Fair Work Bill 2008

LegalTalk - February 2009

Introduction

On 25 November 2008, the Federal Government introduced its highly anticipated Fair Work Bill 2008 (Bill) to replace the previous government's 'Work Choices' national industrial relations system.

The Bill implements key elements of the new government's 'Forward with Fairness' reforms, including:

the National Employment Standards (NES) that will apply to all federal system employees
modern awards to simplify and streamline existing federal and state awards
a new institutional framework for the administration of the national workplace relations system and new bodies to administer the system - Fair Work Australia (FWA) and Fair Work Ombudsman
good faith bargaining
new requirements for agreement content and approval
increasing the access of low-paid, disadvantaged employees to collective bargaining
rules for industrial action, and
a broader and more 'informal' unfair dismissal process with an emphasis on re-instatement and a Small Business Fair Dismissal Code (Code).

The Bill is intended to cover employees of constitutional corporations, the Commonwealth, Commonwealth authorities and employees in the Territories and Victoria.

New safety net

The Bill introduces a new safety net of minimum terms and conditions of employment, comprising the NES and modern awards.

NES

The NES sets out 10 minimum employment conditions for all federal system employees, covering:

maximum weekly hours of work, ie 38 ordinary hours for a full-time employee and reasonable additional hours
the right to request flexible working arrangements for employees who are parents or carers of a child under school age
unpaid parental leave of up to 24 months
four weeks' paid annual leave (five weeks for shift workers) - annual leave can be cashed out provided a minimum accrual of four weeks is retained
personal / carer's leave and compassionate leave - personal / carer's leave may be cashed out for employees under a modern award or enterprise agreement provided a minimum accrual of 15 days is retained
community service leave - this new entitlement gives employees the right to take leave for jury service, voluntary emergency management activities, or another activity prescribed by the regulations
long service leave - existing long service leave entitlements apply pending the development of a national standard
public holidays - employees are entitled to paid public holidays on 1 January, 26 January, Good Friday, Easter Monday, Anzac Day, Queen's Birthday, Christmas Day, Boxing Day, and any other day or part day prescribed by a state or territory law as a public holiday
notice of termination and redundancy - all employees are entitled to receive a minimum notice of termination of employment and redundancy payments in line with federal standards - small businesses are excluded from the obligation to pay redundancy payments, and
Fair Work Information Statement - employers must give each new employee a Fair Work Information Statement published by FWA.

Modern awards

Modern awards, together with the NES, will form a new safety net of employment terms and conditions. The award modernisation process is well underway following the commencement on 28 March 2008 of the amendments to the Workplace Relations Act 1996 (Cth) (Act) by the Workplace Relations Amendments (Transition to Forward with Fairness) Act 2008.

Among other things, those changes provided for the Minister to issue award modernisation requests to the Australian Industrial Relations Commission to kick-start the review process with a view to modern awards commencing on 1 January 2010. The first stage of that process was completed on 19 December 2008, when the Commission issued its award modernisation decision with 17 priority modern awards in the following industries and occupations:

Black Coal Mining industry
Clerks - Private Sector
Fast Food industry
General Retail industry
Hair and Beauty industry
Higher Education industry - Academic Staff
Higher Education industry - General Staff
Horse and Greyhound Training
Hospitality industry (General)
Manufacturing and Associated industries and occupations
Mining industry
Pharmacy industry
Racing Clubs events
Racing Industry Ground Maintenance
Rail industry
Security Services industry
Textile, Clothing, Footwear and Associated industries.

Another Commission decision on 23 January 2009 dealt with:

some draft amendments
stage 2 of the award modernisation process in relation to priority modern awards, to take into account variations to the Minister's request made on 18 December 2008, and
standard provisions dealing with a supported wage system for disabled employees, national training wages and school-based apprentices.
Subsequently, the Commission has issued a list of industries and occupations for non-priority areas and a list of all awards and NAPSAs relevant to those industries and occupations.

Modern awards do not apply to high-income employees who have received and accepted a written guarantee of their annual earnings. The Bill's explanatory memorandum indicates that the high-income threshold will be earnings of $100,000 for full-time employees and a pro rata amount for part-time employees. Earnings include wages, amounts applied or dealt with in any way on the employee's behalf or as the employee directs (but not including employer SGC contributions), the agreed money value of non-monetary benefits, and any amounts or benefits prescribed by the regulations.

