Australia: Workplace Update - IR Reform: New Fair Work Bill Released

Last Updated: 27 November 2008
Article by John Tuck and Nick Ruskin

The Fair Work Bill 2008 (the Bill) was introduced into Federal Parliament yesterday. The Bill is expected to be passed largely in tact with the majority of the changes to commence on 1 July 2009.

The 575 page Bill is a comprehensive reworking of the Workplace Relations Act 1996 (Cth) (the WR Act). It contains significant changes for Australian employers and workplaces with collective bargaining at the heart of the new system. The Bill also expands unions' rights of entry and introduces changes that impact on mergers and acquisitions/transmission of businesses. We have briefly summarised some key elements of the Bill below.

Fair Work Australia

The Bill establishes Fair Work Australia (FWA), replacing the Australian Industrial Relations Commission (AIRC) which recently celebrated its centenary of operation. FWA will operate as a 'onestop- shop' to deal with information, advice and assistance on workplace issues. It is intended that all current AIRC members will be statutorily appointed to FWA.

Fair Work Divisions will be created in the Federal Court and the Federal Magistrates' Court. The limit on claims in the Fair Work Division of the Federal Magistrates' Court will be $20,000.

The FWA Inspectorate will assume the functions of the Workplace Ombudsman.

FWA will include a Tribunal with members having the power to review and vary awards, deal with unfair dismissal claims and make orders against industrial action.

Terms and Conditions of Employment

There will be ten National Employment Standards (NES) that will operate in conjunction with a modern award, an enterprise agreement or a workplace determination to create the terms and conditions of a person's employment. These come into effect on 1 January 2010.


The NES set out minimum standards that apply to all employees in relation to:

  • Maximum weekly hours of work (38 and reasonable additional hours).
  • The right to request flexible working arrangements (for parents with pre-school age children and can only be refused on reasonable business grounds).
  • Parental leave (increased to 12 months unpaid for each parent and can be spread out over 24 months).
  • Annual leave.
  • Personal/carer's and compassionate leave (paid and unpaid).
  • Community service leave.
  • Long service leave (but does not set any new standard).
  • Public holidays.
  • Notice of termination and redundancy pay (introduces redundancy pay for employers with 15 or more employees).
  • Fair Work Information Statement.

Modern awards

The AIRC is currently developing modern awards to apply from 1 January 2010. Those covered by a modern award will also have terms and conditions dealing with minimum wages, overtime and penalty rates, allowances and dispute resolution as part of their guaranteed entitlements. There will also be the benefit of a term allowing employees and employers to agree on flexible working arrangements. Modern awards will not apply to employees who are high income employees (expected to be over $100,000 pa or more). Modern awards will be reviewed every four years.

Minimum rates of pay

These will be included in modern awards. The new FWA will review minimum wages each year. This review will have regard to a range of economic and social factors with the new rates of pay to take effect on or before 1 July each year.

Transfer of business

The Bill largely returns the laws concerning the transfer of entitlements to the pre-WorkChoices position. One area of potential concern is the apparent introduction of a focus on 'work' rather than the 'business' transferred to determine whether instruments transmit. This would be a shift from the previous tests and will most likely leave employers concerned. One important change is the removal on the time limits for the application of transferring instruments.

Workplace Bargaining

The Bill places collective bargaining at the heart of the new workplace relations system. Workplace agreements will now be described as 'enterprise agreements' with no distinction made between an agreement negotiated with a union or one directly made with employees.

It will be possible for an enterprise agreement to override a modern award and regulate the terms and conditions of employment in conjunction with the NES, provided the enterprise agreement satisfies the 'better off overall test' (the BOOT).

An enterprise agreement is made when it is approved by a valid majority of the employees to whom it will apply. A union is entitled to act as bargaining representative and seek to be covered by an enterprise agreement for which it was the bargaining representative.

The content of enterprise agreements will be determined by whether the matters 'pertain to the relationship between the employer and employee' provided that the agreement does not contain unlawful or discriminatory terms. Enterprise agreements must include a flexibility term, a dispute settlement process and a term providing for consultation with employees about major workplace changes.

Where an employer decides to initiate bargaining, the employer is required to notify its employees of their right to appoint a bargaining representative. If any employee who is a member of a union does not issue a notice identifying a bargaining agent, a default position operates. The default position sees the relevant union deemed to be the bargaining representative of the employees. The employer is required to bargain with the union (unless the employer does not reasonably know that the employee is a member of a union).

