High-level guide to proposed IR reforms

11 December 2020

The Federal Government revealed in Parliament on 9 December 2020 its proposed changes to the Fair Work Act 2009 (Cth) and other related legislation.

These proposed changes follow an extensive consultation process with business and unions this year, which took place against the backdrop of the COVID-19 pandemic and its impacts on businesses and job security.

There will be opposition to some of these changes by the Labor Party and other groups, and the Federal Government has said it is ‘open to dialogue and to receive suggestions on any provision in the Bill’. It seems likely that the final version of any legislation that is ultimately passed will differ in at least some material respects from the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 we have reviewed below.

However, it is important to know what the Government has proposed. This short publication is intended to provide a high-level guide to some of the key changes that are proposed. There is more detail in the Bill that has been introduced, which we will explore in future publications.

Key AreasChanges and Impacts
Legislative definition of casual employeeDefinition: A person is a casual employee of an employer if the offer of employment made by the employer:
  • does not involve a ‘firm advance commitment to continuing and indefinite work according to an agreed pattern of work for the person; and

  • the person accepts the offer on that basis’.

Focus on the offer: The question of whether a person is a casual employee of an employer is to be assessed on the basis of the offer of employment and the acceptance of that offer, not on the basis of how the relationship actually operates.
Offers and requests for casual conversion to FT or PT employmentEligibility: These provisions apply where a casual employee:
  • has been employed for 12 months;

  • has worked a regular pattern of hours on an ongoing basis for at least the last 6 months of that period; and

  • could, without significant adjustment, continue to work as a FT or PT employee.

Conversion offer: In these cases, the employer must generally (subject to limited exceptions) make an offer in writing for the employee to convert to FT or PT employment (dependent on whether the employee has worked the equivalent FT hours during the previous 6 month period). An employee can also make a conversion request to the employer.

Response: The employee/employer is required to provide a written response (accepting or declining) the offer/request within 21 days.

Reasonable grounds not to make/accept conversion offer: An employer is not required to make a conversion offer or accept a conversion request where there are ‘reasonable grounds’ to do so.
Casuals - double-dipping responseBackground: Decisions such as Workpac v Skene and Workpac v Rossato have found that employees who were employed incorrectly as casuals could not set off their casual loading against full-time or part-time benefits such as annual leave, personal/carer’s/compassionate leave, public holiday pay, pay in lieu of notice and redundancy pay.

Set-off by courts: In response, this Bill provides that in cases where the casual loading is an identifiable amount in the amounts paid to the employee, any amount that is found to be payable to the employee should be reduced by the amount of the casual loading that was paid.

Challenge is likely: This provision (if passed) is likely to be challenged on the basis that it operates retrospectively on rights of employees which accrued before the legislation took effect.
Additional hours for PT EmployeesKey change: This change allows part-time employees who work 16 hours per week on average to agree to work additional hours (up to 38 hours per week) without overtime rates applying. Each period of additional agreed hours must be part of a period of continuous work of at least 3 hours. Employees cannot be required to agree to this type of arrangement, and either party can terminate the arrangements with 7 days’ notice. An additional hours agreement cannot be inconsistent with certain modern award provisions.

Which awards? These changes only apply to employees working under the following modern awards (called ‘identified modern awards’):
  • Business Equipment Award 2020

  • Commercial Sales Award 2020

  • Fast Food Industry Award 2010

  • General Retail Industry Award 2020

  • Hospitality Industry (General) Award 2020

  • Meat Industry Award 2020

  • Nursery Award 2020

  • Pharmacy Industry Award 2020

  • Restaurant Industry Award 2020

  • Registered and Licensed Clubs Award 2010

  • Seafood Processing Award 2020

  • Vehicle Repair, Service and Retail Award 2020
Flexible work directionsKey change: To expand JobKeeper-style rights for employers to give ‘flexible work directions’ to employees, including:
  • a flexible work duties direction (ie to perform work that is safe and within the employee’s skills and qualifications); and

  • a flexible workplace location direction (ie to work from another work location which is safe, reasonable and suitable for the work to be performed.

