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2008

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

 

 

FAIR WORK BILL 2008

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

 

(Circulated by authority of the Minister for Employment and Workplace Relations,

the Honourable Julia Gillard MP)





FAIR WORK BILL 2008

OUTLINE

The Fair Work Bill 2008 (the Bill) creates a national workplace relations system that is fair to working people, flexible for business and promotes productivity and economic growth. 

The Bill implements the following major reforms:

·                            it establishes a simple and stable safety net comprising:

-       the NES, which will apply to all employees and guarantee:

o       maximum weekly hours of work;

o       a right to request flexible working arrangements;

o       parental leave and related entitlements;

o       annual leave;

o       personal/carer’s leave and compassionate leave;

o       community service leave;

o       long service leave;

o       public holidays;

o       notice of termination and redundancy pay; and

o       provision of a Fair Work Information Statement.

-       modern awards, which provide flexibility and stability for employers and their employees and which may include:

o       additional minimum terms and conditions of employment (such as minimum wages, overtime and penalty rates, allowances, representation and dispute settlement) tailored to the needs of the particular industry or occupation to which the award relates; and

o       terms which supplement the NES.

-       national minimum wage orders that apply to award/agreement free employees

·                            It establishes a new institutional framework for the administration of the new workplace relations system comprising:

-       FWA, an independent, statutory body with a range of functions and powers, including:

o       facilitating collective bargaining;

o       approving enterprise agreements;

o       adjusting minimum wages and award conditions;

o       dealing with unfair dismissal claims;

o       dealing with industrial action; and

o       settling workplace disputes

-       the Fair Work Ombudsman, whose key function is to promote harmonious and cooperative workplace relations and compliance with the Bill through education, assistance and advice and, where necessary, undertake enforcement activities, such as investigation, issuing compliance notices and initiating court proceedings.

·                            It promotes productivity and fairness through enterprise agreements that are tailored to suit the needs of businesses and the needs of employees, including by:

-       providing employees and employers with the right to appoint persons of their choice to represent them in negotiations for a proposed agreement;

-       enabling FWA to facilitate good faith bargaining and the making of agreements, including through making bargaining orders and dealing with bargaining disputes where the parties request assistance; and

-       ensuring that employees covered by an agreement are better off overall against the new safety net. 

·                            It provides a framework for dealing with terms and conditions of employment where there is a transfer of business that balances the protection of employees’ terms and conditions of employment and the interests of employers in running their enterprises efficiently.

·                            It promotes fairness and representation at the workplace through streamlined and simple general protections dealing with workplace and industrial rights, including the rights to freedom of association and protection against discrimination, unlawful termination and sham arrangements (which disguise employment arrangements as independent contractor arrangements).

·                            It provides genuine unfair dismissal protections for employees with a quick, flexible and informal process, an emphasis on re-instatement and a Fair Dismissal Code for small businesses.

·                            It retains clear, tough rules against industrial action, with the right to take protected industrial action during bargaining in support of claims in relation to a new enterprise agreement following a fair and democratic secret ballot.  This includes empowering FWA to make orders to stop industrial action and sets out restrictions on payment to employees during periods of industrial action. 

·                            It retains a fair and balanced framework for right of entry for officials of organisations and empowers FWA to deal with abuses of rights by officials, unreasonable requests by employers and disputes.

·                            It provides a default right for employers to stand down employees in defined circumstances. 

·                            It enhances compliance with the new workplace relations system by providing a single, accessible compliance system, including:

-       the ability of the Fair Work Divisions of the Federal Court or the Federal Magistrates Court to make any order considered appropriate to remedy a contravention;

-       the right to enforce entitlements under a contract of employment that relate to the same subject-matters as the NES or a modern award in the Federal Court and the Federal Magistrates Court and by inspectors in eligible State and Territory courts; and

-       a new small claims procedure in the Federal Magistrates Court.

FINANCIAL IMPACT STATEMENT

The financial impact is yet to be determined in consultation with the Department of Finance and Deregulation and once agreed will be included in the relevant appropriation bills.



REGULATORY ANALYSIS

r.1.               This document analyses the regulatory implications of the key legislative proposals contained in the Fair Work Bill 2008 (the Bill). The analysis has been prepared by the Department of Education, Employment and Workplace Relations (the Department). The Prime Minister and the Minister for Finance and Deregulation have agreed to the inclusion of this analysis in the Explanatory Memorandum to the Bill and note that the Office of Best Practice Regulation (OBPR) agrees that this analysis has effectively documented the regulatory implications of the legislative proposals, compared with arrangements which existed under the legislative framework of the previous Government.

r.2.                     The Prime Minister granted an exceptional circumstances exemption for these proposals at the decision making stage. Consistent with best practice regulation requirements, the Australian Government (the Government) commits to undertaking a post-implementation review within two years of the full implementation of these proposals on 1 January 2010.

INTRODUCTION

r.3.                     The current legislative provisions contained in the Workplace Relations Act 1996 (WR Act) are complex and amount to some 1,500 pages in length. This compares with the simpler provisions of this Bill which amount to fewer than 600 pages.

r.4.                     As the means for fulfilling the election commitments made by the Government in Forward with Fairness , released April 2007, and Forward with Fairness - Policy Implementation Plan , released August 2007, this Bill provides a much needed opportunity to reconceptualise the legislation from first principles and ensure that Australia’s workplace relations legislation:

·                            provides a clear and stable framework of rights and obligations;

·                            is simple and straightforward to understand in terms of structure, organisation and expression; and

·                            reduces the compliance burden on business (for example, by avoiding ‘micro-regulation’ and overly prescriptive provisions and by conferring broad functions and appropriate discretion on Fair Work Australia).

Key Elements of the New System

r.5.                     The new workplace relations system will be built on:

·                            a strong safety net of 10 legislated National Employment Standards for all employees;

·                            a modern, simple award system that complements the National Employment Standards, providing certainty, flexibility and stability for employers and their employees;

·                            an enterprise-level collective bargaining system focused on promoting productivity;

·                            unfair dismissal laws which balance the rights of employees to be protected from unfair dismissal with the need for employers, particularly small business, to fairly and efficiently manage their workforce; and

·                            a ‘one-stop-shop’, Fair Work Australia (incorporating the Fair Work Ombudsman), for advice and support on all workplace relations issues and enforcement of legal entitlements.

Regulatory Implications

r.6.                     The proposed legislation will have a regulatory impact. The new arrangements pose significant implications for employees, employers and the broader community. The new provisions centre on six key policy areas:

                       (i)       Legislated Minimum Employment Standards;

                     (ii)       Modern Awards;

                   (iii)       Bargaining Framework;

                   (iv)       Unfair Dismissal;

                     (v)       Industrial Action; and

                   (vi)       Institutional Framework.

Summary

r.7.                     Pending the development of a national workplace relations system, the Department estimates that up to approximately 85 per cent of Australian employees will be covered by the federal workplace relations system. The remaining employees will be covered by a state industrial relations system in New South Wales, Queensland, Western Australia, South Australia or Tasmania.

r.8.                     The Government’s policy is to enter into new arrangements with state governments to ensure a uniform workplace relations system for private sector employers and employees.

r.9.                     The Bill sets out provisions that provide minimum employment standards and provide an industrial framework for employers and employees in the federal workplace relations system. These provisions are designed to strike a balance between the needs of employers and employees and to promote fair and productive workplaces.

r.10.                 Each of the sections of this analysis discusses this in detail.

r.11.                 The new legislated minimum employment standards, known as the National Employment Standards (NES), contain provisions that provide increased access to leave (particularly unpaid leave), provide flexible working arrangements and simplify the rules by which the entitlements of employees are accrued. Where additional entitlements (including unpaid entitlements) are provided under the NES, this will benefit employees but may, depending on circumstances, impose a cost on an employer. The increased access to flexible working arrangements is designed to assist employees to balance their work and personal lives. However, businesses are able to refuse access to these provisions on reasonable business grounds, which will minimise the disruption of these provisions to business. The simplified rules for accruing leave are designed to benefit both employers and employees.

r.12.                 The bargaining framework contained in the Bill entails significant regulatory change. These include the introduction of good faith bargaining, changes to the content of agreements, the creation of a single stream of agreement-making, a streamlined process for the approval of agreements and the introduction of Fair Work Australia-facilitated bargaining for the low paid. These regulations are focused on facilitating bargaining where employers and employees are not successfully able to bargain together. As a number of the elements of the bargaining framework are new to the federal workplace relations system and do not have parallels elsewhere, the impact of a number of elements of the bargaining framework is difficult to quantify at this stage.

r.13.                 The new legislation will expand access to unfair dismissal provisions. Approximately 100 000 additional previously exempt businesses, with around 3 million employees, will become part of the unfair dismissal system. Businesses have 6 or 12 months to assess their employees before the employees would be able to contemplate an unfair dismissal claim, claims must be lodged within 7 days of dismissal and small businesses can avoid defending claims altogether by following the new Fair Dismissal Code. While there is likely to be more unfair dismissal claims, they should be easier and cheaper to resolve. The unfair dismissal system will provide definite benefits for employees in terms of job security and mitigate adverse impacts on employers.

r.14.                 Industrial action can have a negative impact, particularly in terms of productivity. Regulations that encourage industrial action can have a negative impact on the ability of employers to operate their business and on the take home pay of employees. Bargaining participants should have the right to take protected industrial action and an employer should have a right to provide a proportionate response. The provisions in the Bill largely retain previous rules on industrial action, with some provisions streamlined and simplified.  

r.15.                 The institutional framework of the new workplace relations system will be a ‘one-stop-shop’ - Fair Work Australia (FWA). FWA will replace seven separate agencies that currently span the institutional framework in the federal workplace relations system. The Department is not able to directly quantify the impact of the changes to the institutional framework in the creation of FWA. However, the Department anticipates that employers and employees will benefit from this regulatory change by having a central point of contact for workplace relations issues, as opposed to spending time and resources ascertaining the appropriate institution to contact in relation to their issue.

r.16.                 The impact of modern awards is difficult to quantify at this stage. The Australian Industrial Relations Commission (AIRC) is currently undertaking an award modernisation process to create modern awards to come into effect on 1 January 2010. The impact of award modernisation rests on the final content of these awards. However, the intention of award modernisation is to create modern awards that reduce regulation, are relevant to the needs of employers and employees, provide (along with the NES) the definition of minimum wages and conditions of employment and are fewer in number.

r.17.                 The Department does not anticipate that the impact of these regulations will be differential across industries, occupations and regions. The Bill creates a federal workplace relations system that provides consistent minimum conditions and industrial frameworks for all employers and employees within the system.

r.18.                 As mentioned above, the Government is committed to monitoring the impact of the provisions contained in the Bill through a post-implementation review. This review will provide a comprehensive analysis of how the Government’s new workplace relations system is operating and its impact on employers, employees, the community and governments. The review will assess if the provisions in the Bill have led to any differential impacts across regions, industries and occupations.

Consultation

r.19.                 In Forward with Fairness the Government committed to taking a measured and consultative approach to developing its substantive workplace relations legislation. As detailed in Table A1 of Attachment A, the Government consulted extensively with a wide range of stakeholders, including peak union and employer bodies and state and territory workplace relations ministers. To summarise, the key stakeholder groups that have provided valuable input to the development of the Bill are:

 

·                            Workplace Relations Ministers’ Council (WRMC), a council of federal, state and territory ministers responsible for workplace relations matters in their respective jurisdictions. The New Zealand Minister is invited to attend WRMC as an observer.

·                            High Level Officials Group (HLOG) consists of officials from the federal government and each state and territory. It was established at the WRMC meeting on 1 February 2008 to facilitate collaboration on the development of the new national workplace relations system for the private sector.

·                            National Workplace Relations Consultative Council (NWRCC) is a tripartite body comprised of seven representatives from the Australian Council of Trade Unions (ACTU) and seven employer representatives. It is chaired by the Deputy Prime Minister and under the NWRCC Act is required to meet at least once every six months on a confidential basis to consider workplace relations matters on a national level.

·                            Committee on Industrial Legislation (COIL) is a sub-committee of NWRCC that considers workplace relations and related legislative matters.

·                            Business Advisory Group (BAG) was established on 20 February 2008 and is chaired by Mr John Denton, Managing Partner, Corrs Chambers Westgarth. It involves representatives from the construction, mining, transport, hospitality, retail, banking, labour hire and the media industries meeting on a confidential basis to discuss key issues relating to the Bill.

·                            Workers Advisory Group (WAG) was established on 20 February 2008 and is chaired by the Deputy Prime Minister. It consists of high-level union representatives meeting on a confidential basis to discuss key issues relating to the Bill.

·                            Small Business Working Group (SBWG) was established on 20 February 2008 and is chaired by the Hon Dr Craig Emerson MP, Minister for Small Business, Independent Contractors and the Service Economy. It involves representatives of small businesses, including peak small business organisations, meeting on a confidential basis to provide advice to the Government on the development of the Fair Dismissal Code.

·                            Union Working Group on the Fair Dismissal Code (UWG) was established on 20 February 2008 and is chaired by the Hon Dr Craig Emerson MP, Minister for Small Business, Independent Contractors and the Service Economy.

Consultation on National Employment Standards

r.20.                 The Government has also undertaken extensive consultation on the proposed NES. The Government released the NES and invited submissions on the NES exposure draft and discussion paper on 14 February 2008. A total of 129 submissions were subsequently received from a wide range of stakeholders, including employer and employee representatives, community groups, businesses, state governments and interested individuals. After consideration of the submissions received, the Government released the proposed NES on 16 June 2008.

Outline

r.21.                 This document is structured to provide an analysis of the regulatory implications of the Bill in accordance with the six key policy areas noted above. Each section begins with an outline of the arrangements in place under the system that applied at the time the Government assumed office. This includes the ‘Work Choices’ amendments to the WR Act. Each section then includes details on how the Government’s new policies will operate, followed by an impact analysis of these new arrangements. The analysis concludes with details on how the Government will review and monitor the new provisions.

 



1.       LEGISLATED MINIMUM EMPLOYMENT STANDARDS

Current Arrangements

r.22.                 The current safety net of legislated minimum employment standards under the WR Act came into effect with Work Choices and the implementation of the Australian Fair Pay and Conditions Standard (the Standard). The Standard contains five basic entitlements, detailed as follows:

·                            Basic rates of pay and casual loadings : prescribed in Australian Pay and Classification Scales (Pay Scales), the Federal Minimum Wage or special Federal Minimum Wages for junior employees, employees to whom training arrangements apply and employees with a disability.

·                            Maximum ordinary hours of work : employees cannot be required or requested to work more than 38 hours per week plus reasonable additional hours; or, an average of 38 hours per week over a period of up to 12 months (if the employee and the employer agree in writing) and reasonable additional hours.

·                            Annual leave : all employees, other than casual employees, have a minimum paid entitlement to annual leave based on their calculated ‘nominal hours’ worked. For an employee who works 38 hours or more per week for 12 months, the entitlement to annual leave is four weeks. For shift workers the entitlement is five weeks of leave per year if they worked 38 hours per week.

·                            Personal leave (includes sick leave, carer’s leave and compassionate leave) : an employee is entitled to ten days of paid personal leave per annum after 12 months of service for an employee who works 38 hours per week. This entitlement is pro-rated for employees who have not completed 12 months service. A further entitlement of two days of unpaid carer’s leave per occasion in the event of an unexpected emergency for employees who have exhausted their personal leave entitlement or are casual.

·                            Parental leave and related entitlements : separate provision is made for maternity, paternity, adoption and related kinds of leave. The primary entitlement is to 12 months' unpaid leave, to be shared between both parents. Leave must be taken separately in a single continuous period, except for a one-week period around the birth of the child (three weeks in the case of adoption) which may be taken concurrently.

r.23.                 These five standard entitlements apply to all employers and employees subject to the WR Act. While the specific nature of the application varies depending on the relevant industrial instrument, the five entitlements generally prevail unless a more favourable outcome is provided in a preserved award (for annual leave, personal/carer’s leave and parental leave), workplace agreement or common law contract of employment.

r.24.                 The current provisions include both the entitlement and machinery provisions about how the entitlement is determined or calculated. 

Government’s Policy on Legislated Minimum Employment Standards

r.25.                 The Government’s key objective is to address public concern about the adequacy of the safety net under the current workplace relations system by providing a safety net which is fair for employers and employees and supports productive workplaces. The NES is structured in a way that ensures the provisions are easy to understand and apply for employers and employees at the workplace.

Proposed Changes

r.26.                 The NES provisions, as proposed in the Bill, will apply to all employees covered by the federal system and will come into effect from 1 January 2010. Minimum wages are not included in the NES as they will be provided in modern awards. The ten NES are:

·                            Maximum weekly hours of work : the NES will provide for the same quantum of maximum ordinary hours of work (38 hours for full time employees) as provided under the Standard while making additional provisions of maximum ordinary hours for part-time employees.

The Standard allows for averaging of hours, provided there is agreement in writing and the averaging period is no longer than 12 months. Under the Standard, hours worked in excess of 38 hours in a week are not considered additional (or subject to the reasonableness factor) if these hours are worked in accordance with an averaging agreement.

Under the proposed NES, a modern award or enterprise agreement may provide for averaging of hours of work. An employee not covered by an award or an agreement may agree in writing to average hours over 6 months or less. A key change is that where additional hours worked are based on an averaging arrangement, they will be subject to reasonableness factors. The averaging provision/arrangement will be taken into account in considering whether additional hours are reasonable.

·                            Requests for flexible working arrangements : the Standard does not provide an entitlement to request flexible working arrangements. The NES will provide a new legislated entitlement for parents of, or having responsibility for the care of, a child under school age to request a change in working arrangements to assist with the care of the child. An employer will only be able to refuse this request on reasonable grounds. The employer’s decision will not be subject to review.

·                            Parental leave and related entitlements : both the Standard and the NES provide for maternity, paternity and adoption leave. The NES will provide both parents with the right to separate periods of up to 12 months unpaid parental leave. Alternatively, one parent will have the right to request an additional 12 months of leave, which employers will only be able to refuse on reasonable business grounds. This builds on the previous entitlement under the Standard of 12 months unpaid leave, shared between parents.

·                            Annual leave : both the Standard and the NES provide the same coverage and quantum of annual leave entitlement. A key change under the NES is a simpler manner of accrual and the concept of ‘service’ for calculating the entitlement. Paid annual leave will accrue and then be taken on the basis of an employee’s ordinary hours of work. The NES will enable modern awards to supplement the NES if the effect of those terms is not detrimental. This could include provisions that, for example, allow an employee to take twice the annual leave required by the NES but at half the rate of pay. The cashing out of annual leave may be provided in modern awards and by enterprise agreements, subject to a remaining entitlement balance of 4 weeks leave. Award and agreement free employees may also cash out their annual leave, as long as 4 weeks leave remains. 

·                            Personal/carer’s leave and compassionate leave : the NES will not change the quantum of the entitlement to personal/carer’s leave and compassionate leave but will extend unpaid compassionate leave to casual employees. In addition, the number of paid carer’s leave days which can be used is no longer capped at 10 days per year. The NES will also replace complex rules about the accrual and crediting of paid personal/carer's leave with a single, simple rule that consolidates notice and evidence rules for taking leave. The NES will enable modern awards to make provision for the cashing out of personal/carer’s leave as long as 15 days’ leave balance remains. Employees not covered by an award or agreement will not be able to agree to cash out personal/carer’s leave.

·                            Community service leave : there is no current entitlement to any kind of community services leave under the WR Act, although it is unlawful to terminate an employee’s employment if they are temporarily absent due to a voluntary emergency management activity. Employees currently rely on an employer’s discretion and provisions in awards and agreements. The NES will enable employees to take unpaid leave to undertake an eligible community service activity such as jury service or voluntary emergency management. The NES contains provisions for employers to provide make up payments for full and part time employees undertaking jury duty for a period of up to ten days (at the base rate of pay for ordinary hours of work). This is different from the current situation, where employees rely on provisions in state and territory legislation, awards and agreements for jury make up pay.

·                            Long service leave : an entitlement to long service leave is currently provided by state and territory legislation, awards and agreements. Initially, the NES will draw on current state and territory arrangements for long service leave in providing this entitlement. Meanwhile, the Government is working with state and territory governments to develop nationally consistent long service leave entitlements.

·                            Public holidays : the NES and the Standard both provide an entitlement for an employee to be absent on prescribed public holidays. The NES provides for payment at their base rate of pay for ordinary hours if absent on a public holiday. Under the NES, the Queen’s birthday holiday is prescribed. The current provisions of the WR Act do not prescribe this as a holiday. Under the NES, an employer may make a reasonable request for an employee to work on a public holiday. However, an employee may refuse to work if they have reasonable grounds.

·                            Notice of termination and redundancy pay : the NES will provide for written notice of termination and redundancy pay. The current provision for notice of termination is provided under the WR Act but through provisions separate to the Standard. The substantive change under the proposed reforms is for the employer’s notice to be in writing. The NES provides a new entitlement to redundancy pay, depending on the level of continuous service by an employee. This NES does not apply to employees of a small business. Modern awards may include industry specific redundancy entitlements. These entitlements will provide more comprehensive protection for employees.

·                            Fair Work Information Statement : from 1 January 2010 an employer will be required to give the Fair Work Australia Information Statement to all new employees. However, unlike the Workplace Relations Fact Sheet, there will no longer be a statutory requirement to give the statement to existing employees.

r.27.                 The Bill does not identify what may, or may not, comprise ‘reasonable business grounds’ for the refusal of a request under the NES. Rather, the reasonableness of the grounds is to be assessed in the circumstances that apply when the request is made. Reasonable business grounds may include, for example:

·                            the effect on the workplace and the employer's business of approving the request, including the financial impact of doing so and the impact on efficiency, productivity and customer service ;

·                            the inability to organise work among existing staff; or

·                            the inability to recruit a replacement employee or the practicality or otherwise of the arrangements that may need to be put in place to accommodate the employee's request.

It is envisaged that FWA will provide guidance on this issue.

Impact Analysis

r.28.                 Changes to minimum employment standards will impact on those employers and employees that have their employment arrangements based on these minimum employment conditions. The changes will directly affect those parties that rely on minimum standards currently available through legislation, awards or collective agreements which include minimum employment conditions as part of the agreement. In establishing the impact of these changes to minimum employment standards the first step is to identify how many employers and employees are affected.

How many employers and employees are affected? 

r.29.                 In terms of awards, ABS data from May 2006 (most recent data available) show that 19.0 per cent of employees were paid their exact award rate of pay. However, a larger number of employees rely on awards to form the basis of their minimum entitlements. There are no data available on the proportion of employees who rely on minimum conditions in awards.

r.30.                 It is difficult to identify the number of employees covered by collective agreements that utilise minimum employment conditions as many agreements include conditions over and above the minimum requirements. Nevertheless, the following analysis includes data on the incidence of employment conditions in federally registered collective agreements where available and appropriate.

Impact on employees and employers

r.31.                 Changes to minimum employment standards can afford a benefit to employees if they are increased, in which case they would impose a cost on business that has to pay for the increased standard. Or if a standard is reduced then this affords a benefit to business that has a lowered cost, but imposes a cost on employees who have a reduction in their standards. Therefore, it can be seen that changes to employment standards result in a transfer or redistribution between employers and workers.

r.32.                 What matters when assessing the impact of the change to employment standards is:

·                            the equity effect of any transfer or redistribution between employers and employees; and

·                            the behavioural responses of employers and employees to a change in employment standards.

Equity effect

r.33.                 It is not possible to measure scientifically the equity effect of transfers between different parties in an economy. However, it is important to acknowledge that these equity considerations will play a part in the impact of changes to minimum employment standards.

r.34.                 It is important to also consider the role of government in taxing the payments that are made to workers. This could mean that where an employment standard may, for example, result in employers paying a higher salary to workers, the workers will not receive the full benefit because part of it will go to the government through taxation. 

Behavioural responses

r.35.                 Changes to employment standards may result in employers or employees changing their behaviour. The main behavioural response from employers is their propensity to hire workers in response to changes in costs of employing staff caused by changes in employment standards. For example, if new employment standards are increased to a degree that substantially increases the marginal cost of employing staff to above the marginal benefit, then in this case it is likely that business will have a reduced incentive to employ staff. Conversely, individuals may be more willing to work if they receive more compensation for that work. This could improve participation rates.

r.36.                 The behavioural responses of employers to changes in employment standards may also affect the type of staff that they employ. For example, some employers may recruit employees that are unlikely to take unpaid leave over other potential employees who are more likely to take unpaid leave. However, equal opportunity legislation is designed to prevent this from occurring.

r.37.                 The following sections will analyse in more detail the impact of changes to specific employment standards. In assessing the impact of the changes in legislated minimum entitlements, the Department used Australian Bureau of Statistics (ABS) data where available.

r.38.                 The Department also compared the NES provisions with conditions provided in a sample of 50 awards and a census of federally registered collective agreements to determine if they provided a lesser, equal or higher entitlement.

r.39.                 The sample of awards is not a random sample. The sample was drawn mainly from the list of industries and occupations prioritised by the AIRC for award modernisation but also included non-priority industries, such as road transport. These are important awards with significant employee coverage.

r.40.                 The census of federally registered collective agreements was conducted using the Department’s Workplace Agreement Database (WAD). The WAD provides details on a range of employment conditions for various types of agreements including union collective, employer collective, union greenfields and employer greenfields agreements.

Maximum weekly hours

ABS data

r.41.                 Data from the ABS Labour Force survey show that over the year to August 2008, an average of 43.6 per cent of all employees worked 40 or more hours a week (actual hours). [1]

Award and agreement data

r.42.                 The average maximum weekly hours of current federal collective agreements is 37.5 hours or just below the 38 hour maximum requirement.

r.43.                 In current federal collective agreements, averaging of hours over more than a one month period is relatively common. The accommodation, cafés and restaurants industry has the highest level of averaging in current collective agreements at 39.3 per cent of all agreements in the sector. Other sectors in which more than 20 per cent of all current agreements average hours over more than one month include personal and other services (27.5 per cent), agriculture, forestry and fishing (26.5 per cent), property and business services (25.2 per cent), communication services (24.0 per cent) and retail trade (22.2 per cent).

Impact

r.44.                 Therefore, the Department expects a negligible impact of this provision.

Requests for flexible working arrangements

ABS data

r.45.                 The Department estimates that there are potentially 96,000 eligible mothers who could take advantage of this provision at any one time. This is calculated by taking the number of mothers with a youngest child aged 0-4 who were employed in full-time work whose partner, if they were in a couple family, was also employed full-time (142,700) [2] , adjusting it by both the number of full-time employed females in child bearing age (95.4 per cent) [3] and the share of those employees who have not been with their employer for under twelve months (70.5 per cent). [4]

Administrative burden

r.46.                 The consideration of a request for flexible working hours may involve some minor administrative cost, primarily the time spent by management and/or human resources staff to consider a request and prepare a written response to the employee. However, the department does not expect this requirement to be onerous for the vast majority of businesses and therefore these costs are likely to be minimal.

r.47.                 Furthermore, any costs incurred by businesses in considering requests for flexible working arrangements where industrial instruments did not offer such flexibility may be offset by the benefits to employers such as increased staff retention and loyalty. Indeed, businesses that are able to offer flexible working arrangements may benefit by being viewed favourably as an ‘employer of choice’.

Agreement data

r.48.                 WAD data show that 43.0 per cent of all current federal collective agreements provide for flexible working arrangements through changes related to hours of work. Flexible working arrangements are most common for employees in the retail trade industry (88 per cent of employees covered by federal agreements). The lowest proportion of employees covered by a collective agreement providing flexible working arrangements by industry, is in the wholesale trade industry (24 per cent of employees covered).

Impact

r.49.                 Therefore, as this provision in the NES will be a new entitlement for a number of employees, the Department expects that there will be a moderate increase in compliance costs associated with the processes involved in requesting flexible working arrangements. However, this NES contains provisions that ensure that the right to request flexible working arrangements will not impede the competitiveness and viability of businesses.

Parental leave

ABS data

r.50.                 The analysis of this NES does not include any estimate of the costs of training an employee to replace an employee who is on parental leave.

r.51.                 The Department estimates that a maximum of 26,238 women who had taken leave of 12 months or more in the absence of extended parental leave, would potentially take the full entitlement of 104 weeks. This is calculated by taking the number of live births and adoptions (285,200) [5] , adjusting it both by the share of eligible female employees aged 15-44 years who had been with their current employer for 12 months or more (40 per cent) [6] and the share of female employees who took unpaid parental leave for a period of one year or more (23 per cent) [7] .

Simultaneous unpaid parental leave

r.52.                 The NES increases the amount of leave that can be taken concurrently by both parents (in relation to both birth-related and adoption leave) from 1 week to 3 weeks.

r.53.                 The ABS Career Experience survey asks employed males about their leave experience when their youngest child was born. Only 6 per cent of employed males with children aged under six years take unpaid parental leave when their youngest child is born. [8] Men are most likely to take recreational /holiday/annual leave (68 per cent) on the birth of their youngest child. [9] On the other hand, all men who used unpaid parental leave did so for a period less than six weeks. [10]

r.54.                 International studies show that male use of parental leave is generally low. [11] Where men do use this leave, they only use a small proportion of the total number of days of leave available to them. [12] Figure 1 shows that, at November 2002 (most recent data), a total of 22,000 men with children under 6 years took unpaid parental leave when their youngest child was born. Of these, all took leave for a period of less than 6 weeks.

Same-sex couples

r.55.                 The proposed parental leave NES extends parental leave entitlements to same-sex couples for the first time. Data from the ABS Labour Force survey show that there were 31,100 same-sex couple families in June 2007. Of these, 915 (3.7 per cent) were same-sex couple families with dependants where the youngest child was aged up to 4 years in June 2007. In total, there were approximately 2,300 (9.3 per cent) same sex couples with dependant children in June 2007. [13]

Agreement data

r.56.                 Of current federal collective agreements, 25 per cent provide parental leave provisions consistent with the current Standard. Simultaneous leave is provided in 10.2 per cent of agreements. Only 6.2 per cent of agreements provide for extended unpaid parental leave. The ability to extend unpaid parental leave from 12 to 24 months is a more generous provision than currently provided in 93.8 per cent of current federal collective agreements. However, it is important to note that a business has the right to refuse the extra 12 months leave on reasonable business grounds.

