Australia: Fair Work Review Panel says the Fair Work Act is 'fair'

Last Updated: 10 September 2012

By Paul Burns, Partner, and Natalie Spark, Senior Associate

In brief

  • The Fair Work Review Panel has released its report on its review of the Fair Work legislation.
  • Despite calls for substantive change to the Fair Work Act from most quarters, the Review Panel generally concludes that the current laws work well, and deliver fairness to both employers and employees. This is not a surprising outcome given the terms of reference set by the Federal Government.
  • In all, 53 recommendations are made for the improvement of the Act. They do not deliver the substantive changes sought by many employers or unions.
  • Employers will welcome recommendations which, for example
    • reverse the decisions of the Full Federal Court in Barclay and JJ Richards
    • make unfair dismissal applicants more accountable, and
    • make the transfer of business provisions more workable.
  • Some of the recommendations are likely to be viewed with some caution by employers, while others will be seen as concerning.


The introduction of the Fair Work Act (Act) in 2009 changed Australia's industrial relations landscape. Due to the significant nature of those reforms, the Federal Government committed to a post-implementation review of the legislation. The review panel appointed for that purpose comprised of Professor Emeritus Ron McCallum AO, the Honourable Michael Moore, and Dr John Edwards'delivered its highly anticipated report1 today.

The panel's task was defined by the terms of reference released by Employment and Workplace Relations Minister Bill Shorten: to examine and report on whether the Fair Work legislation is operating as intended and in accordance with the objects of the Act.

The submissions made to the review panel by stakeholders were largely unsurprising. Unions, for example, wanted to be able to bargain about a broader range of matters, access protected industrial action with fewer hurdles, extend the application of the unfair dismissal laws, and expand their rights to enter workplaces. Employers, on the other hand, focused on issues such as the need to improve productivity and increase flexibility in workplaces.

The panel made 53 recommendations for the 'improvement' of the Act. Not surprisingly, it does not endorse the sweeping changes sought by many employers. Nor, however, do the recommendations deliver the unions' wish list.

Employers will certainly take comfort in the recommendations which, in effect, reverse the decisions of the Full Federal Court in JJ Richards and Barclay, and those which make an applicant to unfair dismissal proceedings more accountable. The proposed change to the transfer of business rules will also be welcomed by employers who want to provide employment opportunities for employees within their corporate group.

The manner in which the other recommendations are viewed by employers will depend on their particular circumstances. Employers may be alarmed by some proposed procedural requirements in bargaining, such as the need to lodge a notice of employee representation rights with Fair Work Australia (FWA) and the requirement to, in effect, inform all relevant unions of an intention to negotiate a greenfields agreement. Employers may, as a general rule, also be wary of (but in other circumstances encouraged by) proposed changes which permit FWA to adopt a more interventionist role in bargaining disputes, including in relation to greenfields agreements.

Enterprise bargaining and agreement making

The most significant areas of reform when the Fair Work Act was introduced were to enterprise bargaining and agreement making. The introduction of scope orders and majority support determinations, the concept of bargaining representatives, and the good faith bargaining obligations have been the subject of much case law.

FWA (which, incidentally, the panel recommend be renamed) and the courts continue to provide guidance on these areas of the legislation through their decisions, as we outlined in our Employee Relations Alert dated 1 August 20122 .

The contentious area of 'bargaining' is where the panel makes its most substantive recommendations. Of note (and in some cases concern) are the recommendations that:

  • the good faith bargaining obligations apply in negotiations to vary an enterprise agreement, and when bargaining for a greenfields agreement
  • FWA be empowered to intervene on its own volition in bargaining disputes (including negotiations for a greenfields agreement), to assist parties through a process of conciliation
  • an employer, in effect, notify all unions with possible representation rights of its intention to make a greenfields agreement
  • FWA have 'last resort' arbitral powers to resolve an impasse in negotiations for greenfields agreements
  • opt-out clauses be prohibited in enterprise agreements
  • an employer be required to lodge a notice of employee representational rights with FWA, for publication on its website
  • prohibit a union official from being appointed a bargaining representative for employees for whom that union does not have coverage, and
  • the application of the better off overall test be monitored to ensure that it is not being implemented in too rigid a manner or resulting in agreements being inappropriately rejected.

