Update on the Fair Work Act - moving from 'Choices' to 'Fairness'

LegalTalk - June 2009

The Fair Work Act 2009 (Cth) (Act) received royal assent on 7 April 2009, ready for its proposed commencement on 1 July 2009. Since our last update on this topic earlier this year, this important piece of legislation has undergone some significant changes.

Amendments by the Senate

The Fair Work Bill initially passed through the Senate on 19 March 2008 with numerous amendments. Some of the more important changes were:

Payment of wages: extra protections for employees require an employee to specify any amount of wages that the employee authorises for deduction and to authorise in writing any variation to the amount of the deduction. The amendments also make clear that an authorisation may be withdrawn by the employee at any time.
High income threshold: Regulations cannot be made that would reduce the high income threshold to address unions concern that the figure could be altered, potentially excluding many (or all) employees from award coverage without requiring Parliamentary approval.
Greenfields agreements: the requirement that employers notify all relevant employee organisations of their intention to make a greenfields agreement has been removed. The amendments allow a greenfields agreement to be made and approved without the need to cover all relevant unions, provided that Fair Work Australia (FWA) is satisfied that the union or unions that are covered by the agreement will, taken as a group, be entitled to represent the interests of a majority of the employees to be covered by the agreement, and it is in the public interest to approve the agreement.
Enterprise agreements and Better Off Overall Test (BOOT): the operation of the BOOT test has been clarified - for example, the FWA may consider the circumstances of classes of employees (rather than individual employees) when determining whether the test is met. The amendments also establish an evidentiary presumption that, in the absence of evidence to the contrary, if an agreement covering a class of employees passes the BOOT test, then an employee belonging to that class of employees would also be better off overall under that agreement.
Good faith bargaining: rules fine-tuned, for example, providing a mechanism for employees to revoke the appointment of a bargaining representative for an enterprise agreement by written instrument, and providing an additional good faith bargaining requirement that a bargaining representative must recognise and bargain with other bargaining representatives for a proposed agreement.
Transfer of business: FWA's powers extended - for example, FWA will be required to consider additional factors when making orders on the transfer of instruments to new businesses, and providing an additional ground on which FWA may vary an industrial instrument covering transferring employees so that it operates in a way better aligned to the working arrangements of the new employer's enterprise.
Right of entry: requirements tightened to provide extra protection for employee records and other information - for example, a permit holder can only inspect or copy documents (such as employee records) that are 'directly' relevant to a suspected contravention. The amendments specify that an employer is not required to hand over a document if it would breach a state or federal law (including the Privacy Act), and the prohibition on unauthorised use or disclosure of information was extended to cover not only employee records but also other information and documents.
Reinstatement: this remedy was expanded with the amendment of the 'General Workplace Protections' provisions to include a new FWA power to order the 'reinstatement' of an employee to a job with an 'associated entity' of their former employer in limited circumstances.
Underpayments: a 6 year time limit was added, preventing a court from making an order regarding an underpayment claim that arose more than 6 years before the claim was made.

Passage of the Bill

The House of Representatives disagreed with a number of the Senate's amendments. Following intense debate, on the morning of 20 March 2009, the Fair Work Bill again passed through the Senate after an agreement was struck between the Government and the Senate in relation to the disputed amendments. As a result, the Senate did not insist on the disputed amendments, which allowed the Government to be on schedule for the implementation of its key industrial relations changes by 1 July 2009.

Under the agreement, there will be a phasing-in of the definition of 'small business employer' for unfair dismissal purposes and it will be dealt with in the Fair Work (Transitional Provisions and Consequential Amendments) Bill 2009 (Cth) (Transitional Bill) when it is debated in Parliament. It is intended that from 1 July 2009, the threshold used to define a 'small business employer' for the purposes of applying the new unfair dismissal laws will be fewer than 15 employees on full-time equivalent basis; and the threshold will then change to a simple headcount basis from 1 January 2011.

The Government also agreed that the objects of the Act should acknowledge the special circumstances of small and medium-sized enterprises. Again, this will be dealt with in the Transitional Bill. In addition, a specialist information and assistance unit will be created for small and medium-sized enterprises within the Office of the Fair Work Ombudsman. FWA will also undertake in 2012, a thorough review of employers' experience (particularly small and medium-sized businesses) with respect to the unfair dismissal system.

