Workplace Relations update - September 2008
A recent speech given by the Hon Julia Gillard MP, Minister for Employment and Workplace Relations has revealed some important details that will be contained in the Substantive Bill which will be introduced into Parliament by the end of this year.
The Substantive Bill will replace the existing Workplace Relations Act 1996.
The Australian Government will introduce separate legislation in 2009 which will set out the transitional and consequential changes, which will explain how existing and new employees will move across to the workplace relations legislation.
In a surprising move, the Australian Government, for the first time intends to commence key aspects of the legislation, being the unfair dismissal and associated protections and bargaining framework from 1 July 2009. The balance of the Substantive Bill will commence from 1 January 2010.
The new modernised awards and the National Employment Standards will commence operation from 1 January 2010. Until the new awards commence to operate, the existing minimum entitlements will continue to apply.
Fair Work Australia, which will be the new body that will replace the Australian Industrial Relations Commission, will commence initial operation in July 2009 and will be fully operational from 1 January 2010.
A summary of the significant changes are:
Fair Work Australia
Fair Work Australia will replace a number of Australian agencies including the Australian Industrial Relations Commission, Australian Fair Pay Commission, Workplace Authority, Workplace Ombudsman and the Australian Building and Construction Commission (from 1 February 2010).
Its functions will include:
- Approval of enterprise agreements;
- Award review and variations;
- Good faith bargaining;
- Unfair dismissal;
- Mediation and dispute resolution
A Minimum Wages Panel will be established that will adjust wages in its annual review.
A Fair Work Australia Inspectorate will be established that will assist employers, employees and their representatives to comply with three new laws. The Inspectors will be able to investigate and enforce breaches of terms of contracts and employment matters.
A Fair Work Division of the Federal Court will be created to hear matters that arise under the Workplace Relations laws.
The existing small claims mechanism will be extended to the Fair Work division of the federal court, where it can hear matters regarding underpayment of wages up to $20,000.00. The body will act in an informal manner and will not be bound by formal rules of evidence or formal technicality. The court will have discretion to allow for legal representation.
Changes to the bargaining framework
There will be no requirement for the parties to formally notify Fair Work Australia that they wish to commence bargaining.
From 1 July 2009, the new bargaining rules will apply, including the obligation on employers to bargain in good faith. Fair Work Australia will have powers to make good faith bargaining orders and to determine whether there is a majority of workers' support for pursuing an enterprise agreement. The test that Fair Work Australia would use to determine whether to issue good faith bargaining orders will be based on whether the majority of all employees (not restricted to union members) wish to enter into a Collective Agreement. The Order will require the employer to enter into good faith bargaining with its employees.
Good faith bargaining will not include compulsory arbitration. Arbitration will only be limited to certain circumstances; where industrial action is causing a threat to safety or health, a threat to the economy or a significant harm to the parties.
Employees will have the right to be represented in the negotiations.
There will a Better-Off Overall Test for agreements that will replace the No Disadvantage Test. We are unsure whether this means that all employees must be better off, or the majority of employees must be better off. The test will be applied as a point in time test. The agreement cannot, during its life, have terms that are less than the minimum wages that are prescribed in the new modernised awards and the National Employment Standards.
All agreements will need to be approved by Fair Work Australia before they commence. An agreement will come into operation seven days after Fair Work Australia approves it, or a later date if one is specified in an agreement. Matters that only relate to the employment relationship being ‘matters pertaining to the employment relationship’ will be included in agreements.
For agreements to be approved, they must include:
- Individual flexibility arrangements to be made between the employer and individual employees;
- Dispute resolution;
- Consultation on major workplace change; and
- Representation of employees in dispute resolution and consultation processes.
Certain matters will be unlawful to include in a Workplace Agreement and will not be approved by Fair Work Australia:
- Breach of unlawful termination and freedom of association laws;
- Requiring the payment of bargaining service fees to a union;
- Discriminatory matters;
- Providing remedies for unfair dismissals to persons who have not served the qualifying period (6/12 months); and
- Purporting to authorise industrial action during the period of the agreement.
Assist low paid employees and those without access to collective bargaining
Employees in low paid sectors, such as child care, aged care, community care, cleaning and security will be given access to a multi-employer bargaining stream. Fair Work Australia will be able to facilitate multi-employer bargaining for certain kinds of employees being the low paid and those who have historically not had the benefit of enterprise level collective bargaining.
