Employment & IR - for Employers 15 February 2008

Update - Employment & Industrial Relations

15 February 2008

 

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After work choices: the first steps to 2010

TheFederal Government introduced the Workplace Relations Amendment(Transition to Forward with Fairness) Bill 2008 into Parliament on 13February 2008. The proposed legislation is expected to becomeoperational in about May or June 2008.

Thelegislation aims to lay the foundations for a new industrial relationsframework to begin operating in 2010. By then the Federal Governmentwill have attempted to reach agreement with the State governments toenable the Commonwealth to legislate for a truly national system ofindustrial regulation. Currently, the federal system does not apply toemployers in States other than in Victoria which are not trading orfinancial corporations.

The essential elements of the new legislation are:

  • AWAsabolished - it will be harder to regulate employment using statutoryindividual agreements. The legislation will prevent the use of AWAs,but will allow existing AWAs to continue as late as 2013. A morelimited option for statutory individual agreement-making will beavailable, called ITEAs;
  • stricter no-disadvantage test- to the extent that workplace agreements would diminish existingstatutory employment entitlements, employers will face a more onerousobligation to provide compensation in the agreement for that reduction.Statutory agreements with existing employees will not becomeoperational until they pass this test;
  • harder toterminate collective agreements unilaterally - the existing right ofemployers to terminate expired collective agreements upon giving 90days notice will be replaced by a public

interest test applied by the Australian Industrial

Relations Commission;

    • pre-existingsafety net will return when agreements end - during the life of aworkplace agreement pre-existing awards and collective agreements willnot operate in relation to the employees covered by the agreement.However, these instruments will resume operation if the new agreementis terminated;
    • • oldcertified agreements may be given new life - the AIRC will be able todetermine applications to extend or vary certified agreements thatcommenced operation prior to Work Choices, provided that all partiesagree, no party takes industrial action in relation to the applicationand the variation satisfies a no-disadvantage test using the applicableaward in its pre Work Choices form as the benchmark;
  • no Workplace Relations Fact Sheet - the requirement to give these fact sheets to new and existing employees will be abolished;
  • AIRCto modernise awards - during 2008 and 2009 the AIRC will rationaliseand simplify awards in accordance with specifications issued by theMinister. In this respect awards will deal with more matters than underWork Choices, such as wages and classifications; and
  • NationalEmployment Standards – by 30 June 2008 the Government will have settleda set of minimum employment conditions that will be enshrined inlegislation. New statutory conditions will deal with flexible work forparents, notice of termination, redundancy and long service leave.

These proposed changes and their potential implications are examined in more detail below.

Implications for employers

Inanticipation of these changes becoming effective in mid 2008, employersneed to consider the potential implications for their business. Inparticular:

• Will statutory individual agreements still be a viable option?

Once the legislation prevents the use of AWAs, it

may not be feasible or desirable to have some of

your workforce on AWAs (made before the new

legislation commences) and the balance on

ITEAs (made after the legislation commences).

The no disadvantage test is more onerous in its

application than the current Fairness Test, which

will inevitably lead to differences in conditions

provided under ITEAs compared with AWAs.

If an employer elects to move away from AWAs

they need to explore options to make individual

common law agreements or collective

agreements.

    • What will collective bargaining be like under the new legislation?
    • Inmany areas the rules for collective bargaining have not changed fromWork Choices. However the new legislation gives the AustralianIndustrial Relations Commission the capacity to ‘revive’ pre-reformcertified agreements, that is they can be extended (for up to 3 years)and varied to provide for new wages and conditions. In certaincircumstances, this may be an advantage for employers. While theagreement will not be subject to the rules regarding prohibitedcontent, unions will not be able to organise strike action in supportof their proposals if they wish to retain the more comprehensiveprovisions in the pre-reform certified agreement.
  • Will it be easier to make common law agreements?

Employersare likely to find it easier to contract out of award provisions after2009. The ‘modern awards’ that are to be created by the AustralianIndustrial Relations Commission over the next 2 years must enableemployers to make individual arrangements with employees in respect ofsalary and conditions, where these would otherwise be prohibited by theaward. In the case of employees earning more than $100,000 per annum,the opportunity will be available to

contract out of awards altogether.

