On 2 August 2012, the Federal Government handed down its long-awaited review into the operation of the Fair Work legislation.


Background

On 20 December 2011, Federal Workplace Relations Minister the Hon Bill Shorten MP announced the appointment of a three-member panel to conduct a review of the Fair Work Act 2009 (FW Act) and the Workplace Relations Amendment (Transition to Forward with Fairness Act) 2008 (Transition Act).

The Panel, consisting of economist and former Reserve Bank board member Dr John Edwards, former Federal Court judge the Hon Michael Moore and labour law academic Professor Emeritus Ron McCallum AO, conducted its review with particular reference to the legislation’s objectives, including the promotion of national economic prosperity, productivity and economic growth, and enhancement of equity in the workplace.

After considering public submissions and conducting a consultation process with key stakeholders, the Panel made a total of 53 recommendations for legislative amendment, however concluded that the legislation is broadly operating as intended and its effects are generally consistent with the objects of the FW Act.

Productivity growth

Since its introduction, the FW Act has been criticised by the Opposition, employer groups and business generally as limiting workplace flexibility and having a negative effect on productivity growth. While acknowledging that productivity growth under the FW Act framework had been disappointing, the Panel did not accept that the lack of productivity growth could be attributed to the FW Act, noting that productivity growth has been disappointing over the last decade.

However, the Panel recognised that productivity growth was essential to improving living standards and has made a number of recommendations aimed at improving flexibility and productivity in the workplace including:

  • making individual flexibility arrangements (IFAs) more attractive and accessible – such as by requiring enterprise agreements to include the model flexibility term, clarifying that the better off overall test (BOOT) includes non-monetary benefits and extending the maximum notice period for terminating an IFA from 28 to 90 days;
  • aligning the time limits for filing adverse action and unfair dismissal applications – the Panel noted that aligning the time limits for adverse action and unfair dismissal claims at 21 days would deter adverse action claims that would be better dealt with as unfair dismissal applications;
  • enhancing the powers of Fair Work Australia (FWA) to deal with unfair dismissal applications – allowing FWA to deal with unfair dismissal applications informally, summarily dismiss claims that lack merit and to make costs orders where a party has acted unreasonably;
  • limiting the application of transfer of business provisions – specifically in circumstances where an employee voluntarily moves between related employers.

Right of entry

The right of permit holders to enter premises to hold discussions with employees has regularly been a source of tension and disputes between employers and unions. The Panel has recommended that FWA be provided with greater powers to resolve disputes concerning:

  • the frequency of visits to a workplace by a permit holder; and
  • the location for holding interviews and discussions with employees,

while balancing the right of unions to represent their members in a workplace with the right of occupiers/employers to carry on business without undue inconvenience.

Bargaining and enterprise agreements

Some of the key recommendations of the Panel in relation to enterprise bargaining include:

  • amending the FW Act to apply the good faith bargaining obligations to proposed variations of enterprise agreements (under Part 2-4 Division 7 of the FW Act);
  • amending section 176 of the FW Act to prevent an individual union official becoming a bargaining representative for employees for whom the official’s union does not have coverage (in response to the recent decision concerning MUA official Will Tracey’s attempts to circumvent coverage rules in Western Australia – Technip Oceania Pty Ltd v Tracey [2011] FWAFB 6551);
  • prohibiting enterprise agreement clauses which allow employees to ‘opt out’ of the agreement (citing concerns that the decision in Newlands Coal v CFMEU [2010] FWAFB 7401 may result in employees relying on opt-out clauses to manipulate agreements and re-open bargaining);
  • prohibiting the making of an enterprise agreement with only one employee; and
  • modifying the good faith bargaining rules for greenfields agreements and providing special access to arbitration if the parties are unable to reach agreement within a reasonable time frame.

An area in which employer groups have campaigned strongly for change is the FW Act’s enterprise agreement content rules, with employers arguing that provisions in agreements that impinge on managerial prerogative and restrict business flexibility (eg deterring employers from engaging independent contractors and labour hire workers - “job security” clauses) should be prohibited. The Panel declined to recommend any changes to the content rules, finding that they are operating in a manner consistent with previous frameworks (ie pre-Work Choices).

Industrial action

The Panel also considered the implications of the Full Federal Court’s decision in J.J. Richards & Sons Pty Ltd v Fair Work Australia [2012] FCAFC 53, which upheld a FWA decision allowing protected industrial action to take place before bargaining has started. The Panel found that the ability of employees to take protected industrial action to persuade an unwilling employer to bargain undermined the majority support determination provisions in the FW Act, and was inconsistent with the intended purposes of the bargaining regime. It was recommended that protected action ballot order applications should only be able to be made when bargaining for a proposed agreement had begun.

The Panel also recommended that employers should be required to continue to provide worker accommodation even when employees are taking protected industrial action (the provision of worker accommodation has previously been held to be a “payment” to employees, which is prohibited during a period of protected industrial action – see our previous article on the CFMEU v Mammoet decision, noting that the matter is still to be heard on appeal by the Federal Court).

Access to arbitration

The Panel rejected submissions that the FW Act should be amended to permit easier access to arbitration in the case of long running disputes, or where employees lack industrial strength (in ending last year’s Qantas lockout, FWA noted that it was unlikely that the three employee unions involved in the dispute would have had sufficient influence to trigger the arbitration provisions, even if they were to act together). In doing so, the Panel noted that there were no indications that the current bargaining regime was failing or that the public interest justified making such a change.

Fair Work Australia and Fair Work Ombudsman

Changes to FWA and the Fair Work Ombudsman were also proposed, with recommendations that both bodies be given a more active role in encouraging productivity through promoting best practice drafting and sponsoring training workshops for employers and employees. It was also recommended that FWA be renamed to remove the reference to “Fair Work” and more accurately reflect its role as the Federal industrial relations commission.

Next steps

Workplace Relations Minister Bill Shorten has indicated that the Government will now consult with stakeholders on the recommendations in the review and that he will meet with State and Territory workplace relations ministers in mid-August, with amendments flowing from the review (subject to stakeholder agreement) potentially being put to Parliament in the upcoming Spring sittings.