Australia: Federal Governments Brings Forward Changes To IR Laws

Last Updated: 12 November 2008
Article by Andrew Cunningham

Originally Published 18th September 2008

Federal Governments Brings Forward Changes To IR Laws

Yesterday, the Deputy Prime Minister, Julia Gillard, announced further details of the Labor Government's new IR Laws – which are due to be introduced into Parliament in the next few months.

The Deputy Prime Minister also announced that key parts of the legislation (including unfair dismissal and the new 'bargaining framework') will start early on 1 July 2009 - with the balance to commence on 1 January 2010.

Previously, it has been understood that the new system would start on 1 January 2010 – although there has always been speculation (and some pressure from the union movement) that parts of the laws would be brought forward.

The announcement included more detailed information on enterprise bargaining, industrial action and unfair dismissals. The most controversial part of the proposed legislation (new AWAs having already been abolished) is the enterprise bargaining framework – in particular, good faith bargaining and compulsory bargaining with unions where there is majority employee support. However, it is fair to say that there are also many important elements of Work Choices that are being retained.

It will remain to be seen what approach the Senate takes to the legislation. The Government has been having some difficulties with the Senate passing its new legislation. The balance of power in Senate lies with the Greens and the two independents, Steve Fielding and Nick Xenophon.

Implications for employers

  • The new bargaining regime will now be introduced 6 months earlier than expected. Employers whose agreements expire in mid to late 2009 will now be subject to the new regime (whereas otherwise they may not have been) - including the prospect of good faith bargaining orders and being required to bargain with a union if there is majority employee support.
  • The award modernisation process is very important. In some industries where award coverage is patchy, it will result in many award free employees becoming covered by awards. It will inevitably result in changes to minimum conditions – some of which will be important. Employers who stand to be affected should be monitoring this.
  • Watch this space. The actual legislation is due out in the next few months.

Of course, there is also the impact of Malcolm Turnbull becoming the new Opposition Leader. Previously, the Coalition said it would apply three core objectives:

  • retaining some form of statutory individual contracts;
  • exempting small business from unfair dismissal laws; and
  • keeping the Australian Building Construction Commission.

If these objectives were not met, it would vote against the legislation.

The ALP has responded by saying it has an electoral mandate to abolish AWAs – and this extends to other forms of statutory individual contracts.

The Government has said that the new bargaining framework, unfair dismissals and associated protections will come into force on 1 July 2009. It is not entirely clear what this includes – does it, for example, include the new provisions on industrial action? However, it presumably means the Australian Industrial Relations Commission ('AIRC') will stand in for Fair Work Australia in these areas until Fair Work Australia opens its doors on 1 January 2010.

In other news, the award modernisation process is proceeding at a cracking pace. The AIRC has published exposure drafts of 'priority' modern awards – including a draft Private Sector Clerical Award. The modern awards are due to be finalised and in operation by 1 January 2010 – when the new system starts operating.

The shape of the system

From 1 January 2010, all employees (or at least those covered by the legislation) will be entitled to minimum employment conditions in the ten new National Employment Standards or NESs.

There will then be the award system – which is in the process of being modernised and consolidated by the AIRC. Amongst other things, this will involve properly integrating the old state awards into the federal award system. Modern awards will not apply to new employees with a guaranteed annual earnings of more than $100,000 (indexed annually and pro-rata for part-time employees).

Finally, there will be enterprise agreements – operating in much the same way as before. Individual Transitional Employment Agreements (which are a transitional instrument replacing new AWAs) are no longer available from 1 January 2010. Pre-existing AWAs continue to apply – although they can be terminated after their nominal expiry date.

The system will be administered by a new body, Fair Work Australia, which is described as a 'one stop shop'.

Fair Work Australia

Fair Work Australia will not only replace the AIRC – but also the Australian Fair Pay Commission, the Workplace Authority, the Workplace Ombudsman and, from 1 February 2010, the Australian Building Construction Commission.

