On 21 December 2015, the Productivity Commission released its
final report on Australia's current workplace relations
framework. The Workplace Relations Framework Productivity
Commission Inquiry Report (Report) follows
the Productivity Commission's twelve month inquiry into the
performance of Australia's workplace relations framework.
The Report ultimately found that Australia's workplace
relations system is in need of 'repair', but not
The Report includes a number of recommendations for improvement
to the current workplace relations system. The current
federal Government has previously indicated that, if it considers
there is a good case for adopting any of the Report's
recommendations, proposed reforms will be taken to the Federal
election, due this year, for a mandate from the electorate.
As the first of a two part summary, the HopgoodGanim Lawyers
Industrial and Employment Law team has prepared the following
table, summarising some of the key recommendations made in the
Recommendations of the Productivity
Weekend Penalty Rates
Sunday penalty rates. Sunday penalty
rates in the hospitality, entertainment and retail industries
(currently fixed between 150% to 200% in the relevant awards)
should be set at the higher of 125%, and the Saturday award rate
(which is generally fixed between 125% to 150%). This is with the
exception of penalty rates that are part of overtime or shift work
which will remain unchanged. The Report states this is to
reduce the costs penalty rates impose on employers who are under
increasing pressure to provide services on Sundays.
The Federal Minister for Employment, Senator Michaelia Cash, has
since indicated that any changes to penalty rate arrangements would
be left to the Fair Work Commission (FWC) through
changes to the relevant awards. It is, however, difficult to
see how the FWC could or would make those changes without some
legislative imperative to do so.
Penalty rates for existing public holidays.
Penalty rates for existing public holidays should not be
reduced. Employers have argued that penalty rates for public
holidays are too high, but the Report identifies there are strong
grounds for limiting the expectation that employees should work on
Shopping hour restrictions. South Australia,
Western Australia and Queensland should remove anti-competitive
remnant shopping hour restrictions. The Report identifies that such
restrictions are outdated. Removal of shopping hour
restrictions will require legislative change by the States
concerned – perhaps an unlikely prospect over the short term
in the Labor states of South Australia and Queensland.
National Employment Standards (NES) - public holidays
and annual leave
Swapping public holidays. All awards should
include terms permitting an employer and employee to agree to
substitute a public holiday for an alternative day. Some awards
already contain terms to this effect, but the Report recommends
that such a term be introduced into all awards.
State declared public holidays. Employees
should not receive public holiday penalty rates, or paid leave, on
newly designated State or Territory public holidays. The
Report identifies that as the NES currently provide that public
holiday entitlements are to be invoked on any public holiday
declared by State and Territory governments, this enables the
States and Territories to unilaterally create obligations under the
NES for further paid leave entitlements.
Annual leave review. The Australian, State and
Territory governments should jointly examine whether there are
grounds for increasing the current entitlement to 20 days of paid
annual leave in the NES with a cash out option where that suits the
employee and the employer. The Report recommends that any
increase, if implemented, should involve a trade off between wage
increases and extra paid leave.
Unfair Dismissal claims
Lodgement fees. Lodgement fees for unfair
dismissal applications should be non-refundable, and applicants
should be required to pay an additional fee if their claim proceeds
to arbitration. Currently, lodgement fees are refundable if
the matter is discontinued prior to any conference or hearing
before the FWC. The Report identifies that these changes aim to
reduce speculative unfair dismissal claims.
Advice to applicants. The FWC should advise
all parties that, based on recent decisions, a majority of
arbitrated cases do not lead to compensation. According to
the most recent FWC Annual Report, in the financial year 2014-2015
only 12.3% of unfair dismissal claims were successful at
arbitration and only 9.2% overall resulted in compensation.
Dealing with applications 'on the
papers'. The FWC should be given some clearer
powers to deal with applications 'on the papers' –
that is, by administrative review without hearing from the parties
– before conducting any kind of conference or hearing, in an
effort to weed out unmeritorious claims. This may involve the
use of better designed application forms.
The balance between a "valid reason" and
procedural matters. The Report identifies an imbalance
whereby the FWC currently considers procedural matters in
dismissals to be as important as the reason for the dismissal.
The Report suggests, however, that the validity of the reason
for dismissal should be the primary consideration. This was
addressed in the recommendations in two ways.
Firstly, by the implementation of a two-stage test. The first
stage of the test would be whether there was a valid reason for the
dismissal as the more fundamental consideration. If yes, the
second stage would consider whether due process was
Secondly, reinstatement and/or compensation should only be awarded
to an employee where they have been dismissed without a valid
reason (ie, not for serious misconduct or underperformance).
Reinstatement and/or compensation should not be ordered if an
employee's application is upheld due to faults in the
employer's termination process (and where there is otherwise a
valid reason for dismissal). In the latter case, the FWC may
order the employer to undergo training, or may apply to the court
for penalties to be imposed in serious or repeated cases.
