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IR reforms: a guide for business

By CCIWA Editor

Whatever business you're in, the Federal Government's industrial relations reforms are likely to have an impact on how you operate and plan.

CCIWA experts outline the most significant reforms within the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020.

Earlier this year, the Federal Court handed down a key decision that awarded ongoing casual employees with entitlement to paid leave -- despite receiving a casual loading instead of these entitlements. According to the Federal Government, this decision to allow employees to receive double-payment put into doubt the employment status of over two million Australian workers.

With potential claims amounting to between $18-39 billion, several class action law firms have been clamouring to lodge claims to cash in on this decision and raised concerns for employers across all industry sectors.

The Bill seeks to clarify recent confusion about casual workers in two main ways:

Firstly, it cements into the Fair Work Act offset provisions that courts must use the casual loading to reduce claims for paid leave entitlements

The Bill also includes a definition of casual employment that has a new focus on both parties' intention when the employer first hired the employee.

That is: at the time of employment there was no commitment to continuing work based on an agreed pattern of work.

However, the Bill also grants staff the right to elect to convert to a permanent role after 12 months of regular employment, subject to a reasonable right to refuse.

Similar provisions have operated in Awards since 2001 with the majority of employees electing to remain casual.

A greenfield agreement is an enterprise agreement between a union and an employer before they have hired anyone for a new project.

CCIWA were instrumental during IR roundtables to discuss the Bill, in a proposal to increase the time frames for pay agreements on major projects.

The new eight-year greenfield agreement timeframe for major projects (with capital investment greater than $500m) will remove the threat of industrial action occurring mid-project, as has happened with previous major projects.

The changes are expected to encourage investment in long-term projects.

The IR reforms include tweaks to the enterprise agreement system, most notably the 'better off overall test' (BOOT) test.

The BOOT test requires all workers to benefit from new workplace deals.

The new Bill would require the Fair Work Commission to focus on existing or foreseeable work patterns, rather than hypothetical scenarios, when making that determination.

This change will provide employers with greater scope to deviate from historical award provisions in establishing terms that better meet the needs of their workplace.

The Bill also makes a number of other changes which include:

  • limitations on who can intervene in the approval of an agreement;
  • simplifying the requirements for explaining the meaning and effect of an agreement to employees;
  • a requirement for the Commission to approve an agreement within 21 days, unless that are reasons for a delay;
  • simplifying the steps that employers must take before voting on an agreement; and
  • greater capacity for the Commission to approve agreements that do not meet the BOOT where it is in the public interest.

Under the Fair Work Act, enterprise agreements are the sole option for many employers in establishing workplace-specific terms and conditions of employment.

However, the number of enterprise agreements currently in operation has fallen by almost 60 per cent from over 25,000 in December 2011 to just 10,700 agreements in June 2020.

The prescriptive interpretation of the Fair Work Act is the primary cause of this decline, with the complexity involved in making an agreement, combined with the lack of flexibility, removing key incentives for bargaining.

Both employers and unions have recognised the need to repair the enterprise agreement system.

The changes will not provide the level of flexibility and ease of use drastically needed to make enterprise bargaining a viable option for many small and medium-sized businesses. However, the proposed changes will make it worthwhile taking a second look at the option of an EA.

In a backward step, the changes will also introduce a sunset provision for agreements made prior to the Fair Work Act, which will disrupt long-established employment arrangements for a number of businesses.

Employers in industries that have been left in distress by COVID-19 restrictions, including the retail and hospitality industry, will also gain some greater flexibility for the next two years, particularly concerning part-time employees.

A major limitation in most awards is the requirement to fix the employees working hours at the commencement of employment, with the provision of overtime rates where employees work additional hours.

For many industries, the lack of flexibility is a significant disincentive to the employment of part-time staff.

Under the Bill, employers in specified distressed industries would be able to offer part-time staff additional working hours without incurring penalty rates.

A recent WA inquiry found that most employers seek to pay their staff correctly and that most underpayment errors are unintentional. Despite this, the Federal Government has not addressed the primary cause of most underpayments, being the complexity of the award system.

Instead, the Government is seeking to criminalise underpayments.

The Bill seeks to establish a new offence on top of the serious contravention provisions established in 2017 that are yet to be properly tested.

Under the proposed provisions, employers face up to four-years imprisonment and fines of up to $5.5m where they are found guilty of dishonestly engaging in systematic underpayment of employees.

The Government is also taking the unorthodox steps of providing the FWC with a role in enforcing its own awards, removing the separation of power which is the hallmark of our legal system.

Under the changes, if both the employee and employer are happy to correct the wage underpayment claim the issue may be referred to the Fair Work Commission for conciliation.

The intention is to provide for a quicker resolution of underpayment claims; however, there are concerns that the process could allow unmeritorious disputes before the FWC.

What next?

The Federal Government's will now submit the Bill to Parliamentary Committee Review where relevant parties will make submissions, both in terms of policy objectives and specific wording.

The Bill will likely face fierce debate in Parliament in March, 2021. Already, unions are campaigning for changes.

Businesses are advised to review their contracts of employment for upcoming casual changes and for those businesses in distressed industries to take advantage of the increased flexibilities.

We also suggest reviewing your payroll system to ensure that you're compliant with your employment obligations.

CCIWA has had input across the IR roundtables in the lead up to the Bill's release. And we will continue to campaign in the interests of WA's business community.

Whatever business you're in, the Federal Government's industrial relations reforms are likely to have an impact on how you operate and plan.

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