Australia: Workplace Relations Alert June 2008

Last Updated: 27 June 2008

Andrew Tobin - Special Counsel

The week of Monday 16 June 2008 was big for the development of the Federal government's new industrial relations system. On Monday 16 June 2008 the government released, in final form, the 10 National Employment Standards, the NES, which will define the basic safety-net of terms and conditions of employment in the new federal system from 1 January 2010. This followed the release of draft standards in February and a public consultation process which ended in early April. While the NES are yet to be legislated into law, it has been necessary for the government to develop the standards to a conclusion now, or at least as far as possible, to facilitate the award modernisation process being undertaken by the Australian Industrial Relations Commission. That process, which is legislated for, is expected to be largely completed by December 2009, to facilitate commencement of the new system in 2010.

The same day, the Minister for Industrial Relations issued to the AIRC a revised award modernisation request first made to the Commission on 28 March 2008.1Among other things the revised request directed the AIRC to make, as part of the award modernisation process, a 'catch-all' award to be applicable to workers who are not covered by another award but "who perform work of a similar nature to that which has historically been regulated by awards"2, whether State or Federal.

Then Friday, 20 June, the AIRC released a decision relating to the award modernisation process, in which it (among other things):

  • identified the initial priority list of awards for modernisation;
  • released the text of the model flexibility clause for inclusion in all modern awards; and
  • prescribed a timetable for completion of the award modernisation process, extending out to 4 December 2009.3

National Employment Standards

Readers will recall that the 10 standards for inclusion in the NES were first identified in April 2007 in the ALP's 'Forward with Fairness' policy document and then developed further in the discussion paper released last February. To recap, they include provisions dealing with:

1. maximum weekly working hours (similar to what we already have);

2. requests for flexible working arrangements (new as 'default' entitlements in the federal system, applicable to workers with children under school age);

3. parental leave and related entitlements (consisting of both familiar elements of, and some new additions to, the federal safety net);

4. annual leave (generally familiar);

5. personal/carer's leave and compassionate leave (generally familiar);

6. community service leave (some new concepts, including a default entitlement to limited make-up pay for jury service);

7. long service leave (the eventual plan is to introduce a national standard. For now the NES continue current arrangements in the federal system ie adopting those currently in place, whether derived from State or Territory law or pre-existing industrial instruments);

8. public holidays (similar to what we already have);

9. notice of termination (same as current minimum requirements) and redundancy pay (new as a default entitlement, in the absence of award or agreement coverage, in the federal and Queensland jurisdictions); and

10. the Fair Work Information Statement (which broadly serves the same role as the Howard Government's Workplace Relations Fact Sheet).

The final NES deal with some of the submissions made during the discussion paper exposure period and plug some of the gaps identified during that process, but various issues remain unresolved. This is no great surprise given that the bulk of the legislation establishing the 'Forward with Fairness' system is still under development. There are a few current talking points out of the final statement of the NES.

  • While it is clear that modern awards will be able to modify provisions from the NES to some extent - provided that any changes are not detrimental to employees - there is no word yet on the degree to which, if at all, the NES will be able to be modified through workplace agreements or contracts of employment.
  • The NES offer the potential for greater flexibility than is available in the current system for the cashing out of leave entitlements, except that the standards themselves refer only to the prospect of award-based cashing out arrangements. There are no announcements indicating the extent to which, if at all, cashing-out of leave entitlements prescribed by the NES will be able to be dealt with in workplace agreements or common law employment contracts.
  • No mention is made in the NES at all about the interaction between the NES and workplace agreements or employment contracts generally.
  • No specific provision has been made for the resolution of disputes arising out of the NES. While modern awards will, to some extent, be able to deal with aspects of the NES, it is not clear that the dispute resolution clause for inclusion in all modern awards will extend to disputes arising out of the NES in their basic form, or, how disputes relating to the NES in relation to award-free workers will be resolved.
  • Specific recognition is afforded to same-sex couples in relation to carer and parental leave entitlements.
  • Employees with young children who wish to request a flexible working arrangement will, first, have to complete 12 months service. Whether this limitation will be significant in practice is doubtful, having regard to the laws preventing discrimination against parents with family responsibilities.
  • The standards do not include any dedicated right of appeal from an employer's decision to refuse a request for a flexible work arrangement, or, in the case of parental leave, a request for an extension of the leave period beyond the initial 12 month entitlement (the default entitlement includes the right to request an additional 12 months' leave, taking the total potential leave period out to 2 years). In both cases employers will be entitled to refuse the request on reasonable business grounds, which is undefined.