Who is covered? These rules apply to all award-covered employees working under an identified modern award (see list above), regardless of whether they qualify for JobKeeper benefits.

Limitations: The employer must be able to show that the direction is reasonable, a necessary part of a reasonable strategy to assist in the revival of the employer’s enterprise and has been consulted on. These rules will operate for 2 years from commencement of the amendments to the Fair Work Act.
Pre-approval process for enterprise agreementsThe change: Current rules requiring an employer to give employees at least 7 days to review a proposed enterprise agreement are replaced with a less specific requirement to provide ‘a fair and reasonable opportunity to decide whether or not to approve the agreement’.

The response: Unions are already objecting to this change, saying it undermines the rights of workers in this process.
Approving enterprise agreementsWhat can the Commission consider? In determining an application to approve an enterprise agreement or a variation, the Fair Work Commission may inform itself only on the basis of:
  • information that is publicly available;

  • submissions made by a body under s 254A; and

  • submissions, evidence or other information provided by named persons.

21 days to approve: The Commission must determine these applications within 21 working days, as far as practicable.
Terminating enterprise agreementsWait for 3 months: Employers, employees and unions may not apply to the Fair Work Commission for termination of an enterprise agreement until at least 3 months after the nominal expiry date.
Better of overall test (BOOT)BOOT test not satisfied: The factors which the Fair Work Commission can have regard to in deciding whether to approve an enterprise agreement that does not pass the BOOT have been set out in more detail, including:
  • The views of employees, the employer and relevant unions;

  • The circumstances of those who have given a notice, including the likely effect that approving/not approving the agreement will have on them;

  • The effect of COVID-19 on the business.

Factors relevant to the BOOT test: The BOOT test will remain largely intact, but the factors the Fair Work Commission can have regard to have been detailed to include:
  • The patterns of work that are actually engaged in or reasonably foreseeable at the time of approval;

  • Overall benefits (including non-monetary benefits) of the agreement to an employee; and

  • The views of affected employees, the employer an any bargaining representative.
Cessation of old transitional instrumentsAutomatic cessation on 1 July 2022: Agreement-based transitional instruments and State employment agreements that existed before the commencement of the Fair Work Act (commonly referred to as “zombie agreements”) and have continued to operate under transitional rules will cease to operate on 1 July 2022.
Greenfields agreements - major projectMajor project: This is defined as a project involving capital expenditure of $500m, or if declared by the Minister as a major project and involving capital expenditure of at least $250m.

8 year agreements: For greenfields agreements relating to major projects, the Fair Work Commission can approve an enterprise agreement with a nominal term of up to 8 years.

Annual increase of base rate of pay: If the enterprise agreement would have a nominal term of more than 4 years, it must provide for annual increases of the base rate of pay (amount not specified).
Franchisees and enterprise agreementsSingle enterprise agreements: This Bill enables franchisees to opt-in to a current single-enterprise agreement that covers a larger group of employers that operate under the franchise.
Civil penaltiesIncreased maximum penalties: A wide range of penalties for contravention of Fair Work Act obligations have been increased substantially.
Small claims proceedingsSmall claims up to $50,000: The definition of small claims is to be increased from $20,000 to $50,000 (may be increased further by regulation).

Role of Fair Work Commission: Courts must consider whether it is appropriate to refer any matter in dispute for conciliation by the Fair Work Commission. The Fair Work Commission can arbitrate after the conclusion of conciliation if the parties agree.
Prohibiting job ads with pay rate less than the national minimum wageNew rule: An employer must not advertise, or cause to be advertised, employment with the employer specifying a rate of pay less than the national minimum wage or special national minimum wage, as the case requires, set by a national minimum wage order.
Criminalising underpaymentsCreating a new offence: It will be an offence where an employer dishonestly engages in a systematic pattern of underpaying one or more employees.

Dishonesty: To be determined according to the standards of ordinary people.

Penalties: Up to $5.55m for companies, and 4 years imprisonment and/or $1.11m for individuals.

This article was written by Tim Frost, Partner, Brad Swebeck, Partner and Alanna Condon, Graduate at Law.

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