Background
In its policy statements, the Government had talked about the introduction of a 'one-stop-shop' industrial umpire to oversee the new workplace relations system.
However, presumably for constitutional reasons, the FW Bill actually creates separate bodies within the Fair Work Australia framework. Those bodies are:
- Fair Work Australia (FWA);
- the Fair Work Ombudsman (FWO); and
- the Fair Work Divisions of the Federal Court and Federal Magistrates Court.
The roles and responsibilities of each of these new bodies within the new legislative framework is outlined below.
Fair Work Australia
FWA will replace the Australian Industrial Relations Commission (AIRC), the Australian Industrial Registry, the Australian Fair Pay Commission (AFPC), the AFPC Secretariat and the Workplace Authority.
FWA will have a president, deputy presidents and commissioners and will effectively take on all of the functions of the entities it will replace. Broadly speaking, it will operate in a similar manner to how the AIRC operated before WorkChoices.
The functions of FWA will include:
- facilitating collective bargaining;
- approving enterprise agreements;
- dealing with unfair dismissal claims;
- dealing with industrial disputes; and
- settling workplace disputes.
In addition, FWA will be responsible for the setting and adjusting of minimum wages, with these functions to be performed by a Minimum Wage Panel comprised of FWA members.
The FW Bill sets up FWA with the intention of it having a user friendly culture and adopting informal and non-legalistic processes, and gives FWA broad discretion as to how it will exercise its functions.
Lawyers will only be granted permission to represent a party if FWA considers it would enable the matter to be dealt with more efficiently, taking into account the complexity of the matter, or if it won't result in unfairness to the other party.
Fair Work Ombudsman
The FWO will replace the current Workplace Ombudsman.
The key functions of the FWO will be to promote and monitor compliance with the new workplace relations laws and, where necessary, undertake enforcement activities, such as investigations, issuing compliance notices and initiating court proceedings.
In undertaking its compliance and investigative functions, the FWO will be assisted by inspectors who will have various powers including powers to enter workplaces and inspect and copy employment records and documents.
Fair Work Divisions
Fair Work Divisions will be created in the Federal Court and the Federal Magistrates Court to hear matters which arise under the new workplace relations laws, including matters in relation to contraventions of National Employment Standards (NES) entitlements under common law contracts of employment.
These divisions will have broader powers to deal with any breaches of the laws than what is currently available to the Courts including the power to issue injunctions to restrain breaches.
A small claims jurisdiction with a limit of $20,000 will also be established within the Federal Magistrates Court. In this jurisdiction, the Court will not be bound by the rules of evidence and may act in an informal manner.
New Safety Net
National Employment Standards
The new safety net for employees in the Federal System will be the National Employment Standards (NES). The NES will replace their WorkChoices equivalent, the Australian Fair Pay and Conditions Standard.
There are ten NES, summarised as follows:
Maximum Weekly Hours
- Full-time employees to work a maximum 38-hour week.
- An employer may request or require an employee to work reasonable additional hours.
- An employee may refuse additional hours if they are unreasonable.
- Hours of work can be averaged over a 26 week period.
Request for flexible working arrangements
- A parent or carer of a child under school age may request a change in work arrangements such as a reduction in hours, or change to finishing times.
- An employee, other than a casual employee, must have at least 12 months of continuous service before being able to request flexible working arrangements.
- A casual employee must be employed on systematic basis for at least 12 months before being able to request flexible working arrangements.
- An employer may refuse a request for flexible working arrangements on reasonable business grounds.
Parental leave and related entitlements
An employee who has at least 12 months of continuous service qualifies for 12 months of unpaid parental leave.
The other parent is allowed to take 12 months of unpaid leave subsequently, but not concurrently.
Up to three weeks of concurrent leave may be taken at the time of birth or adoption.
An additional 12 months of unpaid leave is available to an eligible employee, unless their employer refuses on reasonable business grounds.
Annual leave
- Four weeks' annual leave for full-time employees, five weeks' annual leave to award defined shift workers.
- The cashing out of annual leave by an employee in accordance with a term of an award or otherwise by agreement will be permitted as long as the employee maintains a leave balance of at least four weeks.
Personal/Carer's leave and compassionate leave
- Ten days of paid personal/carer's leave for full-time employees.
- Two days of unpaid carer's leave per occasion needed when paid personal/carer's leave entitlements are exhausted or for casual employees.