Fair Work Australia will have a number of parts:

  • there will be a president, senior members and members. This part of Fair Work Australia sounds much like the AIRC. It may be expected that many of its members will be drawn from the AIRC.
  • there will be a special minimum wages panel comprising up to seven full and part-time members. Minimum wages and associated casual loadings will be reviewed each year by this panel. It will adopt a non-adversarial approach to adopting a minimum wage – probably more akin to the Australian Fair Pay Commission's approach than the old National Wage Cases.
  • there will be a Fair Work Inspectorate – with its own director. This will evidently take over from the Workplace Ombudsman which will, among other things, enforce compliance with industrial instruments.
  • there will be some specialist divisions – including a division which deals with the building and construction industry.

While technically (or at least, constitutionally) not a part of Fair Work Australia, there will be Fair Work Divisions established in the Federal Court and Federal Magistrates Court ('Courts'). Amongst other things:

  • the Courts will have the power to give 'flexible' remedies – including the power to issue injunctions rather than just imposing a penalty. This is significant because, at present, the Courts' power to enforce an award or collective agreement is limited. The Courts cannot, for example, issue an injunction. So, if a company breached a provision of its collective agreement (for example, by introducing changes without proper consultation or a redundancy program which did not comply with the procedures in the agreement), a union could apply to a Court for an injunction.
  • the Courts will be able to hear some types of common law claims – including claims for notice of termination and severance pay.
  • there will be some changes to small claims procedures – including increasing the limit from $10,000 to $20,000.

There will be a short transition period where both the AIRC and Fair Work Australia operate concurrently while the AIRC completes the award modernisation.

National Employment Standards and other minimum conditions

The Government has finalised the ten National Employment Standards ('NESs'). We considered these in depth in our HR&IR Update of 18 June 2008 .

However, there have been some clarifications of the NESs and other minimum conditions for award free employees:

  • there will be a national minimum wage and casual loading; and
  • there will be default rules that set out how the NESs apply to award free employees – including when shift workers are entitled to an extra week of leave; the definition of ordinary hours of work; cashing out of annual leave (with four weeks to be retained) and reasonable directions to take annual leave.

Award System

As noted above, the AIRC is in the process of modernising the award system.

With the exception of the tail end of the award modernisation process, Fair Work Australia will be responsible for the award system from 1 January 2010.

There will be an annual wage review – with wage increases to take effect from the first pay period on or after 1 July each year.

Importantly, it seems that Work Choice's strict limitations on varying awards will remain. Awards will only be varied in limited circumstances such as to remove ambiguity, uncertainty or discriminatory terms.

Fair Work Australia will review modern awards every four years – with the first review in 2014.

Workplace Agreements and Enterprise Bargaining

With one or two exceptions, collective agreements will be broadly similar to the current system. Amongst other things:

  • agreements will be subject to a form of 'better off overall test' administered by Fair Work Australia;
  • employee collective agreements will be retained – although the fate of employer greenfields agreements is uncertain. However in some cases, an employer can be compelled to negotiate a collective agreement with a union;
  • restrictions on content of agreements (prohibited content) will be considerably liberalised. It seems the new term will be 'unlawful content'. Matters also must pertain to the employment relationship. Union representation and union dues deductions will be able to be included. However, matters that are a prerogative of management (such as closing an unprofitable plant or using a preferred supplier), bargaining services fees, authorising industrial action during the nominal term and (in some circumstances) some unfair dismissal remedies will not;
  • there will be some compulsory provisions - including a flexibility clause allowing an employer and individual employee to make a 'flexibility arrangement'; dispute resolution (including employee representation) and consultation on major change; and
  • it is still unclear how the NESs and workplace agreements will interact.

However, there are some very significant changes to the negotiating process. Importantly, employers, unions and employees will be required to 'bargain in good faith for a mutually acceptable outcome'. Fair Work Australia will be able to make good faith bargaining orders that can:

  • direct parties to meet;
  • disclose relevant information;
  • consider proposals and respond to them; and
  • refrain from unfair or precipitous conduct.

However, good faith bargaining will not require parties to make concessions or sign-up to an agreement where they don't agree. Parties will still be able to take a tough stance in negotiations.

Importantly, if an employer refuses to bargain, a union or employees can ask Fair Work Australia to determine if there is 'majority employee support' for negotiating an enterprise agreement. Fair Work Australia can use whatever method it considers appropriate – not only a ballot, but also a petition. If Fair Work Australia determines there is majority employee support, the employer will be required to bargain collectively.

