Australia: The ALP´s Forward With Fairness Bill – The First Step Towards Reform Of The Australian IR System

On 13 February 2008, the Rudd Labor Government introduced legislation designed to address the first phase of a two phase agenda for the reform of the Australian industrial relations system.

The reform agenda was outlined in the ALP's Forward with Fairness Policy and Implementation Plan released last year (click here for our workplace relations update – special election edition, october 2007) and formed a key part of the ALP's election commitment in the federal election last year.

Key changes

The Workplace Relations Amendment (Transition to Forward with Fairness) Bill 2008 (Bill) proposes the introduction of 8 key changes to the Workplace Relations Act 1996 (Cth) (Act) as follows:

1. the abolition of the current Australian Workplace Agreement (AWA) regime;
2. the introduction of Individual Transitional Employment Agreements (ITEAs), which will be available to workplaces that have AWAs as a form of regulation until 31 December 2009;
3. the introduction of a new no disadvantage test for the approval of workplace agreements;
4. the removal of the concept of protected award conditions;
5. the reinstatement of the award or previous workplace agreement as opposed to the Australian Fair Pay and Conditions Standards (AFPCS) and protected conditions, as the applicable instruments applying to employees in circumstances where a workplace agreement is terminated;
6. the introduction of provisions to enable the Australian Industrial Relations
   Commission (AIRC) to undertake the process of modernising awards;
7. the introduction of provisions enabling employers to make application to the AIRC to extend and vary pre-reform certified agreements (ie pre March 2006 certified agreements); and
8. the abolition of the Workplace Relations Fact Sheet.

The Bill also contains transitional arrangements which allow AWAs and collective agreements made before the commencement date of the Bill to continue in operation under most of the current rules pending the introduction of a new industrial relations system in 2010.

When will the Bill take effect?

The Bill has been referred to a Senate Inquiry, which is due to report to the Senate on 28 April 2008.

If the Bill remains in its current form, (which will depend upon the position taken by the Opposition to the proposed reforms), then it will not be passed before Easter, which was the timing proposed by the Rudd Labor Government and could be delayed for some time.

Abolition of AWAs

Once the Bill is enacted, employers and employees will not be able to make AWAs.

However, AWAs made prior to the commencement date of the Bill will remain in force until they are terminated in accordance with the current rules.

Employers will be able to continue to make employee collective agreements, union collective agreements, union collective greenfield agreements and employer greenfield agreements, but these agreements will be subject to the new no disadvantage test.

The introduction of ITEAs

An employer and employee will be able to make an ITEA if, as at 1 December 2007 the employer employed at least one employee on an individual statutory agreement (such as an AWA, pre-reform AWA, a preserved individual state agreement or a Victorian employment agreement). However, an employer will not be able to make an ITEA with an employee unless:

1. the employee is a new employee and the ITEA is made within 14 days of the commencement of the employee's employment; or
2. the employee is an existing employee whose employment relationship is regulated by an AWA, pre-reform AWA, a preserved individual state agreement or a Victorian employment agreement.

ITEAs will have a nominal expiry date of no later than 31 December 2009 and will be subject to the new no disadvantage test.

The new no disadvantage test

The "fairness test" will be replaced by the "no disadvantage test", which will apply differently depending upon the nature of the workplace agreement.

For ITEAs, the Workplace Authority Director will need to be satisfied that the ITEA will not result, on balance, in a reduction in the employee's overall terms and conditions of employment under:

1. a relevant collective instrument that would have applied but for the ITEA;
2. a relevant collective instrument and a relevant general instrument if they are capable of operating together;
3. if there is no relevant collective instrument, the relevant general instrument; or
4. if there is no relevant collective agreement or relevant general instrument, an appropriate federal award designated by the Workplace Authority Director.

For collective agreements, the Workplace Authority Director will need to be satisfied that the collective agreement will not result, on balance, in a reduction in the employees' overall terms and conditions of employment under the relevant general instrument or an appropriate federal award designated by the Workplace Authority Director.

For the purposes of the no disadvantage test:

1. "a relevant collective instrument" is a collective agreement, a pre-reform certified agreement, an old IR agreement, a preserved collective state agreement, a workplace determination or a s 170MX award; and
2. "a relevant general instrument" is a federal award, a common rule declaration, a transitional Victorian reference award, or a notional agreement preserving a state award.

The Workplace Authority Director will have the ability to approve agreements that do not meet the no disadvantage test in exceptional circumstances and employers will be able to lodge variations and make undertakings in circumstances where agreements do not pass the no disadvantage test in the first instance.

The removal of protected award conditions

The Bill proposes to repeal the section of the Act dealing with this issue, as it will be unnecessary in the new regime because of the new no disadvantage test and the fact that the award can apply where a workplace agreement is terminated.

The reinstatement of the award or previous workplace agreement in circumstances where a workplace agreement is terminated

The Bill proposes to repeal the section of the Act which prevents an award or previous workplace agreement applying to an employee, once the employee's current workplace agreement is terminated.

The introduction of provisions to enable the AIRC to undertake the process of modernising awards

In our Special Election Update, we highlighted that the AIRC would be given special powers to modernise and simplify awards in light of a number of factors, including 10 national employment standards.

Whilst the Bill gives the AIRC this task, the 10 national employment standards, which was supposed to form part of the Bill, will now be released as a separate exposure draft.

The introduction of provisions enabling employers to make application to the AIRC to extend and vary pre-reform certified agreements

The AIRC will be given the power to extend and vary pre-reform certified agreements where the parties genuinely agree to changes, it has been approved by a valid majority of employees covered by the agreement and provided the parties have not organised or taken industrial action or applied for a protected action ballot after 14 February 2008.

In the Second Reading Speech, Julia Gillard stated that the purpose of this amendment was to allow parties to pre-reform certified agreements to avoid the "double transition" of making an agreement under the transitional arrangements, only to make new agreements under a new Act after 2010.

The abolition of the Workplace Relations Fact Sheet

Under the Act, employers are required to provide employees with a Workplace Relations Fact Sheet within 7 days of the employee first commencing employment with the employer. The Bill proposes to abolish this requirement.

Key implications of the Bill's proposed changes for your business

Assuming the Rudd Labor Government is successful in introducing the proposed changes:

• Once the Bill is enacted, employers will not be able to make AWAs.
• Employers who are able to use ITEAs will need to be diligent in ensuring that they make ITEAs with new employees within 14 days of the commencement of their employment.
• ITEAs can only be offered to an existing employee where the existing employee's employment relationship is regulated by an ITEA, an AWA, pre-reform AWA, a preserved individual state agreement or a Victorian employment agreement.
• The bar will be higher for the approval of collective agreements, as the no disadvantage test will be applied having regard to awards applying to employees and not the AFPCSs and protected award conditions.
• The bar will be even higher for the approval of ITEAs, as the no disadvantage test will be applied having regard to the collective agreements and the awards applying to the employee and not the AFPCSs and protected award conditions.
• The no disadvantage test will act as a disincentive for employers to offer ITEAs as they will not be able to result in a reduction of the terms and conditions under a collective agreement applying to employees.
• In circumstances where a workplace agreement is terminated and not replaced, the award or collective agreement will apply to employees, as opposed to the AFPCSs and protected award conditions.
• Employers with pre-reform certified agreements that contain prohibited content will be able to avoid the complexities of the current prohibited content rules by making an application to the AIRC to extend or vary the pre-reform certified agreement.
• Employers need to closely monitor the progress of award modernisation to assess the impact of the process on their businesses.

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.