Australia’s workplace relations regime is not in for a major overhaul, but the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 (the FW Bill) does represent the most substantial shift in industrial relations since the Fair Work Act 2009 (Cth) (FW Act) was introduced in 2009.

The Bill was introduced into Parliament on Wednesday and Labor and the ACTU have already expressed dissatisfaction with parts of the Bill, including the proposed temporary changes to the BOOT. This means the Bill is unlikely to make it through the Senate without changes.

In the meantime, employers should familiarise themselves with the proposals, and be aware that the proposed amendments in relation to casuals have some retrospective operation, are subject to complex transitional provisions and apply to offers of employment before, on, or after the commencement of this Bill.

The Fair Work (Registered Organisations) Amendment (Withdrawal from Amalgamations) Bill 2020 (Withdrawal Bill) was also introduced (and passed) on Wednesday. Unlike the FW Bill, the Withdrawal Bill was uncontroversial and passed smoothly through both Houses of Parliament.

Casual employees

What the Bill says:

As widely anticipated, section 15A of the Bill will insert a new definition of “casual employee” into the FW Act, being an employee who accepts an offer of employment in circumstances where the employer made “no firm advance commitment to continuing and indefinite work according to an agreed pattern of work”.

As the definition suggests, the key question is whether an employer made a “firm advance commitment” to continuing and indefinite work according to an agreed pattern of work, at the time the offer was made. To assist in this determination, the Bill also provides an exhaustive list of considerations at section 15A(2) that must be taken into account in determining whether the offer of employment meets the definition for casual employment.

The Bill will also amend the National Employment Standards (NES) by inserting a new section 66B, containing a mechanism to convert casual employees to either full or part-time employees where certain criteria have been met.

Notably, employers will be unable to convert casual employees to a fixed-term contract under the new Division 4A. This suggests a concerted effort to ensure casual employees are not simply placed on a series of (what could be equally temporary) fixed-term contracts and are able to obtain ongoing, permanent employment where appropriate.

In addition, casual employees will have a residual right to request a conversion from their employers under certain circumstances. Importantly, the Bill prohibits employers from reducing or varying, or terminating, an employment relationship in order to avoid any conversion obligations.

These amendments will have some retrospective operation in that they apply to offers of employment before as well as on or after the amendments commence. The transitional provisions in Schedule 7 of the Bill are complex and provide a six-month transitional period for employers to assess whether they are required to make conversion offers and other necessary adjustments for casual employees engaged before the amendments came into effect. Casual employees engaged prior to the amendments coming into effect need to have 12 months of service (at the date of the assessment under the transitional provisions) to trigger the operation of the transitional provisions.

What we still don’t know:

Employers will not be required to make a casual conversion offer in circumstances where there are “reasonable grounds” for not doing so, and where those grounds are based on known facts or are reasonably foreseeable at the time.

What will constitute “reasonable grounds” is unclear, although the Bill does include a non-exhaustive list at new section 66C(2) as to what will amount to reasonable grounds to not make an offer, including where doing so would result in a “significant change” in the days, hours, or times the employee’s hours would be required to be performed, which cannot be accommodated within the employee’s availability.

Notwithstanding this, the question of “reasonable grounds” will likely be the subject of a future dispute.

What action employers need to take:

Employers should assess their casual workforce and seek advice about the proposed amendments, noting there is only a 6-month transitional period proposed. If enacted, these sections of the FW Bill will apply to new employees from the date of enactment. It also has some retrospective operation in that it will apply to existing casual employees engaged prior to the amendments taking effect.

Employers should also prepare to provide casual employees with the Fair Work Ombudsman’s “Casual Employment Information Statement”, which will need to be given to each existing and new casual employee before, or as soon as practicable after, the employee starts employment.

Award simplification

What the Bill says:

Reform and simplification of the Modern Award system has been on the agenda for some time. The Bill proposes some relatively modest reforms, however, just because these changes are not ground-breaking, does not mean they are uncontroversial, or that further changes are not on the horizon.

One such example of what is shaping up to be a controversial proposal are the new sections being introduced that would allow certain part-time employees who work at least 16 hours per week, and covered by particular “identified Modern Awards” (as defined in the new section 168M) such as the retail and hospitality industries, to agree to work additional hours at their ordinary rate of pay by entering into a “simplified additional hours agreement”.