Figure 1: Employed males with children under 6 years who took parental leave when youngest child born, November 2002

Source: ABS, Career Experience Survey (Cat No 6254.0), November 2002, unpublished data.

 

Annual leave

r.57.                 The NES will not change the coverage or quantum of the annual leave entitlement. However, the NES will replace complex formulae in the current Standard about the accrual and crediting of paid annual leave with a simplified system - paid annual leave simply accrues and is taken on the basis of an employee's 'ordinary hours of work'. The NES enables modern awards to make provision for additional leave for shift workers and for cashing out of annual leave with appropriate safeguards.

r.58.                 As noted above, the major regulation change under this NES is to simplify complex rules around annual leave accrual. The Department is unable to quantify the regulation impact of the simplification of these rules and formulae.

Personal/carer’s leave

ABS Data

r.59.                 The proposed NES extends unpaid compassionate leave entitlements to casual employees. However, only limited data are currently available, making it difficult to calculate the expected take up of this provision.

r.60.                 The ABS offers three different measures of the incidence of casual employment - the Employee Earnings, Benefits and Trade Union Membership (EEBTUM) [14] , Forms of Employment (FoES) [15] and Labour Market Statistics [16] publications.

r.61.                 ABS EEBTUM data show that casual employee incidence was 24.7 per cent (2,061,000 employees) in August 2007. [17] The Department believes that this is the most accurate estimate of casual employment.

r.62.                 Quantifying the potential take-up of this provision by casuals is problematic. Because casuals are classified as employees without leave entitlements for statistical purposes, data on the leave taken by casuals is very limited. Other potential methodologies, for example, estimating leave based on the propensity of non-casual employees to take compassionate leave, are also frustrated by a lack of suitable data.

Award and agreement data

r.63.                 All awards sampled provided personal/carer’s leave for full-time and part-time employees in varying amounts (from 5 to 15 days). Methods of accrual varied across the instruments, with some instruments requiring a minimum length of service prior to accrual of this entitlement.

r.64.                 In all awards sampled, compassionate leave was available on bereavement only. There was only one example of bereavement leave for casuals ( Metalliferous Mining and Processing Award [AN170065 - Tas]. There was one example of casuals entitled to unpaid carer’s leave ( Clerks’ (South Australia) Award [AN150039 - SA] ). The lack of pre-reform award/Notional Agreement Preserving State Award (NAPSA) provisions in the sample providing casuals with compassionate leave suggests some limited regulatory impact of this provision.

r.65.                 Personal/carer’s leave is also a common entitlement in federal collective agreements - 92.9 per cent of current agreements provide for paid personal leave.

Community Service Leave

Jury service

r.66.                 As noted above, the NES contains provisions for employers to provide make up payments for all permanent full and part time employees undertaking jury duty for a period of up to ten days (at the base rate of pay for ordinary hours of work). At present, relevant legislation for each state and territory prescribes how much each state and territory government will pay employees for each day of jury service. Of all the states and territories, only Victoria and Queensland currently require employers to pay a make-up payment to employees for jury service.

r.67.                 Jury service is a community benefit. It is the Government’s view that employees who provide jury service should not suffer a financial burden due to their participation in jury service. Employees currently not entitled to make-up pay for jury service are likely to be more inclined to try and avoid service, potentially making juries less representative overall than they would otherwise be.

r.68.                 The following analysis provides estimates of the total net additional annual impost on employers under this NES.

Data

r.69.                 National estimates of the proportions of employees undertaking jury service are derived using data from the AIRC’s 2004 decision to vary the Grocery Products Manufacture - Manufacturing Grocers Award 2003 in respect of jury leave entitlements for Victoria in financial year 2003-04. [18] ABS Labour Force and Average Weekly Total Earnings data are also used. The key annual derived estimates are:

·                            0.190 per cent of permanent adult employees will be empanelled (serve as jurors), serving an average of seven days; and

·                            0.433 per cent of permanent adult employees will be required to attend a jury room, for an average of 2 days.

·                            Based on these estimates, Australia-wide 12,896 permanent adult employees would have been empanelled in financial year 2007-08, and 29,414 would have attended the jury room but not been empanelled.

r.70.                 The additional costs to employers for each state and territory are then estimated by calculating the total wages cost of the days of attendance at jury rooms and jury service [19] and subtracting the payments already required to be made according to the legislation applicable in each state and territory. The estimated net additional cost to employers Australia-wide is $7,793,524.

r.71.                 It should be noted that this is likely to be an over-estimate of the total cost for several reasons. Firstly, the average length of time for all jurors is seven days, which presumable includes many cases which extend past ten days, after which time the NES does not require make-up pay. Thus, the average estimated duration for empanelled jurors is probably too high. Secondly, the estimated number of days non-empanelled jurors spend in the jury room was rounded up to two days, inflating the estimated costs. Lastly, WAD data show that 44.9 per cent of current federal agreements (covering 59 per cent of employees) already provide for jury service make-up pay, leading to an over estimate of the additional costs to employers.

r.72.                 Nevertheless, while the additional Australia-wide cost is therefore minimal on an economy-wide basis, it could have a modest impact on some firms, particularly small businesses.

 Emergency services leave

ABS data

r.73.                 According to the ABS Voluntary Work survey 2006, 34.1 per cent (5.2 million persons) of the Australian population aged 18 years and over participated in voluntary work in 2006. Column 2 of Table 1 shows the estimated number of employee volunteers as at May 2008, by the type of organisation. [20] In terms of the relevant group of interest who may take advantage of the NES entitlement, an estimated 104,000 employees volunteered in emergency services as at May 2008.

Table 1: Estimated number and percentage of employees volunteering as at May 2008, by type of organisation [21]

Type of organisation

Volunteer Rate (%)

Employees (000s)

Arts/heritage

1.4

132.2

Community/welfare

7.3

689.2

Education/training

9.1

859.1

Emergency services

1.1

103.9

Environment/animal welfare

1.1

103.9

Health

3.1

292.7

Parenting/children/youth

2.0

188.8

Religious

6.7

632.5

Sport/physical recreation

11.2

1057.4

Other recreation/interest

1.6

151.1

Other [22]

1.8

169.9

Total

34.1

3219.4

Source:ABS Voluntary Work , Australia (Cat No 4441.0), 2006, Table 20. The employee figures (column 2) were derived by multiplying the relevant volunteer rate (column 1) by 9,440,915, the number of employees as at May 2008 (ABS Labour Force , Australia , Detailed, Quarterly (Cat No 6291.0.55.003), May 2008.

 

Award and agreement data

r.74.                 WAD data show that 34 per cent of all employees covered by current collective agreements are provided with emergency services leave.

Impact

r.75.                 Given that emergency services leave is unpaid and there is not a large group of employees engaged in this activity, the Department expects a minimal impact from this provision.

Long Service Leave

r.76.                 An entitlement to long service leave is currently provided by state and territory legislation, awards and agreements. The NES will preserve current arrangements for long service leave. Meanwhile, the Government is working with the states and territories to develop nationally consistent long service leave entitlements. 

r.77.                 Given that the overwhelming majority of employees currently have access to long service leave, the Department expects a minimal impact from this NES.

ABS data

r.78.                 The department is not aware of any data on the usage of long service leave. As noted above, there are divergent entitlements to long service leave in awards, agreements and state and territory legislation. However, an indication of the entitlement to long service leave is the number of employees with 10 years service or over. Table 2 displays ABS data that show an estimated 21.3 per cent of employees (2.2 million) were employed by their current employer/business for 10 years or more.

 

 



Table 2: Employees by duration with employer/business by industry, as at August 2008

Industry

Under 12 months

1 and under 2 years

2 and under 3 years

3 and under 5 years

5 and under 10 years

10 years and over

Proportion 10 years and over

Total

Agriculture, forestry and fishing

37.6

18.3

20.1

26.0

36.2

158.8

46.9%

297.0

Mining

27.1

18.4

15.7

15.2

18.4

24.1

17.8%

118.8

Manufacturing

185.7

102.0

92.2

130.1

182.7

248.1

23.1%

940.6

Electricity, gas, water and waste services

16.4

6.2

10.8

14.0

14.9

32.4

30.0%

94.6

Construction

191.8

103.8

91.7

133.8

133.8

210.0

21.3%

864.7

Wholesale trade

70.0

45.3

40.2

57.6

62.0

85.6

20.8%

360.6

Retail trade

287.9

164.4

139.6

147.1

156.4

149.5

12.5%

1044.8

Accommodation and food services

244.4

97.9

73.0

75.1

58.2

47.7

7.0%

596.4

Transport, postal and warehousing

100.0

47.4

43.2

59.4

85.6

131.1

24.6%

466.7

Information media and telecommunications

41.4

22.6

22.3

21.6

31.2

51.2

23.6%

190.2

Financial and insurance services

76.1

47.3

37.3

49.7

79.4

70.6

17.2%

360.3

Rental, hiring and real estate services

41.6

20.3

20.1

25.3

29.0

32.7

17.0%

168.8

Professional, scientific and technical services

143.9

87.4

92.9

95.8

119.8

142.5

18.3%

682.3

Administrative and support services

91.6

42.1

37.1

39.6

44.6

41.0

12.1%

295.8

Public administration and safety

84.4

45.9

51.3

64.2

102.7

181.8

30.1%

530.2

Education and training

94.1

59.3

51.5

94.6

134.6

235.9

30.9%

670.1

Health care and social assistance

177.3

108.4

89.0

133.7

183.8

262.8

24.1%

955.0

Arts and recreation services

35.8

20.8

16.8

22.7

26.7

38.2

20.9%

160.9

Other services

86.5

52.1

47.4

60.2

73.8

87.7

18.9%

407.8

Total

2033.4

1109.8

991.9

1265.2

1574.0

2231.6

21.3%

9205.9

Note: These data were derived by multiplying the number of persons by duration with employer/business as at February 2008, by 87.7 per cent - the average percentage of the workforce who were employees (aged 15 years and over) as at August 2008.

Source : ABS Labour Mobility (Cat No 6209.0), February 2008, Table 4, and ABS Labour Force , Australia , Detailed Quarterly (Cat No 6291.0.55.003), August 2008.

 







Public Holidays

r.79.                 The NES and the Standard both provide an entitlement for an employee to be absent on prescribed public holidays.

r.80.                 The NES provides for payment at their base rate of pay for ordinary hours if absent on a public holiday. Under the NES, the Queen’s birthday holiday is prescribed. The current WR Act does not prescribe this as a holiday. However, in practice, employees have been receiving the Queen’s Birthday as a public holiday.

r.81.                 Therefore, the Department does not expect an impact from this NES.

Notice of Termination and Redundancy Pay

r.82.                 The NES will provide for written notice of termination and redundancy pay. These are currently awards-based entitlements, which will be legislated to provide more comprehensive protection for employees and extend redundancy pay to award-free employees.

r.83.                 The Department does not have any reliable data on the number of award-free employees nor their redundancy experience. Therefore, the Department is unable to assess the impacts analysis of this NES.

r.84.                 However, Table 3 displays the proportion of employees who ceased a job involuntarily in February 2008 (most recent data) by the duration of their last job.

 

Table 3: Employees who ceased a job involuntarily by duration of last job

Source: ABS Labour Mobility (Cat. No. 6209.0), February 2008

 

Award and agreement data

r.85.                 Analysis of awards revealed that awards in some industries provided a higher level of redundancy pay, for example mining and coal mining (one week per year of service).

r.86.                 In summary, the Department expects only a minor impact from extending notice of termination and redundancy provisions to currently award-free employees.

Table 4: Employer and employee views on new legislated minimum employment standard provisions

 

Employer Stakeholders

 

Employers expressed a wide range of views on the NES.

 

The various employer groups have concerns with the operation and content of the NES. Some groups also felt that some of the provisions of the NES were too generous or too broad, such as the provisions for the right to request flexible work hours and or the number of days available for personal and community leave. Some felt there should be limitations to the provision of redundancy pay based on the number of full time employees in the business. Some felt redundancy and long service leave provisions should remain in awards.

 

Most employer groups agree that wages should be inserted into the NES, that the cashing out of annual leave should be allowed, and that the proposed definition for hours of work be amended.

 

Most felt that the NES should be reviewed within 12 to 18 months after it commences on 1 January 2010.

 

 

Employee Stakeholders

 

Most unions support the provisions contained in the NES, believing that they will benefit workers in work that do not have access to awards or agreements. However, unions generally support a wider number of entitlements.  Unions particularly want stronger entitlements in place for the proposed standards, such as flexible working arrangements that carry obligations on employers when refusing a request.

 

Unions are concerned that a number of provisions, such as the right for parents to request flexible working arrangements, need strong enforcement by Fair Work Australia.

 



2.       MODERN AWARDS

Current Arrangements

r.87.                 As a result of the Work Choices changes to the WR Act, award arrangements are best examined by looking at minimum wages and award conditions separately.

Minimum wages

r.88.                 Under Work Choices, minimum wages were taken out of awards and set up under separate notional instruments known as Australian Pay and Classification Scales (Pay Scales). The establishment of this separate system of minimum wages has given rise to a number of concerns.

r.89.                 One of the key issues is that it has resulted in two different points of reference for employee safety net entitlements. This has caused confusion among many Australians used to minimum wages being contained in awards. The separation of minimum wages from awards also resulted in uncertainty over exactly what wage-related provisions are now contained in Pay Scales and what have remained in awards. While wage-related allowances provide a straight forward example of this, having remained in awards, the complex and detailed nature of awards as they currently stand, means that it has not always been clear which provisions have actually moved into Pay Scales and which have remained in awards.

r.90.                 The main problems, however, with the establishment of Pay Scales is that they have not been published as legally enforceable instruments. While the Workplace Authority has produced around 425 Pay Scale summaries, these have applied only to the most common Pay Scales. In addition, Pay Scales were created under the WR Act as notional instruments implying, in effect, that the summaries are not legally enforceable. Given that there is a total of around 4,000 Pay Scales, employers and employees have therefore been left with no legal certainty as to the correct rates of pay and, in many instances, where Pay Scale summaries have not been available, they have had no information at all to reference for minimum wage information.

Award conditions

r.91.                 Under Work Choices, awards were only permitted to deal with certain allowable matters (such as ordinary hours of work, public holidays, monetary allowances, overtime and shift work loadings, penalty rates and redundancy pay), various other matters (annual leave, personal/carer’s leave, parental leave, long service leave, jury service, notice of termination and superannuation) were ‘preserved’ in awards.

r.92.                 Also under Work Choices, some allowable award provisions (including rest breaks, public holidays, allowances, penalty rates, overtime and shift work loadings) were designated as ‘protected’ in the course of agreement making even though agreements could specifically modify or remove them. Although Work Choices provided for awards to be rationalised and simplified, this process was not undertaken.

Government’s Policy on Modern Awards

r.93.                 The AIRC is currently preparing modern awards in line with the Minister for Employment and Workplace Relation’s award modernisation request pursuant to s. 576C(1) of the WR Act. Along with the National Employment Standards, modern awards will form a safety net for employees in the federal workplace relations system from 1 January 2010.

r.94.                 Modern awards will provide a fair and relevant safety net for employees. They will be simple and promote a certain and sustainable modern award system.

r.95.                 The aim of the award modernisation process is to create a comprehensive set of awards. As set out in section 576A of the WR Act, modern awards:

(a)     must be simple to understand and easy to apply, and must reduce the regulatory burden on business; and

(b)    together with any legislated employment standards, must provide a fair minimum safety net of enforceable terms and conditions of employment for employees; and

(c)     must be economically sustainable, and promote flexible modern work practices and the efficient and productive performance of work; and

(d)    must be in a form that is appropriate for a fair and productive workplace relations system that promotes collective enterprise bargaining but does not provide for statutory individual employment agreements; and

(e)     must result in a certain, stable and sustainable modern award system for Australia.

r.96.                 The AIRC will ensure awards are simple to understand so that employees and employers have certainty regarding their rights and obligations. The AIRC will also ensure awards promote the efficient performance of work having regard to the nature of the work and the characteristics of the workforce covered by the award. Finally, awards will encourage employers and employees to maintain work-family balance.

Proposed Changes

r.97.                 The Workplace Relations Amendment (Transition to Forward with Fairness) Act 2008 (the Transition Act) paved the way for modernisation of awards. As a result of the process, new modern awards will come into effect with the new system.

r.98.                 Currently, s. 576J of the WR Act provides 10 matters that may be dealt with by modern awards. These are:

·                            minimum wages and classifications;

·                            types of employment;

·                            arrangements for when work is performed;

·                            overtime rates;

·                            penalty rates;

·                            annualised wage or salary arrangements;

·                            allowances;

·                            leave related matters;

·                            superannuation; and

·                            procedures for consultation, representation and dispute settlement.

r.99.                 The award modernisation request provides detailed direction to the AIRC on how to undertake the award modernisation process. Among other things, the request requires that the AIRC include the following matters in modern awards:

·                            an award flexibility term;

·                            a dispute resolution term;

·                            terms providing ordinary hours of work;

·                            terms about rates of pay for pieceworkers (where necessary);

·                            terms identifying shift workers eligible for five week’s of annual leave under the NES; and

·                            terms facilitating the automatic variation of allowances.

r.100.             The WR Act also provides that a modern award must not include terms:

·                            that breach freedom of association provisions;

·                            about right of entry, terms that are discriminatory; and

·                            that contain state based differences.

r.101.             All of these parameters, and the Minister’s award modernisation request, are guiding the AIRC in the process of modernisation. The objectives of award modernisation include ensuring that awards are simple to understand, easy to apply and reduce the regulatory burden on business.

r.102.             Modern awards will contain a flexibility clause enabling employers and employees to agree on flexible arrangements varying how modern awards work. This will ensure that the needs of employers and employees are met. It will assist employees in balancing their work and family responsibilities and improve retention and participation of employees in the workforce. The simplification and increased flexibility associated with modernised awards, together with the reduced regulatory burden on business, are all consistent with the Government’s agenda of increasing productivity.

r.103.             Modern awards will not cover employees earning over $100,000 a year (indexed) who will be free to agree to their own pay and conditions without reference to awards. This will provide flexibility for employers and employees. The Government believes that these workers can negotiate their own arrangements and do not require the same level of safety net protection as lower paid employees.

r.104.             Fair Work Australia (FWA) will undertake four yearly reviews of each modern award to maintain a relevant and fair minimum safety net. This will be the main vehicle for varying modern awards (except minimum wages). The first review will take place in 2014, four years after modern awards commence on 1 January 2010.

r.105.             FWA will be guided by criteria which take into account public, social interest and economic aspects when considering whether and how to vary the content of modern awards. Outside of the four yearly review, FWA will have limited power to vary awards. FWA will be able to vary an award to remove ambiguity, uncertainty and discriminatory terms. To ensure awards provide a fair minimum safety net for employees, anyone covered by an award will be able to apply to have the award varied in exceptional circumstances. FWA will be able to adjust awards for ‘work value’ reasons.

Impact Analysis

r.106.             The making of modern awards is a significant change for employees, employers and their representatives. This will require them to adjust and become familiar with the form, arrangement, content and new processes associated with modern awards.

r.107.             Stakeholder consultation by the AIRC - including through the exposure draft process - provides employers, employees and their representatives with the opportunity to start this familiarisation process. This process will continue until modern awards commence on 1 January 2010. The simplicity of modern awards will assist the parties in this phase and also in their future involvement in award related processes.

r.108.             As award modernisation is currently in progress, estimating the future content and impact of modern awards, which are either currently in the exposure draft phase or are yet to be drafted, cannot be undertaken with sufficient accuracy to provide a basis for meaningful analysis of the proposed changes. Therefore, this section does not include an impact analysis of award modernisation. However, as noted later in this analysis, the Government has committed to reviewing the new workplace relations system.

r.109.             The inclusion of minimum wages in modern awards will provide employees and employers with a single point of reference for verifying their rights and obligations with regard to minimum wages and conditions of employment. These new streamlined arrangements will reduce confusion and apprehension among users about where to go for information on safety net entitlements, improving the accessibility to and ease of use of this information by key stakeholders. The new streamlined arrangements will also reduce the regulatory burden imposed on government, both in terms of the direct costs associated with administering two separate systems as well as the indirect costs arising from having to resolve discrepancies across the two arrangements.

r.110.             The clear legal enforceability of minimum wages in the new system will also reduce the regulatory burden imposed on key stakeholders, providing them with legal certainty on minimum wage protections. The legal certainty will not only reduce the vulnerability and hardship experienced by some employees while reducing the compliance costs of the majority of employers committed to observing minimum wage protections for their employees. By reducing the potential for breaches of minimum wage protections in this way, the new arrangements will also reduce the regulatory impact on government leading to significant savings in terms of the monitoring and enforcement of minimum wage protections.

r.111.             The proposed changes in the minimum wage-setting arrangements are designed to improve the regulatory framework. The streamlining of responsibility for reviewing and adjusting minimum wages will reduce confusion and uncertainty among employers and employees about which body is responsible for the determination of minimum wages relevant to their particular circumstances.

r.112.             Annual minimum wage reviews, particularly in requiring that any adjustments take effect on the same date of 1 July each year, will provide greater certainty for employers and employees, especially in terms of accounting for these adjustments in their business plans and household budgets. This increased certainty will be further reinforced by the requirement that any updated wage rates be published by the 1 July date of effect. Moreover, the improved transparency of the process will help ensure that the decisions of the Fair Work Australia Minimum Wages Panel are fair and independent of bias, thereby facilitating greater acceptance of and compliance with its minimum wage rulings.

 

Table 5: Employer and employee views on new award provisions

 

Employer Stakeholders

 

Employer groups broadly support modern awards, but are wary that the timetable for developing and implementing them would be difficult to achieve. Some are concerned that the award modernisation process may become a ‘levelling-up’ exercise that increases costs for employers.

 

Most employer groups support having individual flexibility clauses within awards. The various employer groups also support a monetary threshold on the application of awards.

 

 

Employee Stakeholders

 

As with employer groups, unions also believe that the timetable for the award modernisation process is ambitious. Although unions support the creation of modern awards, they are concerned that the award modernisation process may undercut the pay and conditions for award-dependent workers, particularly non-union workers.

 

Unions believe that no upper monetary threshold should exist for the application of awards.

 



3.       BARGAINING FRAMEWORK

r.113.             Under the Bill, the Government proposes important changes to the collective bargaining framework. These changes include: the introduction of good faith bargaining; less regulation regarding the content of agreements; the creation of a single stream of agreement making; a streamlined process for the approval of agreements; and the introduction of Fair Work Australia facilitated bargaining for the low paid.

r.114.             The proposed bargaining arrangements will be simpler than the current system. The Bill is drafted to reduce the regulation of the bargaining framework in acknowledgement that most employers and employees in Australia voluntarily and successfully bargain collectively. Where there is new regulation it is focused on facilitating the bargaining processes in situations where an employer and their employees are unable to successfully bargain together.

r.115.             This section will assess the regulatory impact of these changes in contrast to the current system under the WR Act.

r.116.             In some instances changes to the ‘current system’ were made by the 2008 amendments to the WR Act under the Transition Act. When discussing these amendments to the WR Act the Transition Act will be specifically mentioned. 

Current Arrangements

Agreement types

r.117.             The current system allows for multiple streams of agreement making, including Individual Transitional Employment Agreements (ITEAS), introduced in the Transition Act to replace the use of Australian Workplace Agreements (AWAs) during the transition to the proposed framework), union collective agreements, employee collective agreements, union greenfields agreements, employee collective greenfields agreements and multi-employer agreements. The existence of multiple streams of agreement making has the capacity to create disputes over which industrial instrument to use.

r.118.             The occurrence of such disputes is quite common. For example, the Cochlear company has been involved in a protracted industrial dispute due to the company’s desire to create a non-union collective agreement. Similarly, Boeing was involved in a dispute for over 9 months, including over 70 days of strike action, because the company refused to negotiate a union collective agreement against the preference of its aircraft maintenance engineers.

r.119.             In addition, prior to the Transition Act, the workplace relations system allowed for ‘take it or leave it’ AWAs which could undercut the safety net and collective bargaining processes.

r.120.             In many industries characterised by low skilled, low paid employment, such as cleaning and retail trade, the shift towards individual agreements on a ‘take it or leave it’ basis expanded managerial prerogative. [23] As such, it allowed some businesses to put downwards pressure on wages and conditions, reflected in studies showing that 89 per cent of pre-Fairness Test AWAs removed at least one protected award condition. [24]

Content of agreements

r.121.             The current workplace relations system extensively regulates what can be included in enterprise agreements. The extent of current regulation adds significant obstacles to genuine agreement making.

r.122.             An agreement must include a nominal expiry date (NED) and dispute settlement procedure. If no dispute settlement procedure is specified the model dispute settlement procedure contained in legislation applies. If no NED is specified, the agreement will have a NED of one year from commencement for employer Greenfields agreements, 31 December 2009 for an ITEA and five years from the date of issue for other agreements.

r.123.             The WR Act introduced a concept of prohibited content which lists some 30 matters which are not to be included in workplace agreements. This includes matters that do not pertain to the employment relationship between the employer and the employees covered by the agreement. ‘Objectionable provisions’ that breach freedom of association provisions, that provide remedies for unfair dismissal or restrict the use of independent contractors or labour hire workers are also prohibited.

r.124.             Other prohibited content relates specifically to union-related clauses. This includes deductions from wages for union membership or dues, employees receiving trade union training leave, employees receiving paid leave to attend union meetings, the renegotiation of a workplace agreement, and the foregoing of annual, compassionate or personal leave for pay or another entitlement.

r.125.             Prohibited content in an agreement is unenforceable but does not render the agreement invalid. The Workplace Authority Director is able to remove such clauses from agreements with significant penalties of up to $33,000 applying for recklessly including prohibited content in an agreement, and for making misrepresentations about prohibited content.

r.126.             The extensive regulation of what can and cannot be included in agreements complicates the bargaining process, with many parties unsure of what clauses were allowable content. It has also exposed employers to penalties for contravening the WR Act. Employers have sought to avoid this by seeking a statement from the Workplace Authority that there is no prohibited content included in the agreement prior to lodging the agreement. This has further lengthened the agreement making process.

r.127.             There is anecdotal evidence that another result of this regulation is the frequent use of ‘side deals’ between an employer and employees and the relevant union. Such side deals have unclear legal status and unnecessarily complicate the bargaining process.



Approval of agreements

r.128.             Prior to the Transition Act, the Workplace Authority was required to apply a Fairness Test to agreements. The Fairness Test added a substantial regulatory burden on businesses and was plagued with inefficiencies. [25] The implementation of the Fairness Test resulted in a considerable backlog of agreements needing to be approved. [26]  

r.129.             Currently (since the introduction of the Transition Act), the Workplace Authority applies a no-disadvantage test to agreements. The Workplace Authority Director has described the no-disadvantage test as a more measured approach to agreement testing that has resulted in better results and faster approvals. [27]  

r.130.             However, both the Fairness Test and the no-disadvantage test are reliant on the current award system or, in the case of ITEAs, an existing collective agreement that would otherwise cover the employee.

r.131.             The complex nature of the existing award system has made the approval process detailed and heavily bureaucratic, requiring assessors to apply a series of formulas to determine the overall value of an agreement to an employee. This requires prescribing a monetary value to non-monetary entitlements, which was criticised as inherently inaccurate. [28]  

r.132.             Furthermore, under the Fairness Test, a series of secondary considerations could potentially form part of the test, drawing out the assessment process. These considerations require written submissions from employers and employees as to the benefits of modified conditions and working arrangements.

r.133.             Where an agreement did not pass the Fairness Test, the Workplace Authority could request an undertaking and provide examples of changes that could be made in order to allow the agreement to pass the test. This process took considerable time and resources to develop and required the Workplace Authority to reassess an agreement when an undertaking was received from the employer.

r.134.             As such, the Fairness Test employed complex approval processes with criticism of its application and processing times.

Bargaining, including in good faith

r.135.             The WR Act provides no avenues of assistance for employers or employees in the circumstances where collective bargaining breaks down other than where both parties agree to use the AIRC or a private dispute resolution provider to help them settle a dispute. As such, the existing bargaining framework does not actively encourage employers and employees to bargain and reach agreement.

r.136.             Without the capacity to determine whether majority support exists for collective bargaining, employers can simply refuse to negotiate with employees, often resulting in protracted disputes.  Examples of these disputes include those at Boeing and Cochlear .

r.137.             Currently, the only test to ensure the parties are genuinely bargaining occurs if an application is made for a secret ballot for industrial action. This means that it is possible for parties to act capriciously or unfairly in bargaining without repercussions.

r.138.             An employer’s ability to object to secret ballot orders on grounds that the union has not genuinely sought to reach agreement has created a mechanism for employers to ask the AIRC, albeit indirectly, to impose good faith bargaining requirements on employee representatives. [29] However, there is no reciprocal right for employees to impose good faith bargaining requirements on employers, creating an imbalance.

r.139.             As a result ‘employees [that are] unhappy with employer intransigence in bargaining must resort to industrial action’. [30] The current system may, therefore, exacerbate industrial disputes.

Bargaining for the low paid

r.140.             The WR Act does not contain provisions to assist the low paid beyond the five minimum entitlements of the Standard.