N.B. A glossary explaining some of the terms used below is included at the end of this document.

Prohibition on making new AWAs

AnyAWA lodged with the Director more than 14 days after transitioncommencement will not take effect. An AWA lodged before that time willbe subject to the rules in the pre transition Act, including theFairness Test provisions.

AnAWA that is operating at transition commencement will continue tooperate until terminated or replaced. The employer or employee partymay terminate the AWA unilaterally after its nominal expiry date bylodging a declaration to terminate with the Director. The party mustgive at least 90 days notice of lodgement to the other party.

Ifthe AWA is terminated, any award, collective agreement, pre-reformcertified agreement or NAPSA that operated in relation to the employeeparty immediately before the AWA began operating, will resumeoperation.

AnAWA will not be able to be replaced by another AWA. If replaced by anITEA (see below), the AWA will cease operation and can never operateagain.

Anemployee subject to an expired AWA will be able to make and approve acollective agreement or take part in a secret ballot for protectedindustrial action, without the need to first terminate the AWA.

ITEAs

ITEAsare the more limited form of statutory individual agreement that willbe provided for under the transition Bill when it becomes operational.

Notall employers will be able to make an ITEA. The employer must have had,as at 1 December 2007, at least one employee whose employment wasregulated by a statutory individual agreement.

Theemployer will be able to make an ITEA with either a new employee (aperson who has not yet commenced employment with the employer, or if sohas only commenced employment within the last 14 days) or an existingemployee (a person, whether permanent or casual, whose employment isalready regulated by a statutory individual agreement).

Inorder to lodge an ITEA, the ITEA will need to be signed and dated byeach party and the signatures must be witnessed. In the case ofemployees aged under 18 years, an adult guardian must sign.

Ifthe ITEA is made with an existing employee, the ITEA will not commenceoperation until 7 days after the Director issues a notice to theemployer and the employee that the agreement passes the no disadvantagetest (see below). In the case of an ITEA made with a new employee, theITEA will commence operation from the date of lodgement.

AnITEA will not be able to provide for a nominal expiry date later than31 December 2009. However an ITEA will continue to operate past itsnominal expiry date unless terminated.

Nocollective agreement or other ITEA will have effect while an ITEAoperates in relation to an employee. However an employer will be ableto make a collective agreement with an employee who is a party to anITEA that has expired, without the need to first terminate the ITEA.

Theemployer or employee party will be able to terminate an ITEAunilaterally after its nominal expiry date by lodging a declaration toterminate the ITEA with the Director. The party will need to give atleast 90 days notice of lodgement to the other party.

Aswith AWAs, an employee on an ITEA that is terminated will becomecovered by the instrument that would have operated in relation to theemployee’s employment if the ITEA had not been made. For instance, if acollective agreement operated it would resume operation.

No disadvantage test

TheFairness Test will not apply to workplace agreements lodged after thetransition commencement. Instead a workplace agreement lodged aftertransition commencement must satisfy the no disadvantage test. When anagreement is lodged, the Director will need to determine whether anagreement satisfies this test.

The Fairness Test will continue to apply to workplace agreements lodged within 14 days of transition commencement.

Inapplying the no disadvantage test, the Director must have regard to thework obligations of the employee or employees under the agreement. TheDirector may seek further information from the employer party, some orall of the employees subject to the agreement, a bargaining agent inrelation to the agreement and/or in the case of a union collectiveagreement or a union greenfield’s agreement, the union party.

Thistest will require that the agreement not result, on balance, in areduction in the employee’s overall terms and conditions of employmentunder any reference instrument relating to the employee. The referenceinstrument depends on whether the agreement is an ITEA or a collectiveagreement.

Inthe case of an ITEA, the reference instrument is any applicablecollective agreement (including a pre-reform certified agreement) and,to the extent that it operates concurrently with the collectiveagreement, any applicable award.

If no collective agreement applies, the reference instrument is any applicable award or NAPSA.

Ifthese instruments do not regulate the employment, the Director mustdetermine that an award is a designated award for the employee.