Currently, part-time employees typically receive overtime for shifts or hours worked outside of their set hours, even if this falls under 38 hours per week.

However, a “simplified additional hours agreement” removes the need to formally alter the number of hours an employee covered by an identified modern award is contracted to work, or pay additional hours at overtime rates. Employees would still be entitled to overtime in accordance with the Award where they work more than 38 hours per week) and it will be a workplace right to enter into, refuse to enter into or to terminate a simplified additional hours agreement.

The second part of the award simplification amendments is the introduction of a new Part 6-4D into the FW Act. Slated as an extension of particular JobKeeper flexibilities, the new provisions will enable employers in industries covered by “identified modern awards” to issue employees with “flexible work directions”.

  • “Flexible work directions” relate to either the duties or location of an employee’s work.
  • This Part will be repealed 2 years after the Bill receives royal assent.

Unlike the JobKeeper provisions which had special dispute resolution provisions (see eg s789GV of the FW Act), disputes about “flexible work directions” will be determined by the Fair Work Commission (FWC) in accordance with the dispute resolution mechanism in the relevant award.

What we still don’t know:
  • It is unclear whether further simplified pay rules are still on the horizon, with IR Minister Christian Porter confirming that he has asked FWC President Iain Ross to consider the most effective way to introduce simplified “loaded rates” that incorporated other rates, into the one rate, in an effort to avoid further underpayments in industries particularly affected by COVID-19.
  • It is also unclear whether the intention is to eventually expand the additional hours for part-time employees provisions to other industries and awards.
  • Finally, it is also not immediately clear whether the JobKeeper provisions will continue to apply in their current form to non-Award covered employees.
What action employers need to take:
  • Employers should consider drafting a template “simplified additional hours agreement” which includes the necessary requirements that can be used when a part-time employee agrees to work additional hours at ordinary rates of pay.
  • In order to issue a flexible work direction to an employee, an employer must have a “reasonable belief” that the direction is necessary as part of a strategy to assist with the revival of the employer’s business.
  • Employers should also be aware that there are conditions on their ability to issue valid flexible work directions, including the impact of the direction on the employee, providing sufficient notice, consultation with the employee and the form of the direction.

Enterprise agreements

What the Bill says:

In the face of a decline in agreement making, the Bill focuses on simplifying and streamlining the agreement-making and approval process and giving the FWC a greater discretion to get agreements approved, particularly while businesses are trying to recover from the impacts of COVID-19.

The Bill proposes the following changes:

Pre-approval process

Under the Bill, there are new steps that employers would need to take before asking employees to vote on a proposed enterprise agreement. Importantly, employees must be given a “fair and reasonable opportunity” to decide how to vote, and the previous 14 days’ notice of representation rights has been extended to 28 days.

Approval process

There is an emphasis on accelerating the approval process under the Bill. Specifically, the FWC will be required to determine applications to approve agreements within 21 working days, as far as practicable. In addition, the FWC will be able to correct minor errors more easily, and the right of additional parties to be heard in relation to the application will be limited to “exceptional circumstances”. This includes unions if they are not a bargaining representative for the agreement.

Further, an employer will no longer be required to demonstrate that a proposed enterprise agreement does not exclude the safety net provided by the NES. Instead, the agreement must include a model term explaining the interaction between the NES and the proposed enterprise agreement.

Revised Better Off Overall Test (BOOT)

One of the most significant changes proposed under the Bill is the revised BOOT.

In particular, the FWC must only take into account patterns or kinds of work, or types of employment, that employees are currently engaged in, or are reasonably foreseeable, not hypothetical working arrangements. The FWC may also have regard to overall benefits, including non-monetary benefits the employees would receive under the agreement compared to a relevant modern award (such as access to support services), as well as the views of employers, employees and bargaining representative as to whether the agreement passes the BOOT.

This signifies a move away from a forensic, clause-by-clause assessment against the relevant award, in favour of a more holistic assessment.

