The proposed changes to the Fair Work Act will have significant implications for employers and employees. Employers should ensure they are well-informed about the proposed changes prior to them taking effect.
What employers need to know
The proposed amendments to the Fair Work Act will have significant implications. Employers should note that the changes propose:
- a crack-down on fixed term contracts, especially rolling fixed term contracts
- new prohibitions on pay secrecy clauses
- changes to multi-employer agreements that will particularly affect those industries that may have difficulty bargaining at a single-enterprise level, such as aged care, disability care, early childhood education and care industries
- new bargaining rules for single interest enterprise agreements, possibly broadening the use multi-employer agreements generally within the Australian economy.
As an upside, there are changes to simplify some enterprise bargaining processes.
What are the changes?
On 27 October 2022, the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022 was introduced into Parliament before the House of Representatives. The Bill is currently still being debated, with the possibility of further amendments to come. As a result, the Bill may not be enacted until the first quarter of 2023.
The Bill seeks to make a number of changes to the Fair Work Act 2009 (Cth) and its associated legislation to:
- improve job security by limiting the use of fixed term contracts
- amend several enterprise bargaining rules to reduce onerous processes
- expand options for multi-employer bargaining to promote wage growth
- strengthen the protections against sexual harassment and discrimination
- prohibit the use of pay secrecy clauses in employment contracts
- abolish the Australian Building and Construction Commission (ABCC).
This article provides an overview of these key changes.
Improving job security by limiting the use of fixed term employment contracts
Fixed term employment contracts are contracts that terminate after a specified period of time (e.g. two years) or after the completion of a specific task or project. At the end of the specified time, task or project, the employment contract automatically comes to an end, giving employers the ability to 'end' an employee's employment at the specified time, without needing to give a reason for termination, provide notice of the termination or to pay any redundancy if the position is no longer required to be performed by anyone. The validity of long-term fixed term contracts has been the subject of significant legal scrutiny over the years.
The Bill proposes to limit the use of these contracts, particularly when those contracts are simply for arbitrary periods of time and not linked to identifiable funding, the performance of distinct identifiable tasks or linked to training arrangements. Subject to the Bill's listed exceptions, if passed, the Bill will prohibit employers from engaging employees under the terms of a fixed term employment contract that:
- is for the same role for longer than two years, or under consecutive fixed term contracts for the same role that exceed two years in total; or
- can be extended or renewed more than once for the same role.
Employers who wish to retain employees for periods of over two years will need to engage these employees under permanent ongoing contracts, which will have major implications for many employers currently relying on rolling fixed-term contracts.
Amending enterprise bargaining rules to reduce onerous processes
The Bill proposes to make significant changes to several enterprise bargaining rules in the Fair Work Act. The amendments include:
- requiring an employer to initiate bargaining if it receives a request from an employee bargaining representative to commence bargaining, in circumstances where the employer has a single enterprise agreement in place that has passed the nominal expiry date
- simplifying the requirements that must be met before the Fair
Work Commission can be satisfied that an agreement has been
'genuinely agreed to' by the employees by removing some of
the strict pre-approval steps currently in place including:
- the arbitrary seven day 'access period', which requires specific steps to be taken within that time period
- the requirement for employers who are making a single interest employer agreement, supported bargaining agreement or cooperative workplace agreement to issue employees with a 'notice of employee representational rights' and removing the limitation that the vote for that agreement can only be taken 21 days after bargaining has been initiated (those bargaining for a single enterprise agreement will still be required to comply with the current NERR requirements)
- removing the complexity of the Better Off Overall Test (BOOT) and instead focussing on a global assessment of whether each employee would be better off overall if the enterprise agreement is applied
- limiting the circumstances where a unilateral application can be made to terminate an enterprise agreement after its nominal expiry date to prevent the reduction of employees' entitlements
- empowering the Fair Work Commission to amend or remove a term in an enterprise agreement that does not meet the BOOT and enabling the Fair Work Commission to reconsider an enterprise agreement upon application by a party.
Expanding options for multi-employer bargaining to promote wage growth
More contentious amendments to enterprise bargaining relate to the significant changes being made to the current multi-employer agreement provisions. The approval of the Bill would create:
- supported bargaining agreements (which effectively extends the low paid bargaining agreement provisions to a wider category of employees)
- cooperative workplace agreements
- single-interest employer agreements.