Adesignated award must be an award regulating employment conditions ofemployees engaged in the same kind of work as the work performed by theemployee under the ITEA (other than an enterprise award) which theDirector considers to be an appropriate benchmark for the purposes ofthe no disadvantage test. In ascertaining the designated award, theDirector may seek further information from the employer and theemployee concerned.

Anemployer will be able to apply to the Director for a determination thatan award is a designated award for an employee or class of employees.

Inthe case of a collective agreement, the reference instrument is anyapplicable award or NAPSA. If those instruments do not regulate theemployment, the Director must determine that an award is a designatedaward for the employee.

Indesignating an award for the purposes of applying the no-disadvantagetest to a union collective agreement or a union greenfields agreementthe Director may seek further information from the union involved.

Inthe case of a collective agreement (other than a greenfields collectiveagreement), the Director may determine that the no disadvantage test issatisfied because exceptional circumstances mean that approval of theagreement would not be contrary to the public interest. An example ofthis situation is where the agreement is part of a reasonable strategyto deal with a short term crisis in, and to assist in the revival ofthe employee’s business. The Director must publish reasons for any suchdecision on the Workplace Authority’s website. An agreement of thiskind can only have a term of 2 years.

Acollective agreement will only begin operation 7 days after theDirector has issued a notice to the effect that the agreement haspassed the no disadvantage test. An exception is a greenfieldsagreement, which will operate from the date of lodgement.

Ifthe Director determines that a workplace agreement does not satisfy theno disadvantage test, the Director must issue a notice to that effect.The notice will contain advice as to how the agreement could be variedto pass the no disadvantage test.

The employer then has 37 days after the date of issue to lodge a variation of the agreement with the Director.

Ifno action is taken within that 37 day period the agreement will ceaseto operate thereafter. The employees subject to the agreement will thenbe entitled to compensation for the period that the agreement operated.

Ifthe agreement is varied and passes the no disadvantage test, itcontinues in operation. However, employees would still be entitled tocompensation for the period between the date it commenced operation andthe date the variation took effect.

Thecompensation would be the difference between the total value of theentitlements to which the employee would be entitled during that periodunder the reference instrument or the designated award, less theentitlements to which the employee was entitled under the workplaceagreement in respect of that period.

Avariation to a collective agreement must be approved before lodgement.This requires that the employer give all employees subject to theagreement a reasonable opportunity to decide whether they want toapprove the variation. Thereafter, a majority of those persons decidethey want to approve the variation.

Ifa workplace agreement ceases to operate because the employer has nottaken the requisite action to vary the agreement so that it passes theno disadvantage test, the collective agreement and/or awards that, butfor the agreement would have applied, become applicable once again. Inthe absence of any such collective agreement or award, the designatedaward will apply.

A workplace agreement that ceases to operate because it does not pass the no disadvantage test can never operate again.

Despitea workplace agreement ceasing to operate because it does not pass theno disadvantage test, redundancy provisions in that agreement willcontinue to bind the employer for a maximum period of 2 years so longas the employee is employed by the employer or until another workplaceagreement comes into operation in relation to the employee.

Ifan employer has received a notice from the Director regarding the nodisadvantage test in relation to a collective agreement it must takereasonable steps to ensure that all employees covered by the agreementreceived a copy of the notice as soon as practicable.

Anemployer must not dismiss or threaten to dismiss an employee for thesole or dominant reason that a workplace agreement does not or may notpass the no disadvantage test. Breach of these provisions will exposethe employer to penalties. In the case of dismissal for the reasonsreferred to, the court may order reinstatement or compensation onapplication by a workplace inspector, the employee affected or theirunion.

Operation of collective agreements

Thecapacity to terminate an expired collective agreement unilaterally on90 days notice will be removed. Instead a party to the collectiveagreement will be able to apply to the AIRC to terminate the agreement.The AIRC would have the power to terminate if satisfied that to do sowould not be contrary to the public interest. The AIRC would berequired to take into account the views of the parties and the likelyeffect on each party of termination.

