Earlier this week, the Federal Attorney General (The Hon. Christian Porter MP) introduced a draft Bill into the Australian Parliament which proposes changes to Australia’s Industrial laws. The Bill, entitled: Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 was developed following the conduct of five Industrial Relations Working Groups. These Groups were convened over a four-month period and involved senior members of business, industry and the Australian Union Movement.
The intent of the Attorney General’s IR Working Groups was to explore opportunities to improve Australia’s IR Laws with a view to supporting Australia’s economic recovery in the years ahead. The Groups started well but progress was stifled at times because of many parties falling back on their historical ideological positions – as opposed to working on genuine opportunity to create jobs and boost economic output in a post-pandemic world.
“I don’t think anyone expected that these Working Groups would result in business, industry and the Australian Union Movement unanimously agreeing on a way forward or emerging from the process and singing ‘Kumbaya’”, said ACAPMA CEO Mark McKenzie
“But the robust discussions during these Working Groups provided each of us with an opportunity to better understand the perspectives of the other parties and created a mechanism for the Australian Government to assess the merits of various arguments for changes to IR Laws”, said Mark.
“Having now read the draft legislation, the Morrison Government appears to have done a good job in advancing modest but meaningful changes to our current IR lawyers that reflect much of what was discussed in these working groups – not that you would not know that given some of the hysterical – and often inaccurate – media commentary that has been published in recent days”, said Mark
The Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 proposes changes to Australia’s current IR laws in five areas, namely:
- Providing certainty to business and employees about casual employment, given past confusion created by two notable legal decisions handed down by the Federal Court.
- Extending workplace flexibilities, that were first introduced during the COVID19 pandemic, to allow businesses to adapt and keep their people meaningfully employed.
- Streamlining the process for the making of Enterprise Agreements in workplaces given the challenges posed by the current Better Off Overall Test (or BOOT) that must be satisfied before any Agreement can be ratified by the Fair Work Commission.
- Removing the four-year limit on Enterprise Bargaining Agreements for major, long duration projects in areas such as mining and construction, to create greater certainty for investors and prospective employees alike.
- Strengthening the compliance and enforcement requirements of the Fair Work Act to ensure employee fairness and address competition distortion created by deliberate and systemic wage underpayment by Australian businesses.
Providing certainty in casual employment
Somewhat surprisingly to many, the Fair Work Act does not currently include a definition of what constitutes a ‘casual’. This issue, coupled with the emergence of Labour Hire employment arrangements, led to two landmark decisions of the Federal Court that effectively meant that a casual, who was paid a casual loading in good faith by an employer, could retrospectively claim entitlements for annual leave (and other leave) entitlements if they were deemed to have worked a regular pattern of hours.
This double-dipping decision sent a shiver down the spine of every employer of casuals in the country, effectively creating a disincentive to employment. The proposed new laws address the problems created by these previous Court decisions issue by:
- Introducing an explicit definition of what constitutes ‘casual employment’
- Allowing employers to nominate whether a new employee is a ‘casual’ on commencement of their employment
- Requiring that all casual employees working a regular pattern of hours be provided with a formal offer of permanent employment after 12 months of engagement, provided this can be reasonably accommodated by the business (including examples of what constitutes reasonable grounds for refusal to provide this offer)
- Introducing a provision that allows an employer to ‘offset’ casual loadings paid to an employee against payment of retrospective entitlements for a period of six years, should a court determine that the employee was a ‘permanent’ employee
In effect, the new laws provide a formal definition of casuals that is aligned with current practice in most businesses (i.e. excluding labour Hire arrangements) and removes the risk of double-dipping claims by casual employees.
In return, businesses are being asked to provide a formal offer of permanent employment to casual employees after 12 months where the business can reasonably do so – as opposed to just notifying the employee of their right to make a request for conversion to permanent employment.
