Earlier today Prime Minister John Howard announced significant changes to WorkChoices Agreements.
All that has been announced to date is the conceptual framework, and it is impossible to determine yet how the changes will work in detail. From the information that has been released we are able to however make the following observations.
The "Fairness Test"
Under the changes, all AWAs and Collective Agreements ("workplace agreements") lodged on or after Monday 7 May 2007 that apply to employees earning less than $75,000 per year, who would otherwise have been entitled to award conditions, will be subject to the 'Fairness Test'.
All workplace agreements lodged before 7 May 2007 will be unaffected by the changes.
If a workplace agreement removes or modifies 'protected award conditions', the employee will be required to receive fair compensation. The protected award conditions are:
- penalty rates, (including public holiday and weekend rates);
- overtime, shift and annual leave loadings; monetary allowances;
- public holidays;
- rest breaks; and
- incentive-based payments and bonuses.
Determining "Fair Compensation"
The Office of the Employment Advocate, which will be re-named the Workplace Authority ("the Authority"), will examine workplace agreements and conduct the Fairness Test. When conducting the Fairness Test the Authority will consider whether an employee is adequately compensated, both in monetary and non-monetary terms, for giving up award entitlements in a workplace agreement.
In considering whether an employee is being adequately compensated, the Authority will consider things such as the work obligations of the employee including whether the employee is required to work shifts, and in appropriate circumstances, the specific business requirements of the employer, the industry in which the employer operates, the employment circumstances of the employee and also all relevant working arrangements and entitlements, such as family friendly conditions.
The Prime Minister has said that it is most likely that to pass the Fairness Test an employee will most often be compensated with a higher rate of pay for each hour worked.
Implications for not complying with the Fairness Test
If a workplace agreement does not comply with the Fairness Test (as determined by the Authority), an employer and employee have 14 days to make the agreement fair. In the meantime, the industrial instrument (ie award) applicable to the employee's employment will continue to apply until the agreement is capable of passing the test.
In addition, if a lodged agreement is subsequently ascertained not to pass the Fairness Test, the employer will have to pay any back pay required to compensate the employee.
In the event a workplace agreement is not rectified and fails the Fairness Test, the agreement will be void and existing employees will continue to be bound by their existing employment arrangements. New employees will be covered by the employment arrangements that would have applied to their employment but for the failed agreement.
Other changes
The Office of Workplace Services will be re-named the Workplace Ombudsman.
The Workplace Ombudsman will take on a greater role in ensuring employers comply with their legal obligations, which will involve things such as regular random audits.
What employers should do
The changes announced today will not affect the status of AWAs or Collective Agreements already in place. As a result, employers with workplace agreements in place will not have to take any action.
However, all workplace agreements currently being made which have not yet been lodged with the Office of the Employment Advocate/Workplace Authority will need to comply with the Fairness Test if they modify or remove protected award conditions.