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Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2021

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2019-2020

 

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

 

 

FAIR WORK AMENDMENT (SUPPORTING AUSTRALIA’S JOBS AND ECONOMIC RECOVERY) BILL 2020

 

 

 

 

 

 

 

 

EXPLANATORY MEMORANDUM

           

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Circulated by the authority of the Minister for Industrial Relations,

the Hon Christian Porter MP)



 

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FAIR WORK AMENDMENT (SUPPORTING AUSTRALIA’S JOBS AND ECONOMIC RECOVERY) BILL 2020

OUTLINE

 

The Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 (the Bill) amends the Fair Work Act 2009 (Fair Work Act) and related legislation to assist Australia’s recovery from COVID-19.

The Bill aims to improve the operation and usability of the national industrial relations system. By providing greater certainty and flexibility to employers and employees the Bill aims to support productivity, employment and economic growth and ensure that employees also receive their share of benefits that flow from economic recovery.

The Bill supports the Government’s commitment to Australia’s jobs and economic recovery, including by:

·                 providing certainty to businesses and employees about casual employment;

·                 giving regular casual employees a statutory pathway to ongoing employment by including a casual conversion entitlement in the National Employment Standards (NES) of the Fair Work Act;

·                 extending two temporary JobKeeper flexibilities to businesses, in identified industries significantly impacted by the pandemic;

·                 giving employers confidence to offer part-time employment and additional hours to employees, promoting flexibility and efficiency;

·                 streamlining and improving the enterprise agreement making and approval process to encourage participation in collective bargaining;

·                 ensuring industrial instruments do not transfer where an employee transfers between associated entities at the employee’s initiative;

·                 providing greater certainty for investors, employers and employees by allowing the nominal life of greenfields agreements made in relation to the construction of a major project to be extended;

·                 strengthening the Fair Work Act compliance and enforcement framework to address wage underpayments, ensure businesses have the confidence to hire and ensure employees receive their correct entitlements; and

·                 introducing measures to support more efficient Fair Work Commission (FWC) processes .

The Bill has been developed with input from a range of stakeholders, including unions and employers to ensure that reforms are appropriately balanced, providing flexibility and certainty for business and important protections for employees.

Casual employees

Certainty about employment arrangements, including the rights and obligations of both parties, is essential to ensure that business has confidence to employ and employees receive their correct entitlements. This Bill will introduce a statutory definition of casual employee that focuses on the offer and acceptance of employment and draws on common law principles. 

The Bill is intended to prevent unfair outcomes in situations where employers have to pay an employee twice for the same entitlement. In the event that an ongoing employee is misclassified as casual, the Bill enables casual loading amounts to be offset against claims for leave and other entitlements in certain circumstances, to address any potential for ‘double dipping’ when recognising the employee’s correct classification. Together with the statutory definition, this will give employers confidence to create jobs by using casual employment as a flexible employment option and encourage rehiring of many casuals who lost their jobs due to COVID-19.

The Bill introduces a statutory obligation for employers to offer regular casual employees conversion to full or part-time employment, unless there are reasonable business grounds not to do so. This will help employees engaged as casual employees who work regularly to become ongoing employees, if that is their preference. The new entitlement will require an employer to offer an eligible casual employee conversion to full or part time employment after 12 months of employment, with a residual right of conversion in certain circumstances for employees who have not received or accepted an employer offer to convert. The Bill also requires casual employees to be provided with a Casual Employment Information Statement published by the Fair Work Ombudsman (FWO).

Award flexibilities

Award complexity is a significant issue for many businesses, especially small businesses, which may lack the resources to understand in detail how awards operate. In the context of the COVID-19 pandemic, business uncertainty was exacerbated by restrictive rules in modern awards around duties and locations of work. To ensure flexibility for employers, especially small businesses in distressed sectors, this Bill will extend existing JobKeeper flexibilities in the Fair Work Act concerning duties and location of work to employers and employees to whom identified modern awards apply. These flexibilities, with appropriate employee safeguards, will be available for a period of 2 years from the passage of the Bill.

The Bill also introduces part-time flexibility provisions to be available across identified modern awards. This will enable employers and employees to work together to agree additional hours of work to part-time employees who already work at least 16 hours per week, to be paid at ordinary rates of pay. Currently under many awards the only way a part-time employee can work additional hours at ordinary rates of pay is to formally alter the regular pattern of hours. An ad hoc arrangement to work additional hours may attract overtime rates - even if an employee volunteers to work those additional hours. This operates as a disincentive for employers to offer additional work to part-time employees and increases the likelihood of employers engaging employees on a casual basis. This change will provide significant benefits for both employers and employees, by encouraging more employment in recovering businesses additional hours of work for employees who want it, and placing permanent employment (with paid leave entitlements) on a more competitive footing with other traditionally more flexible forms of employment.

Agreement making

This Bill aims to increase the number of Australians covered by enterprise agreements - driving higher wages and productivity in the process - by making agreement making and approval processes easier and faster for employers and employees, while balancing flexibility and fairness.

The Bill will enhance these processes by reducing the level of prescription imposed by the Fair Work Act and providing greater flexibility as to the methods by which employees may be provided with a fair and reasonable opportunity to consider whether to approve an enterprise agreement prior to the vote. The FWC will be required to listen to the views of the bargaining parties in the approval process, and intervention by other persons before the FWC will be limited.

The FWC will no longer be required to be satisfied that the terms of an enterprise agreement do not exclude the safety net provided by the NES and instead, the agreement must include a term which explains the interaction between the NES and enterprise agreements. This measure is intended to improve the timeliness of agreement approvals by the FWC, while maintaining the position that enterprise agreements may not contravene the safety net provided by the NES.

The FWC will be required to approve agreements, as far as practicable, within 21 working days.

The process for assessment of enterprise agreements against modern awards will also be clarified by requiring the FWC, in applying the better off overall test (BOOT), to:

·                 only take into account patterns or kinds of work, or types of employment, that are currently engaged in or are reasonably foreseeable, not those that are hypothetical or not reasonably foreseeable;

·                 have regard to the overall benefits (including non-monetary benefits) employees would receive under the agreement compared to a relevant modern award; and

·                 have regard to any views relating to whether the agreement passes the BOOT expressed by employers and employees and their bargaining representatives.

The Bill will also permit the FWC, in limited circumstances, to approve an agreement which may not pass the BOOT taking into account the views and circumstances of employees, employer/s and employee organisation/s covered by the agreement, the impact of COVID-19 on the enterprise and the extent of employee support for the agreement, and whether approval is in the public interest. This is a time-limited measure (which will automatically be repealed two years after commencement), intended to support businesses still recovering from the impact of COVID-19. Agreements approved under this provision would be limited to two years’ duration.

The Bill will enable franchisees to opt-in to a current single-enterprise agreement that covers a larger group of employers that operate under the franchise and ensure that industrial instruments do not transfer where an employee may transfer between associated employing entities at the employee’s initiative.

The Bill will also sunset (by 1 July 2022) agreements approved prior to the commencement of the Fair Work Act and during the ‘bridging period’ prior to the commencement of the system of modern awards.

Greenfields agreements

The construction of major projects contributes significantly to jobs and economic growth around Australia. The risk of enterprise agreements nominally expiring during the critical construction of a major project can give rise to uncertainty and risk, leading to higher costs for employers resulting from potential protracted negotiations and delays. This uncertainty can also potentially impact investment and job creation.

The Bill will enable the FWC to approve longer-term greenfields agreements made in relation to the construction of a major project, to specify a nominal expiry date of up to eight years after the day the agreement comes into operation. Where the greenfields agreement specifies a nominal expiry date more than four years after the day on which the FWC approves the agreement, the agreement must include a term that provides for annual pay increases for the nominal life of the agreement.  

These changes will provide greater investor certainty for future major projects. This will support Australia’s economic recovery and help to encourage jobs growth.

Compliance and enforcement

This Bill enhances the Fair Work Act compliance and enforcement framework to more effectively deter non-compliance with workplace laws and make it easier to recover wages when underpayment does occur. In addition to supporting employees’ financial security in this way, the Bill aims to ensure that widespread compliance with workplace laws promotes fair competition, and that non-compliant businesses do not gain an unfair advantage. 

To better deter non-compliance, the Bill introduces a new criminal offence for dishonest and systematic wage underpayments, and increases the value and scope of civil penalties and orders that can be imposed for non-compliance.

Employees will be able to recover their entitlements more easily, quickly and cost-effectively through the small claims process, by increasing the small claims cap from $20,000 to $50,000. Federal Circuit Court and magistrates courts will be able to refer small claims matters to the FWC for conciliation and consent arbitration. The Bill will prevent businesses from publishing job advertisements with pay rates below the minimum wage.

To encourage voluntary compliance action by businesses and provide greater certainty about how best to rectify inadvertent misconduct, the Bill requires the FWO and the Australian Building and Construction Commission (ABCC) to set out when they will defer litigation in appropriate cases, and will codify the factors they may consider when accepting enforceable undertakings.

Fair Work Commission

The Bill includes measures to support more efficient FWC processes, including to enable the FWC to:

·                 deal with appeals ‘on the papers’ where appropriate;

·                 vary or revoke decisions relating to enterprise agreements and workplace determinations more easily, to correct minor errors; and

·                 deal more effectively with unmeritorious applications.

These measures will enable the FWC to deal with matters more expeditiously and promote effective allocation of its resources.



FINANCIAL IMPACT STATEMENT

The measures in the Bill are estimated to have a minor financial impact and will be reported once the costings have been finalised.



Australian Government | Attorney-General's Department logo December 2020

Regulatory Impact Statement:

Casual Employment Reforms



 

The problem

Casual employees generally receive a 25 per cent casual loading in lieu of paid entitlements received by ongoing employees.

Despite having a long industrial history in Australia, the current legal framework around casual employment, covering over 2 million employees, does not provide certainty or confidence for employers or employees to use casuals as a genuine employment option.

This is because:

·          Recent court decisions have highlighted confusion and uncertainty for employers and employees caused by the absence of a statutory definition of ‘casual employee’.

·          Casual employees do not have universal access to an entitlement to request to convert to full-time or part-time employment where appropriate.

·          COVID-19 has heightened existing concerns about casual employment both in terms of certainty and confidence for job creation and potentially changing individuals’ preferences for long term job security.

Absence of a statutory definition and financial uncertainty

The term ‘casual employee’ is not defined in the Fair Work Act 2009 (FW Act), but takes its meaning from the common law.

Multiple court decisions over time, most recently WorkPac Pty Ltd v Skene [2018] FCAFC 131 ( Skene ) and WorkPac Pty Ltd v Rossato [2020] FCAFC 84 ( Rossato ), have developed the meaning of the term ‘casual employee’ at common law focussing on an assessment of the substance and totality of the employee/employer relationship.

Historically, general industrial practice has been aligned with the description of casual employees in most modern awards which broadly define casual employees as those who are engaged as casuals and paid a loading. The approach in Skene and Rossato departed from earlier decisions of the Fair Work Commission (FWC) which viewed that the characterisation of the employee’s status turned on the terms of the applicable modern award or enterprise agreement. Rather, Skene and Rossato exacerbated uncertainty by confirming that the description of a casual in a modern award or enterprise agreement gives way to the common law definition for the purposes of both National Employment Standards (NES) entitlements and entitlements under the award or agreement.

The common law meaning of casual employee gives regard to the nature of the employment relationship at engagement. The substance of the employment relationship over time (post-contractual conduct) may also be relevant. [1] The transition of an employee’s legal status in many cases is gradual and means that employees who have been engaged as casual may become ‘other than casual’ at an indeterminate point in time and subsequently become entitled to paid NES entitlements that casuals do not receive (despite receiving a 25 per cent casual loading intended to compensate for the absence of those entitlements). The department estimates that existing potential back pay liabilities for employees in these circumstances could be between $18 and $39 billion.

As such, this legal framework requires employers and employees to continuously evaluate their employment relationship to understand the nature of their entitlements and obligations at any point in time.

Certainty in relation to the applicable rights and obligations for casuals who work on a regular basis over an extended period can only be determined through lengthy court proceedings. Users with the greatest need for certainty - including individual casual employees and small businesses - do not have the resources, time or capacity to undertake disruptive and prohibitive legal proceedings to understand their obligations or access their entitlements.

Conversion from casual employment to full-time or part-time employment

While casual employment is a legitimate choice for many employees, some casual employees would prefer the benefits associated with ongoing employment and do not currently have a universally applicable mechanism to assist them to change their employment status. While employers and employees can agree to be engaged under a different form of employment at any time, arguably the power to do this currently rests largely with the employer. Casual employees may also be hesitant to engage with their employer on such matters due to concerns about losing work or being treated differently as a result of making a request to convert to ongoing employment.

On 5 July 2017, the FWC decided to insert a model casual conversion clause in most modern awards. [2] The clause provides that a casual employee who has worked a regular pattern of hours in the preceding 12 months has a right to request to convert their employment to full-time or part-time. An employer must accept the request unless there are reasonable grounds not to do so. Reasonable grounds for refusal must be based on facts which are known or reasonably foreseeable, and include the following:

·          it would require a significant adjustment to the casual employee’s hours of work in order for the employee to be engaged as a full-time or part-time employee in accordance with the provisions of this award;

·          it is known or reasonably foreseeable that the regular casual employee’s position will cease to exist within the next 12 months;

·          it is known or reasonably foreseeable that the hours of work which the regular casual employee is required to perform will be significantly reduced in the next 12 months; or

·          it is known or reasonably foreseeable that there will be a significant change in the days and/or times at which the employee’s hours of work are required to be performed in the next 12 months which cannot be accommodated within the days and/or hours during which the employee is available to work.

This decision improved access to the right to request casual conversion for award reliant employees, however it did not apply to everyone. Seven modern awards, including the Black Coal Mining Industry Award 2010 , do not have casual conversion clauses. Further, the right did not extend to award/agreement-free employees or those employed under an enterprise agreement that does not contain a casual conversion provision. For example, departmental analysis indicates around two-thirds (61.6 per cent) of existing current enterprise agreements (across all industries) do not currently have a casual conversion clause. [3]

Despite protections from adverse action for exercising a workplace right, many workers may still be concerned about negative consequences to their employment in making a request.

The need for government action      

As outlined above, the absence of a statutory definition of casual employee is a longstanding issue. However, the most recent court cases have heightened concerns f or over 2 million casual employees and over 800,000 employing businesses. A Fair Work Commission Vice President has publicly highlighted that the conflict between the common law definition of casual employee and the way it is described in awards is a “ fundamental problem” that “ has to be resolved or in time it will snowball” . [4]

Addressing these concerns is a priority in supporting the Australian economy and labour market over the post-COVID economic recovery phase . In the first months of the COVID-19 pandemic, casuals experienced a disproportionate share of job losses, representing around 500,000 of the 800,000 jobs lost during that period. While casual employment has started to recover since then with an extra 200,000 casual employees in work between May and August 2020, action needs to be taken to give employers the certainty to re-employ displaced workers and create new jobs.

The Government has the capacity and obligation to respond to these concerns by progressing amendments to the FW Act . The primary objective to be achieved through government intervention is to provide a clear and fit - for - purpose casual employment framework that will:

·          give employees and employers certainty around the nature of their employment relationship at all times;

·          preserve the availability of flexible forms of work for employers and employees who have a genuine need and desire to use them; and

·          ensure balance and fairness with genuine pathways in place for casual employees who wish to obtain ongoing employment. 

Policy Options

O ption One: Maintain the status quo

Under this option, what constitutes a ‘casual employee’ will continue to take its meaning from the common law, which requires an assessment of the substance and totality of the employee/employer relationship in every case. This is because under the common law, the nature of a casual employment relationship can change over time, and can only be assessed by reference to the specific circumstances of each employment relationship.

If a Court was to find that an employee was other than a casual, it may not be possible for an employer to offset any casual loading (of generally 25 per cent) paid to compensate the employee for the absence of entitlements such as paid leave against amounts payable to the employee for those entitlements. Any decision in this regard will be based on the specific facts of the matter and the recent Rossato decision did not provide clear guidance about the availability to offset casual loading in these circumstances. The Full Federal Court found that the employer was not entitled to offset any casual loading payments it had made against a claim for unpaid entitlements from an employee who was found to be other than a casual at common law. This has highlighted the risk of significant potential financial liabilities for accrued entitlements which is undermining business confidence during a time of unprecedented economic challenge.

Casual employees only have access to a right to request casual conversion if the terms and conditions of their employment are set by an award or enterprise agreement containing a casual conversion clause.  Using the Employee Earnings and Hours 2018 publication which includes information around method of setting pay, we estimate that three quarters of casual employees or around 2 million casual employees are covered by a modern award or an existing enterprise agreement that includes a casual conversion entitlement, meaning approximately 600,000 casual employees do not currently do not have access to conversion.

The majority of modern awards contain the FWC model casual conversion clause that provides an employee with a right to request to convert if, in the previous 12 months they have worked a regular pattern of hours on an ongoing basis which, without significant adjustment, they could continue to work as a full-time or part-time employee. An employer may only refuse a request on reasonable grounds based on facts that are known or reasonably foreseeable at the time of refusal.

Companies now need to recognise substantial contingent liabilities

As a result of recent court cases concerning the distinction between casual and full-time or part-time employment, Australian accounting standards require approximately 25,000 Australian companies to consider any potential contingent liabilities of casual employees who may be found to be other than a casual at common law.

Following the Court decisions in Rossato and Skene , the Australian Securities and Investments Commission (ASIC) raised awareness of the possible financial reporting considerations associated with the case law for entities reporting in accordance with Chapter 2M of the Corporations Act 2001 (Corporations Act). The Australian Accounting Standards applying under s296 of the Act that become relevant in considering accounting implications arising from the case law are:

·          AASB 119 Employee Benefits (AASB 119)

·          AASB 137 Provisions, Contingent Liabilities and Contingent Assets (AASB 137)

In order to comply with the accounting standards [5] , entities need to consider whether the legal circumstances in the Rossato and Skene cases apply to the entity’s own employment arrangements. In practice, affected entities may group employment arrangements with similar characteristics for the purposes of assessing whether the principles arising from the cases apply to those arrangements.

For financial reporting purposes, the outcome of such assessments may result in one of the following:

·          The entity’s financial report is affected when:

-    Legal circumstances from the case law probably apply and a liability is recognised on the statement of financial position (unless the amount cannot be reliably estimated); or

-    Legal circumstances from the case law possibly (but not probably) apply, in which case a contingent liability would be disclosed in the notes to the financial statements.

·          The entity’s financial report is unaffected when clearly none of the facts/principles apply (e.g. the entity did not employ casuals, or the prospect of casual employees being determined to be ongoing employees by a Court is remote).

Under outcome A above, where the case law probably applies, entities need to consider what entitlements affected casuals may be eligible for. Entities may need to consider the financial reporting requirements on a benefit-by-benefit basis for each group of employees identified.

Entities would also need to consider the recognition or disclosure implications for associated matters such as taxation (e.g. withholding tax and payroll tax) and superannuation guarantee contribution payments.

Option Two:

Amend the Fair Work Act 2009 to:

·          legislate a statutory and objective definition which provides that a casual employee is a person who has accepted an employment offer on the basis that there is no firm advance commitment to continuing and indefinite work according to an agreed pattern of work;

·          provide a universal, strengthened casual conversion mechanism as a National Employment Standard entitlement; and

·          ensure the same entitlements be paid only once in the event of claims for payments for relevant entitlements are made to the court

This option would amend the FW Act to insert a definition of casual employee that gives effect to the parties’ intention on engagement (that is, acceptance of an employment offer that does not include a firm advance commitment to ongoing work). This would provide a high degree of certainty as to a person’s employment status at any point in time and largely alleviate the need to assess contingent liabilities as per the current accounting standards.

This option would also include measures that will apply to court orders where an employee is found to be other than a casual employee. Where an employee was previously paid identifiable loading amounts to compensate for not having relevant entitlements such as paid leave, a court must reduce amounts payable for those entitlements so that employers will not need to pay for the same entitlements twice.

This option would also amend the NES in the FW Act to insert a universal casual conversion mechanism that has been adapted from the FWC model clause (see also Option Three). In comparison to the FWC model clause, the nature of casual conversion would be further strengthened by introducing an employer obligation to offer conversion (rather than an employee right to request) and shortening the period of service required to demonstrate a regular pattern of work.

The key elements of the conversion entitlement would be:

·          An employer would be required to make an offer to convert a casual employee to equivalent full-time or part-time employment if the:

-    casual employee has been employed for a period of 12 months; and

-    employee has worked a regular pattern of hours on an ongoing basis in at least the last 6 months of that period which, without significant adjustment, the employee could continue to work as a full-time or part-time employee. 

·          The employer would not be required to make an offer where the casual employee is not eligible, or where the employer has reasonable grounds to not make an offer. If not making an offer after 12 months of employment, the employer must provide written notice to the employee, including the relevant reasonable grounds.

·          Where an offer is made, the employee would be required to give the employer a written response accepting or rejecting the offer. If the employee does not give a response within the specified time period, they would be taken to have declined the offer.

The employer offer would be coupled with a residual right to request where a casual employee who meets the eligibility criteria could make a written request to convert at any time, as long as they have not in the previous 6 months, been notified by their employer that an offer has not been made because of reasonable grounds, or rejected an offer to convert from their employer. The employer would be required to grant or refuse the request, and must not refuse a request unless they have consulted the employee and the refusal is made on reasonable grounds based on facts that are known, or reasonably foreseeable, at the time of the request.   

This option would also include other consequential measures including anti-avoidance, dispute resolution and transitional arrangements.

Option Three:

Amend the Fair Work Act 2009 to:

·          introduce a statutory definition that a casual employee is a person who is ‘engaged and paid as such’; and

·          provide access to casual conversion to those employees who currently do not have it.

This option would amend the FW Act to insert a definition of casual employee based on the most common descriptors of a casual employee in modern awards, that is, a casual employee is one who has been engaged and paid as such. This would provide the greatest level of certainty to employers and as per Option Two, alleviate the need to recognise contingent liability in accordance with accounting standards and other potential legal cost to determine an employee’s employment status. However, this definition will solidify the employer as the primary decision maker in determining an employee’s legal status, irrespective of the true nature of the employee/employer relationship and with no reference to the current common law.

This option would also amend the NES in the FW Act to insert an entitlement for casual employees to request to convert to full time or part time employment. This would extend the application of the FWC’s model clause to the following categories of casual employees:

·          employees who are covered by a modern award that does not contain a right to request casual conversion;

·          employees to whom an enterprise agreement applies and who are either:

-    covered by a modern award that does not contain a right to request casual conversion; or

-    not covered by a modern award at all; and

·          employees who are award and agreement free.

Modifications from the FWC model clause would be limited to those that are necessary to ensure that the new entitlement operates effectively in the FW Act framework, as well as appropriate consequential and transitional provisions.

Costing of policy options

Available statistics and some base assumptions

For this costing we have used the ABS Characteristics of Employment (CoE) 2018 publication (latest data available) as it contains questions about the work arrangements of casual employees. The CoE data suggests that, as at August 2018, there were roughly 2.6 million casual employees, which includes 2 million casual employees with a tenure with their employer of greater than 6 months and around 1.5 million casual employees with a tenure with their employer of at least 12 months.

The number of casual employees typically increases at or around the same rate as the labour force. The latest ABS Labour Force data shows that as at August 2020 there were around 2.3 million casual employees, which is below the February 2020 estimate of roughly 2.6 million casual employees (before onset of COVID-19 estimates). Budget estimates suggest that unemployment is likely to increase in the short term before recovering. We would not like to speculate on the rate of recovery of casual employment. Instead, we have made our estimates on the assumption that casual employment will remain stable at 2018 rates over the forward estimate. 

Based on the information collected in the CoE, we have identified ‘likely to be regular’ casual employees as those who are guaranteed to work a minimum number of hours each week and meet at least one of two criteria:

·          earnings/income do not vary from one pay period to the next;

·          usually worked the same number of hours each week.

Using the above definition of ‘likely to be regular’, as at August 2018, there were approximately 690,000 casual employees ‘likely to be regular’ with a tenure of greater than six months, which includes 540,000 casual employees ‘likely to be regular’ with a tenure of greater than a year.

There are 820,000 employing business, of which approximately 25,000 are reporting entities under the Corporations Act.

Cost estimate - Option One: Status quo

For Option One (status quo), we estimate the total regulatory costs to be up to $243.8 million over a ten year period.

Cost estimate for Option One (Part 1 - complying with the accounting standards)

To comply with the accounting standards, there is a need to estimate contingent liabilities for casual employees through applying principles from the common law. For the purpose of this costing, we have identified four steps that employers would need to undertake to ensure compliance with these standards.

Identifying employees whose legal circumstances from the case law probably apply.

Calculating potential liabilities for identified employees.

Disclosing and reporting any contingent liabilities for identified employees.

Ongoing record keeping obligations.

For Step 1, we have assumed a simplified process for employers to make a reasonable assessment of the probability that their casuals may be found to be ongoing employees under the common law. The simplified process is not intended to replace the common law assessment. It involves consideration of two key elements - tenure of employment and regularity of engagement.

We assume that casual employees with a tenure of less than 6 months have a remote possibility to be found as ongoing employees for this costing purpose. We consider that identifying these employees is straightforward and, hence, have not included them in the costing.

Under Step 1, employers need to assess the regularity of engagement for the 2 million employees with 6 months or longer tenure. This assessment is assumed to take 5 minutes for each casual employee and we have assumed that the number of casual employees will remain stable at or around 2018 levels over the forward estimates.

For each of the 690,000 casual employees who are ‘likely to be regular’ and hence legal circumstances from the case law probably apply and they could be found to be ongoing employees, employers need to assess their potential liabilities, in the case they have misclassified their workers. We assume it takes businesses 20 minutes to estimate the liabilities for each ‘likely to be regular’ casual employee (Step 2).

Available data shows that 65 per cent of all casuals are employed by medium and large employers [6] , and 35 per cent of all casuals are employed by small businesses. However, we recognise that not all of these businesses are ‘reporting entities’ required to comply with accounting standards as per the Corporations Act .

Based on the coverage of reporting obligations set out in the Corporations Act, including business size, turnover, business ownership, and limited available data, we assume that 70 per cent of all casuals are employed by reporting entities. This estimate comprises all 65 per cent of casuals employed by medium and large employers and 5 per cent of those who are employed by small business (reduced from 35 per cent in recognition that small businesses are less likely to be reporting entities).

Therefore we have adjusted the number of casual employees who are subject to the ASIC guidance downward by 30 per cent. 

Similarly it is possible that reporting entities covered by the Corporations Act may not employ casual employees. In the absence of any reliable data, we assume 70 per cent of the 25,000 businesses (i.e.17,500 businesses) employ casual employees for whom contingent liabilities need to be reported. We also assume that it takes each business 2 hours each year to consolidate liabilities for each individual employee into their annual financial statements (Step 3).

Businesses that report liabilities related to casual employment to ASIC will also have to remove the liabilities when their obligation ends. The FW Act has a statute of limitation of 6 years to claim back pay liabilities. Therefore businesses will need to remove liabilities for departed employees after 6 years. We assume that this step will take businesses an hour a year (Step 4).

Step 1 - Assess casual employees [7]

= Labour cost (hourly wage rate and any non-wage costs of employees) x time to make assessment x number of casual employees x proportion of casual employees in reporting entities

= ($41.74 x 1.75) x 5 minutes x 2 million x 70%

= $8.5 million

Step 2 - Cost of calculating liabilities

= Labour cost (hourly wage rate and any non-wage costs of employees) x time to calculate liabilities x number of ‘likely to be regular’ casual employees x proportion of ‘likely to be regular’ casual employees in reporting entities

= ($41.74 x 1.75) x 20 minutes x 690,000 x 70%

= $11.8 million

Step 3 - Disclosure and reporting

= Labour cost (hourly wage rate and any non-wage costs of employees) x time to report and disclose x number of businesses with casual employees and covered by Corporations Act x proportion of business that are reporting entities

= ($41.74 x 1.75) x 2 hours x 25,000 x 70%

= $2.6 million

Step 4 - Record keeping

= Labour cost (hourly wage rate and any non-wage costs of employees) x time to update records x number of businesses with casual employees and covered by Corporations Act x proportion of business that are reporting entities

= ($41.74 x 1.75) x 1 hour x 25,000 x 70%

= $1.3 million

Costing Right to Request (Part 2 - casual conversion under industrial instruments)

As at August 2018, there were 540,000 casual employees ‘likely to be regular’ with a tenure of greater than a year. We assume this will remain stable at or around this rate for the entire estimate.

Using the Employee Earnings and Hours 2018 publication which includes information around method of setting pay, we estimate that three quarters of casual employees currently have the right to request casual conversion under their award or an existing enterprise agreement. Assuming this is also true for ‘likely to be regular’ casual employees, we estimate approximately 400,000 regular casual employees (75 per cent of 540,000 ‘likely to be regular’ casual employees) have the right to request conversion.

To convert this to an annual estimate, we used the CoE publication which suggests approximately 40 per cent of casual employees (41.3 per cent) have a tenure of less than a year. Using this figure, we assume that 41.3 per cent of the current regular casual employees (roughly 170,000 employees), would commence employment each year and may consider requesting casual conversion in any given year.

There is no comprehensive data on the take-up of casual conversion. Without the enhanced features of the conversion entitlement under Option Two, we assume 10 per cent of eligible employees will request conversion. We estimate 17,000 casual employees will request conversion in any given year.

We also assume it will take 10 minutes for an employee to determine their eligibility for conversion and make a request (Step 1). We assume it will take 10 minutes for an employer to make an assessment on whether an employee is regular and respond (Step 2).

Step 1 - annual employee costs

= Individual leisure rate x time per employee x number of casual employees x proportion that respond to the offer

= $32.4 x 10 minutes x 17,000

= $0.1 million a year

Step 2 - annual employer costs

= Labour cost (hourly wage rate and any non-wage costs of employees) x consider request x number of casual employees

= ($41.74 x 1.75) x 10 minutes x 17,000

= $0.2 million a year

Estimated cost of Option One

Total Cost

 (Annual employer cost x 10 years) + (annual employee costs x 10)

= ($8.5 million + $11.8 million +$2.6 million +$1.3 million + 0.2 million) x 10 years + ($0.1 million x 10 years)

=$243.8 million

We estimate the total costs to both employers and employees to be up to $243.8 million over a ten-year period, or up to $24.4 million annually.

Regulatory burden estimate - Status quo average annual impact

 

Employer costs per year

Employee costs per year

Total costs per year

Annual costs

$24.3 million

$0.1 million

$24.4 million

Cost estimate - Option Two:

Amend the Fair Work Act 2009 to:

·          legislate a statutory and objective definition which provides that a casual employee is a person who has accepted an employment offer on the basis that there is no firm advance commitment to continuing and indefinite work according to an agreed pattern of work;

·          provide a universal, strengthened casual conversion mechanism as a National Employment Standard entitlement; and

·          ensure the same entitlements be paid only once in the event of claims for payments for relevant entitlements are made to the court.

For Option Two we estimate the total regulatory costs to be up to $103.9 million over a ten year-period.

Statutory definition

The statutory definition under this option would significantly reduce the regulatory burden on employers and employees. As per normal practice under the status quo, employers would have to consider whether they are engaging an employee in accordance with the applicable legal framework. However, a key feature of the statutory definition in this option is that once the nature of the relationship has been set on engagement, that status would remain until the employee otherwise converts. This would provide a regulatory cost saving to employers who would no longer have to assess the nature of the relationship on an ongoing basis. Rather, this assessment would take place at the start of employment and at specified times in accordance with the casual conversion framework. This approach would provide certainty to employers and employees alike.

Casual conversion - employer requirement to offer and employee right to request

The casual conversion mechanism under this option would incur a new regulatory cost for all employers of casual employees. The administrative requirements would include:

·          Providing all casual employees with a copy of a Casual Employment Information Statement (note all employers are currently required to provide a copy of the Fair Work Information Statement so there would be no expected additional cost).

·          Considering whether an employee, who has completed 12 months of employment beginning the day the employment started, has met the eligibility criteria.

·          Determining whether they are required to make an offer of casual conversion.

·          Giving a written notice to the employee (including whether the employee is not eligible and/or the applicable reasonable grounds for refusal).

·          If the employee does not accept the employer’s reasons for not making an offer, the cost of engaging in the appropriate dispute resolution procedure is considered out of scope.

Employees who have been made an offer of conversion from their employer would also incur a regulatory cost through the requirement to respond to such an offer in writing.

If an employee exercised their residual right to request casual conversion, the employer would also need to consider and respond to the employee’s request including reasons if the request is refused. If the employee disputes the employer’s refusal, the cost of engaging in the appropriate dispute resolution procedure is considered out of scope.

Cost estimate for Employer obligation to offer (part 1 of Option Two) [8]

The employer obligation to offer would be triggered for all casual employees that have been employed for a period of 12 months.  As at August 2018, there were around 1.5 million casual employees with a tenure with their employer of at least 12 months.

We assume that it would take 10 minutes for an employer to assess whether an employee is ‘regular like’ and to provide written notification of the outcome.

The ABS CoE publication also suggests that around 40 per cent (41.3 per cent) of casual employees start work for a new employer in any given year. Using the initial estimate of 1.5 million, we estimate approximately 620,000 casual employees would trigger the employer right to offer in each of the following nine years.

We assume that only casual employees who are ‘regular like’ would receive an offer, as defined in the ‘available statistics and some base assumptions’ section. As stated in the aforementioned section, we estimate there would be 540,000 casual employees likely to receive an offer in the initial year, noting this is underpinned by a range of working assumptions.

While there are 540,000 casual employees likely to receive an offer in the initial year, the number of employees likely to receive an offer in subsequent years is a function of the number of new casual employees. The ABS CoE publication also suggests that around 40 per cent (41.3 per cent) of casual employees start work for a new employer in any given year. The number of casual employees likely to receive an offer for each of the following nine years is therefore approximately assumed to be 220,000 (41.3 per cent of 540,000).

Step 1

Initial employer cost for existing casuals [9]

= Labour cost (hourly wage rate and any non-wage costs of employees) x time per business to make assessment x number of casual employees

= ($41.74 x 1.75) x 10 minutes x 1.5 million

= $18.4 million

Initial employee cost

= Individual leisure rate [10]   x time per employee x number of casual employees

= $32.4 x 10 minutes x 540,000

= $ 2.9 million

Step 2

Annual employer cost

= Labour cost (hourly wage rate and any non-wage costs of employees) x hours per business to make assessment x number of casual employees

= ($41.74 x 1.75) x 10 minutes x 620,000

= $ 7.6 million a year

Annual employee cost

= Individual leisure rate x time per employee x number of casual employees

= $32.4 x 10 minutes x 220,000

= $1.2 million a year

Cost estimate of residual right to request (part 2 of Option Two):

A casual employee would have a residual right to request casual conversion in the event that they did not receive an employer offer of conversion or had refused an employer offer of conversion.

A casual employee would be able to make a request to convert if none of the following had occurred in the past 6 months:

·          the employee has not, at any time during that period, refused a conversion offer made to the employee;

·          the employer has not, at any time during that period, given the employee a notice that an offer has not been made on reasonable grounds; or

·          the employer has not, at any time during that period, given a response to the employee refusing a previous request.

For employers, there would be an administrative requirement when an employee requests casual conversion. This would include (as per the process outlined by the FWC):

·          Considering whether to grant or refuse the employee’s request.

·          Discussing and recording this in writing.

·          If the request is granted, documenting the discussion concerning the terms of the conversion.

·          If the request is refused, providing within 21 days written reasons .

·          If the employee does not accept the employer’s refusal, the cost of engaging in the appropriate dispute resolution procedure.

The inclusion of the right to request proposal into the NES would provide casual conversion rights to the remaining estimated quarter of casual employees who do not have them through awards or enterprise agreements.

Using the CoE publication, we estimate that there are 540,000 casual employees with regular hours and at least 12 months tenure. The right to request conversion is a residual right, meaning that it is sequenced to only be available after the completion of the employer offer requirement. Hence, we assume there are no regulatory costs associated with the right to request provision in the first year.

To convert the 540,000 employees to an annual estimation, we used the CoE which suggests that around 40 per cent (41.3 per cent) of casual employees or 220,000 casual employees, start work in any given year and would newly gain the right to request in each of the following nine years (as used in the Option One above).

Data on the take up of conversion is limited. However, it is generally agreed that it is relatively low. We used the same take up rate of 10 per cent as used in the Option One above. Approximately 22,000 casual employees would be estimated to use the right to request conversion in each of the following nine years.

Initial employer cost

N/A - initial cost unable to be estimated as detailed above.

Annual employer cost

= Labour cost (hourly wage rate and any non-wage costs of employees) x time per business to make assessment x number of casual employees

= ($41.74 x 1.75) x 10 minutes x 22,000

= $0.3 million a year

Initial employee cost

N/A - initial cost unable to be estimated as detailed above.

Annual employee cost

= Individual leisure rate x hours per employee x number of casual employees

= $32.4 x 10 minutes x 22,000

= $0.1 million a year

Estimated cost of Option Two

Total cost

=Initial employer cost + (annual employer cost x 9) + (residual rights employer cost x 9) + Initial employee cost + (annual employee cost x 9) + (residual rights employee cost x 9)

=$18.4 million + ($7.6 million x 9) + ($0.3 million x 9) + $2.9 million + ($1.2 million x 9) + (0.1 million x 9)

=$103.9 million

We estimate the total costs to both employers and employees to be up to $103.9 million over a ten-year period, or up to $21.3 million in the initial year and $9.2 million annually.

 

Regulatory burden estimate - Option Two average annual costs

 

Employer costs per year

Employee costs per year

Total costs per year

Option 2

$8.9 million

$1.5 million

$10.4 million

Option 1 (Status quo)

$24.3 million

$0.1 million

$24.4 million

Regulatory savings

+$15.4 million*

-$1.4 million

+$14.0 million

*numbers do not sum to the total as the numbers have been rounded.

Cost estimate - Option Three

Amend the Fair Work Act 2009 to:

·          introduce a statutory definition that a casual employee is a person who is ‘engaged and paid as such’; and

·          provide access to casual conversion to those employees who currently do not have it.

For Option Three we estimate the total regulatory costs to be up to $8.9 million over a 10 year period .

Statutory definition

The proposed statutory definition under this option would mean a casual employee is one who is engaged on that basis and paid a casual loading. There would not be a requirement to consider the parties intention as to the nature of the relationship at engagement. An employee will remain casual until the employee otherwise converts. Compared to the status quo, employers will no longer have to assess future contingent liabilities.

Employee right to request casual conversion aligned with modern awards

This would effectively extend the FWC model casual conversion clause to all casual employees in the national system. Administrative requirements under the NES or awards would include (as per the process outlined by the FWC):

·          Providing all casual employees with a copy of the entitlement - to be done through the existing Fair Work Information Statement so no expected cost.

·          Considering and responding to the employee’s request including reasons if the request is refused.

·          If the employee does not accept the employer’s refusal, the cost of engaging in the appropriate dispute resolution procedure which is considered out of scope.

Businesses and employees who are covered by industrial instruments that already have casual conversion clauses would not be directly impacted by this option. The impact of this option would be on employers and employees who do not already have casual conversion provisions in their industrial instruments. We estimate that around one quarter of casual employees do not currently have a right to request casual conversion in their industrial instrument or roughly 600,000 casual employees.

Cost estimate for Option Three [11]

Using the CoE publication, as at August 2018, there were 540,000 casual employees ‘likely to be regular’ with a tenure of greater than a year.

We have also assumed that the introduction of the right to request conversion into the NES, the increased publicity of the right to convert and the clear definition will led to an increased up-take of conversion from 10 per cent to 20 per cent, giving around 110,000 casual employees making a request in the first year. 

We have assumed the number of employees who use the residual right to request will be related to the number of employees becoming casual employees in a given year. The CoE publication suggests that around 40 per cent (41.3 per cent) of casual employees start work on any given year. Using the initial estimate of 540,000, we would estimate approximately 220,000 casual employees would trigger the employer right to offer in each of the following nine years.

Once again, we assume that 20 per cent of these casual employees will use the residual right to request. We estimate approximately 44,000 casual employees will trigger the right to request in each of the following nine years.

We assume it will take employers 10 minutes to assess a request to convert.

Initial employer cost

= Labour cost (hourly wage rate and any non-wage costs of employees) x time to make an assessment x number of casual employees

= ($41.74 x 1.75) x 10 minutes x 110,000

= $ 1.3 million

Annual employer cost

= Labour cost (hourly wage rate and any non-wage costs of employees) x time to make an assessment x number of casual employees

= ($41.74 x 1.75) x 10 minutes x 44,000

= $0.5 million a year

Initial employee cost

= Individual leisure rate x time per employee x number of casual employees

= $32.4 x 10 minutes x 110,000

= $0.6 million

Annual employee cost

= Individual leisure rate x time per employee x number of casual employees

= $32.4 x 10 minutes x 44,000

= $0.2 million a year

Estimated cost of Option Three

Total cost

=Initial employer cost + (annual employer cost x 9) + Initial employee cost + (annual employee cost x 9)

=$1.3 million+ ($0.5 million x 9) + $0.6 million+ ($0.2 million x 9)

=$ 8.9 million

We estimate the total costs to both employers and employees to be up to $8.9 million over a ten-year period, or up to $1.9 million in the initial year and $0.7 million annually.

Regulatory burden estimate - Option Three average annual costs

 

Employer costs per year

Employee costs per year

Total costs per year

Option 3

$0.6 million

$0.3 million

$0.9 million

Option 1 (Status quo)

$24.3 million

$0.1 million

$24.4 million

Regulatory savings

+$23.7 million

-$0.2 million

+$23.5 million

 

Net benefits of policy options

Option One

Many stakeholders, including a Vice President of the Fair Work Commission, have commented that the status quo is not sustainable [12] where there are over 2 million casual employees.

Maintaining the status quo will mean ongoing uncertainty for businesses who employ casual employees. The absence of a statutory definition of a casual employee requires employers to maintain an up-to-date awareness of case law which provides indicia of who is and is not a casual employee based on the court’s assessment of specific circumstances and parties subject to a dispute.

For Australian reporting entities, it means annual reviews of existing casual employee arrangements, an assessment of the probability of the employee being considered a permanent employee under case law, and further calculations to ensure that financial reports accurately reflect the potential liabilities in relation to the employee group. 

For employees, maintaining the status quo means that the right to request conversion from casual to permanent employment is restricted to certain award-reliant employees, with no clear universal path to securing permanent employment for those eligible employees that wish to do so. Employees would also continue to experience uncertainty regarding the nature of their employment, without a clear statutory definition to use as a reference point.

Option Two

Option Two delivers a balanced approach for employers and employees seeking certainty around their obligations and entitlements, as well as a genuine pathway for casual employees seeking to convert to permanent employment.

Regulatory savings

Compared to the status quo, Option Two provides a significant administrative and operational savings for Australian employers and employees alike. The definition of casual employee will provide certainty to employers by ensuring that the employment status of an employee can be determined at the point of engagement, rather than an assessment of a relationship over time.

The employer obligation to offer conversion to eligible employees and residual right to request will expand access to casual conversion provisions beyond employees covered by the industrial instruments which currently have casual conversion clauses. It also serves to eliminate barriers to conversion for employees, and is expected that the current incidence of conversion to ongoing employment will increase as a result.

Fairness and certainty will be enhanced by requiring a court to consider identifiable amounts employees have already been paid in the form of causal loading when determining a claim for entitlements such as paid leave. This will ensure that employers will not have to pay twice for the same entitlements. Removing employment status uncertainty, as well as addressing the prospect of paying for entitlements that have already been paid in the form of a casual loading, will instil greater confidence in employers to hire new employees and contribute to Australia’s COVID-19 economic recovery more broadly.   

This Option will also reduce the administrative burden on Australian reporting entities by removing the requirement under the status quo to do regular assessments on the likelihood of their casual employee cohort being considered permanent employees through the application of case law indicia and calculate financial liabilities.

Option Three

While Option Three results in the largest reduction in overall regulatory costs compared to the status quo, it does not represent a fair and balanced resolution to the current problems faced by employers and employees.

This is because the proposed definition of casual employee in Option Three does not include the key feature of casual employment determined by the Courts, which is an absence of an advance firm commitment to continuing and indefinite work.

Further, while Option Three does expand the existing right to request casual conversion to an increased number of employees, barriers to requesting conversion, such as employees’ concern about negative consequences to their employment in making a request, may continue to exist without a positive obligation on employers to initiate the conversion process.

Consultation

On 11 June 2020, the Australian Government established five working groups to consider how to improve the operation of the industrial relations system, looking at five key areas for reform: agreement making, modern awards, greenfields agreements, casuals and fixed term employees, and compliance.  The Casuals and Fixed Term Employees Working Group met seven times for discussion.

Membership of the working group

·          Employer organisations : Australian Chamber of Commerce and Industry (ACCI), Australian Higher Education Industrial Association (AHEIA), Australian Industry Group (Ai Group), Australian Retailers Association (ARA), Council of Small Business Organisations Australia (COSBOA).

·          Unions : Australian Council of Trade Unions (ACTU), Australian Nursing and Midwifery Federation (ANMF), Health Services Union (HSU), National Tertiary Education Union (NTEU), United Workers’ Union (UWU).

As the discussions of the working groups were held in-confidence and the final outcomes non-binding, this RIS does not discuss in detail the stakeholder views that were put forward in the working groups process. However, working group members generally recognised that the legislative framework that governs casual employment needs to be improved to ensure entitlements and obligations are clear and certain for both employers and employees. They also recognised that casual employees should have a choice if they prefer not to be converted and remain as casual employees.

Preferred Option

For the reasons outlined in this submission, Option Two is the preferred option.

The proposed statutory definition of casual employee will provide certainty to employers and employees by clarifying the employment status of casual employees. This will have a deregulatory impact as it will remove the requirement for employers and employees to apply complex legal concepts to understand the nature of their relationship at any point in time. It will also reduce the need for businesses to account for and report on any potential future employee entitlement liabilities should a court determine the employee to be other than a casual.

The statutory obligation for employers to offer conversion of regular casual employees to full-time or part-time employment after 12 months, and the residual right for employees to request conversion, will have an annual regulatory cost of approximately $10.4 million on employers and employees. It will require employers to offer conversion, or notify employees why an offer has not been made, after 12 months employment, as well as respond to requests from eligible casual employees to convert.

Compared to the status quo, the net benefit of the new reforms have been estimated at up to $14 million per year in reduced regulatory costs for employers and employees. While Option Three results in the lowest regulatory cost, Option Two is the preferred option because it provides a better balance of employer and employee interests in relation to the definition of casual employee as well as by removing the main source of regulatory burden on employees to initiate the conversion process.

Implementation and Evaluation of Options

The reform will be implemented through legislative changes to the Fair Work Act 2009 .

There will be a Casual Employee Information Statement published by the Fair Work Ombudsman (FWO) for employers to give to casual employees to explain the entitlement to convert from casual to part-time or full-time employment.

The FWO will also undertake communications to increase awareness of the change and provide support to employers and employees, particularly small business.

Implementation risks

There are a number of risks to successful implementation. The most significant of these are that necessary legislative amendments may not obtain passage through Parliament. The risk to legislative passage has been partly addressed through the industrial relations reform consultation process, which has involved extensive consultation with key stakeholders.

Another risk is that employers and employees will not become aware of the reforms, or understand their operation. The risk that the reform will not be understood would be addressed through proposed additional advisory materials from the FWO.

Transitional arrangements

Under transitional measures, the statutory definition will apply in relation to the offer of employment that was made before commencement of the legislation.

Employers will be required within the first 6 months to make offers of conversion to all existing eligible casuals, unless they have reasonable grounds not to, and the conversion process and the regulatory costing has been captured above. The residual right to request that will be available to all eligible casuals is also captured by the employee regulatory impacts calculated in the costing above.

