Employment & IR - for Employers 01 July 2009

Fair Work Act 2009 - Overview

01 July 2009

 

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The Fair Work Act 2009 Commences

A short overview

 

Introduction

The tumultuous times in industrial relations regulation continue today with the commencement of the Fair Work Act 2009 (Cth) (Act). This follows relatively soon after the “Work Choices” changes to the Workplace Relations Act 1996 (Cth) (WR Act) which took effect on 27 March 2006. Everything is now ready to “go live” with the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 receiving Royal assent on 25 June 2009 and the Fair Work Regulations 2009 (Regulations) having now been made.

Now, for the second time in less than 4 years employers are facing a new industrial relations system that they must navigate. While there will be some significant changes that apply right from the start others will only become apparent once Fair Work Australia (FWA) establishes its own practices and the Courts start deciding points of contention on the meaning of the Act and its impact on the current state of the law. We will keep you informed of these developments as they transpire.

Weset out below a brief overview of some of the key changes and elements of the Act. It is not intended to be exhaustive but, rather, is designed to provide a high level overview of the Act and highlight some significant areas of change.

A national system

WorkChoices relied upon the Commonwealth’s powers under the Constitution to regulate constitutional corporations, as a basis for extending the scope of the WR Act into what was previously State based industrial law. This was in an attempt to secure a national industrial relations system which at the time was expected to cover approximately 85% of employers in Australia.

The Act has maintained this same approach by looking to cover the field when it comes to employers who are constitutional corporations. However, in addition, the Commonwealth is seeking for the States to refer their industrial relations powers to it. This is the purpose of the Fair Work (State Referral and Consequential and Other Amendments) Act 2009. Victoria has referred its powers and the Commonwealth is looking for the other States to do the same in order to create a comprehensive national industrial relations system. So far South Australia and Tasmania have indicated that they will refer private sector industrial relations powers and Queensland has given an in principle agreement.

New body: Fair Work Australia

The changes are more than a simple change to the law. The Act will bring about a new institutional framework for the administration of the Federal industrial relations system. FWA and the Fair Work Ombudsman will replace the tribunals, agencies and courts that made and enforced employment terms and conditions under the WR Act.

Between July 2009 and January 2010, FWA will take over from the Australian Industrial Relations Commission (AIRC) and the Australian Fair Pay Commission (AFPC) in administering the Federal industrial relations system. It is intended that the FWA will be a “one stop shop” for information, advice and assistance on workplace issues, by merging the functions currently performed across seven governmental agencies. In addition to FWA, enforcement and compliance roles will be undertaken by the Fair Work Ombudsman and judicial functions will be undertaken by the Fair Work Divisions of the Federal Court and the Federal Magistrates Court.

The transition from the current structure to the new structure is summarised in the table below.

Fair Work Ombudsman takes over from Workplace Ombudsman 1 July 2009
FWA takes over the work performed by the Australian Fair Pay Commission and the AFPC ceases to exist 31 July 2009
FWA takes over the work performed by the AIRC and the AIRC ceases to exist Both continue to operate during a transitional period up to 31 December 2009. Thereafter, only FWA operates.
Changes to minimum wage determined 1 July 2010
FWA takes over the work performed by the Workplace Authority and the Workplace Authority ceases to exist Both continue to operate during a transitional period up to 31 December 2009. Thereafter, only FWA operates.

 

New safety net

Under the WR Act, minimum terms and conditions have been maintained by a combination of awards and the Australian Fair Pay and Conditions Standard (Standard). Minimum wages have been set by a separate instrument derived from awards known as the Australian Pay & Classifications Scale (APCS) or the Federal Minimum Wage (FMW) set by the AFPC.

The Act will replace this structure with a more comprehensive “safety net”of minimum terms and conditions regulated by legislation (in the form of the National Employment Standards (NES))and new “modern awards”. These will commence on 1 January 2010. The NES will differ from the Standard in key areas as follows:

  • Working parents of a child under school age will be able to request a change in the working arrangements to assist with the care of the child. An employer will only be able to refuse this request on reasonable grounds. In addition, one parent will now have the right to request an additional 12 months of unpaid parental leave.
  • There will be a new entitlement to take unpaid leave to undertake eligible community service activities, such as jury service or voluntary emergency activity.
  • Employers with 15 or more employees will have to make redundancy payments to retrenched workers.

 

Employers will need to know the procedural requirements of the new rights and the interaction of pre 1 January 2010 and post 1 January 2010 leave and accrued service for the purposes of applying these new rights. In addition, employers will need to ensure they are clear on the interaction between the NES and applicable Federal awards, Notional Agreements Preserving State Awards (NAPSAs), pre WorkChoices certified agreements, collective agreements, Individual Transitional Employment Agreements (ITEAs) and Australian Workplace Agreements (AWAs).

