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Thursday, 11 October 2012
Page: 12035


Mr SHORTEN (MaribyrnongMinister for Financial Services and Superannuation and Minister for Employment and Workplace Relations) (10:12): I move:

That this bill be now read a second time.

I am pleased to deliver on the government’s commitment to introduce legislation extending the existing transfer-of-business protections in the Fair Work Act 2009.

The Fair Work Amendment (Transfer of Business) Bill 2012 extends the existing transfer-of-business provisions in the Fair Work Act to certain former state public sector employees that transition into the national system as a result of a sale of assets or outsourcing of work to a national system employer.

The government does not accept that these employees should be worse off, or that they should have their entitlements put at risk, simply because their jobs are outsourced.

The bill is a necessary response to this challenge—to ensure that these employees generally retain the benefit of their existing terms and conditions of employment, which have been negotiated by them in good faith with their employer, by protecting them where a transfer of business occurs between their former state employer and an employer covered by the national workplace relations system.

These reforms mean that the Commonwealth will establish, for the first time, a nationally consistent set of transfer-of-business rules for public sector employees that will protect their entitlements when they transfer to a national system employer. Employees in the public sectors of the Commonwealth, Victoria and territories are already covered by the Fair Work Act and already have the benefit of these transfer-of-business protections. However, those protections do not currently extend to public sector employees in the remaining jurisdictions which leaves them as second-class citizens and at risk when decisions like outsourcing and asset sales occur. That is why this bill is necessary and a priority for our government.

The transfer-of- business rules under the FW Act

The bill will, as far as possible, reflect the transfer-of-business provisions in part 2-8 of the Fair Work Act.

The transfer-of-business rules in the Fair Work Act reflect the government's clear policy intention to protect employees' existing terms and conditions of employment where their employer changed but their work stayed the same.

These protections apply where the two employers enter into certain transactions such as an asset sale or an outsourcing arrangement.

These rules are designed to balance the protection of employee terms and conditions of employment with the interests of employers in structuring their assets and operations efficiently.

These rules also provide certainty for all parties. The arrangements they replaced were overly complex, often difficult to apply, legalistic and sometimes resulted in employees losing the benefit of their industrial instruments even though they were performing exactly the same work for the new employer. Those pre-existing rules also applied to a narrow set of business transactions—for example, they rarely covered the outsourcing of work.

The industrial terms and conditions negotiated by state public sector employees—for instance, in Queensland and New South Wales—have been entered into in good faith, and it is the case that frequently the wage outcomes accepted by employees have been discounted because of the promise of job security, and where the promise of job security is unilaterally changed by state governments then a problem arises.

The findings of the Fair Work Review

The recent post-implementation review into the operation of the Fair Work Act, which the government publicly released on 2 August 2012, had the following to say about the existing transfer-of-business rules:

'The [Fair Work Review] Panel considers there is a clear need to protect employees in transfer of business situations. The alternative is to allow employees to be exploited by the structuring of businesses and contracting arrangements.'

'On the basis of stakeholder submissions, academic advice … analysis of cases under the provisions and an examination of the provisions themselves, the broader legislative definition succeeds in providing better protections for employees than the previous arrangements did.'

'… The scope [within the transfer of business framework] for employers to determine the appropriate outcome for their business on application to FWA provides significant flexibility.'

So the overwhelming evidence suggests that the transfer-of-business provisions, which this government put in place in our Fair Work Act 2009, deliver a balanced framework that provides both fairness and flexibility to both employees and employers.

The panel made one recommendation in relation to a particular aspect of the transfer-of-business provisions and the government is considering that recommendation in the context of its response to the review.

What is a transfer of business ?

In broad terms, the transfer-of-business rules apply where:

an employee transfers to a new employer within three months of their employment terminating with their old employer; and

the employee performs the same or similar work for the new employer as they did with their old employer; and

the old employer transfers assets or outsources work to the new employer, or undertakes certain corporate restructuring activities, such as movements to associated entities.

Where these conditions exist, the default rule is that the transferring employees' existing workplace instrument transfers with them to their new employer. Fair Work Australia has broad powers to ensure that these rules operate fairly to both the transferring employees and the new employer.

The bill

However, the current rules, which I just described and which were positively endorsed by the review into the new act, only apply where both the old and new employers are covered by the national workplace relations system. In other words, they must both be covered by the Fair Work Act.

Employees in the Commonwealth, Victorian, ACT and Northern Territory public sectors are already covered by the Fair Work Act and already have the benefit of the transfer-of-business protections. However, public sector employees in the remaining jurisdictions, Queensland, New South Wales, South Australia, Tasmania and Western Australia, do not.