Monitoring and evaluation

The Attorney-General’s Department will monitor ABS data on casual employment as well as any disputes before the FWC or courts regarding the operation of the new provisions. The department will also continue to engage in stakeholder consultation with employer groups and unions to gauge the impact of reforms. In particular, consultation will be undertaken through the regular meetings of the National Workplace Relations Consultative Council (NWRCC). The NWRCC is a forum for employer and employee representatives to consult on workplace relations and labour market matters of national concern, and meetings are chaired by the Minister for Industrial Relations.

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The problem

Modern awards (awards), along with the National Employment Standards (NES), constitute the industrial relations safety net that underpins the wages and conditions of national system employees in Australia. Awards are instruments of the Fair Work Act 2009 (the Fair Work Act) that may only be varied by the Fair Work Commission (FWC) consistent with the modern awards objective. [13] There are currently 121 awards, each covering defined industries and occupations. Awards contain mandatory content prescribed by the Fair Work Act and additional non-prohibited terms. [14] The content of each award varies to reflect the industry and work it covers.

Part-time employment is typified by the employee being eligible for the same benefits as a permanent full-time employee on a pro rata basis. For example, a part-time employee working half the time of a full-time employee would be entitled to accrue annual leave at half the amount. There has long been a recognition that arrangements relating to part-time employees should not act to discourage employers from offering additional hours to part-time employees nor encourage the use of casual employment to address this inflexibility. [15] While casual employment offers flexibility that business genuinely needs, there are some businesses that indicate they use casual employment rather than navigate some parts of awards that regulate part-time employment. To this extent, award complexity contributes to the adoption of casual employment.

The concept of ordinary hours of work exists in the industrial relations framework to discourage overwork and establish appropriate safeguards for employees. [16] A full-time employee’s ordinary hours are defined in their award and if they exceed their ordinary hours they are entitled to overtime. Overtime is generally 150 per cent of the base rate of pay for the first 2 or 3 hours and then 200 per cent afterwards. An employee does not accrue leave or superannuation for overtime, meaning a component part of the premium the employer pays for an employee working beyond ordinary hours is to compensate for lost accruals.

A similar practice extends to part-time employees. A part-time employee’s ordinary hours are normally defined by what they agree with their employer as their regular pattern of work (and/or roster). Each award has different rules about how patterns of work (and/or rosters) can be agreed upon and altered. Most awards contain provisions that allow part-time employees to work additional hours, including at ordinary rates, either by varying their regular pattern of work (and/or roster) or by allowing them work ordinary hours outside their agreed work pattern (and/or roster). However these provisions differ in their complexity and efficacy in meeting the business needs where employers commonly need to respond to ad hoc demand, especially in service-based industries, and adjust their operations quickly.

Under some awards it can be impracticable for businesses to offer additional hours to part-time employees even if both employers and employees agree on the arrangement. Instead, businesses advise they either do not offer these additional hours or instead opt to use casual employment. Inhibiting mutual agreement to work additional hours disadvantages part-time employees, of who almost one quarter would prefer to work more hours. [17]

For example, employers face uncertainty when they offer their part-time employees additional hours under the General Retail Industry Award (GRIA). While a part-time employee can agree to change their roster to work additional hours, this cannot change their total number of hours worked in a week. If the employee wants to temporarily increase the number of hours per week they can work, they need to make a separate written agreement with their employer. The award is unclear whether this can be a temporary agreement, so to avoid doubt, the employer and employee may need to make another written agreement to return to their previously agreed number of hours.

More usable part-time flexibility measures can be attained through enterprise bargaining. For example, Woolworths enterprise agreements contain provisions that allow part-time employees’ hours to be adjusted upwards more flexibly. Unlocking additional flexibly is less accessible to small business employers who find the enterprise bargaining process burdensome.

As a result of varied and inconsistent provisions under awards, the mechanisms to provide additional hours to part-time employees are unclear. For employers the uncertainty about how to agree to additional hours of work with part-time employees can make engaging casuals workers more attractive. This attraction towards casual employment disadvantages part-time employees by preventing them from receiving additional hours and reducing the choices prospective employees have in how they are employed. Part-time employees in retail and hospitality consistently report they would work more hours if they were available. [18] The current arrangements are not meeting the operational needs of employees and modern, flexible businesses.

The need for government action      

The modern award system has a long history. Stakeholders, particularly small business, regularly raise concerns about the impact of award complexity on business. Small businesses are less likely to have the resources to devote to understanding how awards operate, and in some cases, this can result in employers avoiding having to engage with the system by not employing new staff or relying on contract employment. [19]

According to ABS Survey of Employee Earnings and Hours in (May 2018), more than half of employees working in small businesses in Accommodation and Food Services (58.9 per cent) and Retail Trade (53.9 per cent) were covered by awards. [20]   The Fair Work Commission mapped 12 awards to these two distressed sectors which are the focus of this policy due to their high proportion of small business employers and award reliance. In total, around 670,000 employees have their pay set directly by an award in these industries. A further 530,000 employees have their pay set under individual arrangements and many of those arrangements are underpinned and impacted by award conditions.

Employers indicate award complexity is leading to them delaying or reconsidering hiring decisions. [21] A successful economic recovery from COVID-19 hinges on employers having the confidence to provide more jobs and more hours. Stakeholders have identified a series of broad issues in the awards system that could be simplified to support this outcome.

The COVID-19 pandemic highlighted particular limitations in the award system. Businesses have had to rapidly change their existing operating arrangements as a result of changed business conditions and trading restrictions. Some industries, namely the hospitality and retail industries, were severely impacted. Between February and May 2020, the Accommodation and food service industry reported a net decrease of 294,100 workers (or a 31.4 per cent decrease) and the Retail trade industry reported a net decrease of 60,000 workers (or a 4.8 per cent decrease).

Awards have been found too restrictive to respond effectively to the COVID-19 pandemic, and had to be addressed by expedited, temporary award variations by the Fair Work Commission (COVID schedules) and JobKeeper flexibilities in the Fair Work Act. The JobKeeper flexibilities and COVID schedules were critical to helping businesses survive the crisis. Providing options for employers to deploy their workforce more flexibly will be just as important in giving employers the confidence to bring forward hiring decisions during the recovery. Related reforms in distressed industries needs to be progressed as a priority. The retail and hospitality are particularly award-reliant. Businesses operating in these sectors are sensitive to demand-side impacts. These sectors also have high rates of casual and part-time employment and underemployment.

One reform area that has been considered particularly relevant to these two industries is providing employers and employees who operate under an award in the hospitality and retail industries with a consistent process to agree to work additional hours without attracting overtime rates, subject to appropriate safeguards. Under the current arrangements, while an employee can agree to work additional hours at ordinary rates, they must do so under systems that can be complex, time consuming and potentially ambiguous. This policy would provide employers with the confidence to engage part-time employees, and to offer them additional hours where agreed and appropriate.

Addressing award complexity remains important. Combined with other reform measures, this policy would provide impetus and a workable model for continuous improvements to the industrial relations system.

Policy Options

Options for consideration

Option one

Option one would maintain the status quo. This would mean that employers and employees could only agree to additional hours in accordance with their award, which can be problematic for the reasons outlined above.

Option two

Option two would introduce a set of provisions into the Fair Work Act to legislate a process for part-time flexibility applying to awards covering the hospitality and retail industries. These provisions would facilitate agreement between employers and employees to undertake additional work beyond their nominal part-time hours. This option would not displace any pre-existing award-based arrangements. Employers could continue to use existing arrangements if it meets their needs.  Instead, it would provide a separate, uniform approach across awards that employers could opt to use instead of existing award-based mechanisms available to them. Employees would be provided with appropriate safeguards:

Only employees who are engaged for a minimum of 16 hours per week and 3 hours per shift where additional flexible hours are agreed could agree to work additional hours. Employers will be required to notify the employee on what basis they are being offered the additional hours.

Employees would have the right to refuse an additional hours agreement. This right would be considered a workplace right for the purposes of the general protections, making it a contravention of the Fair Work Act for employers to take adverse action against an employee who refuses an offer to work additional hours on this basis.

An employee would continue to receive overtime and penalty rates that would otherwise be payable. This includes:

·          Overtime payable for working more than a maximum daily/weekly hours, or working outside a span/spread of hours.

·          Additional amounts like penalty rates, incentive-based payments and bonuses, loadings and monetary allowances.

·          Employers would be required to retain the agreement with their employee, which could be done verbally when the agreement is made and subsequently recorded electronically prior to the end of the additional work.

Option three

Option three would create a new statutory form of employment - Flexible Part-Time. This form of employment would be made mandatory content in modern awards to encourage the FWC and industrial organisations to vary awards to accommodate it. Option three would provide similar rights and entitlements to that of option two, like minimum engagement periods, maximum weekly hours, the right to refuse additional hours, leave accrual for additional hours, an entitlement to superannuation payments on additional hours, and overtime/penalty rates where they would otherwise be payable.

The object of part-time flexibility is to provide consistency and simplicity for employers who employ part-time employees. Option three would disproportionately complicate the already complex industrial relation framework by creating a new category of employment. The creation of a new form of employment may also result in compliance issues concerning the inadvertent misclassification of employees.

Significant work by the Fair Work Commission would be required to vary affected awards to clarify whether and how other award entitlements and provisions apply to this new form of employment in general. This may lead to delays in the adoption of legislated flexibility for part-time employees.

Net benefits of policy options

It is difficult to quantify the regulatory impact of each option as there is no precise information collected on the employees and businesses directly affected.  The analysis below is based on the limited available data and relies on a number of assumptions including the number of award reliant business, the use of existing award provisions and the potential take up of any new provisions.

Table 1 sets out employing businesses in the relevant ANZSIC divisions using counts from 2018-19 ABS Counts of Australian businesses. The Department assumes that 40 per cent of these businesses are award-reliant and employ part-time employees.

Table 1 - Counts of Australian businesses

 

Operating at start of financial year 2018-19

Entries

Total businesses

Retail Trade

131,478

19,416

150,894

Accommodation and Food Services

94,584

16,536

111,120

Combined

226,062

35,952

262,014

Estimated award-reliant businesses that employ part time employees

90,425

14,381

104,806

Source: ABS Counts of Australian Businesses, 2018-19 .

Table 2 provides estimated employee numbers at the ANZSIC divisional level using ABS Characteristics of Employment and ABS Employee Earnings and Hours data. The Department estimated the numbers of existing and new part-time employees by using the tenure of that employee with their current employer: employees with tenure greater than 12 months were considered as existing part-time employees, while employees with tenure less than 12 months were considered new. This estimation does not take into account switching from full-time to part-time employment.

Table 2 - Part-time employees

 

At start of financial year 2018-19 (‘000)

Retail Trade

new part-time employee

51.7

existing part-time employee

126.6

Accommodation and Food Services

new part-time employee

99.7

existing part-time employee

139.0

Combined

new part-time employee

143.3

existing part-time employee

265.2

Source: ABS Characteristics of employment , August 2019 and ABS Employee Earnings and Hours, May 2018.

Option one - Status quo

Maintaining the status quo will mean that employer concerns about the practicality of the application of existing award provisions relating to additional hours will remain un-resolved. Without the ability to easily interpret and apply these award provisions, employers are unlikely to use them due to their inherent limitations. This barrier to using award flexibilities prevents part-time employees from receiving the opportunity to work additional hours. They may also provide perverse incentives to favour offering casual over part-time employment.

Administrative costs

In-scope administrative costs relevant to the maintenance of a business includes the time taken for business and employees to understand and comply with existing provisions in awards. As outlined above, the existing part-time flexibility award provisions can be complex to navigate. The Department assumes that an employer or part-time employee will take 30 minutes to understand and implement their existing award provisions. The Department also estimates that of the relevant businesses, 20 to 50 per cent have attempted to use part-time flexibility provisions. [22]

Table 3 show the total administrative burden associated with the continual compliance with existing award provisions, ranging between $5.6 million (based on 20 per cent usage rate) and $14.1 million (based on 50 per cent usage rate) over ten years.

Table 3 - Estimated regulatory cost of option 1 (status quo)

Item

Calculation*

Cost $

Year 1 - 10 (per year)

Businesses - New award-reliant businesses

Unit labour cost x 0.5 hour x

Number of new award-reliant businesses x

Rate of use of part-time flexibility in awards

 

$73.05 x 0.5  x 14,381 x ( 0.2 and  0.5 )

$105,052 -

$262,629

Employees - New part-time award-reliant employees

Unit labour cost x 0.5 hour x

Number of new part-time employees x

Rate of use of part-time flexibility in awards

 

$32.00 x 0.5 x 143,300 x ( 0.2 and  0.5 )

$458,560 -

$1,146,400

Total over 10 years

 

$5.6 million -

$14.1 million



*Employee and business numbers are from the data in table 1 and table 2.

  $ Costs are expressed as a range depending on take-up (20% - 50%).

Option two

Option two is to provide a more viable option in order to facilitate mutually-beneficial arrangements between employers and employees. Simplified and uniform provisions will also reduce the amount of time it might take for an employer or employee to understand their rights and obligations.

Business impact

This option would provide a uniform approach across awards in these industries under which employers could offer part-time employees additional hours at their ordinary rate of pay where certain overtime rates would otherwise have been triggered. This option:

·          provides additional flexibilities that take into account the operational realities in modern workplaces, including those which involve customer service,

·          introduces consistency of available mechanisms to manage the hours of part-time employees across awards, and

·          is expected to support Australia’s economic recovery by increasing hours worked.

The hourly wage cost for employing a casual employee is generally higher than employing an equivalent full-time or part-time employee due to the casual loading. This option not only encourages the attractiveness of using part-time employment, it also removes a major disincentive to engage part-time employees: rigid and inflexible award provisions and concern about making inadvertent errors as a result of potential ambiguity.

Employee impact

This option is supported by a number of important safeguards to ensure employees are not exploited or coerced into unwanted arrangements, including:

·          allows employees who wish to work additional hours at ordinary rates an clear mechanism to do so, resulting in an increase in their take home pay,

·          creates an explicit right to refuse to enter into an additional hours agreement with an employer, and

·          protects the right of employees to receive overtime where they are directed by their employer to do so.

Further, under this option, for these additional hours worked, employees would:

·          accrue annual leave, personal leave, and superannuation contributions (contrast with normal overtime hours, where these entitlements do not accrue),

·          continue to receive overtime payment should the hours exceed the maximum hours contained in the award, and

·          continue to receive penalty rates and other payments that would apply for those hours worked.

Administrative costs

Where there is agreement between an employer and part-time employee, this option alters arrangements relating to wage entitlements as well as superannuation contributions and leave accruals for additional hours worked. These are outside the regulatory cost framework. In-scope regulatory cost would include the time taken for businesses and employees to understand and comply with the legislation.

The Department assumes that the new simplified, uniform provisions would take 15 minutes to read, understand and implement. It is expected the part-time flexibility provisions under this option will be viewed as more efficient and usable than the existing award provisions, while those employees who want more hours are more likely to agree to these arrangements. The usage rate of the provisions will therefore be higher than option 1, ranging from 40 to 60 per cent, with the corresponding estimated regulatory cost ranging between $6.6 million and $9.9 million (Table 4).

Table 4 - Estimated regulatory cost - Option 2

Item

Calculation*

Cost $

Year 1

Businesses - Award-reliant businesses

Unit labour cost x 0.25 hours x

Number of award-reliant businesses x

Rate of use of new legislated provisions

 

$73.05 x 0.25 x 90,425 x ( 0.4 and  0.6 )

$660,553 -

$990,830

Employees - Part-time award-reliant employees

Unit labour cost x 0.25 hours x

Number of part-time employees x

Rate of use of new legislated provisions

 

$32.00 x 0.25 x 265,200 x ( 0.4 and  0.6 )

$848,640 -

$1,272,960

Years 2-10 (per year)

Businesses - New award-reliant businesses

Unit labour cost x 0.25 hours x

Number of new award-reliant businesses x

Rate of use of new legislated provisions

 

$73.05 x 0.25 x 14,381 x ( 0.4 and  0.6 )

$105,052 -

$157,578

Employees - New part-time award-reliant employees

Unit labour cost x 0.25 hour x

Number of new part-time employees x

Rate of use of new legislated provisions

 

$32.00 x 0.25 x 143,300 x ( 0.4 and  0.6 )

$458,560 -

$687,840

Total

Year 1 + 9 x (Years 2-10)

$6.6 million -

$9.9 million

*Employee numbers are from the data in table 1 and table 2.

  $ Costs are expressed as a range depending on take-up (40% - 60%).

Option three

Option three would have an effect on the same cohort of employers and employees as option two. An employer seeking to apply option three would be engaging an employee in a new form of work (Flexible Part-Time), meaning that the existing part-time provisions of awards would not apply to them. Significant variation in affected awards may be necessary to fully accommodate this new type of part-time employees in the award system.

While we note award variations made by the Fair Work Commission generally are outside of scope of regulatory cost framework, this option could result in an entirely new section in these awards, a considerable increase in the length of awards, and mechanisms created to distinguish regular part-time employees and Flexible Part-Time employees. Further, interaction with other provisions in the awards would also need to be carefully examined by the Commission to eliminate any unintended consequence. For these reasons, stakeholders would prefer the certainty of option two.

While option 3 creates a new form of work, complexity is consequential to the legislation which is in scope under the regulatory cost framework. Administrative costs associated with understanding and applying the new legislative provisions are estimated to be same as option two.

Consultation

On 11 June 2020, the Australian Government commissioned five working groups to consider how to improve the operation of the industrial relations system, one of which related to award simplification. The purpose of the Award Simplification Working Group was to simplifying the award system in key distressed sectors, especially for small businesses. This working group met formally six times and engaged nine third-party experts to inform their work.

Membership of the working group

·          Employer organisations : Australian Chamber of Commerce and Industry (ACCI), Australian Industry Group (Ai Group), Council of Small Business Organisations Australia (COSBOA), Australian Hotels Association (AHA), National Retail Association (NRA).

·          Unions : Australian Council of Trade Unions (ACTU), United Workers’ Union (UWU), Australian Workers’ Union (AWU), Shop, Distributive and Allied Employees’ Association (SDA).

The consultations undertaken as part of the working groups were held in-confidence to promote increased cooperation between parties. While parties had varying assessments of the level of complexities and flexibilities in the award system, it was generally acknowledged that the need to support business and job creation post-COVID and additional flexibilities to business must be balanced with strong safeguards to protect employee entitlements.

Preferred Option

Award complexity is a long-standing issue and there have been successive attempts to simplify and refine the award system over time. Despite these efforts there is broad acknowledgement that system usability and complexity needs further reform. [23] Option two (the preferred option) makes changes consistent with concurrent government reforms to the industrial relations system by ensuring that the reforms are targeted and proportionate.

Employers advise that the current situation materially impacts on the flexibility of business operations and the opportunity for part-time employees to gain more hours. The status quo does not recognise the reality of contemporary employment practices, and it imposes unnecessary complexity to business operations caused by businesses needing to navigate various provisions in the award to identify a pathway. Providing uniform and streamlined provisions will improve the ability for employees to understand their rights and lower the transactions costs for businesses in their day-to-day management of their workforce.

Simplification of the award system is a necessary and ongoing process. The award system requires continual refinements to ensure its operation promotes flexible modern work practices and the efficient and productive performance of work. The status quo is not meeting this objective in respect to part-time employment, and this is why the status quo is not the preferred option.

While option three would largely achieve the same objectives, it represents a disproportionate response to the problem that may necessitate significant and unwarranted variation in awards to accommodate a new statutory form of employment. 

By comparison, option two represents a proportionate response to a known problem. It provides relevant and material benefit for economic recovery, without introducing further unnecessary complexity into the award system. The consistent and streamlined process would reduce administrative burden imposed on employers and employees.

Acknowledging the continuing role of the Fair Work Commission in setting pay and conditions in awards, this option would only introduce part time flexibilities into awards in the hospitality and retail industries. This measured step gives primary focus to award reliant business in priority industries, but also demonstrates a workable model to address complexity, inconsistency and inflexibility in the awards system.

In contrast to the status quo, after taking into account an anticipated higher rate of employers using these provisions, the overall net regulatory saving is estimated to be up to around $4 million over 10 years.

For reasons outlined above, option two is the preferred option.

Implementation and Evaluation of Options

Implementation of the preferred option will require legislative amendments to the Fair Work Act.

Implementation risks

The most significant risk to successful implementation is that the necessary legislative amendments may not obtain passage through Parliament. The risk to legislative passage has been partly addressed through the industrial relations reform consultation process, which involved extensive consultation with key stakeholders.

The preferred option also carries the risk that drafted provisions will have unintended effects when applied to each of the identified awards. As awards construct part-time employment, ordinary hours, rostering and overtime in different ways, there is the possibility that some permutation of a part-time employment arrangement will not operate as intended. This risk will be mitigated by providing the Fair Work Commission with the power to vary awards where the legislated provisions create uncertainty or difficulty. This would ensure that the award can be varied to ensure effective integration with the legislation.

Transitional arrangements

The amendments will apply prospectively to employment relationships where the employee is engaged under one of the identified awards. The amendments may change existing arrangements but this could only be done with the agreement of the employee. Existing arrangements will also be preserved. There will be no requirement for specific transitional arrangements.

Monitoring and evaluation

Consultation on the operation of the provisions will be undertaken through the regular meetings of the National Workplace Relations Consultative Council (NWRCC). The NWRCC is a forum for employer and employee representatives to consult on workplace relations and labour market matters of national concern, and meetings are chaired by the Minister for Industrial Relations.

Data is currently not collected concerning the use of specific industrial relations provisions at the award level. The level of specificity required to undertake a reliable quantitative analysis of the impact of option one is not feasible. Therefore, overall evaluation of the provisions will be undertaken through forums established for the purpose of consulting with industrial relations stakeholders.

The Government recognises that there are multiple forms of work in Australia and they provide meaningful employment suited to individuals circumstances. The purpose of this reform is to ensure that employers and employees have better choice in the type of employment they use. This is difficult to evaluate in its own right. 





The problem

The enterprise bargaining system aims to support businesses and employees to tailor their working arrangements to their unique circumstances. The system provides an incentive for employers, employees and unions to pursue more productive ways of working in exchange for higher wages and better conditions for employees. This bargaining system, governed by the Fair Work Act 2009 (Fair Work Act), is no longer working effectively and is in decline—fewer businesses are making new enterprise agreements or renegotiating them upon their expiry, and fewer workers are covered by them.

Decline in enterprise bargaining

The enterprise agreement system has evolved since its introduction in 1993 through legislative amendments and case law. The Attorney-General’s Department Workplace Agreements Database (WAD) has recorded the decline in the number of new agreements made from 2014 onwards, with only around half as many new agreements made in 2019 as were made in 2014.

Chart 1 shows that enterprise bargaining and coverage steadily increased from 1996 to 2008 while businesses moved into the bargaining system (Phase 1). From 2008 to 2012, there was a spike in new agreements as employers sought to either ‘lock in’ agreements under the Workplace Relations Act 1996 or move to agreements made under the Fair Work Act (Phase 2). While coverage remained relatively steady between 2012 and 2014, a decline in new agreements made was recorded from 2014 onwards (Phase 3).  The increasing number of employees covered since the start of 2018 is due to many large agreements, particularly in the Retail Sector but also in the Education and Higher Education Sectors, which were renewed after the parties had used their nominally expired agreements for an extended period of time.

Chart 1: Current (not expired or terminated) federal enterprise agreements and employees covered - June 1996 to December 2019 [24]

 

There are many possible reasons for this decline, including:

·          employers and employees choosing not to replace existing agreements

·          the procedural complexity and the technical nature of the system

·          cost and perceptions around delays in obtaining approval of agreements, including the potential for protected industrial action [25]

·          employers who are inclined to bargain have already done so (meaning there may be relatively few employers interested in bargaining that don’t already have an agreement), and

·          declining union membership.

According to the Australian Bureau of Statistics (ABS), the proportion of employees covered by enterprise agreements has decreased from its historical peak of 43 per cent in 2010 to 38 per cent in 2018. Over the same period, reliance on modern awards [26] (which outline the minimum pay rates and conditions of employment in certain industries or occupations) to set employees’ wages and conditions of employment has increased from around 15 per cent to 21 per cent.

As shown in Chart 2 enterprise agreements remain the dominant industrial instrument, setting wages and conditions for the highest proportion of workers (despite the current decline in bargaining). In May 2018,

this accounted for an estimated 4 million people, half of whom were on current (in-term) agreements and half of whom were on nominally expired agreements. [27] This data is not able to distinguish between whether pay was set under an in-term/active or nominally expired agreement [28] and only captures information on the industrial instrument which sets an employee’s pay. However, it is clear that the decline in the number of employees covered by enterprise agreements has resulted from the reduction in new or renegotiated agreements being made and approved.

Chart 2: Pay setting mechanisms in Australia, May 2018 [29]

A large number of employees have their pay and conditions set by nominally expired agreements which have not been replaced—indicating that parties are choosing not to bargain. Others have individual agreements which build upon the relevant award, perhaps through company policies, to provide more favourable pay and conditions—indicating this may be easier and more preferable than making an enterprise agreement. Individual agreements may also be more attractive to parties as policies can be adjusted more easily and remain subject to managerial prerogative. Chart 1 demonstrates that the decline in employees covered by enterprise agreements has come from the reduction in new or renegotiated agreements being made and approved.

This is particularly the case for small enterprises, where over 74 per cent of agreements that nominally expired in 2018 were not replaced. Replacement rates are also low for medium and large businesses—49 per cent of medium and 33 per cent of large businesses have not replaced enterprise agreements that nominally expired in 2018. The industries with the highest non-replacement rate are Accommodation and Food Services (86.4 per cent not replaced) and Retail Trade (83.3 per cent not replaced). [30] Enterprise agreements are a vehicle for enhancing labour productivity and innovation because they allow the parties to agree to greater flexibility than exists under awards, improving the allocation of resources within firms. Historically, enterprise agreements have delivered equivalent, or higher, wage increases than the economy-wide Wage Price Index, as shown in Chart 3.

 Chart 3: Yearly Average Annualised Wage Increases (AAWI) and Wage Price Index (WPI) [31]

Note:

·          AAWI is an estimate of the average annualised wage increases and is based on those federal enterprise agreements that provide quantifiable wage increases over the life of the agreement. AAWI calculations thus exclude agreements where wage increases cannot be quantified, for example they are linked to future events (such as each FWC Annual Wage Review).

·          For WPI, the December quarter result has been used as the point of comparison with the AAWI Increases for All Agreements

·          Data for 2020 is to 30 June 2020 (latest available data).

On average, employees working under a collective agreement also receive higher wages than those working under the relevant modern award, as shown in Chart 4.

Chart 4: Average weekly earnings of all employees by employment instrument [32]

Method of pay

Avg. weekly earnings

(FT and PT)

Award only

$788.80

Collective agreement

$1,331.20

Individual arrangement

$1,506.50

Owner managers

$1,486.00

Unnecessary complexity

At the highest level, there is concern from some employers that enterprise bargaining under the Fair Work Act is too focused on process and meeting technical requirements, rather than the end goal of making a mutually beneficial agreement in a timely way.

Much of the complexity in the bargaining system arises from prescriptive legislative requirements under the Fair Work Act, many of which exist to ensure employee rights are protected during the enterprise bargaining process. [33] For example, when an employer agrees to bargain or initiates bargaining for an agreement, it must take all reasonable steps to give their current employees, will be covered by the proposed enterprise agreement, notice of their right to be represented by a bargaining representative. The form and content of this Notice of Employee Representational Rights (NERR) is prescribed by the Fair Work Regulations 2009 (the regulations) and it must be provided as soon as practicable, and not later than 14 days after the notification time (which is when the employer initiates, agrees or is required to bargain). [34]

In some historical matters, applications to approve agreements were dismissed by the Fair Work Commission (FWC) as the content or form of the NERR did not match that prescribed in the regulations or the NERR was issued after the 14 day timeframe—this meant parties would have to repeat parts of the agreement making process. [35]

Similarly, many employers argue that the prescriptive genuine agreement requirements create too much opportunity for error and are unnecessary to achieve the purpose of the requirement, which is to ensure that employees are fully informed about the agreement they are voting on and they are not misled in the process. An enterprise agreement is taken to be genuinely agreed to by the employees it covers if the FWC is satisfied, among other things, that the employer complied with the pre-approval steps for the agreement (that is, the employer took all reasonable steps [36] to explain the terms of the agreement and their effect, notified the employees of when and how to vote and provided a copy of the agreement and any other material incorporated by reference), [37] and there are no other reasonable grounds for believing that the agreement has not been genuinely agreed to by the employees. [38]

Issues at the approval stage and increasing concern from some employer stakeholders has led to uncertainty about the scope of the genuine agreement requirement, even where employers try to act in compliance with the requirements. [39] This extends to matters as important as determining which employees may be eligible to vote on a proposed agreement, which can be challenging for businesses and industries that have a large casual workforce, some of whom may be ‘on the books’ but have not worked during negotiations for, or engaged during the access period in respect of, a new agreement. For example, in one matter the employer was unsure how to determine which employees were eligible to vote on a proposed agreement. [40] With over 21,000 casual employees of a total workforce of over 32,000, the agreement was challenged for both casting the net too wide—allowing casuals to vote that had not worked a shift recently enough—and casting the net too narrow—not allowing certain employees engaged during part of the voting period to vote. This issue caused the application to be dismissed just under 9 months after it had it been lodged with the FWC (and over 2 years since bargaining had begun). While this decision was later quashed by a Full Bench, this initial interpretation prompted the withdrawal of another major enterprise agreement covering over 106,000 employees, the majority being casual employees. [41]

Numerous reviews [42] have found that the agreement making and approval process can be complex, cumbersome and highly technical, resulting in process delays. This may also be a factor inhibiting effective relationships between employers and employees, in turn leading to adversarial relationships, disputes and mistrust.

In an attempt to address some of the concerns about complexity and unnecessary prescription in the Fair Work Act, amendments passed in December 2018 provided the FWC with ability to approve enterprise agreements despite minor procedural or technical errors made in relation to the requirements concerning genuine agreement (including the NERR), provided the error was not likely to have disadvantaged employees. [43] Any disadvantage experienced by employees must relate to the procedural requirements relating to reaching a ‘genuine agreement’ or the requirements relating to the NERR, rather than the substance of those requirements. It may be necessary to consider the particular circumstances of the employees concerned at the time the error occurred and the impact of the error on the subsequent course of bargaining, including any steps taken by the employer to address the adverse impact of the non-compliance. [44]

The 2018 amendments have, to some extent, addressed the problems identified above. As of

13 November 2020, the FWC has approved approximately 325 agreements that were affected by minor procedural or technical errors which were not likely to have disadvantaged employees, for which it would previously have needed to refuse approval. The FWC has found that an error was not a minor procedural or technical error only 18 times since commencement of the 2018 amendments.

While these figures indicate that the 2018 amendments have positively impacted on the approval of enterprise agreements when parties have made a minor procedural or technical error, the agreement making process is still uncertain and prolonged, as the FWC needs to undergo an additional assessment about whether an error falls within that category and may have affected agreement approval. If agreement approval is delayed, this may also impose additional costs on an employer and employees.

Approval tests and process delays

The most consistently raised issue by employers in enterprise bargaining is the application of the better off overall test (BOOT) by the FWC. The BOOT is the key mechanism in enterprise bargaining to safeguard employee wages and conditions. It requires that each award covered employee and each prospective award covered employee would be better off overall if they were employed under the agreement, rather than under the relevant modern award. [45]

However, both the 2012 Post-Implementation Review of the Fair Work Act and the 2015 Productivity Commission Inquiry into the Workplace Relations Framework noted issues with the application of the BOOT which made it substantially more difficult to apply, and discouraged agreement making. [46] The Productivity Commission also found this discouraged innovation and caused businesses to retain inefficiencies for fear of failing an unclear test. [47] The views expressed in both reviews are supported by anecdotal evidence from employers.

The BOOT was intended to be an 'on the papers' assessment of the pay and entitlements of an agreement and was designed to ‘simplify agreement processing’ by avoiding ‘complicated assessment procedures’ as well as the need for undertakings in most circumstances. [48] Undertakings [49] may be required where the FWC has concerns that an enterprise agreement does not meet approval requirements and are binding on the employer.

More recently, concerns have been raised that the BOOT is being applied as a forensic, clause-by-clause assessment against the relevant award, [50] rather than a more global test against the award, weighing up the monetary and non-monetary elements of the agreement. [51] Assessment of monetary and non-monetary elements can be a complex process. Generally, monetary benefits will include any benefits which provide a financial benefit to employees. This could include, for example, rates of pay, penalties, allowances and redundancy entitlements. Often more challenging to quantify, non-monetary elements such as access to workplace flexibility in hours or location, certain leave types (i.e. for volunteering or being a blood donor), counselling or support services and diversity programs, are nevertheless very important for employee welfare. As well as calculating monetary and non-monetary benefits, the FWC must also consider the relative value of any enhancements that are likely to be contingent on employee circumstances. For example, enhanced redundancy is a monetary benefit that is contingent on an employee being eligible for redundancy, and so will hold lower value than enhanced annual leave entitlements. Contingent non-monetary benefits will also carry lower weight in assessment. 

The FWC may also choose to assess agreements for all hypothetical scenarios covered by the relevant modern award, even where it may not be relevant to the patterns or kinds of work of the enterprise. An example was provided of an enterprise agreement for a stationery and office supply retailer where undertakings were sought by the FWC relating to service of alcohol, despite these not being relevant to the enterprise. [52]  

The FWC’s current approach has seen a rise in the number of agreements requiring undertakings generally, including to address non-compliance with the BOOT. From 2013 to 2017, the proportion of agreements approved with undertakings increased from 22 per cent to 70 per cent, declining to 63 per cent in July to December 2019. In respect of BOOT non-compliance, in 2019, 77 per cent of the undertakings in agreements approved by the FWC related to conditions, which includes compliance with the BOOT. While an agreement can have multiple undertaking types, which are not exclusive of each other, conditions-related undertakings have been the most common type of undertaking sought each year since 2015. [53]

A more forensic approach to interpretation of the BOOT makes the process more complex, lengthy and challenging for parties, and may, ultimately, discourage engagement in the agreement making process. In some circumstances, it is also denying work arrangements agreed to, and even preferred by, employees and employers. For example, in determining whether employees would be better off overall under an agreement with loaded rates of pay, the FWC Full Bench has expressed this task may be particularly difficult in respect of casual employees who could be engaged to work at any given point in time that would attract additional penalty rates. [54] For instance, in a recent case, an agreement approved by over 76 per cent of employees and the main employee union (which included pay rises and improvements to penalty rates) was eventually withdrawn for approval by the employer because of the ‘never-ending cycle of review and bargaining’ to make the agreement fully compliant with the BOOT. [55]

The BOOT is not the only matter in respect of which the FWC can and does seek undertakings. For example, the FWC often requires undertakings regarding compliance with the National Employment Standards (NES). [56] While the Fair Work Act requires the FWC to be satisfied that an agreement does not include terms that would exclude the NES at the agreement approval stage, it also provides that a term of an agreement has no effect to the extent that it excludes the NES. [57] A 2019 review by the FWC of 421 agreements identifying common trends and issues in a sample of agreement matters found NES inconsistencies to be the second most common issue affecting applications, at 38 per cent. [58] Undertakings require parties to provide additional assurances and paperwork to the FWC. In 2019-20, the median calendar days was 46 days for all agreement with undertakings, almost three times the median time to approve all agreements without undertakings (17 calendar days in 2019-20).

As an agreement only comes into effect once the FWC approves it (or at a later date specified in the agreement), stakeholders have raised concerns about the amount of time this process takes. Delays in the approval process can affect delivery of agreed pay increases for employees and result in uncertainty for employers, hampering their ability to plan for labour costs and patterns of work. [59] This makes employers more inclined to disengage from the process, which in turn has a negative impact on workplace cooperation and adds to the overall decline in bargaining.

For example, in one matter, it took more than 2 years from the commencement of bargaining, and just under one year from lodgement with the FWC, for an agreement to be approved. In this matter, full hearing and appeal rights were exercised before the FWC. [60] During this period, approximately 32,000 employees remained on a nominally expired 2012 agreement which left them worse off than if the new agreement had commenced more quickly.

The above example illustrates that despite an agreement being supported by the vast majority of employees, the employer and the relevant union, the approval process can be delayed by individuals and unregistered organisations who challenge the approval of the agreement on highly technical grounds. The lengthy period it took the FWC to determine this matter, including the Full Bench’s decision to ultimately approve the agreement, raises questions about whether a more streamlined approval process could result in quicker approvals, while maintaining important protections currently built into the system.

While each application to approve an enterprise agreement is different, and some involve more complex operations or wage structures for the FWC to consider, a frustration for bargaining parties is the perception that the FWC does not communicate why delays happen nor facilitate timely approval. [61] According to the FWC’s triage teams, common reasons for longer approval times are incomplete applications for approval (requiring further information), possible non-compliance or high complexity.

In practice, while there is currently no standard timeframe to deal with an application to approve an enterprise agreement, the FWC sets timeliness benchmarks through its annual Budget Papers to indicate expected timeframes for parties in the majority of cases. In 2019-20, these internal benchmarks were for 50 per cent of all simple applications (being applications which are submitted decision ready) to be finalised within 3 weeks, and 100 per cent in 8 weeks. Complex applications (all other applications, including those that require undertakings or follow up after lodgement) had an internal benchmark of 50 per cent finalised in 10 weeks and 100 per cent in 16 weeks.

While the FWC’s approval times have improved since 2018-19, [62] data for the period of 1 July 2019 to 31 December 2019 shows that the median time for the FWC to approve all agreements was 37 days. [63] However, as per Table 5, in 2018-19 the median number of days for the FWC to approve single-enterprise agreements with undertakings was 122 calendar days, over 3 times longer. [64]

Table 5: Timeliness of approval of agreements with and without undertakings [65]

Agreement type

Proportion of approvals

Time to approve without undertakings (median calendar days)

Time to approve with undertakings (median calendar days)

2018-19

2017-18

2016-17

2015-16

2018-19

2017-18

2016-17

2015-16

Single-enterprise agreements

95%

34

32

15

15

122

93

48

27

Multi-enterprise agreements

1%

86

69

22

21

145

115

101

28

Greenfields agreements

4%

17

32

13

11

48

54

43

21

 

Delays in the approval process can be exacerbated by the FWC’s power to inform itself in relation to any matter before it in such a manner as it considers appropriate. [66] In agreement approval hearings, this can include hearing from parties who are not parties to the agreement but may have relevant information, such as industry specific information. While it does not keep data on the number of applications for intervention by such parties at the agreement approval stage, the FWC notes the experience of senior FWC Members is that a ‘non-party’ would intervene in less than 2 per cent of matters, with the percentage being slightly higher in the construction sector.

Analysis of the requests by unions and third parties to view the forms submitted with an application—often, but not always, a preliminary step to seeking to intervene—shows that there were approximately 177 requests in 2019-20. Many of these will have resulted in no further action. Analysis of decisions issued shows that in only 36 agreement-related decisions issued in 2019-2020, reference was made to a party intervening, noting that some Members do not make explicit reference to involvement of a third party in their written decisions.

While noting the above, when a third party intervenes in the agreement approval process, the impact on the approval process can be significant and leave employees and employers in limbo despite months or even years of bargaining for better conditions. As an example, following over 3 years of bargaining, despite a significant majority vote in favour of the proposed agreement (76.7 per cent) and union support for the agreement, a third party lodged a submission with the FWC opposing approval. This led to a protracted approval process and a hearing where both the supporting union and third party argued for different undertakings to further improve entitlements. More than 8 months after lodging, the employer chose to withdraw its application for approval without resolution. The supporting union indicated disappointment as they argue the majority of employees would have been better off, and the employer has indicated it did not want to spend any more time on a ‘never-ending cycle of review and bargaining’. Consequently, over 35,000 employees who were to be covered by the proposed agreement are still covered by the 2013 enterprise agreement which expired in 2016. [67]

Other problems

The continuing preservation of agreements made under previous workplace relations laws, or legacy agreements, is also a known problem of the current system, potentially harming employee interests and fair market competition between employers. Of particular concern are legacy agreements made under the former Workplace Relations Act 1996 or other predecessor legislation that have been preserved under the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 . Legacy agreements can disadvantage workers because, while their rates of pay need to equal the base rates of pay in relevant modern awards, other conditions such as penalty rates and casual loadings do not need to meet award standards. Employees are often unaware they are receiving less than the terms and conditions in a relevant modern award and workers such as young people and migrant workers are the most vulnerable in this regard. As legacy agreements continue to operate until replaced or terminated, they can also provide an ongoing unfair competitive advantage to employers using them to pay lower labour costs than the award.

There are many reasons why parties may not choose to replace a legacy agreement. For employers, as noted above, there can be cost reasons for doing so, including for those who regard their agreement as ‘good enough’, and will opt to merely provide wage increases for employees to maintain conditions. For employees, there may be a lack of familiarity with the process involved in terminating an agreement. [68] For unions, there may not be an incentive to apply to terminate an agreement, or start bargaining for a new agreement if the employer is not inclined to make a new agreement, as the process may be very drawn-out and ultimately harm employees if they were to revert to inferior wages and conditions under a modern award.

There are also concerns about employers seeking to terminate agreements during bargaining, which may affect the dynamics of bargaining between employers and employees. While enterprise agreements are not intended to operate forever and may be terminated in some circumstances, union stakeholders have alleged that some employers threaten or apply to terminate existing enterprise agreements during bargaining, as a means of shifting the bargaining power in their favour, and that this undermines a fair and genuine agreement making process. [69] Although no hard evidence for the scale of the problem exists, the perception of the problem strains confidence in the system.

There is evidence that the framework is too inflexible in other areas, preventing employers from using simple and common sense approaches to make and vary agreements, and therefore minimise costs and streamline processes. One example is requiring new franchisees to negotiate their own agreement with employees, when it may be more efficient and effective to join an existing single enterprise agreement that covers an existing group of employers operating under the same franchise (made under a single interest employer authorisation).

Another example of the unnecessary process for employers is a requirement to seek an order from the FWC to stop the transfer of an industrial instrument, even when employees initiate the transfer to an associated entity of their employer. Having multiple enterprise agreements for employees at an enterprise may complicate operations and increase labour costs for the business, and should not be necessary where an employee voluntarily agrees to the transfer. Particularly following the recent COVID-19 pandemic, these additional costs and time delays are unnecessary for the efficient operation of productive business.

The need for government action      

The bargaining system requires reform to re-enliven it, to encourage employers and employees to bargain and make new agreements, and provide incentives for productive and innovative ways of working. Effective reform should be geared to addressing the problematic elements of the current system, as outlined above.

Informed by a number of independent reviews, stakeholder advice and most recently, stakeholder discussions and evidence submitted as part of the Industrial Relations Working Group process, [70] the Government has an opportunity to simplify legislative requirements and streamline FWC procedures aiming to reduce the red tape, complexity and timeframes currently impeding an efficient bargaining process.

Reducing regulation is a priority of the Government, particularly where it imposes an unnecessary burden on the population. The proposed reforms will reduce unnecessary burden, and create a bargaining system that is more attractive to employees, employers, unions and other representatives. The reforms will ensure that the bargaining system is easy to navigate, use and understand; reverse the decline in agreement making; and ultimately lift productivity, wages and promote better workplace relations.

The Coronavirus pandemic has caused significant disruption to the labour market

The COVID-19 pandemic has significantly impacted the Australian labour market. In September 2020, just under one million Australians were looking for work and 1.6 million Australians were receiving unemployment benefits including Jobseeker and Youth Allowance. [71] The seasonally adjusted unemployment rate was  6.9 per cent. This represents a slight decrease from the 7.5 per cent unemployment rate in July 2020, which was the highest unemployment rate experienced in Australia since 1998. Treasury forecasts in the 2020-21 Budget released in October are that the unemployment rate may reach 8 per cent by the end of 2020, before falling to 6.5 per cent by the June quarter of 2022 as economic activity recovers. Payroll jobs, where employees are entitled to receive pay from an employer, have fallen across most industries (excluding the electricity, gas, water and waste services, and the financial and insurance services industries). While the labour market has recovered since the depths of the COVID-19 pandemic in May 2020 (when the number of employed people was at its lowest), between March and October 2020, the number of accommodation and food services industry payroll jobs reduced by approximately 18 per cent, and in the arts and recreation services industry, payroll jobs have fallen by approximately 15 per cent. [72]  

This disruption occurred in a labour market that was already not performing at its peak

Even before COVID-19, labour productivity growth in Australia had been slowing, contributing to slower real wage growth. Average annual productivity growth in the market sector from 2015-16 to 2019-20 slipped to 0.7 per cent per annum compared with growth of 2.0 per cent on average over the past 25 years.

Treasury research shows that a significant cause of Australia’s declining productivity was a decrease in the number of people moving from low productivity firms to high productivity firms. [73] This kind of dynamism can lead to better job matching between employees and firms, better quality jobs with higher wages, and is associated with higher aggregate productivity . [74] The features of the industrial relations system are important for the operation of the labour market in Australia. While the Productivity Commission found no direct evidence linking productivity effect from industrial relations reforms, it noted that there is considerable ‘noise’ in productivity data and it is difficult to control for other factors. [75] Additionally, taking into account cyclical factors, there is evidence that higher firm productivity leads to higher wages. [76] Noting this, it is highly likely there is a link between the industrial relations system, labour market adjustment and productivity.

In this context, industrial relations reforms play an important role in improving productivity, and ultimately in supporting the growth of real wages and living standards in Australia. Enterprise bargaining is a vehicle for achieving this.

Stakeholders agree that reform is necessary

Stakeholders agree on the scale of the economic challenge facing Australia following the COVID-19 pandemic, and agree that the enterprise bargaining system requires reform in order to contribute to the economic recovery and job creation. However, while unions have publicly acknowledged that aspects of enterprise bargaining are not working effectively, they reject some of the specific claims regarding the system’s complexity and technicality. Unions argue that the prescribed and technical requirements in the system are essential to protect the rights and interests of employees and guarantee procedural fairness. While supporting the creation of more and better enterprise agreements with employees, unions argue that any options for reform must be carefully balanced against the need to ensure the system is fair. For employees, the decline in bargaining has negative implications for wages and conditions, workplace engagement and cooperation.

Employers, on the other hand, argue the complexity of the process and uncertain outcomes discourage engagement in enterprise bargaining. They argue that the system cannot deliver the benefits it intends because its procedural requirements deny parties negotiating flexibility and productivity gains through bargaining. These requirements dictate a process that is needlessly long, costly and may not result in agreement. In their view, using enterprise agreements as a mechanism to tailor productivity-enhancing workplace changes [77] and employment conditions is prevented by the current framework in the Fair Work Act.

Despite the varied stakeholder positions, there is a clear impetus for change and need to amend aspects of the bargaining system which are no longer fit for purpose. With this in mind, the objectives of enterprise bargaining reform are to:

  • encourage employers to engage in the bargaining system by improving policy settings to support parties to make new enterprise agreements
  • encourage more employers to renegotiate nominally expired enterprise agreements, and
  • over the longer term, contribute to labour market productivity improvements, increased workplace cooperation, flexibility and innovation, and improved wages and conditions for workers.

In the absence of reform, it is likely that the decline in enterprise agreements will continue. This will have enduring negative effects on productivity, innovation, and lower wages and conditions for workers.

Policy Options

The Government has considered a number of possible options to address those problems identified in the bargaining system. The options range from simplifying and streamlining current approval processes, to ensuring core concepts such as the BOOT and genuine agreement are simpler to apply, without undermining employee protections. Additional reforms to address concerns regarding perceived manipulation of the system are also canvassed. It is anticipated that the final, preferred reform package will either decrease or leave relatively static the overall regulatory burden for parties, and improve their experience of the system - particularly for employers who are new to enterprise bargaining. Discussion of the policy benefits and impacts of each option are outlined in the Net Effects section of this Regulatory Impact Statement. 

In addition to the regulatory reforms listed below, non-regulatory reform is being progressed in parallel to provide the FWC with additional resourcing for online guidance and an enterprise agreement approval application portal tool, to make the process simpler, more efficient and easier for users. The Office of Best Practice Regulation has assessed this proposal and found that it has nil regulatory impacts (OBPR ID 42986).

1. Objects

Option 1.1 - amend the objects of Part 2-4 of the Fair Work Act (preferred option)

This option would amend the objects of Part 2-4 of the Fair Work Act to highlight that enterprise agreements should, in addition to the existing objects (outlined under option 10.2 below), enable business and employment growth and reflect the needs and priorities of employers and employees. Amendments will also clarify that the FWC is to deal with approval applications in a timely, practical and transparent manner. 

Option 1.2 - maintain status quo

This option would not make changes to the objects included in section 171 in Part 2-4 of the Fair Work Act. Currently, the objects are:

  • to provide a simple, flexible and fair framework that enables collective bargaining in good faith, particularly at the enterprise level, for enterprise agreements that deliver productivity benefits, and 
  • to enable the FWC to facilitate good faith bargaining and the making of enterprise agreements, including through:
    • making bargaining orders,
    • dealing with disputes in where the bargaining representatives request assistance, and
    • ensuring that applications to the FWC for approval of enterprise agreements are dealt with without delay.

2. Notice of employee representational rights (NERR)

Option 2.1 - amend the Fair Work Act to extend the timeframe for issuing the NERR and clarify how it can be provided (preferred option)

This option would amend 2 specific aspects of the NERR under the Fair Work Act:

  • extending the timeframe in which the employer must give the notice from the current 14 days to 28 days, to give employers more time to comply with the requirement to give the notice and reduce the risk of agreements being challenged on technical grounds at the approval stage, and
  • providing that the FWC must publish on its website the prescribed NERR form that employers are required to provide to employees.

This will make compliance with the NERR requirements easier and reduce the likelihood of errors in both providing the NERR on time and correctly.

Option 2.2 - maintain status quo

The option proposes no changes to the current Fair Work Act requirement that after the ‘notification time’ for a proposed agreement (for example, when an employer agrees to bargain, or initiates bargaining for a new agreement), an employer must take all reasonable steps to give the NERR to each employee who will be covered by the agreement and is employed at that time, to inform them of their right to be represented by a bargaining representative. The NERR must be provided as soon as practicable, and not later than 14 days after the notification time. If it is not provided within the prescribed time, the agreement cannot be genuinely agreed to by the employees. Content of the NERR is prescribed by the regulations [78] and cannot contain any other content. Failure to comply with these requirements may mean the FWC is unable to approve the agreement.

3. Pre-approval requirements—genuine agreement  

Option 3.1 - reduce prescription and red tape in genuine agreement requirements (preferred option)

This option would replace the current pre-approval requirements that must be met for employees to have ‘genuinely agreed’ to the agreement with a broad requirement that the employer must take reasonable steps to give employees a fair and reasonable opportunity decide whether or not to approve the agreement.  The balance of ‘fair’ and ’reasonable’ is a necessary and appropriate safeguard for employees, taking into account the repeal of the prescriptive steps in previous subsections 180(2), (3) and (5).

This takes a purposive approach to the pre-approval requirements, while maintaining the protections they provide to employees when making an enterprise agreement. Employers would still be required to provide employees a fair and reasonable opportunity to decide whether or not to approve the agreement prior to any vote. What is a ‘fair and reasonable opportunity’ would depend on the particular circumstances of the workplace and may include seeking advice from their union. The FWC could take into account any explanation given by an employee organisation to the relevant employees, along with any other matter the FWC considers appropriate.

Option 3.2 - expand and clarify genuine agreement requirements

This option would expand and clarify the existing genuine agreement requirements to provide that:

  • employers can provide access to materials in paper or electronic form
  • employers do not need to provide employees with copies of documents referenced in the agreement which are available in the public domain
  • employers only need to explain the terms of any legislation or industrial instruments incorporated by reference in an agreement insofar as the agreement alters the effect of the terms in the legislation or industrial instrument, and
  • the FWC may take into account the extent of any differences between the proposed enterprise agreement and any previous enterprise agreements applicable to the employees.

Option 3.3 - maintain the status quo

This option would maintain the status quo in respect of genuine agreement, which requires the FWC to be satisfied that an employer has complied with a number of key steps, including provision of the Notice of Employee Representational Rights (NERR) [79] and that there are no other reasonable grounds for believing that an agreement has not been genuinely agreed upon. [80] The FWC may also be satisfied that an agreement has been genuinely agreed despite any minor procedural or technical errors made in the process, as long as the employees covered by the agreement were not likely to have been disadvantaged by the errors. [81]

 

4. Voting requirements

Option 4.1 - amend the Fair Work Act to clarify when a casual employee can vote for an agreement (preferred option)

This option would amend the Fair Work Act to provide certainty as to when casual employees are entitled to vote on an agreement. It would relevantly provide that a casual employee may vote to approve an enterprise agreement if they performed work at any time during the access period (which is the period of 7 calendar days before the day the request to vote is made). Casual employees who did not perform work at any time between the start of the access period and the time the request to vote is made would not be eligible to vote. This approach is based on relevant case law from the Full Court of the Federal Court and the FWC. [82]

Option 4.2 - amend the Fair Work Act to enable the FWC to overlook minor errors and omissions

This option would allow the FWC to overlook minor errors and omissions in calculating the cohort of casual employees invited to vote on an enterprise agreement. As already noted, the FWC already has the ability to overlook minor procedural or technical errors, so changing this to include minor errors or omissions is not likely to make a substantive difference in the operation of the requirement as it is broadly analogous.

What constitutes a minor error is dependent on the circumstances, the underlying purpose of the relevant requirement and the level of non-compliance. Generally, the lower the level of non-compliance the more likely it is to be characterised as a minor error.  For example, informing the employees of the time and place at which the vote will occur, and the voting method that will be used, [83] just after the start of the seven day access period specified in the Fair Work Act (for instance 6 days before the start of the voting process) is likely to be a minor error in most cases.

Option 4.3 - maintain the status quo

This option would make no amendments to the Fair Work Act regarding when casuals are entitled to vote on an agreement. As noted under option 4.1, the authority on when casuals can vote is established under case law, [84] with recent ‘genuine agreement’ cases having illustrated the difficulties users currently face in determining when casual employees are entitled to vote on an enterprise agreement. [85]

5. Better off Overall Test (BOOT)

Option 5.1 - combination of amendments to the BOOT (preferred option)

This option would amend the BOOT so that it:

  • limits the FWC’s ability to consider patterns or kinds of work to only those currently engaged in by award covered employees for the agreement, or are in any case reasonably foreseeable at test time
  • is made clear the FWC may have regard to the overall benefits (including non-monetary benefits) an employee would receive under the agreement compared to the relevant modern award
  • provides that the FWC must consider the views of employees and employers covered by the agreement about whether the agreement passes the BOOT, and
  • includes an additional provision (to sunset automatically 2 years from commencement) allowing the FWC to approve an agreement that did not pass the BOOT where it is not contrary to the public interest and it is appropriate to do so taking into account all the circumstances, including:
    • the views of the employees, employers and bargaining representatives for the agreement
    • the circumstances of those employees and employers and any employee organisations

      (for example, unions) covered by the agreement, including the likely effect that approving or not approving the agreement would have on them
    • the impact of COVID-19 on the enterprise to which the agreement relates, and
    • the extent of employee support for the agreement as expressed in the outcome of the vote to approve the agreement.

Option 5.2 - amend the BOOT to apply to classes or groups

This option would amend the BOOT to apply the test to specified classes or groups of employees, removing the requirement that it be applied as against each award covered and prospective award covered employee. For example, a class or group could include employees within the same classification or working the same roster pattern. 

Option 5.3 - maintain the status quo

This option would make no amendments to the current operation of the BOOT under the Fair Work Act. The BOOT currently requires the FWC to be satisfied that each employee and each prospective employee covered by a modern award would be better off overall under the enterprise agreement compared to the relevant award. [86] If a class of employees would be better off, the FWC is entitled to assume that an individual within the class would also be better off, in the absence of evidence to the contrary. [87] This generally allows a more practical application of the BOOT for the FWC, but does not remove the expectation that each award covered employee, and each prospective award covered employee, must be better off overall under the agreement. [88]  

6. National Employment Standards (NES) compliance requirements

Option 6.1 - amend the Fair Work Act to no longer require the FWC to be satisfied an agreement does not include any terms excluding the NES (preferred option)

This option would amend the Fair Work Act to remove the requirement that, when determining an application to approve an enterprise agreement, the FWC must be satisfied that the agreement does not contain any terms that contravene or undercut the NES. The Fair Work Act already provides that an agreement must not exclude the NES or any provisions of it, and that a term of an agreement has no effect to the extent that it contravenes the NES. This option removes an unnecessary procedural step with respect to NES compliance only.

Option 6.2 - amend the Fair Work Act to require agreements to include a term that explains the interaction between the NES and the agreement (preferred option)

This option adopts option 6.1 and requires an enterprise agreement to include a model NES interaction term, or would read one into an agreement that does not have one, to explain the provisions of the Fair Work Act that deal with the interaction between the NES and enterprise agreements. This is consistent with the advice currently provided in the FWC Enterprise Agreements Benchbook. [89] Where there is inconsistency between a term in the agreement and the NES, and the NES provides a greater benefit, the NES provisions will apply. If an enterprise agreement does not include the model NES interaction term, the model term is taken to be a term of the agreement.

The purpose of this amendment is to simplify the enterprise agreement approval process by avoiding the need for the FWC to examine each clause of an agreement to determine whether it is inconsistent with the NES. Instead, the FWC only needs to consider whether the agreement includes the model NES interaction term.

Option 6.3 - maintain the status quo

This option would make no amendments to the current requirements under the Fair Work Act that an enterprise agreement cannot contain a term that excludes the NES or any provision of the NES. It also provides that where there is an inconsistency between a provision in the agreement and the NES, the term that is more beneficial to the employee shall apply. Terms of an agreement that contravene the NES have no effect. [90]

7. Franchisee agreements

Option 7.1 - allow new franchisees to opt-in to existing single enterprise agreements made with a group of employers operating under the same franchise (preferred option)

This option would allow anew franchisee employer to apply to be covered by an existing single enterprise agreement that covers multiple employers that operate under the same franchise that are single-interest employers, such as under a single interest employer authorisation (for example, large fast food franchises). The option would not allow modification of the existing agreement.

Option 7.2 - maintain status quo

This option would make no amendment to existing provisions, which only allow a new franchisee employer to seek to be covered by a single-enterprise agreement before it is made. For example, the FWC can vary a single-interest employer authorisation to add another employer if each employer specified in the authorisation has agreed to the employer’s name being added and the requirements which deal with franchisees and employers that may bargain together for a proposed enterprise agreement are met. [91]   If an employer is not included in the authorisation, or is otherwise not a single-interest employer with the other employers before the agreement is made, it could make its own enterprise agreement with their employees. This agreement may be exactly or substantially the same as the existing agreement made under the single interest employer authorisation.

8. Terminating agreements after nominal expiry date (NED)

Option 8.1 - modify termination of agreement provisions (preferred option)

This option would make amendments to the enterprise agreement termination provisions of the Fair Work Act to provide that a unilateral application by a party to terminate an enterprise agreement after its NED cannot be made until at least 3 months after the nominal expiry date of the agreement. 

Option 8.2 - maintain status quo

This option would make no amendments to the termination of agreement provisions in the Fair Work Act, which provide that when an agreement has passed its NED, an employer, employee, or employee organisation covered by the agreement may apply to the FWC to terminate it. [92]  

9. How the FWC may inform itself

Option 9.1 - amend the Fair Work Act to restrict who can be heard by the FWC at agreement approval, and allow non-bargaining representatives to be heard in exceptional circumstances (preferred option)

This option would modify how the FWC can inform itself in relation to an application to approve an enterprise agreement or a variation of an enterprise agreement. The FWC could only inform itself in relation to such applications on the basis of information that is publicly available, and accept submissions and evidence from prescribed persons (generally, the parties involved in bargaining for an agreement). This would rectify unnecessary delays in the approval process caused by intervention from parties which were not party to the bargaining for the agreement. This option still allows the FWC to consider information from a party not involved in bargaining for the enterprise agreement, if the FWC is satisfied that there are exceptional circumstances that justify it doing so.

Option 9.2 - adopt option 9.1, but do not allow non-bargaining representatives to be heard in any circumstances

This option would adopt option 9.1, but would not permit non-bargaining representatives to intervene at the approval stage. Only the parties involved in bargaining for an agreement would have capacity or standing to make submissions to the FWC at this stage.

Option 9.3 - maintain the status quo

This option would make no amendments to the Fair Work Act regarding how the FWC may inform itself in regards to, and who is able to intervene in, agreement approvals. Currently, when determining an application to approve an enterprise agreement, the FWC may inform itself in any manner it considers appropriate. [93] The FWC can hear also submissions from persons not involved in bargaining.

10. Time limits for determining certain applications

Option 10.1 - amend the Fair Work Act to require the FWC to approve agreements within 21 days (preferred option)

This option would legislate that the FWC must determine applications to approve agreements within

21 working days, [94] as far as practicable. The FWC can determine an application to approve or vary an enterprise agreement after that time but it must, as soon as practicable, give written notice to specified persons, setting out why it was unable to determine the application during that period, including whether any exceptional circumstances exist. The FWC would also be required to publish the notice on its website.

This option is intended to be combined with the package of other preferred options, such as significantly reducing red tape and prescription for employers during the bargaining and approval processes and limiting intervention in the approval of agreements by non-bargaining representatives. As part of the package, this option will address problems concerning the timeframes for agreement approval by requiring the FWC to approve agreements within 21 working days, as far as is practicable.

Option 10.2 - amend the Fair Work Act to require the FWC to approve agreements within 14 days

This option would require the FWC to determine agreement approval applications within 14 days. Where this timeframe is not met, the FWC must provide explanation of the circumstances that prevented it from meeting this timeframe to the parties.

Option 10.3 - maintain status quo

This option would make no amendments to the Fair Work Act relating to the time taken by the FWC to determine agreement approval applications. While the Fair Work Act does not currently specify a particular timeframe during which approval must take place, the current objects of Part 2-4 of the Fair Work Act require the FWC to ensure that applications ‘…for approval of enterprise agreements are dealt with without delay.’ [95]

11. Transfer of business

Option 11.1 - amend the Fair Work Act to ensure instruments do not transfer for voluntary transfers of staff between associated entities (preferred option)

This option would allow an employee to transfer more easily to another business that is an associated entity where the employee initiates the transfer, without necessarily requiring the new business to take on the transferring employees’ industrial instrument. This would apply only when the employee seeks employment with the new employer at their own initiative—that is, for entirely voluntary moves.

Option 11.2 - exempt transfers of employees between associated business entities made in order to avoid redundancies

This option would allow employees to transfer more easily between businesses within associated entities where employees may be made redundant, without necessarily requiring the new business to take on the transferring employees’ industrial instrument.

Option 11.3 - amend the Fair Work Act to require FWC to consider the job or redundancy implications when considering whether to grant an order relating to a transfer of business, in the case of distressed businesses

This option would amend the statutory criteria the FWC must consider when determining whether to grant an order under section 318 of the Fair Work Act so that the FWC must also consider the job or redundancy implications. Orders under this section can be made that a transferable instrument will not apply to the new employment relationship, or that an instrument that covers the new employer will apply to the new employment relationship. Requiring the FWC to take into account the job or redundancy implications will be particularly relevant in the context of applications made under section 318 by distressed businesses.

Option 11.4 - maintain status quo

This option would make no amendments to current transfer of business provisions in the Fair Work Act, which deal with the transfer of enterprise agreements and other industrial instruments when a business transfers from one national system employer to another national system employer. The provisions seek to balance the protection of employees’ terms and conditions of employment under enterprise agreements and other industrial instruments, with the interests of employers in running enterprises efficiently.

12. Legacy Agreements

Option 12.1 - cease pre-Fair Work Act agreements by 1 July 2022 (preferred option)

This option would mean that agreements made prior to the commencement of the Fair Work Act and during the Fair Work Act ‘bridging period’ (between 1 July 2009 to 31 December 2009, before the commencement of the BOOT and modern awards) would automatically cease to set the terms and conditions of employees covered by those agreements by 1 July 2022. It would be open to the employer whose business operates under such an agreement to negotiate a new agreement or revert to the relevant modern award/s.

Option 12.2 - create a scheme for pre-Fair Work Act agreements to be re-approved by the FWC

This option would establish a transition scheme for employers with pre-Fair Work Act agreements and agreements made during the ‘bridging period’ by 1 July 2022. They would be able to resubmit the agreement to the FWC for approval, provided it still met necessary requirements under the Fair Work Act. It may also require current employees to vote to reapprove the agreement. After 1 July 2022, the agreement would have no effect, unless it had been transitioned under the scheme.

Option 12.3 - maintain status quo

This option would allow agreements made prior to the commencement of the Fair Work Act and agreements made during the ‘bridging period’, to continue to operate after they have nominally expired, by virtue of the Fair Work Act (Transitional Provisions and Consequential Amendments) Act 2009 . Employees employed under these agreements may be paid lower penalty rates or allowances than they would otherwise receive under the relevant modern award.

Net effects of policy options

1. Objects

Neither options 1.1 (the preferred option) or 1.2 would have any regulatory impact—while the objects in section 171 establish the broad purpose for agreement making, they do not directly impact the operative provisions in Part 2-4 which determine how agreement making occurs or how the FWC performs its functions under this Part. The FWC must take into account the objects and Parts of the Fair Work Act when exercising its powers and performing its functions, including in respect of determining applications to approve or vary enterprise agreements. While it may not make a substantive difference to the enterprise agreement system (absent other reforms), it would at the very least be an important optical reform that would influence how those functions and powers are exercised and on that basis would have significant merit. 

2. Notice of employee representational rights

Option 2.1 (the preferred option) would provide that the prescribed NERR form must be provided on the FWC’s website and would have small positive regulatory impact. Ensuring employers have a reliable source for the form will reduce uncertainty for employers when accessing the form, noting that employers are concerned an inadvertent error in the approval process (such as issuing the wrong version of the NERR) can require bargaining to recommence. It will address stakeholder concerns that the current NERR requirements are overly technical. It would also make engagement with the FWC for support in the bargaining process simpler, as it creates a logical first resource for employers and employees new to enterprise bargaining.

The other component of option 2.1 is that it gives parties more time to comply with the requirement to issue a NERR at the commencement of bargaining. This is a significant benefit as although the overall regulatory burden for employers does not change, in practice there is often confusion regarding when the notification period starts. Providing a greater window to alert employees that bargaining has commenced and that they have representational rights is not likely to harm their interests, but appropriately balances concerns from some employers that the current 14 day timeframe is challenging to meet.

While making no amendments to the NERR provisions (option 2.2) does not technically create additional regulatory impacts, it would not achieve the same net regulatory savings and net benefits as option 2.1. It also does not address persistent concerns about NERR requirements from stakeholders, outlined in the previous paragraphs.

3. Pre-approval requirements - genuine agreement

Option 3.1 (the preferred option) will minimise the current regulatory burden on users by reducing the current prescriptive requirements relating to genuine agreement [96] in the Fair Work Act and focusing instead on the substance of the requirements, which is to ensure that employees understand, and are able to participate in, the agreement making process and vote on a proposed agreement. This option would simplify the procedural steps employers must take in order to make an enterprise agreement and the matters the FWC is required to be satisfied of when approving an enterprise agreement. It will simplify the agreement making and approval process by reducing the likelihood that the FWC will not approve an agreement because of procedural errors concerning genuine agreement. This aims to increase user confidence in the system and make bargaining more appealing, particularly for small and medium enterprises (SMEs) and less sophisticated users. This option will provide employers with clear guidance to assist SMEs on how to comply with the requirements, while not prescribing exact steps or timeframes for most aspects of the process. Furthermore, this option may reduce the overall time taken to approve agreements, and limit delays in an agreement commencing.

While this option removes the prescription around the current genuine agreement requirements, it retains the legislative purpose of the requirement, meaning there is limited scope for employers to misuse the option. Employers will be required to take reasonable steps to ensure employees are given a fair and reasonable opportunity to approve the agreement or not - however they will have discretion to choose what is fair and reasonable based on their workplace and employees - for example, emails vs on-site meetings. The FWC must still be satisfied that employees have genuinely agreed before approval, and may request further information if needed. This is consistent with established case law. [97]  

Option 3.2 does not address the underlying issue with the genuine agreement requirements, namely that they are too prescribed. It maintains, and arguably adds to, the regulatory burden experienced by employers in meeting the genuine agreement requirements. It would clarify areas of particular concern for employers in respect of existing prescription, but would not make genuine agreement requirements simpler or reduce the likelihood of errors.

Employers argue that the status quo (option 3.3) is too prescriptive and more complicated than is needed, to ensure employees have genuinely agreed to a proposed enterprise agreement. This can, in turn, hamper effective and timely bargaining processes and approval—the level of prescription can leave otherwise fundamentally sound agreements open to challenge, delaying (and potentially preventing) their approval. [98]

Additionally, while the FWC has scope to overlook minor or technical errors, this can create uncertainty about whether an agreement will be approved, and a determination by the FWC may lead to future appeals. While the approval process will continue to involve a thorough examination of the proposed agreement, timely approval should not be hindered by minor or technical errors in an otherwise sound agreement which benefits both employers and employees. The net effect is a system which is less user friendly and more rigid than required. The current process creates a considerable compliance burden for employers, which may be reduced by a more purposive and less prescribed approach.

4. Voting requirements

Option 4.1 (the preferred option) would not increase the existing regulatory requirements, as users of the system are already required to act in accordance with applicable case law to ensure approval by the FWC. The proposed legislative amendments would instead clarify the requirements and provide certainty of process and criteria for employers and employees, reducing the current confusion and risk of non-approval and having to repeat the agreement making process. The amendments would provide greater clarity about which casuals are eligible to vote on an enterprise agreement, and improve the likelihood of accurate and authoritative votes occurring. The voting rights of casual employees would not be diminished as a result of this option; rather, it ensures the validity of those casual employees who do vote.

Option 4.2 is intended to lessen the regulatory impact of having to repeat certain steps for parties, however there would be no regulatory impact as it is effectively the status quo. It would clarify the requirements and provide certainty of process for employers and employees, reducing the current confusion and risk of having to repeat minor steps in the agreement making process, non-approval and/or having to repeat the agreement making process. It should be noted that the proposed legislative amendments of changing ‘minor procedural or technical errors’ to ‘minor errors or omissions’ in section 188(2)(a) are unlikely to substantively change the operation of the provision, as the phrases are broadly analogous.

Lack of clarity on when a casual employee is entitled to vote (as per the status quo in option 4.3 ) has resulted in uncertainty amongst employers and risk with determining which employees are entitled to vote an agreement. Anecdotal evidence was presented to the Agreement Working Group that some businesses have abandoned agreement making because of the ‘minefield’ caused by the lack of clarity on casuals.

5. Better off Overall Test (BOOT)

Option 5.1 (the preferred option) would make a suite of changes to streamline the BOOT, the net effect of which would be to make the BOOT simpler to apply whilst retaining key protections. Removing hypothetical scenarios would focus the BOOT on the realities of employment at the time the agreement is negotiated and lodged with the FWC, ensuring that it is fit for purpose in respect of patterns or kinds of work, or types of employment, that exist at the time the agreement is made or are reasonably foreseeable to employers. Examples of reasonably foreseeable circumstances may include Christmas casuals for department or retail stores, and seasonal fruit pickers in horticulture. This would be in contrast to unlikely or unrealistic employment scenarios (such as employees working patterns or kinds of work that are not offered or contemplated by the employer at test time) and the resulting need for employers to provide undertakings addressing such scenarios. This option will lead to more consistent and predictable outcomes in how the BOOT is applied. It also aims to result in a faster approval process through the FWC. Furthermore, in the rare circumstances where patterns or kind of work or types of employment that were not reasonably foreseeable at the time the agreement was approved do eventuate when the agreement is in force, the enterprise agreement  can be varied in accordance with existing variation provisions in the Fair Work Act. [99]  

Requiring the FWC to consider the views of the employer and employees on whether the agreement passes the BOOT and on the overall benefits under the agreement, including both monetary and non-monetary benefits gives legislative effect to the policy intent expressed in the explanatory memorandum to the Fair Work Bill 2008. It provides that the subjective preferences of the employee would be relevant in assessing the relative value of a non-monetary benefit. There is benefit in clarifying this in legislation, to provide certainty to parties and guidance to the FWC, and it may assist in improving confidence in enterprise bargaining. 

The FWC may well continue to take an overly forensic approach to assessing the BOOT. This is likely to be a concern for employers since the Hart v Coles Supermarkets Australia Pty Ltd and Bi-Lo Pty Limited T/A Coles and Bi Lo [100] decision in 2016 , which reaffirmed that the BOOT requires every individual employee and potential employee to be better off. Since then, the perception has been that the application of the test has become overly technical. This option seeks to address this issue by focusing the test on realistic patterns and kinds of work and requiring the FWC to more broadly consider the views of the parties to the agreement.

In addition, this option is being proposed with a package of other proposed options which are intended to make enterprise bargaining less complex.

Overall, option 5.1 is unlikely to impact the existing regulatory requirements or rights and protections of users of the enterprise bargaining system. Instead, the changes should make it easier for users to navigate the system in a timely fashion. The option is designed to minimise delays in consideration of the BOOT by the FWC, by making it simpler to apply, which will have flow on regulatory benefits for parties because the approval process is expedited and employers are able to pass on enhanced wages and conditions to employees under an agreement that is approved more quickly. Limiting the FWC to considering the patterns or kinds of work for only those currently engaged in by employees, or that are reasonably foreseeable at the test time, should also lead to more predictable and consistent outcomes for parties engaged in the system.

The impact of option 5.2, which would remove reference to individual employees in the BOOT in favour of classes or groups of employees, is that the revised BOOT would become a ‘majoritarian’ test rather than an ‘individualistic’ test. This may allow agreements to disadvantage certain employees where the group of employees is, as a whole, advantaged. Option 5.2 would simplify the assessment of the BOOT, as broader classes or groups of employees can be more quickly assessed against the relevant modern award, and there is less scope for individual roster variations or technical considerations which could slow an approval down. 

If a simpler BOOT resulted in a shorter approval process, with less undertakings sought by the FWC, arguably this would reduce the regulatory burden on parties. However, depending on how the FWC applies the BOOT to classes or groups of employees, it could leave some employees worse off under the agreement than the relevant modern award despite the relevant group of employees to which they belong being, as a whole, advantaged. 

Maintaining the status quo for the BOOT ( option 5.3 ) would see no change in respect of the complexity of agreement making, the often lengthy process it takes for the FWC to approve agreements and the challenges users experience when attempting to apply the BOOT. Under this option, the identified regulatory burden attached to the current BOOT would continue, alongside uncertainty about the BOOT’s application. 

A significant number of stakeholders find the FWC’s current approach to assessment of the BOOT to be overly technical. Employers argue that the BOOT is being applied as a forensic, clause by clause assessment against the relevant award, with the FWC assessing the effect of the agreement on each award covered employee and prospective award covered employee. As a result, bargaining is no longer flexible to a particular enterprise’s circumstances, and does not provide for productivity gains by employers and employees alike.

The FWC’s current approach has seen a rise in the number of agreements requiring undertakings to address non-compliance with the BOOT. In 2019, 77 per cent of the undertakings sought by the FWC related to conditions which included compliance with the BOOT. While an agreement can have multiple undertaking types, and are not exclusive of each other, conditions-related undertakings have been the most significant type of undertakings sought each year since 2015. [101]

There are significant regulatory burdens associated with the increased number of undertakings required by the FWC. There are also costs associated for employers by a longer approval processes. Employers and employees are also impacted by delays in approving a new agreement which may provide for productivity gains and wage increases. Ultimately, the effect of the current process may be discouraging engagement in the agreement making system.

6. National Employment Standards (NES) compliance requirements

Options 6.1 and 6.2 (the preferred options) would not introduce additional regulatory burdens on parties using the enterprise bargaining system. Neither would the options remove compliance requirements with respect to the NES, since the Fair Work Act already provides that an agreement must not exclude the NES or any provisions of it, and a term of an agreement has no effect to the extent that it contravenes the NES. As such, there is no risk posed by these options to ensure ongoing compliance with the NES. Both options are designed to reduce the need for the FWC to seek undertakings addressing NES compliance and to speed up the approval process.

The FWC has advised that there are significant regulatory savings associated with reducing the incidence of applications with incomplete documentation or which require undertakings, as these options will do. ABS data (Survey of Employee, Earnings and Hours 2018) states the hourly earnings for managers is $60.40. Modelling based on this data indicates that, for each hour of time saved in preparation or by avoiding follow up activity, there is an estimated saving of $214,800 for small-medium sized businesses and for $26,800 for larger businesses. [102] Currently, approximately 50 per cent of enterprise agreement applications are identified as having incomplete documentation or requiring undertakings. While the number of applications to approve a single enterprise agreement dipped in 2019-20 to 3,526 applications, in the 4 previous years, the FWC received an average of over 5,000 application per year. 

Maintaining the status quo in relation to the NES ( option 6.3 ) would result in continued unnecessary regulation on business and likely see a continuation of the approach adopted by some FWC members to seek undertakings in relation to the NES which are strictly unnecessary. The complexity of ensuring all agreement approval requirements are met can delay wage increases, increase costs to parties and drive perceptions of inconsistency in FWC decision making if some Commissioners require undertakings to ameliorate concerns about one agreement, while others in similar circumstances do not require undertakings.

The time taken for the FWC to approve agreements has increased in recent years­, mainly due to an increase in non-compliant agreements for which undertakings are sought and this includes undertakings in relation to the NES. [103] This approach is viewed as excessively technical, a fetter on fast and efficient approvals, and a disincentive to agreement making. While requiring undertakings addressing the NES does not materially impact the operation of the agreement, it does represent a cost to employers and delays for all parties to the agreement.

7. Franchisee agreements

Option 7.1 (preferred option) would result in a net regulatory benefit, as new franchisee employers would be able to apply to be covered by existing enterprise agreements made with a larger group of single interest employers that operate under the same franchise. This has net benefits as operations and duties across all franchisees are broadly identical and pay rates are consistent. This option would lead to a significant saving in time and resources for the employer, as they could avoid undertaking a full bargaining process for a new agreement. It would not result in any negative impacts for employees, as employees of the new franchisee would be required to vote before the agreement covers them, and employees of franchisees already covered would not be affected. 

In circumstances where employees choose not to vote in favour of such an enterprise agreement, the employer would still have the option of negotiating a single enterprise agreement with their employees directly, or relying on the relevant modern award.

Maintaining the status quo (option 7.2) retains the existing unnecessary regulatory burden and cost which requires new employers/franchisees to negotiate substantively identical agreements at a new workplace, as there is no simple mechanism to extend coverage of an existing agreement made under a single interest employer authorisation. This does not provide any additional benefit to employees, as it makes negotiating an enterprise agreement less appealing and may also result in employees having less favourable terms and conditions under the award.

8. Terminating agreements after nominal expiry date

Option 8.1 (the preferred option) is intended to support bargaining for new agreements by preventing employers threatening to terminate current agreements and put employees back on the relevant modern award(s) rates during the 3 month period after the agreement nominally expires, when bargaining for a new agreement may be occurring.

While agreements are tested by the FWC against the relevant award, the previous enterprise agreement is, in practice, the relevant ‘baseline’ against which a new agreement will be negotiated. Employers are generally criticised for unilaterally seeking to terminate an enterprise agreement past its NED during bargaining. The FWC must approve an application to terminate an agreement past its nominal expiry date if it is satisfied that it is not contrary to the public interest to do so, and it is appropriate to do so, taking into account all the circumstances, including the views and circumstances of employees, employer/s and employee organisation/s covered by the agreement. [104] Data from 2019-20 shows that the FWC received 432 applications to unilaterally terminate an enterprise agreement which had passed its NED, of which the majority ­- 290 were approved. Employer initiated applications made up the bulk of all applications, submitting 365 applications, with 264 applications being approved by the FWC. This data does not show if employers are making termination applications during the course of enterprise bargaining, nor does it provide the reasons given for termination.

The Full Bench of the FWC has found that there is nothing ‘inherently inconsistent’ between terminating an agreement that has passed its NED and the continuation of bargaining for a new agreement. [105] However, unions consider this to often be a bargaining tactic used by employers to force employees to agree to terms and conditions they would not otherwise agree to, when faced with reverting to the relevant modern award/s under which they would be worse off. The FWC has acknowledged that termination may disturb parties’ current bargaining positions and, in a recent decision, refused to terminate an agreement during bargaining, as it was of the view that terminating the agreement would change the dynamics of bargaining such as to cause unfairness to certain employees. [106]

This option would appropriately balance employer and employee bargaining power during the 3 month period after an agreement nominally expires. As noted above, the FWC must only terminate an enterprise agreement past its NED if it meets certain requirements under the Fair Work Act [107] . Regardless of these limitations, the act of applying for termination of an enterprise agreement (even if the termination is not approved) may disturb efforts to genuinely engage in enterprise bargaining. By restricting termination of agreements at the commencement of a new bargaining period, the option ensures existing bargaining positions are not disturbed and disproportionate industrial pressure is not exerted in the initial phase of bargaining. This option will ensure employers engage more cooperatively with employees and their representatives in replacing an agreement past its nominal expiry date, as well as promoting better workplace relations and reinforcing ‘fairness’ within the system.

There may be some minimal costs, though no new regulatory burden, for a small number of employers unable to apply to terminate their existing agreements for reasons unrelated to bargaining tactics but which fall within the prohibited timeframe. This may be because for example, they are rationalising agreements or other functions of their old agreement are no longer competitive. However, any impact should be minimal, as the timeframe during which termination is prohibited is relatively short and the employer may be able to achieve a similar objective through a new enterprise agreement negotiation process with employees.

The net effect of not modifying current provisions (option 8.2) is that the behaviour of some employers who choose to terminate an enterprise agreement past its NED will continue and ultimately contribute to a bargaining process that is not constructive for either party. While there is no clear evidence of the proportion of employers that may be choosing to do this, the ability for employers to threaten this action reduces trust and undermines constructive bargaining between the parties. Where an agreement can be terminated during bargaining, it would be seen as an incentive for employees to make a new agreement as soon as possible, rather than engage in protracted bargaining or industrial action (particularly where the employer has given an undertaking to maintain pay and certain conditions for a limited period of time, before employees then drop to the award). [108] When a new agreement is eventually made, it may include less favourable wage and condition outcomes for employees. While unilateral termination of enterprise agreements after the NED has passed can be done for legitimate reasons by an employer, on balance, modifying these provisions will support more efficient and productive agreement making.    

9. How the FWC may inform itself

Option 9.1 (preferred option) would limit the rights of non-bargaining representatives to intervene at the approval stage while preserving the FWC’s power to inform itself in any manner it considers appropriate by allowing any person to apply to the FWC to be heard in exceptional circumstances. As a result, it will impose a small regulatory burden on non-bargaining representative parties as it requires an additional administrative process to demonstrate exceptional circumstances (for example, by providing evidence that an employee would be worse off under the agreement) before standing can be granted by the FWC.

This is a proportionate and balanced response to the current issue of parties intervening in the approval process with the objective of causing significant delay or disruption, resulting in generally negative outcomes for employers and employees. Sometimes, a party who has not been involved in bargaining as a bargaining representative may seek to intervene and raise an extensive log of claims that were not provided to the employer during negotiations where they may have been addressed. The preferred options seek to ensure that, for the most part, only those involved in bargaining can be heard at approval. This minor regulatory impact is justified as reducing the potential for intervention to generally only include bargaining parties at the approval stage will assist in a faster approval process. This will help reduce the overall costs and uncertainty for employers associated with an extended approval process, often requiring further submissions to the FWC. 

Option 9.2 has the same benefits as option 9.1, but by prohibiting non-bargaining representatives from intervening at the agreement approval stage it would disproportionately infringe on freedom of association and is not preferred on that basis.

Option 9.3 is the status quo and would make no change to the regulatory burden imposed on all parties to the agreement when a person not involved in bargaining intervenes in the approval process and engages in delaying tactics. While it may, in limited cases, provide an additional path for deficiencies in an agreement to be brought to the FWC’s attention, it does not improve the overall concerns of parties regarding the time it takes to approve agreements and the uncertainty that can result from a protracted process, which can (and has) caused some parties to disengage with the agreement making framework.

10. Time limits for determining certain applications

Option 10.1 (the preferred option) would have an overall positive regulatory impact, with minimal additional regulatory burden, in that it would speed up the approval processes for the majority of enterprise agreements. The option for the FWC to determine an enterprise agreement approval application within 21 days, as far as practicable, reflects the latest approval data. In 2019-20, the median time to determine all agreement applications was 33 days, and 17 days for agreements without undertakings. Requiring the FWC to determine applications in a shorter timeframe than 17 days may not be achievable, given this is a median timeframe and only relates to relatively simple approval processes. The requirement that the FWC notify bargaining parties in the event that it cannot approve an determine the application within 21 days mitigates the risk that it rushes its approval assessment, while simultaneously addressing stakeholder concerns around uncertainty brought by protracted approval processes. 

The proposal, when combined with the other preferred options, seeks to address lengthy delays in the approval process. It will also provide greater certainty to parties about the likely timeframe for approval of the enterprise agreement and faster passing on of beneficial wages and other conditions to employees. It will also help build confidence in the agreement approval process if the FWC is able to meet the 21 day timeframe, and will encourage users to engage with the system again.

A faster approval process would also benefit SMEs and businesses who are new to enterprise bargaining, and are often dissuaded from engaging in bargaining because of the cost impact and uncertainty of approval delays on the business. While enterprise bargaining is less common among SMEs, the benefit of getting new agreements approved and implemented faster, increasing operational certainty and giving them and their employees faster access to flexibility and wages is considerable. Requiring the FWC to inform the parties why the application was not determined in this time, including whether there were any exceptional circumstances, has no regulatory impact for users of the system. It is designed as an accountability measure for the FWC, and allows for this option to be appropriately tracked and assessed to ensure the FWC is, more often than not, meeting the 21 day timeframe. There are limited risks with option noting FWC currently sets timeliness benchmarks through its annual Budget Papers to establish expected approval timeframes for parties in the majority of cases.

Separate to option 10.1, additional non-regulatory funding is being provided to the FWC to provide parties with an online guidance and application tool, which is designed to simplify and help users through the bargaining and approval processes. Providing enhanced assistance to parties at the bargaining stage is designed to equip them with the tools to make compliant agreements, which in turn will positively impact the time the FWC needs to assess approval applications within the 21 working day timeframe.

While option 10.2 is likely to speed up approval processes for a large proportion of enterprise agreements, it may also have an unintended consequence if the FWC fails to meet the 14 day timeframe. For example, if the FWC did not meet the 14 day timeframe, this could result in increased uncertainty for businesses who may not know when their agreement would be approved. If the FWC fails more often than not to meet the 14 day timeframe, this could result in constant notifications from the FWC to the parties that it has not met the timeframe, which could undermine stakeholder confidence in the simplified system and cause parties to disengage with the process. By imposing unrealistic timeframes on the FWC, the FWC is also more likely to adopt a lower threshold for what constitutes the concept of ‘as far as practicable’, extending it to more and more applications. This reduces the likelihood that it will generally meet legislated timeframes for approval. It will also likely increase the regulatory burden if there are additional processes for the extension beyond the 14 days the FWC needs to initiate for a significant proportion of approval matters. While this option also addresses employer concerns about approval times, the FWC has advised it would require significant additional resources and may not be a realistic timeframe.

The net effect of option 10.3 in maintaining the status quo will likely be a continuation of the current slow approval processes experienced by users, with the attendant regulatory burden it brings. While FWC approval times have improved since 2018-19 [109] and consideration of agreements is admittedly complicated by complex legislative requirements (such as the BOOT and genuine agreement), stakeholders have expressed concern that the process creates uncertainty for parties who are not clear on timeframes for approval and when they can begin to implement agreed terms under the new agreement. This results in greater burden for users in terms of increased costs as the process continues and they must rely on less efficient industrial instruments for longer than anticipated while waiting for their agreement to be approved. Sometimes, the process is so long or unreasonably delayed that parties opt out of bargaining altogether. This option does not address these reasonable concerns about the length of time taken in bargaining. Furthermore, concerns over the proposed time limit causing a time pressure for the FWC would be alleviated by the effect of related reforms, such as significantly reducing red tape and prescription for employers during the bargaining and approval processes and limiting intervention in the approval of agreements by non-bargaining representatives. Providing that the FWC determine applications to approve agreements within 21 days will address problems concerning the timeframes for agreement approval.

11. Transfer of business

Option 11.1 (the preferred option ) would reduce the regulatory and administrative costs associated with voluntary transfers of staff between associated entities. It would allow employees to transfer without requiring the new business to take on the transferring employees’ industrial instrument, removing the requirement for an employer to have to apply to the FWC for an order that the instrument not apply, or for it to be varied. As this only applies to voluntary transfers of staff, this is unlikely to negatively affect employees. The option removes the need for employers to secure orders from the FWC when an employee initiates a transfer of this kind, and will simplify and improve an employer’s ability to operate more flexibly across associated entities. , in the event that the FWC declined to make an order and the industrial instrument transferred with the employee, this amendment will mean the employer will no longer be required to maintain 2 different payroll systems to manage the transferring employee. It also provides more certainty around fixed labour costs and facilitates redeployment of labour.

Option 11.2 would also reduce some regulatory burdens for employers, by removing the requirement for them to apply to the FWC for an order that a transferrable instrument not apply, or for it to be varied, if the transfer of employees is made to avoid redundancies. However, as these transfers are not voluntary, there is a risk that employees may be significantly disadvantaged by such a change. A sufficient case for this amendment has not been presented by stakeholders and it is disproportionate in its potential impact on employees. This option would be open to misuse by employers who keep transferring employees between associated entities so as to avoid paying redundancy entitlements.

Option 11.3 would have a limited regulatory impact—while ultimately it would not change the process to apply for a transferrable instrument to not apply or be varied, adding it as a factor the FWC must take into account when deciding such application adds complexity to the factors the FWC must take into account, which could in turn lead to slight delays in the application process. As with option 11.2, a sufficient case for this amendment has not been made by stakeholders, noting that the FWC must already take into account whether the new employer would incur significant economic disadvantage as a result of the transferable instrument covering the new employer, [110] and the impact option 11.3 may have on employee protections means that it is not appropriate to pursue. Currently, redundancies are not a matter the FWC must take into account under section 318 of the Fair Work Act when determining whether to grant an order. 

Maintaining the status quo (option 11.4) will continue to require employers to seek an order from the FWC to stop an employee’s industrial instrument transferring to the new employer where an employee voluntarily moves between 2 employers that are associated entities.  This will continue to place an administrative burden on employers in terms of time and resources in preparing an application to the FWC, and may diminish opportunities for employees within the group structure due to the cost of seeking an order. Alternatively, the employer will have the cost of having different industrial instruments applying to the same group of employees. While the quantified costs identified are not significant, the effect of maintaining the status quo would potentially reduce mobility for employees between associated entities and the benefits this may have delivered to employees and their employers. Some stakeholders argue that the transfer of business provisions may be a disincentive to transferring staff to an associated entity. However, transfer of business provisions in the Fair Work Act play a key role in protecting employee rights, so any reforms need to be balanced. 

12. Legacy Agreements

Option 12.1 (the preferred option) will create some increased regulatory costs for a small number of impacted businesses, by requiring them to engage in the agreement making system again or by reverting to the relevant award. As a consequence of any pre-Fair Work Act agreements, and agreements made during the Fair Work Act ’bridging period’, terminating by the set date, affected employers wishing to continue to benefit from the arrangements established under their agreement would need to negotiate a new enterprise agreement, go through the approval process and ensure they are compliant with the current requirements in the Fair Work Act . For the affected employers, this requirement to undertake negotiations could disrupt their business operations, which may be a significant impact for some businesses recovering from the impacts of COVID-19. However, noting the broader impact of the preferred policy options is to simplify and improve the bargaining system, this impact should be significantly lessened if it is not as onerous for parties to make for a new agreement.

There is no reliable data for the net number of employers which may be impacted by option 12.1. However, the possible impact of implementing this option is outweighed by the benefits to employees and the broader economy of terminating legacy enterprise agreements. As at 30 September 2019, the department estimates that around 300,000-450,000 employees are currently covered by agreements made prior to the Fair Work Act that have expired, and have not been replaced or terminated, and which may still be operational. This may represent between 2.7 per cent and 4.1 per cent of all employees, of which the majority (almost 95 per cent) are in the private sector. [111] This is a significant number of employees who may be currently receiving penalty rates and allowances lower then currently provided for in the relevant modern award (the Fair Work Act guarantees employees must receive the relevant base rate of pay). This also has potentially serious consequences for market competition, if there are employers that are able to undercut market rates of labour by maintaining lesser rates in legacy agreements.

The net outcome for some employers may be that they opt to default to the relevant modern award to avoid the costs associated with negotiating a new agreement. However, when taken with the broader package of reforms to the agreement making system, employers overall will be more willing and confident in re-engaging with an agreement system that is more simple, less technical and has a faster approval process.

However, option 12.2 may also allow employers to transition their pre-Fair Work Act agreements to the Fair Work Act system, reducing the risk of reverting to awards. It does still impose new regulatory costs, as it would require an application process to the FWC to reapprove. To ensure it also corrects unfair and market distorting agreements which can have employees receive some rates and conditions lower than the award, re-approved agreements would likely require an employee vote and assessment against the BOOT. This means the additional regulatory and administrative imposts may be only slightly lower than option 12.1 .

Continuing to allow pre-Fair Work Act agreements to operate (option 12.3) does not create any regulatory impacts. However, the net effect does not align with the intention of the Fair Work Act, which is to provide a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians. It creates situations where employees can lawfully receive less than their modern award entitlements, potentially for many years, and distorts fair competition in the market.   

Consultation

On 11 June 2020, the Government established 5 working groups to consider how to improve the operation of the Australian industrial relations system, looking at the following key areas for reform: agreement making; modern awards; greenfields agreements; casuals and fixed term employees; and compliance and enforcement. Discussions were facilitated by the Government, chaired by the Attorney-General and Minister for Industrial Relations with the assistance of a Deputy Chair, and took the form of a series of engagements between the employer and employee representative groups. The groups identified problems in the 5 areas for discussion and experts were invited to present to the groups to help develop an evidence base to consider the issues identified and discuss possible reform options.

The Agreement Working Group met 5 times between 7 July and 15 September 2020, with members meeting between formal meetings as needed. The working group comprised representatives from the following employer and employee representatives:

  • Employer groups : Australian Chamber of Commerce and Industry , Australian Industry  Group, Business Council of Australia, Australian Mines and Metals Association, Master Builders Australia.

·          Employee representatives: Australian Council of Trade Unions, Community and Public Sector Union, Shop, Distributive & Allied Employees’ Association, Electrical Trades Union, Transport Workers’ Union.

While noting the in-confidence nature of the Agreement Working Group, members were presented with a broad remit to raise issues which could contribute to consensus solutions regarding:

  • reforming enterprise bargaining to focus on mutual gains and productivity and improve cooperative relationships between employers and employees in workplaces, and

·          reversing the decline in overall agreement making.

Working Group consultations were held in-confidence to promote increased engagement and assist negotiations. In general, employer organisations advocated for changes that improved the simplicity and increased the efficiency of the bargaining and approval process while unions considered that any changes needed to ensure workers were not disadvantaged or employee protections diminished. The views of the working groups were the primary mechanism for putting forward the above policy options. Where agreement was reached between working group members, this strongly influenced final proposals for reform. Where agreement could not be reached, views of stakeholders were taken into account in the final design of the options to balance all stakeholders’ needs. As the discussions of the working groups were held in-confidence and the final outcomes non-binding, this RIS will not discuss in detail the proposals put forward, concessions made or agreement reached to respect confidentiality and not prejudice future discussions.

Preferred Options

For the reasons outlined above, the following are the preferred options:

·          amend the objects of Part 2-4 of the Fair Work Act (option 1.1)

·          amend the Fair Work Act to extend the extend the time for giving the NERR and clarify how the NERR can be provided (option 2.1)

·          reduce prescription and regulation in genuine agreement requirements in the Fair Work Act (option 3.1)

·          amend the Fair Work Act to clarify when a casual employee can vote for an agreement (option 4.1)

·          combination of amendments to the BOOT (option 5.1)

·          amend the Fair Work Act to no longer require the FWC to be satisfied an agreement does not include any terms excluding the NES (option 6.1), and require agreements to include a term that explains the interaction between the NES and the agreement (option 6.2)

·          allow new franchisees to opt-in to existing single enterprise agreements made with a group of employers operating under the same franchise (option 7.1)

·          modify termination of agreement provisions in the Fair Work Act (option 8.1)

·          amend the Fair Work Act to restrict who can be heard by the FWC at agreement approval and allow the FWC to consider information from other persons only in exceptional circumstances (option 9.1)

·          amend the Fair Work Act to provide that the FWC to determine applications to approve agreements within 21 days as far as is practicable (option 10.1)

·          amend the Fair Work Act to ensure instruments do not transfer for voluntary transfers of staff between associated entities (option 11.1), and

·          cease pre-Fair Work Act agreements by 1 July 2022 (option 12.1).

As outlined above, the Government has worked closely with the Agreement Working Group to find consensus positions and compromises to improve the enterprise bargaining system. The employer organisations and unions involved in the working group represent a large number of businesses and employees, and the government is committed to implementing pragmatic solutions to address the current issues identified in agreement making, and reversing its trending decline.

This balanced package represents the most proportionate and effective response to the issues raised. When compared to other options considered above, where there is either no or minimal net benefit or the option has been judged as unsupported by the evidence or too heavy-handed, this preferred package ensures that there is an improved focus on productivity and mutual gains for employers and employees. It addresses a number of technical complexities and will make the system simpler and faster to engage with for all parties, while maintaining important safeguards for employees. These options will also be supported by additional non-regulatory reforms described above.

Implementation and Evaluation of Options

Implementation risks: The most significant risk to successful implementation is that the necessary legislative amendments may not obtain passage through Parliament. The risk to legislative passage has been partly addressed through the industrial relations working group process, which involved extensive consultation with key stakeholders to develop balanced recommendations.

There is also a risk that the benefits resulting from these reforms may be subject to a time delay, reflecting the time taken by employers and employees to understand the new system(s). This will be mitigated through the educational and technical support solutions designed to support implementation. This includes through the non-regulatory FWC practice changes already outlined above. As part of the broader IR Reforms, the government is also progressing a communications package for stakeholders. This will inform and provide support for stakeholders about amendments to industrial relations, including enterprise bargaining. 

A further risk, albeit minimal, is that the legislation is not applied in the way it is intended, resulting in unintended consequences. This will be mitigated by a post-implementation review which will assess whether the improvement have met their objectives and are having their intended effect.

Transitional arrangements: Employers, employees and representative organisations will need sufficient time to review changes made to the bargaining system and adapt to the new rules for agreement making. While the proposed options will change the way in which parties have previously bargained, challenges will be mitigated by the non-regulatory FWC practice changes outlined above. In addition to technological solutions which will reduce red tape and assist first-time and experienced users of the bargaining system alike, the FWC will develop user-friendly education and guidance for the parties. This will be important to ensure employers, employees and representative organisations understand the changes and feel confident to overcome any challenges.

Monitoring and evaluation: Difficulties in measuring industrial relations characteristics at the enterprise level inhibits analysis of the extent to which improvements to bargaining are likely to improve firm-level, and ultimately, aggregate productivity. The volatility of aggregate indicators of macroeconomic performance also makes it difficult to pinpoint the effects of discrete and often minor changes in industrial relations policy settings on productivity. Nonetheless, the fact that enterprise agreements set the pay and conditions for nearly 40 per cent of the labour force, implies improvements in process should benefit significant numbers of Australian workplaces and reduce the current regulatory burden on the large number of businesses which currently rely on bargaining to find arrangements which suit their specific circumstances.

Reform options will be evaluated by a post-implementation review which will assess whether the policies have had their intended effect, and most importantly, if employers are more willing to bargain. This will be assessed by the number of new enterprise agreements approved by the FWC—data which is held by the Attorney-General’s Department (the Workplace Agreement Database) and the FWC itself. The FWC provides its reasons for approval and dismissal which will also provide insight on how the amended provisions are understood by parties and interpreted by the FWC. The use of technological solutions will also provide more data to assess performance and allow the FWC to assist parties as appropriate.



 

 

Australian Government | Attorney-General's Department logo



December 2020

Regulatory Impact Statement:

Greenfields Agreements Reform

 

 

 

 

 

 

 

 

 

 



The problem

What is a greenfields agreement?

A greenfields agreement is an enterprise agreement relating to a genuine new enterprise (including a new business, activity, project or undertaking), which is made at a time when the employer(s) have not yet employed any of the employees who will be necessary to conduct the enterprise and will be covered by the agreement. [112]

Typically, greenfields agreements are made between the relevant employer or employers and the relevant union or unions. When agreement is reached, in the majority of circumstances, the relevant union(s) will sign the agreement.

In approving the agreement, the Fair Work Commission (FWC) must be satisfied that the agreement relates to a genuine new enterprise and that the unions to be covered by the agreement (taken as a whole) are entitled to represent the industrial interests of the majority of employees who will be covered by the agreement. The FWC also applies the Better off Overall Test and other tests for single enterprise agreements, except the requirement for genuine agreement. [113] Relevant unions who were bargaining representatives for the agreement have standing in the FWC to oppose the agreement if they wish.

However, a greenfields agreement can be made without union agreement. At the end of a six-month notified negotiation period, and if the employer(s) gave each of the unions that were bargaining representatives for the agreement a reasonable opportunity to sign the agreement, the employer(s) can apply to the FWC for approval of the agreement without the union(s) having signed the agreement. [114] To date, no agreements have been approved under these provisions.

Greenfields agreements are used extensively on major projects in industries such as construction, mining, infrastructure, and oil and gas production. The current maximum nominal expiry date of a greenfields agreement is four years from the day the FWC approves the agreement, consistent with arrangements for all enterprise agreements.

The current four year limit means agreements can expire mid-construction

Following the nominal expiry of a greenfields agreement, and if bargaining has commenced for a replacement enterprise agreement, employees can access protected industrial action subject to certain requirements being met (i.e. legal industrial action as permitted under the Fair Work Act 2009 (FW Act), that may be taken by employees in support of their claims under a proposed enterprise agreement) .

The current four year limitation on the term of greenfields agreements means that agreements can nominally expire part way through the construction of a major project, which often lasts longer than four years. According to Deloitte Access Economics’ Investment Monitor (June 2020), 27 per cent of projects categorised as ‘under construction’ and ‘committed’ are projected to have construction lives of five or more years. [115]

The risk of agreements nominally expiring during the construction of a major project introduces uncertainty for investors by potentially exposing parties to unexpected delays caused by protracted negotiations for a new enterprise agreement and potential exposure to protected industrial action. Overall, the risk of exposure to renegotiating wages and other conditions during the critical build of a project, introduces cost and timing uncertainty, which can affect the project’s ability to attract investment.

While not specific to industrial relations, a 2019 survey of infrastructure market participants indicates concern about the level of regulatory burden in Australia. Specifically, 79 per cent of investors said North America provides compelling investment opportunities, whereas only 49 per cent said the same about Australia, and 83 per cent agreed uncertainty in Australia’s policy and regulatory settings is limiting their willingness to invest. [116] Similarly, in submissions responding to a 2019 discussion paper [117] on longer greenfields agreements, employer groups emphasised the strong global competition for major project investment and their concerns that publicised cases of industrial disputes diminish Australia’s reputation as an investment destination for new major projects.

The need for government action      

Opportunities for improved productivity

In addition to increasing investment and facilitating job creation, changes to industrial relations policy settings on major projects will also encourage improvements in productivity. Increased foreign direct investment (FDI) in high productivity sectors can support wages growth and generally improve the technical capability of a sector. The Productivity Commission has observed that FDI:

benefits Australians … through ‘spillover’ benefits that ultimately improve living standards. This is particularly the case with commercial direct investment, which comes with greater engagement from multinationals, including use of their intellectual property, international logistics networks and management expertise. The technology, innovation and technical know-how of these multinationals tends to leak into the rest of the economy as a spillover effect, leading to improved productivity for local firms through the direct transfer of advanced technology, enhanced competitive pressures on domestic firms, and greater human capital development. Although these spillover benefits are hard to accurately quantify, decades of economic research suggest they are significant. [118]

Hence, policy settings aimed at attracting investment will in turn encourage higher productivity and higher living standards. The Productivity Commission has also noted the high level of inward FDI in the mining sector. For example, ‘the largest stock of inward FDI in 2018 was in mining ($365 billion, or 38 per cent of the economy-wide total)’. [119] However, while mining and quarrying increased its share of total FDI stocks over the past decade, ‘FDI inflows to the mining and quarrying sector have recently slowed, from a peak inflow of $55 billion in 2014 to only $17 billion in 2018.’ [120] While this is likely influenced by the completion of construction associated with the mining boom of the early 2000s, the Government intends to create the optimal regulatory settings to support the next wave of major resource project investment, which is particularly critical in Australia’s recovery from the economic impacts of COVID-19.

Issues with greenfields agreement making

Employers and employer groups have over many years and in various forums raised concerns that the construction of new large scale projects often lasts longer than the four-year maximum nominal expiry date for greenfields agreements.

The Productivity Commission’s Inquiry Report into the Workplace Relations Framework (2015) noted the significant risks associated with greenfields agreements that have a nominal expiry date that occurs earlier than the expected completion date of the project. It stated that, ‘where an employer can demonstrate that a project will take longer than five years to complete the construction, there are clear grounds for the FWC to approve greenfields agreements with an expiry date that matches the construction of a major project. This proposal was supported by numerous employer participants.’ [121]

In consultation undertaken in 2019 via the public release of a discussion paper [122] on longer greenfields agreements, submissions from employer groups argued that Australia would be a more attractive place to invest if greenfields agreements for major projects had a nominal duration that covered the length of the construction of a project, so that certainty of labour arrangements - and ultimately of the length and cost of the project overall - could be guaranteed. 

Benefits from major projects

A key part of Australia’s recovery from the economic impact of COVID-19 will entail attracting investment in major projects, which create thousands of jobs, and make large contributions to GDP, as well as considerable contributions through state and federal taxation and royalties.

In September 2020, mining made up 247,300 jobs, [123] many of those located in our regional and rural communities, and accounted for 8.9 per cent of Australia's GDP over the year to June 2020. [124] Over the 2019-2020 financial year, the resources and energy sector accounted for 59 per cent of Australia's good and services exports and 74 per cent of Australia's merchandise exports. [125] Additionally, over 2017-18, the minerals sector contributed ‘about $19 billion in company taxes and $12 billion in royalties’, while the ‘oil and gas sector contributed about $5 billion in taxes, royalties and other fees in 2016-17’. [126]

There are around 1.2 million people employed in construction, which is 9.2 per cent of all people employed in Australia. [127] The Gross Value Add of the construction industry is $130.3 billion per year and the industry is the fourth largest contributor to GDP at 6.9 per cent. [128]

Major projects in these sectors inject money into local economies, boost economic productivity and create thousands of high quality jobs. For example, the WestConnex project is expected to deliver around 16,000 jobs during construction and deliver more than $20 billion in economic benefits to NSW. [129]

In the resources sector, Chevron Australia estimates that its Wheatstone natural gas project in Western Australia will create 30,000 direct and indirect jobs over its 2009-2040 life cycle at a rate of 1,000 jobs per year. [130] The project will also add $180 billion to GDP over the same period. [131] Similarly, Woodside’s Burrup Hub natural gas project is estimated to support the creation of an average of 4,000 full-time equivalent jobs per annum over a 40-year timeframe, while boosting GDP by $414 billion between now and 2063. [132] However, the future pipeline of major projects is at risk due to the global economic downturn and uncertainty created by the COVID-19 pandemic.

Attracting investment                          

In a competitive global market for capital, Australia must have appropriate regulatory settings to attract investment and create jobs. Industrial relations arrangements are an important factor in investment decisions. At a global level, Australia’s industrial relations policy arrangements are more complex and rank in the bottom half of countries. For example, the World Economic Forum’s Global Competitiveness Report 2019 ranked Australia 57 th in labour market flexibility, 95th in flexibility of wage determination and 53 rd in cooperation between employers and employees. [133]

Most specific investment decisions are made at board level and are commercial in confidence, which restricts the department’s ability to provide forensic analysis of the drivers behind individual scenarios. However, in submissions to the 2019 greenfields agreements discussion paper, employers and employer groups emphasised that uncertainty around costs, such as labour costs, and timing of major projects can cause significant damage to Australia’s reputation and attractiveness as an investment destination.

The Australian Chamber of Commerce and Industry, for example wrote in its submission, “[a]ny agreement with a life less than the expected duration of the construction of a particular project exposes the business to substantial risks, and risks the negative implications for investment, job creation and the community”. [134]

Similarly, AMMA (Australian Resources and Energy Group) noted in its submission that it “has long contended that uncompetitive aspects of Australia’s approach to industrial relations under the FW Act has been a significant contributing factor to a loss of investment attractiveness in the nation’s resources and energy industry.” [135]

Policy Options

Options for consideration

Option one

Option one would introduce a mechanism in the FW Act to allow extended term greenfields agreements on major projects. This would allow parties to make a greenfields agreement with a nominal duration longer than the current maximum of four years, subject to certain criteria being met and with safeguards for employees to ensure their interests are protected.

If the FWC is satisfied that the work to be performed under a greenfields agreement relates only to the construction of a major project, parties to the agreement would be able to agree a maximum nominal expiry date of up to eight years from the commencement of the agreement. Eight years was chosen as the maximum nominal expiry date as it provides greater flexibility for parties to cover the full length of construction of major projects without unduly limiting an individual’s right to bargain.

A major project would be defined as (a) any project where the total expenditure of a capital nature that is being incurred, or is reasonably likely to be incurred, in carrying out the project is at least $500 million, or (b) any project declared by the responsible Minister to be a major project.

The Minister could only declare a project to be a major project if satisfied that the total expenditure of a capital nature that has been incurred, or is reasonably likely to be incurred, in carrying out the project is at least $250 million and less than $500 million. In deciding whether to make a major project declaration, the Minister would be required to take into account the following matters:

  • the national significance (if any) of the project
  • the regional significance (if any) of the project
  • the contribution the project is expected to make to job creation, and
  • any other matter considered relevant.

Where an agreement with a nominal life of longer than four years is made, there will be a requirement that the agreement includes annual increases to the base rate of pay for each employee over the nominal life of the agreement. 

When approving an extended term greenfields agreement, the FWC would still need to be satisfied that the agreement meets all existing approval tests that apply to greenfields agreements (e.g. the better off overall test).

Option two

Option two would maintain the status quo. This would mean that all greenfields agreements, including greenfields agreements on major projects, would continue to have a maximum nominal expiry date of four years. This option fails to mitigate the risk of disruptive and potentially costly industrial action and protracted bargaining during the construction of major projects, which will be key to Australia’s post-COVID-19 recovery. Businesses will also continue to incur administrative costs from having to re-negotiate an agreement that has expired and support the approval process through the FWC.

As noted above, the risk of mid-project disruptions is one factor that influences decisions about whether to invest in major projects in Australia.

Option three

Option three is a non-regulatory option that would involve providing additional resources to enhance the FWC’s major project national practice area. The FWC’s eight national practice areas cover specialist case types and are overseen by a national practice leader. The practice leader has responsibility for allocating cases that fall within their practice area. For the purposes of the major projects national practice area, a major project is a project with a value of at least $1 billion. However, projects of particular regional significance may be allocated to the practice area despite falling below the $1 billion threshold.

Additional funding could be allocated to the FWC to enhance the services it provides to projects in the major projects national practice area, with the following features:

  • A dedicated outreach program to assist employers and employee organisations on major projects in negotiating greenfields agreements and enterprise agreements.
  • Increased FWC support to resolve disputes between parties during agreement renegotiations.
  • A specific target for the approval time for greenfields agreements and replacement enterprise agreements on major projects, for example, of 21 days.

To enable this, the FWC would need to adjust the criteria it currently uses to determine major projects that fall into this major project national practice area. Given these criteria are not legislatively prescribed, this option could be achieved without regulatory change.

Net benefits of policy options

Option one

This option will increase the attractiveness of Australia as a destination for major project investment, particularly for major resources and construction projects. Encouraging increased investment in major projects in these sectors makes it likely that more will go ahead, with the benefits flowing to the communities and governments that benefit from such projects. 

For the 191 projects in the database for the September 2020 release of Deloitte Access Economics’ Investment Monitor with a cost of at least $500 million, and listed as ‘committed’, ‘under consideration’ and ‘possible’, the total value of projects is $437.866 billion. For the 133 projects with a cost of at least $250 million and less than $500 million, and listed as ‘committed’, ‘under consideration’ and ‘possible’, the total value of projects is $46.147 billion. This does not include those projects for which a predicted cost is not currently available. [136]

This pipeline represents significant potential investment in Australia’s economy, with large employment creation potential. The reform is aimed at ensuring those projects listed as ‘under consideration’ and ‘possible’ ultimately receive financing and become large job creators across Australia’s cities and regions. Expert evidence obtained by the department during this year’s Industrial Relations Reform Working Group process suggests that potential Australian projects are competing for finance with comparable projects in other jurisdictions, and that concerns about Australia’s industrial relations settings could tip the balance in favour of investments outside Australia when companies are making investment decisions. [137] The department has considered the potential for comparisons of the proposed greenfields agreement arrangements with comparable international jurisdictions. We note, however, Australia’s industrial relations system is highly unique comprising a multi-tier system of awards and enterprise-based bargaining, underpinned by a set of 10 national employment standards. In particular, no other OECD country contains an award system that is used as the comparator in the assessment and approval of any form of collective agreement. For this reason, a comparison of greenfields like arrangements across comparable international jurisdictions is not possible.  

In addition to the benefits associated with increased investment, and therefore increased economic activity, employment growth and productivity, the reform would also likely create savings for businesses that operate under greenfields agreements on major projects. This is because major project employers will be able to enjoy the benefits of having a greenfields agreement without needing to bargain multiple times.

Hence, the compliance and administrative costs associated with the bargaining process will be lessened. The reform will ensure that staff otherwise involved in protracted bargaining can be productively engaged elsewhere in the organisation . Other bargaining costs will also be reduced, such as the cost of hiring industrial relations practitioners or more generally, costs associated with lost production while bargaining is on foot. Potential administrative cost savings associated with staff wages are calculated below.

Administrative cost savings

The administrative costs identified by the Attorney-General’s Department are based on a calculation of the average length of time it takes for a nominally expired greenfields agreement to be replaced by an enterprise agreement. This was calculated by extracting relevant data from a sample of Form F17 declarations completed by employers at the time of lodgement . The bargaining period is calculated as the difference between the notification time (the time the employer initiates, agrees to or is compelled to bargain) and the date the replacement agreement was voted up.

According to the WAD, there were 404 approved enterprise agreements that replaced greenfields agreements between 2011 and 2019. Of these 404 agreements, a total of 215 had recorded notification dates (and thus the bargaining period could be calculated).

For these 215 enterprise agreements, the average bargaining period was 146 days (a little under five months). Broken down by the size of the agreement (using the number of employees), the average bargaining period was:

·          236 days - 100+ employees

·          155 days - 20 to 99 employees

·          105 days - less than 20 employees

While it took about five months on average to negotiate the replacement agreements, it took a further two months on average for FWC approval. [138] Thus, it took a total of 210 days, or around 7 months, to negotiate and have approved a replacement agreement.

It is expected that the proposed reform, by extending the maximum nominal agreement duration to eight years, would allow an employer to avoid (at least) one round of bargaining for a replacement agreement, saving costs in resources, particularly labour, devoted to bargaining for each agreement. Based on this data, we can calculate the administrative cost savings based on one business avoiding the replacement of one nominally expired greenfields agreement. 

Using the methodology developed in the RIS for the Fair Work Amendment Bill 2014 [139] as the basis for these calculations, the department has estimated that each staff member on a bargaining team would spend approximately 23 hours per week on the negotiations. Twenty-three hours a week is commensurate to about 60 per cent of an employee’s ordinary weekly working hours and is a reasonable assumption based on the labour intensive nature of enterprise bargaining. In effect we are assuming based on observations of the bargaining process that a relevant participant is likely to spend at least 50 percent (and more like 60 percent of their time) attending to the bargaining process, with the remainder of their time spent on attending to usual work duties. This estimated figure takes into account not just the direct negotiations, but also the planning, preparation and costing required to negotiate and conclude a replacement agreement. Furthermore, organisations making greenfields agreements tend to be large, often multinational or joint venture corporations. In these circumstances, while this has not been specifically costed, it is likely that considerable time and resources would be devoted to additional tasks such as meeting with senior executives, liaising with representatives of parent companies and seeking finance and approval from board members.

Table 1 below sets out the average weekly earnings before tax for a number of roles expected to be involved in negotiations for major mining and construction projects. The department has used ABS ANZSCO 4-digit Classifications and corresponding before tax earnings drawn from the latest available May 2018 ABS Employee Earnings and Hours publication (unpublished Tablebuilder data). Weekly earnings have been calculated at 37.5 hours per working week (5 days).

Table 1 - Employee earnings

Classifications

Hourly full-time ordinary cash earnings**

1323 - Human resource managers

  $80.67 ($141.17 incl. non-wage labour costs)

2231 - Human resource professionals

  $47.02 ($82.29 incl. non-wage labour costs)

2336 - Mining engineers

  $79.94 ($139.89 incl. non-wage labour costs)

1331 - Construction managers

  $62.47 ($109.32 incl. non-wage related labour costs)

* Source: ABS Employee Earnings and Hours, May 2018, unpublished Tablebuilder data

** Hourly earnings for each occupation were calculated by dividing average weekly earnings by average weekly hours worked .

 

Savings from avoiding one bargaining round for a replacement agreement in mining

The department has assumed that for the replacement of one mining greenfields agreement, three employees (one Human Resource Manager, one Human Resource Professional and one Mining Engineer) would each undertake approximately 23 hours per week of work relating to the negotiation and development of a replacement agreement. The calculation of savings in wages is in Table 2 below. It shows that the total likely savings in wages from avoiding one round of bargaining for one replacement agreement is $244,024.

Table 2 - Savings from avoiding replacement of one mining greenfields agreement, 146 days bargaining period (29.2 working weeks), 23 hours per week per employee

 

Employee

Calculation

Savings

1 x Human Resource Manager

$141.17 x 23 x 29.2

$94,809 (a)

1 x Human Resource Professional

$82.29 x 23 x 29.2

$55,265 (b)

1 x Mining Engineer

$139.89 x 23 x 29.2

$93,950 (c)

Total (3 employees above)

(a) + (b) + (c)

$244,024

 

Savings from avoiding one bargaining round for a replacement agreement in construction/infrastructure

The department has assumed that for the replacement of one construction/infrastructure greenfields agreement, three employees (one Human Resource Manager, one Human Resource Professional and one Construction Manager) would each undertake approximately 23 hours per week of work relating to the negotiation and development of a replacement agreement. The calculation of savings in wages is in Table 3 below. It shows that the total likely savings in wages from avoiding one round of bargaining for one replacement agreement is $223,493.

Table 3 - Savings from avoiding replacement of one construction/infrastructure greenfields agreement, 146 days bargaining period (29.2 working weeks), 23 hours per week per employee

 

Employee

Calculation

Savings

1 x Human Resource Manager

$141.17 x 23 x 29.2

$94,809 (a)

1 x Human Resource Professional

$82.29 x 23 x 29.2

$55,265 (b)

1 x Construction Manager

$109.32  x 23 x 29.2

$73,419 (c)

Total (3 employees above)

(a) + (b) + (c)

$223,493

Savings from avoiding one bargaining round for a replacement agreement in mining, 100+ employees

As outlined above, according to the WAD, the average bargaining period for a replacement agreement for an employer with 100+ employees is 236 days (from a sample of 40 replacement agreements between 2011 and 2019). Using the same classifications as outlined in Table 1, Table 4 below shows that for these larger employers in mining the total likely savings in wages from avoiding one round of bargaining for one replacement agreement is $394,452.

Table 4 - Savings from avoiding replacement of one mining greenfields agreement with 100+ employees, 236 days bargaining period (47.2 working weeks), 23 hours per week per employee

 

Employee

Calculation

Savings

1 x Human Resource Manager

$141.17 x 23 x 47.2

$153,254 (a)

1 x Human Resource Professional

$82.29 x 23 x 47.2

$89,334 (b)

1 x Mining Engineer

$139.89 x 23 x 47.2

$151,864 (c)

Total (3 employees above)

(a) + (b) + (c)

$394,452

Savings from avoiding one bargaining round for a replacement agreement in construction/infrastructure, 100+ employees

Using the average bargaining period for a replacement agreement for an employer with 100+ employees, Table 5 below shows that for these larger employers in construction/infrastructure the total likely savings in wages from avoiding one round of bargaining for one replacement agreement is $316,265.

Table 5 - Savings from avoiding replacement of one construction/infrastructure greenfields agreement with 100+ employees, 236 days bargaining period (47.2 working weeks), 23 hours per week per employee

 

Employee

Calculation

Savings

1 x Human Resource Manager

$141.17 x 23 x 47.2

$153,254 (a)

1 x Human Resource Professional

$82.29 x 23 x 47.2

$89,334 (b)

1 x Construction Manager

$109.32 x 23 x 47.2

$118,677 (c)

Total (3 employees above)

(a) + (b) + (c)

$316,265

 

The likely savings in wages from avoiding one round of bargaining have been calculated for a single replacement agreement. Savings are likely to be larger on major projects where there is a high usage of greenfields agreements. Some of these major projects can be covered by dozens or even hundreds of greenfields agreements. If even a small number of these are replaced, then the savings across a single major project will be considerably larger than the calculations provided above.

The department has considered the extent to which robust data can be provided that might show for example, the  average number of greenfields agreements by sector/project value which may provide more practical context to the given regulatory cost compliance analysis.

Due to the way agreement and project data are collected, however, it is not possible, with any level of consistency, to accurately identify the projects to which particular agreements apply, and therefore it is highly difficult to ascertain any meaningful and robust account of the average number of agreements on any particular project. For instance, the primary way of identifying the project to which an agreement might apply is by using the title of an agreement. However, not all agreement titles reflect the project to which they apply.

Moreover, some agreements may cover more than a single project. Further, there is no universal or agreed definition of what constitutes a “project”, complicating any attempt to match agreements and projects. This is compounded by the fact that the average number of greenfields agreements likely differs on different types of projects by sector. For instance, anecdotally, it appears that mining construction projects use a much higher number of greenfields agreements than transport projects (although this is difficult to verify, due to the data issues already outlined above).

For these reasons, this Regulation Impact Statement focuses on the savings associated with avoiding a round of bargaining for a single replacement agreement, rather than assessing the costs and benefits for a larger project. This is appropriate, as it may be somewhat misleading to discuss the potential benefits accruing to a project, as it is often individual subcontractors that undertake discrete packages of work on a project, who will most benefit from an extended agreement duration. If projects benefit, it would be primarily in the form of more easily being able to attract investment (consistent with the primary objective of the reform).

Other cost savings

In addition to the savings in wages outlined above, the reform will also minimise costs associated with industrial action, such as lost production, reputational damage and further interest payments on loans due to delays. (Notwithstanding the KPMG estimate below, the department notes the difficulty of accurately quantifying costs associated with industrial action.)

KPMG has reported that industrial action on large resource projects can have ‘significant financial implications’, with costs ranging ‘from $1 million to $10 million per day of action.’ [140] The KPMG report provides the example of a dispute on Woodside’s Pluto project that potentially caused the loss of $3.5 million each day. [141] While industrial disputation remains at historic lows, disputes in the construction industry remain above the average for all industries. For example, ABS data shows that the rate of industrial disputation over the last two years was 41.0 days lost per thousand workers in the construction industry compared to 12.8 days lost per thousand workers across the economy. [142]

By enabling the nominal expiry date of greenfields agreements on major projects to be extended, the reform would avoid potentially costly industrial action mid-construction, minimising the costs associated with that industrial action for particular projects, but also ensuring Australia has a reputation as a good place to invest in major projects.

Minor regulatory burden

For those projects with a capital expenditure of at least $250 million and less than $500 million that seek a major project declaration, there will be some minor regulatory burden associated with the application process. Using CoreLogic’s Cordell Connect project database (as at 10 November 2020), there are approximately 10 “firm” projects and 76 “possible” projects in the $250 - 500 million range due to commence each year in 2021 and 2022. However, as it is unlikely that all “possible” projects will commence in those years, the department for the purposes of these calculations, has estimated that approximately one third will not commence until a later date (if at all). This would leave an estimated 50 potential projects per year in the relevant cost range.

We assume that a further 10 projects will likely not use greenfields agreements (given that not all projects would be established in the absence of a workforce and therefore would not be genuine new enterprises), and an additional 15 projects will not pursue an extended term greenfields agreement (to allow for a proportion that would, through the bargaining process, determine a longer term agreement was not warranted /desirable for their project), leaving an estimated 25 projects per year that are likely to apply for a major project declaration.

There will be a very minor additional regulatory cost for proponents of the approximately 25 projects that apply for major project declarations. These include the time taken to prepare the application material, and the time taken (if any) to liaise with the relevant agency regarding the application and provide additional information as required. On the assumption that one Human Resource Manager prepares the application over eight hours, and then spends an additional four hours discussing the application with the relevant agency and preparing additional material, this will cost a business $1694.04 in wages. At 25 applications per year, this will result in an annual cost for employers of $42,350.00.

On the assumption that employers on projects subject to a major project declaration would also miss one round of bargaining as a consequence of being able to access extended term greenfields agreements, the savings calculations will be the same as those provided above. Assuming these projects are successful in their applications, these savings will far outweigh the minor costs associated with making a major project declaration application (noting that in many cases, employers working on major projects will benefit from the savings associated with extended term greenfields agreements without having to incur the minor costs associated with making a major project declaration, as these applications will likely be made by the project proponent or head contractor).

Benefits and costs for workers

Under this proposal, workers will not be able to bargain as regularly for improved pay and conditions. However , data from the WAD indicates that workers do not necessarily achieve wage benefits from negotiating a replacement enterprise agreement. Between 2011 and 2019, 404 nominally expired greenfields agreements were replaced by an enterprise agreement. The data shows no trend of spikes in Average Annualised Wage Increases (AAWI) when greenfields agreements nominally expire and are replaced by an enterprise agreement - for all industries, there is little difference between the AAWI for the original greenfields agreement and the replacement enterprise agreement.

In fact, workers in the construction and mining sectors between 2011 and 2019 have, on average, lower AAWIs in enterprise agreements that replace a greenfields agreement than in the initial greenfields agreement. Between 2011 and 2019, replacement enterprise agreements in construction have, on average, a 0.4 percentage point lower AAWI than the greenfields agreements they replace. Over the same period, replacement enterprise agreements in mining have, on average, a 1 percentage point lower AAWI than the greenfields agreement they replaced. If this trend were to continue, the reform would likely enable workers to lock in higher wage increases for an extended period of time.

Both construction greenfields agreements and construction enterprise agreements have consistently included above-average AAWIs in recent years. In 2019, the AAWI for approved construction greenfields agreements was 5.1 per cent, compared to 3.6 per cent for approved enterprise agreements in construction, and 2.7 per cent for approved enterprise agreements in all industries. Under extended term greenfields agreements, workers are likely to benefit from these higher wage increases for even longer.

While workers do not appear to achieve improved wage increases from agreement renegotiations, workers may achieve improved conditions from renegotiations that are not captured in wages data (e.g. improved roster arrangements).

The reform will require extended term greenfields agreements to contain annual wage increases for the nominal life of the agreement, which is an enhancement of the current provisions in favour of employees.

Additionally, unlike for enterprise agreements generally, there is a requirement that greenfields agreements are initially attempted to be made between unions and employers, meaning there is union oversight of the agreement’s content and the interests of employees are represented. [143] Overall, the involvement of unions in negotiating greenfields agreements can act as a safeguard for employee pay and conditions - regardless of whether the agreement has a nominal life of four or eight years. It should be noted that eight years would be the maximum nominal expiry date for greenfields agreements on eligible major projects - parties to agreements can still agree to a reduced agreement length.

Option two

Maintaining the status quo will mean that greenfields agreements for all projects will continue to have a nominal expiry date that is not more than four years after the day of FWC approval. Employers undertaking time-sensitive major projects that take longer than four years will continue to be subject to the potential threat of protected industrial action and protracted bargaining periods once their greenfields agreements expire during the construction of the project, potentially making Australia a less attractive investment option in a competitive global market.

If an employer agrees to bargain to renegotiate the agreement or there is a successful majority support determination, employees will be able to engage in negotiations regarding their pay and conditions at a maximum of four years from the approval of the agreement. As outlined, this will not necessarily result in improved wage increases - and indeed the evidence suggests agreements replacing Greenfield agreements have reduced wage increases. However, outcomes regarding wages and conditions will depend on the circumstances of the particular negotiations and the prevailing economic conditions at the time negotiations are undertaken.

As noted above, under extended term greenfields agreements, workers are likely to benefit from the higher wage increases in greenfields agreements for even longer - a benefit they may not receive under option two. However, they may have less opportunity to renegotiate the conditions in their greenfields agreement.

Finally, the administrative savings associated with avoiding one round of bargaining under Option 1 will, under this option, continue to be costs associated with undertaking bargaining for a replacement agreement.

Option three

Option three would involve providing the FWC with additional funding to enhance the services it provides to projects in the major projects national practice area. The main benefit of this option is that it is non-regulatory and therefore does not fundamentally alter the bargaining framework with which stakeholders are familiar.

It also has the potential to improve workplace cooperation and productivity, as evidence suggests has been achieved through enhanced FWC support in its “New Approaches” program. [144] New Approaches is a program to help parties find ways to build cooperative working relationships. The program supports parties in reaching agreement and establishing processes for future negotiations through training, workshops, discussion and facilitation. It also includes the facilitation of “interest-based bargaining”, which is an approach to bargaining in which the parties to a negotiation approach the process by identifying their individual or shared interests, rather than focusing on their positions or log of claims. By identifying individual or shared interests, the interest-based bargaining process uncovers ways that each party's interests can be met without disadvantaging the other party.

The services the FWC can provide via its New Approaches program include:

  • training in interest-based bargaining
  • help with enterprise bargaining
  • help with developing joint processes to implement enterprise agreements
  • training in interest-based dispute resolution
  • training and assistance in collaborative workplace change, including training for consultative committees.

Cooperative workplace relationships and FWC-supported renegotiations could lead to more efficient agreement making and shorter approval processes. Research suggests that more cooperative approaches to workplace relations, such as those facilitated by the FWC’s New Approaches program, can lead to mutual gains for employers and employees, as well as increased productivity, improved workplace culture, and more efficient agreement making. [145] However, it is difficult to quantify the likely impact of FWC support on the length of bargaining and frequency of industrial disputes due to a lack of quantitative data on the impact of cooperative approaches to workplace relations.

Accordingly, it cannot be said with certainty that increased FWC support would reduce the length of bargaining or by how much. Moreover, as it would be voluntary to seek these services provided by the FWC, there is no guarantee that the services would be used. Some stakeholders have concerns about third party involvement in their workplace relations, and these stakeholders are unlikely to voluntarily access the services of an industrial relations tribunal.

Moreover, this option is unlikely to meet the policy objective of delivering certainty for investors and therefore increasing major project investment and the associated jobs and economic growth. This is because greenfields agreements on major projects will continue to have a nominal expiry date that is not more than four years after the day of FWC approval, meaning employers will be subject to the potential threat of protected industrial action and protracted bargaining periods once their greenfields agreements expire during the construction of a major project. Accordingly, Australia will not be able to provide the cost and timeframe certainty needed to attract additional investment.

As with option two, the administrative savings associated with avoiding one round of bargaining will, under this option, continue to be costs associated with undertaking bargaining for a replacement agreement.

Consultation

On 19 September 2019, a discussion paper was released that sought views from stakeholders on a proposed reform to allow the duration of greenfields agreements to match the life of major infrastructure, resources and energy projects. The Attorney-General’s Department received 18 submissions. Nine submissions were from employer groups and five were from unions. There were also submissions from an employer, a law firm, an industrial relations consultant and a former Fair Work Commissioner. All submissions are publically available on the Attorney-General’s Department’s website. [146]

On 11 June 2020, the Australian Government constituted five working groups to consider how to improve the operation of the industrial relations system, one of which related to greenfields agreements. The purpose of the Greenfields Agreements Working Group was to explore options for making Australian major projects more attractive to investors, by providing greater certainty of costs and delivery timeframes.

The Greenfields Agreements Working Group met seven times. Working group meetings lasted between two to four and a half hours, with additional out of session discussions held between working group members and with the Deputy Chair. In total, working group members spent approximately 18.5 hours in formal discussions (which does not include the time committed to the additional out of session discussions).

Membership of the working group

  • Employer organisations : Australian Chamber of Commerce and Industry (ACCI), AMMA Australian Resources and Energy Group, Minerals Council of Australia (MCA), Australian Constructors Association (ACA), Master Builders Australia (MBA).
  • Unions : Australian Council of Trade Unions (ACTU), Construction Forestry Mining Maritime and Energy Union (CFMMEU), Australian Workers’ Union (AWU), Australian Manufacturing Workers’ Union (AMWU), Electrical Trades Union (ETU).

Principal views of stakeholders               

The consultations undertaken as part of the working groups were held in-confidence to promote increased engagement and assist negotiations. In general, employer groups advocated for changes which would prolong the nominal life of greenfields agreements covering major projects to reduce investment uncertainty, while unions wanted to ensure that major project jobs remained of high quality and that workers were not disadvantaged. Unions, argue that the proposed reform is unnecessary as they indicate the majority of projects do not go over four years and industrial relations arrangements are not a determining factor in investment decisions. Union’s also argue that the reform places a restriction on the ability of workers to bargain for better pay and conditions.

However, there was agreement that there was scope to extend the nominal duration of greenfields agreements on major projects, but differing views about how best to implement this change.

How views of the working group were taken into account

The views of the Greenfields Agreements Working Group were taken into account when developing final policy proposals. Where consensus was reached between Working Group members, this strongly influenced final proposals for reform. Where consensus could not be reached on a particular issue, the views of stakeholders were taken into account in the final reform design.

As the discussions of the Greenfields Agreements Working Group were held in-confidence and the final outcomes were non-binding, this RIS will not discuss in detail the proposals put forward, concessions made or agreement reached. This decision has been made to respect the confidentiality of members and not prejudice future discussions.

Preferred Options

For the reasons outlined in the assessment of benefits above, option one is the preferred option. The status quo, as outlined in option two, will not address the current problem regarding the nominal duration of greenfields agreements, and while the non-regulatory approach outlined under option three may have some positive impact, it fails to adequately mitigate the risks associated with exposure to mid-project agreement renegotiations - most notably, the potential to deter mega projects.

Option 1 reflects findings made during the 2019 discussion paper process and the 2020 Greenfields Agreements Working Group process. It strikes an appropriate balance by making the necessary changes to encourage investment, while maintaining existing safeguards in the current greenfields bargaining framework, and also introducing an additional safeguard (a requirement that annual wage increases must be included over the full term of any agreement with a nominal duration of longer than four years) to ensure employees’ interests are protected.

Employees will retain access to all protections and rights under the FW Act, including general protections, freedom of association and right of entry provisions. As discussed above, greenfields agreements have tended to provide higher wage increases than other agreements in comparable industries, and equivalent or slightly higher wages than the agreements that replace them.

Implementation and Evaluation of Options

Implementation of the preferred option will require minimal legislative amendments to the FW Act.

Implementation risks

The most significant risk to successful implementation is that the necessary legislative amendments may not obtain passage through Parliament. The risk to legislative passage has been partly addressed through the industrial relations reform consultation process, which involved extensive consultation with key stakeholders to develop balanced recommendations.

There is also a possibility, as with any new amendment to the Fair Work Act, that there can be disputation in the Fair Work Commission which can contribute to delays. This is often the case until case law and precedents are developed, which provide more certainty to parties about the interpretation of the new amendments.

Transitional arrangements

The amendments will apply after the commencement of the amendments . The amendments will not change employment arrangements on existing major projects which are utilising in-term greenfields agreements.

Monitoring and evaluation

The Attorney-General’s Department will monitor ABS and Deloitte Access Economics data on the uptake of major projects in conjunction with FWC data on the use of greenfields agreements on major projects with a nominal life of longer than four years. The department will also continue to engage in stakeholder consultation with employer and employee groups to gauge the impact of the reform. In particular, consultation can be undertaken through the regular meetings of the National Workplace Relations Consultative Council (NWRCC). The NWRCC is a forum for employer and employee representatives to consult on workplace relations and labour market matters of national concern, and meetings are chaired by the Minister for Industrial Relations



STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

 

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020

This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

Overview of the Bill

This Bill will progress industrial relations reform to drive employment, wages and productivity growth in a post-COVID-19 economy. It will generate benefits for both employers and employees, focusing on productivity achieved through cooperative working relationships, supported by appropriate protections that balance the needs of employers and employees.

Casual employees

Schedule 1 to this Bill amends Part 1-2 and inserts new Division 4A of Part 2-2 of the

Fair Work Act 2009 (Fair Work Act) to provide for a statutory definition of casual employment and a minimum standard casual conversion right for eligible casual employees. This Schedule also provides for casual employees to be provided with a Casual Employment Information Statement prepared by the Fair Work Ombudsman (FWO) and for an amendment to Part 4-1 of the Fair Work Act to provide in certain circumstances for a court to offset casual loading amounts paid to an employee against claims for amounts for leave and other entitlements.

Modern awards

Part 1 of Schedule 2 to this Bill inserts new Division 9 to Part 2-3 into the Fair Work Act to enable additional hours agreements between employers and part-time employees to be made where an identified modern award applies to the employer and employee. These can provide (subject to various safeguards) for an employer to offer, and for a part-time employee to accept or reject, additional hours at ordinary rates of pay in certain circumstances.

Part 2 of Schedule 2 inserts new Part 6-4D into the Fair Work Act to extend in identified modern awards (subject to various safeguards) flexible work directions in relation to duties and location of work. The Fair Work Commission (FWC) will be able to resolve disputes in accordance with existing dispute resolution terms of modern awards. Part 3 of Schedule 2 repeals new Part 6-4D to cease provision for these directions after 2 years.

Enterprise agreements etc.

Parts 1 to 11 of Schedule 3 to this Bill amend Part 2-4 of the Fair Work Act and make consequential amendments to other parts of the Fair Work Act.

Part 1 amends the objects of Part 2-4 to better reflect the intended operation and outcomes of the enterprise agreement framework.

Part 2 extends the time for an employer to provide the notice of employee representational rights (NERR) and requires the FWC to publish the NERR on its website.

Part 3 amends pre-approval requirements for enterprise agreements to require employers to take reasonable steps to ensure employees are given a fair and reasonable opportunity to decide whether or not to approve a proposed enterprise agreement.

Part 4 amends voting requirements for approving or varying enterprise agreements to clarify that casual employees are entitled to vote if they worked during the ‘access period’.

Part 5 clarifies the matters the FWC is required to have regard to when assessing enterprise agreements against modern awards when applying the better off overall test (BOOT) to:

·          provide that the FWC may only take into account patterns or kinds of work, or types of employment, that are currently engaged in, or are reasonably foreseeable;

·          provide that the FWC may have regard to the overall benefits (including non-monetary benefits) employees would receive under the agreement compared to the relevant modern award;

·          require the FWC to have regard to the views of the employees, employer, and bargaining representatives for the agreement as to whether the agreement passes the BOOT; and

·          allow the FWC to approve agreements that do not comply with the BOOT in limited circumstances for a time limited period.

Part 6 provides that the FWC will no longer need to be satisfied that the terms of an enterprise agreement does not exclude the National Employment Standards (NES) and instead, the agreement must include the new model NES interaction term, which explains interaction between the NES and enterprise agreements.

Part 7 enables franchisees to opt-in to a current single-enterprise agreement that covers a larger group of employers that operate under the same franchise.

Part 8 provides that an application to terminate an enterprise agreement after its nominal expiry date cannot be made until 3 months after that date.

Part 9 limits who can be heard by the FWC in relation to applications to approve or vary enterprise agreements and provides that persons not otherwise prescribed can only be heard in exceptional circumstances.

Part 10 provides that the FWC must determine applications to approve enterprise agreements or variations to enterprise agreements, as far as practicable, within 21 days. If the FWC does not determine the application in this time, it must notify the relevant parties as to the reasons why, including whether any exceptional circumstances exist.

Part 11 amends the functions of the FWC under Part 2-4 to provide that the FWC must recognise the outcome of bargaining at the enterprise level.

Part 12 amends Part 2-8 of the Fair Work Act to provide that a transfer of business does not occur when an employee seeks, at their own initiative, to transfer between employers that are associated entities.

Part 13 amends the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 to provide that all agreement based transitional instruments preserved under that Act, including Division 2B State employment agreements, and enterprise agreements and workplace determinations made during the Fair Work Act ‘bridging period’ from 1 July 2009 to 31 December 2009, will cease on 1 July 2022.

Greenfields agreements

Schedule 4 to this Bill amends the Fair Work Act to enable greenfields agreements made in relation to the construction of a major project to specify a nominal expiry date of up to eight years after the day the agreement comes into operation. Where the greenfields agreement specifies a nominal expiry date more than four years after the day on which the FWC approves the agreement, the agreement must include a term that provides for annual pay increases for the nominal life of the agreement.

Compliance and enforcement

Part 1 of Schedule 5 to this Bill amends Part 4-1 of the Fair Work Act to:

·          increase the maximum civil penalties the court may impose for remuneration-related contraventions;

·          introduce a new ‘value of the benefit’ alternative civil penalty for remuneration-related contraventions by bodies corporate (other than small business employers). As the proposed ‘value of the benefit’ alternative civil penalty only targets bodies corporate, not individuals, it is not considered further here; and

·          clarify that orders the court may make under subsection 545(2) of the Fair Work Act include adverse publicity orders.

Part 2 of Schedule 5 amends Part 4-1 of the Fair Work Act and makes consequential amendments to increase the small claims cap from $20,000 to $50,000, provides for the Federal Circuit Court or a magistrates court to refer small claims matters to the FWC for conciliation, provides for consent arbitration of small claims matters if conciliation is unsuccessful, and provides for the court (and the FWC when arbitrating) to award filing fees as costs to successful small claims applicants.

Part 3 of Schedule 5 inserts new Division 4 to Part 3-6 of the Fair Work Act to prohibit employers from publishing (or causing to be published) job advertisements with pay rates below the relevant national minimum wage (see table 1, below).

Part 4 of Schedule 5 amends Parts 4-1 and 5-2 of the Fair Work Act to increase the maximum penalty for not complying with a compliance notice (see table 1, below); allow for an increase to the maximum penalty able to be imposed under an infringement notice; and codify the factors that the FWO may take into account when deciding whether to accept an enforceable undertaking. It also amends the Building and Construction Industry (Improving Productivity) Act 2016 (BCIIP Act) to empower the Australian Building and Construction Commissioner (ABC Commissioner) to accept an enforceable undertaking in relation to a suspected remuneration-related contravention that relates to building work.

Part 5 of Schedule 5 amends Part 4-1 of the Fair Work Act to increase the maximum civil penalty for sham arrangements (see table 1, below).