It is hoped that these changes would reduce or eliminate the
number of cases which are successful simply due to procedural
Reinstatement. Reinstatement should not
be emphasised as the primary remedy for unfair dismissal. The
Report identifies that compensation is often the chosen
Small Business Fair Dismissal Code. The
Small Business Fair Dismissal Code should be abolished. The Report
identifies that the Code was unclear and was not a sufficient
safeguard for small businesses against liability in unfair
Definition of a 'workplace right'. The
definition of a workplace right should be more precise for example,
by making it clear that the exercise of a workplace right to make a
complaint or inquiry to one's employer must bear a direct and
tangible connection to an employee's employment.
Currently, the extent to which an employee's complaint or
inquiry will constitute a workplace right is unclear. For example,
the courts have taken both a narrow and broad view as to what
constitutes a complaint or inquiry "in relation to" an
employee's employment. A narrow view was taken in
Rowland v Alfred Health  FCA 2, where the Federal
Court found that an employee's complaint about the competency
of his supervisor was not in relation to his employment, and
therefore not a workplace right. However, a broader view has
been taken in decisions such as Henry v Leighton Admin Services
Pty Ltd & Anor  FCCA 1923, where the Federal Circuit
Court accepted that an employee's internal complaint about
alleged issues with his employer's financial reporting was
capable of constituting a workplace right because it was about a
subject that may prejudice the employee in his employment (even
though the complaint was not about the employee's own
Awarding costs against unsuccessful
applicant. The Fair Work Act 2009
(Cth) (FW Act) should be amended to allow
costs to be awarded against an unsuccessful applicant who pursued a
claim contrary to a recommendation by the FWC not to proceed
because the claim has limited prospects of success. The
current situation in regards to costs is that a court may award
costs against a party only in circumstances where the proceedings
were instituted vexatiously or where a party's unreasonable act
or omission caused another party to incur costs.
This recommendation, if implemented, is likely to have little
practical effect as the FWC rarely makes such a
Individual Flexibility Arrangements
Termination. Flexibility terms in modern
awards and enterprise agreements should permit individual
flexibility arrangements to be terminated by giving 13 weeks'
notice (or up to 1 years' notice if agreed by the parties).
Currently, parties can terminate individual flexibility
arrangements with 28 days' notice which, whether from the
employer's or employee's perspective, substantially
curtails their practical utility.
New 'no disadvantage test'. The
'better off overall' test invoked when assessing an
individual flexibility arrangement should be replaced by a
'no-disadvantage' test. The Report states that a
'no-disadvantage' test is less ambiguous.
Enterprise Contract (EC). There should
be a new type of employment instrument – the 'enterprise
contract' – which allows businesses (by agreement with
affected workers) to vary an award for a class of employees, to
suit their business operations and to simplify complex award
language. Currently, if employers wish to modify the
entitlements prescribed by awards they can, either, seek to
negotiate an enterprise agreement, or, an individual flexibility
agreement, both of which can create an excessive administrative
burden on smaller businesses. The Report suggests that the EC
would help bridge the gap in the options available to
ECs would allow employers to instigate a collective arrangement
for a class of employees nominated by the employer, with the
employer choosing whether to seek approval of the EC from the FWC
(although all must be lodged for publication).
While the details of how ECs would work are not entirely clear,
the Report identifies that they would be subject to the following
a 'no-disadvantage test' compared to the relevant
existing employees could not be compelled to join;
employees who joined an EC could withdraw after 12 months, with
the purpose of providing the employer with an incentive to ensure
the EC was more attractive than the relevant award;
ECs would be published on the FWC website for transparency;
an EC would only vary the relevant award to the extent of the
stated variation (and would not displace the award).
Alternative Forms of Employment
Misrepresentation of employment
arrangements. The FW Act should make it unlawful for
an employer to misrepresent an employment relationship as an
independent contractor arrangement where the employer
'could be reasonably expected to know otherwise'.
Currently, an employer will be liable for a breach of the FW Act
sham contracting provisions if they are 'reckless' in
misrepresenting a work arrangement as one for services provided by
a contractor rather than as one of employment. The Report
suggests that the current test of 'recklessness' is too
open to employer abuse and that an alternative test of
'reasonableness' would make a more appropriate – and
tougher – benchmark for employers to observe.
Unlawful terms. Enterprise agreement
terms that restrict the engagement of independent contractors,
labour hire workers, or casual workers, or that generally restrict
an employer's prerogative to choose an employment mix suited to
their business, should constitute unlawful terms under section 194
of the FW Act. This is to provide employers with greater
flexibility and allow them to lower costs and increase
In the coming days we will be publishing a second alert on the
remainder of the key recommendations from the Productivity
An employee that refused a reasonable offer of settlement was ordered by the FWC to pay his ex-employer's legal costs.
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