- Two days of paid compassionate leave for permanent employees, and two days of unpaid compassionate leave for casual employees, per occasion needed.
Community service leave
- Community service leave is available for jury service or voluntary emergency management.
- Employers are required to pay employees for their first 10 days of jury service only.
Long service leave
- The entitlement to award-derived long service leave continues.
- There are exceptions where long service leave is dealt with in certain instruments including a workplace agreement made before the Australian Fair Pay and Conditions Standard commenced operation and a pre-reform AWA.
- There are planned changes to long service leave entitlements when a consistent national standard is agreed between the States and the Federal government.
Public holidays
- Eight national public holidays plus days designated in States and Territories will be available to permanent employees.
- An employer may make a reasonable request for an employee to work a public holiday.
Notice of termination and redundancy pay
- The period of notice of termination of employment will be dictated by the length of an employee's employment.
- National redundancy pay standards will apply to all employees of a business of 15 or more employees, subject to regulations making exemptions.
Fair Work Information Statement
The Fair Work Information Statement is to be presented to every new employee.
Modern awards
For employees earning $100,000 or less, the safety net may also include a 'modern award'. The AIRC is currently going through a process of creating such modern awards.
The FW Bill sets out that a modern award may contain provisions relating to the following matters:
- minimum wages;
- categories of employment (ie full-time, casual, part-time, etc);
- rostering;
- overtime rates;
- penalty rates;
- annualised wage arrangements;
- allowances;
- leave and leave loadings;
- superannuation; and
- dispute resolution procedures.
In addition, the FW Bill sets out that the content of modern awards must include "individual flexibility clauses". Such clauses will allow an employer and employee bound by the award to in effect vary the award as it applies to the employee. Such variation will be ineffectual unless the employee is in a better position overall as a result of the variation in comparison to their position under the award.
The FW Bill also sets out that a modern award must not contain provisions relating to union bargaining fees and union rights of entry.
Enterprise Agreements & Bargaining
In accordance with the Government's policy of having collective agreement making at the heart of its new industrial relations system, the FW Bill makes significant changes to the agreement-making landscape.
In particular, it introduces new types of agreements, promotes good faith bargaining and changes content and approval requirements.
New categories of agreements
Under the FW Bill, two types of agreements can be made:
- single-enterprise agreements which are made by a single employer or by two or more employers in a joint venture or enterprise or who are related bodies corporate, and their employees; and
- multi-enterprise agreements which are made between two or more employers and their employees.
Where a new enterprise is being established and employees are yet to be employed, both types of agreements may be made as greenfields agreements between the employer and a union.
Unlike the current system, greenfields agreements are the only agreements to which a union can be a party. However, once an enterprise agreement (other than a greenfields agreement) is made, a union can apply to FWA to be 'covered'.
What can and can't be in an enterprise agreement?
The concept of 'prohibited content' introduced by WorkChoices has been abolished.
Enterprise agreements may be made about the following 'permitted matters':
- matters pertaining to the relationship between the employer/s and the employees covered by the agreement;
- matters pertaining to the relationship between the employer/s and the union/s covered by the agreement;
- deductions from wages authorised by an employee; and
- how the agreement will operate.
Enterprise agreements must also contain the following mandatory clauses.
A clause which allows the employer and an employee to reach an individual flexibility arrangement about particular matters in the enterprise agreement. An employee must be better off overall under any flexibility arrangement than they would have been under the enterprise agreement for the flexibility arrangement to be enforceable.
A clause which requires the employer to consult with the employees about major workplace changes likely to have a significant effect on the employees. It must also provide that employees have the right to representation for the purposes of that consultation.
- Dispute settlement clause
If these clauses are omitted, model clauses set out in the FW Bill will apply by default.
Also, enterprise agreements must include a nominal expiry date (of a maximum of four years) and must comply with minimum wage requirements and the NES.
While enterprise agreements must comply with the above requirements, they cannot include 'unlawful terms'. Unlawful terms include terms which are discriminatory, objectionable, provide remedies or change the operation of unfair dismissal provisions and which are inconsistent with the industrial action, right of entry provisions or the exercise of OHS rights under the FW Bill.
Bargaining
Notification of bargaining rights and obligations
Employers proposing to implement an enterprise agreement (other than a greenfields agreement) must take reasonable steps to notify employees of their right to be represented by a bargaining representative in negotiations.