Industrial action

Two recommendations are particularly worthy of note in the area of proposed reform to the industrial action provisions in the Act.

The first is to restrict access to protected industrial action to situations where bargaining has commenced voluntarily, or a majority support determination has been obtained. This, in effect, reverses the decision of the Full Federal Court in the JJ Richards case.

The second is to remove the current powers of the Minister to terminate protected industrial action by way of ministerial declaration. The current provision providing that power has not been utilised in the three years that the Fair Work Act has been in effect. Fair Work Australia will retain its limited power to terminate protected industrial action on application by the federal Minister, some state Ministers, or a bargaining representative.

General protections

Despite the stated disinclination of the panel to recommend legislative change where there was a reasonable prospect that judicial interpretation of existing provisions would address the perceived problem, the panel has recommended changes to the adverse action provisions. These proposed changes, in effect, reverse the majority decision of the Full Federal Court in Barclay. In that case, Justices Gray and Bromberg found that a decision maker can be 'infected' with prohibited reasons by an 'unconscious bias'. Most commentators expect the decision of the High Court of Australia to be handed down shortly. Nevertheless, the panel's recommendation is to make clear that the central consideration about the reason for taking adverse action is the subjective intention of the decision maker.

Another recommended change which will be welcomed by employers is to reduce the timeframe for bringing a general protections claim relating to termination of employment from 60 days to 21 days.

Unfair dismissal

The submissions to the panel on the current unfair dismissal laws were polarised. Unions sought increased coverage of the unfair dismissal provisions to include casuals, high income employees and labour hire workers, and to reduce the minimum qualifying period. Many employer submissions pointed to the increase in the number of unfair dismissal claims under the Fair Work system, and the associated costs in defending those claims.

The bulk of the panel's recommendations to the unfair dismissal laws are designed to make applicants more accountable for their claims. Under the proposals, costs orders will be available against applicants who unreasonably fail to discontinue a proceeding or agree to terms of settlement. The tribunal will also have the power to dismiss unfair dismissal applications on the papers' where an applicant fails to comply with directions or orders, or fails to attend a proceeding. More rigour will be expected of applicants in providing information relating to the dismissal on the initial application form. These proposed amendments were in response to numerous submissions from employers expressing their frustration about the need to pay 'go away' money to settle unmeritorious unfair dismissal applications.

The panel recommended the time for lodging an unfair dismissal claim be extended from 14 days, to 21 days, in line with the proposed timeframe for general protections claims.

Transfer of business

In a change also likely to be welcomed by employers, the panel recommends amendments to the transfer of business provisions which will provide greater flexibility for employees who want to transfer employment within a corporate group. In such circumstances, the employee's previous industrial instrument will not transfer with them.

The safety net

The panel recommends a number of relatively minor amendments to the National Employment Standards. Of note are the recommendations that employees absent from work on workers' compensation do not accrue annual leave, and that annual leave loading is not payable on termination of employment. The panel also recommends that requests for flexible working arrangements be made available to a broader range of carers.

Individual flexibility arrangements (IFAs) were seemingly included in the Act to compensate the loss of statutory individual employment agreements (AWAs). The current IFA provisions have proven to be unworkable for employers, and are rarely used. Of some surprise then is the proposal that employers lodge IFAs with the Fair Work Ombudsman. This would allow, in the panel's view, the Ombudsman to investigate, in its absolute discretion, whether the use of IFAs are being abused by employers. Other proposed changes will see the maximum period for unilateral notice of termination of an IFA extended from 28 days to 90 days.

Implications for employers

Given the terms of reference, it was not anticipated that the sweeping changes sought by employers would be endorsed for the panel. The recommendations are, in effect, a mixed bag for employers. There are proposed changes which no doubt will be welcomed, while others will be met with caution, concern or alarm.

We now await the conclusion of the Federal Government's proposed consultation process with key stakeholders before learning further about its response to the report.


1 'Towards more productive and equitable workplaces: An evaluation of the Fair Work legislation'
2Freehills article, Bargaining complexity and risks for employers: Freehills paper confirms

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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