Australia: Fair Work Act Review: Business as usual as the Panel concludes fair work laws are "working well"

Employment Update
Last Updated: 8 August 2012
Article by Alison Baker, Karl Rozenbergs, Mark Dunphy and Jessica Pratt

The highly anticipated report setting out the post-implementation review of the Fair Work legislation was released on Thursday, 2 August 2012 by Workplace Relations Minister, Bill Shorten.

The review is part of the Government's commitment made prior to the introduction of the Fair Work Act 2009 (Cth) (FW Act), to ensure the legislation is operating in accordance with its intended objectives.

The Panel, which included Reserve Bank board member Dr John Edwards, former Federal Court judge, Michael Moore and workplace relations academic Professor Ron McCallum, concluded that since the FW Act came into force, Australia's economy has continued to prosper, evidenced by such outcomes as "wages growth", "the rate of employment growth" and "the flexibility of work patterns".

Unsurprisingly, given the terms of reference of the review, there have been no ground breaking changes that will significantly impact the ever increasing costs on employers of doing business as the review Panel says that "the current laws are working well and system of enterprise bargaining underpinned by the national employment standards and modern awards is delivering fairness to employers and employees".

The Workplace Relations Minister has indicated he will consult with stakeholders regarding the recommendations and release a response in the coming weeks. Therefore the extent to which these recommendations will be legislated, remains to be seen.

The Panel made 53 recommendations on areas where the FW Act could be improved, some have been made to "encourage productivity growth" and others to "enhance equity in the workplace".

For employers, some recommendations will be welcome, while others may be treated with apprehension.

Wins for employers

Hall & Wilcox considers the following recommendations (if implemented) are wins for employers:

  1. Barclay case reversal – Amendment to the general protections provisions so that the central consideration about the reason for adverse action is the subjective intention of the person taking the alleged action. This recommendation reverses the position of the Full Court of the Federal Court decision of Barclay1. In Barclay, the majority stated that while the subjective intention of the employer is centrally relevant, the Court must look for the "real reason" behind the employer's conduct that may be "conscious or unconscious". This is a welcome recommended amendment for employers. The Panel indicated that, under its recommendation, to succeed in a general protections case, the employer would have to convince the judge, on the balance of probabilities, that his/her belief about the lawfulness of the action was "honestly and sincerely held". Barclay is currently on appeal to the High Court of Australia.
  2. JJ Richards case reversal – Amendment to the industrial action provisions so that an application for protected industrial action can only be made when bargaining for a proposed agreement has commenced (ie. voluntarily or by way of majority support determination). This recommendation reverses the Full Bench position set out in JJ Richards v TWU2 and confirmed by the Full Federal Court3 whereby it was held that in circumstances of an employer refusing to bargain, a protected action ballot order was able to be made before bargaining commenced and in the absence of a majority support determination. The Panel commented that "While the law is now settled, we do not think this is the appropriate outcome from a policy perspective... the capacity for protected industrial action to be taken to persuade an unwilling employer to bargain tends to undermine the majority support determination provisions, and represents a clear disconnect with the new bargaining regime in the FW Act." Such a change will be welcomed by employers to provide certainty around exposures to protected industrial action.
  3. Individual Flexibility Arrangements - The review revealed the use of IFAs has not been significant since the introduction of the FW Act, therefore to provide greater flexibility the Panel recommended the following changes:
    • The maximum period for unilateral termination of an IFA be extended to 90 days (from 28 days).
    • The operation of the BOOT be clarified to permit an IFA to confer a non-monetary benefit on an employee in exchange for a monetary benefit, provided the value of the monetary benefit is set out in writing and relatively insignificant.
    • The employer to have a statutory defence to any claim for underpayment and penalties made after entering into an IFA, if the employer notified the FWO of details of the IFA, believed the IFA satisfied the BOOT and there was a reasonable basis for that belief.
    • Enterprise agreements include a model flexibility term so that the areas that can be subject to an IFA cannot be less than the model clause, and there may be capacity for bargaining representatives to negotiate additional flexibility. This is a significant change, as there have been incidents of unions refusing to agree to flexibility terms that operate in respect of more than a small number of matters.
  1. Unfair dismissal costs/timing – Amendment to unfair dismissal provisions allowing FWA to make a costs order against a party that has unreasonably failed to discontinue or settle proceedings or where unreasonable acts or omissions result in costs being incurred. In addition, the time limits for filing unfair dismissal claims and general protections claims be aligned to 21 days post termination (which is a decrease for general protections claims from 60 days to 21 days, and an increase for unfair dismissal claims from 14 days to 21 days).
  2. Enterprise bargaining – To ensure the application of the BOOT to enterprise agreement approvals is not being implemented too rigidly and causing enterprise agreements to be unduly rejected, the Government continue to monitor the application of the BOOT to enterprise agreement approvals. Although this recommendation would not amount to a substantial change, it is a welcome acknowledgement of issues employers have experienced with the BOOT being applied inflexibly and inconsistently.

Missed opportunities for employers

Hall & Wilcox considers that employers will be disappointed with the following recommendations and/or areas where the Panel missed an opportunity to recommend change:

  1. Matters pertaining formulation – The Panel did not recommend any changes to the FW Act with regard to rules relating to enterprise agreement content. This is likely to impact employers in the length of negotiations with bargaining representatives, given the wide range of agreement matters that can be dealt with.
  2. General protections – Employer groups submitted that wide-ranging changes to the general protections provisions are necessary to prevent unmeritorious claims proceeding to Court, for example, by providing more certainty around the term "workplace right" and clarifying what is meant by a "complaint or inquiry", by considering removal of the reverse onus of proof and/or capping compensation. The Panel did not recommend such changes despite submissions regarding the need to deter spurious claims in this jurisdiction.
  3. Coverage and small business – With respect to unfair dismissal, employer groups suggested a number of amendments to unfair dismissal laws, including an increase in the small business threshold, exempting small businesses entirely from the provisions and removing protections for high earning employees who are covered by awards. However, none of these initiatives were adopted by the Panel despite submissions relating to the cost to small businesses of complying with these laws.
  4. "Go away money" - Prior to the introduction of the FW Act, the Government flagged a system where there would be no "go away money" in the context of unfair dismissal claims. The Panel indicated they were anxious to explore options to avoid "go away money", however, the various proposals they were presented with had "unacceptable indirect consequences" for employees and therefore no changes were recommended.
  5. Transfer of business - Despite submissions that the transfer of business provisions place additional burdens on employers and are more complicated and expensive for businesses than previous legislation, the Panel concluded that there was no need to make substantial amendments to the provisions or return to the previous system. The one recommendation made will be welcome to employers, that being that where employees choose to transfer employment within a corporate group, their industrial instruments will not transfer with them and they will be bound by that new employer's terms and conditions.

The Hall & Wilcox Employment team will be monitoring the progress of the recommendations and will provide you with regular updates as to their progress.


1. Barclay v The Board of Bendigo Regional Institute of Technical and Further Education [2011] FCAFC 14
2. JJ Richards & Sons Pty Ltd v TWU [2011] FWAFB 3377
3. JJ Richards & Sons Pty Ltd v TWU [2012] FCAFC 53

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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