Overall the NES occupy 50 pages of text and are much more readable than the legislation prescribing the Australian Fair Pay and Conditions Standard, which occupies more than 100 pages in the current Workplace Relations Act. However, as already mentioned, a range of matters are yet to be dealt with, including the applicable compliance regime.

Award modernisation and the 'catch-all award'

In her revised award modernisation request, the Minister requested the AIRC, as part of the award modernisation process, to create a new award applicable to employees who will in the new system, otherwise, be award free. This new catch-all award:

  • will only apply to employees who perform work "of a similar nature to that which has historically been regulated by awards";
  • is not to cover workers who have not been traditionally covered by awards "because of the nature or seniority of their role".4

While the idea is simple enough we expect that, in many situations in practice, it will be no easy thing to work out whether an employee whose employment used to be award free is now subject to the catch-all award. Where is the dividing line between:

  • an employee not covered by an award and who performs work of a similar nature to that which has historically been award regulated; and
  • those classes of employees who have not traditionally been covered by awards?

Award modernisation: the list of priority industries and occupation

In its decision released on 20 June, the AIRC listed 13 industries and 1 occupation as those for which modern awards will be made in priority to others, in a process intended for completion by 19 December 2008. They are:

  • on an occupational basis - clerical work in the private sector;
  • on an industry basis:
  • coal mining;
  • metal and associated industries including, as separately nominated industries: glue and gelatine, rubber, plastic and cablemaking and vehicle manufacturing
  • higher education;
  • hospitality;
  • mining;
  • racing;
  • rail;
  • retail;
  • security;
  • textile, clothing and footwear.

Between them, these areas currently involve more than 700 existing awards, both State and federal, now operating in the federal system.

Award modernisation: the timetable

The initial priority list is to be followed by three further stages, at each of which target industries or occupations will be identified and subjected to the development of modern awards. The first stage priority areas are currently scheduled for completion before the end of this year, as is the identification of the second round of industries and occupations for award modernisation, to be announced on 10 October.

The decision states that the second stage list will include (probably with others yet to be identified):

  • agriculture;
  • banking;
  • building, metal and civil construction;
  • cleaning;
  • finance and investment;
  • graphic arts;
  • health and welfare;
  • insurance;
  • information and communications technology;
  • private road transport.

All four stages are scheduled for completion on 4 December 2009, in time for commencement of the new system on 1 January 2010, although the AIRC has made it clear that the timetable may change as the modernisation process evolves. Stakeholders affected at each stage of the process will have the opportunity to make submissions and other proposals about the scope, content and transitional arrangements for new awards.

Submissions in relation to the priority list close on 25 July 2008.

Enterprise flexibility through awards? Hardly.

The Minister's award modernisation request requires the AIRC to prepare a model flexibility clause, for inclusion in all modern awards "to enable an employer and an individual employee to agree on arrangements to meet the genuine individual needs of the employer and the employee" but also to ensure "that the flexibility clause cannot be used to disadvantage the individual employee."5

The decision released 20 June 2008 contains the text of the AIRC's model flexibility clause, set out in full at the end of this article.

The degree of flexibility allowed by the clause, as explained in the decision, is so limited that, in our view, rarely will it be in the interests of employers to rely upon it as a means of achieving true enterprise flexibility arrangements. Substantive flexibility arrangements will, as in the past, have to be pursued through collective bargaining for a workplace agreement.

Issues arising from the model clause include these:

1. The AIRC identified the purpose of the provision as to permit a reduction in one or more minimum award entitlements as part of an agreement which meets the genuine individual needs of the employer and the employee, without disadvantaging the individual employee.

2. The terms of the Minister's award modernisation request made it clear that the clause was not available to facilitate collective arrangements of any kind. It will be limited to agreements between employers and individual employees. Conversely, individual flexibility agreements will not be subject to corresponding agreement with a majority of employees otherwise interested or concerned in the subject of the agreement.

3. Use of the flexibility provision will only be permitted after employment has commenced. In other words, employers will not be able to offer employment upon terms which propose an arrangement departing from the provisions of the award, as an agreement utilising the flexibility provision. Many employers will probably dismiss the clause as of any use to their enterprise for this reason alone.