The parties to an enterprise agreement may appoint any person as their bargaining representative, provided they meet good faith bargaining requirements set out in the FW Bill, such as attending and participating in meetings, disclosing certain information, genuinely considering and responding to proposals, and refraining from capricious or unfair conduct.
Where an employee is a union member and they do not appoint a bargaining representative, the union will automatically become their bargaining representative.
Bargaining orders and facilitation of bargaining
Under the WR Act, the AIRC can have very limited involvement in resolving bargaining disputes, except where all parties consent. The FW Bill proposes significant changes to this.
If bargaining representatives consider that the bargaining process is not proceeding efficiently or fairly or the other bargaining representatives involved in the process aren't meeting good faith bargaining requirements, they can seek bargaining orders from FWA to enforce requirements, provided certain notification and procedural requirements are met.
FWA may make orders including orders that:
- enforce the good faith bargaining requirements, for example, by requiring representatives to attend meetings and participate in negotiations, disclose relevant information and give genuine consideration to proposals. (However, this does not require concessions to be made or an agreement reached);
- specify the actions required to ensure representatives refrain from conduct that undermines freedom of association or collective bargaining; and/or
- specify appropriate matters, actions or requirements to promote the efficient or fair conduct of bargaining in the event of multiple bargaining representatives, for example, that a bargaining representative be excluded from bargaining or one representative be nominated to represent all bargaining representatives.
Further, if an employer refuses to bargain with its employees and there is majority employee support for collective bargaining, FWA may make a majority support determination after which orders can be made requiring the employer to negotiate. However, employers cannot be forced to make concessions in the bargaining process against their will.
Failure to comply with orders may result in penalties.
If there is a bargaining dispute and the parties cannot reach agreement, FWA may, upon application by a bargaining representative, deal with the dispute. If the parties consent, FWA may arbitrate the dispute.
If there is continued serious non-compliance with FWA bargaining orders, a bargaining representative may apply for a serious breach order. If the post-order negotiating period ends and there is no agreement, FWA may make a bargaining-related workplace determination binding the parties.
Making Enterprise Agreements
The making of enterprise agreements will be similar to the current system. Employees must be given a copy or access to the agreement (as well as any other instrument incorporated into the agreement) and informed of how and when the vote will take place at least seven days prior to the vote. After the seven day consideration period, a vote will be conducted. If a majority of employees who vote agree to be covered by the agreement, the agreement will be made.
Implementing Enterprise Agreements
Once an enterprise agreement is made, a bargaining representative must apply to FWA for approval within 14 days.
FWA must approve an enterprise agreement if it is satisfied that, generally speaking, the agreement meets the requirements set out in the FW Bill, passes the 'Better Off Overall Test' (BOOT) and is genuinely agreed upon.
The Better Off Overall Test
Once lodged with FWA, enterprise agreements will be subject to the BOOT which will replace the No-Disadvantage Test.
For an enterprise agreement to pass the BOOT, FWA must be satisfied that each employee would be "better off overall" under the agreement when compared against an applicable award.
If an enterprise agreement does not pass the BOOT, FWA may only approve it where it is considered in the public interest to do so (for example, to deal with a short term economic crisis). In this instance, the nominal expiry date will be a maximum of two years from the date the agreement is approved.
Low Paid Bargaining
The FW Bill establishes a regime to facilitate bargaining for multi-enterprise agreements for low-paid employees who do not have a history of collective bargaining or who face difficulties in bargaining, for example, the childcare and cleaning industries.
Access to the low-paid bargaining stream will be limited to those employers and employees covered by a low-paid authorisation made by FWA.
Workplace Determinations
In certain circumstances, and subject to special requirements, the Full Bench of the FWA will be able to determine terms and conditions of employment of employees in what will be known as 'workplace determinations.' Workplace determinations will have content similar to enterprise agreements and, subject to certain exceptions, are treated similarly for the purposes of the FW Bill.
There will be three kinds of workplace determinations:
- Low-paid workplace determination
If there is a low-paid authorisation in operation in relation to proposed multi-enterprise agreement and one or more bargaining representatives are unable to reach agreement, a workplace determination can be made by consent (where representatives jointly apply for a determination) or as a special low-paid workplace determination (where only one representative applies for the determination).
- Industrial action workplace determination
FWA must make a workplace determination if it has terminated protected industrial action (in accordance with the FW Bill) or the industrial action has been terminated by Ministerial declaration and the representatives have not settled the dispute at the end of the negotiating period.