Part 6 of Schedule 5 amends Part 5-2 of the Fair Work Act to require the FWO to publish information relating to when it will commence or defer commencing litigation. It also amends the BCIIP Act to make similar provision with respect to the ABC Commissioner.

Part 7 of Schedule 5 amends Part 2-9 of the Fair Work Act and makes consequential amendments to provide for a criminal offence for dishonestly engaging in a systematic pattern of underpaying one or more employees.

Table 1 Summary of civil penalty increases and new civil remedy provisions under Schedule 5 to the Bill

Fair Work Act 2009

Ordinary contravention (civil)

Serious contravention (civil)

Contravention

Individual

Penalty units/$

Body Corporate

Penalty units/$

Individual

Penalty units/$

Body Corporate

Penalty units/$

Remuneration-related contraventions (see s 12)

90 ($19,980)

(50% increase)

450 ($99,900)

(50% increase)

Or for a body corporate that is larger than a small business employer, and the penalty is greater:

—2 times the value of the benefit obtained

600 ($133,200)

(No change)

3,000 ($666,000)

(No change)

Or for a body corporate that is larger than a small business employer, and the penalty is greater:

—3 times the value of the benefit obtained

Sham contracting-related contraventions (ss 357(1), 358 and 359)

90 ($19,980)

(50% increase)

450 ($99,900)

(50% increase)

N/A

N/A

Non-compliance with a compliance notice (s 716(5))

45 ($9,990)

(50% increase)

225 ($49,950)

(50% increase)

N/A

N/A

Advertising employment below rate of national minimum wage (new s 536AA)

60 ($13,320)

(new civil remedy provision)

300 ($66,600)

(new civil remedy provision)

N/A

N/A

Fair Work Commission

Schedule 6 to the Bill includes measures to support more efficient FWC processes, including to enable the FWC to:

·          hear appeals ‘on the papers’ where the FWC considers a matter can be adequately determined without oral evidence and submissions;

·          vary decisions to approve enterprise agreements more easily, to correct minor errors; and

·          expand the grounds on which the FWC may dismiss applications and provide for the FWC to order a vexatious applicant not to make further applications to the FWC of a kind specified in the order (including applications of a particular type or against a particular person), unless permission is given.

Application, saving and transitional provisions

Schedule 7 to this Bill amends Schedule 1 to the Fair Work Act to insert application, saving and transitional provisions in relation to the measures in this Bill.

Human rights implications

The definition of ‘human rights’ in the Human Rights (Parliamentary Scrutiny) Act 2011 relates to the seven core United Nations human rights treaties. This Bill engages the following rights:

·          the right to work and the right to just and favourable conditions of work contained in Articles 6(1) and 7 of the International Covenant on Economic, Social and Cultural Rights (ICESCR);

·          the right of the child to be protected from economic exploitation and from performing work that is likely to interfere with the child’s education in Article 32 of the United Nations Convention on the Rights of the Child (UNCRC);

·          the right to freedom of association, including the right to form and join trade unions and the right of trade unions to function freely contained in Article 8 of the ICESCR and Article 22 of the International Covenant on Civil and Political Rights (ICCPR);

·          the right to a fair hearing in a civil matter in Article 14 of the ICCPR; and

·          the criminal process rights contained in Articles 14 and 15 of the ICCPR.

The content of the right to work, the right to just and favourable conditions of work and the right to freedom of association in the ICESCR and ICCPR can be informed by specific obligations in treaties of the International Labour Organisation (ILO), such as the Freedom of Association and Protection of the Right to Organise Convention, 1948 (No.87) (ILO Convention 87), the Right to Organise and Collective Bargaining Convention, 1949 (No. 98) (ILO Convention 98) and the Employment Policy Convention 1964 (No.122) (ILO Convention 122).

Rights to work and rights in work

Article 6(1) of the ICESCR recognises the right to work and obliges States Parties to take appropriate steps to safeguard this right. The United Nations Committee on Economic, Social and Cultural Rights has stated that the right to work in Article 6(1) encompasses the need to provide the worker with just and favourable conditions of work.

The United Nations Committee on Economic, Social and Cultural Rights has stated that the right to work also encompasses the right not to be unjustly deprived of work. This right may be subject only to such limitations ‘as are determined by law only in so far as this may be compatible with the nature of these rights and solely for the purpose of promoting the general welfare in a democratic society’.

Article 7 of the ICESCR requires that States Parties recognise the right of everyone to the enjoyment of just and favourable conditions of work which ensure, in particular, remuneration that provides all workers with fair wages, a decent living and rest, leisure and reasonable limitation of working hours and periodic holidays with pay, as well as remuneration for public holidays.

Casual employees

The Bill provides a statutory definition of a casual employee, a minimum standard casual conversion right and a statutory casual loading offset mechanism.

These measures promote rights in work by providing certainty as to the entitlements and obligations for up to 2.3 million casual employees through a statutory definition of casual employment.

The measures promote rights to work by providing a right to be offered or to request conversion from casual employment to permanent employment for eligible employees. They promote the right to just and favourable conditions of work for up to 1.3 million ‘regular’ casual employees who have been with their employer for 12 months or more, making available, if they choose to convert, entitlements such as annual leave and personal leave that are conditions of permanent employees.

The measures are aimed at achieving the legitimate objective for the purposes of international human rights law of promoting full, productive and freely chosen employment (Article 1 of ILO Convention 122). They give employers the confidence to create jobs by using casual employment as a flexible employment option and encourage the re-hiring of casuals who lost their jobs due to the impact of COVID-19 by eliminating uncertainty around casual employment.

The definition provides certainty as it does not rely on an ongoing assessment of the employment based on post-contractual conduct, ensuring certainty of status and entitlements at all times. The assessment of the offer of employment must be made on the basis of there being no firm advance commitment to continuing and indefinite work according to an agreed pattern of work, which is the key element of the common law test.

As a result of the application of Schedule 7 to the Bill, existing employees whose offer and acceptance of employment fall within the terms of the Bill’s definition of casual employee will be casuals within the meaning of that definition for the duration of their employment unless and until they either convert or accept employment on another basis. This will ensure certainty of that status at all times and the resulting rights, obligations and entitlements that apply for the employment relationship.

The inclusion of a safeguard against double-dipping through a statutory offset mechanism does not limit rights in work. The measure requires a court to deduct the casual loading from amounts payable by an employer to an employee for one or more of the relevant entitlements for which the casual loading is intended to compensate, where the employee is later found not to be a casual employee. The measure allows the court to reduce a claim for relevant entitlements by an amount equal to the proportion of the loading amount the court considers appropriate, to ensure fairness between the parties.

Modern awards

Simplified additional hours agreements

The Bill will provide for simplified additional hours agreements between employers and part-time employees to whom one of 12 modern awards applies. These awards cover employers and employees in the accommodation and food services and retail trade industries. This measure will provide a new, clear process (in addition to existing arrangements under modern awards) for additional hours to be offered to part-time employees at ordinary instead of overtime rates of pay.

This measure is aimed at achieving the legitimate objective for the purposes of international human rights law of supporting Article 1(1) of ILO Convention 122: With a view to stimulating economic growth and development, raising levels of living, meeting manpower requirements and overcoming unemployment and underemployment, each Member shall declare and pursue, as a major goal, an active policy designed to promote full, productive and freely chosen employment.

Article 1(3) of ILO Convention 122 provides that such policies shall take due account of, relevantly: the mutual relationships between employment objectives and other economic and social objectives, and shall be pursued by methods that are appropriate to national conditions and practices.

The measure is directed to this objective as it is intended to remove barriers to part-time employment by providing more flexibility around the deployment of part-time employees in response to changing business needs. It will give employers the confidence to engage part-time rather than casual employees.

The measure is compatible with and promotes the right to work. While it may operate to limit the right to just and favourable conditions of work, it is reasonable, necessary and proportionate in the context of overcoming unemployment and underemployment.

Simplified additional hours agreements will be subject to a range of protections. An employee will not be required to enter into an agreement. The employee’s regular hours must be at least 16 ordinary time hours per week and there will be a minimum requirement of work of at least 3 continuous hours. If the agreement to work additional hours is not in writing, the employer must make a record of the fact that the agreement has been entered into.

In addition, entering into, not entering into, terminating, or not terminating a simplified additional hours agreement will be a workplace right within the meaning of the Fair Work Act’s general protections (Part 3-1). Dispute settlement terms of identified modern awards will apply to disputes about the interaction of simplified additional hours agreement provisions and terms of an identified modern award. Overtime will continue to be payable for time worked outside the relevant span of ordinary hours or daily/weekly maximum ordinary hours. Additional agreed hours will be deemed to be ‘ordinary hours’ for specified purposes, including in relation to the superannuation guarantee and the accrual and taking of annual leave and paid personal leave. Simplified additional hours agreements may be terminated by providing at least seven days’ written notice, or at any time if agreed in writing by the employer and employee.

Extension of certain JobKeeper flexibilities

The Bill will temporarily continue the ability of employers covered by identified modern awards to direct employees to work at different locations, including at home, and to perform a broader range of duties. This measure is also directed at the accommodation and food services and retail trade industries. It provides a straightforward mechanism (in addition to existing processes in modern awards) that allows employers to direct their employees to perform different functions and perform work at alternative locations.

The legitimate objective of the measure is to facilitate ongoing employment and support the Australian economy during the COVID-19 pandemic. It is designed to support a limited range of employers to manage their workplace during the COVID-19 pandemic and maximise employee retention rates.

The measure is subject to a range of safeguards such as minimum rates of pay and the ability of parties to have disputes settled in accordance with an identified modern award dispute settlement procedure. Duties must be reasonably within scope of the employer’s business operations. A flexible work direction must be in writing and must not be unreasonable in all the circumstances. The employer must have information that supports a reasonable belief that the direction is a necessary part of a reasonable strategy to assist in the revival of the employer’s enterprise. Written notice of intention to give a flexible work direction will be required, as will consultation with the employee or the employee’s representative in relation to the direction. Changes can only be made to an employee’s duties where the new duties are safe, including having regard to the nature and spread of COVID-19, and all existing work health and safety protections continue to apply. The additional capacity for employers to temporarily alter conditions will be time limited and will cease to operate two years after the commencement of the provisions.

The measure is compatible with and promotes the right to work. While it limits the right to just and favourable conditions of work, it is reasonable, necessary and proportionate in the context of the extreme economic impacts of the COVID-19 pandemic.

Enterprise agreements

Better off overall test

The temporary measure for the FWC to approve an agreement that does not pass the BOOT provides an avenue for agreement-approval in the context of the recovery from the impact of COVID-19. This includes appropriate employee safeguards to ensure that the views and circumstances of employees, employers and bargaining representatives, and the extent of employee support and their employee organisations are taken into account, and the approval of the agreement must not be contrary to the public interest. Agreements made under this mechanism will nominally expire no longer than two years after approval by the FWC and the temporary measure will sunset after 2 years.

While this mechanism may limit rights to just and favourable conditions of work, it is reasonable, necessary and proportionate to achieving the legitimate objective of preserving employment impacted by the COVID-19 pandemic and the recovery of Australian jobs by allowing the FWC to approve such agreements only after taking into account the views and circumstances of the parties covered by the agreement, the impact of COVID-19 on the business and the extent of employee support for the agreement.

Transfer of business

Measures that amend Part 2-8 of the Fair Work Act engage the right to just and favourable conditions at work. Depending on the particular facts and circumstances of each case, the amendments will either limit or promote the right. The provisions will limit rights in work in circumstances where the new employer’s industrial instrument has terms and conditions that are less favourable than the old employer’s instrument. Conversely, rights in work will be promoted where the new employer’s industrial instrument has terms that are more favourable than the old employer’s instrument.

Amending the transfer of business provisions in this way removes red tape by ensuring instruments do not transfer for voluntary movements of staff between associated entities. This will make it easier for employees, if they wish to do so, to transfer between associated entities. It will reduce administrative burden for employers as an employer will no longer need to deal with multiple instruments in the workplace or go to the FWC for orders when an employee chooses to move to an associated entity.

Any limitation of rights to just and favourable conditions of work is proportionate as the provision only applies where an employee seeks to become employed by the new employer at the employee’s initiative. The amendments will not operate in circumstances where the employee’s movement to another employer is in response to a direction by the old employer. Nor would they operate if the movement comes about as a result of the old employer taking or threatening to take action against the employee. The normal rules concerning an employee’s continuity of service in section 22 are not affected by these measures.

Legacy agreements

The measures in Part 13 to Schedule 3 to sunset agreement based transitional instruments, enterprise agreements and workplace determinations made during the Fair Work Act ‘bridging period’ on 1 July 2022 promote the right to just and favourable conditions of work at Article 7 of the ICESCR. These legacy agreements set the pay and conditions of between 300,000 to 450,000 employees and many provide take home pay and conditions inferior to those provided by the relevant modern award. Ceasing these agreements following the extended transitional period provided upon the commencement of the Fair Work Act more than a decade ago is expected to uplift terms and conditions of employment for many employees in the event they make a new enterprise agreement or are engaged under a relevant modern award.

Ceasing these agreements will also mean that employers will no longer have to compete with businesses operating under terms and conditions of employment that were not assessed as leaving employees covered by the agreement better off overall compared to the relevant modern award. This removes the unfair competitive advantage that the continued operation of these agreements may facilitate by allowing some employers to provide entitlements less beneficial than the relevant modern award.

Businesses have the option to use the modern award to set employees’ pay and conditions alone or in combination with contracts of employment, or to bargain for a new agreement better suited to their circumstances. This will level the playing field, reduce complexity and encourage agreement making.

While there may be a small number of employees who may become reliant on terms and conditions provided by the safety net of the NES, the national minimum wage order and modern awards less beneficial than those contained in their preserved transitional instrument, this will be counterbalanced by increases in wages and enhanced conditions of employment for the vast majority of employees.

Variation and revocation of decisions relating to enterprise agreements and workplace determinations

The amendments made by Schedule 6 will allow the FWC to vary or revoke certain decisions relating to the approval of enterprise agreements and workplace determinations. The exercise of this power may engage the right to just and favourable conditions of work, as it confers a broad discretion on the FWC to vary or revoke decisions that determine the terms and conditions of employment and similarly engage the right to freedom of association, as enterprise agreements that were agreed by a process of collective bargaining can be affected by the exercise of this discretion by the FWC.

However, this discretion will be exercised in light of the FWC’s obligation to perform its functions and exercise its powers in a manner that, relevantly, is fair and just, open and transparent, and promotes harmonious and cooperative workplace relations. In performing its functions or exercising powers, the FWC must take into account, among other things, the objects of the Act and any objects of a Part of the Act, equity, good conscience and the merits of the matter. 

In this context, this amendment is reasonable, necessary and proportionate to achieving the legitimate objective of improving the efficiency of FWC ensuring that applications to the FWC are dealt within in a timely, practical and transparent manner consistent with the objects of Part 2-4 of the Fair Work Act.

Greenfields agreements

The Fair Work Act requires the FWC to approve an enterprise agreement if the Act’s approval requirements are satisfied.

Schedule 4 to the Bill engages the right to just and favourable conditions of work by providing an additional new approval requirement for greenfields agreements made in relation to the construction of a major project. Where this type of greenfields agreement specifies a nominal expiry date that is more than four years after the day on which the FWC approves the agreement, the FWC must also be satisfied that the agreement provides for annual pay increases to each employee who will be covered by the agreement, for the nominal life of the agreement.

This amendment promotes the right to just and favourable conditions of work by ensuring that employees receive annual pay increases for the nominal life of the greenfields agreement where the agreement includes a nominal expiry date longer than four years.

Compliance and enforcement

Increases in civil penalties and the small claims cap, and conciliation and arbitration

The compliance and enforcement measures promote rights in work by increasing the likelihood that employees receive their full entitlements, and in particular by introducing and increasing penalties for employers that do not comply with their workplace obligations under the Fair Work Act and relevant employment instruments. Rights in work are also promoted for those employees who do not receive their full entitlements by changes to the small claims process, which will improve access and, through the option of referral to the FWC for conciliation (and alternatively consent arbitration in certain circumstances) provide a faster process to recover entitlements from employers.

Automatic disqualification from managing corporations

A conviction under the proposed offence relating to underpayments will lead to automatic disqualification of a person from managing corporations as a result of the operation of subparagraph 206B(1)(b)(ii) of the Corporations Act 2001 . As a result, this measure may operate to limit the right not to be unjustly deprived of work.

The measure addresses a gap in the existing disqualification regime as it operates in relation to the Fair Work Act and will provide a new enforcement tool to address dishonest and deliberate contraventions of the Fair Work Act by individuals. It supports the legitimate objectives of the Fair Work Act, and is reasonable as it addresses the need to adequately safeguard workers and others against those found to have dishonestly and systematically exploited employees in contravention of the Fair Work Act. It is proportionate as it targets only those individuals who have been found by a court to have dishonestly engaged in a systematic pattern of underpayments of employees. This captures only the most serious conduct involving underpayments under the Fair Work Act, so the sanction of disqualification is commensurate with the seriousness of the wrongdoing.

Individuals facing disqualification are also protected by a court-based process, including due process. In particular, the sanction may only follow a conviction for an offence which may only be exercised judicially. Additionally, there is a court-based process for lifting the ban in certain circumstances under the Corporations Act, which may mitigate the harshness of disqualification in a particular case.

The measure is appropriate insofar as it achieves the legitimate objective of strengthening enforcement options for use against contraveners under the Fair Work Act. It is rationally connected to the objective by providing a preventative remedy that specifically targets the problem of individuals’ serious, repeated misconduct. It is also proportionate, as it responds to the seriousness of the misconduct with a commensurately serious penalty, while providing court-based procedural safeguards for persons potentially facing the sanction.

Rights of the child

Article 32 of the UNCRC recognises the right of a child to be protected from economic exploitation and from performing work that is likely to interfere with the child’s education.

Modern Awards

The measure to provide for additional hours agreements promotes the right of a child to be protected from economic exploitation and performing work that is likely to interfere with a child’s education as the measure provides that a parent or guardian of an employee under the age of 18 must give consent in writing to the employee entering into additional hours agreements. 

Right to freedom of association

Article 8(1)(c) and (d) of the ICESCR protects the right of trade unions to function freely subject to no limitations other than those prescribed by law and which are necessary in a democratic society in the interests of national security or public order or for the protection of the rights and freedoms of others.

Article 8(1)(d) of the ICESCR protects the right to strike, provided that it is exercised in conformity with the laws of the particular country.

Part 1 of ILO Convention 87 protects the autonomy and independence of workers’ and employers’ organisations in relation to the public authorities, in their establishment and in their functioning and dissolution.

Enterprise agreements

Restricting third-party intervention in agreement approval and variation applications may limit the right of trade unions to function freely, as prescribed at Article 8(1)(c) of the ICESCR, by limiting the FWC’s capacity to accept submissions, evidence, or other information from trade unions that are not bargaining representatives to inform itself in relation to the application unless the FWC is satisfied there are exceptional circumstances.

This measure is aimed at avoiding unnecessary delays in the agreement approval process by ensuring that, for the most part, only those parties involved in bargaining can be heard. Relevantly, the ILO has commented that in relation to recognition of organisations for the purposes of involvement in the collective bargaining process, ‘the representativity threshold must be assessed on the basis of the specific characteristics of the industrial relations system’. This measure is proportionate in addressing the concerns of the ILO as it allows third party intervention where exceptional circumstances exist.

Greenfields agreements

The Fair Work Act permits employers and employees to engage in protected industrial action in support of claims for an enterprise agreement provided that certain requirements are satisfied. One of these requirements is that protected industrial action must not be organised or engaged in before the nominal expiry date of an enterprise agreement has passed. Currently, the nominal expiry date of an enterprise agreement must not be more than four years after the day on which the FWC approves that agreement.

While the Bill does not directly amend the protected industrial action provisions of the Fair Work Act, Schedule 4 to the Bill amends the Fair Work Act to enable greenfields agreements made in relation to the construction of a major project to specify a nominal expiry date of up to eight years after the day the agreement comes into operation.

This may operate to extend an existing limitation on the right to strike. However, where this type of greenfields agreement specifies a nominal expiry date that is more than four years after the day on which the FWC approves the agreement, the FWC must also be satisfied that for the nominal life of the agreement the agreement provides for annual pay increases to each employee who will be covered by the agreement. Further, employees that are employed under greenfields agreements (including this type) have access to representation when they commence employment and can agree with employers to vary the terms of an agreement, including the nominal expiry date.

To the extent that the amendments limit the right to strike, they are reasonable, necessary and proportionate as the limitation on this right responds to achieving the legitimate objectives of encouraging investment to promote conditions for productive and increased employment and the realisation of the right to work.

Right to collective bargaining

ILO Convention 98 protects the right of employees to collectively bargain for terms and conditions of employment.  It requires States Parties (among other things) to take measures appropriate to national conditions to encourage and promote machinery for voluntary negotiation between employers or employers’ organisations and workers’ organisations, with a view to the regulation of terms and conditions of employment by means of collective agreements.

Enterprise agreements

Schedule 3 to the Bill promotes the right to collective bargaining by streamlining and clarifying certain aspects of the agreement-making and approval process to encourage collective bargaining at the enterprise level, and completing the transition of employers and employees covered by legacy agreements into the current Fair Work framework.

The amendment to the objects of Part 2-4 expand upon those objects to better reflect the intended operation and outcomes of the enterprise agreement framework, which the FWC must take into account when exercising powers and performing functions under that Part. The amendments also provide that the FWC will be required to exercise powers and perform functions under Part 2-4 in a manner that recognises the outcome of bargaining at the enterprise level, thereby promoting the primacy of bargained outcomes between employers and employees in the enterprise agreement framework.

The current level of prescription in relation to pre-approval requirements for enterprise agreements is complex, onerous, and a disincentive to agreement making. The amendments in Part 3 take a purposive approach to the pre-approval requirements, while maintaining the protections they provide to employees when making an enterprise agreement. Employers would still be required to give employees a fair and reasonable opportunity to decide whether or not to approve the agreement prior to any vote, which may include seeking advice from their union.

The amendments also clarify which casual employees can vote to approve an enterprise agreement is based on current case law and will provide certainty to employers as to which employees are entitled to vote to approve an agreement.

Amendments preventing applications to terminate enterprise agreements within the 3 months after the nominal expiry date are further intended to promote good faith collective bargaining during the period immediately following the nominal expiry of an enterprise agreement.

Allowing franchisee employers to seek to be covered by an existing single enterprise agreement that was made with a larger group of employers operating under the same franchise may limit the right to collective bargaining under ILO Convention 98. While under this measure employees may be asked to approve an application that would have the effect of bringing them within coverage of an agreement they did not bargain for, it would also enable franchisee employers and employees to benefit from an agreement tailored to the conditions of employers and employees operating under the same franchise. The FWC may only vary an agreement to cover a franchisee employer and its employees if the agreement has not passed its nominal expiry date (i.e. it was approved by the FWC and passed the BOOT within the last 4 years) and a majority of the employees have agreed to be covered by the agreement after they have been given a fair and reasonable opportunity to do so. The FWC would also need to be satisfied there are no serious public interest grounds against making the variation.

Greenfields agreements

Currently, the nominal expiry date of an enterprise agreement must not be more than four years after the day on which the FWC approves that agreement.

The amendments in Schedule 4 to the Bill engage Article 4 of ILO Convention 98 by enabling greenfields agreements to specify a nominal expiry date that must not be more than eight years after the day the agreement comes into operation, where the FWC is satisfied that the work to be performed under the agreement relates only to the construction of a major project. While employers and employees may jointly seek to vary the terms of greenfields agreements (including this type) including the nominal expiry date, the amendments potentially impact the timing for renegotiating a new enterprise agreement.

Negotiations for a replacement agreement can cause delays and cost overruns during the construction of the project. Extending the nominal term of greenfields agreements on major projects will make Australian major projects more attractive to investors by providing greater certainty of construction costs and delivery timeframes. Increased investment will mean greater job creation. Any limitation of the right to collective bargaining by this measure is reasonable, necessary and proportionate to achieving the legitimate objectives of promoting employment by improving certainty of labour costs and minimising delays during construction on major projects, which in turn is anticipated to increase job creation and attract greater investment into Australia. 

This measure supports Article 1 of ILO Convention 122 by promoting increased employment and, as such, is aimed at achieving a legitimate objective for the purposes of international human rights law . The ILO Committee of Experts on the Application of Conventions and Recommendations has noted in relation to ILO Convention 122 that there is a wide array of possible measures aimed at creating employment, and that a country’s employment policy may take a variety of forms, including addressing the ‘duty of the State to promote conditions for the realisation of the right to work’.

Right to a fair hearing

Article 14 of the ICCPR protects the right to a fair and public hearing by a competent, independent and impartial tribunal in the determination of rights and obligations in a suit at law.

Preventing vexatious proceedings

Expanding the grounds on which the FWC may dismiss applications to include those that are misconceived, lack substance or are otherwise an abuse of process and allowing the FWC to order a person whose application is dismissed for such reasons not to make a further application to the FWC of a kind specified in the order without permission may operate to limit the right to a fair and public hearing in a civil proceeding.

Unmeritorious applications to the FWC can cause significant costs to be incurred to respondents and to the public, as well as diverting the FWC’s time and resources from other matters. While this measure may limit the right to a fair hearing, it is reasonable, necessary and proportionate to achieving the legitimate objective of the Bill of allowing the FWC to deal with unmeritorious applications more effectively than is currently permitted.

This is because the measure includes the safeguard that the applicant must be given a reasonable opportunity to make submissions to the FWC in relation to whether the application should be dismissed or whether an order should be made. Also, the measure does not apply to applications for the FWC to deal with a termination of employment dispute under the general protections provisions in Part 3-1 or the additional provisions in Part 6-4 of the Fair Work Act, which protect against termination of employment on the basis of prohibited reasons. While Full Bench orders cannot be appealed within the FWC, judicial review of such decisions may be available.

Allowing appeals ‘on the papers’

Allowing the FWC to hear appeals ‘on the papers’ where the FWC considers a matter can be adequately determined without oral evidence and submissions does not limit the right to a public hearing in Article 14.1 of the ICCPR. This is because an appeal under section 604 of the Fair Work Act is an appeal by way of rehearing and the material on which the FWC will base its appeal decision will be publicly available, as will the decision itself.

Criminal process rights

Articles 14 and 15 of the ICCPR protect criminal process rights which may also apply to civil penalty provisions regardless of the distinction between criminal and civil penalties in domestic law:

·          Article 14(2) protects against anything other than the normal standard of proof applying in relation to a criminal penalty.

·          Article 14(7) protects against the risk of double punishment.

·          Article 15(1) protects against criminal penalties applying retrospectively.

Compliance and enforcement

Existing civil remedy provisions

Current maximum monetary penalties for remuneration-related contraventions that can be sought by the FWO under the Fair Work Act are low compared to those that can be sought by other business regulators such as the Australian Competition and Consumer Commission and the Australian Securities and Investment Commission, and do not act as an effective deterrent. Increased penalties ensure that civil penalties for individuals (such as company directors, officers and professional advisers) and bodies corporate who have an obligation to employees proportionately align with the increase in civil penalties for bodies corporate, and act as a sufficient deterrent for non-compliance. Increased maximum penalties will increase the incentive for businesses to comply with their workplace obligations, in recognition of the harm and disadvantage experienced by employees and competing businesses when non-compliance occurs.

The increased penalties (and new civil remedy provisions) will apply prospectively to contraventions that are committed after the Bill commences, therefore upholding article 15 of the ICCPR (to the extent that it may be considered to apply).

While the civil penalty amounts are intended to deter non-compliance, no civil remedy provisions under the Fair Work Act carry a penalty of imprisonment. Some are at or below the level usually considered to be severe enough to be classified as criminal (that is, below 60 penalty units for individuals). In any event, the civil remedy provisions should not be considered ‘criminal’ for the purpose of human rights law due to their application in the regulatory environment for industrial relations.

Prohibition on advertising employment opportunities at below minimum wages

The measure to prohibit employers from advertising jobs with pay rates specified below the national minimum wage fills a gap in the compliance and enforcement provisions of the Fair Work Act.

Concerns were expressed to the Migrant Workers’ Taskforce that migrant workers are specifically targeted with jobs advertised at below national minimum wage pay rates. The Taskforce recommended the introduction of a prohibition on advertising jobs with pay rates that would breach the Fair Work Act (recommendation 4).

This measure is appropriate and rationally connected to the aim of ceasing worker exploitation. It will send a clear message to employers that they must verify the correct entitlements prior to advertising. It will help promote a culture of compliance with industrial relations laws by encouraging employers to consider their workplace obligations before hiring employees, which should help to reduce unintentional underpayments of employees.

Criminal offence provision

The Fair Work Act does not currently criminalise conduct involving underpaying employees. Remuneration-related contraventions are subject to civil pecuniary penalties and other sanctions under the Fair Work Act (see sections 545 and 546 for the kinds of orders courts can make).

The Bill would implement the Government’s commitment to further deter the most egregious and persistent kinds of underpayments by criminalising conduct where an employer dishonestly engages in a systematic pattern of underpaying one or more employees. The fault element for the offence is dishonesty, which necessarily involves intention to engage in (or knowledge of) wrongdoing. The offence provision would apply in relation to national system employers and employees only.

The criminal law framework would be provided for under the Crimes Act 1914 and the Criminal Code Act 1995 (for example, applying the criminal standard of proof to the offence and making provision for ancillary liability).

The Bill would set the maximum penalty for individuals at 4 years’ imprisonment or 5,000 penalty units, or both. For a body corporate, the maximum penalty would be 25,000 penalty units.

Consideration has been given to the interaction between the existing civil and proposed criminal enforcement mechanisms under the Fair Work Act, particular as to any risk of ‘double penalty’. Article 14(7) of the ICCPR prohibits an individual from being tried or punished again for an offence for which they have already been finally convicted or acquitted in accordance with the law and penal procedure of each country. This prohibition is limited to proceedings relating to a criminal charge. Despite this limitation, the approach under international and comparative human rights law has been to look at the substance and the effect of the proceedings themselves rather than their label under domestic law when determining whether a proceeding relates to a civil or criminal charge. From an international perspective, therefore, it is possible for a civil penalty provision which subjects a person to a significantly high penalty that is intended to be punitive or deterrent in nature to constitute a ‘criminal charge’ for the purposes of the prohibition on double jeopardy.

The Fair Work Act addresses this risk in section 552, which ensures that a person cannot be subject to both criminal and civil penalties. In particular, a person cannot be subject to a civil penalty if they have been convicted of an offence relating to conduct that is the same, or substantially the same, as the conduct that contravened the civil penalty provision. This protects a person from being penalised twice for the same conduct under the Fair Work Act.

In addition, the Fair Work Act makes further provision to protect the integrity of criminal law proceedings, by providing for the stay of any related civil penalty proceedings while the criminal proceedings are on foot (see section 553). This protection is in addition to any general powers the courts have to control their own proceedings, to protect the integrity of criminal law proceedings, and does not prevent the court from ordering a person to make monetary reparation to any other person in respect of any loss suffered by reason of the offence.

State-based offence provisions will be inoperable in relation to national system employers and employees as the Fair Work Act continues to cover the field in relation to sanctions for underpayments. As a result, any risk of the same conduct being prosecuted under both state and Commonwealth offence provisions will be mitigated.

Civil penalties and criminal offences - summary

To the extent that Schedule 5 to the Bill limits the rights under article 14 of the ICCPR, it is compatible with human rights. The civil liability and offence provisions are appropriate because they seek to achieve the legitimate objective of protecting employee entitlements under the Fair Work Act and are rationally connected and proportionate to this objective by reducing the risk of non-compliance with the law by imposing proportionate penalties where there is non-compliance.

Conclusion

This Bill is compatible with human rights because it includes measures that promote rights to work and rights in work including the right to just and favourable conditions of work, and promotes rights of the child. To the extent that it may limit rights in work, the right not to be unjustly deprived of work, the right to collective bargaining, the right to freedom of association and the right to a fair hearing, those limitations are reasonable, necessary and proportionate in effectively addressing the legitimate objectives of the Bill.

 



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NOTES ON CLAUSES

 

In these notes on clauses, the following abbreviations are used:

 

ABC Commissioner

The person referred to as the Australian Building and Construction Commissioner under subsection 15(1) of the Building and Construction Industry (Improving Productivity) Act 2016

Act

Fair Work Act 2009

AWA

Australian Workplace Agreement

BCI(IP) Act

Building and Construction Industry (Improving Productivity) Act 2016

Bill

Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020

BOOT

Better off overall test

CDPP

Commonwealth Director of Public Prosecutions, established under the  Director of Public Prosecutions Act 1983

Corporations Act

Corporations Act 2001

Crimes Act

Crimes Act 1914

Criminal Code

Criminal Code Act 1995 , Schedule 1

Federal Circuit Court of Australia Act

Federal Circuit Court of Australia Act 1999

Federal Court of Australia Act

Federal Court of Australia Act 1976

Fair Work inspector

A person appointed as a Fair Work inspector under section 700 of the Fair Work Act 2009 ; the Fair Work Ombudsman in their capacity as a Fair Work Inspector under section 701 of the Fair Work Act 2009

FWC

Fair Work Commission

FWO

Fair Work Ombudsman

Judiciary Act

Judiciary Act 1903

NERR

Notice of employee representation rights

NES

National Employment Standards

Penalty unit

Defined under section 4AA of the Crimes Act 1914 (Cth), subject to indexation under subsection 4AA(3) of that Act. A penalty unit is $222 as at December 2020.

Procedural rules

The procedural rules of the FWC made under section 609 of the Fair Work Act 2009

Small business employer

Defined in section 23 of the Fair Work Act 2009

TPCA Act

Fair Work (Transitional Provisions and Consequential Amendments) Act 2009

 

Clause 1 - Short title

1.              This is a formal provision specifying the short title.

Clause 2 - Commencement

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

Clause 3 - Schedules

3.              Clause 3 provides that each Act that is specified in a Schedule is amended or repealed as set out in that Schedule, and any other item in a Schedule to the Bill has effect according to its terms.



SCHEDULE 1 - CASUAL EMPLOYEES

Overview

4.              Schedule 1 amends the Fair Work Act to:

·                 insert a definition of casual employee that provides both parties to an employment relationship with certainty about an employee’s status and entitlements from commencement and at all times during the employment relationship;

·                 insert a casual conversion entitlement in the National Employment Standards that provides eligible casual employees with a pathway to convert to ongoing full-time or part-time employment;

·                 require an employer to provide all new casual employees with a Casual Employment Information Statement, published by the FWO;

·                 allow a court to offset casual loading amounts paid to an employee against certain entitlements that the casual loading was paid in compensation for, during a period when that employee was not a casual employee; and

·                 make consequential amendments.

Part 1 - Main amendments

Amendments to the Fair Work Act 2009

Item 1 - Section 12

Item 2 - At the end of Division 3 of Part 1-2

5.              These items define the meaning of ‘casual employee’.

6.              Item 2 inserts new section 15A, which establishes the statutory definition. This would override the meaning of casual employee that has evolved over time at common law. Item 1 signposts this definition in the Dictionary (section 12).

7.              The definition incorporates elements of the common law meaning but provides the parties with greater certainty as to an employee’s status on commencement of employment and at all times during the employment relationship, and the entitlements that flow from that status.

8.              New subsection 15A(1) provides that a person is a casual employee if:  

·                 an offer of employment is made on the basis that the employer makes no firm advance commitment to continuing and indefinite work according to an agreed pattern of work for the person (paragraph 15A(1)(a)); and

·                 the person accepts the offer on that basis (paragraph 15A(1)(b)); and

·                 the person is an employee as a result of that acceptance (paragraph 15A(1)(c)).

9.              The requirement in new paragraph 15A(1)(a) reflects the common law principle that the essence of casual employment is the absence of a ‘firm advance commitment to continuing and indefinite work according to an agreed pattern of work’: WorkPac v Skene [2018] FCAFC 131 (Skene) and WorkPac v Rossato [2020] FCAFC 84 (Rossato). The indicators of the absence of a firm advance commitment are set out in subsection 15A(2).

10.          New paragraph 15A(1)(b) requires that the person accepts the offer of employment on the basis of there being no such firm advance commitment. The negotiation of other terms and conditions since the initial offer (such as rates of pay) does not affect whether the acceptance satisfies paragraph 15A(1)(b).

11.          The requirement in paragraph 15A(1)(c) makes clear that a person will only become a casual employee once they have commenced employment with the employer (that is, once they are an employee).

12.          The elements of the absence of a firm advance commitment may be expressly specified in the terms of a written offer of employment. However, there is no requirement for the offer and acceptance to be in writing, and the definition is intended to apply to informal arrangements.

13.          New subsection 15A(2) provides the following exhaustive list of factors against which the absence of a firm advance commitment to continuing and indefinite work according to an agreed pattern of work in paragraph 15A(1)(a) is assessed at the time the offer is made:

·                 whether the employer can elect to offer work and whether the person can elect to accept or reject work;

·                 whether the person will work only as required;

·                 whether the employment is described as casual employment;

·                 whether the person will be entitled to a casual loading or a specific rate of pay for casual employees under the terms of the offer or a fair work instrument (this term is defined in existing section 12 and includes the national minimum wage order).

14.          The factors are drawn from the existing common law test of casual employment, including as expressed in recent cases of Skene and Rossato.

15.          The exhaustive list narrows the factors a Court can consider in assessing whether an offer of employment has the requisite absence of a firm advance commitment to continuing and indefinite work according to an agreed pattern of work, in order to provide the greatest degree of certainty. All of the factors may be relevant and none are determinative.

16.          For example, if an offer of employment describes the employment as casual and includes payment of a casual loading, but provides for guaranteed hours on a continuing and indefinite basis according to an agreed pattern of work and the employee has no right to accept or reject work that is offered, the employment would not be casual.

Illustrative example - absence of firm advance commitment

José works as a shop assistant in a boutique clothing store owned by Lucy.

Lucy advertised a casual position because she needed a shop assistant to help out in periods of peak demand and when other staff are on leave, but cannot guarantee work every week. Casual employment suits José who lost his job due to COVID-19 and wants the freedom to refine his invention when he is not working.

José’s offer of employment provides that his hours of work will depend on the needs of the business and he is free to accept or reject any shift Lucy offers to him. The offer describes the position as casual and provides that Lucy will pay him as a Retail Employee Level 1 under the General Retail Industry Award 2020 , including the 25 per cent casual loading in addition to the minimum hourly rate for this classification. José accepts the position on this basis.

As such, José’s offer and acceptance satisfy the terms of the definition in section 15A and he is therefore a casual employee.

 

Illustrative example - employment described as casual but existence of firm advance commitment to continuing and indefinite work

Jaqueline owns and runs a dental practice. She hires Marie as a receptionist to work on the front desk. The position is described as casual in Marie’s written offer of employment. The offer provides that Jaqueline will pay Marie a casual loading on top of her hourly rate of pay. The offer says Marie’s employment can only be terminated by the employer or by Marie by two weeks’ notice in writing and that she will work from 9am to 5pm Monday to Friday with a one hour lunch break each day for the foreseeable future unless advised otherwise. At the time of providing the written offer, Jaqueline informs Marie that she will not be able to refuse shifts and will need to seek Jaqueline’s prior approval to take time off work.

Even though Marie is described as a casual and is entitled to a loading, she will not meet the definition of casual employee in new section 15A. This is because Marie’s fixed weekly hours, the indefinite nature of her engagement and the absence of a requirement to work only as required indicate that Jaqueline has made a firm advance commitment to continuing and indefinite work according to an agreed pattern of work.

 

Illustrative example - verbal employment offer and contract

Jack is a university student. Jack wants to find a job with flexible hours so he can attend lectures and tutorials at various different times during the week.

Jack has a meeting with Li Min, who owns a local café. Li Min is expecting customer numbers to increase over coming months as government restrictions in response to the COVID-19 pandemic ease and she wants to hire an additional waiter to help with increased demand. Li Min says the job would be perfect for Jack because he could work around his university commitments. Li Min says she will offer Jack shifts on different days and times depending on customer numbers and she might ask him to cover for other waiters from time to time. Li Min assures Jack that he can always refuse a shift, for instance if it clashes with a lecture, tutorial or exam. Li Min explains that Jack would be paid as a grade 2 Food and Beverage Attendant under the Restaurant Industry Award 2020 . She says Jack would be a casual employee, which means, per the Award, he would also receive a loading of 25 per cent in addition to the minimum hourly rate applicable under the Award.

At the end of their meeting, Li Min says the job is Jack’s if he wants it. Jack says the job sounds perfect and they both agree Li Min will add Jack to her next shift roster. As a result, Jack is an employee at Li Min’s café.

Even though the offer, acceptance and resulting contract of employment are not in writing, on the basis of their meeting, the offer and acceptance meet the terms of the definition and Jack is a casual employee.

17.          The note to new subsection 15A(2) refers the reader to the rights of a casual employee to casual conversion under new Division 4A of Part 2-2 if they have worked for their employer for at least 12 months, and during at least the last 6 months have worked a regular pattern of hours on an ongoing basis. This note highlights that Division 4A contemplates the possibility of a casual employee performing work on a regular basis, and that there may be consequential rights that arise for such an employee.

18.          New subsection 15A(3) provides, for avoidance of doubt, that a regular pattern of hours does not, of itself, indicate the requisite firm advance commitment. A casual can be expected to work a regular pattern of hours and still meet the statutory definition when taking all the circumstances of their offer and acceptance into account.

19.          New subsection 15A(4) makes clear that the absence of a firm advance commitment is only to be assessed on the basis, and at the time, of the offer and acceptance of employment, and any subsequent conduct is irrelevant. This means a person’s employment status cannot unintentionally change over time.

20.          New subsection 15A(5) makes clear the employee’s status for the duration of their employment, providing that a person employed as a casual in accordance with subsection 15A(1) will remain a casual employee until either:

·                 the employee’s employment is converted to full-time or part-time employment under Division 4A of Part 2-2; or

·                 the employee accepts an alternative offer of employment (other than as a casual employee) by the employer and commences work on that basis.

Illustrative example - employment commences on the basis of irregular hours but later develops into a regular pattern of hours

Anika owns a hairdressing salon. Anika’s business is doing very well and her clientele list is rapidly growing. Anika hires Ollie, an experienced hair stylist, to help the business cope with increasing client bookings. Ollie’s offer of employment specifies that he will only be offered shifts as required to meet increasing business demand. The offer describes the position as casual, and provides that he will be paid as a level 5 Hair and Beauty Employee under the Hair and Beauty Industry Award 2010 , and will receive the required 25 per cent loading for casuals. It is clear from Ollie’s offer of employment that he is free to refuse shifts. Ollie negotiated a higher rate of pay, but his acceptance of the offer otherwise incorporate these terms. When Ollie first starts working for Anika, his shift patterns are irregular and change significantly week to week.

After several months, one of Anika’s part-time hair stylists quits and rather than advertising for a new employee Anika asks Ollie to cover those shifts, as he has demonstrated himself to be a skilled stylist and great addition to the team. Ollie agrees and thereafter works shifts from 10am to 3pm Thursday to Saturday each week.

Ollie is a casual employee within the meaning of section 15A. This is because the absence of the requisite firm advance commitment is only assessed on the basis, and at the time, of the offer and acceptance of employment, not subsequent conduct. The fact that Ollie ultimately works a regular pattern of hours does not change this. However, if these working arrangements continue, Ollie may become eligible to convert to ongoing part-time employment in accordance with new Division 4A (assuming other requirements of that Division are met).

Item 3 - After Division 4 of Part 2-2

21.          Item 3 inserts new Division 4A - Offers and requests for casual conversion, as part of the NES in Part 2-2 of the Act. The inclusion of this Division in the NES engages existing NES interaction rules, including that a modern award or enterprise agreement must not exclude any provision of the NES (section 55).

22.          New Division 4A has four subdivisions:

·                 Subdivision A, which sets out the general application rule for Division 4A;

·                 Subdivision B, which requires an employer to offer (subject to reasonable grounds not to offer) eligible casual employees conversion to ongoing full-time or part-time employment within 21 days after the end of the 12 month period from the employee’s commencement of employment;

·                 Subdivision C, which provides casual employees with a residual right (if they are eligible) to request conversion to ongoing full-time or part-time employment (and sets out the employer’s rights and obligations if a request is so made); and

·                 Subdivision D, which deals with other provisions relevant to casual conversion, including its effect and dispute resolution arrangements.

Subdivision A - Application of Division

23.          New section 66A sets out application rules for new Division 4A. New subsection 66A(1) provides that Division 4A applies in relation to an employee who is a casual employee. New subsection 66A(2) specifies that for the purposes of Division 4A, a reference to full-time employment or part-time employment does not include employment for a specified period of time, for a specified task or for the duration of a specified season. This means an employee cannot be converted to a fixed term contract under this Division, but does not prevent an employer and employee from agreeing (outside Division 4A) to enter into a new fixed term arrangement.

Subdivision B - Employer offers for casual conversion

24.          New section 66B requires an employer to make an offer of full-time or part-time employment to an eligible casual employee within 21 days of the employee having been employed for 12 months, subject to the exceptions in section 66C.

25.          Under subsection 66B(1) a casual employee will be eligible if the employee:

·                 has been employed by the employer for a period of 12 months beginning the day the employment started (paragraph 66B(1)(a)); and

·                 during at least the last 6 months of that period, the employee has worked a regular pattern of hours on an ongoing basis which, without significant adjustment, the employee could continue to work as a full-time employee or a part-time employee, as the case may be (paragraph 66B(1)(b)).

26.          Whether a person has been employed for a period of 12 months will depend on the particular circumstances. For example, a person who is employed to perform an afternoon of casual work in March, and is then employed to perform another afternoon of casual work in the April of the following year will not have been employed ‘for a period of 12 months’, so that employer will not have to consider whether to make an offer in relation to that employee at that time.

27.          The term ‘regular pattern of hours’ is adopted from the FWC’s model casual conversion term. Whether an employee meets this requirement will depend on the particular circumstances and involves consideration of the pattern of hours worked during the relevant 6 month period. For example, if an employee has worked shifts of 8 hours each on every Monday and Tuesday for the most recent 9 months of their employment, it will be clear they have worked a regular pattern of hours for the requisite 6 months. Depending on the circumstances of any particular case, the employee may still have worked a regular pattern of hours even with some fluctuation or variation in specific times and days worked, including (for example) if the employee took time away from work when ill or on holiday.

28.          Additionally, the assessment of whether the employee worked a ‘regular pattern of hours’ is qualified by the contextual requirement that the pattern of hours must be able to be continued as a full-time or part-time employee without significant adjustment.

29.          The note to new subsection 66B(1) explains that an employee who is eligible for conversion would also be a ‘regular casual employee’ (item 9 inserts this definition in section 12, which requires such an employee to have been employed on a regular and systematic basis). This is because an employee who has worked the required regular pattern of hours for a period as required by section 66B would also necessarily have been employed on a regular and systematic basis for that period.

30.          New subsection 66B(2) provides for the form of the offer, which must be in writing and be an offer to convert to either:

·                 full-time employment, if the employee has worked the equivalent of full-time hours in the relevant 6 month period; or

·                 part-time employment that is consistent with the regular pattern of hours worked during the relevant 6 month period, if the employee has worked less than the equivalent of full-time hours in that period.

31.          The requirement for the offer of part-time employment to be consistent with the regular pattern of hours worked during the relevant period is intended to ensure that the offer is not made only on the basis that the employee would have to significantly change their working patterns in order to accept the offer.

32.          The offer must be given to the employee within 21 days after the end of the employee’s 12 month anniversary of commencing employment (new paragraph 66B(2)(c)). Subsection 36(1) of the Acts Interpretation Act 1901 as in force on 25 June 2009 that applies to the Act (see section 40A of the Fair Work Act) makes clear that for the purpose of calculating the 21 day period, the day the offer was made is not counted.

33.          The note to subsection 66B(2) directs the reader to section 66K, which provides that following conversion, an employee is taken to be a full-time or part-time employee for the purposes of Commonwealth and state and territory laws, an applicable fair work instrument and the employee’s contract of employment.