 

New modern awards will also play a key role in establishing the new “safety net”. An award modernisation process is currently being undertaken by the AIRC. Throughout 2008 and 2009, the AIRC has been drafting and will continue to draft a set of modern awards. The AIRC has published exposure drafts of modern awards for the purposes of further consultation. The process will be completed by 31 December 2009. There are a series of approximately 78 proposed modern awards which cover a range of industries and activities. Details of the proposed modern awards and the industries they will cover can be found at www.airc.gov.au.

Where an employer is currently subject to a NAPSA or a Federal award that will not be subsumed within a new proposed modern award, it will continue to have effect until modernised, in the case of an award, or until 1 January 2014, in the case of a NAPSA.

 

Employers will need to determine what awards/NAPSAs will continue to apply and what modern awards may also apply as of 1 January 2010. If a modern award will apply, employers need to consider whether they can enter into a guarantee of annual earnings undertaking or enter into an individual flexibility arrangement with any particular employee.

  

Employers also need to be aware of the interaction rules that will apply between a modern award and any other form of industrial instrument. Modern awards will not apply to an employee covered by a WorkChoices collective agreement, AWA or ITEA. Modern awards will, however, apply to an employee covered by a pre WorkChoices certified agreement. If the pre WorkChoices certified agreement is inconsistent with the modern award, the agreement will prevail to the extent of any inconsistency albeit the base rate of pay in the agreement must not be less than the relevant modern award rate.

Unfair dismissal law changes

Changes to unfair dismissal provisions will bring approximately 100,000 previously exempt businesses, with around 3 million employees, under the federal unfair dismissal system. Key changes include:

  • Employers with fewer than 15 full-time employees who dismiss an employee during the first 12 months of service will not be exposed to an unfair dismissal claim (following1 January 2011 the test will refer to 15 employees including part-time and casual employees). For all other employers, the exemption only applies for the first 6 months of service.
  • Small businesses that follow the new Fair Dismissal Code, which sets out the steps that need to be taken in order for the dismissal to be fair, will have an automatic defence to any unfair dismissal claim.
  • Retrenchments will only be exempt from unfair dismissal laws if the employer has followed consultation procedures in awards or workplace agreements and explored opportunities for the employee to move to other jobs in the employer’s business or in an associated business before retrenchment.

In addition to these substantive changes, there are also some important procedural changes that employers will now have to deal with. An unfair dismissal claim must now be made with 14 days. Once made, the process for resolving the dispute is likely to be somewhat different than what currently applies under the WR Act. The key change is the requirement for most claims to be dealt with by a Conference rather than a hearing where it is not resolved at Conciliation. What is not known is how the Conference will operate and how different this will be from a hearing.

 

The new unfair dismissal laws will require some significant changes to approach for employers, particularly in the areas of retrenchments and workforce planning regarding the use of casuals. In respect of retrenchments, the onus will be on employers to make sure that they follow the consultation requirements and can evidence that redeployment was not reasonable. In respect of casuals, employers need to note that casuals will now have more rights to bring an unfair dismissal claim and this should be factored into their workforce planning.

 

New workplace rights

The Act has encompassed the traditional unlawful termination and freedom of association provisions within a broad scheme of rights for employees designed to prevent adverse and other action in respect of an employee’s “workplace rights”. While retaining traditional protections the overall rights of an employee are now much broader than what employers are used to and in respect of which employers will need to be very careful.

Central to the new protections, is the concept of a “workplace right”. This is a broad concept and includes:

  • An entitlement to the benefit of a workplace law, workplace instrument or order by an industrial body. For example, this could include a right to request flexible working arrangements.
  • A role or responsibility under a workplace law, workplace instrument or order made by an industrial body. For example, this could include being a health and safety representative or union delegate.
  • An employee’s right to make a complaint or enquiry in relation to his/her employment. For example, this could include making a complaint under an internal bullying policy.

This concept of a “workplace right” extends to prospective employees and provides protection against “adverse action”. An adverse action in the context of employment is defined to include dismissal, injuring the employee in employment, altering the employee’s position to the employee’s prejudice and discrimination.

There are other protections including protection from coercion, undue influence or pressure or misrepresentation, each in respect of a person’s workplace rights. In addition, there are also protections in respect of a person’s participation or non-participation in industrial activity.

There have also been some procedural changes including the reversal of the onus of proof where a workplace right is involved. In these circumstances, the employer will have the onus of proving that the workplace right did not feature in terms of the decision or action imposed upon the employee. In addition, where there has been a dismissal, which is alleged to have been in connection with a workplace right, the dispute will be dealt with at first instance in a Conference conducted by FWA. If the dispute remains unsettled after the conclusion of the Conference, the dismissed employee can proceed to court. In all other cases participation in a Conference is voluntary and a person can elect to proceed directly to court. At court, remedies can include obtaining injunctive relief.