That is why the bill will amend the Fair Work Act to enable certain employees in these jurisdictions to retain their existing terms and conditions of employment—which they have negotiated in good faith—where they transfer from a public sector employer to the national workplace relations system as a result of a transfer of business.

The bill will do this by:

providing for the transfer of employees' terms and conditions of employment from an old public sector employer to a national system employer where there is a connection between the two employers;

preserving the transferring employees' existing terms and conditions of employment, whether those terms are reflected in a relevant state award or agreement, by the creation of a federal instrument containing those terms and conditions and recognising service and certain accrued entitlements such as annual leave;

enabling Fair Work Australia to make orders that modify the general effect of the transfer-of-business rules, where appropriate;

providing for the interaction between the transferring terms and conditions of employment and the Fair Work Act, including the National Employment Standards, and other necessary transitional and technical provisions.

Preserving entitlements for certain transferring employees

Transferring employees' terms and conditions of employment from the old employer to a national system employer will be protected under the bill through the creation of a new federal instrument—a 'copied state instrument'.

The instrument will copy the existing terms and conditions of employment for a transferring employee where those terms are derived from a state award or agreement. This will enable those terms and conditions to transfer across to the national system with the employee where there has been a decision to sell assets or outsource work so that the employee will continue to benefit from the conditions in their existing industrial instruments which they had previously negotiated in good faith with their employer.

To put it plainly, transferring employees' existing terms and conditions of employment as set out in their industrial instrument will be protected.

The bill also ensures that a term of a copied state instrument has no effect to the extent that it is detrimental to an employee, in any respect, when compared to an entitlement of the employee under the National Employment Standards. The bill will also generally ensure that an employee’s service with the old employer counts as service with the new employer for the purpose of determining the employee’s entitlements under the copied state instrument.

This means, for example, that an employee’s accrued annual leave entitlement is preserved when they transfer to the new employer and their entitlement has not already been paid out by the old employer. A laundry worker working at the Townsville Hospital who gets transferred to a new national employer by Queensland Health cannot arbitrarily have their accrued service written off and the clock start running again on their new service.

Orders to modify the effect of a transferred instrument

Similar to the position under the existing Part 2-8 of the Fair Work Act, the bill confers power on Fair Work Australia to make orders that modify the general effect of the transfer of business rules in certain circumstances.

In particular, Fair Work Australia will be able to make orders regarding the coverage of certain instruments, including enabling transferring workplace instruments to better align with the new employer’s business operations.

In some circumstances it may also be in the interests of the transferring employees and of a new employer to consolidate terms and conditions of employment in a copied state instrument, so that they can apply to more than one employee. This may be the case, for example, when differing instruments set out similar terms and conditions for transferring employees.

To this end, Fair Work Australia will also have the power to make orders that ‘consolidate’ various workplace instruments applying at a workplace. For example, Fair Work Australia may order that a copied state instrument for a particular transferring employee is also a copied state instrument for both transferring and non-transferring employees, having regard to the views of the relevant employees and of the new employer.

Conclusion

So, in conclusion, this government takes very seriously moves by any employer to attempt to restructure their business operations that would have the effect of undermining employee entitlements. This government will not countenance employees incurring real cuts to their pay and conditions because of decisions by their employer to sell assets or outsource work.

Employees should be able to retain the benefit of their existing terms and conditions of employment in circumstances where there is a transfer of business—that is, where their employer changes but the work stays the same.

There are some who might say that this bill is unnecessary, because employers can already agree in the course of contractual negotiations for any transferring employees to maintain their existing terms and conditions of employment with the new employer.

However, this approach, of saying, 'It'll be all okay and we don't have to worry about protecting people,' does not provide certainty for employees and it does not provide guaranteed protection for their hard earned and negotiated entitlements. This bill allows employers to restructure their businesses. However, we will not stand by and see no ongoing protection for employees’ terms and conditions.

Indeed, further, the approach which says that this bill is unnecessary fails to reflect the policy intent underlying the Fair Work transfer of business rules. The idea that you can simply transfer people's jobs and cut their pay and conditions is not grounded in fairness, nor does it provide the nationally consistent and transparent set of rules which this bill provides.

Our bill will protect all state public sector employees who are moving from the state public sector to the national workplace relations system. It does so by putting in place, as far as possible, a nationally consistent set of rules which will protect public sector employees’ existing terms and conditions as set out in their industrial instrument where a transfer of business occurs between a former state employer and an employer covered by the national system.

I commend the bill to the House.

Debate adjourned.