Australia: Fair Work Bill Update

When Will The Fair Work Bill Commence?

The Fair Work Bill will commence on 1 July 2009. Certain of its provisions will commence later on 1 January 2010, such as those provisions which deal with the National Employment Standards (NES) and modern awards. Various changes are highlighted below.

What is the new unfair dismissal regime?

Under the Bill, the number of employees who will be eligible to make a claim for unfair dismissal will increase significantly. The Bill removes the present exemption under the Workplace Relations Act (WRA) with respect to claims for unfair dismissal which exemption prohibits employees in an employer organisation of 100 or less employees from bringing a claim for unfair dismissal.

A new regime will permit claims for unfair dismissal to be brought as follows:

  • *Large business (15 or more employees) - claim can be brought after 6 months from commencement of employment.
  • *Small business (14 employees or less) - claim can be brought after 12 months from commencement of employment.
  • Casuals will be able to access the jurisdiction if they satisfy the applicable "qualifying period" and have been employed on a regular and systematic basis and have a reasonable expectation of continuing employment.
  • *STOP PRESS Under transitional arrangements agreed upon between the Government and Senator Fielding, there will be an 18 month transitional period during which the calculation of a "small business" will be based on "15 Full Time Equivalent" employees. This number of full time equivalent employees is to be calculated by averaging the ordinary hours worked by all employees in the business over the 4 week period immediately prior to the employee's termination, and dividing that by 38, being ordinary weekly hours. From 1 January 2011 the threshold shall be as set out above.

The Bill retains a jurisdictional cap which prevents employees not subject to a modern award or enterprise agreement from bringing a claim for unfair dismissal if they earn above the high income threshold. It is anticipated that under the regulations to be made pursuant to the legislation, the threshold will be $100,000.

For small businesses, a claim for unfair dismissal may be capable of being defended if the employer is able to demonstrate that in terminating the employee it complied with the "Small Business Fair Dismissal Code". The Code will require an employer to provide one warning, either verbal or written and must also provide an employee with a reasonable opportunity to respond and improve their behaviour or conduct prior to termination of employment. Employers will still be entitled to terminate employees summarily on grounds of serious misconduct. Whether or not an employer gave a verbal warning to an employee, is likely to be a hotly contested issue where the defence of compliance with the Small Business Fair Dismissal Code is raised.

Additionally, the Bill removes the current exemption from unfair dismissal relating to "genuine operational reasons" and replaces it with a narrower and more prescriptive defence of "genuine redundancy". Under the new exemption, employers will, amongst other things, be required to demonstrate that the terminated employee could not be redeployed within their business or that of an associated entity.

Fair Work Australia - what is it?

The Bill, dismantles the current framework of enforcement under the WRA and replaces it with a one stop shop body namely Fair Work Australia (FWA). The Bill establishes the FWA which replaces the AIRC, the Australian Fair Pay Commission and the Workplace Authority. The Bill also establishes the Office of the Fair Work Ombudsman which assumes the functions presently performed by the Workplace Ombudsman.

The Bill gives the FWA a significant role in resolving disputes. It will also play a role in ensuring that good faith bargaining occurs in relation to enterprise agreements The FWA will also play a role in the approval of enterprise agreements before they can operate. The FWA will seek to resolve claims for unfair dismissal. If it is unable to resolve unfair dismissal matters through conciliation, then it will make a determination on the merits. The FWA may hold conferences either at its office or at the premises of the employer.

Agreement making - what are the key changes?

There will be a single stream of agreement making which removes the distinction between union and non-union agreements. A union will automatically be a "bargaining agent" for an agreement if it has a member at the workplace of the employer concerned (and the member does not appoint another person).

Good faith bargaining requirements will now exert greater pressure on employers albeit that the changes are procedural and cannot require an employer to make concessions or reach an agreement. However employers will be required to, amongst other things, respond to proposals, give genuine consideration to those proposals, refrain from any capricious or unfair conduct and attend and participate at meetings at reasonable times.

National Employment Standards (NES) and Modern Awards

Under the Bill, the proposed 10 NES are scheduled to commence on 1 January 2010. These standards build upon the existing Australian Fair Pay and Condition Standard and introduce such things as:

  • Requests for flexible working arrangements (for employees with children under school age).
  • Redundancy pay.
  • Fair Work Information Statement.

Under the flexible working arrangements provisions, an employer may only refuse a request by an employee for working arrangements for the purpose of assisting the employee to care for a child, on "reasonable business grounds".

The Bill introduces provisions which build upon the existing minimum notice requirements (or pay in lieu) for regular employees not terminated due to misconduct. Under the new provisions, in addition to notice entitlements, employees who are terminated due to redundancy are required to be paid a minimum severance payment in accordance with a scale of between 4-16 weeks (subject to various exemptions in the Act including an exemption for small business employers).

Under the Bill, employers are required to give each employee a Fair Work Information Statement upon their commencing employment. The Fair Work Information Statement will include information about various things such as the NES, modern awards, agreement making under the Act, "freedom of association" and the role of Fair Work Australia.

Modern awards will commence on 1 January 2010. Award modernisation is a "work in progress" and a highly ambitious project involving the rationalisation of thousands of awards. Unlike unmodernised federal awards (which generally speaking, apply to named employers) modern awards will relate to industries and occupations. Modern awards must contain a flexibility provision which allows employers and employees to contract out of modern awards by a written Individual Flexibility Arrangement (IFA). However the ability to contract out of a modern award will be limited and in particular, an employer must be able to demonstrate that an employee by entering into an IFA is "better off overall", than if there had been no IFA.

Swaab was recently named a 2009 Winner in the ALB Employer of Choice awards, and was winner 'Best Law Firm in Australia (Revenue < $20m)' and 'Attribute Award for Exceptional Service (Australia Wide)' in the 2008 BRW- Client Choice Awards.

This Article was prepared before the recent Parliamentary debate on the Fair Work Bill and apart from the key amendment discussed above with respect to the unfair dismissal laws does not address the other amendments made.
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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