination if it does not offend the ‘public interest’. This amorphous concept will be judged by the AIRC, and it is interesting that the AIRC will be authorised to take into account all the circumstances of each case including:
the views of each party under the agreement (including all the employees bound by it) about whether it should be terminated
the circumstances of each party under the agreement
the likely effect on each party under the agreement.
The legislation does give an ‘example’ of what may be in the ‘public interest’: “a reasonable strategy to deal with a short-term crisis in, and to assist in the revival of, the employer’s business”. Although this is encouraging, it is not a factor that must be taken into account. It is relegated to an example with arguably no legal force. It would presumably not deter the AIRC from concluding that if the interest of an employee or group of employees may be affected adversely, this must necessarily be against the ‘public interest’.
When an ITEA or AWA is terminated, employees will have access to whatever award or agreement conditions would have been applicable but for the terminated agreement (that is, any collective agreement at the workplace or the full award where there is no such agreement). Further, employees working under expired AWAs entered into under the WorkChoices regime will still be able to unilaterally terminate the agreement if they can point to an award or agreement with more beneficial conditions.
Pre-WorkChoices Collective Agreements
Some certified agreements that were formed before the start of the WorkChoices reforms (that is, before March 2006) may be extended or varied by the AIRC. This will be done apparently if there is agreement between the parties and approval from the affected employees. However, if such an application to the AIRC is made, it will not be possible where the parties have engaged in industrial action or applied for a protected action ballot for proposed industrial action from the day after the Bill itself was introduced (that is, 14 February 2008). This aspect of the legislation was included after employer and union representations urged the avoidance of ‘double transition’, with parties making transitional arrangements followed by new agreements under the future regime when enacted.
Award Modernisation
The legislation provides for the initial process of modernising awards, a task to be given to the AIRC in the transition period. A timetable is provided and the AIRC will be required to provide a list of priority industries or occupations for modernisation by 30 June 2008. The transitional period is meant to be over by 31 December 2009. Amendments will have to be made to the Workplace Relations Act at a future time to enable the modernisation process to proceed.
A ‘modernised’ award is envisaged to be one that provides for the ten National Employment Standards plus ten further entitlements as announced in Forward with Fairness, a safety net, minimum award entitlements, flexible work arrangements, industry/occupation specific provisions and benchmarks for collective agreement making. However, at this stage we have little idea of how awards will be recast in terms of their number, coverage and application. An important element will be how various awards may be merged and which of their provisions will be adopted as the standard in the modernised award.
An ‘award flexibility clause’ will have to be produced by the AIRC for introduction into all awards. The future workings of this clause are unknown, but it is meant to be a theoretical window of opportunity for employers and employees to make individual arrangements “so long as the employee is not disadvantaged”. There will be award provisions that will be banned, such as terms that allow the contravention of statutory ‘freedom of association’ provisions or that stop certain specified organisations from entering an employer’s workplace.
Minister Gillard has announced the government’s intention to allow employees earning over $100,000 pa to “agree to their own pay and conditions without reference to awards”.
The promised flexibility in awards is crucial to the Gillard scheme, since it aims to entice employers and employees away from independent individual contracts and arrangements by offering instead a modernised and flexible form of the traditional method of creating awards and agreements, over-award arrangements and common law contracts.
Whether the government will be capable of delivering on this promise, or whether the unions will allow the promised flexibility to eventuate, is yet to be seen.
National Employment Standards
Minister Gillard has also released a draft of the promised ten National Employment Standards (NESs) to replace the guaranteed standards introduced by the Howard Government (the five benchmarks of the Australian Fair Pay and Conditions Standard). They are available for public comment and are meant to provide, together with the modernised awards, the mandatory ‘safety net’ for awards and agreements after 1 January 2010.
The National Employment Standards could make a dramatic difference to all businesses and employers should consider the possible consequences for their organisations now. They will replace the current five WorkChoices standards and add five more for agreements. Awards will be subject to 20 standards. Employers Adviser will provide more information in the future, and employers should advise Employers First of specific difficulties for their businesses posed by the NESs.
For example, employees will now have a guaranteed right to request flexible working arrangements, which the employer will only be able to refuse on ‘reasonable grounds’. There will be important changes to parental leave and other leave provisions that will have a possibly unforeseen impact on your business. Important changes to redundancy provisions will have to be included in every agreement.
The National Employment Standards are as follows:
Maximum weekly hours of work – A standard 38-hour working week for full time employees, plus reasonable additional hours. These will be decided by assessment of certain factors, including the needs of the business and the compensation payable to the employee. Averaging of hours will have to be provided in the award.
Requests for flexible working arrangements – Employees with caring responsibilities for a child under school age will have the right to request flexible working arrangements, which could include reduced or altered hours or work from home. Written employee requests can be refused only on “reasonable business grounds”. The meaning of this term, which appears throughout the NES, is uncertain and will be open to interpretation.