New rules for enterprise agreements

The Bill removes the current distinction between union and non-union agreements. Employees may be covered under a single-enterprise agreement or a multi-enterprise agreement, both of which can be made as 'greenfield' agreements. Under the Bill, an enterprise agreement must satisfy the following requirements in order to be approved by FWA:

it has been genuinely agreed
it does not contravene the NES
it passes the 'Better Off Overall Test' (BOOT)
the employees covered by the agreement are fairly chosen
the agreement includes specified terms and does not include any unlawful terms
it specifies a nominal expiry date that is four years or less, and
it contains a dispute settlement clause.

Better Off Overall Test

The current 'No Disadvantage Test' only requires that an agreement does not, on balance, result in a reduction in the overall terms and conditions of employment of employees covered by the agreement. The BOOT introduced by the Bill appears to be more onerous for employers, as it requires that each employee covered by the agreement must be better off overall in comparison to the relevant modern award.

Unlawful terms

The Bill removes the concept of prohibited content. Instead, provisions will be considered unlawful terms if they are discriminatory, inconsistent with the Bill, or seek to override the Bill on such matters as unfair dismissal, industrial action and OHS right of entry. Agreements that contain unlawful terms will not be approved by FWA.

Mandatory flexibility term

The Bill mandates that a 'flexibility term' be included in all modern awards and enterprise agreements. Its purpose is to enable employer and employees to agree on an 'individual flexibility arrangement' that meets their needs. The arrangement must be genuinely agreed and result in the employee being better off overall than if it were not in place. The flexibility term must also allow for the arrangement to be terminated by agreement or with written notice.

Once both parties agree to the individual flexibility arrangement, it will be deemed to be a term of the modern award or enterprise agreement and be legally enforceable. If an enterprise agreement does not include a flexibility term, the 'model flexibility term' (to be prescribed by the regulations) will be taken to be a term of the agreement.

Duty to consult

The Bill mandates that a 'consultation term' be included in all enterprise agreements. It will require employers to consult employees in the presence of the employee's representative (if the employee chooses) about major workplace changes that are likely to have a significant effect on them.

If an enterprise agreement does not include a consultation term, the 'model consultation term' (to be prescribed by the regulations) will be taken to be a term of the agreement.

Interaction with NES

The Bill prohibits a modern award or enterprise agreement from excluding any provisions of the NES. A term of a modern award or enterprise agreement is deemed to have no effect to the extent that it contravenes the NES.

Dismissals

Unfair dismissal

The Bill removes the unfair dismissal exemption for businesses employing 100 or fewer employees and replaces the 'genuine operational reasons' exemption with a 'genuine redundancy' exemption.

Under the Bill, an employee must establish the following to succeed in an unfair dismissal claim:

the employee has been dismissed
the dismissal was harsh, unjust or unreasonable
where relevant, the dismissal was not consistent with the Code - this only applies to businesses employing 15 or fewer employees (Small Business), and
the dismissal was not a genuine redundancy.

A Small Business employer acting in accordance with the Code will be protected from unfair dismissal claims. 'Genuine redundancy' is defined as a dismissal where:

the employer no longer requires the employee's job to be performed by anyone because of changes in the operational requirements of the employer's enterprise
the employer has complied with any duties to consult contained in a modern award or enterprise agreement applicable to the employment, and
it was not reasonable for the employee to be redeployed within the employer's enterprise or an associated entity of the employer.

This definition appears to be more limited and therefore narrower in scope than the current exemption for dismissals due to 'genuine operational reasons' under the Act. The new qualifying periods of service for employees (including casual employees employed on a regular and systematic basis) to be entitled to file an unfair dismissal claim are:

one year, if employed by a Small Business employer, or
6 months, if employed by any other business.

The Bill has reduced the limitation period for lodging an unfair dismissal application from 21 days to 7 days, with the possibility of an extension of time in exceptional circumstances. The limitation period, however, now starts from the date dismissal takes effect rather than from the date that notice of dismissal is given.

Under the proposed new system, FWA will conduct a conference (or a hearing if appropriate) to determine the claim. However, the parties' right to appeal any determination appears limited.

Unlawful dismissal

The Bill retains the grounds for unlawful dismissal contained in the Act (except for s 659(2)(g): "refusing to negotiate in connection with, make, sign, extend, vary or terminate an ITEA".

The Bill has increased the limitation period for lodging an unlawful dismissal application from 21 days to 60 days, with the possibility of an extension of time in exceptional circumstances. Again, the limitation period starts from the date of effect of the dismissal.

The Bill also retains the requirement for employers retrenching 15 or more employees to provide written notice to Centrelink and to consult with the employees' unions about the proposed redundancies.