Proposed Changes

Agreement types

r.141.             Under the Bill there will be no distinction between union and non-union agreements. The Bill will provide for the creation of a single stream of collective, enterprise agreements that are to be made between an employer or employers and employees. A union that is entitled to represent the industrial interests of an employee and was a bargaining representative for a proposed agreement may notify FWA in writing that it wants to be covered by the agreement. When an employee organisation is covered by an agreement, it will have certain entitlements that it would not otherwise have. For example, an employee organisation that is covered by an agreement would be able to enforce the agreement to ensure that the employer is meeting its obligations. A single stream will remove the capacity for disputes over which type of agreement to enter into.

r.142.             The Bill will maintain the capacity for employers to make greenfields agreements to establish terms and conditions of employment for a genuine new enterprise. However, the Bill will require that greenfields agreements must be made with one or more unions that would be eligible to represent the employees who will be employed in the enterprise.

r.143.             The proposed system ensures that employers can tailor agreements to the requirements of their business by focusing on agreement making at the enterprise level. However it will maintain a strong safety net for employees that cannot be undercut and builds the inherent protections of collective bargaining into all enterprise agreements.

Content of Agreements

r.144.             The proposed workplace relations framework expands what matters an enterprise agreement can be made about to one or more of the following:

(a)                       matters pertaining to the relationship between the employer or employers that will be covered by the agreement and the employees who will be covered by the agreement;

(b)                      matters pertaining to the relationship between the employer or employers, and the employee organisation or employee organisations, that will be covered by the agreement;

(c)                       deductions from salary for any purpose authorised by an employee who will be covered by the agreement;

(d)                      how the agreement will operate.

r.145.             This content rule retains the ‘matters pertaining’ formulation established in case law and ensures that matters that clearly fall within ‘managerial prerogative’, that are outside the employer’s control or are unrelated to employment arrangements are not subject to bargaining and industrial action. The continuation of the familiar ‘matters pertaining’ formulation provides certainty to employers as to what matters can be included in enterprise agreements.

r.146.             The content rule will cut regulation so that matters that historically have been included in agreements which encompass the relationship between an employer and a union but were prohibited under Work Choices can be included where agreed to, for example, union consultation clauses or leave to attend union training. The formulation also makes it clear that provisions for payroll deductions such as salary sacrifice and union fees can be included in agreements.

r.147.             The capacity to include more issues in agreements where the parties agree will make side agreements between employers and unions unnecessary.

r.148.             Provisions that would be inconsistent with, or seek to override provisions in, the new legislation on matters such as freedom of association, unfair dismissal and industrial action would be classed as unlawful content. For example, the payment of union bargaining fees, provisions that purport to ‘contract out’ of unfair dismissal protections and provisions that purport to allow industrial action during the life of an agreement would be unlawful. FWA will not approve agreements that contain unlawful content.

r.149.             Provisions that breach occupational health and safety laws will also be unlawful subject to interaction rules between state and territory laws. Provisions which are discriminatory will also be classed as unlawful content.

r.150.             Other matters currently classed as prohibited content may be included in agreements where they meet the content rule. There will be no concept of ‘prohibited content’ in the Bill.

r.151.             In order to facilitate more flexible employment relationships, enterprise agreements will also be required to include an individual flexibility arrangement and a consultation clause where major change is considered. Where no such provisions are included, the respective model term prescribed by the regulations is taken to be a term of the agreement.  It is intended that the model term to be prescribed will be based upon the model flexibility term developed by the AIRC for inclusion in modern awards.   These provisions will allow employers to enter into individual flexibility arrangements with employees where this is to the benefit of the employer and the employee. 

r.152.             In addition, before approving an agreement, FWA must be satisfied that the agreement includes a term that provides a procedure that requires or allows FWA or another person who is independent of the employers, employees or employee organisations covered by the agreement, to settle disputes about any matters arising under the agreement; and in relation to the NES.  Such term must allow for the representation of employees covered by the agreement for the purposes of the dispute settlement procedure.

r.153.             Agreements will have a NED of no later than four years after the date of operation.

r.154.             The removal of complex regulation surrounding the content of agreements will simplify the agreement making process, offer employers and employees genuine flexibility and remove harsh financial penalties for including content in agreements that is outside the content rule.

Approval of agreements

r.155.             Under the Bill, all enterprise agreements must be lodged with FWA for approval before they commence operation. The approval process is a simple, point in time assessment of the enterprise agreement and the circumstances under which it was made.

r.156.             Once an agreement has received employee approval, FWA will ensure that:

·                            there is genuine agreement;

·                            the group of employees covered by the agreement was fairly chosen;

·                            the agreement passes the ‘Better Off Overall Test’ (BOOT);

·                            the agreement contains a nominal expiry date and dispute settlement clause;

·                            the agreement does not contain terms that contravene the NES; and

·                            the agreement does not contain unlawful content.

r.157.             The approval process under the Bill will simplify many of the procedures previously applied as part of the Fairness Test.

r.158.             At the time of agreement lodgement bargaining representatives will be required to submit a statutory declaration setting out details of the agreement. The agreement will need to be signed by the employer and a representative of the employees.

r.159.             FWA will apply the BOOT to ensure that each employee covered by the agreement is better off overall in comparison to the relevant modern award. The use of modern awards as reference instruments will further simplify the approval process in comparison to the current, complex minimum standards arrangements.

r.160.             The BOOT will be an ‘on the papers’ assessment of the pay and entitlements of an agreement and will avoid the complicated assessment procedures adopted for the Fairness Test, such as accepting written submissions from employees on the personal value of intangible benefits. Undertakings will not be a feature of the approval process except where FWA is satisfied that the effect of accepting the undertaking is not likely to cause financial detriment to any employee covered by the agreement or result in substantial changes to the agreement. Before accepting an undertaking FWA must seek the views of bargaining representatives for the agreement.

r.161.             Minimum wage provisions in awards or the National Minimum Wage will override less generous minimum wage provisions in an enterprise agreement. This will mean that where minimum award rates increase during the life of an agreement to above the agreement rates, employers will have to make up any difference, thereby protecting the integrity of the safety net.

r.162.             An agreement will come into operation seven days after it is approved by FWA or on a later date if one is specified in the agreement.

Good faith bargaining

r.163.             The proposed good faith bargaining system recognises that most employers and employees voluntarily and successfully bargain collectively in good faith and that most employers respect their employees’ right to bargain collectively.

r.164.             If no issues arise in bargaining, the Bill will only regulate the bargaining process by requiring employers to advise employees of their right to be represented at the commencement of bargaining. Bargaining representatives will be able to bargain and create an agreement and will not be required to interact with FWA until the agreement is submitted for approval.

r.165.             The proposed system will include a number of processes designed to facilitate agreement making and assist bargaining representatives to bargain effectively when it is required.

r.166.             There are times where a majority of employees at a workplace want to collectively bargain and this choice is not respected by their employer. If an employer refuses to bargain with their employees, FWA will have the power to test the support amongst the employees to which the agreement will apply in a manner it considers suitable, for example, using evidence of union membership, petitions or a ballot of employees. If a majority of the employees wish to collectively bargain, their employer will be required to bargain with them.

r.167.             Under this Bill, if bargaining representatives are not effectively bargaining together, FWA will have the power to issue bargaining orders requiring representatives to bargain in good faith.

r.168.             The good faith bargaining requirements over which FWA can make bargaining orders relate to procedural matters only and not the content of the agreement. These requirements will be defined through an exhaustive list which will require attending and participating in meetings at reasonable times; disclosing relevant information (other than confidential or commercially sensitive information) in a timely manner; responding to proposals made by other bargaining representatives in a timely manner; giving genuine consideration to the proposals of other bargaining representatives and providing reasons for responses to those proposals; and refraining from capricious or unfair conduct that undermines freedom of association or collective bargaining.

r.169.             Good faith bargaining requirements aim to ensure that all bargaining representatives act in an appropriate and productive manner when working towards a collective agreement. The requirements also facilitate improved communication between bargaining representatives, which is expected to reduce the likelihood of industrial action.

r.170.             During agreement making, where representatives are failing to bargain in good faith, the good faith bargaining requirements will act to avoid protracted disputes by allowing FWA to make orders. This facilitation of agreement making is in the interests of both bargaining representatives and the general public.

r.171.             Where one bargaining representative believes another representative is not negotiating in good faith, they must notify the offending representative of their concerns and give them a reasonable time to respond. This will stop capricious claims that representatives are not bargaining in good faith as FWA will only be able to make bargaining orders if it is satisfied that this notification was made.

r.172.             To uphold the integrity of existing agreements, FWA will not be able to make good faith bargaining orders until 90 days before the nominal expiry date of an existing collective agreement if the employer has not offered employees a new agreement.

r.173.             Bargaining orders will not require bargaining representatives to make concessions or sign up to an agreement where they do not agree to the terms of the agreement. If FWA believes that there have been serious and sustained breaches of bargaining orders by a bargaining representative and those breaches have significantly undermined bargaining for the agreement, it will have the power to make a workplace determination.  In this context FWA must be satisfied that all other reasonable alternatives to reach agreement have been exhausted and that agreement will not be reached in the foreseeable future.

r.174.             Where bargaining representatives cannot agree regarding agreement content, they will be able to jointly walk away (in which case the workplace arrangements already in place would remain in force), take protected industrial action or jointly seek FWA’s assistance in determining a settlement.  A bargaining representative can also seek FWA’s assistance through mediation or conciliation.

r.175.             Good faith bargaining requirements protect employers from unfair bargaining processes. Analysis of secret ballot applications by unions to the AIRC indicates that, in many cases, employers raise objections about whether a union is engaging in genuine bargaining or not. During the period March 2006 to May 2007 there were at least 28 objections to secret ballot applications on the grounds of unions failing to genuinely trying to reach agreement.

r.176.             Many businesses will be familiar with the concept of good faith bargaining, reducing the uncertainty that could arise upon its introduction. Under the federal workplace relations system the concept of bargaining in good faith was set out in the Industrial Relations Act 1988 as amended by the Industrial Relations Reform Act 1993 .

Facilitated bargaining for the low-paid

r.177.             Under the Bill, FWA will be able to facilitate multiple employer bargaining for employees who are low-paid and those who have not historically had access to the benefits of collective bargaining.

r.178.             Currently there are no provisions to assist the low paid beyond the five minimum entitlements of the Standard and an annual minimum wage review. Enterprise level bargaining has been a central feature of workplace relations since the early 1990s. However, over that time not all employers and employees have participated in enterprise bargaining. This may have occurred because employees in low-paid sectors lack the skills and bargaining power to negotiate for improved wages and conditions at the single enterprise level. Similarly, some individual employers in low-paid sectors may lack the time, skills and resources to bargain collectively with their employees. Some of these employees are unable to negotiate above minimum award rates and conditions because a third party (such as a head contractor) effectively sets their pay and conditions, not their direct employer.

·                            Parties will have the benefit of access to FWA to help them negotiate the making of a multi-employer agreement. Examples of assistance by FWA include the ability to call compulsory conferences to bring the parties together and to take a more hands-on role in facilitating the negotiations. FWA will also be able to require a third party to attend a conference in certain circumstances, if this is necessary to advance negotiations. This might include a head contractor who actually determines the terms and conditions that apply.

r.179.             The Bill will provide access to a separate multi-employer bargaining stream for the low-paid. Bargaining representatives may apply on behalf of employers or employees for a low paid authorisation which will allow for FWA to facilitate bargaining for a specified list of employers. 

r.180.             FWA will consider a range of factors to determine if the proposed bargaining is in the public interest. These factors include the history of bargaining in the industry where the employees work and whether the granting of the authorisation would assist in identifying improvements to productivity and service delivery at the enterprises to which the agreement relates. Further, FWA must take into account the views of employers and employees who will be covered by the agreement and the extent to which the applicant is prepared to respond reasonably to the needs of individual employees.

r.181.             FWA will be able to facilitate bargaining in this stream by the use of compulsory conferences and good faith bargaining orders which would not otherwise be available in multi employer bargaining. Protected industrial action will not be available.

r.182.             If the bargaining representatives for an agreement in the low paid bargaining stream are unable to reach agreement on the terms that should be included in the agreement, employee representatives and one or more of the employers could seek a workplace determination by consent. There will also be capacity for FWA to make a workplace determination on the application of only one party. Under this category, FWA would apply a set of threshold criteria to decide whether the arbitration should proceed including that the parties had genuinely tried to reach agreement, and that making the determination will promote productivity and efficiency in the enterprises concerned.

Impact Analysis

r.183.             The introduction of a new bargaining system may involve some transitional costs as the parties adjust to a new set of legislative provisions. Some features of the new system may also impose new or additional obligations and regulations on employers and employees. This is an inevitable result of a major overhaul of current workplace relations laws.

r.184.             However, the Government believes that the new bargaining system will deliver benefits that offset these costs. The new system is designed to provide a fair and simple framework for employees and employers to determine their working arrangements in a way that encourages productivity at the enterprise level. While some features of the new system may have some regulatory impact, they will also help to make the bargaining process run more efficiently and smoothly.

r.185.             A fair and balanced bargaining framework that properly recognises the interests of both employees, employers, and their representatives is also more likely to achieve broad support from all parties. This will help ensure a more stable and enduring system that allows employers to get on with the job of running their business, and employees to perform their work productively.

r.186.             This Bill will place collective bargaining at the enterprise level at the heart of the workplace relations system.

r.187.             Enterprise agreements can ensure that increases in pay and entitlements are linked to productivity increases at the enterprise. This is due to negotiations at the level of the enterprise better reflecting the financial situation of the enterprise. Furthermore, collective bargaining will shift the focus of negotiations towards boosting productivity.

r.188.             Collective bargaining under the Bill will be less bound by regulation and red tape and is designed to have a positive impact on labour productivity.

r.189.             The post-implementation review of the new system will be an important means of assessing the effectiveness of the new bargaining system.

Individual agreements

r.190.             The Transition Act removed the capacity for employers and employees to enter into AWAs. It introduced ITEAs, which were solely designed to be transitional instruments with a nominal expiry date no later than 31 December 2009. As these agreements are not the subject of provisions in this Bill, there is no impact analysis of statutory individual agreements.

Approval of agreements

r.191.             The Australian Human Resources Institute (AHRI) published 1 001 responses to an online survey about the take-up of the WR Act and whether it was achieving benefits. [31] The majority of responses regarding the Fairness Test indicated frustration with its complexity which tended to complicate agreement making and increased administrative costs.

r.192.             The BOOT will simplify agreement processing. Enterprise agreements will be assessed ‘on the papers’ against modern awards, providing for a simpler comparison compared to the current assessment against the old award system. The BOOT will also be a point in time assessment.

r.193.             The removal of the capacity to make individual statutory agreements under the proposed framework will substantially improve the approval process. As at September 2009, 80 per cent of all agreements being processed were individual statutory agreements, [32] so the removal of these forms of agreements will dramatically reduce the volume of agreements lodged for approval.

Evidence on the effects of collective bargaining on productivity

r.194.             Collective bargaining at the level of the enterprise is a productive form of agreement making that allows employer and employees to examine the way they work, discover new ways to improve productivity and efficiency and communicate to make workplaces more flexible. Research by the Melbourne Institute and Productivity Commission links productivity gains to collective bargaining.

r.195.             In 1999, the Productivity Commission conducted case studies into the factors affecting productivity growth. The case studies included industries such as the whitegoods, automotive, textile clothing and footwear, NSW rail freight and wholesale and retail trade industries. [33] The main findings from these studies were that flexibility in work arrangements increased through collective agreements.

r.196.             More specifically, the Productivity Commission found that workplace bargaining provided a framework in assisting the redesign of working arrangements and ensuring workers were employed more productively. Productivity improvement was therefore found to be an explicit feature of many of these agreements.

r.197.             Furthermore, Tseng and Wooden found that firms with employees on collective agreements experienced a 9 per cent increase in productivity levels, when compared to firms with employees on awards. [34] The authors point out, however, that their results do not prove that collective bargaining causes higher productivity (though they imply that it may) but that rather, collective bargaining and higher productivity are correlated.

r.198.             Fry, Jarvis and Loundes, also found that organisations entering into collective agreements with their workers, reported substantially higher levels of self-assessed labour productivity relative to their competitors. [35]

Good faith bargaining

r.199.             Good faith bargaining provisions currently operate in the Queensland and Western Australian workplace relations systems. Consultations with state government representatives indicate that these state systems do not impose onerous additional obligations on employers. The Department is not aware of any concerns with these good faith bargaining systems among state-based employer representatives.

r.200.             For example, in the entire Queensland bargaining system in 2006-07 there was only one application to arbitrate a bargaining dispute to determine whether negotiations were conducted in good faith. In Western Australian bargaining system, there were only 4 requests for good faith bargaining orders between 2002 and 2006. This period was prior to the commencement of the Work Choices amendments to the WR Act when the jurisdiction of the state industrial relations systems was considerably larger.

r.201.             It is advanced that good faith bargaining requirements will serve to facilitate more effective agreement making without unnecessarily imposing regulation and outcomes on bargaining representatives.

Facilitating bargaining for the low paid

r.202.             The provisions for multi-employer bargaining for low paid sectors in this Bill are designed to assist those that typically find it difficult to bargain to enter into enterprise agreement making. This will facilitate employees working in areas such as child care, aged care, community services, security and cleaning, who are often paid the relevant minimum wage rate entering into the bargaining stream, with associated productivity benefits.

r.203.             Table 6 below displays the rates of pay for occupations closely linked with those discussed above. In all occupations, employees on collective agreements earn more than those who are paid the award rate of pay.



 

Table 6: Average hourly ordinary time cash earnings (AHOTE) for adult non-managerial employees by select occupation codes and pay-setting method, Australia

Occupation (ANZSCO 3-digit code)

Award-only

Collective agreement

Difference

 

($)

($)

($)

Health and Welfare Support Workers (411)

22.10

25.30

3.20

Child Carers (421)

16.80

18.00

1.20

Personal Carers and Assistants (423)

19.80

20.80

1.00

Prison and Security Officers (442)

20.00

24.20

4.20

Cleaners and Laundry Workers (811)

17.00

18.60

1.60

Food Process Workers (831)

16.30

20.50

4.20

Packers and Product Assemblers (832)

16.30

18.20

1.90

Notes: Differences in earning are statistically significant.

Source: ABS Employee Earnings and Hours (Cat No 6306.0), May 2006, unpublished data

r.204.             The capacity for one party to apply for a workplace determination where there has been a failure to reach agreement in this stream could potentially lead to arbitrated wage outcomes that are not linked to factors at the workplace. Importantly, however, the provisions contained in this Bill ensure that this will only occur where genuine productivity and efficiency gains have been identified to offset any increases.

 



Table 7: Employer and employee views on the new bargaining framework provisions

Employer Stakeholders

Employer groups support a voluntary bargaining framework where workers may seek a collective agreement, but employers are not compelled to bargain collectively with their workforce.

 

Employer groups are generally accepting of the proposed good faith bargaining framework, in particular the specific provision that Fair Work Australia will not have the power to force bargaining representatives to make concessions during the bargaining process.

 

Employer groups want restrictions on the content that can be bargained for and contained in agreements. Most are satisfied with the retention of the ‘matters pertaining formulation.’ However, some are concerned that the expansion of the content rule to relate to employee associations as well as the removal of ‘prohibited content’.

 

Employer groups are generally satisfied that industrial action is not available for multi-employer agreements and that arbitration is only for low paid workers.

 

Some groups are concerned with the expanded formula for matters pertaining to the employment relationship and their implications for delegates’ rights.

 

 

Employee Stakeholders

 

Unions support the collective bargaining framework. They also want a strong industrial umpire to enforce the framework through the capacity to arbitrate outcomes. They want this framework to come into effect immediately.

 

Unions are particularly concerned that there are restrictions on the content that can be bargained. Some unions believe that there will be disputes over whether the content being bargained is a matter pertaining to the employment relationship.

 

Unions support the bargaining stream for low paid workers. Unions believe that workers in this stream must have the right to access arbitration by an umpire, as well as have access to industrial action in pursuit of claims.

 



4.       UNFAIR DISMISSAL

Current Arrangements

r.205.             The current unfair dismissal laws, under the WR Act, apply only to employees working in businesses with more than 100 staff and who have met a six month qualifying period of employment. Within this group, certain categories of employees are also exempt, including:

·                            employees dismissed for ‘genuine operational reasons’;

·                            short term casual employees (with less than 12 months regular and systematic employment), fixed term and fixed task employees, trainees, probationers and seasonal workers; and

·                            employees not employed under award-derived conditions whose remuneration exceeds a rate specified in regulations. [36]

r.206.             Applications for unfair dismissal relief are made to the AIRC and must be on the grounds that the dismissal was harsh, unjust or unreasonable. Applications must also be lodged within 21 days of the dismissal, although the AIRC has the discretion to accept late applications.

r.207.             Once lodged, the AIRC will first attempt to conciliate the claim. If this is unsuccessful, the case will then move to arbitration and a binding order will be made. The AIRC’s order may be for reinstatement or compensation. Compensation is capped and the amount cannot include any component for shock, distress, humiliation or other similar hurt caused by the termination.

r.208.             Parties in unfair dismissal claims may, with leave from the AIRC, be represented by a legal practitioner or other, non-legal representative or adviser. Appeals may also be granted by the AIRC except for certain matters. These include orders relating to the eligibility of an applicant to make a claim as well as those relating to whether a claim is frivolous, vexatious or lacking in substance. Decisions made by the AIRC to allow an extension of time on applications lodged after 21 days, are also exempt from appeal.

Unfair dismissal under Work Choices

r.209.             Criticisms of the current unfair dismissal system revolve around two issues. The first is the reduction in unfair dismissal protections imposed by Work Choices (i.e. the 100 employee and genuine operational reasons exclusions). The second is the burden on business, particularly small business, of defending an unfair dismissal claim.

r.210.             The Work Choices legislation introduced exclusions from complying with unfair dismissal laws for businesses with 100 employees or less, removing unfair dismissal protection from approximately 4.6 million (or 56 per cent) of employees. Work Choices also stipulated that an unfair dismissal claim could not be made if the employee was dismissed for genuine operational reasons, or for reasons that include genuine operational reasons. These changes were introduced to reduce the administrative burden of defending an unfair dismissal claim for businesses that needed to make operational changes to the business structure but had the effect of significantly reducing the protections available to employees in businesses of 100 or more employees.

r.211.             Employer organisations asserted that for many businesses, the cost of defending a claim would often exceed the cost of paying out an employee that threatened to make a claim, leading to the practice of paying “go away” money. [37]

Proposed Changes

r.212.             The new system will remove the 100 employee exemption introduced under Work Choices and instead introduce new qualifying periods that have to be met before an unfair dismissal claim can be made - 12 months for employees of businesses with fewer than 15 employees and six months for employees in businesses with 15 or more employees. Casual employees will no longer be excluded but will have to meet the same qualifying periods as permanent employees, provided that they have been employed on a regular and systematic basis for the requisite period and they had a reasonable expectation of continuing employment by the employer.

r.213.             Employees not covered by a modern award or employed under collective agreements whose remuneration exceeds the high income threshold [38] and employees dismissed due to genuine redundancy will be excluded from making an unfair dismissal claim. Employees who are under a contract of employment for a specified period of time, for a specified task or for a specified season are also excluded from making a claim when their employment ends on the completion of the specified period, task or season. Similarly, an employee to whom a training agreement applies and whose employment is limited to the duration of that agreement is excluded from making a claim where their employment ends on completion of that training agreement.

r.214.             Applications for relief on the grounds that the termination was harsh, unjust or unreasonable must be lodged with Fair Work Australia (FWA) within 7 days. FWA will have discretion to accept late applications in exceptional circumstances.

r.215.             FWA will be able to consider matters such as whether the employee has completed the minimum qualifying period or whether the employer has complied with the Small Business Fair Dismissal Code in an informal and ‘inquisitorial’ manner. For example, FWA may gather information via telephone discussions with the parties, FWA may ask the parties for written information, or FWA may convene a face-to-face conference, either at the employer’s premises or at FWA. Where there are contested facts between the parties, FWA will be required to either hold a conference or conduct a hearing.

r.216.             Any face-to-face conference will be informal with formal written submissions or cross examination not necessarily required. Only matters that are considered appropriate by FWA will be referred to a full public hearing. In considering what is appropriate FWA must have regard to the views of the parties and whether a hearing would be the most effective and efficient way to resolve the matter.

r.217.             In any matter being considered by FWA, the parties will be able to be supported by a non-legal representative or agent. Legal representation will only be allowed where FWA deems it appropriate.

r.218.             Reinstatement will be the preferred remedy. However, if it is not in the interests of the employee or the employer’s business, compensation in lieu of reinstatement may be ordered. Compensation will be capped at half of the high income threshold (i.e. 6 months pay) immediately before the dismissal or worked out from the total remuneration received by the person or to which they were entitled during the 26 weeks immediately before the dismissal. The factors for determining compensation within the maximum amount will be specified.

r.219.             There will also be a Small Business Fair Dismissal Code (the Code) for businesses with fewer than 15 employees (small business employers). The Code will set out the steps a small business employer needs to take in order for the dismissal to be fair. If an employee of a small business employer makes an unfair dismissal claim, FWA will first determine if the employer has complied with the Code. If so the dismissal will be considered fair. If the employer has not complied with the Code, the claim will treated in the same way as any other unfair dismissal claim, and FWA will go on to determine whether the dismissal was harsh, unjust or unreasonable.

How does it overcome the disadvantages of the old system?

r.220.             Abolishing the 100 employee exemption and replacing it with qualifying periods of 6 and 12 months (depending on the size of the employer) will allow many more employees to access unfair dismissal laws - estimated to be 6.7 million (or 80 per cent of employees) compared with 3.7 million (or 44 per cent of employees) under Work Choices. 

r.221.             There are several aspects of the new system that should make compliance easier for businesses.

r.222.             For example, under the new system, the time limit to lodge an unfair dismissal claim will be reduced from 21 days to 7 days. The aim of the new time limit is to promote quick resolution of claims and increase the feasibility of reinstatement as an option. FWA will have discretion to accept late applications in exceptional circumstances.

r.223.             Similarly, employers will still be able to dismiss an employee in cases of genuine redundancy.

r.224.             There will also be special assistance for small business employers through the Small Business Fair Dismissal Code and a 12 month qualifying period for small business employees. Therefore, small businesses will have 12 months in which to assess the performance of an employee and terminate their employment if necessary. This will be adequate time for a small business to assess the performance of an employee.

r.225.             Small businesses tend not to have the resources to employ dedicated human resources professionals to help them manage dismissals. By providing a clear process and guidance to follow when dismissing an employee, the Code may help to mitigate any increase in unfair dismissal claims from small business employees, and provide certainty to small business when they need to dismiss an employee.

r.226.             The new system administered by FWA will be simpler and easier for all parties to use. Under the current system, an unfair dismissal claim must go through an initial conciliation stage, which goes on to arbitration if not able to be conciliated. In the new system, FWA will be able to respond to claims in a flexible and informal manner. This includes through initial inquisitorial inquiries, and where there are contested facts, an informal conference or hearing. FWA will be able to make binding decisions following a conference, without the need for a formal, public hearing. Where conferences are held, they will be able to be conducted at alternative venues, such as the employer’s place of business, which will minimise the cost in time and lost earnings an employer may face in defending a claim.

r.227.             Overall the new system has more of a focus on early intervention and informal processes over the previous system. It will increase access to unfair dismissal remedies for employees while still imposing certain conditions on access that will benefit business, particularly small business.

Impact Analysis

r.228.             The unfair dismissal provisions in the Bill will increase the number of businesses and employees covered by unfair dismissal laws with the removal of the current exemption for firms employing less than 100 employees. In addition, there will be changes to the process of resolving claims. The net regulatory effect will depend largely on the impact on employees who will be covered by unfair dismissal laws and the impact on employers employing less than 100 employees.

Impact on employees

r.229.             The major impact for workers will be that a larger number will be covered by unfair dismissal laws. It is estimated that with the removal of the exemption for firms employing less than 100 employees there will be an increase of 3 million workers covered by unfair dismissal laws in the federal workplace relations system, subject to them meeting certain qualifying periods. 

r.230.             For these workers, the major benefit is that it provides reinstatement (or compensation) for those who are unfairly dismissed. This compensation will be capped at six months of salary. In addition:

·                            The sense of justice could be an important benefit for those workers who are dismissed unfairly, although this benefit is difficult to estimate accurately.

·                            There would also be a benefit to employees in having an option to have their case heard. Again, this benefit is difficult to estimate.

·                            It could reduce the number of unfair dismissals - the presence of the law will provide an incentive for employers not to unfairly dismiss workers because of the legal consequences of doing so .

·                            However, for employees who bring an unfair dismissal claim there is the cost of preparing and presenting their case, which in unusual cases, could include the hiring of a legal representative.

Impact on employers

r.231.             For employers the major impact is the cost of dealing with an unfair dismissal case and this is not just limited to the cost of paying compensation.

·                            There is the cost of defending unfair dismissal cases, which involves time and possibly the cost of hiring legal representatives. However, under these provisions, legal representatives will only be allowed where FWA deems it appropriate.

·                            As is currently the case, where an employer has been found to have unfairly dismissed an employee they will be required to reinstate or pay compensation to the dismissed employee.

·                            It is also possible that employers will continue to employ an inefficient employee because of the possibility of that employee bringing an unfair dismissal claim, although the Bill provides additional time for an employer to assess the performance of an employee which mitigates against this.

r.232.             If employers perceive that there is a risk of an unfair dismissal claim being made, then this could increase the cost of employing workers and may reduce the incentive of businesses to employ workers.

r.233.             Another possible response from some employers may be to avoid compliance with the regulations, for example, it may increase the incentive for some employers to sack staff just before the qualifying periods or employing more staff on a contract basis. This type of behaviour is unlikely to be widespread given the costs of excessive staff turnover. Moreover, the time-based approach allows employers to ensure that the employee is right for the job before the probation period is over.

r.234.             Such a response is difficult to predict in advance but can be subject to monitoring and review. However, the Fair Dismissal Code is designed to provide small business employers and employees with clear guidelines to minimise the extent of unfair dismissal action.

Community-wide effect

r.235.             For the community, there is the cost of running the unfair dismissal process through FWA. The change in this cost will largely depend on how many unfair dismissal claims are made. This issue is discussed later in this section.

r.236.             Overall, the unfair dismissal laws will have a positive impact if the equity effect of reinstating or compensating those employees who are dismissed unfairly outweighs the cost borne by employers and employees in preparing and participating in the unfair dismissal process and the government to run it and any possible negative employment effect.

r.237.             The following sections provide empirical evidence on the size of these effects, starting with the possible impact on employment levels.

OECD Analysis of Employment Protection Legislation

r.238.             The OECD ranked Australia sixth in 2006 in terms of how strict its employment protection legislation (EPL) is compared with other OECD countries. [39] A relatively high ranking such as this implies a country’s EPL is not too strict and that an employee can be dismissed without too much difficulty. The US and the UK, with the least strict EPL, had rankings of 1 and 2 respectively in 2006. [40]

r.239.             The precise relationship between EPL and employment is still unclear. The OECD stated in its 1999 Employment Outlook that:

Simple, cross-country comparisons suggest that EPL has little or no effect on overall unemployment, but may affect its demographic composition. In countries where EPL is stricter, unemployment tends to be lower for prime-age men but higher for other groups, especially younger workers. However, this latter finding must be regarded as tentative, since it is not supported by the evidence from the multivariate regressions, except in the case of stricter EPL having a negative impact on the unemployment of prime-age men. [41]

r.240.             More recently, the OECD stated in its 2007 Going for Growth publication that:

While some studies have found negative effects of stringent EPL on aggregate employment, [42] other evidence, including OECD research, finds no significant impact [43] . [44]

r.241.             In looking at the link between employment protection legislation and productivity, the OECD stated that the available literature is inconclusive about the direction of the overall effect. [45] In examining the specific issue of employment protection legislation and worker effort, the OECD noted that “layoff protection might reduce worker effort (thus productivity) because there is a lower threat of layoff in response to poor work performance or absenteeism” but “alternatively, layoff regulations could provide additional job security for workers, increasing job tenure and work commitment and making firms and workers more likely to invest in firm or job-specific human capital”. [46]

Australian academic studies

r.242.             There are two Australian studies that attempted to estimate the employment impact of the unfair dismissal laws operating early this decade (Harding [47] and Freyens and Oslington [48] ). The Harding study reports on a survey commissioned by the (then) Department of Employment and Workplace Relations under the previous Government. Although both studies found a negative employment effect, the extent of the impact differed significantly between the two studies and, subsequently, the authors of these studies have both contested the validity of each others’ methodology.

r.243.             These studies are not considered relevant in assessing the current changes because the employment impact is based on the previous unfair dismissal laws that are different in their design and operation. For example, previous laws did not include a fair dismissal code for small business or the same qualifying periods that are afforded to employers to assess staff performance. 

Number of businesses impacted

r.244.             The proposal to remove the current 100-employee exemption from unfair dismissal laws will impact primarily on businesses with 15-100 employees. As noted above, businesses with fewer than 15 employees will have access to the Fair Dismissal Code and will have a 12 month qualifying period before an unfair dismissal claim can be made. As noted earlier, small business has been consulted extensively in the development of the Fair Dismissal Code.

r.245.             The ABS Counts of Australian Businesses, including Entries and Exits publication provides information on the count of businesses by number of employees. The latest data are for June 2007. Unpublished data from this publication show that there were 101,188 businesses with 15-99 employees in June 2007.

r.246.             Data on the proportion of businesses who reported that they have had an employee or former employee take action or threaten to take action relating to unfair dismissal are available from the Sensis Business Index survey for August 2005. The Sensis Business Index is one of the most extensive and regular surveys of small businesses in Australia. [49]

r.247.             Unpublished data from the August 2005 Sensis Business Index show that around 35 per cent of businesses with 15-100 employees reported having an employee or former employee take action relating to unfair dismissal, 10 per cent reported that they have been threatened with action and 57 per cent reported they had neither had action taken or been threatened with action. [50]

r.248.             Importantly, these proportions relate to all threats or actions relating to unfair dismissals that have been made or taken by employees ever , rather than those that occurred during a specific period. The proportion of businesses who face threats or action relating to unfair dismissals each year would therefore be far lower than those reported in the Sensis Business Index . However, some businesses may have faced multiple unfair dismissal threats or action.

AIRC data

r.249.             Data from the AIRC 2004-05 Annual Report (the last full year before the commencement of Work Choices) show that 19.7 per cent of unfair dismissal claims are withdrawn, settled or otherwise discontinued prior to conciliation. [51] The data also show that 77 per cent of claims went to conciliation and were settled in 2004-05, while around 5.4 per cent of cases proceeded to arbitration. [52]

r.250.             The AIRC 2004-05 Annual Report data also show that there were only 6,707 lodgements of matters concerning termination in 2004-05. [53] As this figure includes both unfair dismissal and unlawful termination applications (these data were not disaggregated until 2006), this figure is an overestimate of the number of unfair dismissal cases in that year.

r.251.             While the 6,707 figure was at a time prior to the expansion of the federal system under Work Choices, the department expects this figure to remain relatively stable due to the introduction of the Small Business Fair Dismissal Code and the reduction of the time limit to lodge an unfair dismissal claim from 21 days to 7 days which will contract the window of opportunity for dismissed employees to lodge a claim.

Estimates of the costs of dismissal action

r.252.             Estimates of the costs of dismissal action are available from Oslington and Freyens [54] . The authors estimated that the average cost of an uncontested dismissal for employers under the old pre-Work Choices system is $3,044, representing 10.3 per cent of annual wage cost, $9,780 for a dismissal that reached conciliation and $12,818 for an arbitrated dismissal. This comprises:

·                            time spent writing warnings;

·                            obtaining managerial and legal advice;

·                            gathering evidence and documenting the dismissal action; and

·                            meeting with the employee to guarantee the employee’s right to respond to the charges and meeting with union delegates (It may also include the time originally needed to take a decision with respect to poor performance or misbehaviour).

r.253.             These costs are based on the previous process in the AIRC. As noted above, the process for dealing with unfair dismissal claims will be far simpler and more efficient under FWA resulting in minimal costs to employers. Therefore, the Oslington and Freyens figures cannot be used to reliably estimate the potential cost to employers of the system proposed in the Bill.

Benefits to employees

r.254.             The removal of the 100-employee exemption for unfair dismissal laws carries is likely to provide significant benefits to a large number of employees. Indeed, survey data show that employees strongly support unfair dismissal laws because of the protection they offer via increased job security and a reduced feeling of vulnerability in the workplace.

r.255.             The March 2008 Sensis Consumer Report found that 26 per cent of Australians felt Work Choices has had a negative impact on them compared with 13 per cent who felt Work Choices had a positive impact (the report includes responses by business operators), resulting in an overall net negative impact of 13 per cent.

r.256.             In terms of unfair dismissal related concerns, the Sensis Consumer Report found that the main reasons given for Work Choices having a negative impact were: a view that employees were more vulnerable (21 per cent), a feeling that it was negative in general (10 per cent), a feeling that the impact would be negative (6 per cent).

r.257.             For details on employee coverage of unfair dismissal laws please see Attachment B .



Table 8: Employer and employee stakeholder views on the new unfair dismissal legislation

 

Employer Stakeholders

 

Almost all employer groups welcome the Fair Dismissal Code’s simplicity, clarity, and ease in application.

 

Employer groups want to ensure that speculative or frivolous unfair dismissal claims could not be lodged, and that the proposed provisions take into account the needs of small businesses.

 

Employer groups want to retain the current exemptions for unfair dismissal claims. Some also consider the six month compensation cap to be too high.

 

 

Employee Stakeholders

 

Most support the existence of the Fair Dismissal Code and other additional protections afforded under unfair dismissal provisions, but they want these provisions to be implemented immediately, and want them administered by a strong umpire.

 

Unions believe that workers in small businesses should have the same access to unfair dismissal provisions as those in large businesses.

 

 



5.       INDUSTRIAL ACTION

Current Arrangements

Protected industrial action - employees

r.258.             The concepts of protected action and a limited right to strike within a bargaining period were introduced in the Industrial Relations Reform Act 1993 . The WR Act introduced prohibitions on action during the life of an agreement and payment during strikes and restored the prohibition against secondary boycotts.

r.259.             Protected employee industrial action may only be taken by an employee who is a negotiating party to the proposed agreement or an employee who is a member of a union that applied for a ballot order authorising the action.

r.260.             Employee industrial action is not protected if it is:

·                            taken in support of prohibited content;

·                            taken while a bargaining period is suspended;

·                            taken, or organised by, persons who are not protected for that industrial action;

·                            taken in support of pattern bargaining;

·                            taken during the life of an agreement;

·                            not authorised by a protected action ballot or taken in response to employer industrial action;

·                            taken before the required notice has been given;

·                            taken, or organised by, an employee or union who have not complied with Commission orders and directions; or

·                            taken by a union but not authorised according to the union’s rules.

r.261.             The prohibited content rules, introduced as part of the Work Choices amendments, restricted the matters over which employees could take protected industrial action.

Occupational Health and Safety (OHS) Exception

r.262.             Action taken by an employee because of a ‘reasonable’ concern of an imminent risk to his or her own health or safety is not classified as industrial action. Therefore, the employee is not susceptible to orders, sanctions or strike pay provisions. Currently, the onus of proof falls on an employee claiming this exemption.

Protected industrial action - employers

r.263.             Prior to the Work Choices amendments, the WR Act defined industrial action as ‘the performance of work in a manner different from that in which it is customarily performed’ and included bans, limitations or restrictions on the performance of work, or on acceptance of or offering for work [s.4(1)]. Until 2004, the AIRC took the view that the pre-Work Choices WR Act definition applied to action by employers, and on a number of occasions issued s127 orders that employer industrial action cease. In 2004, the Full Bench of the AIRC ruled, in a matter commonly known as The Age case, that termination of employment or giving notice of a termination could not be considered industrial action. [55]

r.264.             Work Choices limited the definition of employer industrial action to lockouts. Section 420(3) defines a lockout as: ‘an employer locks out employees from their employment if the employer prevents the employees from performing work under their contracts of employment without terminating those contracts (except to the extent that this would be an expansion of the ordinary meaning of that expression)’.

r.265.             The narrowing of the definition ended the symmetry in the treatment of employer industrial action and employee industrial action under the WR Act.

r.266.             Protected employer industrial action may be taken by employers for the purpose of responding to employee industrial action or taken proactively to support or advance claims made in respect of a proposed agreement. Industrial action by an employer is not protected if the employer has not genuinely tried to reach agreement.

Strike pay

r.267.             The “no work-as-directed, no pay” principle has been part of the common law for more than 20 years. Since 1996, the WR Act has prohibited employers from making a payment to an employee in relation to a period in which the employee takes industrial action. It is also prohibited for employees to demand or accept such a payment from an employer.

r.268.             Work Choices introduced the ‘four hour rule’ whereby an employer must withhold four hours pay for a period of industrial action less than four hours in a day. For industrial action longer than four hours, the employer must not pay the employee for the total duration of the action on that day. The four hour rule applies to both protected and unprotected action.

r.269.             The four hour rule has been a source of confusion for some stakeholders and, it could be argued, in some cases, has resulted in employees taking action for longer periods than otherwise planned. The deduction of four hours pay for very short periods of industrial action is arguably punitive in nature for protected industrial action. For example, the breadth of the industrial action definition means the provisions technically require the docking of fours hours pay where employees return to work slightly late after a meeting during an unpaid period. There have been cases where workers have been docked four hours pay for holding brief meetings with little impact on an employer’s business. In relation to overtime bans, the rule could arguably operate to prohibit payment for ordinary hours worked (for example, a 30 minute overtime ban could result in a loss of 3.5 hours of ordinary pay).

Protected action ballots

r.270.             The current protected action ballot process is set out in detail in the WR Act, running to some 44 sections. The process is complicated and prescriptive. The protected action ballot provisions in the WR Act impose the following requirements:

·                            the application must have the support of at least the prescribed number of relevant employees;

·                            the nominal expiry date of the relevant collective agreement(s) must have passed;

·                            a copy of the application must be given to the other party and any person nominated to conduct the application within 24 hours; and

·                            the application must include:

-       the question or questions to be asked;

-       details on the types of employees to be balloted;

-       any details required by the Rules of the Commission;

-       a copy of the notice to initiate bargaining;

-       a declaration that the industrial action to which the application relates is not for the purpose of supporting or advancing claims for prohibited content; and

-       written notice that the application has been duly authorised according with the union’s rules (if the application is by a union); or

-       a document containing the name of each employee applicant (if the application is by a group of employees).

r.271.             Currently, a ballot order may only be issued by the AIRC if it is satisfied that the applicant:

·                            has, during the bargaining period, genuinely tried to reach agreement with the employer; and

·                            is genuinely continuing to attempt to reach agreement with the employer; and

·                            is not engaged in pattern bargaining.

r.272.             The AIRC has discretion to refuse an application if granting it would be inconsistent with the objects of the protected action ballots division.

r.273.             Protected industrial action is available for 30 days after the declaration of the ballot result. The AIRC may, on application by the ballot applicant and the employer, extend this period by up to 30 days.

r.274.             Currently, a ballot may be conducted by the AEC or another qualified ballot agent. The applicant must pay 20 per cent of protected action ballot costs, with the Commonwealth funding the remaining 80 per cent, regardless of who conducts the ballot. To date, only one application for a ballot order has been made by an employee and that application was made with the assistance of a union. There is an argument that this is likely due to the complexity of the process and the liability of the applicant to meet 20 per cent of the costs of the ballot.

r.275.             It is currently an offence to breach the protected action ballot provisions, although there have not been any criminal prosecutions to date.

r.276.             If a party challenges an order for a protected action ballot, the order can be stayed until the challenge is determined. This delays the conduct of the ballot and in some cases, has led to the ballot order expiring while the challenge is still being heard.

Suspending and terminating industrial action/a bargaining period

r.277.             The AIRC must order unprotected industrial action to stop, not occur or not be organised. Such an application must, as far as practicable, be heard and determined within 48 hours. If the AIRC is unable to do so, it must make an interim order.

r.278.             The AIRC must make an order to suspend or terminate a bargaining period (and therefore end access to protected action that is occurring or being organised) if it is satisfied that:

·                            a party has failed to genuinely try and reach agreement with other parties;

·                            there has been a failure to comply with an AIRC direction or order;

·                            a union is organising industrial action in relation to employees who are not eligible to be members;

·                            the industrial action relates to a demarcation dispute;

·                            pattern bargaining is taking place; or

·                            the industrial action is adversely affecting, or would adversely affect, the employer or employees; and is threatening or would threaten:

-       to endanger the life, the personal safety or health or the welfare, of the population or part of it ; or

-       to cause significant damage to the Australian economy or any part of it.

r.279.             The AIRC also has power to suspend a bargaining period if:

·                            a party is taking protected industrial action and the Commission considers that a cooling off suspension is appropriate and would assist the parties to resolve the dispute; or

·                            the action is adversely affecting the employer or employees and third parties are directly threatened with significant harm from the industrial action.

r.280.             The Federal Court may grant an injunction against industrial action if pattern bargaining is occurring or industrial action is taken during the life of an agreement.

r.281.             Ministerial power to terminate a bargaining period (which ends access to protected industrial action) applies if industrial action (or proposed action) adversely affects the negotiating parties and threatens, or would threaten:

·                            the life, safety, health or welfare of the population (or part of it); or

·                            significant damage to the Australian economy or an important part of it.

r.282.             If a bargaining period has been terminated by the AIRC or the Minister due to a threat to the life, safety, healthy or welfare of the population or the economy, a negotiating period applies in which the parties must attempt to settle the matters at issue. If the parties have not settled the matters by the end of the negotiating period (21 days), a Full Bench of the AIRC must make a workplace determination. The workplace determination applies as if it were a collective agreement.

Proposed Changes

Protected industrial action

r.283.             Protected industrial action will continue to be available only during negotiations for an enterprise agreement.

r.284.             A pre-condition for taking protected industrial action will be that the participants are genuinely trying to reach agreement and are complying with any good faith bargaining orders in place.

r.285.             The requirement to hold a mandatory secret ballot authorising industrial action will be retained. However, provisions will be streamlined and simplified, impacting positively on users of the system. Further details are provided below. 

r.286.             The protected action provisions will also be changed so that an “unprotected” person joining protected action will be subject to orders and penalties, but the action and its protected participants will not. This change will address any actual or perceived inequities in the current arrangements.

r.287.             These requirements are aimed at ensuring that industrial action is only taken during genuine bargaining and not for spurious reasons. This is consistent with minimising the economic impact of industrial action.

OHS Exception

r.288.             The reverse onus of proof regarding the health and safety exception to the definition of industrial action, introduced under Work Choices, will be removed - restoring the position that existed pre Work Choices. While employees will not be able to use the OHS exception as justification for action taken for industrial reasons, the burden will no longer be on the employee to demonstrate that he or she acted out of a reasonable concern for his or her health or safety.

r.289.             The few published decisions that considered the operation of the pre-Work Choices OHS exception make clear that it was not sufficient for an employee to simply assert that the action was based on a reasonable concern about an imminent risk to his or her safety. In these matters, the AIRC in effect required employees to establish the reasonableness of their concern as a defence to the employer’s claim. Generally employees did not succeed.

Protected action ballots

r.290.             When making an application for a secret ballot, there will still be a requirement for applicants to be genuinely trying to reach agreement, but the current complex and prescriptive procedural requirements will be streamlined reducing the red tape burden on applicants, Fair Work Australia (FWA), the Australian Electoral Commission (AEC) and alternative approved ballot agents. 

r.291.             Protected action ballots may be conducted by the AEC or alternative approved ballot agents. The Commonwealth will bear the full cost of conducting all the ballots conducted by the AEC.

r.292.             For ballots conducted by alternative ballot agents, the applicant will meet the full cost of conducting the ballot. As only a small number of ballots have been conducted by agents other than the AEC since the commencement of the secret ballot provisions.

r.293.             This measure will provide additional flexibility for ballot applicants. Stakeholders indicate that where a very small number of employees are to be balloted, some applicants find using an alternative provider to be quicker than the AEC. Applicants, such as non-union employee representatives who may lack funds to utilise an alternative approved ballot agent will no longer have any actual or perceived disincentive to apply for a ballot order, as they will be able to utilise the AEC, with the Government funding the total costs of conducting the ballot.

r.294.             Alternative ballot agents, and applicants choosing to use alternative ballot agents, will need to comply with regulations dealing with alternative ballot agents, including matters relating to the conduct of the ballot. For ballots not conducted by AEC, FWA will have the appropriate power to issue directions relating to the conduct of the ballot, including the timetable, compilation of roll and reports about the conduct of ballots. This should ensure that such ballots meet accountability expectations.

r.295.             FWA will no longer be able to stay protected action ballot orders in the event of a challenge to the application by an employer. Employers will still have recourse to FWA if industrial action is taken after the ballot and it is found that the other (non-ballot) requirements for protected action have not been met (for example, the party taking action is not genuinely trying to reach agreement). This will reduce delays in the protected action ballot process and prevent parties from having to re-apply for ballot orders that have expired during a challenge. The requirement that 50 per cent of employees must vote in a ballot to take industrial action and 50 per cent of these employees must support industrial action remains.

r.296.             Industrial action will continue to be protected if taken within 30 days after the result of the ballot has been declared. FWA may extend the period by up to 30 days upon application by the applicant. As employers will no longer be required to consent to this application, employee access to protected industrial action will increase.

r.297.             Protected action ballot offences will be subject to civil penalties, not criminal proceedings. Any offences may be enforced by a wider range of people, such as FWA inspectors. This will ensure that ballot applicants and agents adhere to the provisions and it will increase protection for other parties.

r.298.             Applications for protected action ballot orders will be able to be made up to 30 days prior to the Nominal Expiry Date (NED), of an enterprise agreement. From a practical perspective, this will give employees access to protected industrial action earlier than is currently the case, as under current arrangements, a ballot order cannot be applied for until the NED of an agreement has past.

Employer industrial action

r.299.             Employer industrial action will continue to be defined as a lockout. However, employer industrial action will only be protected where the employer locks out employees in response to employee industrial action.

r.300.             This measure may reduce the incidence of lockouts and their negative impact on productivity and the economy. During a lockout, all production is typically lost and the financial impact on employees can be profound.

Strike pay

r.301.             The four hour rule for strike pay will be retained for unprotected industrial action. Additional options will be introduced to provide employers flexibility in managing partial work bans. Providing employers with some discretion on partial work bans should assist in resolving some disputes more quickly and efficiently.

r.302.             It will continue to be unlawful for an employer to pay, or an employee to demand or to accept strike pay for any period of protected or unprotected action. However, strike pay provisions will differ according to whether the industrial action is protected or unprotected.

Unprotected action

r.303.             Employers will be required to withhold four hours pay for any incident of unprotected industrial action up to, or including, four hours. For action longer than four hours, the employer will be required to withhold pay for the total duration of the action. This would include complete withdrawals of labour, overtime bans and partial work bans or restrictions. The rate of pay required to be withheld will be the rate of pay that would have applied to the period during which action was taken.

r.304.             This should act as a strong disincentive to taking unprotected action. Unprotected action typically has a greater impact on the economy as it is often targeted to cause significant damage to a business, with no opportunity afforded to the employer to prepare for or manage the impact.

Protected action: complete withdrawal of labour

r.305.             For protected action where there is a complete withdrawal of labour, such as a stoppage or strike, employers will be required to withhold pay for the actual period of industrial action taken. This is a more balanced response to protected industrial action, and may see the duration of periods of industrial action fall (e.g. stop work meeting of one hour then a return to work, rather than no production for four hours, if staff fail to return to work immediately following the meeting due to the four hour rule). 

Protected action: overtime bans

r.306.             In the case of protected overtime bans, employees will not be paid for the overtime hours not worked, but pay for ordinary hours worked will be unaffected.

Protected action involving partial work bans or restrictions

r.307.             The employer will now be able to choose to:

·                            accept the partial performance by employees and continue to pay full salary, or

·                            lock out the employees, or

·                            refuse to accept partial performance and (where the agreement or contract allows) stand the employees down until such time as they are prepared to perform all their duties, or

·                            issue a ‘partial work notice’ and apportion pay according to work performed.

r.308.             This measure will provide employers with more discretion and flexibility on how to best manage the impact of the situation when action of this nature is taken. This may assist in resolving disputes more efficiently and may prevent the escalation of some disputes.

Process for apportioning pay where partial performance is accepted and a “partial work notice” is issued

r.309.             An employer will be required to issue a written notice accepting partial performance and specifying the proportion of the employee’s wages to be deducted that are reasonably attributable to the work which is the subject of the ban. The amount to be deducted will not be damages suffered by the business, but will relate to the proportion of the employee’s work not performed and his or her normal wages. At least one working day must elapse after the notice before a deduction is made. 

r.310.             FWA will have the power to settle any dispute about the proportion of wages that should be deducted.

r.311.             There will be no deduction from wages if an employee has not done anything except express an intention to not do something if asked, for example, work unrostered overtime or commence a task.

Termination of industrial action

r.312.             The concept of a bargaining period has been removed in the Bill, although industrial action will continue to be protected during bargaining for an enterprise agreement. FWA will be required to order industrial action to end if it is causing or may cause significant harm to the Australian economy or to the safety or welfare of the community.

r.313.             FWA will have discretion to end industrial action and determine a settlement where industrial action is protracted and significant economic harm is being caused to, or is imminent for, both of the bargaining parties.

r.314.             However, Ministerial power to terminate industrial action will be restricted to ‘essential services’ only. This is likely to have a neutral impact, as, to date, the Ministerial power to stop industrial action has never been used. This will also help ensure the independence of FWA.

Impact Analysis

r.315.             Many of the current industrial action provisions are retained in the Bill. The Bill retains clear, tough rules regarding industrial action, though aspects of the framework will be streamlined and simplified. From a regulatory perspective, this should impact positively on employers and employees and their representatives. Where provisions have been streamlined, for example the definition of pattern bargaining, feedback from stakeholders has been taken into account to ensure no effective change to the regulations.

r.316.             While, generally speaking, industrial action has a negative impact on productivity, these proposals recognise the right of bargaining participants to take protected industrial action and provide the employer with a proportionate response. The options for managing partial work bans give additional flexibility and discretion to employers. The provisions will provide clarity and improve the regulatory impact in this regard.

Protected industrial action

OHS exception

r.317.             To the department’s knowledge, since Work Choices, there have been six applications for section 496 orders made to the AIRC which have concerned the OHS exception. Of these six, one application was upheld, one application was withdrawn after employees subsequently returned to work and four attempts to rely on the OHS exception were unsuccessful.

r.318.             The limited number of OHS exception claims in relation to section 496 orders made to the Commission may reflect that the express requirement to prove the OHS case has dissuaded employees from stopping work over legitimate OHS concerns.

r.319.             Two OHS exception claims were also made by employees as a response to orders or injunctions sought by employers under s36 of the Building and Construction Industry Improvement Act 2005 and s494 of the WR Act. Neither of these exception claims was successful.

r.320.             While removing the reverse onus of proof will reduce the regulatory burden on an employee for action taken out of concern for his or her health or safety, this may result in employees being more prepared to take action over legitimate OHS concerns.

Protected action ballots

Genuinely trying to reach agreement

r.321.             The current pre-requisite for a protected action ballot application is that the party must be genuinely trying to reach agreement. From the commencement of Work Choices in 2006 to 18 February 2008, there were 19 decisions published where an application was not approved - 11 of these applications were refused because the party was not genuinely trying to reach agreement. Retaining the requirement for parties to be genuinely trying to reach agreement before a ballot order is granted will help to ensure that parties focus on agreement making and the Government does not fully fund ballots authorising industrial action which would be unprotected at the time of the application.

Results of protected action ballots

r.322.             Of the 19 unsuccessful protected action ballot applications in which reasons were published, seven were rejected because of procedural errors. These errors included:

·                            the bargaining period was not properly notified as the notice referred to wrong employer, employees, or provisions in Act;

·                            the bargaining period notice was unsigned;

·                            the nominal expiry date hadn't passed; and

·                            the employee applicant didn't advise the employer of the application in time.

                       

r.323.             Streamlining the protected action ballot provisions and reducing procedural complexity will have a positive regulatory impact on applicants.

Employer industrial action

r.324.             The number of employee applications for orders that employer industrial action cease, or not occur, has fallen sharply since the Work Choices amendments. In 2007, there were two such applications compared with 38 in 2005.

r.325.             Evidence on the number of working days lost due to lockouts is limited, but research presented by Briggs suggests that while lockouts comprised a small proportion of disputes between 1999 and 2003, they were responsible for just over half of long disputes (disputes that lasted more than a month) and therefore a disproportionate number of working days lost. [56]

r.326.             It is possible therefore that restricting protected employer industrial action to reactive lockouts only will reduce the number of working days lost to disputes, impacting positively on productivity and the economy more broadly.

 

Table 7: Employer and employee stakeholder views on new industrial action provisions

 

Employer Stakeholders

 

Employer groups generally support the retention of existing industrial action provisions , including secret ballots .

 

While supporting the role of FWA in issues arising with secret ballots, some groups are concerned with the proposed arbitration powers of FWA for protracted disputes. Employer groups have suggested that if such provisions are to be in the Bill, the threshold for arbitration must be very high and the notion of harm should be defined as ‘economic harm’.

 

Most employer groups support the four hour rule, noting that this has been a disincentive to taking industrial action. One group would like some discretion in applying the rule, but this is not generally supported by other employer groups.

 

 

Employee Stakeholders

 

Employee groups are dissatisfied with retaining the four hour rule for unprotected industrial action. They do not support the four hour rule, and have argued that it is counter-productive to business, as it provides no incentive for workers to return to work for the remaining work day.

 

Unions are opposed to holding secret ballots for initiating protected industrial action.

 

Employee groups reaffirm the need for a strong umpire to settle disputes, believing that otherwise employers could deliberately frustrate collective bargaining negotiations. As such, they support last resort arbitration to resolve protracted disputes.

 



6.       INSTITUTIONAL FRAMEWORK

Current Arrangements

r.327.             Under the current system, there are a range of separate statutory agencies that share responsibility for various aspects of the workplace relations system. The various agencies and their roles and responsibilities are detailed as follows:

·                            Australian Industrial Relations Commission (AIRC) is responsible for creating modern awards, resolving industrial disputes and dealing with unfair dismissal claims. The AIRC has a five-tier officeholder structure: the President, Vice Presidents, Senior Deputy Presidents, Deputy Presidents and Commissioners

·                            Australian Industrial Registry (AIR) : provides registry and administrative support to the AIRC and is headed by the Industrial Registrar, a statutory office holder and agency head.

·                            Australian Fair Pay Commission (AFPC) : is responsible for conducting wage reviews and exercising wage-setting powers, as well as promoting an understanding of matters relevant to its wage-setting and other functions. The AFPC consists of the AFPC Chair, four AFPC Commissioners and is supported by a secretariat.

·                            Workplace Authority (WA) : is headed by a Director and has responsibility for a number of functions including: promoting the understanding of federal workplace relations legislation and the making of workplace agreements; providing education, assistance and advice to employees, employers and organisations; accepting lodgement of workplace agreements and notices about transmission of instruments; assessing workplace agreements to determine whether they pass the No Disadvantage Test; authorising multiple business agreements; analysing workplace agreements; and, referring matters, where necessary, to the Workplace Ombudsman for investigation.

·                            Workplace Ombudsman (WO) : is a statutory agency, headed by the Workplace Ombudsman, and is responsible for promoting and monitoring compliance with, and investigating suspected contraventions of, federal workplace relations laws, awards and agreements.

·                            Australian Building and Construction Commission (ABCC) : is a statutory agency, established under the Building and Construction Industry Improvement Act 2005 , to undertake a compliance function in the building and construction industries. 

·                            Judicial functions are also conferred by the WR Act on the Federal Court, the Federal Magistrates Court and in some cases, state and territory courts.

Government Policy on the Workplace Relations Institutional Framework

r.328.             The Government’s objectives for the workplace relations institutional framework are twofold. One is to efficiently integrate the services that currently span seven agencies, to ensure the public is provided with a streamlined, accessible, one-stop shop on workplace relations issues. The other key objective is to combine the best elements of the past arrangements, particularly the historical independence of Australia’s industrial umpire, with new approaches so that they are less formal, legalistic and adversarial. The aim is to ensure the new institutional framework is both accessible and responsive in providing fair, efficient services to users.

Proposed Changes

r.329.             The Government will establish a new institution, Fair Work Australia (FWA), which will replace the AIRC, AIR, AFPC, WA and WO from 1 January 2010 and the ABCC from 1 February 2010. The key functions of FWA will include:

·                            minimum wage-setting and adjustment by a specialist Minimum Wages Panel to be established within FWA;

·                            award variation;

·                            ensuring good faith bargaining;

·                            facilitating multi-employer bargaining for the low paid;

·                            dealing with industrial action:

·                            approval of agreements; and

·                            resolution of disputes and unfair dismissal matters.

r.330.             A diagram illustrating the structure of FWA is at Figure 3. FWA will comprise the FWA President, deputy presidents, commissioners and specialist Minimum Wages Panel members, as well as a general manager and administrative staff.

r.331.             FWA members will be appointed via a merit based process. A panel of federal and state and territory senior government officials will shortlist candidates with bipartisan consultation and consultation with the President of FWA to be undertaken before appointments can be made. All current AIRC members will be invited to become FWA members.

r.332.             FWA will be complemented by a related but independent and separate statutory agency, the Office of the Fair Work Ombudsman, and newly created Fair Work Divisions of the Federal Court and the Federal Magistrates Court. The Office of the Fair Work Ombudsman will be headed by the Fair Work Ombudsman. It will have separate governance arrangements and will have an educative role in the new system. However, its day-to-day operations will be practically integrated with FWA. Fair Work Inspectors will be appointed by the Fair Work Ombudsman. It will be possible for the Fair Work Ombudsman to establish specialist divisions in the Office to focus on persistent or pervasive unlawful behaviour in particular industries or sectors .

r.333.             Fair Work Divisions of the Federal Court and the Federal Magistrates Court will operate as the independent judicial arm of FWA. Matters brought under the Bill will be required to be heard and determined in the Fair Work Divisions. State and territory courts will continue to have jurisdiction to hear and determine claims in respect of breaches of awards, workplace agreements and minimum entitlements.

r.334.             The Wilcox Inquiry is reviewing the operation of the ABCC. The Hon Murray Wilcox QC, a former Australian Federal Court judge, is conducting consultation on the structure, independence, powers, resourcing and other matters relating to the new specialist division and will report to the Government by the end of March 2009. 



Figure 2: Structure of Fair Work Australia

Fair Work Australia

Office of the Fair Work Ombudsman

Fair Work Divisions of the Federal Court and the Federal Magistrates Court

President of FWA

·          Statutory office holder with tenure to age 65

 

Fair Work Ombudsman

·          Statutory office holder

·          Will promote compliance with legislation, including through education, information and assistance

·          Will appoint Fair Work Inspectors

 

·          New specialist Fair Work Divisions will be created in Federal Court and Federal Magistrates Court

-          Will deal with all matters arising under new workplace legislation

-          Will deal with entitlements under a contract of employment about matters in the NES (e.g. leave) or modern awards (e.g. wages)

·          Small claims procedure extended to the Federal Magistrates Court

Tribunal functions

Non-Tribunal functions

 

FWA Members

·          Statutory office holders with tenure to age 65

·          Functions/powers, include:

-          Approval of enterprise agreements

-          Awards review and variation

-          Good faith bargaining orders

-          Unfair dismissal

-          Industrial action orders

-          Mediation and dispute resolution

·          FWA will have broad powers to conduct matters and inform itself as it considers appropriate in an informal and non-adversarial way (e.g. compulsory conferences)

 

 

General Manager and staff

·          Statutory office holder

·          Will provide assistance to President and FWA members

·          Exercise powers under delegation of President

·          Will manage FWA staff, who will assist FWA members to discharge functions (including ancillary non-determinative functions, e.g. provide registry functions, gather information for matters before FWA)

·          Provide information about role and functions of FWA

 

Fair Work Inspectors

·          Powers include:

-          Entry to premises to monitor compliance with legislation or instruments made under legislation (e.g. NES, awards, agreements)

-          Bring court proceedings to enforce rights and obligations

-          Investigate and enforce common law entitlements that relate to the NES or modern awards

State and Territory Courts

 

·          State and Territory Courts will retain existing jurisdiction and powers

Minimum Wages Panel

·          Will set and adjust wages in its annual wage review

·          Headed by President



Less formality

r.335.             FWA will move away from formal, adversarial processes, with legal representation and intervening parties. There will also be a higher bar set for representation. Permission for representation will only be granted to parties (including the Minister) where it would enable the matter to be dealt with more efficiently or fairly. [57] It is envisaged that in most cases legal representation will not be necessary.

r.336.             The language employed to describe FWA functions and powers will move away from powers and procedures premised on all matters being dealt with by hearing and instead reflect the fact that matters may be dealt with through a range of processes (for example, on the papers). The ability to decide matters ‘on the papers’ combined with the proposed FWA less-adversarial style will add to the informality of proceedings.

r.337.             In most cases, FWA’s powers and functions will be exercised by a single FWA member with FWA staff performing ancillary non-determinative functions. Staff will conduct initial enquiries and gather information about a matter before FWA. This will be particularly important in relation to approval of agreements and unfair dismissal applications. This large range of ancillary functions to be performed by FWA staff will allow FWA to act quickly, informally and by avoiding unnecessary technicality.

r.338.             When dealing with a matter under the small claims procedure, the Fair Work Division may act in an informal manner, will not be bound by formal rules of evidence, and may act without regard to legal form and technicality. The Court will have discretion to allow a person to be represented by a lawyer but in most cases this will not be necessary.

A ‘one-stop shop’ - closer to workplaces, more accountable and quicker in response

r.339.             FWA staff will perform ancillary non-determinative functions for workplace agreement and unfair dismissal matters. In addition, the need for legal representation before FWA will be minimised as there will be a move away from a third person ‘intervening’ in a proceeding towards a ‘right to be heard’. FWA will only grant permission for a person to be heard where it would enable the matter to be dealt with more efficiently, or the person or organisation (or its members) are likely to be directly affected by the outcome of the matter, or it would be in the public interest. This means that a person being heard or making a submission will not have the right to cross-examine, appeal, or exercise a range of other rights enjoyed by parties. These two measures should minimise delays and quicken proceedings while still according the parties procedural fairness.

r.340.             It is anticipated that restricting responsibility for decision making to FWA members however, will improve the consistency of decision making and consequently reduce the rate of appeals - making for a shorter process and greater accountability. A potentially lower rate of FWA appeals would contrast with the proportionate increase in the number of AIRC appeals under Work Choices. Currently, appeals to a full bench are restricted to AIRC and AIR matters. Appeals against WA decisions (for example in relation to whether an agreement passes the No Disadvantage Test) however are prohibitive as they must currently go to the High Court. Under FWA, appeals against a decision by a single member (or by the General Manager or FWA staff under delegation) will generally be by leave to a Panel. This will provide greater accountability in relation to, for example, decisions on whether agreements pass the BOOT.

r.341.             In relation to any subsequent appeals, it will be cheaper and more streamlined for litigants to commence appeal proceedings in the Federal Court, rather than the High Court which is currently the case for decisions of the AIRC, Registry, AFPC and the WA.

r.342.             FWA will be required to disclose information about, and provide copies of, notifications or applications to FWA and orders, decisions or actions made by FWA to the Office of the Fair Work Ombudsman. This will address the current problem of the AIRC not being able to pass on information that contains ‘personal information’ to the WO, and is consistent with the two agencies operating as a ‘one-stop shop’ to reduce delays.

r.343.             Delays will also be reduced through requiring employers to ‘allow access’ to inspectors. Currently WO investigations may be sometimes frustrated by employers not facilitating the work of inspectors through access to premises. Inspectors will also be able to perform their functions more effectively by being able to take assistants, such as an interpreter or forensic accountant, on-site.

r.344.             Inspectors will also be allowed to investigate and enforce common law safety net entitlements, that is, entitlements relating to the NES or a modern award, where there is a breach of the NES, modern award, enterprise agreement or wages order. This will allow the Fair Work Ombudsman to assist employees resolve statutory and basic common law underpayments at the same time, and provides a ‘one-stop shop’ for enforcement of these matters.

r.345.             The legislation will allow entitlements under a common law contract of employment that relate to matters in the NES, such as leave and notice of termination and redundancy, or modern awards (for example, wages, penalty rates and allowances) to be enforced by the Federal Court and the Federal Magistrates Court. This will make it easier to enforce related entitlements at the same time. State and territory courts will also be able to hear claims about these matters.

r.346.             The existing small claims mechanism will be extended to the Fair Work Division of the Federal Magistrates Court and the monetary limitation of the small claims mechanism will be increased from $10,000 to $20,000 (including in relevant state and territory courts). This will allow employees to elect to have claims about entitlements, such as underpayment of wages, dealt with under a simple and quick mechanism. 

Dispute Mediation and Resolution

r.347.             The Department expects that case flow measures will improve as a result of FWA being responsive and able to visit workplaces to offer assistance and resolve issues quickly and informally. As shown in Table 8 below, the average time taken to hold the first hearing in a dispute resolution of 28 days includes an average of 16 days taken by the AIR to formally list the hearing. [58] In relation to termination of employment claims, 85 per cent of cases are finalised within 102 days. As FWA will be more flexible, the Department expects that these processing times will fall. This is likely to be particularly the case in relation to dispute resolution, an area in which case flow times have increased since Work Choices.

 

Table 8: Current AIRC case flow statistics

Nature of proceeding

Event

No. of cases %

Days from lodgement

2003-04

2004-05

2005-06

2006-07

 

Dispute resolution

First hearing

85

22

21

21

28

 

Order relating to industrial action

First hearing

85

3

3

3

1

 

Dispute resolution in agreements

First hearing

85

25

23

29

24

 

Termination of employment

First conciliation

85

50

52

55

46

 

Termination of employment

Finalisation

85

124

120

115

102

 

Source: AIRC Annual Report 2006-2007, page 45

 

r.348.             Improved case flow measures would benefit the economy as should the increased jurisdiction of FWA with respect to mediating disputes. As well as taking longer to resolve, dispute notifications to the AIRC dropped to around 10 per cent of 2002-03 levels following Work Choices. International experience suggests that economic advantage should result from FWA’s involvement in mediating disputes the AIRC is currently excluded from.

Impact Analysis

r.349.             As a new institution, with no precedent in Australia, it is difficult to gauge the potential impact of Fair Work Australia using Australian-based evidence.

r.350.             While the Productivity Commission has recommended establishing institutional arrangements in relation to National Workers’ Compensation and Occupational Health and Safety Frameworks, there has been little assessment of the economic impact of employment-related tribunals. [59] It is instructive, however, to examine international evidence, particularly the experience of the UK in establishing the Advisory, Conciliation and Arbitration Service (ACAS).

UK evidence - Advisory, Conciliation and Arbitration Service (ACAS)

r.351.             ACAS in the UK has generated economic advantage for the British economy, operating as a one-stop-shop in relation to preventing and resolving workplace relations disputes.

r.352.             Details of ACAS performance measures are at Table 17. Note that measures used by ACAS are not consistent with measures used by the AIRC. ACAS measures performance generally in terms of tribunal hearing days saved through its success in resolving workplace disputes while the AIRC measures time taken to hold a hearing across a range of matters, and time taken to finalise employment termination matters. The ACAS model is, however, indicative of the economic benefits that may be expected from a body with streamlined processes such as those proposed for FWA.

r.353.             While FWA will not have the same expansive dispute prevention capacity as ACAS, it will provide information and advice to employers and employees and it will have a greater capacity to mediate disputes than the AIRC. The evidence from the UK therefore suggests that the changes to be implemented with the establishment of FWA are likely to result in economic benefits for Australia.

r.354.             The economic benefits of ACAS are discussed in a recent article by Dr Anthony Forsyth of Monash University. [60] In his article, Dr Forsyth cites a report by the National Institute of Economic and Social Research (NIESR), published in 2007, which stresses the independent nature of ACAS and its role in facilitating harmonious workplaces, features that are objectives for FWA. [61]

r.355.             The NIESR found, in particular, that every pound of taxpayers’ money spent on ACAS delivers a 16 pound return. ACAS’ work in resolving individual and collective disputes at work produced immediate savings to the economy of £313 million, while the advice and guidance services contributed a further £475 million. Overall, ACAS provided an economic dividend of almost £800 million per year to UK business. Australian commentators have noted that further benefits of ACAS were anticipated to arise from long term improvements in productivity and investment in the UK economy.

Potential impacts of FWA

r.356.             Given that FWA will act as far as possible as a one-stop-shop, with increased powers and streamlined processes, any regulatory burden on employers and employees is likely to be minimal.

r.357.             Ensuring that FWA will be independent and effective in assisting to resolve disputes is likely to provide for direct and immediate benefits to the Australian economy, in the way that ACAS has been found to contribute to economic success in the UK. Allowing for appeals from FWA to the Fair Work Divisions of the Federal Courts is likely to result in reduced costs and a lower regulatory burden as compared with current arrangements.



Table 9:  ACAS performance measures, 2007-08

Key performance indicators for service level agreement (SLA)

2007/08

2006/07

2005/06

Target

Outturn

Target

Outturn

Target

Outturn

Conciliation in collective disputes

 

 

 

 

 

 

a) The promotion of a settlement in disputes in which ACAS is involved

80%

90%

80%

90%

80%

n/a

B) ACAS involvement in large-scale disputes

100%

100%

100%

100%

100%

100%

Conciliation in employment tribunal cases

 

 

 

 

 

 

Percentage of tribunal hearing days saved during fixed period of conciliation in short and standard period cases or prior to the full hearing in open period cases

Short period

50%

53%

50%

52%

50%

53%

Standard period

60%

63%

60%

63%

60%

64%

Open period

85%

85%

65%

84%

85%

86%

Workplace projects

The percentage of workplace projects reporting an improvement in employment relation following ACAS intervention

70%

81%

70%

70%

70%

75%

ACAS training services

The percentage of managers in SMEs who introduce or reform discipline and grievance procedures following

 

 

 

 

 

 

a) Attendance at an ACAS training event

70%

n/a

70%

n/a

70%

68% 1

b)Use of an e-learning tool

65%

n/a

70%

n/a

70%

78%

ACAS helpline

 

 

 

 

 

 

The percentage of callers who were able to take clear action following their call to ACAS helpline

70%

n/a

70%

87%

70%

n/a

Mediation services

 

 

 

 

 

 

a) The percentage of mediations that are successful

80%

82%

n/a

n/a

n/a

n/a

b) The number of individuals receiving accreditation following ACAS CIWM training

72

121

72

100

72

74

Equality services 2 (NEW)

 

 

 

 

 

 

The percentage of workplaces reporting a change in equality policies, practices and supporting activities such as training and monitoring

75%

76%

70%

n/a

70%

n/a

Publications on good practice at work 3 (NEW)

 

 

 

 

 

 

a) the percentage of users for whom the guidance helped solve a problem at work or reassured them that they had taken the right course of action

65%

76%

60%

n/a

60%

n/a

b) The percentage of users reporting that the guidance helped to amend or introduce a policy

15%

20%

n/a

n/a

n/a

n/a

Performance against key targets

2007/08

2006/07

2005/06

 

target

outturn

target

outturn

target

outturn

Promoting settlements of employment tribunal cases

 

 

 

 

 

 

Customers satisfied or very satisfied with service

85%

n/a

65%

90%

85%

90%

Provision of information and advice

 

 

 

 

 

 

Percentage of helpline callers answered within 20 seconds

70%

57%

70%

63%

70%

73%

Customers satisfied or very satisfied with the service

95%

n/a

95%

94%

95%

n/a

Training Services

 

 

 

 

 

 

Customers very satisfied or satisfied with charged services

95%

96%

95%

96%

95%

95%

 

 

 

 

 

 

Other performance targets

 

 

 

 

 

 

2007/08

 

 

 

 

 

 

2006/07

 

 

 

 

 

 

2005/06

 

target

outturn

target

outturn

target

outturn

Percentage of arbitration awards provided to parties within three weeks of hearing

100%

90%

100%

88%

100%

92%

Percentage of letters to helpline answered within seven working days

100%

96%

100%

98%

100%

98%

Percentage of bills paid within the terms of the relevant contract or within 30 days of receipt of valid invoice

100%

98%

100%

96%

100%

96%

Other performance measures

 

 

 

2007/08

2006/07

2005/06

Number of ET1s and non-ET1s received

 

 

 

203,184

162,653

141,288

Number of non-ET1s received

 

 

51,935

57,476

31,576

Number of re-employments

670

660

913

Number of collective conciliation requests received

896

912

952

Number of workplace projects started

237

221

245

Number of requests for trade dispute arbitration

47

47

57

Number of calls answered by the national helpline

885,353

839,335

906,553

Number of calls answered by Equality Direct

5,238

6,181

5,061

Number of advisory visits

1,972 4

1,343

2,002

Number of training sessions delivered

2,500

2,707

2,964

Number of equality contracts delivered

199 5

1,008

135

Parties to tribunal cases who felt that ACAS helped speed up the resolution of their case

n/a

n/a

81%

Costs of completed collective conciliation cases where a settlement was achieved or significant progress made

£2,773

£2,044

£1,673

Cost of an arbitration hearing

£2,414

£2,287

£1,650

Cost of an individual conciliation case settled or withdrawn

£213

£219

£280

Cost of a helpline enquiry answered

£8.50

£9.11

£7.33

 

 

 

 

[1] This figure was reported as 80% in 2005/06 but was later adjusted to 68%

2 This KPI has been changed. Therefore, it is not possible to have direct comparisons with previous years.

3 This KPI has been changed. Therefore, it is not possible to have direct comparisons with previous years.

4 For 2007/08 this includes in-depth advisory telephone calls which have replaced some visits to maximise the number of employees assisted with the available resource

5 The variance between 2006/07 and 2007/08 is due to a change in the methodology for recording equality and diversity contracts. The new system now focuses solely on recording equality and diversity policies, procedures and health checks with all advice and workplace training captured elsewhere. It is not therefore possible to make a direct comparison between the years.

 

r.358.             The Office of the Fair Work Ombudsman will investigate and enforce NES and modern award entitlements much in the same manner as the Workplace Ombudsman currently investigates and enforces award and agreement entitlements.

r.359.             The new Fair Work Divisions of the Federal Court and the Federal Magistrates Court will likely result in a reduced regulatory impact as employees and employers will be able to have claims about entitlements dealt with under a simple and quick mechanism.

 



Table 10: Employer and employee stakeholder views on new institutional framework provisions

 

Employer Stakeholders

 

Employer groups have raised concerns over the separation of FWA’s judicial and non judicial roles. Many are satisfied with the incorporation of powers from current stand-alone institutions into FWA, but want assurances that there will be no arbitration for matters above the safety net.

 

All employer groups want the existing powers of the Australian Building and Construction Commission to be incorporated into the Fair Work Inspectorate beyond 2010, although some want the ABCC to remain as a stand-alone entity. Some groups warn that major projects are at risk should the powers of the ABCC be watered down.

 

Some employer groups support current members of the AIRC being appointed to FWA.

 

Some employer groups have also sought a lower threshold to appeal decisions of FWA (particularly any arbitrated outcomes).

 

 

Employee Stakeholders

 

Unions want FWA to have strong powers to enforce collective rights and resolve disputes in the new bargaining framework, to enforce the provisions in the NES, and to enforce unfair dismissal protections for workers.

 

All unions want the powers of the ABCC, and the institution, to be abolished and are critical of its proposed retention by the Government until 31 January 2010. Unions are unhappy that workers in the building and construction industry are regulated differently to the rest of the workforce.

 

 



POST IMPLEMENTATION REVIEW

r.360.             The Government is committed to ensuring that the new workplace relations system provides a fair and flexible workplace relation system that achieves the right balance between employers and employees. As part of this commitment, the Government will be putting in place appropriate information gathering mechanisms. This will ensure that, once implemented, the new measures can be closely monitored, to enable the evaluation of their effectiveness in achieving the Government’s policy objectives as stated in this impact analysis in a clear and transparent manner.

 

 



ATTACHMENT A

 

Table A1: Consultations conducted by the Australian Government in the development of the Substantive Bill





Forum

Membership

Meetings

 

 

Workplace Relations Ministers’ Council

(WRMC)

 

Council of federal, state and territory Workplace Relations Ministers, with the New Zealand Minister of Labour invited as an observer.

 

Current Membership:

 

1 Feb 08

23 May 08

22 Aug 08

5 Nov 08

The Hon Julia Gillard MP (Cth)

The Hon John Hatzistergos MLC (NSW)

The Hon Joseph Tripodi (NSW)

The Hon Robert Knight MLA (NT)

The Hon John Mickel MP (QLD)

The Hon Tim Holding MP (VIC)

The Hon Rob Hulls MP (VIC)

 

 

Mr John Hargreaves MLA (ACT)

The Hon Troy Buswell MLA (WA)

The Hon Paul Caica MP (SA)

The Hon Allison Ritchie MLC (TAS)

The Hon Trevor Mallard MP (NZ)

 

High Level Officials’ Group

(HLOG)

 

At a meeting of WRMC on 1 February 2008, members agreed to establish a high level officials’ group to collaborate on the development of the new workplace relations system and its interface with state systems.

 

7 Feb 08

18 Feb 08

25 Feb 08

6-7 Mar 08 13 Mar 08

9 Apr 08

30 Apr 08

16 Jun 08

2 Jul 08

17 Jul 08

29 Jul 08

17 Sept 08

 

 

 

National Workplace Relations Consultative Council (NWRCC)

 

Chair: The Hon Julia Gillard MP, Minister for Employment and Workplace Relations. Membership is made up of seven representatives from employer associations, and seven representatives from the ACTU:

 

Current Membership:

 

24 Jan 08

14 Mar 08

16 Sept 08

Mr Jeff Lawrence (ACTU)

Ms Sharan Burrow (ACTU)

Mr Geoff Fary (ACTU)

Mr Joe De Bruyn (ACTU)

Ms Cath Bowtell (ACTU)

(Vacant, to be determined) (ACTU)

(Vacant, to be determined) (ACTU)

Mr Peter Anderson (ACCI)

Mr Steven Knott (ACCI)

Mr Graham Harris (ACI)

Ms Denita Wawn (NFF)

Mrs Heather Ridout (AiG)

Mr Richard Calver (MBA)

Dr Ruth Dunkin (BCA)

 

 

 

Committee on Industrial Legislation

(COIL)

 

COIL is a sub-committee of NWRCC.

 

On 18 December 2007, the Deputy Prime Minister invited all NWRCC members to attend COIL. On 16 September 2008, the Deputy Prime Minister indicated that other stakeholders such as state territory officials would be invited to consider the draft Workplace Relations Bill.

 

 

 

 

 

 

 

7-17 Oct 08

14 Nov 08

 

Business Advisory Group (BAG)

 

Chair:    

Mr John Denton, Partner and Chief Executive Officer, Corrs Chambers Westgarth

National Workplace Relations Consultative Council (NWRCC) Representative:

Ms Heather Ridout, Chief Executive of the Australian Industry Group

 

 

27 Feb 08

4 March 08

11 April 08

22 April 08

16 Sept 08

Current Membership:

Australian Hotels Association          

Australian National Retailers Association

Housing Industry Association

Mirvac

News Limited

Recruitment & Consulting Services Australia

Rio Tinto Australia

Ron Finemore Transport

St. George Bank

Woodside

 

Mr Bill Healey

Mr Margy Osmond

Dr Ron Silberberg

Mr Greg Paramor

Mr John Hartigan

Ms Julie Mills

Mr Stephen Creese

Mr Ron Finemore

Mr Paul Fegan

Mr Don Voelte

 

Workers’ Advisory Group (WAG)

Chair: The Hon Julia Gillard MP, Minister for Employment and Workplace Relations

 

5 March 08

4 April 08

20 May 08

14 July 08

2 Sept 08

Current Membership:

Mr Jeff Lawrence (ACTU)

Ms Sharan Burrow (ACTU)

Ms Cath Bowtell (ACTU)

Ms Susan Hopgood (AEU)

Mr Julius Roe (AMWU)

Ms Ged Kearney (ANF)

Ms Linda White (ASU)

Mr Paul Howes (AWU)

 

Mr Stephen Jones (CPSU)

Mr John Sutton (CFMEU)

Mr David Carey (CPSU-SPSF)

Mr Peter Tighe (ETU)

Ms Louise Tarrant (LHMU)

Mr Charlie Donnelly (NUW)

Mr Tony Sheldon (TWU)

Mr John Robertson (Unions NSW)

 

 

Small Business Working Group (SBWG)

 

 

Chair: The Hon Craig Emerson MP, Minister for Small Business, Independent Contractors and the Service Economy

 

 

27 Feb 08

7 March 08

1 July 08

 

Current membership :

Council of Small Business of Australia

Hotel, Motel and Accommodation Association

Institute of Chartered Accountants

McDonald’s

National Retailers’ Association

Pharmacy Guild

Real Estate Institute of Australia

Restaurant and Catering Australia

Victorian Automobile Chamber of Commerce

Victorian Farmers Federation

 

 

 

Mr Tony Steven

Mr Greg Holmes

Mr Andrew Arkell

Mr Frank McManus

Mr Gary Black

Mr Wendy Phillips

Mr Neil Fisher

Mr John Hart

Mrs Leyla Yilmaz

Ms Patricia Murdock

 

 

 

 

 

 

Union Working Group on Unfair Dismissal (UWG)

 

Chair: The Hon Craig Emerson MP, Minister for Small Business, Independent Contractors and the Service Economy

 

 

28 Feb 08

7 March 08

 

Current membership:

Mr Jeff Lawrence (ACTU)

Mr Richard Watts (ACTU)

Mr Barry Terzic (AMWU)

Mr John Nucifora (ASU)

Mr Neal Swancott (LHMU)

 

 

Ms Deborah Ralston (QCU)

Ms Sue-Anne Burnley (SDA)

Ms Bev Myers (TCFUA)

Mr Angus Storey (Unions SA)

 

 

 

 



ATTACHMENT B

Employee coverage of unfair dismissal laws

 

Under Work Choices

No of employees

% of employees

Total number of employees eligible for UFD (October 2008 estimate)

3,739,661

44

Total number of employees not eligible for UFD (October 2008 estimate)

4,664,834

56

Total number of employees (October 2008)

8,404,496

100

 

 

Under Forward with Fairness

No of employees

% of employees

Total number of employees eligible for UFD (October 2008 estimate)

6,747,074

80

Total number of employees not eligible for UFD (October 2008 estimate)

1,657,422

20

Total number of employees (October 2008)

8,404,496

100

Source: DEEWR calculations using ABS data

·          Under Work Choices legislation, approximately 3.7 million employees (44 per cent) had access to unfair dismissal laws. The Government’s proposed changes to unfair dismissal laws will see the number of employees who will have access to unfair dismissal laws increase to 6.7 million or 80 per cent of employees.

Estimated number of employees covered by unfair dismissal laws under Work Choices

Employees of businesses with 100 or more employees

Permanent employees (May 2006):

A) Total number permanent employees (ex working proprietors) [62] =  3,453,522

B) Number of permanent employees (ex working proprietors) with less than 6 months tenure =  310,817

Casual employees (May 2006):

C) Total number of casual employees =  700,878

D) Total number of casual employees with less than 12 months tenure =  319,820

Employees of businesses with 1 - 99 employees

E) All employees excluded from UFD

 

Employees eligible for unfair dismissal laws

F) Total number of employees eligible for UFD (May 2006) = (A-B) + (C-D) =  3,523,763

G) Employment growth between May 2006 to October 2008 = 6.1%

H) Taking G into account, the total number of employees eligible for UFD (September 2008) = F * (1.061) =  3,739,661

(Conversely, total number of employees not eligible for UFD (October 2008) =  4,664,834)

Estimated number of employees covered by unfair dismissal laws under this Bill

Employees of businesses with 15 or more employees

Permanent employees (May 2006):

A) Total number permanent employees (ex working proprietors) [63] =  4,854,999

B) Number of permanent employees (ex working proprietors) with less than 6 months tenure =  436,950

Casual employees (May 2006):

C) Total number of casual employees =  1,192,961

D) Total number of casual employees with less than 6 months tenure =  349,249

Employees of businesses with 1 - 14 employees

Permanent employees (May 2006):

E) Total number of permanent (ex working proprietors) =  1,457,703

F) Total number of permanent (ex working proprietors) less than 12 months tenure =  269,675

Casual employees (May 2006):

G) Total number of casual employees =  499,507

H) Total number of casual employees with less than 12 months tenure =  227,932

Non-award employees earning $98,200 or more per year

I) Total number of non-award employees earning $98,200 or per year (May 2006)

=  363,812

Employees eligible for unfair dismissal laws

J) Total number of employees eligible for UFD (May 2006) = (A-B) + (C-D) + (E-F) + (G-H) - I =   6,357,552

K) Employment growth between May 2006 to October 2008 = 6.1%

L) Taking K into account, the total number of employees eligible for UFD (October 2008) = J * (1.061) =   6,747,074

(Conversely, total number of employees not eligible for UFD (October 2008) =   1,657,422)

 

 

 



NOTES ON CLAUSES

 

In this notes on clause the following abbreviations are used:

 

AEC

Australian Electoral Commission

AIRC

Australian Industrial Relations Commission

EEZ

Exclusive economic zone

FWA

Fair Work Australia

FWO

Fair Work Ombudsman

HREOC

Human Rights and Equal Opportunity Commission

NES

National Employment Standards

Transitional and Consequential Bill

Fair Work (Transitional Provisions and Consequential Amendments) Bill 2009

WR Act

Workplace Relations Act 1996

 

 

 

Chapter 1 - Introduction

Part 1 - 1 - Introduction

Division 1 - Preliminary

Clause 1 - Short title

1.                         Once enacted, the short title of the Act will be the Fair Work Act 2008 .

Clause 2 - Commencement

2.                         The table in this clause sets out when the Bill’s provisions commence.

3.                         Clauses 1 and 2 commence on the day the Fair Work Act receives Royal Assent (item 1 of the table).  Clauses 3 to 800 commence on a day or days to be fixed by Proclamation (item 2).

