The Fair Work Amendment Bill 2014, tabled in the House of Representatives on 27 February 2014, represents the first attempt by the Abbott Government to deliver promised changes to the Fair Work Act 2009.
The Liberal/National Coalition went to the 2013 federal election with a policy that committed it to maintain the Fair Work laws, pending a ‘comprehensive and broad’ inquiry by the Productivity Commission. Any changes that might flow from that inquiry would be taken to a new election. Before then, the Coalition would seek to do no more than make a number of limited (though still important) improvements to the legislation. The new Bill contains some, but not all, of the proposals foreshadowed in the 2013 policy.
Before outlining those proposals, it should be stressed that with no majority in the Senate, the government will need to negotiate the passage of the Bill through the upper house. At present, Labor and the Greens have the numbers to block any changes. Once the new Senate sits after July 2014, control will pass to a group of minor parties and independents. But with a new election still to be held in Western Australia, and uncertainty over the position to be taken by Clive Palmer (who controls the largest bloc of votes in this category), it remains to be seen how easy (or costly) it will be for the government to win the necessary support.
The Bill proposes three changes that affect entitlements for employees under the National Employment Standards (NES), each based on recommendations from the 2012 Fair Work Review established by the previous Labor Government. These would involve:
requiring employers to meet with an employee before refusing any request under s 76 of the Fair Work Act 2009 (FW Act) for extended parental leave;
clarifying that any annual leave loading (or other addition to a base rate
of pay) to which an employee is otherwise entitled is not payable on the termination of their employment, unless an applicable modern award or enterprise agreement expressly provides otherwise; and
amending s 130 of the FW Act so that an employee cannot take or accrue leave under the NES while absent from work and receiving workers compensation payments,
regardless of what the relevant workers compensation law might otherwise provide.
In relation to the first of those changes, it should be noted that there is no proposal to require a meeting when an employer refuses a request under s 65 for flexible working arrangements, even though
this too had been recommended by the Review.
A further recommendation from the Review that did find favour with the new government concerns the ‘transfer of business’ provisions in Parts 2-8
and 6-3A of the FW Act. Where an employee seeks on their own initiative to move to a job at a related entity of their existing employer, and before the
termination of their current employment, they would automatically be covered by any award or agreement that applied
to the new employer, rather than their
old employer’s instrument. The new employer would not then need to apply to the FWC for an order avoiding the application of the transferred instrument, as is presently the case.
Individual flexibility arrangements
It has been common for trade unions to seek to negate the use of individual flexibility arrangements (IFAs) under enterprise agreements, by insisting on negotiating flexibility terms that are narrow in scope.
To prevent this, and as recommended by the Fair Work Review, the Bill proposes that agreements should, as a minimum, permit individual employees to negotiate arrangements as to the following matters (if dealt with in the agreement): the
times at which work can be performed, overtime or penalty rates, allowances and leave loadings. These are the
matters currently stipulated by the model flexibility term in Schedule 2.2 of the Fair Work Regulations 2009, as well as by the standard flexibility term in awards.
The Bill also seeks to implement a further set of recommendations from the Review in relation to flexibility terms under both enterprise agreements and modern awards, in order to make IFAs easier to access. These involve:
lengthening the period of notice to be given to unilaterally terminate an IFA from 28 days to 13 weeks;
making it clear that the better-off overall test (see below) can be satisfied by providing non-monetary benefits in lieu of monetary entitlements; and
providing that an employer may defend an action for breaching a flexibility term, by showing that it followed the required procedures and reasonably believed
that the requirements for a valid IFA were satisfied.
Importantly, however, the legislation is to retain important safeguards on the use of IFAs. Any arrangement must leave each affected employee better off than they would have been under the relevant award or agreement. Indeed the Bill proposes to add a requirement that each IFA contain
a statement by the employee explaining why the arrangements meets their ‘genuine needs’ and leaves them better off. And an employer cannot insist on a job-seeker signing an IFA as a condition of being employed, or exert undue pressure or influence on an existing employee to enter into an IFA.