Parental leave and related entitlements – A right for each eligible parent to 12 months’ unpaid parental leave (with a maximum of 3 weeks’ parental leave taken concurrently by couples, thereupon consecutively). An additional period of up to 12 months’ unpaid leave may be requested by one parent and refused only on “reasonable business grounds”. Return to work and other entitlements are provided for, including transfer to safe job provisions. If no safe job can be provided then leave is to be paid for the remaining duration of the ‘risk period’.
Annual leave – A guaranteed 4 weeks’ paid annual leave (an extra week for shift workers) and a pro rata amount for part-time workers. This does not apply casual employees.
Personal, carer’s and compassionate leave – Ten days’ paid personal and carer’s leave per year of service for full-time workers (pro rata for part-time employees) which accrues indefinitely plus 2 days’ paid compassionate leave per occasion. This does not apply to casual employees. All workers (including casuals) will be entitled to 2 days of unpaid personal leave for “genuine caring purposes and family emergencies” upon each occasion (not capped).
Community service leave – An entitlement to all employees to unpaid leave for all prescribed community service activities, such as emergency services and jury service (where make-up pay may be paid).
Long service leave – Anticipating nationally uniform long service leave standards in the future, all long service leave entitlements in an AWA or workplace agreement, or where there is no such agreement, in pre-modernised awards, NAPSAs and state or territory laws, will be preserved in the interim.
Public holidays – Employees will be entitled to be absent from work on public holidays and be paid at ordinary hours rates (unless they work at the reasonable request of the employer, in which case they may be paid a penalty rate, depending on what the relevant award provides).
Notice of termination and redundancy pay – Employees (except those serving a qualifying period, those on a fixed term or seasonal contract and casual employees) will be entitled to minimum periods of notice of termination, or pay in lieu, based on their period of continuous service. Employers with over 15 employees will have to make severance payments in cases of redundancy.
Fair Work Information Statement – Employers will have to provide new employees with a “Fair Work Information Statement” from the regulator Fair Work Australia with information about the NES, awards, making agreements, freedom of association and Fair Work Australia. |
Other Matters
Minister Gillard also gave notice that the following matters will be achieved with the legislation:
Comment
The legislation sets the groundwork for a new industrial relations system that purports to maintain the flexibility businesses need to create jobs, while in effect looking to the past and reintroducing familiar rigidities imposed from above into workplace relations.
Of interest to employers will be the fact that the government intends to retain the ‘exceptional circumstances test’ introduced by WorkChoices. This means that agreements failing the ‘no disadvantage test’ could still be approved if there was a special case that was not against the public interest. However, these agreements will be limited to a two-year period and will not be able to be appealed. The Workplace Authority will have to publish reasons. Only the future will tell if this will open ‘a can of worms’.
The ITEAs, in effect a form of temporary individual contract until 2010, are meant to ease the transition away from AWAs. Employers will be able to offer them to staff already on AWAs or even to new staff until the new system is in place. But because they will be subjected to a ‘no disadvantage test’ they will offer no strategic benefits to either employers or their employees, who mostly entered into AWAs in order to go beyond the legislated or award-based standards. The temporary nature of ITEAs is likely to deter employers, who may settle on award conditions in order to achieve long-term stability. Only enterprises that find real advantages in flexible arrangements are likely to use ITEAs, with perhaps a take-up of common law contracts (backed up by the NES and compulsory award conditions) after 2010. Unions have already objected to ITEAs on the basis that employers could still offer them on a ‘take it or leave it’ basis for the next two years.
Also, the legislation moves away from the published ALP Forward with Fairness policy of maintaining the 90-day rule for unilateral termination of expired agreements (except for ITEAs or AWAs) brought in by WorkChoices. Now termination of agreements is subject to much greater regulation and scrutiny – by application to the AIRC and an uncertain public interest test. Once termination is approved, employees will revert to their previous relevant award or agreement.
The AIRC’s new brief to modernise awards will be under careful scrutiny. Minister Gillard says that modern awards will have to increase participation in the workforce, boost competition, increase skills, enhance a fair labour market and promote ‘the creation of jobs, high levels of productivity, low inflation, high levels of employment’. This is a tall order – and does not characterise the traditional award system with its rigidity and restrictive work practices.
Most importantly, the modern Australian economy needs a labour market with inherent flexibilities. A workable alternative to AWAs must be retained, with the capacity for employers and employees to enter into individual agreements, even with some form of guaranteed minimal conditions. These can co-exist with a collective enterprise bargaining system and a ‘safety net’ for the low paid. The future of the common law contract may hold the key to a vibrant labour market.
Latest Amendments
Employers will be able to enter into an ITEA with a former employee ‘provided that employee’s employment was not terminated in order to re-engage the former employee on an ITEA.
In some cases the Workplace Authority may be able to take into account State and Territory laws about long service leave as part of the ‘no disadvantage test’.
Outworker conditions in awards are to continue to have effect despite any less favourable terms of a workplace agreement.
Preserved state agreements may be able to be varied and extended in some cases.
Other technical amendments.