 

The scope of the new workplace rights that employees have is significant and for many employers could prove a lasting legacy of the commencement of the Act. Workplace rights affect all aspects of engaging with staff. They encompass the reasons for not hiring or promoting, how complaints are handled under existing policies and even the process of effecting restructures. Whether and how any decision may impinge upon a workplace right needs to be part of an employer’s decision making process going forward.

 

New enterprise bargaining rules and industrial action

The Act retains the bulk of the tough restrictions on the use of strikes as a means of putting pressure on employers to agree to union and employee demands. However, it makes it harder for employers to ignore unions in the making of enterprise agreements. In particular, the Act:

  • Will remove the current capacity of employers to use non-union agreements to bar unions from exercising rights to enter the workplace to talk to members; and
  • Will give unions and employers rights to seek an order from FWA requiring bargaining in good faith for a collective agreement.

In addition, the concept of “prohibited content” under the WR Act has been removed. Instead, the contents of agreements will now be much broader and limited only by the requirement that they be about “permitted matters. Permitted matters are:

  • Matters pertaining to the relationship between an employer or employers and employees; and
  • Matters pertaining to the relationship between an employer or employers and an employee organisation or employee organisations.

In the period up to 1 January 2010 enterprise agreements will need to pass the no disadvantage test. After that, enterprise agreements will need to pass the better off overall test (BOOT). An agreement that is not a greenfields agreement will pass the BOOT if FWA is satisfied, as at the test time, that each award covered employee and each prospective award covered employee would be better off overall if they were employed under the agreement than under the relevant modern award. It is because the BOOT relates to the modern award that it will not apply until after 1 January 2010.

Enterprise agreements will also be required to include a flexibility term. It will specify which terms of the enterprise agreement can be varied by an individual flexibility arrangement. In addition, certain terms will be unlawful. These will include discriminatory terms and terms that are objectionable. Objectionable terms include those which might infringe a workplace right or require the payment of bargaining fees.

 

The new rules concerning enterprise bargaining and the content of enterprise agreements will bring about significant changes for employers. These changes have been designed to ensure that unions get a “seat at the table” and employers will need to take this into account in their industrial planning. In addition, the new rules regarding good faith bargaining will also require a change in bargaining strategy by employers.

 

The rules for protected action remain largely the same under the Act asunder the WR Act. Protection from penalties for industrial action remain available if industrial action is undertaken during negotiations for an enterprise agreement and on the condition that the parties have been genuinely trying to reach agreement and comply with any good faith bargaining orders made by FWA. However, there are some key differences between the WR Act and the Act including the following:

  • The concept of a bargaining period is removed.
  • It will be easier to comply with the secret ballot requirements. Further,FWA will not have the power to stay protect action ballot orders and employer consent will no longer be required in order to apply to FWA to extend the 30 day period in which industrial action will be protected.
  • Protected industrial action will not be lost to protected participants because unprotected persons join the action (although those unprotected persons will be exposed to orders and penalties).
  • The prohibition against strike pay for protected industrial action will only apply to the actual period of industrial action. In the case of protected overtime bans, employees will not be paid for overtime hours not worked, but they would not lose their rights to payment for ordinary hours. In the case of partial work bans, employers can elect to accept the work and pay full wages, lock out the employees, refuse to accept the work and (if permitted) stand employees down until the employees agree to work full duties or issue a partial work notice and apportion pay accordingly.

 

While the same structure for taking industrial action continues as under the WR Act, employers will need to be aware of the new interplay that will exist between good faith bargaining, seeking a good faith bargaining order and protected industrial action.

 

New right of entry provisions

The right of entry provisions have changed under the Act with the result that unions will now have more scope for access to workplaces. This is because the right to have access in order to hold discussions with employees is based on the union’s eligibility to represent the employees, regardless of whether an enterprise agreement, other form of collective agreement, AWA or ITEA applies to them. The right of entry provisions are likely to be the initial “tool” used by unions as a way of asserting their new rights under the Act and testing the boundaries.

 

Employers should expect that there will be an uptake in the exercise of rights of entry from today onwards. It is expected that this will be part of a union “show of strength” to reflect the commencement of the Act and what is perceived as a structural change in the industrial landscape. Employers should therefore refresh their policies and procedures relating to handling requests to enter the workplace by union that this will be part of a union “show of strength” to reflectofficials and be prepared for increased activity.

 

Other Changes

There is a raft of other significant changes brought about under the Act, including in respect of new rules applying to transfer of businesses. There are also significant procedural changes in respect of the means, timing and processes by which rights and obligations under the Act will be or can be enforced. Many of the procedural changes will still need to be determined as FWA commences to undertake its new responsibilities and role.

Further information

We will continue to update you in respect of important news on the Act and its operations. However, if you have any questions in regards to the changes or impact on your business, then we would welcome the opportunity to discuss these with you further.

Useful links

Useful links on the Act include: