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Monday, 20 June 1994
Page: 1736

Senator SCHACHT (Minister for Small Business, Customs and Construction) (5.04 p.m.) —I table the revised explanatory memorandum and move:

  That this bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

  Leave granted.

  The speech read as follows

This bill amends the Industrial Relations Act 1988. The amendments concern two separate topics. The first is age discrimination in setting junior rates. The second is termination of employment.

Age discrimination

The Bill would suspend for 3 years the age discrimination provisions of the Industrial Relations Act in relation to junior wage rates. This issue was foreshadowed in the Government's "Working Nation" white paper on employment and growth.

These provisions were included in the Industrial Relations Reform Act 1993 as a result of amendments in the Senate in December last year. Although the Senate amendments required that junior wage rates be removed from all Federal awards as they are progressively reviewed under the Act by the Australian Industrial Relations Commission, they did not allow for a transition period. These provisions are also creating difficulties for new agreements and awards, because some employers have not had sufficient time to adapt to the new requirement.

The Government has received representations suggesting that many parties, particularly those whose awards would be examined early in the first statutory review period, would not be able to adjust to the new requirements in time. The Government considers that an orderly change to competency based wages can be achieved within 3 years and regards this a reasonable transition period.

The Government is concerned that the existing requirements of the Act may create difficulties for that orderly transition, given that many parties appear to need more time to develop wage arrangements that pay workers on the basis of their skill and capacity rather than their age.

This bill will modify the effect of the four provisions in the Act that prevent age discrimination. They are to be suspended to the extent that they apply to discrimination because an employee has not reached a particular age.

The provisions concerned are for the Australian Industrial Relations Commission to review all awards over a three year cycle beginning on 22 June 1994; for the Commission to certify agreements and to approve enterprise flexibility agreements; and a provision contained in the Act's principal object. The period of suspension in each case would correspond with the first 3 year cycle of award reviews under section 150A of the Act.

In other words, this aspect of the age discrimination provisions would commence in relation to wage rates on 22 June 1997. All other grounds of award review would commence on 22 June 1994. This would result in the Commission's only applying the age discrimination element of section 150A in the second and subsequent 3-year cycles of award reviews. Similarly, agreements which contained wage rates that discriminated on the basis of age could not be approved or certified under the Act from 22 June 1997.

The Government remains committed to the general policy of preventing and eliminating age discrimination. However, the Government has been persuaded that a suspension of the relevant provisions of the Act would facilitate the orderly introduction of more appropriate arrangements for junior rates.

Termination of employment

The bill also includes provisions that relate to the termination of employment provisions of the Industrial Relations Act.

The proposed amendments, which were announced by the Minister for Industrial Relations on 30 May 1994, will change certain aspects of those provisions, namely:

who is covered by the termination of employment provisions;

the amounts of compensation that can be awarded by the Court; and

where the onus of proof lies in proceedings before the Court.

The termination of employment provisions are part of a safety net of statutory minimum entitlements for employees who do not have adequate alternative remedies. This protection is contained in Part VI A of the Industrial Relations Act which took effect on 30 March 1994.

Broadly expressed, the existing termination of employment provisions of the Act have the following features.

Under the Act, an employer must have a valid reason for dismissing an employee. That reason must be connected with the employee's conduct or capacity or the operational requirements of the employer's business. An employee must be allowed to respond to any alleged grounds of dismissal, except if the employer could not be reasonably expected to give that opportunity to the employee. Employees must be given specified periods of notice or pay in lieu of that notice, unless that is not reasonable.

The Act also prohibits dismissals on various discriminatory grounds. Some reasonable exceptions are allowed. There are also consultation and notification provisions in respect of redundancies.

If someone is sacked and wants to challenge the dismissal, the Industrial Relations Court can decide whether the dismissal was fair, unless there is an adequate alternative remedy available under other Federal or State laws. Conciliation occurs before the Australian Industrial Relations Commission in the usual case.

If conciliation fails and the employer cannot justify the dismissal, under the current law the Court can order the employee's reinstatement or the payment of compensation or both.

These provisions are to be modified in the following ways.

The amendments will confine the termination provisions to employees who are either employed under a Federal or State award or whose base wage is no more than $60,000 per year. This amount is to be indexed annually by regulation to reflect increases in average weekly earnings.

This restriction will not affect applications made to the Court before the bill is enacted. The exclusion of high income earners who are not covered by awards is intended to ensure that the Court's resources are fully available to address matters involving the lower paid and non-managerial employees who constitute the vast majority of the Australian workforce.

There will be a broader power to make regulations excluding categories of employees from the provisions about termination of employment, as allowed by the ILO Termination of Employment Convention. This will allow regulations to be made to exclude those cases where the application of the legislation is anomalous. An example is where the statutory notice provisions could apply in a way which is not consistent with employment arrangements for which special provision has already been made under an award.

There will be full consultation with interested parties before any regulations are made.

The proposed modifications will maintain the key objective of the current provisions, namely, to give employees protection against unfair dismissal. This is to be by reinstatement, or if that is not practicable, by fair compensation. The emphasis is on reinstatement in an unfairly dismissed employee's former position or one that has no less favourable terms. In such a case the Court will be able to make orders for the payment of any lost remuneration and to preserve the employee's continuity of service.

The Court will also be able to award compensation as an alternative, where reinstatement is impracticable. This condition is not meant to be narrowly construed. It is expected that the Court will have regard to the surrounding circumstances, such as the practical effect of reinstatement on the working relationship or the industrial consequences.

Compensation that is awarded instead of reinstatement is to be limited to an amount not exceeding six months' remuneration. For non-award employees, the compensation will be limited to an amount which does not exceed six months' remuneration or $30,000, whichever is the lower. This amount will also be indexed annually by regulation to reflect increases in average weekly earnings. This new limit on compensation will apply to all cases decided by the Court after this bill becomes law.

The onus of proof in Court proceedings alleging unlawful dismissal is to be altered. The employer will only have the onus of establishing that the dismissal was for a valid reason. The applicant will have the onus of establishing any other elements of the case, including that a dismissal was harsh, unjust or unreasonable.

Employers involved in proceedings before the Court about termination of employment will be given the right to be represented by any association of employers to which they belong. At present, only federally registered organisations of employers can represent their members in such proceedings.

The Government is proceeding with these amendments in advance of a review of the practical operation of the Act scheduled for later this year. This action is being taken in direct response to some employers' views that the existing unfair dismissal provisions are an impediment to employment. The Government considers that the concerns expressed in some quarters about the legislation are exaggerated, particularly since the Court has yet to order compensation in any application under the existing provisions. Even so, it is not acceptable for the termination of employment provisions to be perceived as an impediment to the recovery of the labour market.

It also appears that a number of claims have been made in the Court in anticipation of more generous awards of compensation than have been available in other jurisdictions. This is not consistent with the purpose of these provisions which is to guarantee adequate forms of protection for people who do not otherwise have them.

The amendments should also assist in ensuring that proceedings before the Court are not delayed by unnecessary arguments about the adequacy of alternative remedies or arguments about the validity of extremely large claims for compensation. The Government considers that the amendments will ensure that the provisions operate fairly and effectively, particularly for ordinary Australian employees who require the protection of the law against the unfair termination of their employment.

Financial impact

The bill will have no significant impact on Commonwealth expenditure.

I present the Explanatory Memorandum for the bill, and I commend the bill to the Senate.

  Debate (on motion by Senator Panizza) adjourned.