News

17 December 2020

Proposed Industrial Relations Reforms in brief

Industrial Relations Reforms — Supporting Australia's Jobs and Economic Recovery package

The Fair Work Act (Supporting Australia’s Jobs and Economic Recovery) Bill was introduced into parliament on Dec 9 2020 as part of the post-COVID economic recovery package. The Bills key aim is to amend the Fair Work Act 2009 and support the Fair Work Commission, instilling confidence in business to stimulate job growth.

The six key areas of reform include proposed changes to:

Casual employees

Under the current Fair Work Act there is no definition of casual employment.

Casual employees are categorised under common law as someone who does not have a commitment to ongoing and definite agreed work patterns. Casuals currently receive a 25 per cent loading aimed at compensating them for loss of other entitlements such as paid leave.

Recent court decisions have confused the issue and allowed for ‘double dipping’ whereby an employee is found not to be a casual and the employer has been ordered to pay annual leave and personal leave (on top of the loading already paid).

The bill aims to:

  • introduce a statutory definition of a casual employee
  • give all casuals the option to convert to full or part-time employment after 12 months of employment (unless there are reasonable business grounds not to do so). The employee may choose to remain a casual
  • if the employee chooses to remain a casual, or is not offered the option to convert, they will have the option to access a ‘residual right to request casual conversion, provided they meet the eligibility criteria’. This request can only be made once every six months
  • the National Employment Standards will provide a new casual conversion entitlement, providing a clear pathway to convert to full or part-time employment
  • courts will be required to consider the casual loading amount if an employee is later found not to be a casual

Awards

COVID-19 hit the retail and hospitality industry the hardest. To assist businesses and employees get back to work the government is proposing to:

  • legislate two COVID-19 JobKeeper flexibilities for a further two years allowing for employers to direct employees to perform different duties consistent with their skill or competence, or work at locations different from their normal place of work
  • legislate increased access to flexible part-time arrangements enabling employees to agree to additional hours at their normal rates of pay when it suits them, subject to safeguards
  • ensure that employers offer at least 16 hours of work per week, with no less than three hours in a shift and pay applicable penalty rates
  • simplify classifications and introduce loaded rates and/or exemption rates to make it easier for small businesses to generate new jobs
  • work with the Fair Work Commission (FWC), the Fair Work Ombudsman (FWO), employer groups and unions to design a RegTech product simplifying the payment process
  • simplify the awards system and review duplicative award terms

Enterprise agreements

The government wants to encourage employers and employees to bargain more effectively and create higher productivity and wages, by reducing complexity, speeding up the approvals process, reducing risks of failure and focusing on parties’ cooperation.

Changes include:

  • a revision of the ‘better off overall test’ (BOOT) by:
    • ensure it is applied to each current and prospective employee
    • remove hypothetical scenarios and only look at those in place or ones that are reasonably foreseeable
    • ensure the FWC gives weight to the parties’ views when looking at whether the BOOT has been met
    • emphasising monetary and non-monetary improvements for employees
  • legislation requiring all agreements to be approved within 21 working days (as far as is reasonably practicable
  • allowing the FWC to approve an agreement that doesn’t comply with the BOOT if it is agreed that it is in the public interest to do so
  • limiting the ability of non-bargaining parties to intervene
  • replacing the ‘genuine agreement’ prescriptive test with a simple test that focuses on the substance of the agreement process
  • restricting termination applications of expired agreements
  • streamlining how new franchisee employees can join existing enterprise agreements Stopping Zombie agreements (from early 2000s) from operating by 1 July 2022
  • adopting tech solutions

Greenfields agreements

  • can be made up to eight years for construction of major projects valued over $500m or above $250m and below $500m in value if the project has national or regional significance and is likely to create jobs
  • where Greenfields agreements operate for more than four years, providing for annual wage increases
  • mental health initiatives for fly-in-fly-out or drive-in-drive-out workers

Compliance and Enforcement

The government has designed a system whereby deliberate flouts of the law are punished.

  • The introduction of a criminal offence for deliberate, dishonest, and systematic underpayments to employees, punishable by up to four years imprisonment, and large fines. Individuals convicted of committing this offence will be disqualified from managing corporations for five years
  • Increase in the maximum civil penalties under the Fair Work Act for underpayments
  • The use of a ‘benefit gained’ penalty scale for medium to large businesses
  • An increase in the maximum penalty for sham contracts, infringement notices and non- compliance
  • Not allowing jobs to be advertised with minimum wage rates

For employers who do not flout the law but make genuine mistakes, the government aims to give them greater assistance:

  • increase funding for the FWO to deliver guidance and services
  • work with industry to design a free ‘Employer Advisory Service’ making it easier for small business to comply with legislation
  • institute a ‘Deferred Litigation Process’ whereby underpayments are rectified quickly and in good faith
  • expand and improve the small claims process – increase the small claims cap from $20,000 to $50,000 and allow the courts to refer issues to the FWC for resolution via conciliation or arbitration

Fair Work Commission

The Fair Work Act will be amended to:

  • allow the Commission to dismiss misconceived, lacking in substance or abuse of the process claims
  • enable the Full Bench of the FWC to prevent further applications being made once it has been dismissed

Resolution Institute Professional Member, Shiv Martin, commented on the proposed changes:

Along with any proposed industrial relations reform, it is also important for the government to set in place a clear initiative for how employees and employers will be educated as to their new obligations and entitlements. Many conflicts are driven by the failure to understand entitlements and then to make decisions accordingly. Ideally, legislative change is accompanied by clear transitioning arrangements and community information initiatives. There must also be recognition of significant power imbalances between workers and the employers, and particularly where there is no clear union involvement, it is important to put in place some safeguards to enable workers to negotiate the best outcomes.

I suspect that the changes will cause an increase in workplace disputes in the short term as individuals begin to understand their new entitlements and adjust contractual arrangements accordingly.