A bargaining representative or an organisation of employees with relevant coverage, may apply to Fair Work Australia for entry into the low paid stream to bargain with a specified list of employers.
Fair Work Australia will consider a range of factors to determine whether the proposed multi-employer bargaining is in the public interest. Individual employers may seek exemption from the process if they can justify why they should not be part of the process.
The types of assistance that will be available from Fair Work Australia will include compulsory conferences, good faith bargaining orders and powers to conciliate or mediate and to make recommendations.
Parties that will bargain in the low paid bargaining stream will not be able to take protected industrial action in support of their claims.
The outcomes of bargaining in the low paid stream could include;
- A single agreement that applies to all employers;
- Separate agreements;
- A combination of both.
Dismissal system
New laws regarding unfair dismissal aim to ensure that good employees are protected from being dismissed unfairly, while enabling employers to manage under-performing employees with fairness and confidence.
Within the overall unfair dismissal system, special arrangements will apply for small businesses with fewer than 15 employees. These arrangements recognise the special circumstances of small business owners, who do not have human resource management departments and cannot afford to lose time and cannot readily redeploy employees into other positions or workplaces.
Compared with larger businesses, small business owners will benefit from:
- A doubling of the qualifying period from six to 12 months, during which time employees cannot make a claim for unfair dismissal; and
- A simple Fair Dismissal Code to ensure that a dismissal is not unfair.
The Code sets out the circumstances in which a summary dismissal (a dismissal without notice or warning) is warranted, including cases of theft, fraud and violence.
For under-performing employees, the Code simply requires the employer to give the employee a valid reason, based on the employee's conduct or capacity to do the job, why the employee is at risk of being dismissed and a reasonable chance to rectify the problem. Multiple warnings are not required.
If an employee is made redundant, and the redundancy is genuine, the dismissal will not be unfair. Re-filling a position with a new employee is not a genuine redundancy.
Exclusions from unfair dismissal remedies include seasonal employment and specified-task employment at the end of which an employee's work is no longer required. The ending of employment that was for a fixed period or task is not considered to be a dismissal.
Where a claim of unfair dismissal is made, claims must normally be lodged with Fair Work Australia within seven days. Fair Work Australia will take a flexible approach in gathering information, making initial inquiries and discussing the issues with employers and employees, including informal conferences at mutually agreed locations, with a view to achieving a mediated resolution.
The new system will be non-legalistic, aiming to keep lawyers and contingency fee agents out of the process. Legal representation will be allowed only in exceptional circumstances where Fair Work Australia determines that a party is unable to represent him or herself. Decisions will be able to be made without the need for a full public hearing. Public hearings will only occur where the case involves particularly complex issues. Legal representation may be allowed at this stage.
Reinstatement will be the remedy, unless it is not in the interests of either party. Where reinstatement is not feasible, compensation may be ordered, although a cap will apply (the maximum being six months' pay).
It may be in the best interests of all employers (not just small businesses) to complete the following checklist at the time of dismissal and to keep it in case of a future unfair dismissal claim (although it is not a requirement of the Fair Dismissal Code that it be completed):
- How many employees are employed in the business (including full-time, part-time and regular long-term casual employees) – under 15, or 15 or more?
- Has the employee been employed in this business as a full-time, part-time or regular casual employee for 12 months or more?
- Did you dismiss the employee because of a genuine redundancy as set out in the Code, explaining the reason for redundancy if so?
- Do any of the following statements about dismissal on reasonable grounds apply?
- The employee was stealing money or goods from the business
- The employee defrauded the business
- The employee threatened me or other employees or clients with violence, or actually carried out violence in the workplace
- The employee committed a serious breach of occupational health and safety procedures
- Did you dismiss the employee for some other form of serious misconduct?
- Did you dismiss the employee because of the employee's unsatisfactory conduct, performance or capacity to do the job? If so:
- Did you clearly warn the employee that improvements to conduct or performance would have to be made?
- Did you provide the employee with a reasonable amount of time for improvement? If so, how much?
- Did you offer to provide any training or development opportunity?
- Did the employee subsequently improve?
- Did you give the employee the reason for dismissal and an opportunity to respond?
- Did you keep any records of warnings make to the employee, or of discussions on how his or her conduct or performance could be improved?
- Did you dismiss the employee for some other reason, if so, what?
- Did the employee voluntarily resign or abandon his or her employment, giving details if necessary?
Minimum wages
Modern awards will specify the minimum wages for all award employees.