Right of entry

The Bill retains the types of union right of entry (ROE) currently permitted under the Act, namely:

to investigate suspected contraventions of the Bill or a term of an industrial instrument
to hold discussions, and
to investigate suspected occupational, health and safety breaches.

The Bill allows enterprise agreements to contain ROE terms because the concept of prohibited content has been removed and therefore ROE provisions will no longer be treated as 'prohibited content'. The Bill broadens ROE by allowing unions to:

access all relevant employee records (including those for non-members) when investigating suspected contraventions of the Bill or industrial instruments, and
hold discussions with all employees (including non-members) provided that:

the employees perform work on the premises
the union is entitled to represent the employees' industrial interests, and
the employees wish to participate in the discussions.

The Bill introduces a new provision which prohibits unions from using or disclosing an employee record obtained when investigating suspected breaches, if it is in contravention of National Privacy Principle 2 in Schedule 2 of the Privacy Act 1988 (Cth). Unions are liable to civil penalties if they do not comply. Principle 2 prohibits disclosure of personal information for a purpose other than the primary purpose of collection except in limited circumstances.

Transfer of business

The Bill proposes very significant changes to business transfer rules. Essentially, the Bill appears to propose a return to the situation that existed before the High Court's decision in PP Consultants. This means that to determine whether a business transfer has occurred, the focus is on the work performed by employees rather than the nature of the business being transferred.

The transfer provisions cover a much broader scope of activities than currently applies. For example, a business transfer will occur if:

employment with an old employer has terminated
the employee is employed by a new employer within three months of the termination
the work the employee does for the new employer is substantially the same as that done for the old employer, and
there is a relevant connection between the old employer and the new employer.

There is a 'relevant connection' between the old employer and new employer if, in accordance with an arrangement between the old employer and the new employer, the new employer owns or has a beneficial use of some or all of the assets of the old employer that relate to the transferring work done by the employee. There will also be a sufficient connection if:

the old employer outsources work to the new employer
the new employer ceases to outsource work to the old employer, or
the new employer is an associated entity of the old employer.

Where a transferred enterprise agreement, workplace determination or named employer award applies to a new employer, it will do so to the exclusion of any other enterprise agreement or named employer award that applied to the new employer and the transferring employee in relation to the transferred work. There is no 12-month time limit, unlike the current situation.

Moreover, where an instrument transfers as a result of a transfer of business it may apply to new, non-transferring employees employed by the new employer to do the transferring work if no other enterprise agreement or modern award covers the new employer and the employee in relation to that work. This is a significant extension of the current situation, whereby transferring instruments are limited in their application to transferring employees.

Transfer of employment

In addition to the transfer of business rules, the Bill also proposes to regulate transfers of employment where there is a transfer of business or where the employee moves from one employer to another within three months and the employers are associated entities.

In that situation, an employee's service with the first employer is generally regarded as being service with the second employer for the purpose of calculating service-related benefits. However, a second employer that is not an associated entity of the first may decide not to recognise the employee's service with the first employer for the purpose of calculating annual leave benefits or redundancy pay.

New rights and responsibilities

The Bill sets out 'General Workplace Protections' covering not only freedom of association provisions but also prohibitions against discriminatory or wrongful treatment, coercion, misrepresentation, unlawful termination and sham contracting arrangements.

This part of the Bill creates a new concept of 'workplace rights' that is very broadly defined. The Bill also prohibits persons from taking 'adverse action' against another because the other person has a workplace right. Again, adverse action is broadly defined and civil penalties apply for breaches.

Employers are also prohibited from exerting 'undue influence' or 'undue pressure' on an employee in a variety of situations in relation to them making certain agreements or arrangements.

The discrimination provisions in this part appear to replicate or overlap existing protections against unlawful discrimination under state and federal discrimination legislation. This part seems to create additional remedies for those who claim to have been discriminated against unlawfully.

Transitional arrangements

The Bill does not deal with the transition from Work Choices and Forward with Fairness to the Fair Work regime. That will be dealt with in a separate Bill that is proposed to be introduced to Federal parliament later this year.

Conclusion

The time period for public submissions on the Bill closes towards the end of February 2009, with the Senate Committee's report due soon after that. The government's proposed timetable is that the Bill will become law on 1 July 2009, with most of its provisions commencing then and others (such as the NES and modern awards) commencing on 1 January 2010.

It remains to be seen what amendments, if any, will be made to the Bill between now and 1 July 2009. What is clear, however, is that all federal system employers need to prepare for a dramatically new system of industrial relations that will change fundamentally how they engage and manage their workforces.