“To be honest, more than 96% of casuals in our industry have elected to stay casual because they apparently value the increased weekly salary higher than annual leave and other entitlements – and the new laws are not expected to change this pattern”, said Mark
“Further, the slight increase in the administration burden created by providing a formal offer to staff after 12 months is a modest price to pay for increased certainty and removal of the risk of double-dipping claims in the future”, said Mark
Award simplification and workforce flexibility improvements
Two changes are proposed in relation to the operation of current Awards. The first involves a 2-year extension of the Job Keeper IR flexibilities relating to duties and location of awards for businesses operating in so-called ‘distressed’ industries. This provision relates to 12 Modern Awards, including the Vehicle Repair Services and Retail Award (2020).
The second change proposes to allow employers and part-time employees who are operating under the same 12 Modern Awards, to enter into agreements for additional hours to be worked at ordinary rates (i.e. no overtime payable). This provision will only apply to part-time employees working at least 16 hours per week.
“Businesses operating in the fuel retail industry will be able to take advantage of both of these provisions, in the event that the laws are passed, providing improved employment flexibility and encouraging greater use of existing permanent part-time employees as an alternative to casual employees”, said Mark
Making of Enterprise Bargaining Agreements
The new laws propose some modest changes to the operation of the Better Off Overall Test (BOOT) for the making of new Enterprise Agreements. Effectively, these changes provide greater flexibility in the application of the BOOT test as a means of validating new enterprise agreements as well as seeking to reduce the time taken for the approval of these agreements.
“The new laws propose that the Fair Work Commission be required to approve new agreements, as far as practicable, within 21 working days which is a welcome development given that numerous recent agreements have been abandoned by businesses as a result of having spent more than 12 months trying to get an agreement approved”, said Mark
The current 4-year limit on new Enterprise Agreement means that large construction and mining projects of longer duration are often required to negotiate a new enterprise agreement midway through the life of their project. In the past, this has made businesses vulnerable to unjustified claims and extensive delays to work during the mid life of the project.
To address this situation, the new laws propose to extend the maximum term for these types of agreements to a maximum of 8 years.
“While this change has significant merit in the construction and mining industry, it is not a change that is directly relevant to our industry”, said Mark
Compliance and enforcement – criminalising wage underpayment
One of the most significant changes proposed in the new laws relates to the treatment of wage underpayment, with the introduction of criminal penalties for deliberate and systemic wage underpayment and an increase in the civil penalties for wage payment breaches.
Importantly, criminal penalties are not automatic in terms of wage underpayment. Rather, for a criminal action to be brought against an employer (or Directors of a business), there will be a need to demonstrate that such behaviour satisfies a criminal test of deliberate intent. Within this context, a court may have regard to the following:
- the number of underpayments
- the period over which the underpayments occurred
- the number of employees affected by the underpayments
- the employer’s response, or failure to respond, to any 15 complaints made about the underpayments
The new criminal offence of wage theft will carry a maximum jail term of 4 years and a fine of $1.1M for individuals, and fines of up to $5.5M for corporations.
“No-one likes seeing criminal laws introduced for business owners, but deliberate wage underpayment is not only unlawful and morally reprehensible, it also provides businesses with a significant and unfair competitive advantage over other businesses”, said Mark
“These concerns, coupled with the inclusion of an appropriate ‘high bar’ that protects against businesses being prosecuted for innocent mistakes, is considered to provide a good mechanism for safeguarding the interests of employees and employers alike”, said Mark
“All things considered, and despite the hysterical cries coming from some stakeholders about elements of the laws, ACAPMA believes that the proposed laws are modest in scope and meaningfully address some priority issues for IR reform”, said Mark
It is understood that the new IR Laws will be considered by the Senate and referred for Committee consideration, before being debated in the Australian Parliament in February 2021.
ACAPMA will continue to monitor the progress of these new IR laws in the meantime and will prepare new guidance materials for the use of all members when/if the new laws are formally passed into law.
Further information on these proposed laws can be obtained by emailing email@example.com.