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Insights Paper | Significant Fair Work Act Amendments Proposed

December 2020

In what would be the first major changes to Australia’s industrial relations legislation since the Fair Work Act was introduced in 2009, the government has put forward the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020.

At a glance

  • The Bill proposes a raft of changes to Australia’s industrial relations legislation that, if passed, would have a significant impact on employers and employees alike.
  • Proposed amendments relate to part-time flexibility, making enterprise agreements, award variations, definition of casual employment, casual loadings, creating a criminal offence for wage theft, and amending the small claims jurisdiction to include the FWC.
  • This article provides a brief summary of the core changes that will be most relevant to our corporate-employer clients.*

Part-Time Flexibility

In a change that would provide part-time employees greater flexibility to work additional hours of work, the Bill would allow part-time workers covered by certain awards to pick up more hours of work, at their normal rates of pay (rather than these additional hours being classified as overtime). This would allow greater flexibility for employers to offer part-time workers more hours, without being required to pay those hours at overtime rates.

As many of our clients are well aware, overtime rates provided in many of the modern awards provide a disincentive to employers to provide part-timers with additional hours, even where the employee would agree to the additional hours. This often has the effect of making casual employment preferable, particularly where hours of work and workloads vary, or an employer has a genuine need for flexibility within their workforce.

Enterprise Agreement Making

Significant changes have been proposed to the “machinery provisions” that regulate precisely how an enterprise agreement can be made and approved by the Fair Work Commission. The government has been clear that its goal with these changes is to increase the number of employees covered by enterprise agreements. We suspect this will not be without controversy.

Along with requiring the Fair Work Commission to approve enterprise agreements (so far as practicable) within 21 days (which would significantly increase workload for the FWC) the Bill also introduces changes to the Better Off Overall Test (BOOT) to allow the FWC greater flexibility to approve agreements that would not have, before the proposed changes, met the strict requirements of the current BOOT.

Firstly, the Bill stipulates that the FWC should not consider hypothetical situations in which employees could be disadvantaged. That is, the FWC would only take into account the patterns or kinds of work that are currently engaged in by employees, or reasonably foreseeable. Further, the FWC in determining whether to approve the agreement must have regard to the overall benefits (including non-monetary benefits) employees would receive under the agreement, compared to the relevant modern award, along with the views relating to whether the agreement passes the BOOT expressed by employers, employees and their bargaining representatives.

Secondly, and to support businesses still affected by COVID-19, the Bill would also permit, in limited circumstances, the FWC to approve an agreement that does not pass the BOOT. This provision would be in place for two years, with agreements approved under this provision similarly limited to two years duration.

Thirdly, employers would now have the ability to implement Greenfields agreements for new worksites to be able to extend those terms for up to eight years duration where a project is worth more than $500 million, or $250 million where the project is deemed to be in the national interest. The expressed intention being that the extended duration would avoid major projects being interrupted by industrial action after four years (the current nominal expiry date for Greenfields agreements). Where these agreements are approved with a duration longer than four years, the Bill would require those agreements to include annual pay increases for the life of the agreement.

Award Variations

For those industries particularly affected by the coronavirus pandemic, the IR Minister has written to the FWC asking that those industry awards include provisions for “loaded rates” so that employers and employees can agree to a higher base rate of pay instead of penalty rates.

Other flexibility provisions are to be introduced for those employers particularly affected by COVID-19 to allow an employer to reasonably issue a direction to employees that changes their work location or work duties. Importantly though, these directions would be qualified, and at this point in time would only apply to a handful of (admittedly common) Awards.

A Definition of Casual Employment, the Casual Loading and a Right of Conversion

The Bill includes a statutory definition of ‘casual employment’, something which many assert is long overdue. It also includes provisions that create a right for casual employees to become permanent after 12 months of employment, unless there are reasonable business grounds not to do so. Most of our readers would be aware that these provisions are already included in many awards, but including this right in the NES will extend the casual conversion provisions to all national system employees.

The Bill also addresses a significant concern for employers who have engaged long term casual employees, in that it includes a retrospective provision that provides for any casual loading paid to an employee to be deducted from any employer liability arising from the misclassification of those employees as casuals.

The provisions of course address the uncertainty for employers arising from the recent decision in Workpac, in particular the concerns that casuals could now “double dip” (by receiving a casual loading and paid leave).  However, for precisely the reason that the Workpac appeal will be debated before the High Court of Australia next year, we suspect that this proposal will not be without controversy, and could well be subject to significant change as it works its way through Parliament.

Criminalising “Wage Theft” and Increased Civil Penalties

Finally, in a move made to encourage compliance, the Bill introduces a criminal offence for dishonest and systematic wage underpayments, and increases the value and scope of civil penalties that can be imposed for non-compliance. This will have legal and political implications given this (Commonwealth) change will likely have the effect of overriding State based “wage theft” laws that have already been passed.

Importantly, it has been noted by the Attorney General that the criminal offence is not intended to apply to one-off underpayments, inadvertent mistakes or miscalculations. Like any criminal offence, these provisions require a “mental” element of intention, in this case “dishonesty”.

…And Other Changes of Interest

Other (“incremental changes” to quote the Attorney General) will include:

  • Empowering the FWC to dismiss an unfair dismissal claim on the basis it is misconceived or lacking in substance; or otherwise an abuse of the processes of the FWC.
  • Making it an offence to advertise a position for pay less than the legal minimum.
  • The jurisdiction for the Federal Court to hear “small” (underpayment) claims will increase to $50,000, and the FWC could have a role to play in mediating and potentially arbitrating underpayment claims (something it is currently unable to do).

Where to From Here?

The Bill is just that; a Bill, and will likely go through significant changes to be able to pass both house of Parliament. Further, it is expected to be referred to a Senate inquiry, so it may be some time until any or all of the proposed changes become law.

In short: watch this space. If you have any questions about the proposed changes in the interim, please contact a member of our team to discuss further. This article is only a very brief summary of the changes. Alternatively, the Explanatory Memorandum for the Bill can be accessed here: https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r6653

*This article is not applicable to employers in Local and State Government in South Australia.

Disclaimer

The content of this newsletter is for general information purposes only and should in no way be treated as formal legal advice.