If an employer does not wish to bargain, a bargaining representative or an employee can make an application to FWA to require the employer to bargain. If FWA considers that a majority of employees to be covered by an enterprise agreement want such an agreement, then FWA can require that employer to bargain.

In what is considered 'low pay sectors' of the workforce, FWA can determine that there should be multi-employer bargaining and this can be imposed on those identified employers. Low pay sectors appear to be defined as employers who provide wages and conditions of employment at the minimum of the award or the NES.

Good faith bargaining

Negotiations for enterprise agreements must be conducted through 'good faith bargaining'. The Bill sets out procedural requirements including requiring parties to attend and participate in meetings at reasonable times as well as refrain from capricious or unfair conduct.

FWA is responsible for overseeing the bargaining process, registering the agreements and administering the BOOT.

Workplace determinations

In limited and exceptional circumstances, FWA will have the power to make binding workplace determinations on matters in dispute.

One such ground for a determination is where a party has committed a serious breach of one or more bargaining orders.

Where low paid multi-employer workplace bargaining does not result in an agreement and there is no prospect of an agreement being reached, FWA can make a workplace determination (ie effectively making the agreement for the parties).

Workplace determinations can also be made when protected industrial action has been terminated (because the industrial action was, for instance, damaging the economy) or where a party had failed to follow a good faith bargaining order.

Scope orders

Where there is bargaining and a bargaining representative does not consider that the coverage of the proposed enterprise agreement is appropriate, the representative can ask FWA to issue an order to change the scope of the agreement, for example, to add additional employees to be covered by the proposed agreement or to remove certain types of employees.

Workplace Rights

The Bill provides protection against 'adverse action' towards a person because they have a 'workplace right' which, for example, entitles them to a benefit or allows them to initiate proceedings under a workplace law. This is an expansion of the current provisions of the WR Act. Discrimination protections have been added to prohibit adverse action by an employer against an (existing or former) employee or prospective employee 'because of the person's race, colour, sex, sexual preference, age, physical or mental disability, marital status, family or carer's responsibilities, pregnancy, religion, political opinion, national extraction or social origin'.

A Court can grant an injunction to stop the contravention, order compensation for any loss suffered by the person and impose a penalty of up to $6,600 plus interest.

Unfair dismissal

The main changes in relation to unfair dismissal are:

  • The introduction of a 12 month qualifying period for small business.
  • The introduction of the Small Business Fair Dismissal Code.
  • The removal of 'operational reasons' as a defence.
  • The establishment of FWA to deal with unfair dismissal applications (via informal conference and then via Tribunal hearing and determination).

Industrial action

The provisions regarding industrial action remain largely unchanged. Lawful industrial action continues to be limited to protected bargaining periods and first subject to approval by a secret ballot. The requirements for approving a secret ballot have been simplified and the threshold participation requirements lessened. Employer industrial action is still defined as a 'lockout' but is only protected where the employer locks out employees in response to the employees' industrial action.

There are proposed changes to strike pay. When employees apply partial work bans, employers are able to choose whether to provide full pay or dock some part of the pay proportional to the duties not performed, after complying with notice requirements.

Employers are required to withhold four hours of pay for any incident of unprotected industrial action up to and including four hours. Action is unprotected if it is taken inside the term of an agreement.

Importantly, FWA will still be able to issue orders (including interim orders) to prevent or stop unprotected industrial action.

Right of entry

There is significant change proposed that will expand a union's right of entry. A permit holder may enter premises to investigate a contravention of the Bill, a modern award, enterprise agreement, workplace determination or FWA order.

A permit holder may also enter a workplace to hold discussions provided that the premises have one person employed at that workplace whose industrial interests the union is entitled to represent. In some instances this may mean a number of unions will claim such a right in respect of one employee.

What now?

The Bill must still pass through the House of Representatives and the Senate before it comes into effect. Deputy Prime Minister Gillard indicated yesterday that she hoped that a Senate Inquiry would be complete by February with the Bill to take effect from July 1 2009. However, it is intended that the NES and modern awards will commence on 1 January 2010.

A separate Transitional Bill will be introduced in the first half of 2009 to provide for the transition into the new scheme.

Phillips Fox has changed its name to DLA Phillips Fox because the firm entered into an exclusive alliance with DLA Piper, one of the largest legal services organisations in the world. We will retain our offices in every major commercial centre in Australia and New Zealand, with no operational change to your relationship with the firm. DLA Phillips Fox can now take your business one step further − by connecting you to a global network of legal experience, talent and knowledge.

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.

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