4.                         Transitional arrangements and consequential amendments relating to the Bill will be set out in separate legislation, to be known as the Fair Work (Transitional Provisions and Consequential Amendments) Bill 2009. 

5.                         It is intended that no provision of the Bill will commence before the Transitional and Consequential Bill is enacted and that no provision will commence later than six months after that enactment.

6.                         These arrangements will phase in the new workplace relations system and ensure that it operates in a seamless and comprehensive way.

Division 2 - Object of this Act

Clause 3 - Object of this Act

7.                         This clause sets out the object of the Bill, which is to provide a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion by the means set out in the clause.

Division 3 - Guide to this Act

Clause 4 - Guide to this Act

8.                         This clause provides a guide to this Bill. 

Clause 5 - Terms and conditions of employment (Chapter 2)

Clause 6 - Rights and responsibilities of employees, employers, organisations, etc (Chapter 3)

Clause 7 - Compliance and enforcement (Chapter 4)

Clause 8 - Administration (Chapter 5)

Clause 9 - Miscellaneous (Chapter 6)

9.                         Clauses 5 to 9 set out the key elements to each of the chapters in the Bill.

 



Part 1-2 - Definitions

Division 1 - Introduction

Clause 10 - Guide to this Part

10.                     This clause provides a guide to this Part. 

Clause 11 - Meanings of employee and employer

11.                     The terms employer and employee are used in various contexts in the Bill and have their ordinary meanings in this Part unless otherwise specified.

Division 2 - The Dictionary

12.                     The Dictionary contains a list of every term that is defined in the Bill.  It includes a number of ‘signpost’ definitions that refer readers to the sections in which terms are substantively defined.  For example, in relation to the meaning of the term covers, readers a re re f erred to clause 48 in relation to a modern award, clause 53 in relation to an enterprise agreement and clause 277 in relation to a workplace determination.

13.                     Key definitions are explained below in alphabetical order.

4 yearly review of modern awards

14.                     A 4 yearly review of modern awards is a review conducted under clause 156.

15.                     Under clause 156, FWA must conduct a regular review of modern awards starting as soon as practicable after each 4 year anniversary of the commencement of the award.  These reviews are the principal way in which an award is maintained as a fair and relevant safety net of terms and conditions. 

annual wage review

16.                     An annual wage review is a review referred to in clause 285.  During an annual wage review, FWA must review modern award minimum wages and the national minimum wage order and:

·                            may make one or more determinations to set, vary or revoke award minimum wages; and

·                            must make a new national minimum wage order.

associated entity

17.                     Associated entity has the meaning given by section 50AAA of the Corporations Act 2001 .  The definition includes, but is not limited to, the following structures:

·                            a principal entity controlling an associate entity;

·                            an associate entity controlling a principal entity, where the operations, resources or affairs of the principal are material to the associate; and

·                            a principal entity and associate entity that are related bodies corporate. 

Australian ship

18.                     The definition of Australian ship has the meaning given by section 29 of the Shipping Registration Act 1981 .  It includes ships registered under that Act, as well as unregistered ships that are Australian-owned (within the meaning of section 3 of that Act) or wholly owned or operated by residents of Australia, or Australian nationals, or both.  The definition is relevant to provisions dealing with the geographical application of the Bill (Division 3 of Part 1-3). 

award/agreement free employee

19.                     An award /agreement free employee means a national system employee to whom neither a modern award nor an enterprise agreement applies. 

continental shelf

20.                     The definition of continental shelf has the meaning given by the Schedule to the Seas and Submerged Lands Act 1973 .  The Schedule sets out relevant Parts of the United Nations Convention on the Law of the Sea (Montego Bay, 10 December 1982) [1994] ATS 31.  Article 76 of the Convention defines the continental shelf of a coastal state to mean the sea-bed and subsoil of the submarine areas that extend beyond the territorial sea throughout the natural prolongation of its land territory to the outer edge of the continental margin, or (where the outer edge of the continental margin does not extend up to that distance), to a distance of 200 nautical miles from the territorial sea baseline.

21.                     The definition is relevant to provisions dealing with the geographical application of the Bill (Division 3 of Part 1-3).

Commonwealth authority

22.                     The definition of Commonwealth authority includes a body corporate established for a public purpose under a Commonwealth law, and a body corporate incorporated under a law of the Commonwealth or a State or Territory and in which the Commonwealth has a controlling interest.  The definition is relevant in a number of provisions of the Bill, including the definition of national system employer (in clause 14).

constitutional corporation

23.                     The definition of constitutional corporation means a corporation to which paragraph 51(xx) of the Constitution (the corporations power) applies.  The corporations power enables the Parliament to legislate with respect to foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth.  The definition is relevant to the definition of national system employer (in clause 14) and to a number of other provisions, including those relating to general protections (Part 3-1) and right of entry (Part 3-4).

constitutional trade or commerce

24.                     The definition of constitutional trade or commerce means trade or commerce between Australia and a place outside Australia, among the States, between a State and a Territory, between two Territories or within a Territory.

25.                     This definition reflects the scope of the Parliament’s capacity to regulate trade and commerce with other countries and among the States under paragraph 51(i) of the Constitution (the trade and commerce power), and in relation to the territories under section 122 of the Constitution (the Territories power).  The definition is relevant to the definition of national system employer (in clause 14).

de facto partner

26.                     A de facto partner of a national system employee includes an employee’s same sex de facto partner.  This is consistent with amendments being made to Commonwealth legislation to remove discrimination and has the effect of ensuring that entitlements under the NES to carer’s leave, compassionate leave and birth-related unpaid parental leave apply to members of same sex couples and their children. 

employee, employer

27.                     These definitions refer readers to the provisions in the first Division of each Part in which the terms employee and employer appear.  Those provisions give these terms their constitutionally limited national system meanings (see clauses 13 and 14) or their ordinary meanings (see clause 15).

28.                     National system employers and national system employees are employers and employees (at common law ) who are within the constitutional limitations set out in clauses 13 and 14.  Generally speaking, the ordinary meanings of employer and employee encompass but are not limited to national system employers and national system employees.

·                            In some parts of the Bill, the ordinary meanings are used because rights and obligations may be imposed on any employer (e.g., in Part 3-1 (General protections), in circumstances where an employer’s action affects a constitutional corporation (as defined in clause 12) or certain other persons).

·                            In other parts (e.g., Part 4-1 (Civil remedies) and Part 5-1 (Fair Work Australia)), the ordinary meanings are used because references to employer and employee are incidental to substantive rights and obligations that arise under other parts of the Bill, which are supported by relevant heads of constitutional power.  A provision in Part 4-1 or 5-1 could relate to national system employers and their employees, or to other employers and employees, depending on the part of the Bill that creates the substantive right or obligation.

29.                     However, the ordinary meanings are also used where they relate to employers and employees who are not national system employers and employees.  For example, Part 6-3 (Extension of NES entitlements ), relies on paragraph 51 (xxix) of the Constitution (the external affairs power) to assist in giving effect to Australia’s international obligations.  These provisions can therefore extend to employers and employees who are not within the national system definitions .

enterprise

30.                     The term enterprise is used in various clauses in the Bill. 

31.                     The definition makes it clear that an enterprise includes an activity.  This is intended to ensure that an enterprise includes activities carried out by not-for-profit organisations and government authorities.  For example, an employer that is government authority, such as the Commonwealth, or a State or Territory, may make a greenfields agreement in relation to a genuine new activity that it proposes to undertake (see clause 172). 

32.                     The definition of enterprise also includes a project to enable employers and employee organisations to make a greenfields agreement in relation to a genuine new project.

exclusive economic zone

33.                     The definition of exclusive economic zone has the meaning given by section 3 of the Seas and Submerged Lands Act 1973 , which refers to Articles 55 and 57 of the United Nations Convention on the Law of the Sea (Montego Bay, 10 December 1982) [1994] ATS 31, set out in the Schedule to that Act.  Article 57 of the Convention provides that the EEZ is the area beyond and adjacent to the territorial sea, and extends up to 200 nautical miles from the territorial sea baseline.

34.                     The definition is relevant to provisions dealing with the geographical application of the Bill (Division 3 of Part 1-3).

fixed platform

35.                     The definition of fixed platform means an artificial island, installation or structure that is permanently attached to the sea-bed for the purpose of exploration for, or exploitation of, resources or for other economic purposes.

The definition is relevant to provisions dealing with the geographical application of the Bill (Division 3 of Part 1-3).

flight crew officer, maritime employee, pilot, waterside worker

36.                     These definitions are relevant to the definition of national system employee (in clause 13) and national system employer (in clause 14) to the extent that those definitions rely on paragraph 51(i) of the Constitution (the trade and commerce power).

industrial association

37.                     The definition of industrial association is mainly relevant to the general protections in Part 3-1 of the Bill.  It has three limbs. 

38.                     Paragraph (a) of the definition provides that an industrial association means an association of employees and/or independent contractors, or an association of employers, which is registered, or recognised as such an association (however described), under a workplace law (as defined in this clause).

39.                     Paragraph (b) of the definition provides that an industrial association means an association of employees and/or independent contractors (whether formed formally or informally), a purpose of which is the protection and promotion of their interests in matters concerning their employment, or interests as independent contractors, as the case requires.  This element of the definition differs from the pre-reform definition in subsection 779(1) of the WR Act in two respects:

·                            it now includes informal associations of employees and/or independent contractors; and

·                            the requisite purpose of protecting and promoting their interests does not need to be a principal purpose of the association.

40.                     Paragraph (c) of the definition provides that an industrial association means an association of employers, a principal purpose of which is the protection and promotion of their interests in matters concerning employment and/or independent contractors.

41.                     Industrial association is also defined to include a branch of an industrial association , an organisation (as defined in clause 12) and a branch of an organisation.

minimum wages objective

42.                     Clause 284 sets out the minimum wages objective and provides for when the minimum wages objective applies. 

43.                     The minimum wages objective requires FWA to establish and maintain a safety net of fair minimum wages, taking into account factors that are specified in clause 284. 

44.                     The minimum wages objective applies to the performance or exercise of FWA’s functions and powers under Part 2-6 (Minimum wages).  The minimum wages objective also applies when FWA performs or exercises its functions or powers under Part 2-3 (Modern awards) to set, vary or revoke modern award minimum wages. 

modern awards objective

45.                     Clause 134 sets out the modern awards objective and provides for when the modern awards objective applies.

46.                     The modern awards objective requires FWA to ensure that modern awards, together with the NES, provide a fair and relevant minimum safety net of terms and conditions, taking into account factors that are specified in clause 134.

47.                     The modern awards objective applies to the exercise of FWA’s functions and powers under Part 2-3 (Modern awards).  The modern awards objective also applies when FWA exercises its powers or functions under Part 2-6 (Minimum wages), to the extent that they relate to setting, varying or revoking modern award minimum wages. 

modifications

48.                     The term modifications is used in various clauses in the Bill.  For example, it is used in Part 6-3 to describe the additions, omissions and substitutions that are made to the NES. 

49.                     Further additions, omissions and substitutions may be provided for in the regulations in relation to:

·                            the application of the Bill, including extensions of the Bill (see Division 3 of Part 1-3);

·                            variations of enterprise agreements (see subclause 211(6)).

national minimum wage order

50.                     T he national minimum wage order is the national minimum wage order made in an annual wage review (as defined in this clause).  Each national minimum wage order must set:

·                            the national minimum wage;

·                            special national minimum wages for junior employees, employees to whom training arrangements apply and employees with a disability; and

·                            the casual loading for award/agreement free employees.

The national minimum wage order applies to award/agreement free employees. 

nominal expiry date

51.                     The Bill provides the following in relation to the nominal expiry date of enterprise agreements and workplace determinations:

·                            In the case of an enterprise agreement approved under clause 186 or a workplace determination - the nominal expiry date is the date specified in the agreement or determination as its nominal expiry date, which must not be more than 4 years after the day on which FWA approves the agreement or determination.  (Note that an agreement cannot be varied to extend its nominal expiry date to a date that is more than four years after the day on which FWA approved the agreement - see paragraph 211(1)(b));

·                            In the case of an agreement approved under clause 189 - the nominal expiry date is the date specified in the agreement as its nominal expiry date or two years after the day on which FWA approved the agreement.

outworker

52.                     An employee is an outworker if the employee, for the purpose of his or her employer, performs work at residential premises or other premises that would not conventionally be regarded as business premises. 

53.                     An individual who is not an employee may also be an outworker.  An individual, who is not an employee, is an outworker if, for the purposes of a contract for the provision of services, she or he performs work in the textile, clothing or footwear industry at residential premises or at other premises that would not conventionally be regarded as business premises.

outworker entity

54.                     The term outworker entity means any of the following entities, other than in the entity’s capacity as a national system employer:

·                            a constitutional corporation;

·                            the Commonwealth;

·                            a Commonwealth authority;

·                            a body corporate incorporated in a Territory;

·                            a person who carries on an activity (whether of a commercial, governmental or other nature) in a Territory in Australia, in connection with the activity carried on in the Territory.

55.                     A modern award may cover an outworker entity in relation to the outworker terms included in the award.

outworker terms

56.                     Clause 140 defines outworker terms.  Outworker terms are terms that relate to the conditions under which an employer may employ outworkers or terms that relate to the conditions under which an outworker entity may arrange for work to be carried out for the entity (either directly or indirectly), if the work is, or is reasonably likely to be, carried out by outworkers.  Terms that are incidental to these terms or are machinery terms are also outworker terms.

57.                     Outworker terms may include, but are not limited to, terms relating to pay and conditions of outworkers.  Clause 140 is intended to give FWA broad scope to include terms in modern awards dealing with outworkers.  In particular, it allows terms dealing with chain of contract arrangements, registration of employers, employer record keeping and inspection to be included in modern awards.

relevant employee organisation

58.                     The definition of relevant employee organisation is relevant to greenfields agreements.  An employer is prevented from making a greenfields agreement with an employee organisation that is not entitled to represent the industrial interests of the employees who will be covered by the agreement.

ship

59.                     The definition of ship (as distinct from Australian ship, as defined in clause 12) is an inclusive, not exhaustive, definition.  The definition is relevant to provisions dealing with the geographical application of the Bill (Division 3 of Part 1-3) .

vocational placement

60.                     The definition of vocational placement is relevant to the meanings of employee (as defined in clause 15) and national system employee (as defined in clause 13).  These terms exclude persons on a vocational placement.  A vocational placement is a period of unpaid placement with an employer as part of an education or training course which is authorised under a law or an administrative arrangement of the Commonwealth, a State or a Territory.

workplace instrument

61.                     Workplace instrument is defined to mean an instrument that is made under, or recognised by, a workplace law (as defined in clause 12) and concerns the relationships between employers and employees.  This definition is relevant to the protection in Part 3-1 of a person’s workplace rights (see subclause 341(1)).

workplace law

62.                     Workplace law means this Bill, Schedule 1 to the WR Act, the Independent Contractors Act 2006 or any other law of the Commonwealth, a State or a Territory that regulates the relationships between employers and employees (including by dealing with occupational health and safety matters).  This definition is relevant to the protection in Part 3-1 of a person’s workplace rights (see subclause 341(1)).

Division 3 - Definitions relating to the meanings of employee, employer etc.

Clause 13 - Meaning of national system employee

Clause 14 - Meaning of national system employer

63.                     The definitions of national system employee and national system employer in these clauses operate together to provide the constitutional support for most parts of the Bill.

64.                     These parts rely on the Parliament’s power to legislate with respect to foreign corporations and trading or financial corporations (paragraph 51(xx) of the Constitution), the territories (section 122 of the Constitution), interstate and overseas trade and commerce (paragraph 51(i) of the Constitution) and the Commonwealth’s power to regulate its own employment relationships (incidentally to other legislative powers).

65.                     The links to these heads of power are established by defining national system employer as the following, in their capacities as employers of individuals:

·                            a constitutional corporation;

·                            the Commonwealth or a Commonwealth authority;

·                            a person who employs a flight crew officer, maritime employee or waterside worker in connection with constitutional trade or commerce;

·                            a body corporate incorporated in a Territory; or

·                            a person who carries on an activity in a Territory and employs a person in connection with the activity.

66.                     The definition of national system employer includes a constitutional corporation that usually employs an individual and national system employee includes an individual usually employed by a national system employer.

67.                     The Federal Court considered the meaning of ‘usually employed’ in Australian Meat Industry Employees’ Union v Belandra Pty Ltd [2003] FCA 910; 126 IR 165.  In that case, the Court held that while an employer ceased operating for a period of time and did not have any employees during that period, it was still an employer for the purposes of then paragraph 298K(1)(c) of the WR Act.  Other cases considered in that decision indicate that a casual or daily hire employee may still be an employee for the purposes of the Bill, even though their employment relationship terminates at the end of each shift or daily period of employment.

68.                     The definition of national system employee makes clear that a person on a vocational placement (as defined in clause 12) is not within the definition.

69.                     A reference to a person in the definition of national system employer includes a body politic or body corporate as well as an individual (section 22 of the Acts Interpretation Act 1901 ).  Only legal persons can enter into contracts of employment with employees.  In the case of a partnership, an employee’s contract of employment is with each and every partner.  In the case of an unincorporated body, an employee’s contract of employment is with an individual member or individual members of that body.

70.                     While an industrial instrument may use the name of a partnership or association as a description of the persons to whom an instrument applies, any action for contravention of the instrument must name the actual individual employers (see Devane v Gati (1956) 95 CLR 174; Re Independent Schools’ Staff Association (ACT); Ex parte Hubert (1986) 65 ALR 673; Peckham v Moore [1975] 1 NSWLR 353; Executive Council of Australian Jewry v Scully (1998) 79 FCR 537.

Clause 15 - Ordinary meanings of employee and employer

71.                     In some Parts of the Bill, the terms employee and employer have their ordinary meanings (see clause 12).  Clause 15 provides that:

·                            a reference to an employee, within the ordinary meaning of that term, includes a refere nce to a person who is usually an employee, but does not include a person on a vocational placement; and

·                            a reference to an employer, within the ordinary meaning of that term, includes a reference to a person who is usually an employer.

72.                     As noted above, the concepts of ‘usually employed’ and ‘usually employs’ were considered by the Federal Court in Australian Meat Industry Employees’ Union v Belandra Pty Ltd [2003] FCA 910; 126 IR 165.

Division 4 - Other definitions

Clause 16 - Meaning of base rate of pay

73.                     Subclause 16(1) defines base rate of pay as the rate payable to a national system employee for his or her ordinary hours of work, but does not include incentive based payments and bonuses, loadings, monetary allowances, overtime and penalty rates and any other separately identifiable amounts. 

74.                     The definition is relevant to calculating the amount payable to an employee when they take various forms of leave under the NES , including paid annual leave, paid personal carer’s leave, payment for an absence from work on a public holiday or when a female employee takes paid no safe job leave. 

75.                     Subclause 16(2) provides that the base rate of pay for pieceworkers is specified in an applicable modern award or enterprise agreement or in the regulations for award/agreement free pieceworkers. 

Clause 17 - Meaning of child of a person

76.                     Subclause 17(1) defines child for the purposes of the Bill.  This definition is relevant to entitlements in the NES to request flexible working arrangements (Division 4 of Part 2-2), unpaid parental leave (Division 5 of Part 2-2) and carer’s and compassionate leave (Division 7 of Part 2-2). 

77.                     The definition is inclusive, and builds upon the ordinary meaning of the word child.  A child of a person includes a person who is:

·                            a person’s child within the meaning of the Family Law Act 1975 (see further detail below); and

·                            an adopted child or step-child of the person. 

78.                     The definition also clarifies that a person may be the child of a person even though the child is an adult (this is relevant to the NES entitlements to personal/carer’s leave and compassionate leave). 

79.                     Child within the meaning of the Family Law Act 1975 includes, but is not limited to:

·                            a child conceived by an artificial conception procedure (whether or not there is a biological link), where the child is a child of a woman under a prescribed law of a State or Territory; 

·                            a child of a man who is the parent of the child under a prescribed law of a State or Territory (even though not biologically related to the child); or

·                            a child born under a surrogacy arrangement, if a court has made an order under a prescribed law of a State or Territory determining that the person is a parent of the child. 

80.                     Subclause 17(2) clarifies that if one person is the child of another person, then other family relationships are determined on the basis that the child is the child of the other person.  This clarification is relevant to the concept of a national system employee’s immediate family and the NES entitlements to carer’s leave and compassionate leave.  For example, for the purposes of personal/carer’s and compassionate leave, the de facto partner of the child’s father is the child’s parent and the children of the de facto partner are the child’s siblings. 

Clause 18 - Meaning of full rate of pay

81.                     Subclause 18(1) defines full rate of pay as the rate of pay payable to a national system employee for his or her ordinary hours of work, including any incentive-based payments and bonuses, loadings, monetary allowances, overtime or penalty rates and any other separately identifiable amounts. 

82.                     The definition is relevant for two entitlements under the NES.  A pregnant female employee who is transferred to an appropriate safe job under subclause 81(5) is entitled to be paid at her full rate of pay, as is an employee who receives a payment in lieu of notice on the termination of his or her employment under paragraph 117(2)(b). 

83.                     Any other separately identifiable amounts could include amounts otherwise payable to an employee that the employee has agreed, under a permissible salary sacrifice or other arrangement, to forgo in order to receive other benefits. 

84.                     Subclause 18(2) provides that the full rate of pay for pieceworkers will be specified in an applicable modern award or enterprise agreement or in the regulations for award/agreement free pieceworkers. 

Clause 19 - Meaning of industrial action

85.                     Clause 19 sets out the definition of industrial action

86.                     The definition of industrial action identifies:

·                            the kind of action that can be taken by an employee, employer and their bargaining representatives that is capable of being protected industrial action under the Bill (if the requirements in Division 2 of Part 3-3 are met); and

·                            the kind of action that if taken by an employee, employer and their bargaining representatives could be subject to statutory and common law remedies (including those contained in Division 4 of Part 3-3) for taking industrial action that is not protected industrial action under the Bill. 

87.                     Subclause 19(1) sets out the types of conduct by an employee that constitute industrial action, including:

  • performing work in a manner that is different from the manner in which work is customarily performed or adopting a practice in relation to work the result of which is a restriction or limitation on or delay in the performance of work;
  • a ban, limitation or restriction on the performance of work or on the acceptance of or offering for work;
  • a failure or refusal to attend for work or a failure or refusal to perform any work at all by the employees who attend for work. 

88.                     The subclause also defines industrial action by employers as locking out employees from their employment. 

89.                     An employer locks out employees from employment if the employer prevents the employees from performing work under their contracts of employment in circumstances where the contracts of employment have not been terminated (subclause 19(3)).

90.                     The legislative note at the end of subclause 19(1) alerts the reader to the decision of the AIRC in Automotive, Food Metals, Engineering, Printing and Kindred Industries Union v The Age Company Ltd [2004] AIRC 1254.  The note is included to clarify that the definition of industrial action is only intended to cover actions that have an industrial character and occur within the area of disputation and bargaining. 

91.                     Subclause 19(2) provides that action is not considered industrial action if the action has been authorised or agreed to by the person to whom the action is directed.

92.                     Paragraph 19(2)(c) provides an exception to the definition of industrial action for action based on occupational health and safety concerns.  Action by an employee is not industrial action if:

  • the action was based on a reasonable concern of the employee about an imminent risk to his or her health and safety; and
  • the employee did not unreasonably fail to comply with a direction of the employer to perform other available work, whether at the same or another workplace, that was safe and appropriate for the employee to perform. 

Clause 20 - Meaning of ordinary hours of work for award/agreement free employees

93.                     The concept of an employee’s ordinary hours of work is central to the accrual and payment rules for a number of entitlements under the NES

94.                     The definition of ordinary hours of work in clause 20 only applies to an award/agreement free employee. 

95.                     Under subclause 20(1), the ordinary hours of work for an award/agreement free employee are the hours agreed as such between the employee and his or her employer.

96.                     If no such agreement is reached, the ordinary hours of work for an award/agreement free employee are 38 hours for a full-time employee and the lesser of 38 hours or the employee’s usual weekly hours of work for an employee who is not a full-time employee (subclause 20(2)). 

97.                     Subclause 20(3) is designed to protect employees who are not full-time employees who may have agreed ordinary hours of work under subclause 20(1) which are less than the employee’s usual weekly hours of work.  In this situation, the employee’s ordinary hours of work are the lesser of 38 hours or the employee’s usual weekly hours of work. 

98.                     Subclause 20(4) enables regulations to be made to specify the usual weekly hours of work for the purposes of subclauses (2) and (3) for an award/agreement free employee who is not a full-time employee and who does not have usual weekly hours of work. 

99.                     The Bill does not define the concept of an employee’s ordinary hours of work for those employees to whom a modern award or enterprise agreement applies.

100.                 The ordinary hours of work for an employee to whom a modern award applies are the ordinary hours set out in the award (all awards are required to provide ordinary hours, or a means of identifying ordinary hours).  The ordinary hours of work for an employee to whom an enterprise agreement applies are the hours identified in the agreement.  (An agreement should identify ordinary hours, or a means of identifying ordinary hours, in order for the agreement to satisfy the better off overall test.)

Clause 21 - Meaning of pieceworker

101.                 Subclause 21(1) defines pieceworker as an employee who is defined or described as a pieceworker in a modern award or enterprise agreement that applies to the employee.  Regulations may also be made to identify a class of award/agreement free employees as pieceworkers. 

102.                 Subclause 21(2) lists ways in which regulations could describe a class of award/agreement free employees as pieceworkers (e.g., by reference to an industry or a particular kind of work). 

Clause 22 - Meanings of service and continuous service

103.                 Clause 22 defines the meaning of service and continuous service in general terms that apply to the Bill as a whole (including the NES ), and also in the specific context of identified Divisions of the NES where a particular meaning is required. 

104.                 Under subclause 22(1), a period of service by a national system employee with his or her national system employer is a period during which the employee is employed by the employer, less any excluded period that does not count as service.

105.                 Subclause 22(2) identifies the periods that are excluded and therefore do not count as service.  They are:

·                            any period of unauthorised absence (e.g., when an employee has abandoned his or her employment, is engaging in industrial action or is otherwise absent from work for a period contrary to a direction made by an employer) (paragraph 22(2)(a));

·                            any period of unpaid leave (e.g., unpaid parental leave or unpaid carer’s leave) or unpaid authorised absence other than a period when the employee is absent from work on community service leave, a period when an employee is stood down from work (under Part 3-5 of the Bill or under an applicable enterprise agreement or contract of employment) or a period or absence prescribed by the regulations (paragraph 22(2)(b)). 

106.                 Subclause 22(3) confirms that while an excluded period does not count as service, it does not break the employee’s continuity of service. 

107.                 Subclause 22(4) sets out a different rule for the calculation of an employee’s service for the purposes of Division 4 (Requests for flexible working arrangements), Division 5 (Parental leave and related entitlements) and Subdivision A of Division 11 (Notice of termination or payment in lieu of notice) of Part 2-2 (the NES). 

108.                 Under this subclause, a period of service by a national system employee with his or her national system employer is a period during which the employee is employed by the employer, less any period of unauthorised absence that does not count as service (paragraph 22(4)(a)).  However, the period of unauthorised absence does not break the employee’s continuity of service, even though the period does not count towards the length of service (paragraph 22(4)(b)).  The general meanings of service and continuous service otherwise do not apply (paragraph 22(4)(c)). 

109.                 The effect of this definition is that an employee’s absence from work on unpaid parental leave, for example, does count as service for the purpose of determining the employee’s entitlement to a later period of unpaid parental leave, even though it does not count as service for the purpose of accruing other entitlements under the NES , such as paid annual leave or paid personal/carer’s leave. 

110.                 Subclause 22(5) provides that where a transfer of employment (as defined in subclause 22(7)) occurs, an employee’s service with one employer is treated as service with another employer.  It also provides that any period that occurs between the employee’s employment with the first employer and the second employer does not break the employee’s continuity of service (although the period does not count towards the length of an employee’s continuous service with the second employer). 

111.                 Subclause 22(7) defines a transfer of employment as:

·                            where an employee’s employment with the first employer ceases and the employee accepts new employment with an associated entity of the first employer within three months (defined as a transfer of employment between associated entities); or

·                            where an employee is a transferring employee in relation to a transfer of business and the first employer and the second employer are not associated entities (defined as a transfer of employment between non-associated entities). 

112.                 Associated entity is defined in clause 12.

113.                 Broadly, these provisions are intended to ensure that an employee’s service-related entitlements under the NES are not affected merely because the employee’s employer changes as a result of a transfer of business, or because the employee’s employer changes within a group of employers who are associated entities.

Illustrative example

Teneille has worked as a beautician at Nifty Nails for 18 months.  While an employee of Nifty Nails, she has accrued 15 days of paid personal/carer’s leave under the NES .  Following a transfer of business, Teneille becomes employed by Acrylics-R-Us.  Acrylics-R-Us is required to recognise Teneille’s service with Nifty Nails - in effect, recognising the paid personal/carer’s leave she accrued with Nifty Nails.

114.                 A legislative note under paragraph 22(5)(b) makes clear that this subclause does not apply to a transfer of employment between non-associated entities in relation to the NES annual leave provisions in Division 6 of Part 2-2 of the Bill, or the NES redundancy pay provisions in Subdivision B of Division 11 of Part 2-2 if the second employer decides not to recognise the employee’s service with the first employer. 