Minimum wages and casual loadings will be set and adjusted by a specialist Minimum Wages Panel within Fair Work Australia. The panel will conduct an annual review through a non-adversarial process and will do so openly and transparently.
The updated wage rates will take effect from the first pay period to commence on or after 1 July each year.
Safety Net and Modern Awards
Under the new workplace relations system there will be two parts that will form the safety net. The first part is the 10 National Employment Standards that will apply from 1 January 2010. These standards are:
- Maximum weekly hours of work;
- The right to request flexible working arrangements;
- Parental leave;
- Annual leave;
- Personal/Carer’s leave and compassionate leave;
- Community service leave;
- Long service leave;
- Public holidays;
- Notice of termination and redundancy pay; and
- Provision of the Fair Work Information Statement.
The second stage is the creation of the modernised awards that will be either industry or occupation awards. They are being developed by the Australian Industry Relations Commission.
Modern awards will not apply to employees with guaranteed annual earnings of more than $100,000.00 and pro-rata for part-time employees. The exemption ($100.000) must be in writing and must have been agreed with the employee in advance or at the time of the engagement or a variation to the contract. Earnings that are not guaranteed, such as bonuses, cannot form part of the $100,000.00. Non monetary benefits may be included where the value can be calculated and is guaranteed in advance.
Modern awards will be reviewed every four years. Outside of the four year review, there will be limited circumstances where Fair Work Australia will be able to vary the award.
Strike pay
Under the new system it will be unlawful for an employer to pay, demand to be paid or request payment for strike pay.
For unprotected action of less than four hours the employer will be required to withhold four hours' pay and for unprotected action in excess of 4 hours to withhold payment for the duration of the stoppage.
Protected industrial action during bargaining after a secret ballot and after giving three days' notice will be treated differently. Employees who take protected industrial action, with full withdrawal of their labour, may have payment withheld by the employer for the actual period of the industrial action.
Where an employee chooses to take protected industrial action by performing only part of their duties, the employer may choose to either pay full pay or, after notifying the employee, dock part of the employee’s wages proportional to the duties the employee has refused to perform.
Freedom of association and other workplace rights
All employees will remain free to choose whether or not to be a union member along with the choice of whether or not they wish to participate in collective activities such as bargaining for an enterprise agreement or taking protected industrial action. It will be unlawful to try to stop an employee from exercising these free choices and to discriminate against a person because they are, or aren't a member of a trade union.
The Workplace Relations Act currently contains a range of protections, but they are scattered throughout the act and are often duplicated or vague. The new legislation will streamline all of these related protections into one part of the Act that will make it simpler to follow. The current freedom of association, unlawful termination and other miscellaneous protection provision will be combined into a new set of general protections.
Under these combined protections, it will be unlawful for a person to take adverse action because another person has, or exercises, a workplace right. Adverse action includes dismissal, discrimination, refusing to employ a person, or prejudicially altering the position of a person. Workplace rights include an entitlement under an award or agreement, or an industrial law.
The general protections will also cover industrial action, sham contracting arrangements, discrimination on a number of grounds including race, sex, sexual preference, age, disability, pregnancy, among others, and absence from work because of illness or injury.
The new general protections will provide more comprehensive protections for workers in some situations than is currently the case. It is currently unlawful for an employer to dismiss an employee for certain reasons, such as sex, race, or family responsibilities. Under the new laws, a range of additional adverse actions, falling short of dismissal, will be unlawful; for example, placing an employee in a position that pays less, or refusing to employ them, for one of the prohibited reasons.
Australian Building Construction Commission
The Australian Government has reaffirmed its pre-election commitment that the ABCC will remain unchanged until it is replaced on 1 February 2010 with a new specialist inspectorate within Fair Work Australia.
ATO ruling on redundancy
On 27 August 2008, the ATO released Draft Taxation ruling 2008/D6. The Ruling outlines the requirements that must be satisfied before a payment to a person whose employment is terminated qualifies for the concessional tax rate for a genuine redundancy. This Ruling replaces the previous ATO Ruling on bona fide redundancy payments' which was withdrawn on the above date.
For the 2008/09 income tax year the threshold amount is $7,350 plus $3,676 for every full year of service.
The Draft Ruling provides that an employee's position is redundant when an employer determines that the functions, duties and responsibilities of that position are 'superfluous to the employer's needs and therefore 'unnecessary', and that the employer does not want the position to be occupied by anyone.
The Draft Ruling also provides that redundancy must be the 'prevailing or most influential reason for the dismissal'.
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