34.          For the purpose of determining whether an employee whose terms and conditions of employment are not provided in a modern award or enterprise agreement has worked the requisite  ‘full-time hours’, regard can be had to the hours of work of other full-time employees of the employer who work in the same or a comparable position (new subsection 66B(3)). For example, in a workplace where full-time employees work 35 hours per week, an employee to whom no modern award or enterprise agreement applies will satisfy the full-time hours requirement for their workplace if they have worked a regular pattern of 35 hours per week over the relevant period.

Illustrative example - offer of conversion to eligible employee

Marcella commenced work as a casual employee in the fashion retail industry for Très Chic Boutique. On the one year anniversary of Marcella’s employment, Marcella’s employer assesses whether Marcella is eligible to convert under Division 4A. Over the previous six months, Marcella has regularly worked 8 hours on Monday, Tuesday and Friday each week. Marcella’s employer considers that over that period Marcella has worked a regular pattern of hours on an ongoing basis which, without significant adjustment, she could continue to work as a part-time employee. There are no reasonable grounds to not make Marcella an offer to convert.

Two weeks after the 12 month anniversary of Marcella’s employment (within the 21 day timeframe in section 66B(2)(c)), Marcella’s employer sends an email to Marcella making an offer of ongoing part-time employment consistent with the hours Marcella has worked over the previous six month period.

When employer offers not required

35.          New section 66C provides for when an employer is not required to make an offer to convert. Despite section 66B, an employer is not required to make an offer if there are reasonable grounds not to do so (paragraph 66C(1)(a)). The reasonable grounds must be based on facts that are known or reasonably foreseeable at the time of deciding not to make the offer (paragraph 66C(1)(b)).

36.          Reasonable grounds for deciding not to make an offer include (but are not limited to):

·                 the employee’s position will cease to exist in the period of 12 months after the time of deciding not to make the offer (paragraph 66C(2)(a));

·                 the hours of work the employee is required to perform will be significantly reduced in that 12 month period (paragraph 66C(2)(b));

·                 there will be a significant change in either or both of the days on which or times at which the employee will be required to perform work in that period which cannot be accommodated within the days or times the employee is available to work (paragraph 66C(2)(c));

·                 making the offer would not comply with a recruitment or selection process required by or under a law of the Commonwealth or a State or a Territory (paragraph 66C(2)(d)).

37.          New paragraph 66C(2)(d) is included for the avoidance of doubt. For example, the Public Sector Employment and Management Act 1993 (NT) and the associated Public Sector Employment and Management Regulations 2011 (NT) provide requirements for selecting employees within the Northern Territory Public Service, such as merit selection principles. There is nothing in new Division 4A that would require the Northern Territory Public Service to make an offer for casual conversion under Division 4A if this would be inconsistent with its statutory obligations. In such a case, new paragraph 66C(2)(d) should be read in conjunction with section 40 relating to the interaction between fair work laws and public sector employment laws.

38.          There may be other reasonable grounds on which an employer can decide not to make an offer, including those specific to their workplace or the employee’s role. Whether a ground is reasonable is to be assessed taking into account all of the circumstances, including the needs of the employer’s business and the nature of the employee’s role.

39.          New subsection 66C(3) requires an employer to give written notice to a casual employee if they decide not to make an offer because:

·                 there are reasonable grounds not to make the offer in subsection 66C(1); or

·                 the employee has been employed by the employer for the 12 month period referred to in paragraph 66B(1)(a) but does not meet the requirement in paragraph 66B(1)(b) that the employee has worked a regular pattern of hours on an ongoing basis which the employee could continue to work without significant adjustment after conversion.

40.          The note to subsection 66C(3) refers readers to the residual right to request casual conversion that is available in certain circumstances.

41.          Under new subsection 66C(4) the notice required by subsection 66C(3) must:

·                 advise the employee that the employer is not making an offer under section 66B; and

·                 include reasons for not making the offer, including grounds on which the employer has decided not to make the offer (so if the offer is not made because of a reasonable ground, this notice must include details of that ground, and if the offer is not made because the employee has not satisfied the eligibility requirement in s 66B(1)(b), the notice must include details of that reason); and

·                 be given to the employee within 21 days after the end of their 12 month anniversary of commencing employment.

Illustrative example - notice of no offer to convert because of reasonable grounds

Zeynab is a casual office cleaner at Corporate Clean Pty Ltd, which contracts cleaning services to the Greenspace office building. On the one year anniversary of Zeynab’s employment, her employer assesses her employment against the conversion criteria.

Zeynab’s employer considers her to be eligible for conversion on the basis that she has worked the same shifts Monday to Friday over the previous six months pursuant to Corporate Clean’s contract with Greenspace. However, her employer is aware that the Greenspace contract will not be renewed beyond the end of the current financial year and without that contract there will be no work available for Zeynab.

Within 21 days after the 12 month anniversary of Zeynab’s employment, her employer provides written notice to her that Corporate Clean is not going to offer conversion on the reasonable ground that there will be a significant reduction in her hours of work in the next 12 months, on the basis of the Greenspace contract ending and no other work being available.

If, however, Zeynab does ultimately continue to be employed by Corporate Clean and satisfies the relevant eligibility criteria in future, she may be entitled to request to convert under section 66F (but cannot make such a request until at least 6 months after she was provided with the notice of no offer of conversion).

Employee response

42.          An employee must respond in writing to an employer’s offer made under section 66B within 21 days after the offer is given to the employee, stating whether the offer is accepted or declined (new subsection 66D(1)). An employee who fails to do so is taken to have declined the offer (new subsection 66D(2)).

43.          New subsection 66E(1) specifies that if the employee accepts the offer, the employer must, within 21 days after the acceptance is given to the employer, give the employee written notice of:

·                 the employee’s new employment status (whether full-time or part-time);

·                 the employee’s hours of work after the conversion takes effect; and

·                 the day on which the conversion takes effect.

44.          Provision of this notice to the employee will ensure both parties understand these key features of the employment relationship following conversion.

45.          An employer must discuss with the employee the matters it intends to specify in the written notice under new subsection 66E(1) before giving the notice, including the employee’s hours of work after conversion and the day the conversion will take effect (new subsection 66E(2)). The 21 day notice period in subsection 66E(1) provides time for the employer and employee to have discussions about the particulars of the conversion.

46.          The day specified in the notice on which conversion takes effect must be the first day of the employee’s first full pay period starting after the day the notice is given, unless otherwise agreed between the employer and employee (new subsection 66E(3)). This means that an employer cannot delay the commencement of the employee’s conversion to full-time or part-time employment without the employee’s agreement.

Subdivision C—Residual right to request casual conversion

47.          Subdivision C sets out the residual right to request casual conversion available to casual employees in certain circumstances who have not received or accepted an employer offer to convert. Eligibility criteria, grounds for refusal and formal requirements broadly reflect those applying to the obligation to offer conversion under Subdivision B.

Employee requests

48.          A casual employee is eligible to make a request if:

·                 the employee has been employed by the employer for at least 12 months (paragraph 66F(1)(a)); and

·                 the employee has, in the period of 6 months before giving the request to the employer, worked a regular pattern of hours on an ongoing basis which, without significant adjustment, the employee could continue to work as a full-time employee or part-time employee (paragraph 66F(1)(b)); and

·                 all of the following apply:

-       the employee has not, in the 6 months before giving the request to the employer, refused an offer to convert to full-time or part-time employment under section 66B (subparagraph 66F(1)(c)(i)); and

-       the employer has not, in the 6 months before the employee gave the request, given the employee a notice of a decision not to make an offer for conversion on reasonable grounds (subparagraph 66F(1)(c)(ii)); and

-       the employer has not, in the 6 months before the employee gave the request, given a response to the employee refusing a previous request (subparagraph 66F(1)(c)(iii)); and

-       the request is not made during the 21 days after the 12 month period since the employee commenced employment with that employer (subparagraph 66F(1)(c)(iv)).

49.          The requirement for the employee to have been employed by the employer for at least 12 months ensures that the residual right to request does not arise before the employer’s obligation to offer.

50.          The requirement in paragraph 66F(1)(b) that the employee has worked a regular pattern of hours on an ongoing basis which, without significant adjustment, the employee could continue to work following conversion is the same as that under paragraph 66B(1)(b), as explained above in relation to that provision.

51.          Additional circumstances in paragraph 66F(1)(c) that prevent an employee from making a request to convert are intended to minimise the regulatory burden on an employer. 

52.          If an employer fails to comply with the requirement to provide a notice under paragraph 66C(3)(a) within the required 21 days, an eligible employee will be able to request conversion (and will not have to wait a further 6 months after the 12 month anniversary of their employment).

53.          Further, if an employer gave notice that the employee did not meet the regular pattern of hours requirement under paragraph 66B(1)(b), the employee will be entitled to request conversion at the point when that requirement has been met, without having to wait a further 6 months after receiving the notice. For example, if the employer did not make the offer because at the relevant time the employee had only satisfied the regular pattern of hours requirement for the previous 4 months, but that pattern continues, they may be eligible to request conversion after 2 more months (for a total of 6 months of working a regular pattern of hours, as required).

54.          The request must be in writing and given to the employer (new paragraphs 66F(2)(a) and (c)). An employee may request to convert to full-time or part-time employment in the same circumstances as paragraph 66B(2)(b) (new paragraph 66F(2)(b)). The note to subsection 66F(2) directs readers to section 66K, which provides that the conversion has effect for all purposes.

55.          For the purpose of determining the ‘equivalent of full-time hours’ of an award and agreement free employee, regard may be had to the hours of work of other full-time employees of the employer in the same or comparable position to the employee (new subsection 66F(3), which is in identical terms to subsection 66B(3)).

56.          An employer must respond in writing to an employee’s request to convert made under section 66F within 21 days after the request is given to them, stating whether the request is granted or refused (new section 66G).

Refusals of requests

57.          New section 66H provides for when and how a conversion request can be refused on the same grounds as those for not making an offer under section 66C, with one addition. An employer must not refuse a request unless they have consulted the employee and there are reasonable grounds to refuse the request (new subsection 66H(1)). As with offers of conversion, the reasonable grounds must be based on facts that are known, or are reasonably foreseeable, at the time of refusing the request.

58.          This consultation requirement enables an employer and the employee to discuss matters relating to the request, including reasons for a proposed refusal or alternative arrangements that suit the needs of both the employer and employee. For example, where an employer may not be able to offer an ongoing full-time position due to a foreseeable reduction in workload after six months, the employer may refuse the request, but separately propose an alternative arrangement outside the process in Division 4A that suits both parties.

59.          New subsection 66H(2) sets out the same non-exhaustive list of reasonable grounds for refusing a request as subsection 66C(2), with the addition of paragraph 66H(2)(a), which provides the additional reason that granting the request would require a significant adjustment to the employee’s hours of work in order for the employee to be employed as a full-time or part-time employee.

60.          This additional ground in paragraph 66H(2)(a) reflects eligibility criteria to request conversion under paragraph 66F(1)(b), such that if the ground in paragraph 66H(2)(a) is satisfied then the employee was not actually eligible to make a request under section 66F. However, because the question of whether an employee could continue to work their regular pattern of hours on an ongoing basis without significant adjustment is a matter within the particular knowledge of the employer, paragraph 66H(2)(a) is included in the event that an employee requests conversion on a misapprehension that they were eligible.

61.          If an employer refuses a conversion request, the written response must include the reasons for the refusal (new subsection 66H(3)).

Illustrative example - refusal of request for conversion

Chen works as a casual waiter at the Seashells Beachfront Restaurant. Although Chen has a full-time job at another restaurant, she enjoys working occasionally for Seashells and the supplementary income. Within 21 days after the 12 month anniversary of her employment at Seashells, Chen receives notice that she will not be offered casual conversion as she has not worked a regular pattern of hours of work in the previous six months.

Shortly after receiving that notice, Chen loses her full-time job and starts working regular eight hour shifts every Monday to Friday at Seashells, which has been experiencing increasing demand over the spring and summer period. After working in this manner for six months, Chen assesses that she is eligible for conversion, in that she has worked a regular pattern of hours on an ongoing basis which, without significant adjustment, she could continue to work as a full-time employee. She sends her employer a request to convert to full-time employment.

Due to the work being seasonally based, Seashells struggles financially each year in the winter months, when customer patronage significantly decreases. The end of summer has also coincided with the opening of Healthy Utopia, a nutrition store and café located next door to Seashells, featuring a seasonal menu, takeaway options and healthy groceries; all factors which have significantly eroded Seashells’ business. Due to these reasons, her employer can reasonably foresee that Chen’s working hours will be significantly reduced in the following 12 month period.

Within 21 days of receiving Chen’s request, the employer meets with Chen to discuss these circumstances and subsequently responds to Chen’s request in writing that her request has been refused, and outlining the grounds why. However, in order to retain Chen, who is an efficient and valuable worker, the employer decides it wants to offer her a part-time position instead outside the Division 4A framework.

Grants of requests

62.          New section 66J sets out steps that must be taken by an employer when granting a request. The requirements regarding providing a notice (subsection 66J(1)), discussing the matters specified in the notice (subsection 66J(2)) and the timing of the conversion date (subsection 66J(3)) are broadly the same as those in relation to an employer offer under section 66E, and are intended to ensure clarity about these key details of employment following conversion.

63.          New subsection 66J(4) clarifies that the notice required in subsection 66J(1) may be included in the written response to the employee’s request. This minimises the regulatory burden on employers by allowing one notice to be given both granting the request and specifying the required information.

Subdivision D—Other provisions

Effect of conversion

64.          New section 66K specifies that, on and after the day specified in the written notice required under subsections 66E(1) or 66J(1), the employee is taken to have been converted to a full-time or part-time employee for the purposes of the following:

·                 the Act, and any other law of the Commonwealth;

·                 a law of a State or Territory;

·                 any fair work instrument that applies to the employee; and

·                 the employee’s contract of employment.

65.          This ensures that when a conversion takes effect, the employee’s new employment type (full-time or part-time) will be the same for all purposes. For example, if a request to convert to full-time employment made under new Division 4A is granted, the employee will be a full-time employee for the purposes of the Act (including the NES), as well as any relevant modern award or enterprise agreement and their employment contract. This means it will not be possible for the employee to become, for instance, a full-time employee for the purposes of the Act, but to remain a casual employee for the purposes of a modern award that applies to their employment.

66.          The conversion is similarly intended to take effect for all Commonwealth, State and Territory laws. This section will not alter whether or not a casual, full-time or part-time employee has any rights or obligations under applicable State or Territory laws, but merely ensures the employee’s employment type is consistent for all purposes.

Other rights and obligations

67.          New section 66L sets out certain rights and obligations additional to those already found in the general protections in Part 3-1 of the Act.

68.          An employer cannot vary or reduce an employee’s hours of work, or terminate an employee’s employment, in order to avoid any right or obligation under new Division 4A (new subsection 66L(1)). This means an employer cannot deprive an employee of their new entitlement, for example, by deliberately changing the employee’s roster to defeat the employee’s eligibility to receive an offer to convert under section 66B.

69.          The note to subsection 66L(1) alerts the reader to the general protections in Part 3-1 of the Act, which may also prohibit adverse action by an employer against an employee, including a casual employee, because of their workplace right under the new Division.

70.          New subsection 66L(2) provides that nothing in the new Division:

·                 requires an employee to convert to full-time or part-time employment; or

·                 permits an employer to require an employee to convert; or

·                 requires an employer to increase the hours of work of an employee who requests conversion to full-time or part-time employment under the Division.

71.          This clarifies that an employee who does not wish to convert to full-time or part-time employment (for example because they prefer greater flexibility of work and the payment of a casual loading) can remain employed on a casual basis even if they satisfy the requirements for an offer to convert. It also makes clear that if an employee does convert under Division 4A, the employer is not required to provide them with a greater number of hours of work (for example, an employer of an employee whose pre-conversion hours were around 20 hours per week is not required to provide that employee with post-conversion work of 30 hours per week).

Disputes

72.          New section 66M provides a procedure that parties must follow to resolve any dispute that arises about the operation of the new Division, unless another dispute resolution procedure applies. The FWC must deal with a dispute that is unable to be resolved at the workplace level. The dispute resolution procedure broadly mirrors dispute resolution terms of modern awards.

73.          Section 66M applies to a dispute between an employer and employee about the operation of Division 4A (subsection 66M(1)), but not if a term providing a procedure for dealing with the dispute is included in a fair work instrument that applies to the employee, the employee’s contract of employment, or another written agreement between the employer and employee (subsection 66M(2)).

74.          This means that disputes will ordinarily be dealt with in accordance with existing dispute resolution processes available to the parties. For example (as highlighted in the note to subsection 66M(2)), modern awards and enterprise agreements must contain dispute settlement terms, which would be capable of dealing with any disputes that arise under the NES (which includes new Division 4A). The dispute resolution procedure in section 66M will therefore only apply if the employee is award and agreement-free and does not otherwise have access to a procedure capable of dealing with a dispute about Division 4A.

75.          In the first instance the parties must attempt to resolve the dispute at the workplace level by discussion (subsection 66M(3)), which could include discussion between an employee and their supervisor, or more senior levels of management if appropriate. This obliges both the employer and employee to attempt an agreed resolution of the dispute.

76.          If discussions at the workplace level do not resolve the dispute, a party may refer the dispute to the FWC (subsection 66M(4)). New paragraph 66M(5) requires the FWC to deal with a dispute so referred to it, and may arbitrate the dispute if the parties notify the FWC of their agreement to arbitration. The note refers readers to subsection 595(2) which sets out ways in which the FWC may deal with disputes (such as by mediation, conciliation, making a recommendation or expressing an opinion).

77.          In accordance with section 595, subsection 66M(5) authorises the FWC to deal with disputes about the operation of Division 4A. The FWC’s power to arbitrate only with the parties’ consent is consistent with dispute settlement terms of modern awards.

78.          Either party to the dispute may appoint a person or industrial association to provide them with support or representation for the purposes of resolving, or having the FWC deal with, the dispute (subsection 66M(6)). A representative may provide such support or representation when the dispute is dealt with at the workplace level or by the FWC. However, this is subject to section 596 of the Act, which provides that a person may be represented in a matter before the FWC by a lawyer or paid agent only with the FWC’s permission (see note). 

Item 4 - Division 12 of Part 2-2 (heading)

Item 5 - At the end of Division 12

79.          Item 5 inserts new section 125A at the end of Division 12 in Part 2-2, requiring the Fair Work Ombudsman (FWO) to prepare and publish a Casual Employment Information Statement (Statement), which employers must provide to new casual employees. Item 4 consequentially amends that Division’s heading to reflect this change.

80.          The FWO must prepare the Statement and publish it in the Gazette (subsection 125A(1)). The note observes that any changes to the Statement must be published as a new version in the Gazette.

81.          New subsection 125A(2) provides that the Statement must contain information about casual employment and offers and requests for casual conversion under Division 4A of Part 2-2, including:

·                 the meaning of ‘casual employee’ under section 15A;

·                 an employer offer for casual conversion must generally be made to certain casual employees within 21 days after the employee has completed 12 months of employment;

·                 an employer can decide not to make an offer for casual conversion if there are reasonable grounds to do so, but the employer must notify the employee of these grounds;

·                 certain casual employees will have a residual right to request casual conversion; and

·                 the FWC may deal with disputes about the operation of that Division.

82.          This list is not exhaustive and the FWO may decide to include other information about casual employment and conversion in the Statement, including information about transitional arrangements.

83.          New subsection 125A(3) makes clear that the Statement is not a legislative instrument (within the meaning of section 8 of the Legislation Act 2003 ).

84.          Matters relating to the content and form of the Statement, or the manner in which employers may give the statement, may be prescribed by regulation (subsection 125A(4)). 

85.          Item 5 also inserts new section 125B, outlining when an employer must provide an employee with the Statement. An employer must give each casual employee this Statement before, or as soon as practicable after, the employee starts employment as a casual employee with the employer (subsection 125B(1)).

86.          This requirement ensures that employees are aware of their casual employment status and consequential rights and entitlements, including casual conversion. An employer may provide an employee with this Statement together with the Fair Work Information Statement (as required by section 125 of the Act). An employer is not required to give an employee the Statement more than once in any 12 month period (subsection 125B(2)).  The note explains that this clarification is relevant if the employer employs the employee for multiple engagements in the space of 12 months. This may be the case for irregular and intermittent casual engagements under separate employment contracts over a period.

Item 6 - After section 545

87.          Item 6 inserts new section 545A, which sets out a statutory rule for offsetting amounts payable by an employer to a person for relevant entitlements by the amount of a casual loading previously paid by the employer to compensate the person for not having those entitlements.

88.          The statutory offset rule is intended to apply in circumstances where a person has been employed and paid on the understanding they were a casual employee, but is later found not to be a casual employee and a claim is made for amounts for entitlements casual employees do not receive (as occurred in Rossato ). When making orders in relation to such a claim, a court must reduce any amounts payable by the employer for relevant entitlements against casual loading amounts paid to the person. This is intended to achieve a balance between ensuring that employees are appropriately classified and receive their correct entitlements, and that employers do not have to effectively pay for such entitlements twice.

89.          Many enterprise agreements and modern awards provide that a casual employee is one who is engaged and paid as such, or a similar ‘designation’ approach (see Telum Civil (Qld) v Construction, Forestry, Mining and Energy Union [2013] FWCFB 2434). Employers have relied on this long-standing industrial practice and the accompanying payment of a casual loading (as provided for in such instruments) when employing casual employees. The Full Federal Court concluded in Rossato (as it did in Skene) that, despite the parties indicating at the outset of their relationship that the employee was a casual employee, it does not necessarily follow that the employee should be so characterised. This has resulted in a risk that a significant number of employers and employees have been left in a precarious position of uncertainty as to their rights and obligations. This is particularly so where the Full Court in Rossato and Skene endorsed an approach where determination of a casual employment relationship could be assessed by reference to the totality of the circumstances at some point during or at the end of the relationship.

90.          The Attorney-General’s Department has conducted an analysis of enterprise agreements and modern awards that indicates these ‘designation’ terms for identifying casual employment and the incidence of provision for payment of a casual loading is widespread. Indeed, 77 per cent of enterprise agreements the Department analysed (which cover over 140,000 casual employees) used a designation approach for casual employment. Further, 88 per cent of a possible 121 modern awards analysed by the Department adopted the designation approach. Of the enterprise agreements and modern awards that were analysed, over 95 per cent provided for a casual loading.

91.          As a result, the Department has estimated that widespread reliance on these terms means that employers who have paid employees a casual loading in the mistaken belief they are casual could be liable to pay those employees up to approximately $18 billion to $39 billion (over a six year period) for entitlements casual employees do not get.

92.          The likely widespread mistakes by employers and employees, and associated consequences and costs, give rise to the genuine need for legislation to affect the adjustment of their rights, claims and obligations. Without these amendments, employers would need (on a case by case basis) to litigate any possibly available restitution claims in order for courts to conclusively determine liabilities outstanding to employees who have already been paid a casual loading.

93.          These provisions, in conjunction with the new statutory definition and conversion mechanism in new Division 4A, will address the issue of widespread reliance on a mistaken belief about the nature of their casual employment relationships, and form part of a broad overall adjustment of relations between employers and employees. Without these amendments, significant costly and time-intensive court processes would be needed to determine the appropriate rights and obligations of employers and employees in these situations. This will impose significant burdens on both employers and employees.

94.          Section 545A applies if:

·                 a person is employed by an employer in circumstances where the employment is described as casual employment (paragraph 545A(1)(a)); and

·                 the employer pays the person an identifiable amount (the loading amount ) to compensate the person for not having one or more relevant entitlements (as defined in subsection 545A(4)) during a period (the employment period ) (paragraph 545A(1)(b)); and

·                 during that period, the person was not a casual employee (paragraph 545A(1)(c)); and

·                 the person (or another person for the benefit of the person) makes a claim to be paid an amount for one or more of those entitlements with respect to the employment period (paragraph 545A(1)(d)).

95.          New paragraph 545A(1)(a) means the statutory offset will only apply if a person has been employed in circumstances where their employment is described as casual employment. The terms of the employment contract or other evidence of agreement between the parties may contain a description of the person’s employment. After commencement of these amendments, the new statutory definition of casual employee will provide further guidance as to whether the person is employed as a casual.

96.          The loading amount in new paragraph 545A(1)(b) must be an identifiable amount paid as compensation for the absence of the relevant entitlements during the employment period. This may be the case, for example, where a modern award or enterprise agreement, or an employment contract, provides for a clearly identifiable casual loading. This would not include circumstances where an employee is paid a flat hourly rate and it is not clear from the terms of the applicable instrument whether that rate includes a casual loading. The instrument does not need to state precisely which entitlements the loading is compensating for, but it must identify an amount that is paid to compensate a casual employee for the absence of one or more of the relevant entitlements.

97.          New paragraph 545A(1)(c) requires that the person was not a casual employee during the employment period. That is, the basis on which the employee was employed and therefore paid the loading amount did not reflect their status at law.

98.          The statutory offset will only be available where the person, or another person for the benefit of the person, has made a claim for an amount for one or more of the relevant entitlements (paragraph 545A(1)(d)). This recognises that a claim may be brought by a person other than the person who was paid the loading amount. The note to subsection 545A(1) states that this could include an inspector or an employee organisation.

99.          New subsection 545A(2) requires a court, when making orders in relation to the claim, to reduce any amount payable by the employer for the relevant entitlements (the claim amount) by an amount equal to the loading amount, but not below nil. The requirement that the claim amount cannot be reduced below nil makes explicitly clear that an employee cannot be required to make a positive payment to the employer as a result of this provision. The note to subsection 545A(2) refers readers to the availability of the small claims procedure in section 548, in relation to claims below a certain amount.

100.      New subsection 545A(3) provides that despite subsection 545A(2), the court may reduce the claim amount by an amount equal to a proportion of the loading amount the court considers appropriate, having regard only to the factors listed in paragraphs 545A(3)(a) to (c). This assessment of proportionality is intended to provide fairness between the parties in the adjustment of their rights, claims and obligations.

101.      The only factors to which the court may have regard in determining the proportionate reduction in the claim amount are:

·                 if a term of the fair work instrument or contract of employment under which the loading amount is paid specifies the relevant entitlements the loading amount is compensating for and specifies the proportion of the loading amount attributable to each such entitlement - that term (including those proportions); or

·                 if such a term specifies the relevant entitlements the loading amount is compensating for but does not specify the proportion of the loading amount attributable to each such entitlement - that term, and what would be an appropriate proportion of the loading amount attributable to each of those entitlements in all the circumstances; or

·                 if paragraph (a) or (b) does not apply - the entitlements referred to in subsection 545A(4) and what would be an appropriate proportion of the loading amount attributable to each of those entitlements in all the circumstances.

102.      For example, if an enterprise agreement that applied to the person stipulated that casual employees are to be paid a loading of 25 per cent, and attributed proportions of that loading to specific entitlements, the court must have regard to those proportions under paragraph 545A(3)(a) in determining the proportionate reduction of the claim amount.

103.      The chapeau to subsection 545A(3) makes clear that the proportion of reduction may be nil. The court may determine that the appropriate amount by which to reduce the claim amount is nil (no reduction in the claim amount). However, such an assessment must be consistent with the strict requirements of paragraphs 545A(3)(a) to (c). For example, if the person’s contract of employment specifies they were to be paid a loading of 25 per cent instead of paid annual leave and personal/carer’s leave, but the claim amount is for payment in relation to absence on a public holiday and redundancy pay, it would be appropriate for the court not to offset the claimed amount at all because the loading was not provided as compensation for absence of the claimed entitlements.

104.      New subsection 545A(4) specifies that a relevant entitlement refers to an entitlement under the NES, a fair work instrument or contract of employment to any of the following:

·                 paid annual leave;

·                 paid personal/carer’s leave;

·                 paid compassionate leave;

·                 payment for absence on a public holiday;

·                 payment in lieu of notice of termination;

·                 redundancy pay.

105.      The entitlements listed at subsection 545A(4) are those that casual employees do not receive under the NES, and for which a casual loading - usually 25 per cent - has historically been paid as compensation for under the terms of industrial instruments. While there is no definitive formula setting out what any particular casual loading compensates for, general principles have been established in a number of tribunal decisions.

106.      In Re Metal, Engineering & Associated Industries Award (2000) 110 IR 247 (the Metals Casuals Decision), the Australian Industrial Relations Commission (AIRC) determined that the rationale for the casual loading (and calculation of components) should reflect the safety net of benefits applicable to full-time employees but not applicable to casuals, even though not all could be precisely quantified. The AIRC decided to vary the relevant award to increase the casual loading to 25 per cent, payable as compensation for paid leave (annual and sick leave, public holidays, and long service leave) and a component for notice of termination, severance pay and the itinerant effects of casual employment.

107.      In its 2008 Award Modernisation decision [2008] AIRCFB 1000, the AIRC Full Bench standardised the casual loading at 25 per cent, consistent with the Metals Casuals Decision. The Full Bench considered that the 25 per cent loading was sufficiently common to qualify as a minimum standard and that it included compensation for annual leave, but did not address the proportionate value of its components.

108.      Long service leave is not included as a relevant entitlement as defined in new subsection 545A(4), as many casual employees are entitled to long service leave in accordance with applicable State and Territory laws in this area.

109.      New subsection 545(5) provides, for avoidance of doubt, that a relevant entitlement includes any such entitlement that has accrued but is untaken (for example, accrued annual leave that has not been taken but becomes payable on termination under subsection 90(2)).

 

PART 2 - OTHER AMENDMENTS

Amendments to the Fair Work Act 2009

Item 7 - Section 12 (definition of long term casual )

Item 8 - Section 12

Item 9 - Paragraph 23(2)(b)

Item 11 - Subparagraph 65(2)(b)(i)

Item 14 - Paragraph 67(2)(a)

Item 22 - Subparagraph 384(2)(a)(i)

110.      These items amend the Act to make consequential amendments, including:

·                 repealing the definition of ‘long term casual’ in section 12 and insert the new definition of ‘regular casual employee’; and

·                 clarifying how conversion to full-time or part-time employment affects eligibility for, and the calculation of, other NES entitlements.

111.      Items 7 and 8 repeal the definition of ‘long term casual’ and insert a new definition of ‘regular casual employee’. The purpose of these amendments is to ensure references to casual employees throughout the Act are more consistent and therefore easier to understand and apply. These amendments do not change any entitlements or obligations relating to long term casual employees or casual employees who have been employed on a regular and systematic basis, but only affect signpost labels used throughout the Act.

112.      A national system employee of a national system employer is defined in section 12 as a ‘regular casual employee’ at a particular time, if at that time the employee is a casual employee who has been employed by the employer on a regular and systematic basis.

113.      The definition of regular casual employee incorporates the criterion of employment on a regular and systematic basis from the repealed definition of ‘long term casual’, but it does not include the timeframe of 12 months. This is because while some provisions in the Act relevant to casual employees who have been employed by their employer on a regular and systematic basis include a 12 month time frame, other provisions require a reduced time frame or no timeframe at all. The new definition provides a consistent meaning of ‘regular casual employee’ throughout the Act to refer to those who perform work on a regular and systematic basis, with any particular time frames included in the provisions to which they are relevant.

114.      For this purpose, items 9, 11, 14 and 22 vary relevant existing provisions of the Act to replace references to ‘long term casual employee’, or to an employee who performs work on a regular and systematic basis, with the new defined term ‘regular casual employee’ and any relevant time frames. This includes:

·                 paragraph 23(2)(b) - when a casual employee is to be counted as an employee of the employer for the purpose of determining whether the employer is a small business employer (item 9);

·                 subparagraph 65(2)(b)(i) - when a casual employee is eligible to request flexible working arrangements (item 11);

·                 paragraph 67(2)(a) - when a casual employee is entitled to take unpaid parental leave (item 14); and

·                 subparagraph 384(2)(a)(i) - when casual employment counts towards periods of employment for the purpose of protection from unfair dismissal (item 22).

115.      The requirement for a casual employee to have been employed for 12 months in the repealed definition of long term casual is incorporated into two provisions that previously used that term (subparagraph 65(2)(b)(i) and paragraph 67(2)(a)).

Item 10 - After paragraph 61(2)(b)

116.      Subsection 61(2) of the Act lists the minimum standards that comprise the NES. Item 10 is consequential on new casual conversion provisions in new Division 4A, and introduces new paragraph 61(2)(ba), which refers to offers and requests for casual conversion in new Division 4A, to that list.

Item 12 - After subsection 65(2)

Item 13 - After subsection 67(1)

117.      These amendments ensure that employees who have converted to full-time or part-time employment under new Division 4A are not disadvantaged by such conversion for the purpose of eligibility to request flexible working arrangements or for parental leave by ensuring that periods of service as a regular casual employee count for the purposes of ‘continuous service’ for these entitlements.

118.      Subsection 65(2) of the Act sets out the categories of employees who are entitled to request flexible working arrangements under Division 4 of Part 2-2 of the Act. Paragraph 65(2)(a) provides an employee who is not a casual employee may only request flexible working arrangements after having completed at least 12 months of continuous service. Item 12 inserts new subsection 65(2A), which enables an employee who has converted to full-time or part-time employment under new Division 4A to count the time they were a regular casual employee as continuous service for this purpose.  

119.      The amendment made by item 12 ensures that such conversion does not break an employee’s period of continuous service for the purposes of their eligibility to request flexible working arrangements, and that certain periods of pre-conversion service are to be counted. The employee will still be required to satisfy criteria in subsection 65(1) and comply with formal requirements for making a request under subsection 65(3).

120.      Section 67 sets out the general rule for when an employee is entitled to parental leave and related entitlements under Division 5 of Part 2-2 of the Act. Subsection 67(1) provides that an employee who is not a casual employee is not entitled to leave under that Division (other than unpaid pre-adoption leave or unpaid no safe job leave) unless the employee has completed at least 12 months’ continuous service immediately before the relevant date specified in subsection 67(3). Item 13 inserts new subsection 67(1A), which enables an employee who has converted to full-time or part-time employment under new Division 4A to count the time they were a regular casual employee as continuous service for this purpose.  

121.      The effect of this amendment (like the amendment made by item 12) is that conversion to full-time or part-time employment does not break an employee’s period of continuous service for the purposes of their eligibility to take unpaid parental leave, and that certain periods of pre-conversion service are to be counted. This ensures that an employee will not lose an entitlement to unpaid parental leave as a result of conversion to full-time or part-time employment.

Item 15 - Subsection 87(1)

Item 16 - Subsection 87(2)

122.      Division 6 of Part 2-2 of the Act relates to annual leave. Section 86 provides that the Division applies to employees ‘other than casual employees’. In other words, casual employees are not entitled to accrue, take or be paid for annual leave. Section 87 provides that for each year of service, an employee is entitled to four weeks of annual leave (or five weeks for shiftworkers).

123.      For the avoidance of doubt, items 15 and 16 amend subsections 87(1) and (2) to confirm that references to a year of service in those provisions do not include periods of employment as a casual employee of the employer. In other words, these items provide further clarity, consistent with section 86, that periods of casual employment prior to conversion to full-time or part-time employment do not count towards a full-time or part-time employee’s accrual of annual leave entitlements, post-conversion.

Item 17 - Subsection 96(1)

Item 18 - Subsection 96(2)

124.      Subdivision A of Division 7 of Part 2-2 of the Act relates to paid personal/carer’s leave. Section 95 provides that the Subdivision applies to employees ‘other than casual employees’. In other words, casual employees are not entitled to accrue, take or be paid for paid personal/carer’s leave. Section 96 provides that for each year of service, an employee is entitled to 10 days of personal/carer’s leave.

125.      The purpose of items 17 and 18 is the same as for items 15 and 16. For the avoidance of doubt, items 17 and 18 amend subsections 96(1) and (2) of the Act to confirm that references to a year of service in those subsections do not include periods of employment as a casual employee of the employer prior to conversion.

Item 19 - At the end of section 117

Item 20 - At the end of section 119

Item 21 - Paragraph 121(1)(a)

126.      Division 11 of Part 2-2 of the Act relates to notice of termination and redundancy pay, which rely on periods of continuous service with an employer for calculation of the relevant entitlement. Paragraph 123(1)(c) of the Act provides that the Division does not apply to casual employees. In other words, casual employees are not entitled to notice of termination and redundancy pay under the Division.

127.      The purpose of items 19, 20 and 21 is the same as for items 15 to 18 above. For the avoidance of doubt, items 19, 20 and 21 amend sections 117 and 119, and paragraph 121(1)(a), to confirm that references to a period of continuous service do not include periods of employment as a casual employee of the employer prior to conversion.



SCHEDULE 2 - MODERN AWARDS

Overview

128.      Part 1 of Schedule 2 amends the Act to insert new Division 9 into Part 2-3 of the Act. New Division 9:

·                 contains facilitative provisions for eligible part-time employees and their employers to agree to work additional agreed hours at ordinary time rates as an alternative to entering into an arrangement under the existing terms of their identified modern award;

·                 provides for provisions of Division 9 to operate as terms of a relevant identified modern award (allowing them to be enforced as award terms, with disputes to be resolved in accordance with the dispute settlement terms of the award); and

·                 provides the FWC with power to vary existing terms of an identified modern award to resolve uncertainty or difficulty, or to ensure the effective operation of the award with the new Division 9 provisions.

129.      Part 2 of Schedule 2 amends the Act to insert new Part 6-4D for a temporary period of 2 years. New Part 6-4D:

·                 enables employers to whom an identified modern award applies to issue ‘flexible work directions’ to their employees relating to duties and location of work; and

·                 provides for provisions of Part 6-4D to operate as terms of a relevant identified modern award.

 

PART 1 - ADDITIONAL HOURS FOR PART-TIME EMPLOYEES

Amendments to the Fair Work Act 2009

Item 1: Section 12

Item 2: Section 132

Item 3: After paragraph 136(1)(b)

Item 4: At the end of Subdivision B of Division 5 of Part 2-3

Item 5: At the end of Part 2-3

Item 6: After paragraph 344(c)

130.      These items amend the Act to support increased flexibility in part-time employment, and make related changes.

131.      Item 5 inserts new Division 9 of Part 2-3, which supplements existing award flexibility arrangements in 12 specified modern awards (called ‘identified modern awards’) by providing a new mechanism for employers and eligible part-time employees to agree to additional hours of work at ordinary time rates of pay. These provisions will operate as terms of relevant awards and cannot be varied or revoked (see new paragraph 136(1)(ba) and notes to new section 168S).

132.      Item 2 consequentially amends section 132 (the Guide to Part 2-3), and item 3 amends section 136 (terms that may be included in modern awards) to reflect this mechanism. To ensure the effective integration of part time flexibilities introduced by new Division 9 with existing award terms, item 4 inserts new section 161A, which enables the FWC to vary an award to resolve an uncertainty or difficulty relating to the interaction of award terms with Division 9, or make the award operate effectively with those provisions.

133.      Subdivision A of new Division 9 deals with conditions for entering into a ‘simplified additional hours agreement’ (item 1 inserts a signpost in the Dictionary at section 12 to this definition), and the effect of such an agreement. An employer and employee can enter into a simplified additional hours agreement for the employee to work ‘additional agreed hours’ (see item 1) at ordinary time rates if the following conditions are met (new subsection 168M(1)). An identified modern award (called the ‘relevant identified modern award’ - see item 1) must apply to the employer and employee. The note to subsection 168M(1) refers readers to section 47 of the Act, which sets out when a modern award applies to an employee and employer.

134.      An employee must be employed as a part-time employee under the modern award and the employee’s ordinary hours of work must be at least 16 hours per week, or at least 16 hours per week averaged over a period (such as a roster cycle), if the modern award provides for such an averaging arrangement.

135.      A modern award may include terms specifying or providing for the determination of ordinary hours of work (section 147) (for example, the regular pattern of hours agreed on engagement) and for averaging ordinary hours.

136.      An employer must not require an employee to enter into a simplified additional hours agreement (new subsection 168M(2)). This operates as a term of a modern award (subsection 168S(1)), and the prohibition against contravention of a modern award is a civil remedy provision under Part 4-1 of the Act.

137.      The notes observe that entering or not entering into a simplified additional hours agreement is a workplace right for the purposes of the general protections in Part 3-1 of the Act (see section 168T), and section 344 of the Act prohibits the exertion of undue influence or pressure on an employee to enter into a simplified additional hours agreement (see item 6).

138.      New paragraphs 168M(3)(a)-(l) provide that ‘identified modern award’ means the following modern awards, as in force from time to time:

·                 the Business Equipment Award 2020 ;

·                 the Commercial Sales Award 2020 ;

·                 the Fast Food Industry Award 2010 ;

·                 the General Retail Industry Award 2020 ;

·                 the Hospitality Industry (General) Award 2020 ;

·                 the Meat Industry Award 2020 ;

·                 the Nursery Award 2020 ;

·                 the Pharmacy Industry Award 2020 ;

·                 the Restaurant Industry Award 2020 ;

·                 the Registered and Licensed Clubs Award 2010 ;

·                 the Seafood Processing Award 2020 ;

·                 the Vehicle Repair, Services and Retail Award 2020 .

139.      Item 1 inserts a signpost in the Dictionary (section 12) to this definition.

140.      The inclusion of ‘in force from time to time’ would ensure that variations made to identified modern awards by the FWC, including variations to the terms of the award and variations to the name of the award, will be captured.

141.      New paragraph 168M(3)(m) and subsection 168M(4) enable the Minister to make regulations prescribing whether a modern award is, or is not, an identified modern award. This is necessary to effectively adapt this framework to changing circumstances, which may warrant the inclusion or exclusion of a particular award. This could occur, for example, if the FWC were to remake one of the identified modern awards with different coverage from current arrangements. Any regulation made under this power would be subject to disallowance as set out in the Legislation Act 2003

142.      New subsection 168M(5) makes clear that Subdivision A does not prevent employers and employees from utilising current arrangements, under which they may agree to an employee working additional hours consistent with any terms of an identified modern award that permits this (for example, terms that permit a part-time employee to vary their regular pattern of hours in relation to a particular rostered shift).

143.      However, where an employee and employer do decide to enter into a simplified additional hours agreement, the provisions in new Subdivision A of Division 9 prevail over other identified modern award terms to the extent of any inconsistency (new subsection 168M(6)).

Process for simplified additional hours agreement

144.      New section 168N establishes the process for entering into a simplified additional hours agreement. A simplified additional hours agreement must identify additional agreed hours to be worked on one or more days (paragraph 168N(1)(a)), and must be entered into before the start of the first such period of those hours (paragraph 168N(1)(b)). These agreements may apply to a single day, or identify additional hours to be worked on a future day or days, including on multiple separate occasions.

145.      The employer must inform the employee that the agreement is a simplified additional hours agreement before entering into it (paragraph 168N(2)(a)). This distinguishes these agreements from other forms of agreement permitted by some modern awards.

146.      New paragraphs 168N(2)(b) and (c) require that:

·                 if the simplified additional hours agreement is not in writing, the employer must make a written record of the agreement that has been entered into, before the employee finishes working the first period of additional agreed hours; and

·                 the employer keep a copy of the simplified additional hours agreement or record, and provide a copy to the employee if requested.

147.      A written record need not be formal, and may be electronic (such as an email).

148.      A simplified additional hours agreement has no effect if the employer fails to comply with these requirements (subsection 168N(3)).

149.      New subsection 168N(4) clarifies that additional agreed hours may include part hours (e.g. half an hour), subject to subsection 168P(1), which requires additional agreed hours to be, or be part of, a period of continuous work of at least 3 hours.

150.      New subsections 168N(5) and (6) provide that an employer may only enter into a simplified additional hours agreement with an employee under 18 years of age if the employee’s parent or guardian has consented in writing (subsection 168N(5)). This aligns with existing safeguards around similar award-based processes, such as agreements to enter into individual flexibility arrangements. Parental or guardian consent has effect until withdrawn (subsection 168N(6)).

Requirements for simplified additional hours agreements

151.      Simplified additional hours agreements are subject to minimum engagement of a continuous period of at least three hours, or part of a period of continuous work of at least three hours (subsection 168P(1)). This reflects a common minimum shift standard in most of the identified modern awards. The note to subsection 168P(1) provides an example of a period of one hour of additional agreed hour of work after the end of a two hour shift as a period of continuous work of at least three hours. A period may still be ‘continuous’ under subsection 168P(1) regardless of whether a meal break or other break required by the identified modern award takes place during that period (subsection 168P(2)).

152.      Modern awards contain terms that limit the maximum number of consecutive days an employee may be required to work, or that require an employee not to work on a day. In some cases, these are strict limitations that cannot be varied or displaced. New subsection 168P(3) ensures that such limitations cannot be circumvented by a simplified additional hours agreement.

153.      For example, a provision of an identified modern award that requires an employee to work no more than 6 consecutive days, without exceptions, would prevent additional agreed hours being worked in contravention of that requirement. However, a provision of an identified modern award that prevents an employee working outside certain hours unless the employee agrees to do so would not prevent additional agreed hours being worked outside those hours.

Effect of simplified additional hours agreement

154.      New subsection 168Q(1) gives legal effect to simplified additional hours agreements by providing that additional agreed hours under a simplified additional hours agreement may be worked subject to any modern award requirement for the employee to take a break after a certain period of work.

155.      Additional agreed hours are to be paid without overtime (subsection 168Q(2)). However, new subsection 168Q(3) provides exceptions in certain circumstances.

156.      Subsection 168Q(3) provides that overtime is payable in respect of agreed additional hours where these hours result in the employee working outside the span or spread of hours, for which the relevant identified modern award requires any part-time employee to be paid overtime (paragraph 168Q(3)(a)).

157.      A span or spread of hours is a period set by the modern award that applies generally, or to a particular category of employee (such as day workers). For example, clause 15.1 of the General Retail Industry Award 2020 provides that the span of ordinary hours on Monday to Friday is 7:00 am to 9:00 pm, and clause 21.2 provides that an employer must pay an employee overtime for any hours worked outside of this span.

158.      Subsection 168Q(3) also provides that overtime is payable in respect of agreed additional hours where an employee’s ordinary hours, together with other hours worked by the employee, result in the employee working more than the maximum number of hours specified in the relevant identified modern award that any part-time employee may work in a day without being paid overtime (subparagraph 168Q(3)(b)(i)). For example, clause 26.2(a)(iii) of the Fast Food Industry Award 2010 requires a part-time employee to be paid overtime for all work in excess of 11 hours on any one day.

159.      New subparagraphs 168Q(3)(b)(ii) and (iii) further provide that overtime is payable in respect of agreed additional hours where an employee’s ordinary hours, together with other hours worked by the employee, result in the employee working more than 38 hours in a week (or averaged over a period, as provided for by the identified modern award). For the purposes of paragraph 168Q(3)(b) other hours worked by the employee include additional hours, but not hours that attract overtime payments.

160.      New paragraph 168Q(3)(c) permits the Minister to prescribe by regulation additional circumstances where overtime is payable in respect of additional agreed hours. There is considerable variation in awards as to the types of payments that are expressed to be in the nature of overtime payments and the circumstances in which overtime is paid. This regulation-making power operates as an appropriate safeguard for employees to ensure that additional circumstances that attract overtime payments in respect of additional agreed hours can be prescribed. However, the regulations could not reduce the availability of overtime payments.

161.      Additional agreed hours are to be treated as ordinary hours for certain purposes. New subsection 168Q(4) provides that, except for additional agreed hours worked in situations where overtime is payable under new subsection 168Q(3), additional agreed hours are to be treated as ordinary hours of work for the purposes of:

·                 paying penalty rates that apply to ordinary hours of work;

·                 accruing and taking annual leave and paid personal/carer’s leave under the Act;

·                 the definition of ordinary time earnings in subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 ; and

·                 any purposes prescribed by the regulations.

162.      This ensures that employees working agreed additional hours have the benefit of these entitlements that apply to ordinary hours of work.