4. Award terms which might be subject to flexibility arrangements relying upon the model clause will be limited to those dealing with:

(a) Arrangements for when work is performed;

(b) Overtime rates;

(c) Penalty rates;

(d) Allowances; and

(e) Leave loading.

5. Agreements made utilising the clause will be subject to a 'no disadvantage' test, based on familiar concepts ie a flexibility agreement will be permitted provided that it does not result:

(a) or would not result, on balance, in a reduction in the overall terms and conditions of employment of the employee whose employment is subject to the agreement having regard to the relevant award itself and any applicable workplace agreement;

(b) in a reduction in the terms and conditions of employment of the employee under any other relevant Commonwealth, Territory or State laws.

6. Once made, a flexibility agreement will be able to be unilaterally terminated by either the employer or the individual employee party to it, on 4 weeks notice to the other. As the AIRC points out in their decision, employers will be concerned about the prospect for termination of flexibility arrangements by the employee parties to them, because it will lead to an unsatisfactory level of uncertainty for employers. Nevertheless, the Commission's view is that they "do not think the problem will be too onerous". They point out that "where significant numbers of employees are involved, the employer can obtain greater certainty by entering into a collective agreement should that course be a practical one."

The model clause expressly preserves the possibility for other flexibility arrangements dealt with elsewhere in an award. Presumably, this will allow a model award to incorporate such things as exemption provisions, similar to those contained, for example, in the current Clerical Employees Award - State in Queensland.

It remains to be seen just how useful the model clause will be in practice. It is a disappointment when measured against the fanfare that accompanied the ALP's policy announcements and the assurances of flexibility in the proposed new system, in the lead up to last year's election.

Model Flexibility Clause

1. An employer and an individual employee may agree to vary the application of certain terms of this award to meet the genuine individual needs of the employer and the individual employee. The terms the employer and the individual employee may agree to vary the application of are those concerning:

(a) arrangements for when work is performed;

(b) overtime rates;

(c) penalty rates;

(d) allowances; and

(e) leave loading.

2. The employer and the individual employee must have genuinely made the agreement without coercion or duress.

3. The agreement between the employer and the individual employee must:

(a) be confined to a variation in the application of one or more of the terms listed in sub-clause 1; and

(b) not disadvantage the individual employee in relation to the individual employee's terms and conditions of employment.

4. For the purposes of sub-clause 3(b) the agreement will be taken not to disadvantage the individual employee in relation to the individual employee's terms and conditions of employment if:

(a) the agreement does not result, on balance, in a reduction in the overall terms and conditions of employment of the individual employee under this award and any applicable agreement made under the Workplace Relations Act 1996 (Cth), as those instruments applied as at the date the agreement commences to operate; and

(b) the agreement does not result in a reduction in the terms and conditions of employment of the individual employee under any other relevant laws of the Commonwealth or any relevant laws of a State or Territory.

5. The Agreement between the employer and the individual employee must also:

(a) be in writing, name the parties to the agreement and be signed by the employer and the individual employee and, if the employee is under 18 years of age, the employee's parent or guardian;

(b) state each term of this award that the employer and the individual employee have agreed to vary;

(c) detail how the application of each term has been varied by agreement between the employer and the individual employee;

(d) detail how the agreement does not disadvantage the individual employee in relation to the individual employee's terms and conditions of employment; and

(e) state the date the agreement commences to operate.

6. The employer must give the individual employee a copy of the agreement and keep the agreement as a time and wages record.

7. The agreement may be terminated:

(a) by the employer or the individual employee giving four weeks' notice of termination, in writing, to the other party and the agreement ceasing to operate at the end of the notice period; or

(b) at any time, by written agreement between the employer and the individual employee.

8. The right to make an agreement pursuant to this clause is in addition to, and is not intended to otherwise affect, any provision for an agreement between an employer and an individual employee contained in any other term of this award.


1 A full copy of the consolidated award modernisation request is at: 2149187DE3D9/0/ConsolidatedAwardModernisationRequest.pdf

2 See paragraph 4A of the request.

3 The report of the decision is available from the AIRC website at:

4 See paragraph 4A of the request.

5 See clauses 10 and 11 of the request.

© Hopgood Ganim

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