Australia: How will the changes to the Fair Work Act affect employers?

Last Updated: 10 December 2012
Article by Dan Trindade and Amy Lee

Key Points:

The Fair Work Amendment Act will bring changes to unfair dismissal and enterprise agreements.

The Fair Work Amendment Act 2012, containing approximately one-third of the Fair Work Act Review Panel's 53 recommendations in its Report, was passed by the Senate on 28 November 2012 and assented to on 4 December 2012. Employers should start thinking about how to be ready for the first tranche of changes, especially the new mechanisms which may assist to manage the conduct of unfair dismissal claims and the making of Enterprise Agreements.

Changes to how Enterprise Agreements are made

Applicants seeking a scope order from the Fair Work Commission (the new name for Fair Work Australia) to determine the coverage of a proposed Enterprise Agreement no longer must notify all other relevant bargaining representatives of the application; they will now only be required to "take all reasonable steps" to notify them.

Employers must issue a Notice of Representational Rights as strictly prescribed by section 174 of the Fair Work Act and the regulation. This means an employer may no longer argue it "substantially complied" with the notice requirements and cannot alter or add its own content to the form.

An employee organisation or an official of an employee organisation cannot act as a bargaining representative unless it is entitled to represent the interests of the employee(s). This change seeks to clarify an individual union official cannot represent employees who do not fall within the coverage of the union rules in a personal or professional capacity. This change may potentially assist to minimise demarcation disputes."Opt out" clauses in Enterprise Agreements are now unlawful, including in enterprise agreements already approved by Fair Work Australia. Employees will now not be able to opt out of an enterprise agreement using such a clause, but if an employee has already opted out this will still be valid. This will mean that employers will need to consider other mechanisms for making flexible working arrangements with individual employees, such an individual flexibility agreement. One-employee Enterprise Agreements are prohibited. This means employers can no longer make an Enterprise Agreement with just one employee (for example in a start-up phase), and must ensure that the coverage of its employees is "fairly chosen" on a geographical, operational or organisational basis.
Protected action ballots also have some changes:

  • electronic voting is permissible;
  • employee bargaining representatives and new employees who become a union member after a protected action ballot has been granted may vote and take protected industrial action; and
  • the Fair Work Commission will ensure ballot agents conduct ballots expeditiously.

Unfair dismissal – changes to procedures in the Fair Work Commission

Three key changes have been made to the procedures for unfair dismissal claims.

First, the time limit for lodging unfair dismissal claims will be increased from 14 days to 21 days. On the other hand, general protection claims relating to a termination of employment will have to be lodged within 21 days from the date of termination, down from 60.

Secondly, the Fair Work Commission has more powers to manage unfair dismissal claims. The President may require applicants to provide more information about the circumstances of the dismissal in the initial documentation they lodge. This may assist employers to gain a clearer understanding of the case being brought against them. The Commission can also dismiss an application where:

  • the parties have concluded a settlement agreement; or
  • an applicant fails to attend a proceeding or comply with its directions or orders.

Finally, the Fair Work Commission may make costs orders. It can do this against a party that has:

  • unreasonably failed to discontinue a proceeding; or
  • unreasonably failed to agree to terms of settlement that could have led to discontinuing the application; or
  • has caused the other party to incur costs through an unreasonable act or omission.

It can also make cost orders against lawyers or paid agents, irrespective of whether the lawyer or agent was permitted to represent a party.

Whilst on the face of them, these changes appear beneficial to employers, the strong likelihood is that they will, in practice, provide little relief to employers from the challenges of the unfair dismissal regime. The reluctance of most members of industrial tribunals to order costs against employees or dismiss or strike out claims (even when they appear to be without any merit) is unlikely to change despite the changes the FWA Bill has made.
Where to from here? Is there a second tranche of changes to the Fair Work Act?

This first wave of changes has addressed a number of issues raised by the Fair Work Act Review Panel but a number of big-ticket issues have not yet been addressed. Given that many of the changes that haven't been made are the more contentious ones, it is very unclear if they will be made before the next Federal election. Some of the issues that have not be addressed are:

  • whether good faith bargaining obligations also apply to negotiation of greenfields agreements (and whether the Fair Work Commission could intervene if these negotiations have hit an impasse). Employers with major projects have been concerned with union representatives' ability to apply pressure by delaying major projects as the good faith bargaining principles do not currently apply to greenfields agreements;
  • whether expired fixed-term contracts will be deemed as a "dismissal" for the purpose of making an unfair dismissal claim where the substantial purpose of the fixed-term contracts was to avoid unfair dismissal;
  • right of entry issues arguably remain largely unresolved for employers; and
  • whether employees accrue annual leave while absent from work and are receiving workers' compensation payments.

While the Report did not make a recommendation on this issue, many employers are also particularly concerned by the withdrawal of notice of employee industrial action at the eleventh hour, a tactic they say is a misuse of the notice provisions and one which skews the balance of inconvenience and cost of industrial action against employers.

Key actions for employers now the Fair Work amendments have been passed

You should obtain advice about how these changes affect your contracts, Enterprise Agreements and HR policies and procedures.

Be aware what the pending changes to unfair dismissal could mean for you as an employer:

  • check the date of unfair dismissals applications and general protection claims relating to a termination of employment complies with the new time limits;
  • seek advice on whether the applicant's initial documentation lodged with the Fair Work Commission provides sufficient information about the alleged circumstances of their dismissal;
  • seek advice on whether there are grounds to apply for a cost order; and
  • seek advice on whether there is scope to apply to the Fair Work Commission for an unfair dismissal application to be dismissed.

Seek advice on updating your bargaining strategy:

  • one-employee enterprise agreements are prohibited;
  • confirm an individual union official actually has coverage of the employees in negotiations;
  • draft Notice of Employee Representational Rights carefully so that it conform with section 174 of the Fair Work Act and the regulation; and
  • make sure your Enterprise Agreements don't contain clauses which allow employees to opt out of the Enterprise Agreement.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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