163.      Additional agreed hours may be treated as ordinary hours of work for any other purposes prescribed by the regulations (paragraph 168Q(4)(e)). This is necessary because there is considerable variation across modern awards as to the types of hours particular entitlements are expressed to attach to. Further, award entitlements can be expected to change over time. If further purposes are identified for which additional agreed hours are to be treated as ordinary hours, they can be prescribed.

Illustrative example - span of hours

Meg is a part-time employee who works at a large department store. The General Retail Industry Award 2020 provides that the span of ordinary hours on Monday to Friday is between 7:00 am and 9:00 pm. Coming into Christmas, Meg enters into a simplified additional hours agreement to work an additional shift on Thursday nights from 5:00 pm until 10:00 pm for a 6 week period. The store closes at 9:00 pm but Meg helps to replenish stock for the next day’s trading for an hour after trading ceases.  

Meg’s additional hours will mean that she works one hour each Thursday outside the set span of ordinary hours provided under her award. As such, she will be paid at overtime rates for the additional one hour between 9:00 pm and 10:00 pm each Thursday.   

Other payments not affected

164.      Notwithstanding subsection 168Q(2), an employee must be remunerated for any additional pay (other than overtime) required by an identified modern award when working additional agreed hours (subsection 168Q(5)). Such additional amounts include (but are not limited to) penalty rates, incentive-based payments and bonuses, loadings and monetary allowances.

Terminating a simplified additional hours agreement

165.      New section 168R establishes a process for terminating simplified additional hours agreements. An employee or employer may terminate a simplified additional hours agreement by giving at least 7 days written notice of the termination date (paragraph 168R(1)(a)). An employer and employee may also terminate the agreement at any time without notice, if they agree in writing to the termination (paragraph 168R(1)(b)).

166.      New subsection 168R(2) requires the employer to keep a copy of the notice or agreement to terminate a simplified additional hours agreement, and provide a copy to the employee if requested.

167.      The notes observe that terminating or not terminating a simplified additional hours agreement is a workplace right for the purposes of the general protections in Part 3-1 of the Act (see section 168T), and section 344 of the Act prohibits the exertion of undue influence or pressure on an employee to terminate, or not terminate a simplified additional hours agreement (see item 6).

Other provisions

168.      New subsection 168S(1) provides that each provision in Subdivision A of Division 9 (other than subsections 168M(3) and (4), which specify the identified modern awards covered by the provisions) is taken to be a term of an identified modern award. This means that those terms will be relevant for the purposes of the BOOT. The note highlights that a person must not contravene a term of a modern award.

169.      The FWC must not vary or revoke a term of an identified modern award mentioned in new subsection 168S(1) (subsection 168S(2)).

170.      Disputes relating to the interaction between an existing term of an identified modern award and a provision taken to be a term of an identified modern award under subsection 168S(1), or arising as a result of the operation of such a provision, may be resolved in accordance with dispute settlement terms of identified modern awards (subsection 168S(3)).

171.      To avoid doubt, new subsection 168S(4) confirms that provisions taken to be a term of an identified modern award under subsection 168S(1) operate subject to the National Employment Standards (Part 2-2).

172.      Employees are free to choose whether or not to enter into a simplified additional hours agreement. To avoid doubt, subsection 168T confirms that entering or not entering into and terminating or not terminating a simplified additional hours agreement are workplace rights within the meaning of Part 3-1 of the Act (general protections).

173.      Item 6 inserts paragraph 344(ca) into section 344 to provide that an employer must not exert undue influence or pressure on an employee in relation to a decision by the employee to enter into or not enter into, or terminate or not terminate a simplified additional hours agreement.

 

PART 2 - FLEXIBLE WORK DIRECTIONS

Amendments to the Fair Work Act 2009

Item 7 - Before paragraph 136(1)(c)

Item 8 - After Part 6-4C

174.      Item 7 inserts new paragraph 136(1)(bb) with the effect that modern awards may include terms permitted or required by new Part 6-4D. This amendment is consequential on new subsection 789GZO, which deems certain provisions of new Part 6-4D to be terms of each of the identified modern awards.

175.      Item 8 inserts new Part 6-4D, which deems identified modern awards to include terms that enable employers to direct their employees about duties to be performed, and the location of their work.

Guide to Part 6-4D

176.      New section 789GZC is a Guide to Part 6-4D.

177.      Part 6-4D provides for identified modern awards to include terms that allow an employer to give a direction to their employee about the duties to be performed by the employee, as well as the location of the employee’s work.

178.      The Guide also notes that the FWC may deal with disputes about the operation of Part 6-4D via existing dispute resolution terms in modern awards.

Application

179.      New Part 6-4D applies in relation to employers and employees to whom an identified modern award applies (section 789GZD). Note 1 refers readers to section 47 of the Act, which provides that a modern award applies to an employee and employer if the modern award covers the employee and employer, is in operation, and no other provision prevents its application. Note 2 to new section 798GZD refers readers to the definition of ‘identified modern award’ in subsections 168M(2) and (3) as inserted by item 5 of Part 1 of Schedule 2 to the Bill.

Definitions

180.      Section 789GZE provides definitions for Part 6-4D as follows:

·                 employee and employer - these are references to the definitions of national system employee and national system employer (see sections 13, 14, 30C, 30D, 30M and 30N of the Act);

·                 flexible work direction - which means a flexible work duties direction or a flexible work location direction;

·                 flexible work duties direction - which means a direction referred to in section 789GZG;

·                 flexible work location direction - which means a direction referred to in section 789GZH; and

·                 licence - which includes a registration and a permit.

Flexible work directions

181.      Division 2 prevails over an inconsistent provision of an identified modern award to the extent of any inconsistency (section 789GZF).

182.      New section 789GZG establishes prerequisites for an employer to be able to direct an employee to perform any duties during a period that are within their skill and competency (a ‘flexible work duties direction’). A flexible work duties direction may be given if:

·                 the duties are safe having regard (without limitation) to the nature and spread of COVID-19;

·                 the employee is licensed and qualified to perform the duties (if a licence or qualification is required); and

·                 the duties are reasonably within scope of the employer’s business operations.

183.      New section 789GZH establishes prerequisites for an employer to be able to direct an employee to perform duties during a period at a place (including the employee’s home) that is different from the employee’s normal workplace (a ‘flexible work location direction’). The flexible work location direction may be given if:

·                 the place is suitable for the employee’s duties;

·                 if the place is not the employee’s home - it does not require the employee to travel a distance that is unreasonable in all the circumstances (including those surrounding the COVID-19 pandemic); and

·                 performance of the employee’s duties at the place is safe (having regard, without limitation, to the nature and spread of COVID-19), and is reasonably within scope of the employer’s business operations. 

184.      A direction given by an employer is effective until withdrawn or revoked by the employer, or replaced by a new direction given to the employee by the employer (new section 789GZI). The duration of a direction is subject to any order made by the FWC concerning a flexible work direction (new subsection 789GZI(2)). A flexible work direction ceases to have effect when the provisions are repealed, which is the day after 2 years from the day on which this Bill receives the Royal Assent (new subsection 789GZI(3)).

185.      A flexible work direction given by an employer to an employee must not be unreasonable in all the circumstances, otherwise it does not apply to an employee (new section 789GZJ). The note indicates that a direction may be unreasonable based on the impact it may have on an employee’s caring responsibilities.

186.      For a flexible work direction to have effect, an employer must have information to support a reasonable belief that the direction is a necessary part of a reasonable strategy to assist in the revival of the employer’s enterprise, which may for example arise because of the continuing impact of COVID-19 (new subsection 789GZK(1)). In this context it is irrelevant whether a similar direction could have been given to another employee (new subsection 789GZK(2)).

187.      New subsection 789GZL(1) provides that a flexible work direction does not apply to an employee unless the employer:

·                 gives the employee at least three days written notice of the intention to give a direction (or a lesser period by genuine agreement); and

·                 before giving the direction, consults the employee or the employee’s representative about it.

188.      An employer’s obligation to consult does not apply if the employer previously complied with that subsection in relation to a proposal to give the employee another flexible work direction and considered the view of the employee or their representative as part of the consultation process for giving the relevant direction (new subsection 789GZL(2)).  

189.      An employer must keep a written record of consultation (new subsection 789GZL(3)).

190.      A flexible work direction must be in writing, which may include by electronic means such as email (new section 789GZM).

191.      A flexible work direction cannot reduce an employee’s hourly base rate of pay. New subsection 789GZN(1) requires an employer to ensure that where an employee is given a flexible work duties direction under section 789GZG, the employee’s hourly base rate of pay is not less than the greater of:

·                 the base rate of pay on an hourly basis that would have applied if the direction had not been given; or

·                 the base rate of pay on an hourly basis applicable to the duties performed.

192.      A note under subsection 789GZN(1) alerts the reader that the section guarantees an employee’s hourly rate of pay. Base rate of pay is defined in section 16 and does not include overtime or penalty rates, monetary allowances or any other separately identifiable amounts. However, monetary allowances, including the payment of monetary allowances in relation to higher duties, must be paid to an employee in accordance with the obligation to pay amounts payable to the employee under section 323.

193.      If an employee is paid other than on an hourly basis (or by reference to an hourly pay rate) and the applicable identified modern award specifies the employee’s base rate of pay for the purposes of the NES or sets a method for working out the employee’s base rate of pay for that purpose, the employee’s base rate of pay is the amount specified in the identified modern award, or the amount worked out using the method specified by the identified modern award (new subsection 789GZN(2)).

194.      This ensures that employees paid other than by reference to hours, such as on an annualised salary arrangement, have clear rules about how their pay arrangements are treated for the purpose of the hourly rate of pay guarantee.

195.      Each provision of new Division 2 of Part 6-4D is taken to be a term of an identified modern award (new subsection 789GZO(1)). This means that those terms will be relevant for the purposes of the BOOT. The note observes that a person must not contravene a term of a modern award (section 45), and this is a civil remedy provision under Part 4-1 of the Act.

196.      New subsection 789GZO(2) provides that the FWC must not vary or revoke a term of an identified modern award mentioned in new subsection 789GZO(1). 

197.      Disputes about the interaction between a term of an identified modern award and a provision taken to be a term of an identified modern award under subsection 789GZO(1), or arising as a result of its operation, may be resolved in accordance with dispute settlement terms of identified modern awards (new subsection 789GZO(3)). The note refers readers to section 146 of the Act, which requires modern awards to include a term that provides a procedure for settling disputes about matters arising under the award.

198.      To avoid doubt, new subsection 789GZO(4) confirms that provisions taken to be a term of an identified modern award under Division 2 operate subject to the NES (Part 2-2).

199.      To ensure the effective integration of flexible work direction provisions in new Division 2 of Part 6-4D with existing terms of an identified modern award, new subsection 789GZP(1) authorises the FWC (on its own initiative, or on application by an affected employer, employee or organisation), to vary an identified modern award to resolve an uncertainty or difficulty relating to the interaction between these provisions and any terms of the identified modern award, or make the identified modern award operate effectively with those provisions. Variations made under new section 789GZP operate from the day specified in the determination, which may be a day before the determination is made.

 

PART 3 - REPEAL OF THE CORE PROVISIONS OF PART 6-4D OF THE FAIR WORK ACT 2009

Amendments to the Fair Work Act 2009

Item 9 Paragraph 136(1)(bb)

Item 10 Part 6-4D

200.      Items 9 and 10 repeal the amendments made by Schedule 2, Part 2 to the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 (Bill). The repeal occurs the day after 2 years from the day on which this Bill receives the Royal Assent (see subsection 2(1) of the Bill, table item 4).

 



SCHEDULE 3 - ENTERPRISE AGREEMENTS ETC.

Overview

201.      Schedule 3 to the Bill amends the Act to:

·                 change the objects of Part 2-4 to better reflect the intended operation and outcomes of the enterprise agreement framework (Part 1);

·                 extend the time for an employer to provide the notice of employee representational rights (NERR) and require the FWC to publish the NERR on its website (Part 2);

·                 replace prescriptive steps employers must take before asking employees to vote to approve an enterprise agreement with a requirement that employers take reasonable steps to ensure employees are given a fair and reasonable opportunity to decide whether or not to approve a proposed agreement (Part 3);

·                 clarify the circumstances in which casual employees may vote to approve an enterprise agreement (Part 4);

·                 modify the operation of the BOOT for enterprise agreements and variations of agreements by:

-    permitting the FWC to take into account only patterns or kinds of work, or types of employment, that employees currently perform or could reasonably be foreseen to perform;

-    enabling the FWC to have regard to overall benefits (including non-monetary benefits) employees would receive under an agreement compared to a relevant modern award; and

-    requiring the FWC to give significant weight to any views of the employees, employer, and bargaining representatives for the agreement that have been expressed as to whether the agreement passes the BOOT (Part 5);

·                 provide a new temporary mechanism for the FWC to approve an enterprise agreement that does not pass the BOOT where appropriate to do so taking into account all the circumstances (Part 5);

·                 require agreements to include a new model term that explains the interaction between the NES and enterprise agreements (Part 6);

·                 enable an eligible franchisee employer to apply to the FWC to be covered by an existing single-enterprise agreement that covers a group of employers who operate under the same franchise (Part 7);

·                 permit an application to terminate an enterprise agreement after its nominal expiry date only to be made three months after that date (Part 8);

·                 limit who can be heard by the FWC in relation to an application to approve or vary an enterprise agreement (Part 9);

·                 require the FWC, as far as practicable, to determine an application to approve or vary an enterprise agreement within 21 working days after the application is made - otherwise the FWC must notify relevant parties of the reasons why, including any exceptional circumstances (Part 10);

·                 require the FWC to perform its functions and exercise its powers in a manner that recognises bargaining outcomes at the enterprise level (Part 11);

·                 amend Part 2-8 of the Act to ensure industrial instruments do not transfer in relation to voluntary transfers of staff between associated entities (Part 12); and

·                 provide for the sunsetting on 1 July 2022 of agreement-based transitional instruments, including Division 2B State employment agreements, and enterprise agreements and workplace determinations made during the Fair Work Act ‘bridging period’ from 1 July 2009 to 31 December 2009 (Part 13).

 

PART 1 - OBJECTS

Amendments to the Fair Work Act 2009

Item 1 - Section 171

202.      This item repeals and replaces section 171, which sets out the objects of Part 2-4 of the Act. This amendment expands upon the objects of Part 2-4 to better reflect the intended operation and outcomes of the enterprise agreement framework.

203.      The FWC must take into account the objects of Part 2-4 when performing functions or exercising powers under this part (see paragraph 578(a)).

 

PART 2 - NOTICE OF EMPLOYEE REPRESENTATIONAL RIGHTS

Amendments to the Fair Work Act 2009

Item 2 - Subsection 173(3)

Item 3 - After subsection 174(1B)

Item 4 - After paragraph 625(2)(a)

204.      Item 2 amends subsection 173(3) to replace the reference to 14 days with a reference to 28 days, which means that employers must now give employees who will be covered by an enterprise agreement notice of the right to be represented by a bargaining representative as soon as practicable, but not later than 28 days after the notification time (see subsection 173(2)) for the agreement.

205.      Item 3 inserts new subsection 174(1C), which requires the FWC to publish the NERR prescribed in the Fair Work Regulations 2009 in accordance with section 174(1A) on its website.

206.      Item 4 inserts new paragraph 625(2)(aa), which enables the President of the FWC to delegate the function of publishing the NERR on the FWC’s website (in accordance with new subsection 174(1C)) to the FWC General Manager, FWC Senior Executive Service (SES) staff or acting SES staff, or FWC staff prescribed by the regulations.

PART 3 - PRE APPROVAL REQUIREMENTS

Amendments to the Fair Work Act 2009

Item 5 - Section 180 (heading)

Item 6 - Subsection 180(1)

Item 7 - At the end of subsection 180(1)

Item 8 - Subsections 180(2) and (3)

Item 9 - Subsection 180(4)

Item 10 - Subsections 180(5) and (6)

Item 11 - Subparagraph 188(1)(a)(i)

Item 12 - Paragraph 211(3)(a)

Item 13 - Paragraph 211(3)(e)

207.      These items make changes to the steps employers must take before asking employees to decide whether or not to approve a proposed agreement, and related amendments.

208.      Item 8 repeals and replaces current subsections 180(2) and (3), and inserts a note. New subsection 180(2) requires an employer to take reasonable steps to ensure that relevant employees are given a fair and reasonable opportunity to decide whether or not to approve the proposed agreement. ‘Relevant employees’ are those the employer requests under new subsection 181(1) to approve a proposed enterprise agreement (see the amendment to subsection 180(1) made by item 6 and the note added by item 7).

209.      The reasonableness of the steps to provide a fair and reasonable opportunity to decide whether or not to approve the agreement will depend on the particular facts and circumstances. This requirement refers to actions the employer takes to enable employees to make an informed decision, and ultimately, to genuinely agree to the agreement (see section 188).

210.      The opportunity will be fair if employees were treated equally, without favouritism or discrimination. The opportunity will be reasonable if it was objectively sensible, rational, practical and logical in the circumstances.

211.      New subsection 180(3) provides that an employer is taken to have complied with new subsection 180(2) if the employer takes reasonable steps to ensure that:

·                 during the access period for the agreement (i.e. the period of 7 calendar days before vote commences), the relevant employees can access a copy of the written text of the agreement and any other material incorporated by reference in the agreement that is not publicly available - if incorporated material is publicly available (for example, a modern award), the employer is not required to provide it to employees (paragraph 180(3)(a));

·                 by the start of the access period, the employer has notified the employees of the time and place that the vote to approve the agreement will occur, and the voting method that will be used (paragraph 180(3)(b)); and

·                 the terms of the agreement, and the effect of those terms, are explained to the relevant employees taking into account their particular circumstances and needs (paragraph 180(3)(c)) - the note to paragraph 180(3)(c) provides examples of employees whose particular circumstances and needs may need to be taken into account.

212.      New subsections 180(2) and (3) do not limit the steps an employer may take for the purpose of giving employees a fair and reasonable opportunity to decide whether or not to approve an agreement under subsection 180(2).

213.      Item 9 amends subsection 180(4) to make clear that the access period is the 7 calendar day period ending immediately before the day the voting process referred to in subsection 181(1) starts. This period does not include the day on which the employer makes the request to approve the agreement by voting for it under subsection 181(1). This is a technical amendment that clarifies this provision and reflects relevant case law (see Construction, Forestry, Maritime, Mining and Energy Union and Ors v CBI Constructors Pty Ltd [2018] FWCFB 2732 ).

214.      Item 10 repeals current subsections 180(5) and (6). Matters concerning the explanation of enterprise agreement terms are contained in new paragraph 180(3)(c). 

Illustrative example - ensuring employees are given a fair and reasonable opportunity to decide whether or not to approve the agreement

Renate Engineering Pty Ltd (Renate) is a mid-sized civil engineering firm, which is bargaining for an enterprise agreement proposed to cover all of its employees including managers, clerical staff, mechanical and electrical engineers. The firm employs a group of longstanding employees, working a number of different shifts and locations, including some employees working from home. During bargaining, some employees have been on long leave, including long service leave and parental leave.

The proposed new agreement is substantially identical to the previous agreement, except for increases to the rates of pay and some changes to rostering arrangements.

Renate’s human resources manager emails all staff at their work email address with an intranet link to the proposed agreement and says the vote will take place in two weeks by electronic ballot, which will be accessible in an email to be sent at a later date. The email is accompanied by an explanation that the proposed agreement is largely the same as the current agreement, except for these two changes. The email explains these changes in detail, but does not explain the terms of the agreement that are staying the same.

The agreement also incorporates terms of the relevant modern awards (like the previous agreement), but the email does not provide links to the awards, as they are available on the internet.

Renate’s human resources manager sends this information to the home email addresses of employees on leave or otherwise out of the office during this time, but does not post it to their home addresses.

The FWC is satisfied that Renate took reasonable steps to give employees a fair and reasonable opportunity to decide whether or not to approve the agreement in accordance with the requirement at subsection 180(2).

215.      Item 11 is consequential on the repeal of subsections 180(2), (3) and (5) and changes one of the requirements in section 188 (about when employees have genuinely agreed to an enterprise agreement) to reflect new subsection 180(2). 

216.      Item 13 amends section 211 (which regulates variation of enterprise agreements), consequential on amendments to section 180. This reflects that section 180 no longer refers to ‘employees employed at the time who will be covered by the proposed enterprise agreement’. Modification of the agreement approval requirements for agreement variation at paragraph 211(3)(e) only deals with references in subsection 186(2) and section 188 to employees covered by the agreement.

 

PART 4 - VOTING REQUIREMENTS

Amendments to the Fair Work Act 2009

Item 14 - Subsection 181(1)

Item 15 - Paragraphs 207(1)(a) and (b)

Item 16 - Subsection 207(2)

217.      These items repeal and replace current subsection 181(1) and make related amendments to clarify when casual employees can vote to approve a proposed enterprise agreement.

218.      New subsection 181(1) provides that an employee may vote to approve an enterprise agreement if they will be covered by it and are employed:

·                 other than as a casual employee (e.g. as a full-time or part-time employee) at the time of the request to vote; or

·                 as a casual employee and performed work at any time during the access period for the agreement.

219.      An employee will not be entitled to vote on an agreement if they commenced employment after the time the request to vote is made, or if they are a casual employee who only performed work before or after the access period, but not during the access period.

220.      The amendment at item 9 makes clear that the access period is the 7 calendar day period ending immediately before the day the voting process referred to in subsection 181(1) starts. Any casual employee who performed work during this period is therefore entitled to vote to approve the agreement. This approach also ensures that employers can clearly identify which casual employees are entitled to vote to approve an agreement, in the period between the end of the access period and immediately before the request to vote is made.

221.      For example, if a voting process commences at 12:00 pm, Monday, 8 July (i.e. makes the request under subsection 181(1)), then the access period is the seven calendar day period before that date, being Monday 1 July to Sunday 7 July. The employer would then have the period before 12:00 pm on Monday, 8 July to determine which casual employees worked the preceding 7 calendar days and are entitled to vote to approve the agreement, before commencing the voting process.

222.      This approach is informed by relevant decisions of the Full Court of the Federal Court of Australia and the FWC which considered current subsection 181(1) and the question of which employees may vote to approve an agreement (see National Tertiary Education Industry Union v Swinburne University of Technology [2015] FCAFC 98 and Appeal by Shop, Distributive and Allied Employees Association [2019] FWCFB 7599 ).

223.      Subection 181(3) makes clear that, without limitation, an employer may request the employees to vote by ballot or by an electronic method. The Act does not prescribe the method or duration of the voting process, meaning that an employer may request employees to vote to approve an agreement using any voting method or over a duration that is appropriate in the circumstances, on condition that the employer requested the employees described in subsection 181(1) to approve the agreement and the FWC is satisfied that the employees genuinely agreed to the agreement (section 188).

224.      Items 15 and 16 are consequential on the amendment to subsection 181(1).

225.      Item 16 repeals and replaces subsection 207(2) to introduce a new definition of ‘affected employees’ for the purposes of a variation of an enterprise agreement, which is consequential on the amendment to subsection 181(1).

226.      ‘Affected employees’ for a variation of an agreement are the employees who:

·                 are covered by the agreement or will be covered by the agreement if the FWC approves the variation; and

·                 are employed as non-casual employees at the time the request to approve the variation is made, or as casual employees who performed work at any time during the access period.

227.      The note refers readers to subsection 180(4) (as it has effect in accordance with subsection 211(3)) for the access period for a variation.

228.      Item 15 repeals and replaces paragraphs 207(1)(a) and (b) to provide that the following may jointly make a variation of an enterprise agreement:

·                 if the agreement covers a single employer - the employer and the affected employees; or

·                 if the agreement covers 2 or more employers - all of the employers and the affected employees.

PART 5 - BETTER OFF OVERALL TEST

Amendments to the Fair Work Act 2009

Division 1 - Main amendments

Item 17 - Subsection 186(2) (note 2)

Item 18 - Paragraph 189(1)(a)

Item 19 - After the heading to subsection 189(2)

Item 20 - Subsection 189(2)

Item 21 - Subsection 189(2) (note)

Item 22 - At the end of subsection 189(3)

229.      These items make amendments relating to circumstances when the FWC can approve an enterprise agreement that does not pass the BOOT.

230.      Item 19 inserts new subsection 189(1A), which sets out a new circumstance in which the FWC may approve an enterprise agreement that does not pass the BOOT, in addition to the existing capacity to do so where this would not be contrary to the public interest (sub0section 189(2)). Items 17-18 and items 20-22 make related consequential amendments.

231.      Under new subsection 189(1A), the FWC can approve an enterprise agreement (not being a greenfields agreement) that does not pass the BOOT if the FWC is satisfied that it is appropriate to do so taking into account all the circumstances, including:

·                 the views of the employees and each employer covered by the agreement, and each bargaining representative for the agreement;

·                 the circumstances of those employees and employers, and any employee organisation that has applied to be covered by the agreement, including the likely effect of approval or non-approval;

·                 the impact of COVID-19 on the enterprise or enterprises to which the agreement relates;

·                 the extent of employee support for the agreement as expressed in the outcome of the voting process; and

·                 because of these circumstances, approving the agreement would not be contrary to the public interest.

Illustrative example - FWC may approve an enterprise agreement that does not pass the better off overall test where it is appropriate to do so taking into account all the circumstances and it would not be contrary to the public interest

During negotiations for a new enterprise agreement for office administrative staff, employee representatives request that the span of hours be expanded to allow employees more flexibility to start work later and finish at 10:00 pm.

As the Clerks - Private Sector Award 2020 provides that ordinary hours are between 7.00 am and 7.00 pm on Monday to Friday, the employer must provide overtime for work performed outside of this span of hours.

As the employer has been significantly affected by COVID-19 they cannot provide another benefit which offsets the detriment of not receiving overtime for working outside of those hours.

The employees understand that this change would not result in them being better off overall under the agreement compared to the award, but consider that it is important to have a new agreement that provides greater flexibility and helps maintain the viability of their workplace. Over 90 per cent of the employees voted to approve the agreement.

While the agreement does not pass the BOOT due to the expanded span of hours, the FWC takes into account the views and circumstances of the parties, including the benefit of a greater span of hours in the current context; the impact of COVID-19 on the business; and the extent of support for the agreement as expressed in the vote to approve it. As it would not be contrary to the public interest to approve the otherwise compliant agreement because of these reasons, the FWC approves the agreement with a nominal expiry date of two years after approval.

232.      An agreement approved under this provision can have a nominal expiry date not longer than two years after the day on which the FWC approves the agreement (see paragraph 189(4)). This measure will automatically repeal two years after commencement (see items 27-31), but this does not affect the validity of agreements approved during the two year period it was in operation (see Schedule 7, item 1).

233.      These measures are time limited for two years, to assist recovery from the impact of COVID-19 (see items 27-31).

234.      This provision operates in the broader agreement-making context. Even if an agreement does not pass the BOOT, the FWC will still be required to be satisfied (among other things) that the employees genuinely agreed to the agreement, the group of employees covered by the agreement was fairly chosen, and the agreement does not contain any unlawful terms. Additionally, the FWC can hear from any employer, employee, or bargaining representative for the agreement (as well as other persons, in exceptional circumstances) when determining whether to approve the agreement.

Item 23 - Subsection 190(2)

235.      Item 23 amends subsection 190(2) to ensure that the FWC can approve an enterprise agreement with undertakings under either section 186 or section 189 (when an agreement does not pass the BOOT).

Item 24 - Subsection 193(2)

Item 25 - At the end of section 193

Item 26 - Subsection 211(4)

236.      Item 25 inserts new subsection 193(8), which identifies matters to which the FWC must, or must not, have regard when deciding whether an enterprise agreement passes the BOOT, and identifies matters the FWC may take into account. Item 25 consequentially amends section 211(4) to reflect this change in requirements for FWC approval of agreement variations.

237.      Paragraph 193(8)(a) provides that, when determining whether an agreement passes the BOOT, the FWC may have regard to patterns or kinds of work, or types of employment:

·                 where the agreement is not a greenfields agreement - only if these are engaged in by the award covered employees who are employed at the test time; or

·                 in any case - only if it is reasonably foreseeable by the employer at the test time that they will be engaged in by award covered employees or prospective award covered employees.

238.      When considering patterns of work, the FWC may have regard (for example) to the rosters, ordinary hours of work, span of hours, and shift patterns that can be worked under the agreement. When considering kinds of work, the FWC may have regard (for example) to the nature of the work, levels of skill or responsibility involved in the work, and the conditions under which work is done. When considering types of employment, the FWC may have regard to whether the agreement provides for full-time, part-time, casual, and shift work.

239.      For example (in the case of an agreement that is not a greenfields agreement):

·                 if an employer only operated Monday to Friday, and the employer could not reasonably foresee that it would start operating on weekends, the FWC could not, in deciding whether an enterprise agreement passes the BOOT, have regard to any patterns of work that included weekend working hours; and

·                 if an employer did not engage any casual employees, and could not reasonably foresee that it would engage such employees, the FWC could not have regard to casual employment in conducting the BOOT.

Illustrative example - the FWC may have regard to patterns or kinds of work or types of employment if they are engaged in by award covered employees for the agreement

Dom has run a lawn-mowing business called ‘Dom’s Lawns’ in Dubbo for ten years. Dom’s Lawns only operates Monday to Friday and does not operate on the weekends and does not intend to do so in the future. Felicia and Abdul both work as full-time employees of Dom’s Lawns. Dom’s daughter Aimee works part-time as she is studying at the local university. Dom also anticipates that when Aimee finishes her degree and finds other employment, he may engage one or two more employees on a casual basis.

Dom’s Lawns made an enterprise agreement with these three employees, who are all award covered employees. Dom’s Lawns and its employees agreed to the agreement, and Dom applied to the FWC for approval.

When deciding whether an enterprise agreement passes the better off overall test, the FWC may have regard to the full-time hours of Felicia and Abdul and the part-time hours of Aimee. None of Dom’s Lawn’s employees work any weekend hours. The FWC does not have to consider any weekend working hours as it is not reasonably foreseeable that Dom’s Lawns will broaden its operations to run over the weekend.

However, because Dom reasonably anticipates that he will engage casual employees in the future, the FWC does need to be satisfied that a casual employee who works on weekdays would be better off overall under the agreement compared to the modern award.

240.      Paragraph 193(8)(b) provides that the FWC may have regard, in determining whether an enterprise agreement passes the BOOT, to the overall benefits (including non-monetary benefits) an award covered employee or prospective award covered employee would receive under the agreement when compared to the relevant modern award.

241.      Non-monetary benefits may include, for example:

·                 flexible working arrangements;

·                 time off in lieu;

·                 time off to participate in community service activity;

·                 provision of training; or

·                 health care benefits.

242.      This provision makes clear that the BOOT requires consideration of agreement terms that are more beneficial and less beneficial, and an overall assessment of whether an employee would be better off under an agreement compared to the award, and that non-monetary benefits are to be taken into account in this exercise. This reflects case law concerning the BOOT (see for example Armacell Australia Pty Ltd [2010] FWAFB 9985 , Solar Systems Pty Ltd [2012] FWAFB 6397 ).

243.      Paragraph 193(8)(c) provides that, in determining whether an agreement passes the BOOT, the FWC must give significant weight to any views in that regard expressed by:

·                 the employer or employers that are covered by the agreement; or

·                 if the agreement is not a greenfields agreement - the award covered employees for the agreement; or

·                 in any case - a bargaining representative for the agreement.

244.      Such views may inform the FWC about the subjective value of particular terms of the agreement, including terms that confer non-monetary benefits. While the FWC must have regard to such views, this does not mean the FWC is obliged to decide that an agreement passes the BOOT on that basis.

245.      Item 24 repeals current subsection 193(2), as the requirement for the FWC to disregard an individual flexibility arrangement when conducting the BOOT is now included in paragraph 193(8)(d).

Division 2 - Repeal of subsection 189(1A) and related consequential amendments

Item 27 - Subsection 186(2) (note 2)

Item 28 - Subsection 189(1A)

Item 29 - Subsection 189(2)

Item 30 - At the end of subsection 189(2)

Item 31 - Subsection 189(3) (note)

246.      These amendments reflect the temporary nature of provisions enabling the FWC to approve an enterprise agreement that does not pass the BOOT and related consequential amendments. The repeals made by these provisions occur two years after the day the Amendment Act commences (see commencement information at subsection 2(1) of the Bill, table item 7).

 

PART 6 - NES INTERACTION TERMS

Amendments to the Fair Work Act 2009

Item 32 - Section 12

Item 33 - Subsection 55(7) (note)

Item 34 - Section 169 (paragraph beginning “Division 5”)

Item 35 - Subsection 186(2) (heading)

Item 36 - Paragraph 186(2)(c)

Item 37 - Subsection 186(2) (note 3)

Item 38 - Paragraph 201(1)(b)

Item 39 - At the end of paragraph 201(1)(b)

Item 40 - Before section 202

Item 41 - Before section 205

Item 42 - At the end of Division 5 of Part 2-4

Item 43 - Paragraph 211(3)(ha)

247.      These items amend the Act to require enterprise agreements to include a model term that explains the interaction between the NES and enterprise agreements (the model NES interaction term), and to make related changes.

248.      Item 36 repeals paragraph 186(2)(c). When deciding whether to approve an enterprise agreement, the FWC no longer needs to be satisfied that the terms of the agreement do not contravene section 55 (which governs the interaction between the NES and enterprise agreements). Item 35 reflects this change in the heading to subsection 186(2).

249.      Instead of this process, new section 205A (explained below) requires enterprise agreements to include the model NES interaction term.

250.      While this may result in agreement terms appearing to contravene section 55, such terms have no effect to that extent because of section 56, and employees covered by the agreement will be entitled to the NES in accordance with section 61.

251.      Item 42 inserts new section 205A, which requires an enterprise agreement to include the model NES interaction term (this must be prescribed by the regulations). Item 34 reflects this change in the Guide to Part 2-4, and item 32 inserts a signpost in the Dictionary (section 12) to the definition of model NES interaction term in new subsection 205A(3).

252.      This amendment simplifies the enterprise agreement approval process by avoiding the need for the FWC to examine each term of an agreement to determine whether it contravenes section 55. Instead the FWC will only need to consider whether the agreement includes the model NES interaction term.

253.      The model NES interaction term must explain the provisions of the Act that regulate interaction between the NES and enterprise agreements. Those provisions include section 55 (which concerns the interaction between the NES and a modern award or an enterprise agreement), section 56 (which provides that a term of a modern award or enterprise agreement has no effect to the extent that it contravenes section 55), and section 61 (which provides that the NES are the minimum standards that apply to the employment of employees which cannot be displaced, even if an agreement includes terms that have the same or substantially the same effect as provisions of the NES).

254.      If an agreement does not include the model NES interaction term, the model term is taken to be a term of the agreement.

255.      Items 38 and 39 consequentially amend subsection 201(1) to provide that if the FWC approves an enterprise agreement and the model NES interaction term (or the existing model flexibility term or model consultation term) are taken to be a term of the agreement, the FWC must note this in its decision.

Item 44 - Subsection 272(5)

Item 45 - At the end of section 273

256.      Consistent with amendments concerning NES interaction terms of enterprise agreements, these items make similar amendments in relation to workplace determinations (which can be made by the FWC in certain circumstances, including after the termination of protected industrial action, and operate in a similar way to enterprise agreements).

Part 7 Variation of single enterprise agreements to cover eligible franchisee employers and their employees

Amendments to the Fair Work Act 2009

Item 46 - Section 12 (definition of affected employees )

Item 47 - Section 12 (definition of agreed to )

Item 48 - Section 12

Item 49 - At the end of section 58

Item 50 - Subdivision A of Division 7 of Part 2-4 (at the end of the heading)

Item 51 - After Subdivision A of Division 7 of Part 2-4

Item 52 - After subsection 278(1)

257.      These items amend the Act to provide a process for an enterprise agreement to be varied to cover an eligible franchisee employer and its employees, and make related amendments (including to the Dictionary in section 12 of the Act).

258.      Item 51 inserts new Subdivision AA of Division 7 of Part 2-4, which establishes a new variation mechanism to enable an eligible franchisee employer to apply to the FWC to vary an existing single-enterprise agreement that covers other employers operating under the same franchise, so that it also covers the eligible franchisee employer and its employees.

259.      An eligible franchisee employer may request its employees to vote to approve an application to the FWC for this purpose (new subsection 216A(1)). Employees already covered by the existing agreement are not required to vote to approve the application.

260.      Under new subsection 216A(2) an employer is an ‘eligible franchisee employer’ for a single-enterprise agreement if:

·                 the agreement does not cover the employer, but covers two or more other employers that are single interest employers (see subsection 172(5));

·                 the employer carries on similar business activities under the same franchise as those other employers; and

·                 the employer and those other employers are either franchisees of the same franchisor, or are related bodies corporate of the same franchisor, or any combination of these.

261.      Item 48 signposts this definition in the Dictionary (section 12).

262.      New subsection 216A(3) provides that the employer may request the following employees of the eligible franchisee employer who will, if the FWC makes the variation, be covered by the single-enterprise agreement:

·                 non-casual employees employed at the time the request is made;

·                 casual employees who performed work at any time during the 7 day period ending immediately before the day the voting process referred to in subsection (1) starts.

263.      This is consistent with provisions about who may vote to approve an enterprise agreement (reflecting amendments in item 14 to subsection 181(1)).

264.      The ‘affected employees’ for a variation under Subdivision AA are the employees who are asked to vote on the variation, referred to in paragraphs 216A(3)(a) and (b) (new subsection 216A(4)). Affected employees can be asked to vote by means including ballot or an electronic method (new subsection 216A(5)).

265.      Before applying to the FWC to vary an agreement under subsection 216A(1), the eligible franchisee employer must take reasonable steps to notify affected employees of the time and place of the vote and the voting method to be used, and which employees will be covered by the agreement if the FWC makes the variation. The eligible franchisee employer must also take reasonable steps to ensure the affected employees are given a fair and reasonable opportunity to decide whether they want to approve the proposed application (new subsection 216A(6)). Similar considerations to those relevant to new section 180(2) (see item 8) will be relevant in this context.

266.      An application under subsection 216A(1) is agreed when a majority of the affected employees who cast a valid vote approve the application (new subsection 216A(7)). If the affected employees have agreed to the application the employer must apply to the FWC for the variation (new subsection 216B(1)). The application must be accompanied by any declarations that are required by the procedural rules (new subsection 216B(2)). The application must be made within 14 days after employee approval or a further period allowed by the FWC (new subsection 216B(3)).

267.      Under new section 216C, if an eligible franchisee employer has applied for a variation under subsection 216B(1), the FWC must vary the single-enterprise agreement to cover the eligible franchisee employer and employees specified in the application if satisfied that:

·                 the agreement has not passed its nominal expiry date;

·                 no person coerced, or threatened to coerce, the eligible franchisee employer to request the affected employees to approve the application;

·                 the eligible franchisee employer gave affected employees a fair and reasonable opportunity to decide whether they want to approve the application;

·                 the application was agreed to in accordance with subsection 216A(7); and

·                 there are no other reasonable grounds for believing that the affected employees have not agreed to the variation;

unless it is satisfied there are serious public interest grounds for not varying the agreement.

268.      The variation operates from the day specified in the FWC decision to vary the agreement (new section 216D). A single-enterprise agreement that is varied under this Subdivision remains a single-enterprise agreement, despite the variation (new section 216E).

269.      Item 49 inserts new subsection 58(4), the effect of which is that if an enterprise agreement (the earlier agreement) applies to an employee in relation to particular employment and another agreement is varied under section 216A to cover the employee in relation to that employment, that varied agreement displaces the earlier agreement (which can never apply again). Item 52 makes a similar amendment in relation to the displacement of an earlier workplace determination following variation of the coverage of an enterprise agreement under section 216A.

 

PART 8 - TERMINATING AGREEMENTS AFTER NOMINAL EXPIRY DATE

Amendments to the Fair Work Act 2009

Item 53 - Section 225

270.      Section 225 currently allows any of the following to apply to terminate the enterprise agreement if the agreement has passed its nominal expiry date.

·                 one or more of the employers covered by the agreement;

·                 an employee covered by the agreement; or

·                 an employee organisation covered by the agreement.

271.      This item amends section 225 so that an application to terminate an agreement under this section cannot be made until at least three months after the agreement’s nominal expiry date.

 

PART 9 - HOW THE FWC MAY INFORM ITSELF

Amendments to the Fair Work Act 2009

Item 54 - After section 254

Item 55 - At the end of subsection 590(1)

Item 56 - At the end of subsection 625(1)

272.      Item 54 inserts new section 254AA, which sets out how the FWC may inform itself in relation to applications for approval or variation of enterprise agreements.

273.      Subsection 254AA(2) qualifies how the FWC may inform itself in relation to such applications to the following, unless the FWC is satisfied there are exceptional circumstances:

·                 information that is publicly available;

·                 submissions made by a volunteer body under section 254A;

·                 submissions, evidence or other information provided by or requested from:

-       the person who makes the application to approve or vary the enterprise agreement to the FWC;

-       the employer or employers covered by the agreement;

-       an employee covered by the agreement;

-       a bargaining representative for the agreement;

-       in the case of a variation, an employee who will be covered by the agreement if the FWC approves the variation;

-       in the case of a variation, an employee organisation covered by the agreement; or

-       the Minister or a Minister of a State or Territory who has responsibility for workplace relations matters.

274.      Exceptional circumstances that may justify the FWC receiving or requesting submissions from another person or body (such as a registered or unregistered employee organisation that was not a bargaining representative for the agreement) may include circumstances (for example) where there are significant public interest concerns about the enterprise agreement (e.g. possible human rights issues, or implications for the economy or public health and safety).

275.      Section 254AA qualifies section 590 (which enables the FWC to inform itself in a manner it considers appropriate) in relation to applications for agreement approval or variation. The limitation only relates to information that can be provided to or requested from the FWC and the circumstances in which it can be provided or requested (in addition to publicly available information and submissions made by a volunteer body under section 254A).

276.      Item 55 inserts a note at the end of subsection 590(1) reflecting the limitation to section 590, and item 56 inserts a related note to subsection 625(1).

 

PART 10 - TIME LIMITS FOR DETERMINING CERTAIN APPLICATIONS

Amendments to the Fair Work Act 2009

Item 57 - After section 255

Item 58 - Before paragraph 625(2)(b)

277.      Item 57 inserts new section 255AA, which provides a timeframe for the FWC to determine applications to approve or vary enterprise agreements.

278.      Subsection 255AA(1) provides that the FWC must, as far as practicable, determine an application to approve or vary an agreement within 21 working days (the ‘decision period’) after the application is made. The FWC can determine an application to approve or vary an agreement after the decision period if it was not practicable to determine the application within that period.

279.      If the FWC does not determine an application within the decision period, subsection 255AA(2) requires it to give written notice as soon as practicable to the following, setting out why it was unable to determine the application during that period, including because of any exceptional circumstances:

·                 each employer covered by the agreement;

·                 for an application to approve an enterprise agreement:

-       if the agreement is a greenfields agreement - each relevant employee organisation the agreement is expressed to cover;

-       if the agreement is not a greenfields agreement - each employee organisation that has given notice under subsection 183(1) stating that the organisation wants to be covered by the agreement;

·                 for an application to approve a variation of an enterprise agreement - each employee organisation covered by the agreement; or

·                 in any case—the applicant (if not covered by the preceding paragraphs).

280.      Subsection 255AA(3) requires the FWC to publish this notice on its website or by any other means it considers appropriate.

281.      Item 58 inserts new paragraph 625(2)(ab), which enables the President of the FWC to delegate the function of publishing this notice on the FWC’s website to:

·                 the General Manager of the FWC;

·                 a member of staff of the FWC who is an SES employee or acting SES employee;

·                 a member of staff of the FWC who is in a class of employees prescribed by the regulations.

 

PART 11- FWC FUNCTIONS

Amendments to the Fair Work Act 2009

Item 59 - After section 254A

Item 60 - At the end of section 578

282.      Item 59 inserts new section 254B, which requires the FWC to perform its functions and exercise its powers under Part 2-4 in a manner that recognises the outcome of bargaining at the enterprise level. This new requirement operates together with section 578, which sets out matters the FWC must take into account when performing functions or exercising powers, including the objects of the Act and any objects of the parts of the Act. Item 60 consequentially amends section 578 to insert a note referring to this requirement.

 

PART 12 - TRANSFER OF BUSINESS

Amendments to the Fair Work Act 2009

Item 61 - Section 12 (paragraph (a) of the definition of transfer of business )

Item 62 - After subsection 311(1)

283.      As a general rule, Part 2-8 of the Act provides, in a transfer of business situation, for an old employer’s enterprise agreement or other relevant industrial instrument to continue to cover a transferring employee and their new employer in relation to transferring work, regardless of how the employee came to be employed by the new employer. The only way continued instrument coverage does not occur is if there is an order to that effect from the FWC.

284.      Item 62 inserts new subsection 311(1A), which ‘turns off’ the transfer of business rules in Part 2-8 of the Act in the case of an employee who becomes employed with an associated entity (as defined by section 50AAA of the Corporations Act 2001 ) of their former employer after seeking that employment on their own initiative before the termination of the employee’s employment with the old employer. That employee will then be covered by the relevant industrial instrument (if any) that covers the type of work performed by the employee for the new employer. This means the new employer is not required to seek orders from the FWC to achieve that outcome. The rules concerning an employee’s continuity of service in section 22 are not affected by this amendment. Item 61 amends the definition of ‘transfer of business’ in the Dictionary (section 12) to reflect new subsection 311(1A).

285.      The reference in paragraph 311(1A)(b) to termination of employment is intended to capture all circumstances in which employment ceases, including resignation and termination by operation of law (for example, a contract for a fixed term).

286.      The circumstances giving rise to the new employment relationship need to be considered to determine whether an employee sought to become employed on their own initiative before termination of employment with the old employer. For example, this may be satisfied where an employer provides information about job opportunities within the corporate group which the employee then chooses to pursue for career progression or lifestyle reasons.

Illustrative example - at the initiative of the employee

Anne is employed full time as an engineer with Mega Engines Pty Ltd (Mega). Her employment with Mega is covered by the Mega Engines Pty Ltd Enterprise Agreement 2019-2021 (Mega Agreement). Super Engines Pty Ltd (Super) and Mega are part of the same corporate group and are associated entities.

Super conducts a recruitment and selection process for a senior engineer position. Super’s relevant industrial instrument is the Super Engines Pty Ltd Enterprise Agreement 2018-2022 (the Super Agreement) Anne voluntarily applies for the position with Super in order to progress her career as a senior engineer and to work on a larger range of projects in a bigger team. She is offered and accepts the position.

Under the new rules, Super, Anne or the relevant employee association will no longer be required to apply to the Fair Work Commission for an order that the Mega Agreement not transfer with Anne and apply to her work with Super. Anne’s work with Super will automatically be covered by the Super Agreement as she has decided to move across at her own initiative.

287.      However, it is not intended that an employee who accepts alternative employment within a corporate group with an asso ciated entity in the context of an organisational restructure would be covered by the new provision (for example, in a redundancy, redeployment or stand down scenario). In such cases, the employee’s move from one employer to another arises from an operational decision of the employer, and is not properly characterised as being at the employee’s initiative. For example, new subsection 311(1A) would not apply to a situation where:

·                 the old employer stands down an employee without pay, who then takes up employment with an associated entity of the old employer; or

·                 an employee seeks employment with a new employer on the basis that their current employment is to be terminated or otherwise significantly altered.

288.      In these circumstances the transfer of business rules would apply and an order from the FWC under section 318 would be required to displace coverage of the old employer’s industrial instrument.

Illustrative example - operational decision by first employer

Bob is employed full-time as a warehouse manager with Cardboard Boxes R Us Limited (Boxes). His employment with Boxes is covered by the Cardboard Boxes R Us (Sydney, Brisbane and Melbourne Warehouses) Enterprise Agreement 2020-2024 (the Boxes Agreement). Boxes is restructuring its business as a result of increased competition in the packaging industry. As part of the restructure, Bob’s position is to be made redundant. Boxes’ subsidiary is Streamline Your Packages Pty Ltd (Streamline). Boxes and Streamline are associated entities.

