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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:
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