115.                 Subclause 22(6) is an ‘anti-double dipping’ provision.  Where an employee has taken the benefit of an entitlement and that entitlement was calculated by reference to a period of service with the first employer, then subclause 22(5) does not result in the employee’s period of service with the first employer being counted again when calculating the employee’s entitlements of that kind as an employee of the second employer.

116.                 A legislative note under subclause 22(6) provides two examples of how the subclause is intended to operate. 

117.                 The first example provides that an employee with an entitlement to accrued paid annual leave as an employee of the second employer does not include any period of paid annual leave that the employee has already taken as an employee of the first employer.  This includes any accrued annual leave paid to the employee on the ending of the employee’s employment with the first employer. 

118.                 The second example provides that an amount of notice of termination or payment in lieu of notice that an employee receives at the end of their employment with the first employer is not counted again in calculating an amount of notice of termination or payment in lieu of notice to which the employee is entitled as an employee of the second employer. 

119.                 Subclause 22(7) provides a definition of transfer of employment (see above).  A legislative note under paragraph 22(7)(b) makes clear that paragraph 22(7)(a) applies whether or not there is a transfer of business from the first employer to the second employer. 

120.                 For the purposes of paragraph 22(7)(b), the operative transfer of business provisions are located in Part 2-8 (Transfer of business).  Transferring employee is also defined in Part 2-8.

121.                 Subclause 22(8) provides that a transfer of employment is:

·                            a transfer of employment between associated entities if paragraph 22(7)(a) applies; and

·                            a transfer of employment between non-associated entities if paragraph 22(7)(b) applies. 

Clause 23 - Meaning of small business employer

122.                 The definition of small business employer is relevant to determining an employer’s obligation to pay redundancy pay under clause 119 (see paragraph 121(b)), provide notice of termination of employment under clause 117 (see paragraph 123(3)(a)), determine the applicable minimum employment period (see clause 383) and determine the applicability of the Small Business Fair Dismissal Code (see clause 388). 

123.                 Under subclause 23(1), an employer is a small business employer if the employer employs fewer than 15 employees at a particular time.  The particular time referred to in this subclause is set by the applicable provision that relies on this definition.  For example, in clause 121 (exclusions from obligation to pay redundancy pay), the particular time is either immediately before the time of termination of employment or when the employee is given notice of the termination (whichever happens first). 

124.                 The effect of subclause 23(2) is that, for the purpose of calculating the number of employees at a particular time, all employees employed by the employer are counted.  All casual employees are included in the calculation if they have, at the particular time, been employed on a regular and systematic basis.  Employees employed by associated entities are also included in the count (subclause 23(3)). 

125.                 The purpose of subclause 23(4) is to confirm that, when calculating the number of employees at a particular time in relation to the ending of an employee’s employment, employees of an employer include not only the employee whose employment is ending, but also other employees of the employer whose employment is ending. 

 



Part 1-3 - Application of this Act

Division 1 - Introduction

Clause 24 - Guide to this Part

126.                 This clause provides a guide to this Part. 

Division 2 - Interaction with State and Territory laws

127.                 This Part establishes the basis for a national workplace relations system that recognises the appropriate balance between Commonwealth, State and Territory regulation.  This framework includes mechanisms that enable this balance to be adjusted in light of future circumstances.

128.                 The Bill is intende d to cover the workplace relations field by excluding the application of State and Territory industrial laws to national system employers and their employees.  This approach was upheld by the High Court in New South Wales v Commonwealth (2006) 219 CLR 1.

129.                 However, t he Bill does not exclude State and Territory laws that impose obligations on national system employers and employees in relation to matters outside the central area of workplace relations.

Clause 25 - Meanings of employee and employer

130.                 The terms employer and employee are used in various contexts in this Part and have their ordinary meanings unless otherwise specified.

Clause 26 - Act excludes State or Territory industrial laws

131.                 Subclause 26(1) excludes State and Territory industrial laws so far as they would otherwise apply to national system employers and national system employees.

132.                 Paragraph 26(2)(a) excludes general State industrial laws - that is, the State Acts specified in subclause 26(3).  Paragraph 26(2)(b) excludes State or Territory laws that apply to employment generally (considered further below) and have the main purpose, or one or more main purposes, of:

·                            regulating workplace relations (including settling industrial disputes and regulating industrial action and collective bargaining);

·                            providing for the establishment or enforcement of terms and conditions of employment;

·                            providing for the making and enforcement of statutory individual agreements, collective agreements and other industrial instruments or orders that determine terms and conditions of employment;

·                            regulating conduct relating to a person’s membership or non-membership of an industrial association;

·                            providing rights and remedies connected with termination of employment or conduct that adversely affects an employee in his or her employment.

133.                 These provisions therefore exclude the application, to persons in their capacities as national system employers and national system employees, of named State industrial relations Acts, as well as present or future State or Territory laws that are within the scope of clause 26(2)(b).

134.                 In addition, subclause 26(2) excludes State or Territory laws that:

·                            apply to employment generally and deal with leave, other than long service leave or leave for victims of crime (paragraph 26(2)(c));

·                            provide for State tribunals or courts to make equal remuneration orders (paragraph 26(2)(d)), or to vary or set aside unfair contracts (paragraph 26(2)(e)); or

·                            provide rights of entry for trade unions (paragraph 26(2)(f)).

135.                 Paragraph 26(2)(g) excludes legislative instruments (such as regulations) made under the excluded State or Territory laws.  Paragraph 26(2)(h) excludes State or Territory laws, and legislative instruments made under those laws, that are prescribed by the regulations.

136.                 For the purposes of paragraph 26(2)(b) and paragraph 26(2)(c), subclause 26(4) provides that a law applies to employment generally if it applies to all employers and employees in a State or Territory, even though:

·                            for constitutional reasons, the law does not apply to some employers and employees (such as national system employers and their employees);

·                            some classes of employers and employees (e.g., by reference to industry sectors or classifications) are excluded from the law’s scope;

·                            the law applies to other persons (such as independent contractors); or

·                            an exercise of power under the law (e.g., to make a modern award) does not affect all employers and employees.

137.                 Examples of State or Territory laws that apply to employment generally are laws dealing with annual leave for all employees in the State or laws setting State-wide minimum terms and conditions of employment.  Examples of laws that do not apply to employment generally include laws that apply to a single industry sector, or to a particular class of employees and their employers or to only one employer and its employees (e.g., a law creating a body corporate and setting terms and conditions of employment for its employees).

Clause 27 - State or Territory industrial laws that are not excluded

138.                 Clause 27 ‘saves’ certain State or Territory laws that might otherwise be excluded by making clear that they are not part of the field covered by clause 26 and are intended to apply to national system employers and national system employees.  Under subclause 27(1), the following State or Territory laws are not excluded:

·                            laws dealing with discrimination and/or equal employment opportunity;

·                            laws prescribed by the regulations;

·                            laws dealing with the non-excluded matters set out in subclause 27(2); and

·                            laws dealing with rights and remedies that are incidental to any of these laws.

139.                 Paragraph 27(1)(a) saves the application to national system employers and employees of State and Territory anti -discrimination and equal employment opportunity legislation, including laws about discrimination in relation to parental or carer responsibilities (such as the Equal Opportunity Act 1995 (Vic)).  Such laws are not saved to the extent that they are, or are contained in, State or Territory industrial laws (e.g., a State industrial relations Act).

140.                 The intention is that rights and remedies in relation to termination of employment and other adverse treatment for discriminatory reasons in State and Territory anti-discrimination and equal employment opportunity legislation are preserved in their application to national system employers and employees.  A person whose employment has been terminated or who has been adversely treated in employment for reasons such as race, colour, sex, sexual preference, age or other discriminatory reasons could seek a remedy under either a State or Territory anti-discrimination or equal employment opportunity law or a remedy for contravention of the protections under Division 5 of Part 3-1 (General protections), but not both (see Division 3 of Part 6-1(Multiple actions)).

141.                 Clause 66 provides that it is not intended to exclude State or Territory laws to the extent that they provide more beneficial entitlements to a national system employee than Division 4 of Part 2-2 (the NES) in relation to requests for flexible work arrangements.  Under the Equal Opportunity Act 1995 (Vic), for example, employers must not unreasonably refuse arrangements to accommodate an employee's parental or carer responsibilities.

142.                 Paragraph 27(1)(c) saves State or Territory laws dealing with the following non-excluded matters, which are set out in subclause 27(2):

·                            superannuation ;

·                            workers compensation;

·                            occupational health and safety;

·                            outworkers ;

·                            child labour (such as minimum age of employment, restrictions on working hours, supervision and parental contact requirements and permitted types of child employment);

·                            training arrangements (such as the administration of training contracts and the award of training qualifications), but not terms and conditions of employment dealt with by the NES or that can be included in modern awards (such as classifications and rates of pay, certain monetary allowances and penalty rates);

·                            long service leave, but not for employees who have long service leave entitlements under the NES (Division 9 of Part 2-2);

·                            leave for victims of crime (such as provided for under Part 4B of the Industrial Relations Act 1996 (NSW));

·                            attendance for jury service or emergency service duties (including entitlements to payment for such service);

·                            declaration , prescription or substitution of public holidays, but not employee and employer public holiday rights and obligations, which are dealt with by the NES (Division 10 of Part 2-2);

·                            directions to perform work at any time, or in any place, or in a particular way, in relation to disrupt i ons to essential services or in situations of emergency (such as pandemics or natural disasters);

·                            regulation of employer and employee organisations and their members;

·                            workplace surveillance;

·                            business trading hours (including functions conferred on inspectors who are appointed under a general State industrial law in connection with regulation of trading hours); and

·                            claims for enforcement of contracts of employment (e.g., under section 14 of the Fair Work Act 1994 (SA)), but not the variation or setting aside of unfair contracts.

143.                 In relation to the general saving of State or Territory laws dealing with jury service or emergency service duties (paragraph 27(2)(i)), clause 112 in Division 8 of Part 2-2 (the NES) specifically provides that it is not intended to exclude State or Territory laws to the extent that they provide entitlements in relation to participation in eligible community service activities that are more beneficial to national system employees than entitlements provided under the NES.

·                            For example, under the Juries Act 2000 (Vic), an employee may be entitled to a higher level or longer period of ‘make up’ payment from an employer while absent from work during a period of jury service.

144.                 State or Territory laws dealing with attendance for jury service and emergency service duties also apply to national system employers and their employees under paragraph 27(1)(c) and paragraph 27(2)(i), including in relation to matters not within the meaning of eligible community service activity in subclause 109(1).

145.                 The regulations could may save additional State or Territory laws (paragraph 27(1)(b)) and also prescribe additional non-excluded matters (paragraph 27(2)(p)).  State or Territory laws dealing with rights or remedies that are incidental to any of the non-excluded laws are also saved (paragraph 27(1)(d)).

·                            For example , rights of entry under State or Territory laws about outworkers and occupational health and safety are saved (despite paragraph 26(2)(f)).  Rights of entry under State or Territory laws about occupational health and safety operate subject to the requirements set out in Division 3 of Part 3-4 (Rights of entry).

·                            Remedies for termination of employment and other adverse treatment in employment under the non-excluded State and Territory laws are preserved in their application to national system employers and employees.

Clause 28 - Act excludes prescribed State and Territory laws

146.                 Clause 28 provides that the regulations may prescribe additional State or Territory laws that are exclude d , so far as they would otherwise apply to national system employers and their employees, even if the law is not excluded by reason of clause 27.  This enables the regulations to prescribe an excluded State or Territory law in circumstances where it would not be appropriate for regulations under paragraph 26(2)(h) to prescribe such a law as a State or Territory industrial law (a definition which is also relevant in Part 3-4 (Right of entry)).

Clause 29 - Interaction of modern awards and enterprise agreements with State and Territory laws

147.                 Subclause 29(1) provides that a modern award or enterprise agreement prevails over a State or Territory law (such as an industry-specific employment law that is not already excluded as a State or Territory industrial law) to the extent of any inconsistency.

148.                 Such a law cannot operate, in relation to persons in their capacities as national system employers and national system employees, to the extent that it prescribes rights and obligations that are inconsistent with their rights and obligations set out in a modern award or enterprise agreement.

·                            Modern awards can only include terms that are permitted or required under subclause 136(1) to provide a minimum safety net of terms and conditions of employment.

·                            Enterprise agreements can only contain permitted matters (subclause172(1)).

149.                 However, subclause 29(2) provides that a modern award or enterprise agreement is subject to any of the State or Territory laws that are saved by clause 27, as well as any State or Territory laws prescribed by the regulations.  This means that a modern award or enterprise agreement cannot diminish , but may supplement, rights and obligations under these laws.

150.                 Subclause 29(3) enables the regulations to prescribe State or Territory laws to which modern awards or enterprise agreements are not subject.

Clause 30 - Act may exclude State and Territory laws etc.  in other cases

151.                 This clause provides that Division 2 of Part 1-3 does not comprehensively state the circumstances in which the Bill prevails over or excludes State or Territory laws and instruments.  This clause makes clear that:

·                            where no express provision is made about the relationship between the Bill and State or Territory laws and instruments, other provisions of the Bill might nevertheless, by implication, leave no room for the operation of a State or Territory law or instrument; and

·                            the existence of clauses 26, 27 and 28 does not affect the drawing of such an implication.

Division 3 - Geographical application of this Act

152.                 This Division provides for the extraterritorial operation of the new workplace relations system.  It includes mechanisms to adjust rights and obligations where necessary to reflect Australia’s obligations under international law and to suit particular circumstances.  This framework recognises limits on the extent to which the Bill’s extraterritorial application is possible and appropriate.

153.                 The Bill applies geographically in Australia and in other areas or circumstances in relation to which Australia has sovereign rights.

154.                 The Bill applies generally in Australia, the coastal sea and the territories of Christmas Island and the Cocos (Keeling) Islands.  An express statement to this effect in the Bill is not necessary because the Acts Interpretation Act 1901 makes this clear (see the note to clause 31).  Coastal sea is defined in section 15B of the Acts Interpretation Act 1901 and includes the territorial sea of Australia, as well as the sea on the landward side of the territorial sea and the airspace over, and the seabed and subsoil under, those waters.

Clause 31 - Exclusion of persons etc.  insufficiently connected with Australia

155.                 Under clause 31, the regulations may prescribe persons or entities in relation to whom the Bill does not apply.  Before any regulations are made, the Minister needs to be satisfied that the person or entity does not have a sufficient connection to Australia.

Clause 32 - Regulations may modify application of this Act in certain parts of Australia

156.                 This clause enables the making of regulations to modify the operation of the Bill in relation to the waters out to the limits of the territorial sea, the internal waters of the States and Territories, and in relation to the territories of Christmas Island and the Cocos (Keeling) Islands.  Under clause 12, modifications includes additions, omissions and substitutions.

157.                 The Bill’s application in Australia is subject to any modifications prescribed by the regulations that are necessary to adapt the workplace relations system in these areas (see clause 32).

·                            For example , regulations may be made to exclude foreign-flagged ships engaged in innocent passage across the coastal sea between an overseas port and an Australian port.

158.                 The regulation making power allows different modifications to be made in relation to each area or territory.

Clause 33 - Extension of this Act to the exclusive economic zone and the continental shelf

159.                 Under paragraphs 33(1)(a) and (b), the Bill applies generally to Australian ships and fixed platforms i n the EEZ and the continental shelf (these terms are defined in clause 12).

160.                 The Bill applies to foreign-flagged ships in the EEZ and over the continental shelf that operate to and from Australian ports and that service or operate in conjunction with fixed platforms (paragraph 33(1)(c)).

161.                 Under paragraph 33(1)(d), the Bill applies to foreign-flagged ships in the EEZ and over the continental shelf that are operated or chartered by an Australian employer (see subclause 35(1)) and that use Australia as a base.  For this purpose, references in relevant provisions of the Bill to employer and employee are deemed to mean, respectively, Australian employer and employee of an Australian employer (subclause 33(2)).

162.                 The Bill’s application to these ships and platforms is subject to any modifications prescribed by the regulations that are necessary to adapt the workplace relations system in these areas.  Modifications may be made in relation to different parts of the EEZ and continental shelf (subclauses 33(4) and (5)).

163.                 Subject to any modifications prescribed by regulations made under clause 32, ships and platforms located in the coastal sea are within the Bill’s scope because of its application in Australia, which, under the Acts Interpretation Act 1901 , includes the coastal sea.

Clause 34 - Extension of this Act beyond the exclusive economic zone and the continental shelf

164.                 The Bill applies beyond the EEZ and the continental shelf within recognised limits under international law.  In general terms, this means there must be a sufficient connection between the Bill and Australia in terms of geography or nationality of persons.

165.                 In the area beyond the EEZ and Australia’s continental shelf, the Bill applies to Australian ships and to foreign- flagged ships operated or chartered by an Australian employer and using Australian ports as a base (subclause 34(1)).  For this purpose, subclause 34(2) deems references in relevant provisions of the Bill to employer and employee to mean, respectively , Australian employer and employee of an Australian employer.

166.                 The regulations are able further to extend or modify the application of the Bill beyond the EEZ and continental shelf in relation to Australian employers and Australian-based employees (as defined in clause 35). 

·                            For example, regulations could apply minimum terms and conditions of employment to Australian-based employees of Australian employers working overseas for a period or provide for the application of an enterprise agreement to those employees.

167.                 In making regulations , account will be taken of Australia’s international law obligations.  As with any extraterritorial application of law, the Bill’s application is subject to the concurrent jurisdiction of other countries which also have sovereign rights in relation to areas within the scope of the Bill in which work is performed.  Inconsistency may arise and, in these circumstances, it may not be possible to enforce the provisions of the Bill.

Clause 35 - Meanings of Australian employer and Australian-based employee

168.                 The definitions of Australian employer and Australian-based employee in clause 35 encompass employers and employees with a substantial connection to Australia, for the purpose of applying provisions of the Bill to certain ships, and to persons beyond the EEZ and the continental shelf.

169.                 The definition of Australian employer includes Australian trading and financial corporations (but not foreign corporations), the Commonwealth and Commonwealth authorities and bodies corporate incorporated in a Territory (each of which is also within the definition of national system employer).  The definition of Australian employer also includes an employer that carries on an activity in Australia, in the EEZ or on or over the continental shelf and whose central management and control is in Australia (paragraph 35(1)(f)).  This clause and any regulations extending the Bill’s application beyond the EEZ and continental shelf to employers within this meaning is supported by paragraph 51(xxix) of the Constitution (the external affairs power).

170.                 The definition of Australian-based employee means an employee:

·                            whose primary place of work is in Australia or who is prescribed by the regulations (e.g., such regulations could clarify whether the primary place of work of a class of employees is in Australia ); or

·                            who is employed by an Australian employer, whether the employee is in Australia or elsewhere (but under subclause 35(3) this does not include an employee engaged outside Australia and the external Territories to perform duties outside these places).

Division 4 - Miscellaneous

Clause 36 - Geographical application of offences

171.                 This clause displaces the application of Division 14 of the Criminal Code in relation to an offence under the Bill .  That Division provides for the geographical jurisdiction applicable to offences under Commonwealth laws.

172.                 Division 3 of Part 1-3 sets out the geographical application of the Bill.  That scheme is appropriate for the workplace relations system under the Bill.  It is not necessary or appropriate to rely on the operation of Division 14 of the Criminal Code in relation to this system.

Clause 37 - Act binds Crown

173.                 This clause provides that the Bill binds the Crown in each of its capacities.  This does not render the Crown liable for prosecution for an offence under the Bill. 

Clause 38 - Act not to apply so as to exceed Commonwealth power

174.                 This clause reflects the intention that the Bill not operate beyond the limits of the constitutional power of the Commonwealth.  The clause enables any invalid application of the Bill to be read down so that only the valid application is taken to have been intended.  The reading down of invalid applications is not available where otherwise valid applications can only operate together with the invalid applications.

Clause 39 - Acquisition of property

175.                 It is not anticipated that the Bill (or instruments made under it) effects any acquisition of property other than on just terms contrary to paragraph 51(xxxi) of the Constitution.  Clause 39 is included out of an abundance of caution to ensure that an acquisition contrary to paragraph 51(xxxi) cannot take place.  In any circumstance where an acquisition contrary to paragraph 51(xxxi) is effected, the relevant law or instrument does not apply. 

Clause 40 - Interaction between fair work instruments and public sector employment laws

176.                 Clause 40 is about the interaction between fair work instruments that deal with public sector employment and public sector employment laws.

·                            Fair work instruments are defined in clause 12 as a modern award, an enterprise agreement, a workplace determination and an order of FWA.

·                            Subclause 40(3) defines public sector employment law for the purposes of this clause as any law of the Commonwealth (other than the Fair Work Act) or a Territory, or of an instrument made under such a law, that deals with public sector employment.

·                            Public sector employment is defined in subclauses 795(4) and (5).

 

177.                 Subclause 40(1) provides that, in general, a public sector employment law prevails over a fair work instrument that deals with public sector employment to the extent of any inconsistency.  This means, for example, that determinations made by the Police Arbitral Tribunal under the Police Administration Act (NT) prevail over a fair work instrument that applies to the Police Force of the Northern Territory.

178.                 However, subclause 40(2) allows regulations to prescribe a fair work instrument or term, or class of fair work instruments or terms, so that they prevail over particular public sector employment laws.  For example, a regulation could be made under subclause 40(2) to provide for an enterprise agreement to prevail over a specified term or condition contained in a determination made by an Agency Head under subsection 24(1) of the Public Service Act 1999 , except where the determination is made for the purposes of a machinery of government change.

179.                 Subclause 40(4) ensures that a fair work instrument cannot prevail over certain public sector laws including the Safety, Rehabilitation and Compensation Act 1988 , specified laws dealing with superannuation matters or instruments made under those laws. 

180.                 Subclause 40(5) clarifies the relationship between this clause and clause 29.  Clause 29 provides that a modern award or enterprise agreement prevails over a law of a State or Territory to the extent of any inconsistency.  The two rules are inconsistent in so far as they deal with the interaction between a modern award or enterprise agreement on the one hand and Territory public sector employment laws on the other.  Subclause 40(5) provides that clause 40 prevails over clause 29 to the extent of any inconsistency.  This ensures that Territory public sector employment laws and instruments made under those laws prevail over fair work instruments.

 



Chapter 2 - Terms and conditions of employment

Part 2-1 - Core provisions for this Chapter

Overview

181.                 Part 2-1 is a set of core provisions for Chapter 2 of the Bill.  The rest of the Chapter provides for the fundamental terms and conditions of employment (such as wages and leave) of national system employees (as defined in clause 13).  The principal sources of these terms and conditions are the NES, modern awards and enterprise agreements.

182.                 The core provisions detail how the NES, awards and agreements give rise to rights and obligations of employers and employees and, in some cases, organisations (as defined in clause 12) and outworker entities (as defined in clause 12), which can be enforced under Part 4-1 (Civil remedies).  This includes the rules which determine how rights and obligations under the NES, modern awards and enterprise agreements interact with each other.

Division 1 - Introduction

Clause 41 - Guide to this Part

183.                 This clause provides a guide to this Part. 

Clause  42 - Meanings of employee and employer

184.                 In this Part, the terms employee and employer mean national system employee and national system employer respectively (as defined in clauses 13 and 14).  The rights and obligations of employers and employees set out in this Part apply only to the employment relationships within the scope of the corporations and other constitutional powers that are engaged by clauses 13 and 14.

Division 2 - Core provisions for this Chapter

Subdivision A - Terms and conditions of employment provided under this Act

Clause 43 - Terms and conditions of employment provided under this Act

185.                 This clause lists the sources of the terms and conditions of employment provided for in Chapter 2 of the Bill.

Subdivision B - Terms and conditions of employment provided by the National Employment Standards

Subdivision C - Terms and conditions of employment provided by a modern award

Subdivision D - Terms and conditions of employment provided by an enterprise agreement

Clause 44 - Contravening the National Employment Standards

Clause 45 - Contravening a modern award

Clause 50 - Contravening an enterprise agreement

186.                 Clause 44 provides that an employer must not contravene a provision of the NES.  Similar clauses provide that a person to whom a modern award or an enterprise agreement applies must not contravene a term of the award (clause 45) or agreement (clause 50).

187.                 The prohibitions on contravening a provision of the NES, or a term of an award or an agreement, are civil remedy provisions under Part 4-1 (Civil remedies). 

·                            Under Part 4-1, a person who contravenes clauses 44, 45 or 50 may be subject to a maximum civil penalty of 60 penalty units (i.e., $6,600) in the case of an individual, and 300 penalty units (i.e., $33,000) in the case of a body corporate, and may be ordered to pay amounts not paid to a person in contravention of a provision of the NES or a term of an award or an agreement.  Penalty and payment orders can be made by an eligible State or Territory court, the Federal Court or the Federal Magistrates Court.  The Federal Court or the Federal Magistrates Court may also make such other orders as they see fit. 

·                            However, orders cannot be made in relation to a contravention (or alleged contravention ) of subclauses 65(5) or 76(4) of the NES.  These subclauses provide that an employer may only refuse a request for flexible work arrangements or extended parental leave on reasonable business grounds.  This is also reflected in the scope of FWA’s power to deal with disputes about the operation of the NES (see subclause 739(2)).  However, an employer is still required to provide details about a decision to refuse such a request (see notes on clauses 65 and 76).

Subdivision C - Terms and conditions of employment provided by a modern award

Clause 46 - The significance of a modern award applying to a person

Clause 47 - When a modern award applies to an employer, employee, organisation or outworker entity

Clause 48 - When a modern award covers an employer, employee, organisation or outworker entity

Clause 49 - When a modern award is in operation

Subdivision D - Terms and conditions of employment provided by an enterprise agreement

Clause 51 - The significance of an enterprise agreement applying to a person

Clause 52 - When an enterprise agreement applies to an employer, employee or employee organisation

Clause 53 - When an enterprise agreement covers an employer, employee or employee organisation

Clause 54 - When an enterprise agreement is in operation

188.                 The NES apply to national system employees at all times, whether as a direct source of entitlements or as a minimum standard underpinning their entitlements under a modern award, enterprise agreement or contract of employment.  The remaining provisions of this Part deal with when a modern award or enterprise agreement applies to an employee (or employer, organisation or outworker entity) to provide a direct source of entitlements (such that the term providing the entitlement cannot be contravened).  Subdivisions C and D contain provisions dealing with the concepts which govern the operation and effect of modern awards and enterprise agreements. 

Operate

189.                 Clauses 49 and 54 deal with when modern awards and enterprise agreements ‘operate’.  Awards and agreements do not necessarily start to operate when (in the case of awards) they are made or (in the case of agreements) they are approved by FWA.  Further, once they operate, they may or may not apply to determine entitlements of any person (or any particular person).  For instance, an agreement in operation may be displaced by another agreement in operation (see clause 58).

190.                 For modern awards, the general rule is that an award starts operating on 1 July in the financial year after it is made (or on the day it is made if the award is made on 1 July) (subclause 49(1)).  This timing is consistent with when changes to modern award minimum wages commence (see Part 2-6), and is designed to ensure certainty and predictability for employers and employees.

191.                 However, if FWA is satisfied that it is appropriate to specify a different date then it has power to do so ( subclause 49(2 )).  This date may not be earlier than the day on which the modern award is made ( subclause 49(3 )). 

192.                 Subclauses 49(4) and (5) provide for the revocation of modern awards.  If FWA makes a determination to revoke a modern award the determination will come into operation on the date that is specified in the determination ( subclause 49(4 )).  This cannot be earlier than the day on which the revocation determination was made ( subclause 49(5 )). 

193.                 A modern award or a determination revoking a modern award does not take effect in respect of a particular employee until the start of an employee’s first full pay period that starts on or after the day the award or determination comes into operation. 

194.                 Subclause 49(7) provides that a modern award continues in operation until it is revoked.

195.                 On the other hand, an enterprise agreement operates from seven days after the agreement is approved by FWA or from a later date specified in the agreement (subclause 54(1)). 

196.                 The terms of an agreement can only have any effect when an agreement commences operation.  However, this does not preclude an agreement from including a term that has retrospective effect (e.g., a backdated wage increase).

197.                 An enterprise agreement will operate indefinitely unless it ceases to operate under subclause 54(2).  This subclause provides that an enterprise agreement ceases to operate on the earlier of the following days:

·                            the day on which a termination of the agreement comes into operation (under clause 224 or clause 227); or

·                            the day clause 58 has the effect that the agreement does not apply to any employee.

198.                 Subclause 54(3) provides that an enterprise agreement can never operate again if it has ceased to operate.

Illustrative example

An online service provider makes an enterprise agreement with its IT specialists (the earlier agreement).  The earlier agreement comes into operation on 1 May 2010 and specifies a nominal expiry date of 10 February 2013 (the agreement will continue to operate beyond this date if it is not replaced).  The online service provider later makes a single-enterprise agreement with the entire workforce (the later agreement), which covers all the IT specialists.  The later agreement comes into operation on 21 June 2013 - after the nominal expiry date of the earlier agreement.  Paragraph 58(2)(e) provides that the earlier agreement ceases to apply to the IT specialists when the later agreement commences operation.  The effect of clause 54(2)(b) is that the earlier agreement will cease to operate on 21 June 2013 when the later agreement commences operation because it will no longer apply to any employees.  Once the earlier agreement has ceased to operate, it can never operate again.

Covers and applies

199.                 A modern award or enterprise agreement covers a person if, in effect, the person is within the scope or coverage of the award or agreement, even if the instrument does not actually confer entitlements or impose obligations on that person at a particular time (because the instrument is not yet in operation or because it has been displaced by or under the Bill by other entitlements and obligations which operate instead).  This is subject to any contrary provision of the Bill or an order made under the Bill - e.g., in a transfer of business situation, FWA can order that a transferable instrument that covers a transferring employee does not in fact cover the employee (see, generally, Part 2-8).

200.                 On the other hand, a modern award or enterprise agreement applies to a person if the relevant instrument is in operation, covers the person and actually confers entitlements or imposes obligations on that person at a particular time.  It is only where the award or agreement applies to a person that the person has obligations under the instrument which the person is capable of contravening (see clauses 46 and 51). 

