The Attorney-General has tabled a Bill for reforms to certain aspects of Australia’s industrial relations system arising from the consultation of five working groups comprising both employer and employee representatives.  The Bill aims to facilitate jobs growth to enable Australian economic recovery in the wake of the global Coronavirus pandemic.

The Bill targets five key areas of Australia’s industrial relations system, namely:

  1. Modern Award simplification to improve flexibility and create job opportunities in industries most severely affected by COVID-19, such as retail and hospitality;
  2. Greenfields Agreements with an eight-year life span and guaranteed wage increases to boost investment in major projects;
  3. Clarifying casual employment and enabling casual employees who work regular shifts to convert to permanent employment after 12 months if they so choose;
  4. Simplification of the BOOT test for enterprise agreements and establishing a 21-day approval deadline to drive productivity gains and wage growth; and
  5. Establishing mechanisms for employers to rectify underpayments and ensure compliance.

Summary of Changes Proposed by the Bill

Modern Awards

  • Extension to JobKeeper flexible work directions: Employers in the retail, food and accommodation industries will be able to direct employees as to changes in their work location or duties provided the location is not at an unreasonable distance if it is not at the employee’s home, the employee is qualified to perform the duties and the duties are reasonably within the scope of the employer’s business operations.  A flexible work direction will be effective for 2 years from the commencement of the amendment if it is not withdrawn or revoked sooner.

Relevant Awards

Business Equipment Award

Commercial Sales Award

Fast Food Industry Award

General Retail Industry Award

Hospitality Industry (General) Award

Meat Industry Award

Nursery Award

Licensed Clubs Award

Seafood Processing Award

Vehicle Repair, Service and Retail Award

  • Simplified additional hours agreements for permanent part-time employees: part-time employees who work a minimum of 16 hours per week under the above-listed modern awards will be able to enter into an agreement to perform additional hours above and beyond their regular roster without payment of overtime penalty rates.  Each period of additional agreed hours must be at least 3 hours in length or part of a period of continuous work of at least 3 hours.  Overtime will continue to be payable for any time worked outside the span of ordinary hours or the daily or weekly maximum ordinary hours under the applicable modern award.

Whole-of-Project Greenfields Agreements

  • Projects over $500 million: major projects with a higher value will be able to make greenfields agreements lasting up to 8 years.
  • Projects between $250 million and $500 million: major projects within this range will be able to do so by ministerial direction only.
  • Annual increases required: such agreements will need to provide for defined annual wage increases for the life of the agreement.

Casual Employment

  • Definition of casual employment: casual employees are defined as those to whom employment is offered and accepted on the basis of no firm advance commitment to continuing and indefinite work according to an agreed pattern of work.  The definition is guided by specific factors, including whether:
  • The employer can elect to offer work and the employee can elect to accept or reject work;
  • The person will only work as required;
  • The employment is described as casual employment;
  • The person will be entitled to a casual loading or specific rate of pay for casuals under the terms of an industrial instrument.
  • Casual Conversion: after 12 months employment, employers will be required to offer permanent employment to casuals who have worked a regular pattern of hours for the previous six months.  Employers will not be required to offer casual conversion where reasonable business grounds exist, including that the job will not exist in the future, conversion will result in changes to the days and hours of work that cannot be accommodated, the employee’s hours of work will be significantly reduced or significant adjustments will be required to effect the conversion.
  • Casual loading offset: courts will be required to reduce any amount payable to an employee under an order of compensation for unpaid entitlements by the amount of the casual loading, provided it is identifiable and paid to compensate the employee for not having one or more entitlements that are characteristic of permanent employment, such as paid leave, payment for absence on public holidays, payment in lieu of termination and redundancy pay.  The purpose of this provision is to prevent double dipping claims and allows the employer to offset amounts paid to an employee that identifiably compensate the employee for those relevant entitlements.

