Industrial relations reform on the horizon

Industrial relations reform on the horizon

David Sofrà, Adrian Wong, Paul Hum & Katherine Southwell highlight key aspects of the proposed changes with Fair Work Bill introduced in Parliament.

workers in foyer

The Federal Government has introduced legislation into Parliament which proposes to amend the Fair Work Act 2009.

The introduction of the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 (Bill) in the House of Representatives on 9 December is the result of the Government’s industrial relations working groups, which considered priority areas for reform.

The Government has described the Bill as a “fair and balanced response” to issues with the current system, that is aimed at “breaking down the barriers to job growth so that we can get Australians back to work”, in response to the COVID-19 pandemic.

While the Government may need to compromise on parts of the Bill to secure its passage in the Senate, we highlight below some key aspects of the proposed changes.

Casual employment

In a direct response to the Full Federal Court’s decision in WorkPac v Rossato, the Bill proposes several amendments to provide greater certainty for employers, as detailed below.

  • A statutory definition of ‘casual employee’ ­– for the first time, a single statutory definition of ‘casual employee’ has been proposed. This will apply to an employee who accepts an offer of employment where there is no ‘firm advance commitment’ of continuing work. Whether an employee meets this definition will be determined on the terms of the contract (in writing or otherwise), and not by the parties’ subsequent conduct or the employee’s actual pattern of work.
  • Conversion to permanent employment – all casual employees will have a statutory right to convert to permanent employment after 12 months, if they have worked a ‘regular pattern of hours on an ongoing basis’ over the past 6 months. However, an employer will not be required to make such an offer if there are reasonable business grounds not to do so, based on known or foreseeable circumstances. Eligible casual employees will also have a right to request conversion on a periodic basis, subject again to an employer’s ability to refuse on reasonable business grounds. 
  • No ‘double-dipping’ for permanent entitlements – as a safeguard for where ‘casual’ employees do not meet the definition, Courts will have the power to reduce certain claimed amounts (i.e. for leave entitlements) by an amount equivalent to any identifiable casual loading paid. Importantly, the Bill proposes that these provisions will have retrospective effect and apply to periods of employment before the Bill’s commencement, though there is some uncertainty as to the legal effectiveness of this approach. 

Modern award flexibilities

For employers and employees under 12 identified modern awards (which apply to those industries significantly impacted by COVID-19, including the retail, hospitality, fast food and related sectors), the Bill will introduce:

  • a statutory option for employers and certain part-time employees to agree to work additional hours at ordinary rates of pay rather than overtime, under ‘simplified additional hours’ agreements; and
  • for a two-year period only, the right for employers to implement flexible work directions relating to an employee’s duties and work location.  This amendment reflects existing JobKeeper flexibilities, however, will apply to all employers and employees to whom an identified modern award applies.

Separate to the Bill, the Government has requested the Fair Work Commission (FWC) to consider including ‘loaded rates’ (all up rates which incorporate penalty rates and other benefits) and simplified classification structures into four key modern awards (retail, restaurants, hospitality and clubs), which require additional flexibility to support the recovery from the impacts of COVID-19. The FWC will undertake this process under the existing award review framework in the FW Act.

Enterprise agreements

  • A streamlined process for agreement approvals – the Bill sets out a less stringent approval process, by only requiring employers to take ‘reasonable steps’ to provide employees with a ‘fair and reasonable opportunity’ to consider a proposed agreement.  So far as is practicable, the FWC will be required to approve agreements within 21 days of lodgement.
  • Specific considerations for the Better Off Overall Test (BOOT) – the controversial BOOT will not be replaced, however the FWC will be constrained in its application.  It will only be able to have regard to ‘reasonably foreseeable’ (rather than hypothetical) patterns of kinds of work, will only be able to rely on certain parties’ submissions and publicly available information, and must give ‘significant weight’ to the views of the employer and employees that the agreement meets the BOOT. 
  • New public interest exception to meeting the BOOT – presently, the FWC can only approve an enterprise agreement that does not meet the BOOT if it would be in the public interest to do so because of exceptional circumstances.  The Bill proposes that, for a two-year period, a new public interest exception would apply, which specifically considers COVID-19 related issues and does not require exceptional circumstances.  This would set a lower bar than the existing exception.

Greenfields agreements

The Bill will allow Greenfields agreements for defined ‘major projects’ (where the costs of the project are at least $500 million, or as otherwise declared by the Minister) to have a nominal life of up eight years from the date of approval.  For these long-term agreements, there will also be a new requirement to include annual increases until the nominal expiry date of the agreement.

Compliance and enforcement

  • Criminalising ‘wage theft’ – as expected, the Bill introduces a criminal offence where an employer dishonestly engages in a systematic pattern of underpaying one or more employees. This will cover intentional acts that involve a recurring pattern of conduct, rather than accidental acts or once-off conduct. These offences will attract a maximum penalty of up to fours years imprisonment and/or a penalty of up to $1.1 million for an individual, or $5.55 million for a body corporate. Additionally, individuals may also be liable for a criminal offence if they are complicit in an employer’s ‘wage theft’.
  • Expanded and expedited underpayment claims process – the Bill will provide Courts with the power to refer underpayment claims to the FWC for conciliation and consent arbitration.
  • Role of the Fair Work Ombudsman (FWO) – additional guidance is proposed for when the FWO can accept enforceable undertakings from employers or elect to initiate proceedings. These proposed changes place an even greater emphasis on employers making voluntary disclosures to the FWO.

What’s next?

The Bill will be referred to the Senate Education and Employment Legislation Committee, which will provide its inquiry report by 12 March 2021. The Government will likely seek for the Bill to be passed by the Senate by 18 March 2021.

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