As a direct response to the COVID-19 pandemic, the Bill also proposes a new mechanism enabling the FWC to approve a proposed enterprise agreement notwithstanding it failing to pass the BOOT, where the FWC is satisfied in all the circumstances that it is appropriate to do so. As part of a more relaxed overarching public interest test, relevant considerations for the FWC include the views of the parties covered by the agreement, the extent of employee support for the agreement, the circumstances of those parties, including the likely effect of approval or non-approval, and the impact of COVID-19 on the business.

An agreement approved under this mechanism will be limited to no more than two years’ duration, and the temporary mechanism will sunset after two years.

Termination after the nominal expiry date

An employer will not be able to apply to terminate an enterprise agreement after its nominal expiry date, until 3 months after that date. This will prevent employers from using this as a tool during bargaining.

What we still don’t know:

A number of the proposed changes, particularly those concerning amendments to the application and assessment of the BOOT, have already received significant pushback. At this stage, it is unclear everything will make it through the Senate in its current form.

What action employers need to take:

Employers should consider the benefits of seeking approval for a new enterprise agreement given the revised BOOT test for the next two years.

Employers with legacy agreements should review their employment arrangements and consider bargaining for a new agreement in advance of 1 July 2022.

Employers requiring employees to vote on a new enterprise agreement should become familiar with the new requirements involved in asking employees to vote on an agreement, including changes to the period in which the employees must have access to the agreement, notification of voting process, and explanation of the terms of the agreement and their effect.

Compliance and enforcement

What the Bill says:

The Bill aims to enhance the FW Act compliance and enforcement framework to more effectively deter non-compliance with workplace laws, make it easier to recover wages when underpayments occurs and promote fair competition.

Schedule 5 of the Bill introduces a range of new provisions, including:

  • Orders relating to civil remedy provisions (Part 1): The Bill increases civil penalties for remuneration-related contraventions and sham arrangements by 50%, and introduces a new “value of the benefit” alternative civil penalty for remuneration-related contraventions by bodies corporate (other than small business employers). It also clarifies that the orders the court can make include adverse publicity orders.
  • Small claims procedure (Part 2): Employees will be able to recover their entitlements more easily, quickly and cost-effectively through the small claims process, by increasing the small claims cap from $20,000 to $50,000. The Federal Circuit Court and Magistrates Courts will also be able to refer small claims matters to the FWC for conciliation and consent arbitration.
  • Employment advertisements (Part 3): Employers are prohibited from publishing (or causing to be published) job advertisements at a rate of pay less than the relevant national minimum wage.
  • Compliance and infringement notices (Part 4): Increases the maximum penalty for not complying with a compliance notice and allows for an increase to the maximum penalty able to be imposed under an infringement notice.
  • Enforcement undertakings (Part 4): Codifies factors the FWO may take into account when determining whether to accept a written undertaking, including for example whether the person has made a voluntary disclosure to the FWO, demonstrated a willingness to address the contravention, and is fully cooperative with the FWO.
  • Sham arrangements (Part 5): Increases the maximum civil penalty for sham arrangements by 50%.
  • Criminalising underpayments (Part 7): Introduces a new criminal offence for an employer that dishonestly engages in a systematic pattern of underpaying one or more employees.
    • An underpayment will occur ‘dishonestly’ where it is considered dishonest according to the standards of ordinary people and the defendant knew their behaviour was dishonest.
    • An employer underpays an employee if they fail to pay the employee any amount payable in relation to the performance of work in full, in money or at least monthly.
    • This includes the payment of incentive-based payments, loading, allowances, overtime rates or leaves payments.
    • A breach can result in a four-year prison term and/or a fine of up to $1,110,000 for an individual or up to $5,550,000 for a body corporate.
What action employers need to take:

In relation to underpayments, employers will need to be particularly careful in ensuring they are complying with their obligations under legislation and any relevant Enterprise Agreements or Modern Awards. The reality is that many businesses are likely sitting on an underpayment issue whether it has been identified or not and the introduction of criminal offences means that, where employers become aware of underpayments, they should be immediately proactive about remediation and keep good evidence of doing so in order to defend any claim the underpayments were made “dishonestly”

It follows that all businesses should be focusing on auditing payroll systems, undertaking assessments of compliance and resolving any identified issues as a matter of urgency.

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