201.                 Thus, coverage of a modern award or enterprise agreement is a broader concept than application of the award or agreement.  An award or agreement that covers a person does not necessarily apply to the person.  For example, an award will not apply to a person where an agreement applies to the person (see clause 57) or where the person is a high-income employee (see subclause 47(2)).  Similarly, an agreement may not apply to a person where another agreement applies to the person, depending on which agreement applied first and the agreements’ nominal expiry dates (see clause 58).

202.                 The note to subclause 46(2) points to the fact that modern awards do not apply to outworkers who are not employees but that this does not affect whether outworker terms in a modern award relate to those outworkers, or whether those outworkers are affected by a contravention of such terms, for the purposes of giving those outworkers standing to enforce those terms. 

203.                 Even though coverage of a modern award or enterprise agreement does not necessarily determine who has enforceable entitlements and obligations under those instruments, coverage of the instrument can be significant for a variety of other reasons.  For example, coverage means that, from the time the award is made or the agreement is approved by FWA until the time the award or agreement ceases to operate:

·                            persons covered by the award or agreement can apply to vary the instrument;

·                            employers and employees can participate in bargaining and industrial action for an agreement which will cover them, even if the agreement will not necessarily apply to them once it operates;

·                            the application of the better off overall test (including for high-income employees) will depend on the award which covers the employee, whether or not the award applies to the employee (as long as, in this case, the award is in operation); and

·                            certain awards and agreements can transfer on a transfer of business even if not yet in operation .

204.                 The provisions setting out when modern awards and enterprise agreements cover, and apply to, persons are formulated slightly differently only because:

·                            agreements cover, and apply to, employers, employees and employee organisations, and modern awards also cover, and apply to, outworker entities (in relation to outworker terms) and employer organisations; and

·                            the way organisations become covered by awards and agreements is different.  An award must contain coverage provisions stating which persons (including which organisations) are covered by the award.  Although an agreement will necessarily cover the employer(s) and employees it is expressed to cover (however coverage is described), an employee organisation is covered by an agreement only if it notifies FWA that it wishes to be covered (non-greenfields agreement) or makes the agreement (greenfields agreement). 

205.                 S ubclauses 47(3), 48(3), 52(2) and 3(6) make it clear that a reference in the Bill to a modern award or enterprise agreement applying to, or covering, an employee is a reference to the award or agreement applying to, or covering, the employee in relation to particular employment.  This means that, if a national system employee has more than one job, each job is treated separately in determining the effect of an award or agreement on the employee’s entitlements in relation to each job.  For instance, the rule that only one enterprise agreement can operate in relation to a person at a particular time (see clause 58) does not mean that two agreements cannot cover, or apply to, an employee in relation to two different jobs.

Division 3 - Interaction between the National Employment Standards, modern awards and enterprise agreements

Subdivision A - Interaction between the National Employment Standards and a modern award or an enterprise agreement

Clause 55 - Interaction between the National Employment Standards and a modern award or enterprise agreement

Clause 56 - Terms of a modern award or enterprise agreement contravening section 55 have no effect

206.                 Clause 55 sets out the relationship between the NES on the one hand and modern awards and enterprise agreements on the other.

207.                 No specific rule is provided about the relationship between the NES and contracts of employment.  That relationship is governed by well established principles (e.g., a term in the contract of employment that is less favourable than a statutory entitlement is not effective) and does not require additional legislative elaboration.

208.                 The intent of the NES is that it provides enforceable minimum entitlements for all eligible employees.  This is reflected in subclause 55(1), which provides that a modern award or enterprise agreement may not exclude the NES, or any part of it.

209.                 This prohibition extends both to statements that purport to exclude the operation of the NES or a part of it, and to provisions that purport to provide lesser entitlements than those provided by the NES.  For example, a clause in an enterprise agreement that purported to provide three weeks’ annual leave would be contrary to subclause 55(1).  Such a clause would be inoperative (clause 56).

210.                 Some provisions of the NES expressly authorise a modern award or enterprise agreement to deal with certain issues in a way that would, or might, otherwise be contrary to the NES - and which may therefore be prohibited by subclause 55(1).  For example:

·                            clauses 93 and 101 allow for the cashing out of paid annual leave and paid personal/carer’s leave; and

·                            subclause 107(5) allows a modern award or enterprise agreement to specify the kind of evidence that must be provided to access paid personal/carer’s leave. 

211.                 Subclause 55(2) ensures that such terms are able to be included in a modern award or enterprise agreement.  Subclause 55(2) also ensures that an award or agreement may include any additional matters permitted by regulations made under clause 127. 

212.                 The NES operates subject to such terms (subclause 55(3)). 

213.                 A modern award or enterprise agreement can also include:

·                            terms that are incidental or ancillary to the operation of NES entitlements; and

·                            terms that supplement NES entitlements,

provided that the effect of those terms is not detrimental to an employee in any respect compared to the NES (subclause 55(4)). 

214.                 This provision allows modern awards and enterprise agreements to deal with machinery issues (such as when payment for leave must be made).  It also allows awards to provide more beneficial entitlements than the minimum standards provided by the NES.  For example, an award or agreement could provide for more beneficial payment arrangements for periods of leave, or provide redundancy entitlements to employees of small business employers.  Similarly, an agreement could provide a right to flexible working arrangements.  The term about a dispute settlement procedure would also apply to that right.

215.                 A term permitted by subclause 55(4) does not contravene subclause 55(1) (subclause 55(5)).

216.                 A legislative note to this section points readers to the approval requirements for enterprise agreements, and notes that an enterprise agreement term that contravenes this section must not be approved (see clause 186). 

217.                 Clause 56 provides that if a modern award term or enterprise agreement term contravenes clause 55 it will have no effect.

Subdivision B - Interaction between modern awards and enterprise agreements

Clause 57 - Interaction between modern awards and enterprise agreements

218.                 This clause provides for the interaction between a modern award and an enterprise agreement that each cover an employee in relation to particular employment at the same time. 

219.                 Subclause 57(1) provides that a modern award does not apply to an employee in relation to particular employment at a time when an enterprise agreement applies to the employee in relation to that employment.  The effect of this subclause is that an agreement that is in operation and covers an employee determines the employee’s rights and obligations in relation to particular employment, even if an award covers the employee in relation to that employment. 

220.                 This subclause highlights the difference between when an agreement covers an employee and when it applies to an employee.  An employee may be covered by both a modern award and an enterprise agreement in relation to particular employment at the same time; however, both types of industrial instrument cannot apply to an employee in relation to that particular employment at the same time. 

·                            Clause 206 provides a limited exception to this rule: where an enterprise agreement contains a base rate of pay for an employee that is less than the base rate of pay that would apply to that employee under an award that covers them, the base rate of pay from the award is taken to be a term of the agreement.

Illustrative example

Rihanna is a clerical officer.  The Clerks Award (the award) applies to determine the rights and obligations between Rihanna and her employer.  Her employer makes a single-enterprise agreement with its employees.  The agreement comes into operation on 12 September 2011 and applies to Rihanna’s employment as a clerical officer.  When the enterprise agreement applies to Rihanna, the award will no longer apply.  The award does, however, still cover Rihanna’s employment as a clerical officer.  This means that if, e.g., the agreement was later terminated (and consequently ceased to operate), the award would apply to Rihanna again. 

221.                 Subclause 57(2) provides that where a modern award does not apply to an employee because of subclause 57(1), the award does not apply to an employer or employee organisation in relation to the employee.  For example, if an employee is covered by a modern award and an enterprise agreement commences operation in relation to his or her employment, the modern award would cease to apply to:

·                            the employee (subclause 57(1));

·                            his or her employer, in relation to the employee; and

·                            an employee organisation of which the employee is a member and who is covered by the award and entitled to represent the employee’s industrial interests under the agreement, in relation to the employee.

Subdivision C - Interaction between one or more enterprise agreements

Clause 58 - Only one enterprise agreement can apply to an employee

222.                 This clause sets out the interaction between enterprise agreements where more than one agreement covers an employee at a particular time.

223.                 Subclause 58(1) provides that only one enterprise agreement can apply to an employee at a particular time.  While an employee may be covered by more than one agreement at a particular time, only one agreement can apply to that employee.  This is intended to encourage employees and employers to make comprehensive agreements. 

224.                 Subclause 58(2) provides for the interaction between two enterprise agreements where:

·                            an enterprise agreement (the earlier agreement) applies to an employee in relation to particular employment; and

·                            another enterprise agreement (the later agreement) that covers the employee in relation to the same employment comes into operation; and

·                            the interaction rule dealing with single-enterprise agreements and multi-enterprise agreements (subclause 58(3)) does not apply.

225.                 In that situation, subclause 58(2) provides for the interaction between the earlier and the later agreement where the earlier agreement:

·                            has not passed its nominal expiry date; or

·                            has passed its nominal expiry date. 

226.                 Paragraph 58(2)(c) provides that if the earlier agreement has not passed its nominal expiry date and the later agreement comes into operation, the later agreement cannot apply to an employee until the earlier agreement has passed its nominal expiry date.  When the earlier agreement reaches its nominal expiry date it will cease to apply to the employee and the later agreement will apply.

227.                 Paragraph 58(2)(d) provides that if the earlier agreement has passed its nominal expiry date it ceases to operate when the later agreement comes into operation.

228.                 Subclause 58(2) has the effect that an earlier agreement that ceases to operate in relation to an employee can never apply again to that employee.

Illustrative example

Luke works as an engineer in a car factory.  An enterprise agreement is in operation that only covers the engineers in the factory (the earlier agreement).  This agreement applies to Luke and his employer.  The earlier agreement has a nominal expiry date of 31 October 2010.  In May 2010, Luke’s employer agrees to bargain collectively with all of the employees in the factory and an agreement is made and approved by FWA (the later agreement).  The later agreement specifies a nominal expiry date of 31 May 2014.  The later agreement commences operation on 14 August 2010, before the earlier agreement has reached its nominal expiry date.  It would not apply to Luke at this time.  On 31 October 2010, the earlier agreement would cease to apply to Luke and the later agreement would then apply to determine the rights and obligations between Luke and his employer. 

229.                 Subclause 58(3) provides for the interaction between a single-enterprise agreement and a multi-enterprise agreement.  Despite subclause 58(2), if a multi-enterprise agreement applies to an employee in relation to particular employment and a single-enterprise agreement that covers the employee in relation to the same employment commences operation, the multi-enterprise agreement ceases to apply to the employee when the single-enterprise agreement comes into operation.  Unlike subclause 58(3), this interaction rule does not depend on whether or not the multi-enterprise agreement had passed its nominal expiry date.

230.                 The interaction rule in subclause 58(3) only takes effect where a single-enterprise agreement comes into operation after a multi-enterprise agreement has come into operation.  Where a multi-enterprise agreement comes into operation during the life of a single-enterprise agreement the interaction rules in subclause 58(2) apply.  This will allow an earlier agreement that is a single-enterprise agreement to be replaced by a later multi-enterprise agreement only after the nominal expiry date of the single-enterprise agreement.

Illustrative example

Willow Tree Childcare Pty Ltd (Willow Tree) is one of a number of employers to which the North Townsville Childcare Centres Agreement 2011 (NTCC Agreement) applies.  The NTCC agreement - a multi-enterprise agreement - started operating from 5 August 2011 and has a nominal expiry date of 30 September 2014.  In June 2013, Willow Tree and its employees make a single-enterprise agreement.  The single-enterprise agreement would, from the day it starts operating, replace the NTCC Agreement as it applies to Willow Tree and its employees, even though the NTCC Agreement has not passed its nominal expiry date.  The NTCC Agreement would continue to apply to the other employers that it covers and their employees.

 



Part 2-2 - The National Employment Standards

Overview

231.                 Part 2-2 contains the NES.  The NES are minimum entitlements listed in clause 61.

232.                 The NES provide entitlements which, together with modern awards (Part 2-3) and the national minimum wage order (Part 2-6), provide a safety net of terms and conditions for national system employees (as defined in clause 13).  The NES also provide a benchmark for bargaining and underpin enterprise agreements (see Part 2-4). 

233.                 The NES is designed to ‘lock in’ to modern awards and enterprise agreements.  It does this by including provisions that specifically allow awards and agreements to deal with specific issues.  Modern awards and enterprise agreements can also ‘build on’ the NES by including terms that supplement, or are ancillary or incidental to, the NES.  But, other than as expressly allowed, an award or agreement cannot be detrimental to an employee in any respect when compared to the NES. 

234.                 There are a number of concepts that are used regularly in Part 2-2.  These are explained below.

235.                 Various employee entitlements under the NES are based on the employee’s ordinary hours of work.

·                            The ordinary hours of work for an employee to whom a modern award applies will be the ordinary hours set out in the modern award (all awards are required to provide ordinary hours, or a means of determining ordinary hours) (see clause 147).

·                            The ordinary hours of work for an employee to whom an enterprise agreement applies will be the hours identified in the enterprise agreement.  (An agreement should identify ordinary hours, or a means of determining ordinary hours, in order for the agreement to pass the better off overall test.)

·                            The ordinary hours of work for an award/agreement free employee (as defined in clause 12) are calculated in the manner set out in clause 20. 

236.                 An employee’s base rate of pay is defined in clause 16 as the rate of pay payable for the employee’s ordinary hours of work, but does not include any incentive-based payments and bonuses, loadings, monetary allowances, overtime or penalty rates or any other separately identifiable amount. 

237.                 An employee’s full rate of pay is defined in clause 18 as the rate of pay payable for the employee’s ordinary hours of work, including any incentive-based payments and bonuses, loadings, monetary allowances, overtime or penalty rates and any other separately identifiable amount (which may, for example, include superannuation payments). 

Division 1 - Introduction

Clause 59 - Guide to this Part

238.                 This clause provides a guide to this Part. 

Clause 60 - Meanings of employee and employer

239.                 In this Part, the terms employee and employer mean national system employee and national system employer respectively (as defined in clauses 13 and 14).  The rights and obligations of employers and employees set out in this Part apply only to the employment relationships within the scope of the corporations and other constitutional powers that are engaged by clauses 13 and 14.

Division 2 - What are the National Employment Standards?

Clause 61 - The National Employment Standards are minimum standards applying to employment of employees

240.                 The NES are minimum standards that employers are required to provide to employees (clause 61).  The NES relate to:

·                            maximum weekly hours;

·                            requests for flexible working arrangements;

·                            parental leave and related entitlements;

·                            annual leave;

·                            personal/carer’s leave and compassionate leave;

·                            community service leave;

·                            long service leave;

·                            public holidays;

·                            notice of termination and redundancy pay; and

·                            the Fair Work Information Statement.

241.                 These standards are explained in more detail in Divisions 3 to 12 of Part 2-2.

Division 3 - Maximum weekly hours

242.                 This Division establishes the maximum weekly hours for employees and also the circumstances in which an employee may refuse a request or requirement to work additional hours if the hours are unreasonable. 

243.                 This Division also sets out arrangements for the averaging of hours of work under a modern award or enterprise agreement, or by agreement between an employer and an award/agreement free employee. 

Clause 62 - Maximum weekly hours

244.                 Subclause 62(1) provides that an employer must not request or require an employee to work more than a specified number of hours in a week, unless the additional hours are reasonable. 

245.                 The specified hours are:

·                            for a full-time employee - 38 hours; or

·                            for an employee who is not a full-time employee  - the lesser of 38 hours or the employee’s ordinary hours of work in a week. 

246.                 The ordinary hours of work for an employee to whom a modern award or enterprise agreement applies will be those hours set out in the modern award or enterprise agreement.  The ordinary hours of work for an award/agreement free employee are calculated in the manner set out in clause 20. 

247.                 An employer may request or require an employee to work additional hours either expressly or by implication (e.g., by setting tasks that could only be completed by the employee working additional hours). 

248.                 An employee may refuse to work additional hours if the additional hours are unreasonable (subclause 62(2)).

249.                 Subclause 62(3) contains a non-exhaustive list of factors that must be taken into account in determining whether additional hours are reasonable or unreasonable.  These are:

·                            any risk to employee health and safety from working the additional hours;

·                            the employee’s personal circumstances, including family responsibilities;

·                            the needs of the workplace or enterprise in which the employee is employed;

·                            whether the employee is entitled to receive overtime payments, penalty rates or other compensation for, or a level of remuneration that reflects the expectation of, working additional hours;

·                            any notice given by the employer of any request or requirement to work the additional hours;

·                            any notice given by the employee of his or her intention to refuse to work the additional hours;

·                            the usual patterns of work in the industry, or part of the industry, in which the employee works;

·                            the nature of the employee’s role and the employee’s level of responsibility;

·                            whether the additional hours are in accordance with an averaging arrangement; and

·                            any other relevant matter.

250.                 The relevance of each of these factors and the weight to be given to each of them will vary according to the particular circumstances.  In some cases, a single factor will be of great importance and outweigh all others.  Other cases will require a balancing exercise between factors.  For example:

·                            There may be a situation where, although an employer provides advance notice of the requirement to work additional hours and the requirement to work those hours is based on the needs of the workplace, the hours are nonetheless unreasonable when the risks to employee health and safety or the employee’s family responsibilities are taken into account. 

·                            The significant remuneration and other benefits paid to a senior manager, together with the nature of the role and level of responsibility, may be sufficient to ensure that additional hours are reasonable in many cases.

·                            The additional hours an employee is required to work may also be reasonable if the hours are worked at a particular time and in a particular manner in order to meet the employer’s operational requirements, or are worked in accordance with a particular pattern or roster that is prevalent in a particular industry, such as the fly-in-fly-out arrangements in the mining industry.  The fact that a requirement to work additional hours is set out in the offer of employment accepted by an employee will also be relevant, though not determinative. 

251.                 Subclause 62(4) provides that, for the purposes of subclause 62(1), the hours an employee works in a week must be taken to include any hours of authorised paid or unpaid leave or absence. 

Clause 63 - Modern awards and enterprise agreements may provide for averaging of hours of work

252.                 Clause 63 permits a modern award or enterprise agreement to include terms providing for the averaging of hours of work over a specified period.  The average weekly hours over the period must not exceed 38 hours (for a full-time employee), or the lesser of 38 hours or the employee’s ordinary hours of work in a week (for an employee other than a full-time employee).  Hours worked in a week in excess of this number of hours are additional hours and must not be unreasonable.  The fact that additional hours are worked in accordance with an averaging arrangement does not necessarily mean that those hours are reasonable.  Rather, the averaging arrangement is one factor to be considered in the particular circumstances. 

253.                 The clause does not restrict the period over which the hours can be averaged under a modern award or enterprise agreement. 

254.                 The general protections set out in Part 3-1 of the Bill, and in particular clause 344 which prohibits the exertion of undue influence and undue pressure, apply when an employer and employee enter into an averaging arrangement under a term included in a modern award or enterprise agreement.  This is designed to ensure that averaging arrangements are genuinely consensual.

Clause 64 - Averaging of hours of work for award/agreement free employees

255.                 Clause 64 permits an employee who is not covered by a modern award or enterprise agreement to make a written agreement with their employer to average their hours of work over a specified period of no more than 26 weeks. 

256.                 The average weekly hours over the period must not exceed 38 hours (for a full-time employee), or the lesser of 38 hours or the employee’s ordinary hours of work in a week (for an employee other than a full-time employee).  Hours worked in a week in excess of this number of hours are additional hours and must not be unreasonable.  The fact that additional hours are worked in accordance with an averaging arrangement does not necessarily mean that those hours are reasonable.  Rather, the averaging arrangement is one factor to be considered in the particular circumstances.

257.                 The general protections set out in Part 3-1 of the Bill, and in particular clause 344 which prohibits the exertion of undue influence and undue pressure, apply when an employer and employee enter into an agreement under this clause.

Illustrative example

Averaging arrangements and reasonable additional hours

The modern award regulating Alex’s employment includes averaging arrangements in relation to hours of work so that full-time employees would ordinarily work 152 hours over four weeks (an average of 38 hours per week).  Over a four week period, Alex’s work pattern was as follows:

Week 1 - worked 21 hours

Week 2 - worked 60 hours

Week 3 - worked 38 hours

Week 4 - worked 33 hours

The averaging arrangement would be relevant in determining the reasonableness of the additional 22 hours that Alex was required to work in week 2.  Other factors such as Alex’s family responsibilities, his health and safety and the notice he was given of having to work those additional 22 hours would also be relevant. 

Division 4 - Requests for flexible working arrangements

258.                 Division 4 establishes a right to request flexible working arrangements in certain circumstances.  The intention of these provisions is to promote discussion between employers and employees about the issue of flexible working arrangements. 

Clause 65 - Requests for flexible working arrangements

259.                 Subclauses 65(1) and (2) establish a right to request flexible working arrangements for employees (including casual employees) where:

·                            the employee is a parent of a child under school age, or a person with a responsibility for the care of a child under school age (e.g., a foster parent);

·                            the change is to assist the employee to care for the child; and

·                            the employee has 12 months continuous service with the employer, or (in the case of a casual employee) is a long term casual employee with an expectation of ongoing employment on a regular and systematic basis. 

260.                 School age is defined in clause 12 of the Bill to mean the age at which a child is required to start attending school in the relevant State or Territory.

261.                 A child of a person includes someone who is the person’s child within the meaning of the Family Law Act 1975 , or an adopted child or step child of the person (see clause 17). 

262.                 For the purpose of this Division, continuous service is defined in subclause 22(4) to mean the employee’s period of service with their employer other than any period of unauthorised absence.  (The period of unauthorised absence does not break the employee’s continuous service, but does not count as service.)

263.                 A long term casual employee is defined in clause 12 of the Bill as an employee who, at a particular time, is casual employee who has been employed by the employer on a regular and systematic basis for a sequence of periods of employment during a period of at least 12 months. 

264.                 A request for flexible working arrangements must be in writing and set out the change sought and reasons for the change (subclause 65(3)). 

265.                 Subclause 65(4) requires that the employer give the employee a written response to the request within 21 days, stating whether the request is granted or refused.  If the employer refuses the request, the written response is required to include details of the reasons for the refusal (subclause 65(6)).  The intention is that an employee is able to clearly understand why their request is being rejected.  A bare refusal (i.e., without reasons) is insufficient. 

266.                 Subclause 65(5) provides that the employer may only refuse the request on reasonable business grounds.

267.                 The Bill does not identify what may, or may not, comprise reasonable business grounds for the refusal of a request.  Rather, the reasonableness of the grounds is to be assessed in the circumstances that apply when the request is made.  Reasonable business grounds may include, for example:

·                            the effect on the workplace and the employer’s business of approving the request, including the financial impact of doing so and the impact on efficiency, productivity and customer service;

·                            the inability to organise work among existing staff; and

·                            the inability to recruit a replacement employee or the practicality or otherwise of the arrangements that may need to be put in place to accommodate the employee’s request. 

268.                 It is envisaged that FWA will provide guidance on this issue. 

269.                 Rather than refusing a request, it would be open for an employee and their employer to discuss the request and come up with an approach that would accommodate the needs of both parties. 

270.                 An employee who is not eligible to request flexible working arrangements under this Division (e.g., because they do not have the requisite service) is not prevented from requesting flexible working arrangements.  However, such a request would not be subject to the procedures in this Division.

Illustrative example

Michael would like to start work at 10am, four days a week, to enable him to take his three year old son to pre-school.  He submits a written request to his employer setting out the reasons for requesting the change in hours.  His employer considers the request but is unable to agree to the changes, as they would mean that Michael misses an important nationwide teleconference each morning.

However, instead of simply refusing the request, Michael’s employer discusses the situation with him.  They agree to an arrangement where Michael will start work at 10am four days a week and participate in the teleconference by phone hook-up before he leaves home, while attending in person for the most important weekly agenda-setting meeting.

Michael’s employer gives Michael a written response, setting out details of the reasons for the refusal of the initial request as well as a statement of the revised arrangements they have agreed. 

Clause 66 - State and Territory laws that are not excluded

271.                 Clause 66 makes clear that State and Territory laws that provide employee entitlements in relation to flexible work arrangements are not excluded and continue to apply to employees where they provide more beneficial employee entitlements than the entitlements under Division 4. 

272.                 The intention of clause 66 is to ensure the application to national system employers and their employees of more beneficial State or Territory laws that confer a right to request flexible work arrangements and deal with discrimination in relation to parental or carer responsibilities.  For example, this clause is intended to enable the operation of provisions in the Equal Opportunity Act 1995 (Vic) that oblige an employer in Victoria to accommodate an employee's responsibilities as a parent or carer and that prescribe remedies if an employer breaches those obligations.  (See also paragraph 27(1)(a) of the Bill.)

273.                 An employee may also have remedies under relevant discrimination legislation (including federal anti-discrimination legislation) if an employee considers they have been discriminated against by the employer’s handling or refusal of their request. 

Division 5 - Parental leave and related entitlements

274.                 This Division establishes minimum parental leave and related entitlements for eligible national system employees.  (See, also, Part 6-3 which provides for the extended application of this entitlement to non-national system employees.)

275.                 Under the Bill, parental leave includes birth-related leave and adoption-related leave.  The separate labels of maternity and paternity leave are not used.  The leave must be associated with the birth of a child to the employee, the employee’s spouse or the employee’s de facto partner, or the placement of a child under 16 years of age with the employee for adoption. 

276.                 Under this Division, each member of an employee couple will be entitled to be absent from work for separate periods of up to 12 months. 

277.                 However, if only one person is taking leave, or if one member of an employee couple wishes to take more than 12 months leave, the employee may request a longer period from their employer.  The period of the extension cannot exceed 12 months less any period of parental leave taken, or intended to be taken, by the other member of an employee couple in relation to a child (i.e., the total period of leave for an employee couple cannot exceed 24 months).

278.                 Specific provision is made to cover the situation where only one member of a couple is an employee. 

279.                 The parental leave NES recognises same-sex de facto relationships for the purpose of determining unpaid parental leave entitlements.  This means, for example, that the same-sex de facto partner of either a person who gives birth or the biological parent of a child may be eligible to take unpaid birth-related parental leave, if they are otherwise eligible. 

280.                 The parental leave NES also provides the following related entitlements:

·                            unpaid special maternity leave;

·                            a right to transfer to a safe job in appropriate cases, or take paid no safe job leave;

·                            consultation requirements;

·                            a return to work guarantee; and

·                            unpaid pre-adoption leave. 

Subdivision A - General

281.                 This Subdivision establishes the eligibility rules for:

·                            unpaid parental leave and related entitlements taken in association with the birth of a child; and

·                            unpaid parental leave and unpaid pre-adoption leave taken in association with the placement of a child for adoption.

282.                 In general terms, an employee must have completed at least 12 months of continuous service with their employer immediately before the proposed leave is to start.

283.                 Specific rules apply to determine the eligibility of long term casual employees (see subclause 67(2)).

284.                 The eligibility rules in clause 67 do not apply to unpaid pre-adoption leave. 

285.                 This Subdivision also sets out rules that apply in a transfer of employment situation to ensure recognition of notice and other information relevant to an employee’s application for leave, or to enable an employee on leave to continue on leave.

Clause 67 - General rule - employee must have completed at least 12 months of service

286.                 Subclause 67(1) requires an employee (other than a casual employee) to have completed at least 12 months of continuous service immediately before the date that applies under subclause 67(3) to be entitled to unpaid parental leave.

287.                 For the purpose of this Division, continuous service is defined in subclause 22(4) to mean the employee’s period of service with their employer other than any period of unauthorised absence.  (The period of unauthorised absence does not break the employee’s continuous service, but does not count as service.)  Subclause 67(2) establishes a corresponding eligibility rule for casual employees. 

288.                 To be entitled to unpaid parental leave (other than unpaid pre-adoption leave), a casual employee must qualify as a long term casual employee of the employer immediately before the date that applies under subclause 67(3) (paragraph 67(2)(a)). 

289.                 A long term casual employee is defined in clause 12 as an employee who, at a particular time, is a casual employee who has been employed by the employer on a regular and systematic basis for a sequence of periods of employment during a period of at least 12 months. 

290.                 Additionally, the casual employee must have a reasonable expectation of continuing employment by the employer on a regular and systematic basis, but for the birth or expected birth or placement or the expected placement of the child or the taking of unpaid parental leave (paragraph 67(2)(b)).

291.                 Subclause 67(3) specifies the date at which an employee must have completed 12 months of service in order to qualify for unpaid parental leave (other than unpaid pre-adoption leave).  The relevant date is:

·                            for birth-related leave - the date of birth, or the expected date of birth, of the child (subparagraph 67(3)(a)(i));

·                            for adoption-related leave - the day of placement, or the expected day of placement, of the child (subparagraph 67(3)(a)(ii));

·                            for an employee taking a period of leave that is to start within 12 months after the birth or placement of the child under subclause 71(6) (which deals with the situation where a member of a couple is not an employee) - the date on which the employee’s period of leave is to start (paragraph 67(3)(b)); or

·                            for an employee who is a member of an employee couple taking a period of leave that is to start after the other member’s period of leave finishes - the date on which the employee’s period of leave is to start (paragraph 67(3)(c)).

292.                 Subclauses 67(4) to (6) define the terms birth related leave, adoption-related leave and day of placement respectively for purposes of this Division:

·                            Birth-related leave means unpaid parental leave taken in association with the birth of a child and unpaid special maternity leave.

·                            Adoption-related leave means unpaid parental leave taken in association with the placement of a child for adoption and unpaid pre-adoption leave.

·                            The day of placement, in relation to the adoption of a child, means the earlier of the day on which the employee first takes custody of the child or the day on which the employee starts any travel that is reasonably necessary to take custody of the child for adoption. 

Clause 68 - General rule for adoption-related leave - child must be under 16 etc.

293.                 Clause 68 establishes additional eligibility rules for adoption-related leave.

Under this clause, adoption-related leave (including unpaid pre-adoption leave) is only available if the child placed with the employee:

·                            is, or will be, under 16 years of age as at the day of placement, or the expected day of placement;