Between them, these safeguards will continue to make it difficult for any employer to ‘roll out’ IFAs to a group of employees as a standard arrangement – or at least to do
The FW Act allows an employer to negotiate a ‘greenfields agreement’
for a new business, activity, project or undertaking, ahead of employing the staff required for that venture. The agreement locks in pay and conditions ahead of
time, and also rules out any possibility of protected (lawful) industrial action for at least the nominal duration of the
agreement. These advantages have made greenfields agreements especially useful for major construction projects.
As the Act stands, such an agreement can only be made with one or more unions that are eligible to represent at least a majority of the staff to be employed. Employer groups have, however, expressed concerns about the capacity
of unions to frustrate or delay the making of an agreement, or to make ‘excessive’ wage claims, thereby threatening investment in new projects.
To address such concerns, the Fair Work Review proposed two changes
to the Act. The first of these is reflected in the Bill, which would allow bargaining orders be available from the Fair Work Commission (FWC) to enforce good faith bargaining requirements in relation to such agreements. This is to be done by amending the Act to recognise that the union(s) with whom the employer chooses to negotiate, the employer and anyone it appoints to negotiate on its behalf are to be regarded as ‘bargaining representatives’.
The Review’s second recommendation was that the FWC be empowered to resolve greenfields disputes by arbitration. This has not been adopted.
Instead, the Bill would allow an employer to take unilateral action to have its preferred ‘agreement’ approved by the FWC. This could be done after three months of unsuccessful negotiation with the relevant union(s), commencing from a date that must be formally notified in
advance to those unions. Once that three- month period elapsed, there would be no scope for bargaining orders to be sought.
Besides the usual approval criteria, the FWC would need to be satisfied that the employer’s proposed agreement provided for ‘pay and conditions that are consistent with the prevailing pay and conditions within the relevant industry for equivalent work’. A note to be inserted into the
Act suggests that the FWC may for this purpose have regard to ‘prevailing pay and conditions in the relevant geographical area’.
In effect, the Bill marks a partial return to the Work Choices regime, under which an employer could at any time choose to
make an ‘employer greenfields agreement’ rather than negotiating with a union. The difference this time is that an employer would at least need to attempt to negotiate a union deal – and be exposed to the possibility of bargaining orders (at least before the end of the negotiation period) if it failed to do so in good faith.
It should also be noted that if an employer chooses to have a greenfields agreement approved in this fashion, the agreement will be taken to have been ‘made’ by any unions that were bargaining representatives, despite their lack of consent. That in turn means that the resulting agreement will ‘cover’ those unions - an important point in relation to rights of entry to any workplace covered by the agreement, as discussed below.
Protected industrial action
In JJ Richards & Sons Pty Ltd v Fair Work Australia  FCAFC 53 it was held that
a union may initiate protected action against an employer who has refused to commence negotiations for an enterprise agreement. The requirement to make ‘genuine’ attempts to reach agreement before taking such
action was held to be satisfied by merely putting forward claims which the employer refused to discuss.
This ruling has excited a great deal of opposition from certain employer groups, even though in practice it is rare for an employer to refuse to bargain with a
union that has enough support to organise effective industrial action. Nevertheless, and in accordance with a recommendation from the Fair Work Review, the Bill proposes that no application for a protected action ballot order may be made to the FWC unless the point has been reached under
s 173(2) of the FW Act that the employer is obliged to issue representation notices to its employees.
What this would mean is that where an employer refused to commence negotiations, a union (and/or other employee representatives) would
generally need to go through the process of demonstrating sufficient employee support among the relevant group(s) of workers to obtain a ‘majority support determination’ from the FWC. Only once that was done would it become possible to initiate industrial action – and even then, only after the employer had been given a reasonable chance to consider and respond to the employees’ claims.
Rights of entry
Part 3-4 of the FW Act authorises accredited trade union officials to enter workplaces for various purposes. The Bill proposes to undo or amend certain changes to these provisions recently introduced by Labor’s Fair Work Amendment Act 2013.
The threshold for the FWC’s power to regulate excessive union visits to a workplace is to be lowered, so that
there would be no need for the occupier to establish an ‘unreasonable diversion
of [its] critical resources’. The Bill also seeks to repeal provisions that require employers to facilitate union visits to remote workplaces, and that make a lunchroom the default venue for meetings with employees in the absence of any agreement with the occupier.
The provisions about the location of meetings are to be restored to those that applied under the original FW Act,
meaning that it would be left to the FWC, in the event of any dispute, to determine whether a particular location proposed by an employer was or was not reasonable in the circumstances.
However, the Bill also goes further in seeking to limit the power of unions to enter workplaces for the purpose of holding discussions with current or potential members. Prior to the FW
Act, unions only had such a right if they were named as a party to an industrial instrument that applied at the relevant workplace. This effectively allowed employers to exclude particular unions, by entering into non-union agreements or agreements with a different union. By contrast, the FW Act confers a right of entry on any union that is eligible
to represent workers at the relevant workplace.
What the Bill now purports to do, according to the government, is to restore the pre-FW Act position. In fact, the Bill does something rather different. A union would only have rights of entry for discussion purposes if:
an enterprise agreement applied at the workplace and the union was covered by that instrument; or
in any other situation, a member or prospective member had invited the union to conduct a visit.
Unlike the position under the Work Choices regime, this would allow a ‘minority union’
to retain rights of entry at an agreement- covered workplace, provided it had represented at least one employee in negotiating that agreement and applied to be covered. It could not be ‘locked out’ by the employer or by a rival union, as used to be the case. Nor would an employer be able to use the new procedure for making unilateral
greenfields ‘agreements’ to block rights of entry, at least for those unions with which it had previously been negotiating.
By contrast, in workplaces regulated only by awards, unions would lose the
automatic right of entry they have enjoyed under both the FW Act and previous legislation. They would now need to establish an invitation from at least one employee. This requirement might
(but would not have to be) satisfied by applying to the FWC for an ‘invitation certificate’ that could be shown to the relevant employer or occupier. Such
a certificate could be used to establish the existence of an invitation, without revealing the identity of the employee(s) in question to their employer.
What the Bill does not seek to do is to alter the eligibility of a union to enter
a workplace to investigate a suspected breach of the legislation. For that purpose, it would continue to be sufficient that the breach in question related to or affected a member of the union.
Another Fair Work Review recommendation that the Bill seeks to implement is to clarify that the FWC is
not required to hold a hearing or convene a conciliation conference before rejecting an unfair dismissal application. Where
it is clear enough that an application is misconceived – for example, because it is made before the applicant has been employed for less than six months – it could be rejected ‘on the papers’.
The Bill also gives effect to a Coalition policy commitment that where the Fair Work Ombudsman (FWO) recovers
back pay on behalf of a worker who is not identified until at least six months’ later, the FWO must pay over to the worker not merely the amount recovered, but
any interest earned during the intervening period.
Changes still to come
Proposals in the Coalition’s 2013 policy platform that have been not dealt with in this first Bill include:
considering the establishment of an ‘independent appeals jurisdiction’ for the FWC – an idea which appears (though this has not been officially confirmed) to involve the government hand-picking a new set of tribunal members to review FWC decisions, in place of the current Full Bench system;
requiring the FWC, in determining whether to approve a proposed enterprise agreement, to consider the extent to which the parties have ‘considered and discussed ways to improve productivity’;
prohibiting the taking of protected industrial action, other than in support of ‘sensible and realistic’ claims
that ‘would not adversely affect productivity’; and
amending the new workplace bullying provisions in Part 6-4B of the FW Act so that complainants must first seek help from an ‘independent regulatory agency’, and that the provisions expressly apply to bullying by union officials.
It remains to be seen how quickly the government will seek to move on these proposals, as well as to introduce its much-discussed new paid parental leave scheme.
If you have any concerns about how these legislative changes will impact your business, please contact a member of the Employment Relations team for advice.