Australia: Significant amendments to the Fair Work Act become law

As an employer, you may be aware that on 2 December 2022, the Federal Government passed the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022 (the Bill) through both houses of Parliament. On 6 December 2022, the Bill received royal assent and passed into law, becoming the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (the Act). The Act marks significant reform to the legal framework that underpins Australia's workplace relations system. This article outlines the key changes to Australia's workplace laws, particularly those that will affect your business' employment agreements, enterprise agreements, and workplace policies and procedures. We also explore immediate steps employers should take in response.

Key Changes Made by the Act

Fixed or Maximum Term Contracts

Fixed or maximum-term contracts set a time limit on an employment relationship with an agreed end date. The Act seeks to restrict employers from using such contracts, including in the following circumstances:

• the contract's term exceeds two years; 
• the contract allows for renewal that would see the term exceeding two years; or 
• there are consecutive contracts for the employee to perform the same or substantially similar work.

Notably, there are exceptions where your business can use fixed or maximum-term contracts. Consider whether the following circumstances apply:

• the relevant employee earns over the high-income threshold;
• a modern award permits it;
• the employee works in a governance role; 
• the role requires specialised skills to complete specific tasks;
• you are hiring for seasonal work or to fill a temporary absence; 
• you are using government contracts; or
• the contract is part of a specific training arrangement.

Flexible Work Requests

The Act expands the scope for flexible work requests to include circumstances for employees caring for family members over 55 or in family and domestic violence circumstances. Furthermore, employers will be required to give reasons for refusing flexible working requests. Additionally, the Fair Work Commission (the Commission) has increased the power to arbitrate disputes with flexible work arrangement applications.

Pay Equality

To increase transparency in workplaces and reduce risks of gender pay discrimination, the Act prohibits pay secrecy clauses in employment agreements. The Act also creates a workplace right that will allow employees to question each other about their remuneration and conditions of employment.

Unpaid Parental Leave

The Act includes increased employer obligations when an employee requests an extension to unpaid parental leave. In these circumstances, employers will be obliged to give reasons for refusing an extension, and these reasons have been limited in scope. The Commission also has powers to arbitrate unpaid parental leave disputes.

Discrimination and Respect@Work

Under the new law, sexual harassment is expressly prohibited, and the Commission has broader powers to deal with relevant disputes. The Act also provides further protections for intersex status, gender identity and breastfeeding by including these as protected attributes.

This exists in tandem with the introduction of a positive duty for employers to prevent sexual harassment in the workplace as outlined in the Anti-Discrimination and Human Rights Legislation Amendment (Respect at Work) Bill 2022 (the Respect@Work Bill). The Respect@Work Bill also recently passed both houses of Parliament on 28 November 2022. In addition to the positive duty, it also prohibits people from being subjected to a hostile work environment based on their sex.

Bargaining and Enterprise Agreements

From an industrial relations perspective, the Act:

• allows the Commission to make workplace determinations and intervene in the context of bargaining disputes;
• provides broader access to both single and multi-employer enterprise bargaining, with the latter meaning that some agreements may cover multiple employers;
• provides an automatic sunsetting for agreements that predate the Fair Work Act 2009 (Cth);
• shortens the approval process for enterprise agreements; and
• simplifies the better off overall test (commonly referred to as the BOOT) to increase flexibility and ensure a global rather than line-by-line analysis of relevant terms.

Fair Work Commission

In terms of the Commission, as well as the additional powers outlined above, the Act also:

• allows for the ordering of pay increases for workers in low-paid and female-majority industries;
• abolishes the Registered Organisations Commission and transfers its existing functions to the Commission; and
• abolishes the Australian Building and Construction Commission, with the Fair Work Ombudsman to take responsibility for the regulation of the building and construction industry.

When Do These Changes Take Effect?

As the Act came into effect on 6 December 2022, it is now law. The key changes made by the Act, as outlined above, will commence in stages over a 12-month period. These amendments and their corresponding dates are summarised in the following table.

How Should Employers Respond?

Employers must comply with the Act, and its various changes outlined above, as it is now law. In response to these various changes, and in accordance with the 12-month staged rollout, it would be prudent for employers to:

• conduct a review of any existing fixed-term employment contracts and consider future engagement on a fixed or maximum-term basis;
• determine if pay secrecy clauses are present in any existing employment contracts or master templates and make any necessary changes;
• review existing processes regarding handling requests for flexible work arrangements and unpaid parental leave and make necessary changes;
• update workplace policies and procedures regarding sexual harassment and discrimination to ensure they actively eliminate the risk of sexual harassment in the workplace;
• consider the benefit of ongoing workplace training concerning sexual harassment and discrimination;
• review existing enterprise agreements in light of relevant changes; and
• be prepared for the possibility of being included in a multi-employer bargaining process where relevant.

Key Takeaways

As of 6 December 2022, the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (the Act) introduced significant reforms to Australia's workplace relations system. It is the most notable reform since the introduction of the Fair Work Act in 2009. Accordingly, employers must respond to these changes by reviewing relevant employment agreements, enterprise agreements, and workplace policies and procedures. Likewise, your business should make necessary changes to comply with its legal obligations.