- Bargaining-related workplace determination
As noted above, FWA can make a workplace determination if a serious breach declaration has been made in relation to an enterprise agreement and at the end of the negotiating period the parties have not settled the matters in dispute.
Right of Entry
Generally speaking, the right of entry provisions contained in the FW Bill are consistent with those in the WR Act.
Authorised union officials (permit holders) can enter a workplace to investigate breaches of the legislation or a 'workplace instrument' or to hold discussions with their members. The procedure to be followed before those rights are exercised is in line with the current system. Penalties will apply if the rules are contravened.
FWA will have power to deal with disputes about the right of entry provisions and to take action against officials and unions who abuse their access rights.
Currently, unions can only enter premises to hold discussions with a member who is covered by an award or agreement binding the union. Notably, and controversially, the provisions under the FW Bill will enable unions to enter a workplace to hold discussions with potential members. While unions will have to comply with certain notice requirements and reasonable requests of the employer, this new broad right for unions to recruit from within the workplace has caused, and we suspect will continue to cause, some consternation among employers.
Another controversial change is the ability of union officials in certain circumstances to inspect and copy any record or document that is kept on or is accessible from the premises (both when on the premises and afterwards). This right, on its face, will extend to records held in relation to non-union members.
Industrial Action
The rules relating to industrial action in the FW Bill remain largely similar to those in the WR Act.
Protected industrial action will still only be available to parties when they are negotiating an enterprise agreement. Also, the FW Bill retains the requirement to hold a mandatory secret ballot authorising industrial action.
The grounds on which FWA can suspend or terminate industrial action remain those that currently exist. However, a new ground for suspension or termination of industrial action has been introduced where the industrial action is causing significant economic harm to the parties themselves.
Other key changes to industrial action rules include:
- the concept of a 'bargaining period' has been removed;
- employers will only be able to take industrial action by way of a lockout when responding to employee industrial action;
- the 'four hour rule' for the deduction of strike pay will no longer apply to protected industrial action. Where an employee takes protected industrial action, the employer will only be able to withhold pay for the actual period of industrial action taken;
- all employees to be covered by an enterprise agreement will be able to take protected industrial action, regardless of whether they are a member of the union negotiating the agreement;
- while employees cannot take protected industrial action in support of claims for unlawful terms, they can take protected industrial action for terms that are not 'permitted matters' if they reasonably believed those terms were permitted;
- where employees are taking protected overtime bans, employers may only withhold pay for the overtime hours not worked; and
- where employees are taking protected action in the form of a partial work ban employers may continue to pay full salary; stand down or lock-out their employees; or make a partial payment.
Transfer of Business
The FW Bill sets out major changes to the current transmission of business rules.
Currently, the WR Act provides that where a "transmission of business" occurs, the awards or workplace agreements of employees whose employment is transferred from one employer to another will transmit - that is, the new employer will be bound by the old employer's industrial instruments whether they like it or not. The most common scenario is where an employer sells its business.
Under the current system, for there to be a transmission, a business or part of a business must transfer from one party to another. This has been interpreted narrowly by the courts to exclude some outsourcing arrangements. Moreover, the current rules provide that the new employer is only bound by the transmitted instruments for a period of 12 months after which time they fall away and the relevant employees become subject to their new employer's existing environment.
The FW Bill contains a new test for when a transmission (or "transfer", as it will now be known) of business occurs. The new test focuses on the work performed by the transferring employee (rather than whether or not a business or part of a business has transferred) and requires that there is a connection between the old and new employer. There will be a 'connection' for the purposes of the FW Bill where:
- there is an arrangement between the old and new employer with regard to all or some of the assets of the old employer that relate to the transferring work (ie a typical business sale situation);
- an employer outsources or insources part of its operation; or
- an employer implements a restructure with its associated entities.
Notably, the new rules place no time limit on the application of transferring instruments. Assuming a transfer of business occurs, the transferring employee will continue to be bound by any enterprise agreement, workplace determination or modern award (as well as any individual flexibility arrangements made under those instruments) (known collectively as a 'transferable instrument') that applied to the employee before their employment with the old employer ended until such time as it is replaced or terminated.
Also of interest is:
- where a transfer occurs and the new employer hires a non-transferring employee, that new employee
may be covered by a transferable instrument if there is no enterprise agreement or modern award covering the type of work performed by the employee; and
- pay arrangements for 'high income employees' (employees earning more than $100,000), can apply to the new employer.