Transition

Transitional Bill

The Transitional Bill is the first of two Bills which make transitional and consequential provisions in relation to the new Fair Work system. This Bill repeals the Workplace Relations Act 1996 (WR Act) (other than Schedules 1 and 10) which will form a new Act, makes transitional provisions to move employers, employees and unions from the old system to the new, and makes consequential amendments to Commonwealth legislation that are essential to the operation of the Act (for example, the creation of the Fair Work Divisions of the Federal Court and the Federal Magistrates Court).

The Transitional Bill provides that most provisions of the Act will commence on a day fixed by proclamation, which is anticipated to be 1 July 2009. The National Employment Standards (NES) and modern awards will commence on a later day (anticipated to be 1 January 2010).

The Transitional Bill allows for the operation of the Act and the continued operation of some provisions of the WR Act in the 'bridging period' between 1 July 2009 and 1 January 2010. Key features of the Bill include:

All industrial instruments (other than transitional awards and common rules for excluded employers) made before the Act commences will become 'transitional instruments' from 1 July 2009, and will continue to apply as if the WR Act had not been repealed.
Individual transitional employment agreements (ITEAs) can be made until 31 December 2009.
Pre-reform agreements and notional agreements preserving State awards (NAPSAs) can be extended or varied until 31 December 2009.
Instruments applying to non-national system employers (e.g. pre-reform agreements made under the conciliation and arbitration power) terminate on the earlier of 27 March 2011 and when it passes its nominal expiry date and is replaced by a State employment agreement.
NAPSAs are set to terminate on 31 December 2013 or later date set by the regulations.
Bargaining for enterprise agreements can take place under the Act from 1 July 2009 and enterprise agreements lodged during the bridging period (i.e. until 31 December 2009) will be assessed by FWA against the no-disadvantage test.
Most of the relevant provisions of the WR Act will continue to apply to 'transmissions of business' occurring before 1 July 2009, and 'transfers of business' occurring from 1 July 2009 will be covered by the Act. The relevant time is when the transmission or transfer of business occurs, not when the transfer of employee occurs.
FWA to commence from 1 July 2009, and Australian Industrial Relations Commission (AIRC) and Australian Industrial Registry (AIR) to cease operations on 31 December 2009; Commissioners will hold dual appointments during the bridging period; Fair Work divisions of Federal Magistrates Court and Federal Court will operate from 1 July 2009; Workplace Ombudsman abolished and functions assumed by Fair Work Ombudsman from 1 July 2009; Workplace Authority will operate until 31 January 2010 to complete the assessment of agreements made before 1 July 2009 and ITEAs; and Australian Fair Pay Commission (AFPC) will cease on 31 July 2009.

State Referral Bill

On 27 May 2009, the Government introduced its second transitional bill - the Fair Work (State Referral and Consequential and Other Amendments) Bill 2009 (Cth) (State Referral Bill). This Bill proposes to amend the Act to enable States to refer matters to the Commonwealth with a view to establishing a national workplace relations system, at least for private sector employers and employees. It envisages that State references of these matters may be subject to certain exclusions relating to public sector employment (including in relation to law enforcement officers).

The State Referral Bill makes transitional arrangements for Victorian employees and employers, who are currently covered by the WR Act as a result of a reference of power, and who are expected to be covered by a new reference of power. It is expected that only Victoria will be a referring State when most of the Act commences on 1 July 2009. Other States have ruled out a full referral of State Industrial Relations powers, but have not determined their final position in relation to whether they will refer their powers to the Commonwealth and if so, to what extent.

The State Referral Bill makes transitional and consequential amendments to other Commonwealth legislation (e.g. the Human Rights and Equal Opportunity Commission Act 1986 (Cth) and the Migration Act 1958 (Cth)) to provide clarity and consistency with respect to the operation of that legislation in the new Fair Work system. The State Referral Bill also allows further transitional or consequential arrangements to be addressed in regulations made under the Act.

Conclusion

It remains to be seen what further changes will be made to the First Transitional Bill and the State Referral Bill before these pass the Senate, and the effects any amendments will have on the operation of the Act.

Nevertheless, as we approach the tentative commencement date of the Act on 1 July 2009, it is more important than ever for employers to prepare for the new Fair Work system by reviewing their existing arrangements, including awards, contracts, agreements and policies to ensure they comply with the new rules, and by seeking professional advice when necessary.