Enterprise Agreements

  • Eligibility of Casuals to vote: casuals who performed work at any time during the access period will be entitled to vote for the agreement.  This will apply to the making of new enterprise agreements or the variation of existing enterprise agreements.
  • Target FWC approval period: the Fair Work Commission will be required to approve agreements within 21 days unless it is prevented by extraordinary circumstances.  Where they are unable to they will be required to advise of their reasons.
  • Zombie agreements: transitional instruments that predate the Fair Work Act will cease to have effect automatically on 1 July 2022.
  • Termination of expired agreements: enterprise agreements that have exceeded their nominal life will only be terminable 3 months after their nominal expiry date.
  • Model NES interaction clause: the Fair Work Regulations will prescribe a model term for enterprise agreements that explains their interaction with the National Employment Standards.  This model term must be included in enterprise agreements or will be taken to be a term of all agreements that are approved.
  • Better off overall test: the BOOT will be limited to what is reasonably foreseeable in relation to prospective employment, rather than what is theoretical or hypothetical.  Additional weight will be given to the terms agreed between the employer and employees, including consideration of both monetary and non-monetary benefits.  The circumstances in which the Fair Work Commission can approve agreements that do not meet the BOOT will also be expanded for a limited period of 2 years to consider the impact of COVID-19, employer and employee circumstances and views and the outcome of the vote.
  • Period for Issuing the NERR extended: currently, employers are required to issue the Notice of Employee Representational Rights within 14 days of notification of the intention to bargain, or the operation of a majority support determination, scope order or low paid authorisation.  This will be extended to a period of 28 days to issue the NERR.  The Fair Work Commission will also be required to publish a prescribed NERR form on its website.
  • Unions that do not apply to be covered by an agreement will not be able to object to its approval: only those unions that file an application pursuant to s.183(1) for coverage under the agreement will have standing to make submissions for consideration by the Fair Work Commission for the approval or otherwise of the agreement.
  • The Commissions power to inform itself in relation to Enterprise Agreement applications will be strictly limited unless there are exception circumstances (the limited list means unions who were not involved as bargaining reps cannot be heard) and in variations will be strictly limited unless there are exception circumstances to those covered by the EA

Compliance and Enforcement

  • Criminal penalties: criminal offences and penalties will apply federally for underpayments with a maximum jail term of 4 years and fines of up to $1.1 million for individuals and $5.5 million for companies.  A dishonesty test will apply taking into account whether there is a systematic pattern of underpaying one or more employees, including factors such as the number of underpayments, the period over which they occurred, the number of affected employees, the employer’s response, or failure to respond, to any complaints made or breaches of record keeping and payslip requirements.  These considerations are not exhaustive.
  • Higher penalties and differing treatment for businesses: big businesses may be subjected to higher maximum fines or three times the value derived from the contravention.  Small businesses will not be subject to additional liability related to the benefit obtained by the underpayment.
  • Small claims process and the Fair Work Commission: the existing small claims jurisdiction will be expanded to address claims of up to $50,000.  The Fair Work Commission will participate in dealing with underpayments by referral from the Federal Circuit Court for first instance conciliation and arbitration where it is agreed by the parties.  This will reduce the costs to employers of defending or redressing an underpayment claim.
  • Jobs cannot be advertised at rates that are below the national minimum wage or any applicable special national minimum wage: penalties will apply for breaches of these new provisions.

Outside of the changes drafted into the bill, the Attorney-General has written to President of the Fair Work Commission, Iain Ross, requesting consideration of how best to insert loaded rates into the General Retail Industry Award, the Hospitality Industry (General) Award, the Restaurant Industry Award and the Registered and Licensed Clubs Award.  This review must be undertaken with employer and employee representatives and completed by the end of March 2021 to coincide with the end of the JobKeeper wage subsidy.

The Attorney-General has also announced that the Fair Work Ombudsman will be given the ability to provide authoritative advice on request, but not fine businesses that act on that advice and remediate any identified error.

Lessons Learned:

  • The Bill proposes a number of reforms to the industrial relations system that will benefit businesses operating in Australia and advance investment in resource and infrastructure projects;
  • In light of the introduction of federal offences for underpayments, businesses ought to undertake an audit of their payroll systems to identify any requirement to remediate wages and to ensure compliance; and
  • Employers contemplating making a new enterprise agreement ought to consider the drafting of the agreement and their timeline for the process to take advantage of the changes provided by the Bill.
  • The Bill requires Senate approval to become law so we expect there will be some horse trading for support

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

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