Aworkplace agreement will not come into operation unless certainrequirements are satisfied. For instance, if the collective agreementdoes not regulate the employment of persons in a single business orpart of a single business it will not operate despite an employerpurporting to lodge it with the Director. Another example is where anemployer purports to lodge a greenfields agreement with the Directorbut the agreement does not relate to a new business as defined, or anAWA is not properly signed.

Despitethe fact that an employer has lodged with the Director a documentpurporting to be a workplace agreement that is not capable of cominginto operation, the civil remedy provisions in the WR Act will stillapply. This means that the prohibitions on an employer lodging adocument without having provided employees with ready access to theagreement or any information statement, or without obtaining employeeapproval still apply. This allows an employer to be prosecuted forbreaching these provisions even if the document lodged is not capableof coming into operation.

Anaward will have no effect in relation to an employee while theworkplace agreement operates in relation to the employee. However, oncethe workplace agreement has ceased to operate, the award is capable ofoperating again

Content of workplace agreement

Thedeeming of protected award conditions to be part of workplaceagreements unless expressly excluded or modified will be abolished.

Theprovisions preventing incorporation by reference into workplaceagreements of certain industrial instruments will be removed.

Pre-reform certified agreements

Aperson bound by a pre-reform certified agreement will be able to applyto the AIRC for an order extending the nominal expiry date of theagreement or varying its terms. This order can be made on applicationby a person bound by the agreement.

However before making such an order the AIRC would need to be satisfied that:

• all parties genuinely agreed to the extension or variation (which would require a valid majority of

employees to approve the step);

  • noneof the parties have on 14 February 2008 or thereafter organised orengaged in, or threatened to organise or engage in, industrial action,or applied for a protected action in relation to the proposedindustrial action; and
  • in the case of a variation of the term of the agreement, the variation satisfies a no disadvantage test.

Intesting the agreement, the AIRC would need to be satisfied that thevaried agreement would not result, on balance, in a reduction in theemployee’s overall terms and conditions of employment compared to anyrelevant legislation (which will include the Australian Fair Pay andConditions Standard and possibly applicable State legislation) and anyaward that regulated employment immediately before 27 March 2006.

Workplace Relations Fact Sheet

The requirement on employers to issue new and existing employees with the Fact Sheet will be removed.

Awards

TheAIRC will undertake steps to ‘modernise’ awards during 2008 and 2009.The process is invoked by the Minister issuing a request to the AIRCPresident, who will in turn establish one or more AIRC Full Benches tocarry out the award modernisation process. Subject to the directions ofthe President, each Full Bench has complete discretion as to theprocedure for undertaking the modernisation process.

Therequest that will be made by the Minister requires the AIRC to createmodern awards primarily along industry lines by 31 December 2009. Tothat end the AIRC is required to provide by 30 June 2008 a list ofpriority industries or occupations for award modernisation, develop thetimetable for completing the award modernisation process and developthe proposed model award flexibility clause.

These‘flexibility clauses’ will enable employers to agree on arrangementswith individual employees that do not disadvantage the employees andsuit their genuine individual needs, but which might otherwise beinconsistent with award provisions.

Therequest will also enable provisions in awards which will permitemployers to agree with award-based employees earning in excess of$100,000 per annum that the award conditions do not apply to them.

Themodern awards may only contain terms about certain matters. Once itcommences operation, the transition Bill will expand the list ofallowable award matters to include the following:

  • minimum wages;
  • skill based classifications and career structures;
  • piece rates;
  • facilitation of flexible working arrangements, particularly for employees with family responsibilities;
  • rostering;
  • annualisedwage or salary arrangements that have regard to the patterns of workingin occupation, industry or enterprise, provide an alternative to theseparate payment of wages or salaries or other monetary entitlementsand include appropriate safeguards to ensure the individual employeesare disadvantaged;
  • superannuation; and
    • procedures for consultation, representation and dispute settlement.
    • Inaddition, terms about certain matters that the pre-transition Actprevented from being included in awards will now be able to beincluded. These matters are:
  • matters that do not pertain to the employment relationship;
  • redundancy pay for small employers;
  • trade union training leave;
  • union participation in dispute settlement;
  • conversion from casual employment to another employment;
  • union picnic days;
  • restrictions on use of labour hire or contractors;
  • restrictions on the range or duration of training arrangements;
  • the maximum or minimum hours of work for

regular part timers; and

• the number or proportion of employees that may be employed in a particular type of employment.

