Australia: Review of the Fair Work Act - report and recommendations

Last Updated: 9 September 2012

By Sam Eichenbaum,Lesley Maclou,Chris Mossman and Audrey Mills

When the Rudd Government brought in the Fair Work Act ("Act"), it undertook to have a review of the Act after 2 years of its full operation. That review was conducted in the early part of 2012 and the report has recently been released.

For decades now, employment and industrial relations issues have been one of the major areas of difference between Australia's main political parties. In addition, it goes without saying that there are vastly different approaches to employment and industrial relations issues between the forces of capital and labour. Consequently, it ought to be no surprise that much of the reporting of the review of the Act was focussed on the comments of leading spokespeople for each of the differing camps. Meanwhile, the issues of substance in the report seem to have been lost in the rhetoric of the participants. That, unfortunately, has hidden some interesting proposals.

Workplace Flexibility

When the Industrial Relations Commission was making modern awards, it introduced into all modern awards a term that allowed employers and employees to individually reach agreements about matters that would modify the terms of those awards to suit the circumstances of a particular worker and their employer. Such "Individual Flexibility Agreements" were allowed, provided that the end result was that the employee was better off over all for having entered into the agreement. All Enterprise Agreements must have a flexibility term. There is a model term that would apply if the terms of the Enterprise Agreement don't deal with it. Unions have vigorously resisted clauses like those in modern awards or the model clause. The end result - in many agreements negotiated with Unions the idea that there might be an Individual Flexibility Agreement or arrangement is illusory.

The reviewers recommended changes to make it easier for employers and employees to make flexibility agreements. These include that:

  • the model clause is inserted in all agreements,
  • Individual Flexibility Agreements are lodged with the Fair Work Ombudsman (but not that there be any approval process);
  • non-monetary benefits be taken into account in working out if the employee is better off overall;
  • an employer that complies with these requirements has a defence to a claim of breach of minimum entitlements if it can show that it genuinely believed when it lodged the agreement that it passed the Better Off Overall Test; and
  • the notice period to terminate an individual flexibility arrangement be extended to 90 days.

These changes, if implemented, would go a long way towards allowing employers and employees to reach an agreement which, although not a statutory individual agreement in the same way than an Australian Workplace Agreement was, nevertheless allows for considerable scope for bargaining between employers and individual employees.

Dismissal Claims

The report recommends a number of changes to dismissal claims. Firstly, it recommends bringing the time limit to file both an unfair dismissal claim and a general protections dismissal claim to 21 days (compared to 14 days and 60 days respectively at the moment). Secondly, in deciding a general protections claim (where the employer has to show that none of the prohibited reasons was a reason why it dismissed the worker) the subjective intention of the employer should be the fact that determines why the employer did what it did. Thirdly, Fair Work Australia (which the report recommends should be renamed) should have the power to order a party pay the other party's costs if the first party unreasonably refused to settle the matter.

Other Amendments

There are numerous other amendments recommended by the review. Many of those changes proposed would address particular anomalies that have arisen in the two years of the full operation of the Act. For example, it was recommended that unless an award requires otherwise, annual leave loading not be payable on annual leave paid out on termination of employment. There was also a recommendation that employees not accrue annual leave whilst they are absent on Workers Compensation payments. Various other recommended changes address problems identified, primarily by employers, in enterprise bargaining. This includes giving Fair Work Australia powers to intervene in negotiations of Greenfields Agreements where there has been considerable discussions but no agreement reached between the proposed employer and a Union that would have coverage of the workers to be employed on the project.

All in all, the 53 recommendations of the panel provide a road map for the Government to make amendments to the operation of the Act that would improve it, with most of those improvements providing benefits to employers or individual workers (as opposed to Unions). It will be interesting to see how many of these recommendations the Government proposes to implement and can get through the Parliament.

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