Compulsory arbitration will not be available as part of good faith bargaining – although it seems a form of arbitration will be available if Fair Work Australia terminates a bargaining period because of damage caused by industrial action (see below).

Finally, low paid workers (for example, employees in industries such as childcare, community work, security and cleaning) will be able to bargain on a multi-employer basis. A union or bargaining representative can apply to Fair Work Australia to allow them to bargain with a specified list of employers. Fair Work Australia will be able to issue good faith bargaining orders – as well as conciliating. However, protected action will not be able to be taken. In effect, this will allow a form of compulsory multi-employer bargaining in particular industries. It appears there would be nothing stopping a union from using an extensive list of employers – harking back to the days of using the Yellow Pages to determine who was roped into a federal award.

Importantly, it appears these provisions will now start from 1 July 2009 – instead of 1 January 2010.

Industrial Action

Fair Work Australia will be able to issue orders to prevent or stop any unprotected industrial action. At present, the AIRC has no discretion whether to issue such orders – if the industrial action is occurring, it must issue the orders. It is not clear whether Fair Work Australia will have any discretion whether to issue the orders or not.

Employees will be able to take protected action in support of negotiations for a new enterprise based collective agreement. Protected action can only be taken after the expiry of the nominal term of any existing agreement. Importantly, it will still be necessary to have a secret ballot before employees take protected action – administered by the Australian Electoral Commission. It will also be necessary to apply for a secret ballot from Fair Work Australia. This is an important part of Work Choices which is retained.

An employer will still be able to lock out in support of their claims in enterprise bargaining. However, pre-emptive lock-outs will no longer be permitted – that is a lock-out taken by the employer when the employee has not taken any industrial action. Question whether this rule will apply on an individual or collective basis - that is, if some employees have taken industrial action, can all employees be locked out?

The requirement that employees not be paid during industrial action will be retained (including the 4 hour minimum non payment) but with some modifications:

  • the four hour minimum non payment will only apply to unprotected industrial action, not to protected industrial action; and
  • in the case of partial work bans, employers can choose to tolerate the bans (and presumably pay the employees in full), stand down or lock out employees, or issue a partial work notice and make deductions of pay proportionate to work not performed.

These are interesting developments. The retention of the 4 hour minimum non payment provision (which was introduced by Work Choices) is unexpected.

Fair Work Australia will have the power to terminate a bargaining period where industrial action is protracted and causing significant harm to the relevant employer and employees. This appears to be an extension of existing rights to terminate a bargaining period – which largely focuses on the wider effects of industrial action beyond the participants.

Unfair Dismissal

The Government's most recent announcements largely concern unfair dismissals in small businesses – that is employers with less than 15 employees. In small businesses:

  • employees must have been employed for at least 12 months before they can bring an unfair dismissal.
  • a dismissal will be deemed fair if the employer complies with the 'Fair Dismissal Code for Small Business', which the Government has now released. Interestingly, it includes a checklist for the employer to complete at the time of dismissal and keep in case of a future unfair dismissal claim – although this is not compulsory. There is no specific requirement for 3 warnings. Instead:
  • the employee must be warned clearly they are not doing their job properly and would have to improve or be dismissed.
  • the employee must have a reasonable amount of time to improve and failed to do so.
  • If an employee is made genuinely redundant, they will not be able to bring an unfair dismissal claim.

It does not appear there will be a Fair Dismissal Code for medium to large businesses.

For all unfair dismissals:

  • reinstatement will be the remedy unless it is not the interests of either party (which, in actual fact, seems to make reinstatement arguably not the primary remedy) Otherwise, compensation will be up to 6 months' remuneration – but according to Deputy Prime Minister Gillard, in most cases it will probably be lower.
  • unfair dismissal claims will not be available in cases of a genuine redundancy;
  • unfair dismissal claims must normally be lodged with Fair Work Australia within seven days;
  • legal representation will only be allowed in exceptional circumstances where Fair Work Australia determines that a party is unable to represent him or herself; and
  • decisions will be able to be made without the need for full public hearing. Public hearings will only occur where the case involves particularly complex issues. Legal representation may also be allowed at this stage.

Freedom of Association

The Government will also consolidate – and possibly extend - the existing protections for freedom of association and associated matters.

Importantly, it will still be unlawful to discriminate against a person because they are not a member of the trade union.

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.

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