Boxes indicates to Bob that Streamline has a full-time warehouse assistant manager role on offer. Streamline’s relevant industrial instrument is the Storage Services and Wholesale Award 2020. Bob applies for, is offered, and accepts the role with Streamline.

Bob’s work with Streamline will continue to be covered by the Boxes Agreement, subject to Streamline, Bob or a relevant employee association applying to the Fair Work Commission for an order under section 318 that the Boxes Agreement not transfer. This is because Bob did not decide to move to Streamline at his own initiative, rather, it was the result of an operational decision by Boxes.

 

PART 13 - CESSATION OF CERTAIN INSTRUMENTS

Amendments to the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009

Item 63 - Item 20 of Schedule 3 (heading)

289.      This item omits and replaces the heading of item 20 of Schedule 3 to reflect the insertion of additional sunsetting rules for particular transitional instruments currently preserved by the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (TPCA Act).

Item 64 - After item 20 of Schedule 3

Item 65 - After item 26 of Schedule 3A

290.      These items provide for the sunsetting of various transitional instruments on 1 July 2022. This will not affect any accrued rights, liabilities or extant investigations, and any investigation, legal proceeding or remedy in relation to such rights or liabilities may be instituted, continued or enforced as if the transitional instrument had not terminated or ceased to apply (see the Schedule 3, item 7 of the TPCA).

291.      Employers and employees covered by instruments that terminate on 1 July 2022 may transition to the current framework by making new enterprise agreements. If a replacement enterprise agreement is not in place by 1 July 2022, from this date a relevant modern award would apply.

292.      Item 64 inserts new item 20A to provide that an agreement-based transitional instrument terminates on 1 July 2022 if it was not terminated before that day.

293.      Agreement-based transitional instruments are collective agreement-based transitional instruments made under predecessor legislation to the Act (including collective agreements, workplace determinations, preserved collective State agreements, pre-reform certified agreements, old IR agreements, section 170MX awards) and individual agreement-based transitional instruments (individual transitional employment agreements, preserved individual State agreements, Australian Workplace Agreements (AWAs) and pre-reform AWAs).

294.      The TPCA Act provides that once an agreement-based transitional instrument terminates, it ceases to cover (and can never again cover) any employees, employers or other persons (Schedule 3, item 21).

295.      Item 65 inserts new item 26A in Schedule 3A to the TPCA Act, which provides that a Division 2B State employment agreement terminates on 1 July 2022 if it was not terminated before that day.

296.      Division 2B State employment agreements are comprised of collective Division 2B State employment agreements and individual Division 2B State employment agreements, established and approved under state industrial relations laws, then recognised in the national workplace relations system following the referral of powers by Division 2B referring states.

297.      Once a Division 2B State employment agreement terminates, it ceases to cover (and can never again cover) any employees, employers or other persons (Schedule 3A, item 28).

Item 66 - At the end of Part 3 of Schedule 7

Item 67 - At the end of Part 5 of Schedule 7

298.      Item 66 inserts new Division 5 of Part 3 of Schedule 7 and new item 17A(1), which provides that an enterprise agreement made during the bridging period will cease to operate on 1 July 2022 if it has not ceased to operate before that day in accordance with subsection 54(2) of the Act.

299.      Enterprise agreements made during the bridging period (from 1 July 2009 to 31 December 2009) needed to pass a no disadvantage test and were not assessed against the BOOT, as modern awards did not commence operation until 1 January 2010.

300.      New subitem 17A(2) provides that if an enterprise agreement ceases to operate in accordance with subitem 17A(1) the cessation does not affect:

·                 any right or liability that a person acquired, accrued or incurred before the instrument ceased to operate; or

·                 any investigation, legal proceeding or remedy in respect of any such right or liability.

301.      New item 17A(3) provides that any such investigation, legal proceeding or remedy may be instituted, continued or enforced as if the enterprise agreement had not ceased to operate.

302.      Relevant provisions of the Act provide that once an agreement ceases to operate it can never operate again (subsection 54(3)), and can no longer cover an employee, employer or employee organisation (subsubsection 53(5)).

303.      Employers and employees covered by these instruments may transition to the current framework by making new enterprise agreements by 1 July 2022. If a replacement enterprise agreement is not in place by 1 July 2022, from this date the relevant modern award would apply.

304.      Item 67 adds new item 26A, which makes the same sunsetting arrangements for all remaining workplace determinations made during the Fair Work Act ‘bridging period’ from 1 July 2009 to 31 December 2009.

305.      Relevant provisions of the Act provide that once a workplace determination ceases to operate, it can never operate again (subsection 276(3)), and can no longer cover an employee, employer or employee organisation (subsection 277(4)).



SCHEDULE 4 - GREENFIELDS AGREEMENTS

Overview

306.      Schedule 4 to the Bill amends the Act to:

·                 enable the FWC to approve a greenfields agreement made in relation to the construction of a major project, which specifies a nominal expiry date of up to eight years after the day the agreement comes into operation (instead of the current maximum nominal expiry date of four years after the date of approval) to improve cost certainty and minimise delays for projects;

·                 provide a definition of a ‘major project’ and enable the Minister prescribed by the regulations to declare, by legislative instrument, that a particular project is a ‘major project’; and

·                 require the FWC to be satisfied that a greenfields agreement provides for annual increases to the base rate of pay for each employee covered by the agreement for its nominal life, if work to be performed under the agreement relates only to the construction of a major project, and the agreement specifies a nominal expiry date more than four years after the day on which the FWC approves the agreement.

Amendments to the Fair Work Act 2009

Item 1 - Section 12

Item 2 - At the end of Division 4 of Part 1-2

307.      These items insert relevant definitions. Item 1 provides:

·                 a signpost in the Dictionary referring readers to the definition of major project in new section 23B, which is relevant to requirements for the FWC to approve certain greenfields agreements under sections 186 and 187; and

·                 that responsible Minister means the Minister who is prescribed by the regulations for the purposes of this definition (in the Dictionary at section 12).

308.      Item 2 inserts new section 23B. New subsection 23B(1) provides that a project is a ‘major project’ if: 

·                 the total expenditure of a capital nature that has been incurred in carrying out the project, or is reasonably likely to be incurred, is at least $500 million; or

·                 a declaration is made by the responsible Minister under new subsection 23B(2) that the project is a major project.

309.      Total expenditure of a capital nature is intended, for example, to cover expenditure for acquisition of assets such as land, equipment and technology or construction of structures.

310.      New subsection 23B(2) enables the responsible Minister to declare by legislative instrument that a project is a major project. The responsible Minister cannot make such a declaration unless satisfied that total expenditure of a capital nature in carrying out the project incurred, or reasonably likely to be incurred, is at least $250 million but less than $500 million (new subsection 23B(3)). The making of a declaration can be used by, for example, multiple employers, to enable them to make greenfields agreements that relate only to the construction of the major project.

311.      New subsection 23B(4) sets out the following matters that the responsible Minister must take into account in deciding whether or not to make a declaration under new subsection 23B(2):

·                 the national and regional significance (if any) of the project (new paragraphs 23B(4)(a) and (b));

·                 the contribution the project is expected to make to job creation (new paragraph 23B(4)(c)); and

·                 any other matter the responsible Minister considers relevant (new paragraph 23B(4)(d)).

312.      For these purposes the responsible Minister could consider, for example, the contribution (if any) the project is expected to make to Australia’s recovery from the economic impact of the COVID-19 pandemic.

313.      Section 42 of the Legislation Act 2003 (which deals with disallowance of legislative instruments by the Parliament) will not apply to declarations made by the responsible Minister (new subsection 23B(5)). This is to avoid commercial uncertainty for parties negotiating greenfields agreements and the enterprise bargaining framework generally.

314.      Requiring an employer to wait until the disallowance period had passed before bargaining in reliance of a declaration that would effectively enable a proposed greenfields agreement to include a longer nominal expiry date, could unreasonably delay its approval, engagement of new employees and commencement of work on the project. The risk that a declaration could be disallowed could also affect the parties’ capacity to bargain consistent with the good faith bargaining requirements in section 228. 

Item 3 - Paragraph 186(5)(b)

315.      Section 186 requires the FWC to approve an enterprise agreement if the requirements in sections 186 and 187 are met.

316.      Subsection 186(5) requires the FWC to be satisfied that an enterprise agreement specifies a nominal expiry date (paragraph 186(5)(a)) and that the nominal expiry date will not be more than four years after the day on which the FWC approves the agreement (paragraph 186(5)(b)).

317.      This item repeals and substitutes paragraph 186(5)(b) so that the nominal expiry date cannot be more than:

·                 eight years after the day the agreement will come into operation - if the agreement is a greenfields agreement and the FWC is satisfied that work to be performed under the agreement relates only to the construction of a major project (new subparagraph 186(5)(b)(i)); or

·                 otherwise, four years after the day on which the FWC approves the agreement (new subparagraph 186(5)(b)(ii)).

318.      It is intended that new subparagraph 186(5)(b)(i) will apply (for example) to greenfields agreements where the work to be performed under the agreement relates only to the construction of a new mining venture and agreements that apply to the performance of ancillary work, such as security, transportation or catering, insofar as that work relates only to the construction of that new mining venture.

319.      This item also inserts a note at the end of new paragraph 186(5)(b) referring readers to subsection 54(1), which provides that an enterprise agreement approved by the FWC operates from seven days after the agreement is approved or, if a later day is specified in the agreement, that later day.

Item 4 - At the end of section 187 (after the note)

320.      Section 187 sets out additional requirements that must be met before the FWC approves an enterprise agreement, and contains specific requirements in relation to greenfields agreements about which the FWC must be satisfied.

321.      This item adds new subsection 187(7), which contains an additional approval requirement for certain greenfields agreements. Where work to be performed under a greenfields agreement relates only to construction of a major project, and the agreement specifies a nominal expiry date more than four years after the day on which the FWC approves the agreement, the FWC must be satisfied that the agreement includes a term providing for at least annual increases to the base rate of pay for each employee covered by the agreement. The annual increase must occur on or before each anniversary of the day the agreement comes into operation, occurring before the agreement’s nominal expiry date.

322.      This gives negotiating parties appropriate flexibility on the exact dates of pay increases, which could (for example) be scheduled to align with pay cycles, as long as the pay increase occurs on or before the anniversary of the day the agreement comes into operation each year before the nominal expiry date of the agreement.

323.      An agreement term that provides a mechanism for an increase to the base rate of pay (for example, that the quantum of the pay increase will be determined following a wage review) may satisfy this requirement, as long as it at least results in an increase to the base rate of pay for each employee who will be covered by the agreement.

324.      Where the approval requirements have not been met, the amendments made by this item do not modify the existing position that the FWC may approve the agreement with undertakings (section 190) or not approve the agreement.

Item 5 - Paragraph 211(1)(b)

325.      Section 211 deals with when the FWC must approve a variation of an enterprise agreement. In general, the requirements for approval of agreements apply equally to variations. Section 211 applies those requirements by reference, but makes some modifications to ensure they work appropriately for variations. Relevantly, existing paragraph 211(1)(b) provides that the FWC must approve a variation if the FWC is satisfied that the agreement as proposed to be varied does not specify a nominal expiry date of more than four years after the day on which the FWC initially approved the agreement.

326.      This item repeals and substitutes paragraph 211(1)(b). The effect of new paragraph 211(1)(b) is that the FWC must approve a variation if the FWC is satisfied that the agreement as proposed to be varied does not specify a nominal expiry date which is more than:

·                 if subparagraph 186(5)(b)(i) applied in relation to the approval of the greenfields agreement - eight years after the day on which the agreement came into operation (new subparagraph 211(1)(b)(i)); or

·                 otherwise - four years after the day on which the FWC approved the agreement (new subparagraph 211(1)(b)(ii)).

327.      This amendment is consequential on the amendment made by item 3 of Schedule 4.

Item 6 - Subsection 211(1) (note)

328.      This item is consequential on item 7 of Schedule 4, which inserts a second note at the end of subsection 211(1).

Item 7 - At the end of 211(1)

329.      This item inserts a note at the end of new paragraph 211(1)(b) referring to subsection 54(1), under which an enterprise agreement approved by the FWC operates from seven days after the agreement is approved, or, if a later day is specified in the agreement, that later day.



SCHEDULE 5 - COMPLIANCE AND ENFORCEMENT

Overview

330.      Schedule 5 amends the Fair Work Act’s compliance and enforcement framework by:

·                 increasing civil pecuniary penalties for ordinary remuneration-related contraventions and sham arrangements by 50 per cent;

·                 introducing a new penalty for remuneration-related contraventions by bodies corporate (other than small business employers) based on a multiple of the ‘value of the benefit’ of the contravention;

·                 increasing the cap for amounts that can be awarded in small claims proceedings from $20,000 to $50,000;

·                 making provision for courts to refer small claims matters to the FWC for conciliation and, if conciliation is unsuccessful, enabling the FWC to subsequently arbitrate such matters with consent of the parties;

·                 introducing a new civil contravention that prohibits employers publishing (or causing to be published) job advertisements with pay rates specified at less than the relevant national minimum wage;

·                 increasing civil pecuniary penalties for non-compliance with a compliance notice and the maximum penalty payable under an infringement notice by 50 per cent;

·                 requiring the FWO to publish information relating to the circumstances in which enforcement proceedings will be commenced or deferred;

·                 codifying factors the FWO may take into account in deciding whether to accept an enforceable undertaking; and

·                 introducing a new criminal offence for employers who dishonestly engage in a systematic pattern of underpaying employees.

331.      Schedule 5 also amends the Building and Construction Industry (Improving Productivity) Act 2016 (BCI(IP) Act) by:

·                 enabling the Australian Building and Construction (ABC) Commissioner to accept an enforceable undertaking in relation to a suspected remuneration-related contravention within their jurisdiction;

·                 requiring the ABC Commissioner to publish information relating to the circumstances in which enforcement proceedings will be instituted or deferred; and

·                 ensuring the ABC Commissioner has the same role as the FWO in relation to investigating, etc., the new criminal underpayments offence in the building and construction sector.

PART 1 - ORDERS RELATING TO CIVIL REMEDY PROVISIONS

Division 1 - Main amendments

Amendments to the Fair Work Act 2009

Item 1 - Section 12

Item 2 - Subsection 539(2) (after note 3)

Item 3 - At the end of subsection 545(2)

Item 4 - Subsection 546(2) and (3)

Item 5 - After section 546

332.      These items increase the base maximum civil penalties for ordinary remuneration-related contraventions by 50 per cent and introduce an alternative new penalty calculation method for remuneration-related contraventions by bodies corporate (other than small business employers) based on a multiple of the ‘value of the benefit’ obtained from the contravention.

333.      Item 1 inserts a definition of ‘remuneration-related contravention’ into the Dictionary at section 12. The definition lists remuneration-related contraventions drawing from the table in subsection 539(2). In general, paragraph (a) of the definition lists contraventions that are by nature remuneration-related. Paragraph (b) lists table items in subsection 539(2) that generally involve contravention of industrial instruments. Subparagraphs (b)(i) to (iv) narrow this list to capture only contraventions generally considered remuneration-related. The new ‘value of the benefit’ calculation method for civil penalties would only apply to remuneration-related contraventions. Item 1 also inserts a signpost in the Dictionary (section 12) to the definition of ‘value of the benefit’ in new subsection 546A.

334.      Item 3 amends subsection 545(2) to make clear that the kinds of orders courts may make under subsection 545(1) includes adverse publicity orders.

335.      Item 4 repeals subsection 546(2) and inserts a table in subsection 546(2) for determining the maximum amount of a pecuniary penalty for contraventions, including for remuneration-related contraventions. This item also repeals and reinserts subsection 546(3), subject to new subsection 546(3A). New subsection 546(3A) provides that any penalty based on the new ‘value of the benefit’ method may only be payable to the Commonwealth.

336.      Items 1 and 2 of the table in new subsection 546(2) reflect the status quo, subject to higher penalties prescribed in items 3 to 6 of the table. That is, the maximum available penalty is specified in penalty units in column 4 of the table in subsection 539(2) for the kind of contravention committed (being either an ordinary or ‘serious contravention’ under section 557A). The penalty for bodies corporate is 5 times higher than the penalty for individuals. Item 3 of the table sets the maximum penalty for a remuneration-related contravention that is not a serious contravention for individuals at 1.5 times the amount that would otherwise apply under item 1.

337.      There are no base penalty increases for serious contraventions, as that regime was introduced relatively recently in late 2017 by the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 , and its full effect is yet to be realised. However the new alternative ‘value of the benefit’ method for penalty calculation will apply to serious contraventions of remuneration-related contraventions.

338.      Item 4 of the table sets the maximum penalty for a remuneration-related contravention by a body corporate that is not a serious contravention at 7.5 times the amount that would apply to an individual. This comprises a multiple of 5 to convert the penalty for a body corporate, and again by 1.5 because the contravention is remuneration-related.

339.      Items 5 and 6 of the table set the maximum penalty for a remuneration-related contravention by a body corporate that is not a ‘small business employer’ (see section 23). The test for whether an employer is a small business employer is applied when the application for a pecuniary penalty is first made.

340.      The maximum pecuniary penalty for a remuneration-related contravention by a body corporate (other than a small business employer) is, for an ordinary contravention, the greater of the following:

·                 7.5 times the amount that would otherwise apply to an individual; or

·                 if the court can determine the value of the benefit of the contravention—two times the value of the benefit.

341.      The maximum pecuniary penalty for a remuneration-related contravention by a body corporate (other than a small business employer) is, for a serious contravention, the greater of the following:

·                 the amount that would usually apply for a serious contravention by a body corporate (that is, the relevant amount specified in column 4 of the table in subsection 539(2) times 5); or

·                 if the court can determine the value of the benefit of the contravention—three times the value of the benefit.

342.      The new ‘value of the benefit’ penalty (see below) is only available if the court can determine on the available evidence the value of the benefit of the contravention to the body corporate.

343.      The new ‘value of the benefit’ penalty is only available in relation to primary contraveners who are employers, and does not extend to accessories (see section 550).

344.      Item 5 inserts new section 546A and sets out how the value of the benefit of a remuneration-related contravention by a body corporate (other than a small business employer) is worked out. This value is derived by reference to the amount of remuneration employees of the body corporate would have received, retained or been entitled to if the contravention had not occurred. The term ‘remuneration’ is intended to be read beneficially to include all remuneration entitlements including wages, allowances, superannuation, etc., for work, and does not include non-remuneration amounts such as interest on amounts of remuneration that would have been earned from a bank had the contravention not occurred.

345.      New subsection 546A(2) makes clear that a particular amount obtained from a remuneration-related contravention by a body corporate cannot be double counted. New subsection 546A(3) deals with the situation where multiple contraventions forming part of a course of conduct are grouped and taken to be a single contravention under section 557. It clarifies that, if contraventions are ‘grouped’ in this way, then all amounts (including underpayments) derived from those contraventions are likewise aggregated. No amounts (falling within scope of the provision) are double counted, and none are disregarded for the purposes of this exercise. The provision does not otherwise affect the operation of the grouping rule in section 557.

Illustrative example - ‘Value of the benefit’ penalty

An employer with 50 employees admits to underpaying 10 employees, and to contraventions of the following sections of the Act outlined in the table below (after the commencement of the new provisions). The contraventions are ordinary contraventions - not serious contraventions - for the purposes of section 557A:

Provision(s) contravened

Description

Remuneration-related contravention

Ordinary maximum penalty (based on a penalty value unit of $222)

‘Value of the benefit’ maximum penalty

Applicable penalty

Section 357

Misrepresentation

No

$99,900

(50% uplift)*

Ordinary

Section 50

Failure to pay minimum hourly rate

Yes

$99,900

(50% uplift)

$150,000

Value of the benefit

Section 50

Failure to pay overtime rates

Yes

$99,900

(50% uplift)

$110,000

Value of the benefit

Section 50

Failure to pay uniform allowance

Yes

$99,900

(50% uplift)

$500

Ordinary

Section 50

Failure to pay superannuation

Yes

$99,900

(50% uplift)

$80,000

Ordinary

Section 44

Failure to provide a Fair Work Information Statement

No

$66,600

(no uplift)

Ordinary

Section 536

Failure to provide pay slips

No

$66,600

(no uplift)

Ordinary

* See Part 5 (Sham arrangements) below, which provides for a 50% uplift for contraventions of subsection 357(1).

To determine which maximum penalty applies it is necessary to:

Step 1 —work out whether the contravention is a remuneration-related contravention. If not, the ordinary penalty applies.

Step 2 —for a remuneration-related contravention, add a 50 per cent uplift to the ordinary penalty that would apply to the contravention (see the table in section 539(2)).

Step 3 —for a remuneration-related contravention, work out the value of the benefit obtained from each contravention, based on the amount of remuneration employees would have received, retained or been entitled to if the contravention had not occurred. For multiple breaches arising from part of a single course of conduct, which are taken to be a single contravention, the benefit obtained from each breach is aggregated. Disregard if there is no evidence as to the value of the benefit obtained.

Step 4 —if two maximum penalties are determined, the higher one applies.

 

Division 2 - Consequential amendments

Amendments to the Building and Construction Industry (Improving Productivity) Act 2016

Item 6 - Paragraph 49(c)

346.      This makes a consequential amendment as a result of the amendment to the Act made by item 4 above.

PART 2 - SMALL CLAIMS PROCEDURE

Division 1 - Main amendments

Amendments to the Fair Work Act 2009

Item 7 - Section 12

Item 8 - Paragraph 548(2)(a)

Item 9 - At the end of section 548

Item 10 - After section 548

Item 11 - Subsection 570(1)

Item 12 - Subsection 570(1) (note)

347.      These items amend the Act to expand access to the small claims procedure, enable successful small claims applicants to recover filing fees, empower the Federal Circuit Court and magistrates courts to refer small claims matters to the FWC for conciliation and, if conciliation is unsuccessful, enable the FWC to subsequently arbitrate such matters with consent of the parties.

348.      Item 7 inserts a definition of ‘small claims proceedings’ into the Dictionary at section 12 as those dealt with under section 548 . Item 8 amends paragraph 548(2)(a) to increase the jurisdictional limit for small claims from $20,000 to $50,000, which broadens access to this simpler enforcement process (note that pecuniary penalties are not available in this jurisdiction (see paragraph 548(1)(a))). Item 9 inserts new subsection 548(10), which enables the court to award a successful applicant their filing fee from the respondent, and new subsection 548(11), which clarifies that the costs rule in section 570 does not affect this discretion. Items 11 and 12 make consequential amendments consistent with these changes.

349.      Item 10 inserts new sections 548A to 548D, which enable courts to refer matters in dispute in small claims proceedings for conciliation by the FWC. If unsuccessful, consent arbitration may follow (that is, by agreement of both parties).

Court consideration of referral for conciliation

350.      New section 548A requires a court to consider whether it is appropriate to refer any matter in dispute in small claims proceedings for conciliation by the FWC. This must be done as soon as practicable after small claims proceedings commence, taking into account the available information. This enables the court to consider competing options for dispute resolution as soon as practicable in the proceedings, including the new option of conciliation by the FWC. A legislative note alerts readers to related requirements about other available dispute resolution processes under the Federal Circuit Court of Australia Act 1999 (Federal Circuit Court Act), sections 22 and 23.

351.      New subsection 548B(1) enables the court to refer any matter in dispute in small claims proceedings for conciliation by the FWC if the court considers this appropriate, having regard to the matters in new subsection 548B(3). A note alerts readers to the fact that, if conciliation is unsuccessful, the parties may agree to the FWC conducting consent arbitration to settle the matter (which does not require any further court order or direction). Subsection 548B(2) enables the court to make the order referring a matter in dispute to the FWC on its own initiative or on application by a party to the proceedings.

352.      New subsection 548B(3) sets out matters the court must consider in determining whether to make the order, but these are not exhaustive (new subsection 548B(4)). There is no requirement for the court to conduct a hearing or any other additional court event as part of the court’s consideration or determination of whether to make the order. New subsection 548B(5) requires the court to notify the FWC of the referral order as soon as possible.

353.      If a referral order is made, the court may order specified information given in the proceedings be provided to the FWC for the purposes of the conciliation, or make any other order in relation to the proceedings while the conciliation is occurring (new subsection 548B(6)). This facilitates the transfer of relevant information between the two bodies, and avoids the need for the parties to resubmit materials already before the court.

354.      This new ability for the court to refer small claims matters in dispute to the FWC does not affect any other power a court may have to refer a matter in dispute to conciliation, mediation or other form of dispute resolution (new subsection 548B(7)).

355.      Item 9 inserts new subsection 548(10), to enable the court in small claims proceedings to award a successful applicant their filing fee in the matter. This would be recovered from the respondent. New subsection 548(11) clarifies that the costs rule in section 570 does not affect this discretion.

Conciliation by FWC

356.      New subsection 548C(1) requires the FWC to deal with a dispute in a small claims proceeding by conciliation (see also new subsection 548C(4)). This engages the FWC’s existing conciliation powers.

357.      A note to new subsection 548C(1) describes how existing rules in sections 611 and 570 as to costs operate in this context - including that a court may order costs against a party that unreasonably refuses to participate in an FWC process.

358.      The FWC’s procedural rules may regulate the conduct of conciliation (new subsection 548C(2)). For example, the procedural rules may provide for:

·                 the manner in which the FWC conducts the conciliation;

·                 the manner in which the parties are to appear in a conciliation conference; and

·                 when the parties must provide information or take certain actions in relation to the conciliation.

359.      New subsection 548C(3) requires any conference conducted for the purposes of the conciliation to be conducted in private, despite subsection 592(3) (which would otherwise allow the person conducting the conference to direct it be held in public).

360.      These new provisions do not affect existing restrictions on representation by lawyers and paid agents in matters before the FWC in section 596.

End of conciliation and conciliation outcomes

361.      Conciliation may be ended if the parties jointly request this, or if the FWC considers the matter resolved, or considers that conciliation will be unsuccessful (new subsection 548C(5)). The note to this subsection alerts readers that consent orders (for example, as available under section 32 of the Federal Circuit Court Act) may also be available. The court can make an order ending the conciliation (new subsection 548C(6)). If the FWC ends the conciliation under subsection (5) (that is, because the parties jointly request this, or if the FWC considers the matter resolved, or considers that conciliation will be unsuccessful), it must issue a certificate to that effect to the parties and the court (new subsection 548C(7)). This provides a clear statement about the outcome of the process.

362.      If a matter settles, the parties may best determine how and when to finalise or discontinue proceedings before the court, or take any other action, consistent with the terms of settlement.

363.      In situations where conciliation ends because the FWC is satisfied that all reasonable attempts to resolve the proceedings are likely to be unsuccessful, the FWC must advise the parties if it considers a party has no reasonable prospects of success in the proceedings (new subsection 548C(8)). This aligns with arrangements for the FWC’s handling of disputes about termination of employment in contravention of the Act’s general protections (section 368).

364.      New subsection 548C(9) prevents the FWC from facilitating a conciliation outcome that would be inconsistent with the Act, or a fair work instrument, that applies to the parties to the proceedings, as these rights and obligations can only be finally determined by a court. However, this does not affect the parties’ ability to come to a genuine agreement outside the FWC conciliation process or court process.

Arbitration by FWC

365.      New section 548D enables the FWC to arbitrate small claims matters by consent of the parties if conciliation has been unsuccessful and a certificate has been issued under new subsection 548C(7). The FWC must be notified of the parties’ agreement to arbitration within 14 days after the new subsection 548C(7) certificate is issued, or a longer period permitted by the FWC. New subsection 548D(2) requires the FWC to notify the court in the proceedings whether it is arbitrating the matter.

366.      New subsection 548D(3) sets out the kinds of orders the FWC may make by consent arbitration. Consistent with the nature of the small claims jurisdiction, the FWC may only award an amount that relates to the ‘disputed amount’ referred to in new subsection 548(1A), which cannot exceed the jurisdictional limit specified in subsection 548(2), any interest that a court could have ordered (had a court made the order), and any filing fees the applicant has paid to the court, that related to the disputed amount. The FWC may order the amount to be paid in instalments (new subsection 548D(4)). New subsection 548D(5) caps the maximum amount that may be awarded by reference to the jurisdictional limit specified in subsection 548(2).

367.      New subsection 548D(6) makes clear that no other order can be made. This reflects the nature of the small claims jurisdiction, which delivers compensatory but not other kinds of relief. New subsection 548D(7) (like new subsection 548C(9)) prevents the FWC from facilitating an outcome that would be inconsistent with the Act, or a fair work instrument, that applies to the parties to the proceedings. These rights and obligations can only be finally determined by a court.

Appeal under section 604

368.      New subsection 548D(8) makes clear that section 604, which concerns appeals to a Full Bench of the FWC, applies to an arbitration order under new section 548D.

Court order in terms of arbitration order

369.      New section 548E enables the court in the small claims proceedings to make an order in terms of the arbitration order, on application by a party to the proceedings. This means that the arbitration order may be enforced as an order of the court. A note following the section alerts readers to another enforcement option (arbitration awards) that may be available to the Federal Circuit Court.

Item 13 - After paragraph 576(2)(aa)

Item 14 - Subsection 592(3) (note)

Item 15 - At the end of subsection 592(3)

Item 16 - After paragraph 601(5)(f)

Item 17 - After paragraph 675(2)(i)

370.      These items are consequential on the FWC’s new small claims dispute resolution function. Item 13 amends the list of FWC functions in section 576 to add new functions in relation to conciliation and consent arbitration of small claims disputes under new sections 548C and 548D. Items 14 and 15 amend the notes to subsection 592(3) to alert readers to the fact that conferences carried out for this function are private (and cannot be directed otherwise).

371.      Item 16 is consequential on the certification process in new subsection 548C(7), and clarifies the FWC is not required to publish a decision to issue a certificate under the subsection. Item 17 amends subsection 675(2) to include an order under new subsection 548D(3) to the list of FWC orders that are not subject to a criminal sanction for non-compliance.

Amendments to the Federal Circuit Court of Australia Act 1999

Item 18 - At the end of subsection 102(2)

372.      This item amends subsection 102(2) of the Federal Circuit Court Act, which enables certain powers of the Federal Circuit Court to be exercised by a Registrar, if the Court or a Judge so directs. The amendment adds the power to refer matters in dispute in small claims proceedings for conciliation by the FWC under new section 548B to this list.

Division 2 - Amendments contingent on the commencement of the Federal Circuit and Family Court of Australia Act 2020

Amendments to the Fair Work Act 2009

Item 19 - Section 548A (note)

Item 20 - Subsection 548C(5) (note)

Item 21 - Subsection 548E(2) (note)

373.      These items update the references to the courts legislation in the specified notes, should the Federal Circuit and Family Court of Australia Bill be enacted.

Amendments to the Federal Circuit and Family Court of Australia Act 2020

Item 22 - At the end of subsection 254(2)

374.      This item makes a contingent amendment, should the Federal Circuit Court and Family Court of Australia Bill be enacted, so registrars may continue to refer matters in dispute in small claims proceedings to the FWC for conciliation by the FWC.

PART 3 - PROHIBITING EMPLOYMENT ADVERTISEMENTS WITH PAY RATE LESS THAN THE NATIONAL MINIMUM WAGE

Amendments to the Fair Work Act 2009

Item 23 - At the end of section 528  

Item 24 - At the end of Part 3-6

Item 25 - Subsection 539(2) (after table item 29)

Item 26 - After paragraph 557(2)(o)

Item 27 - After paragraph 716(1)(f)

375.      These items amend the Act to introduce a new civil contravention that prohibits an employer from publishing a job advertisement that specifies a pay rate below the relevant national minimum wage.

376.      Item 24 amends the Act to insert new Division 4 into Part 3-6, including new section 536AA, which prohibits employers (including prospective employers) from advertising, or causing to be advertised, a job with the employer specifying a rate of pay less than the national minimum wage or special national minimum wage (as the case requires). This is a civil remedy provision. New subsection 536AA(2) permits a base rate of pay that is below the national minimum wage to be advertised by an employer if it is the base rate of pay the employer is legally required to pay. This could occur, for example, where the lawful rate under an award is lower than the minimum wage. Any liability for breaching this provision falls on the employer, rather than an employee or the publisher.

377.      The national minimum wage and special minimum wages are published annually in the national minimum wage order (see Part 2-6).

378.      Item 23 amends the guide to Part 3-6 to reflect the prohibition in new section 536AA. Item 25 adds new section 536AA as a civil remedy provision to the table in subsection 539(2), which sets out standing requirements, the courts that may grant relief, and the maximum penalty for contraventions. Here, the maximum penalty would be 60 penalty units for individuals (5 times higher for bodies corporate). This is commensurate with penalties for misrepresentations under section 345.

379.      Item 26 amends the ‘course of conduct’ rule in section 557 to ensure that two or more contraventions of the advertising prohibition in new section 536AA are treated as a single contravention (and penalised once) if the contraventions are committed by the same person and arose out of a course of conduct by that person. This could apply (for example) if an employer arranges for the same non-compliant employment advertisement to be published on two websites, in which case there is just one contravention arising from a single course of conduct.

380.      Item 27 amends subsection 716(1) to enable a Fair Work inspector to issue a compliance notice to a person the inspector reasonably believes has contravened new section 536AA. A compliance notice could require an employer (for example) to remove or revise a non-compliant employment advertisement.

381.      This new contravention commences at the end of six months after the Bill receives the Royal Assent.

Illustrative example - Non-compliant job ad

Esme is asked by her employer, a fast food operator, to place a job ad with the local newsletter, which she does. The job ad states that a local employer is looking for a kitchen hand and will pay $10 per hour, and includes contact details for the employer.

By placing the ad, Esme’s employer (not Esme and not the local newsletter) has breached the new contravention under section 536AA by advertising a rate of pay below the applicable national minimum wage. The FWO could issue her employer with a compliance notice, requiring the ad to be rectified, or could seek a civil penalty.

 

PART 4 - COMPLIANCE NOTICES, INFRINGEMENT NOTICES AND ENFORCEABLE UNDERTAKINGS

Amendments to the Building and Construction Industry (Improving Productivity) Act 2016

Item 28 - Section 5

Item 29 - Section 98 (at the end of the heading)

Item 30 - Subsection 98(1)

Item 31 - After subsection 98(4)

Item 32 - Application of amendments

382.      Item 28 inserts a definition of ‘remuneration-related contravention’ in section 5 of the BCI(IP) Act. It provides that the term has the meaning given by the Fair Work Act.

383.      Item 29 is a consequential amendment to the heading of section 98 of the BCI(IP) Act to reflect that the section also relates to certain remuneration-related contraventions.

384.      Item 30 repeals current subsection 98(1) of the BCI(IP) Act and inserts a new subsection which provides that the section applies if the ABC Commissioner reasonably believes a person has committed:

·          a contravention of a BCI(IP) Act civil remedy provision; or

·          a remuneration-related contravention that relates (whether directly or indirectly) to building work.

385.      This amendment supplements the ABC Commissioner’s existing capacity to accept written undertakings in relation to contraventions of BCI(IP) Act civil remedy provisions by providing that such undertakings may also be accepted from a person if the ABC Commissioner reasonably believes that the person has committed a remuneration-related contravention.

386.      Item 31 inserts new subsection 98(4A), which provides that an inspector must not under section 111 of the BCI(IP) Act institute proceedings under the Act against a person in relation to a remuneration-related contravention if that person has given an undertaking in relation to the contravention under section 98 of the BCI(IP) Act and that undertaking has not been withdrawn.

387.      Item 32 provides that section 98 of the BCI(IP) Act, as amended by this Part, applies in relation to contraventions that occur before, on or after the commencement of this item.

Amendments to the Fair Work Act 2009

Item 33 - subsection 539(2) (table item 33, column 4)

Item 34 - subsection 558(2)

Item 35 - After subsection 715(2)

388.      These items amend the Act to improve the effectiveness of FWO compliance notices, infringement notices and enforceable undertakings .

389.      Subsection 716(2) enables a Fair Work Inspector to give notice requiring a person to take specified action to remedy the direct effects of a contravention listed in subsection 716(1) - for example, a contravention of the NES or a modern award. An inspector must reasonably believe that the person has contravened one or more of the relevant provisions.

390.      Item 33 increases the maximum pecuniary penalty specified in subsection 539(2) (table item 33, column 4) for failure to comply with a compliance notice issued by a Fair Work Inspector by 50 per cent, from 30 penalty units to 45 penalty units for an individual (5 times higher for a body corporate).

391.      Section 558 permits the regulations to establish an infringement notice scheme for contraventions of civil remedy provisions in Part 4-1 as an alternative to court proceedings. Subsection 558(2) caps the maximum penalty amount an infringement notice may specify at one-tenth of the maximum penalty that could have been imposed by a court for the contravention. Item 34 increases the cap from one-tenth (or 10 per cent) to three-twentieths (or 15 per cent) of the maximum penalty that could be imposed by a court.

392.      An enforceable undertaking is an alternative to court action and could include (for example) a commitment by an employer to provide back pay or compensation to an employee. An undertaking that is accepted becomes enforceable against the person who provides it (subsection 715(7)).

393.      Item 35 inserts new subsection 715(2A) to clarify the matters the FWO may take into account for the purpose of deciding whether to accept an enforceable undertaking from a person in relation to a contravention of a civil remedy provision. This provides more certainty about the decision-making process the FWO follows in relation to undertakings. New subsection 715(2A) sets out a non-exhaustive list of factors (including the circumstances, nature and gravity of the contravention, and the person’s willingness to address its impact) the FWO may take into account when determining whether to accept an undertaking.

PART 5 - SHAM ARRANGEMENTS

Amendments to the Fair Work Act 2009

Item 36 - Subsection 539(2) (table item 11, column 1)

Item 37 - Subsection 539(2) (table item 11, column 1)

Item 38 - Subsection 539(2) (table item 11, column 1)

Item 39 - Subsection 539(2) (before table item 12)

394.      Item 39 amends the table in subsection 539(2) to insert new item 11B, which  increases the maximum penalty for sham contracting contraventions in subsection 357(1), section 358 and section 359 by 50 per cent from 60 to 90 penalty units (5 times higher for bodies corporate).  Items 36 to 38 make consequential amendments that group all sections dealing with sham arrangements in new item 11B.

PART 6 - FUNCTIONS OF THE ABC COMMISSIONER AND THE FAIR WORK OMBUDSMAN

Amendments to the Building and Construction Industry (Improving Productivity) Act 2016

Item 40 - Before paragraph 16(1)(d)

395.      This item inserts new paragraph 16(1)(cb) to add to the ABC Commissioner’s functions a requirement to publish information relating to the circumstances in which the ABC Commissioner will institute proceedings in accordance with the BCI(IP) Act or, alternatively, defer proceedings to deal with suspected non-compliance through other compliance mechanisms.

396.      The amendment provides employers with greater certainty about possible enforcement outcomes, to further encourage identification of remuneration-related and other contraventions.

397.      This new function commences at the end of six months after the Bill receives the Royal Assent.

Amendments to the Fair Work Act 2009

Item 41 - After paragraph 682(1)(d)

 

398.      This item inserts new paragraph 682(1)(da) to add to the FWO’s functions a requirement to publish information relating to the circumstances in which the FWO will commence proceedings in accordance with the Act or, alternatively, defer proceedings to deal with suspected non-compliance through other compliance mechanisms.

399.      The amendment provides employers with greater certainty about possible enforcement outcomes, to further encourage identification of remuneration-related and other contraventions.

400.      This new function commences at the end of six months after the Bill receives the Royal Assent.

 

PART 7 - CRIMINALISING UNDERPAYMENTS

Amendments to the Fair Work Act 2009

Division 1 - Main Amendments

Item 42 - Section 12

Item 43 - After paragraph 26(2)(d)

Item 44 - Paragraph 26(2)(g)

Item 45 - At the end of subsection 323(1)

Item 46 - Before section 325

Item 47 - Section 536CA

Item 48 - After subsection 536D(2)

401.      These items amend the Act to introduce a new criminal offence for the dishonest and systematic underpayment of employees by employers and to make related changes.

Relationship with State and Territory laws

402.      Item 43 inserts new paragraphs 26(2)(da) and (2)(db) to clarify the Act’s interaction with State and Territory industrial laws in relation to underpayments and records offences for national system employers and national system employees, in light of the underpayment offence established by new section 324B.

403.      Section 26 provides that the Act is intended to exclude the application of State and Territory industrial laws to national system employers and national system employees. For this purpose:

·                 new paragraph 26(2)(da) specifies a State or Territory law that provides for a national system employer , or an officer, employee or agent of such an employer, to be liable to be prosecuted for an offence relating to underpaying a national system employee an amount payable to the employee in relation to the performance of work (including incentive-based payments and bonuses, loadings, monetary allowances, overtime or penalty rates, leave payments (e.g. public holidays, annual leave, personal/carer’s leave) and meal breaks); and

·                 new paragraph 26(2)(db) specifies a State or Territory law that provides for a national system employer, or an officer, employee or agent of such an employer, to be liable to be prosecuted for an offence relating to an employee record that is required to be made or kept under the Act.

404.      Paragraphs 26(2)(da) and (2)(db) confirm that State or Territory laws that criminalise underpayment or record-keeping failures by national system employers in relation to their employees, but not general criminal laws of theft or fraud, are intended to be excluded.

405.      This item does not alter the current framework for excluding or preserving State and Territory laws. That is, section 26 (including new paragraphs 26(2)(da) and (2)(db)) will not apply in relation to any State or Territory law:

·                 that is specified in subsection 27(1A) (that is, a specified anti-discrimination or equal opportunity law), or that deals with rights or remedies incidental to such a law; or

·                 that is prescribed by the regulations as a law to which section 26 does not apply, or that deals with rights or remedies incidental to such a law; or

·                 that deals with any non-excluded matters (for example, long service leave, superannuation or child labour), or that deals with rights or remedies incidental to such a law;

unless the State or Territory law is prescribed under section 28.

406.      Item 44 makes a consequential amendment to paragraph 26(2)(g) by adding a reference to new paragraphs 26(2)(da) and (2)(db). This ensures that any instruments made under laws excluded by those provisions are also excluded.

Offence relating to underpayments

407.      Item 46 inserts new section 324B into the Act. New section 324B makes it a criminal offence for an employer to dishonestly engage in a systematic pattern of underpaying one or more employees. This does not apply to one-off underpayments, genuine mistakes or miscalculations, as the conduct must be intentional, dishonest and systematic.

408.      This offence covers conduct that may also be subject to a civil remedy provision under the Act, including:

·                 subsection 44(1) (Contravening the National Employment Standards);

·                 section 45 (Contravening a modern award);

·                 section 50 (Contravening an enterprise agreement);

·                 section 280 (Contravening a workplace determination);

·                 section 293 (Contravening a national minimum wage order);

·                 section 305 (Contravening an equal remuneration order);

·                 subsections 323(1), (3) (Method and frequency of payment);

·                 subsections 325(1), 325(1A) (Unreasonable requirements to spend or pay amount); and

·                 subsections 328(1), (2), (3) (Employer obligations in relation to guarantee of annual earnings).

409.      The offence invokes a level of seriousness above the current civil penalties regime in the Act for serious contraventions (see section 557A of the Act).

410.      The maximum penalty for an individual offender is imprisonment of up to 4 years or 5,000 penalty units, or both. For a corporation, the maximum penalty is 25,000 penalty units.

411.      Part 2.6 of the Criminal Code Act 1995 (Criminal Code) (which deals with proof of criminal responsibility) applies to an offence under new section 324B. The prosecution bears the legal burden of proof which must be discharged beyond reasonable doubt. 

Illustrative example - Underpayments arising from a mistake

Amir starts a new job and, over the next few months, realises he has been classified incorrectly under the applicable award, and underpaid. He raises the issue with his supervisor, who was unaware of the inadvertent error, and the matter is quickly rectified - Amir is repaid the amount of the underpayment, his employer has made adjustments to the payroll process to ensure the error does not occur again, and Amir is paid his full entitlements going forward. This resulted in unlawful, but not criminal, conduct as the conduct was not dishonest.  

 

Illustrative example - Underpayments arising from negligence or reckless conduct

Kate is the sole director and shareholder of a company that operates a fast-food takeaway. The company employs staff at a flat rate of $20 per hour, irrespective of any penalty rates, loadings or allowances that apply under the applicable award. Kate understands this is the ‘going rate’ for the industry in the local area. This means many employees have been underpaid penalty rates under the applicable award.

Kate is relatively new to the industry, and has not checked the company’s workplace obligations with the FWO or any other reliable source.

David, one of Kate’s employees, complains to her about his incorrect rate of pay. Kate realises her mistake and quickly rectifies the situation for all her employees. Her conduct is not dishonest because it was not intentional. Kate simply failed to give the matter proper consideration and attention and failed to seek appropriate advice. This resulted in unlawful, but not criminal, conduct as the conduct was not dishonest.

412.      New subsection 324B(2) provides that for the purpose of subsection 324B(1) an underpayment occurs if an employer fails to pay the employee an amount payable in relation to the performance of work:

·          in full, except as provided by section 324 (which permits deductions in certain circumstances); or

·          in money; or

·          at least monthly.

413.      This provision is intended to operate broadly and cover (for example) underpayment of base rates of pay as well as unlawful deductions from wages payable to employees in relation to the performance of work.

414.      A note provides examples of the kinds of amounts that may, in addition to base rates of pay, become payable to an employee in relation to the performance of work. Failing to pay any of these may constitute an offence, in the circumstances set out in new section 324B.

415.      For the purpose of new subsection 324B(2), new paragraph 324B(3)(a) provides that anything given or provided other than in money (for example, ‘payment in kind’ of goods, food, beverages or accommodation) is taken never to have been given or provided to the employee.

416.      However, this does not affect the operation of section 324, which permits an employer to deduct certain amounts from amounts payable under subsection 323(1) to an employee if the deduction is authorised in writing by the employee and is principally for the employee’s benefit. Amounts payable to employees must be paid in full, except as provided by section 324.

417.      New paragraph 324B(3)(b) deals with situations where an employee has been required by their employer to spend or pay an amount contrary to subsection 325(1), or under a term of an instrument or contract deemed by section 326 to have no effect. The amount in question is taken to be an unlawful deduction for the purposes of the new offence.

Amount payable to employee ‘in relation to the performance of work’

418.      The phrase ‘an amount payable to the employee in relation to the performance of work’ in new subsection 324B(2) derives from subsection 323(1) and is intended to have the same meaning, informed by the notes to those sections.

419.      The phrase does not cover non-monetary benefits, amounts not payable directly to an employee (for example, compulsory superannuation contributions), or payments that do not relate to the performance of work (for example, income replacement payments under workers’ compensation schemes).

Payment ‘in full’ and deductions

420.      The reference to payment ‘in full’ in new paragraph 324B(2)(a) derives from subsection 323(1), and is intended to have the same meaning.

421.      The Act contemplates that while payments in relation to the performance of work must be made in full, lawful deductions may be made in accordance with section 324. There is no offence (and no civil contravention) if an employer makes a lawful deduction in accordance with section 324—for example, because the deduction is authorised in writing by the employee and is principally for their benefit, such as a salary sacrifice arrangement.

422.      Additionally, there is no offence (but there could be a civil contravention) if a deduction or series of deductions is made unlawfully because of a genuine mistake as to whether the deduction could be made. For conduct to be caught under new section 324B, it must form part of a dishonest and systematic pattern of underpayments.

Payment ‘in money’

423.      The reference to payment ‘in money’ in new paragraph 324B(2)(b) derives from subsection 323(1), and is intended to have the same meaning. Payment ‘in money’ includes payment in cash, cheque, money order, postal order or similar order payable to the employee, electronic funds transfer, or some other method authorised under a modern award or enterprise agreement.

424.      There is no requirement, for the purposes of new section 324B, for payment to be made by any particular method, providing that the payment is made in money. After any lawful deductions permitted by section