Existingaward terms about superannuation will continue beyond 30 June 2008.Terms that breach freedom of association provisions, terms about unionrights of entry and terms that are discriminatory must not be includedin modern awards.

Asa general rule, modern awards are to be national in operation and notconfined to particular State or territory boundaries. However thetransition Act will allow state-based differences in modern awards fora transition period of up to 5 years after the commencement of themodern award.

Underthe pre-transition Act all NAPSAs were to cease operation on 27 March2009. The new legislation will extend their operation to 31 December2009.

National Employment Standards

TheFederal Government intends to enshrine 10 National Employment Standardsin the WR Act, which would commence operation in 2010. To this end, theMinister released a draft of the Standards on 14 February 2008 fordiscussion purposes. The draft Standards add to the existing minimumentitlements to annual leave, personal/carer’s leave, maximum workinghours and parental leave provided in the WR Act. The additionalStandards are summarised as follows:

  • anemployee who is a parent of a child under school age and hasresponsibility for the child’s care may request flexible workingarrangements from their employer until the child reaches school age.The employer can only refuse the request on reasonable businessgrounds;
  • in addition to the entitlement to 12 months’unpaid parental leave, an employee may request additional leave fromtheir employer of up to 12 months. The employer can only refuse therequest on reasonable business grounds;
  • an employeewill be entitled to be absent from work to engage in prescribedcommunity service activities such as jury service and emergency serviceduties (including reasonable travel and rest time); and
  • aStandard will ensure that when a workplace agreement ceases operationthe employee’s long service leave entitlement will continue to beregulated by an applicable award or State legislation;
  • anemployee will have the right to be absent on a public holiday. If theemployee would have otherwise worked ordinary hours on the publicholiday the employee will be entitled to public holiday pay;
  • anemployee will be entitled to a minimum period of notice of terminationin writing. The periods proposed reflect the existing minimum statutorynotice periods in the WR Act;
  • an employee of anemployer with 15 or more employees will be entitled to redundancy paybased on Redundancy Test Case Standard set by the AIRC in 2005; and
  • uponcommencement of employment an employee will be entitled to a Fair WorkStatement, which will contain information about the antional EmploymentStandards, modern awards, agreement making, freedom of association andthe role of Fair Work Australia.

Australian Fair Pay Commission

TheAFPC will continue to undertake annual minimum wage reviews in 2008 and2009 for the purposes of adjusting wage rates and existing APCSs.However, the AFPC will not have the power to make new APCSs.

The AFPC will retain the power to adjust the standard FMW or a special FMW.

Glossary

AFPC: Australian Fair Pay Commission.

APCS: Australian Pay and Classification Scale.

AWA: Australian workplace agreement made under the WR Act.

collective agreement: A collective agreement made under the WR Act.

Director: Workplace Authority Director.

FMW: Federal Minimum Wage.

ITEA: Individual transitional employment agreement made under the WR Act after transition commencement.

NAPSA: A notional agreement preserving a State award which operates under the WR Act.

pre-reform certified agreement:Collective agreement made under the WR Act before Work Choicescommences in respect of which an application for certification was madebefore Work Choices commencement.

pre-transition Act: WR Act in its current form.

statutory individual agreement:AWA, preserved State individual agreement with the meaning of Schedule8 of the WR Act or an employment agreement within the meaning ofsection 887 of the WR Act.

transition Bill: Workplace Relations Amendment (Transition to Forward with Fairness) Bill 2008.

transition commencement: Assuming the transition Bill becomes law, the date the legislation commences.

Work Choices amendments: Amendments made to the WR Act by Workplace Relations Amendment (Work Choices) Act 2005.

Work Choices commencement: 27 March 2006.

WR Act: Workplace Relations Act 1996 (Cth).

contact details

melbourne

Charles Power, Partner

t: +61 (0)3 9321 9999

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sydney

Stephen Trew, Partner

t: +61 (0)2 8083 0388

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brisbane

Paul Hardman, Partner

t: +61 (0)7 3135 0675

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