The new provisions include a mechanism for an application to be made to FWA to limit the application of the rules. In considering such an application, FWA must assess whether any employees will be disadvantaged by the making of the order and the public interest.
Unfair Dismissal
The FW Bill does not contain any real surprises in relation to unfair dismissals.
From 1 July 2009, all employers covered by the Federal system will now fall within the unfair dismissal jurisdiction. Employees will be able to make claims for an unfair dismissal as long as they:
- have completed the minimum period of employment (six months for businesses with 15 or more employees and 12 months for businesses with less than 15 employees); and
- are covered by a modern award/enterprise agreement; and/or
- earn less than $100,000.
A dismissal will not be unfair where:
- in relation to small business employers (less than 15 employees), the dismissal was undertaken in a manner consistent with the Small Business Fair Dismissal Code (the Code); or
- the dismissal was a genuine case of redundancy. Notably, there will be no genuine redundancy if it would have been reasonable for the employee to be redeployed within the employer's organisation or within an associated entity, which could make it difficult for larger employers to qualify for the 'genuine redundancy' exemption.
An employee who claims to have been dismissed unfairly will need to lodge their claim within seven days of their dismissal. However, FWA will be able to extend this period in exceptional circumstances.
When investigating claims, FWA will be able to consider such matters as it deems appropriate. FWA will have broad powers which will allow it, among other things, to request documents from parties, take oral evidence or just require parties to answer queries over the phone.
If FWA considers a claim has merit then it will then move to consider whether the dismissal was unfair. If there are contested facts, FWA will hold either a conference or a hearing. A party will be allowed to be legally represented where FWA considers the matter would be dealt with more effectively if representation is allowed or it would be unfair not to allow representation.
When deciding whether the dismissal was 'harsh, unjust or unreasonable', FWA will consider similar factors as those currently required. Ultimately, for an unfair dismissal claim to be defeated, there will need to have been a valid reason for the dismissal and procedural fairness must have been given to the employee. The remedies available will be reinstatement, and if that is not appropriate, compensation of up to six months' pay.
Appeal rights under the FW Bill are narrower than those currently available. Decisions of FWA can only be appealed where the FWA considers it to be in the public interest.
Typically, each party will have to pay their own costs of running the unfair dismissal claim.
General protections
The FW Bill brings together in a more organised fashion many of the protections contained in the current legislation including unlawful termination, freedom of association and sham contracting arrangements.
The new provisions are centred around the concepts of "adverse action" (which includes an employer dismissing an employee; an employee taking industrial action; an employer altering an employee's position to the employee's detriment, etc) and "workplace rights" (which includes a right under a workplace law, workplace instrument or an order made by an industrial body).
It will be unlawful for a person to take "adverse action" against a person because they have a "workplace right".
The changes mean that there will be more comprehensive protection for employees than is currently the case. For instance, employees with family or carer responsibilities or employees who participate in collective activities and who are discriminated against will be able to take action.
A person can take action to enforce a workplace right which is affected by adverse action by applying to FWA. The range of sanctions available includes injunctions, compensation and fines. Where the application involves a dismissal, the application will need to be made within 60 days. The interaction between this time period and the seven day period applying in relation to unfair dismissal claims may create problems in practice.
So what does it all mean?
In announcing the FW Bill, Deputy Prime Minister Julia Gillard remarked that it "is based on the enduring principle of fairness while meeting the needs of the modern age. It balances the interests of employers and employees and balances the granting of rights and responsibilities."
The introduction of the FW Bill was preceded by a lengthy period of stakeholder consultation. While it's still early days, the generally muted response so far from the Federal Opposition and employer and employee organisations tends to suggest that the proposed legislation has struck a chord.
It is important not to lose sight of the fact that the FW Bill is only one part – if a significant part - of the new workplace relations landscape. The transitional legislation to be introduced in the new year and the regulations which will follow will play a key role in guiding the practical implementation of the new laws. Both will require careful scrutiny when they become available in 2009.
Beyond that, we note that the FW Bill delivers only part of the industrial relations policy taken by the Australian Labor Party to the 2007 Federal election. Important industrial relations commitments remain to be delivered including the achievement of nationally consistent industrial relations laws for the entire private sector. Negotiations are continuing between State and Federal governments in this regard.
We will continue to monitor the developments in this area and provide regular updates.