As the multi-employer bargaining amendments are the more contentious amendments, it is anticipated that changes will be made to those provisions prior to the Bill being passed. However, based on the current provisions within the Bill:
- Supported Bargaining Agreements will be available for employees
and employers who have difficulty bargaining at the
single-enterprise levels as they lack the necessary skills,
resources and power to bargain effectively (the Bill names the aged
care, disability care and early childhood education and care
industries specifically). The agreements:
- can only be made after a supported bargaining authorisation is granted by the Fair Work Commission
- can be bargained with the Fair Work Commission facilitating bargaining in circumstances where the Fair Work Commission will be able to have a degree of control over the employment conditions of the workers to be covered by the agreement
- allow protected industrial action to be taken by employees in support of the agreement
- can be extended by the Fair Work Commission once made, by variation to cover additional employers either with the consent of the employer, or without consent, in circumstances where the majority of employees want to be covered by the agreement (but can not be extended to an employer who has a single enterprise agreement in place that has not passed its nominal expiry date).
- Single-interest employer agreements will allow a union or other employee bargaining representative to seek a single-interest employer authorisation, without an employer's consent (if supported by the majority of employees) so employees from multiple employers can be covered by a single-interest employer enterprise agreement. The amendments will allow the Fair Work Commission to authorise the bargaining for a single agreement with multiple employers, if it is satisfied that employees want to be covered by one agreement and the nominated employers have a common interest, when considering the geographical location, regulatory regime, the nature of the relevant enterprise and the terms and conditions of employment. There is currently a significant degree of uncertainty regarding the possible application of single-interest employer agreements and amendments will likely be made to these provisions before they are enacted.
Strengthening protections against sexual harassment and discrimination
The Bill implements more of the recommendations from the Respect@Work Report published in 2020. This includes introducing a broad prohibition against sexual harassment in connection with work that applies to all workers, including prospective workers.
Applications will also be able to be made to the Fair Work Commission to deal with a sexual harassment dispute, which could result in the Fair Work Commission dealing with the dispute by mediation, conciliation or by making a non-binding recommendation.
Once these laws are enacted, it will be more important than ever that employers have up-to-date policies in place that deal with sexual harassment and discrimination in order to avoid intervention by the Fair Work Commission, which can be time consuming, costly and onerous.
You can read more about the Respect@Work recommendations in our article, which discusses the key impacts for Australian employers.
Prohibiting pay secrecy clauses in employment contracts
With many employers being affected by the tight labour market, employers often use pay secrecy clauses in employment contracts to ensure that employees do not discuss their remuneration with other employees.
The Bill proposes to make it unlawful for employees to be prevented from disclosing information about their pay to other employees, along with other details about their employment terms and conditions that are reasonably necessary to determine remuneration outcomes.
Importantly, an employee's ability to disclose information about their pay to other employees will be considered a 'workplace right' within the meaning of the Fair Work Act, therefore making it unlawful for employers to take any 'adverse action' (e.g. disciplinary action or dismissal) against employees for discussing their pay or employment terms with other employees.
Abolishing the Australian Building and Construction Commission
Since 2005, the ABCC has held a wide range of responsibilities in the building and construction industry. These include providing advice, conducting investigations into alleged legislative contraventions, and instituting legal proceedings in relation to matters such as wages and entitlements.
While amendments were made in July to the Code for the Tendering and Performance of Building Work 2016 that significantly reduced the functions of the ABCC and the practical application of the laws, the Bill proposes to amend the Building and Construction Industry (Improving Productivity) Act 2016 (BCIIP Act) to formally abolish the ABCC and remove provisions providing higher penalties for building industry participants. As a result, the BCIIP Act will become legislation that focuses on promoting work health and safety for building workers.
Next steps for employers
Many of the proposed changes in the Bill are 'civil remedy provisions', meaning that an employer's failure to comply with any new requirements may result in high monetary penalties.
Employers should be aware of these potential changes and consider the impact the changes will have on their current business model. If the Bill is passed, employers will need to review their employment contracts and any enterprise agreements to ensure that they are compliant with the amended Fair Work Act.
Those currently engaged in bargaining, or seeking to initiate bargaining in the near future, will need to be aware of the impact of the laws as the amendments will create significant changes to the bargaining landscape.
Cooper Grace Ward is a leading Australian law firm based in Brisbane.
This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please contact Cooper Grace Ward Lawyers.
