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What the new Fair Work Bill means for your business
Written by Andrew Bland, BlandsLaw

The passing of the Fair Work Bill means WorkChoices will be finally buried ... but what does this mean for your business?

After a series of deals with the cross-bench Senators, the Minister for Workplace Relations declared that WorkChoices was “finally buried” with the Federal Parliament passing the Fair Work Bill on 20 March 2009.

The Bill is now set to be implemented on 1 July 2009, with the National Employment Standards and Modern Awards coming into effect from 1 January 2010.

The Bill introduces significant changes to the industrial relations arena particularly in the areas of unfair dismissal, minimum employment entitlements (known as the National Employment Standards), Modern Awards and good faith bargaining in the workplace.

Each of these areas of change will likely have some impact on your business operations and we discuss what these changes may mean for you, in further details below.

Transition
The Rudd Government has now introduced transitional legislation into Federal Parliament, the Fair Work (Transitional Provisions and Consequential Amendments) Bill 2009).

The Transitional Bill operates to set in place arrangements for transition into the new system under the Fair Work legislation.
The provisions in the Transitional Bill seek to recognise and acknowledge the rights and entitlements of both employers and employees under what will be an entirely new workplace relations system.

New Rules for Unfair Dismissal

Under the new legislation, for all unfair dismissals from 1 July 2009, regardless of the size of the employer:

reinstatement will be the remedy unless it is not the interests of either party. Otherwise, compensation is capped at the lesser of six months salary or half the high income threshold (approximately $53,200);

unfair dismissal claims will not be available in cases of a genuine redundancy; and
unfair dismissal claims must normally be lodged with Fair Work Australia within seven days.

Under the new unfair dismissal rules, there will no longer be a 100 employee exemption and unfair dismissal will be available to employees after a six month qualifying period, or a period of one year for employees of small business.

Until 31 December 2010, employers with fewer than 15 full time equivalent employees will be considered small business employers. The number of full-time equivalent workers will be calculated by averaging the ordinary hours worked by all employees in the business over the four weeks prior to the employee being terminated, and then dividing that by 38 (to give the number of equivalent full time employees).

After 1 January 2011, the fewer than 15-employee exemption will be applied using the Government's original definition of a straight head count of all employees.

The Transitional Bill will provide for a phase-in of unfair dismissal rules to small business. From 1 July 2009, small business employers will be able to defend an unfair dismissal claim on jurisdictional grounds if they have complied with the Small Business Fair Dismissal Code.

Rights to unfair dismissal remain unavailable to employees engaged on fixed term contracts, trainees engaged for specific tasks and when a demotion occurs that does not involve a significant reduction in remuneration or duties if the employee remains in the employment of the employer.

>>Implications for your business
For all business, employers will now be liable if they breach unfair dismissal laws.

Employers will need to ensure that, prior to terminating employees for unsatisfactory performance, they have given employees a reasonable opportunity to improve their performance. To properly terminate an employee, a process, including a series of warnings, will need to be implemented to ensure compliance. Given the looming commencement date, employers should be examining and evaluating their systems now.

For small business, employers will need to comply with the Fair Dismissal Code which will include providing warnings to employees regarding unsatisfactory performance prior to taking steps to terminate employment.

National Employment Standards (NES)
It is important for all employers to understand that as from 1 January 2010, modern awards and the NES will immediately apply to all “national system employers” (ie, a constitutional corporation).

The NES will apply as a statement of 10 minimum employment standards for all employees, even if the employer is covered by an existing industrial instrument. In addition to the five existing standards being annual leave, personal leave, parental leave, maximum 38 hour week and minimum wage, the following will be compulsory in every contract:

•   Flexible working arrangements
•   Community Service Leave
•   Long Service leave
•   Redundancy Pay
•   Fair Work Statement

The most significant new changes among the NES will be amendments to parental leave entitlements, flexible working arrangements and an obligation upon employers with 15 or more employees to pay redundancy benefits in accordance with a statutory scale.

The major change to Parental Leave is that Parents will have a right to separate periods of 12 months unpaid leave, up to a total of 24 months (if parents want one parent to take a further 12 months after they have taken the first 12 months, then they must make a request, with employers only able to refuse such requests on reasonable business grounds).

The Fair Work legislation provides employees with a "right to request" flexible work until children reach school age, with employers only able to refuse on reasonable business grounds. The request must be in writing and set out the details of the changes sought and reasons for the change.

An employee is not entitled to make a request unless the employee has completed at least 12 months of continuous service immediately before making the request (for casual employees, the employee needs to have been engaged by the employer on a regular and systematic basis for a sequence of periods during a period of at least 12 months immediately before making the request and has a reasonable expectation of continuing engagement.

Minimum notice requirements of up to 4 weeks notice (progressing from 1 week for employees with less than 12 months service to 4 weeks for workers with more than 5 years service) for all employees plus an extra week for workers aged over 45 will apply.

Under the new legislation, employees in workplaces with 15 or more employees will also be entitled to severance pay of up to 16 weeks after 9 years service and 12 weeks after 10 years service. The extent of severance will depend on the length of service.

>>Implications for business.
Employers ought to take steps to include these new requirements in their contracts and policies to ensure compliance. More importantly however, they will need to start to plan how to ensure that business is not negatively affected by the increased flexibility in working conditions that the minimum standards provide.

Provisioning may also need to be made for the new compulsory redundancy scheme, which provides many employees with benefits that they did not previously have.

Modern Awards

Modern Awards will commence from 1 January 2010 and will replace all existing Pre-Reform Federal Awards and NAPSAs (Notional Agreements Preserving State Awards), with the exception of single enterprise awards.
The timetable on modernising enterprise awards (ie awards that apply to a single business) has been clarified. Presently, these awards stand outside the award modernisation process.
The Transitional Bill includes a process whereby parties to an enterprise award may apply to FWA to have their enterprise award modernised and integrated within the modern award system.

Modern awards will not apply to new employees with agreed guaranteed annual earnings of more than $100,000 (indexed annually and pro-rata for part-time employees).

Employers that are presently covered by an ongoing collective agreement must pay their employees at least the minimum rate of pay specified in a modern award as from 1 January 2010 for each hour worked.

In addition, the transitional provisions set in place a process to ensure that employees do not suffer a reduction in “take home pay” as a result of the award-modernisation process for a transition period. Such an employee would be entitled to make an application to FWA seeking to remedy the situation.

The full bench of the AIRC will sit in June and July for final consultation on the exposure drafts, with September 4 being the final date for making stage three modern awards.

Implications for business
This will be a welcome simplification of the awards system and hopefully will lead to business being covered by just one award.

For business with multi-award coverage, they will need to ensure that there is full compliance. In many instances, awards have slightly different conditions and the new award may afford benefits that are greater than that which employees are currently entitled to. This is particularly so for business operating in more than one state. For example, casual loading will differ from one state to the next and business will need to ensure compliance in each state.

Return of Good Faith bargaining

The transitional provisions indicate that the new bargaining framework under the Bill will operate from 1 July 2009.

The new bargaining framework imposes a requirement on employers and employees to bargain in good faith. Good faith bargaining obligations will be:

attending and participating in meetings at reasonable times;
disclosing relevant information in a timely manner, subject to appropriate protection for commercial in confidence information
responding to proposals made by a party in a timely fashion;
giving genuine consideration to the proposals of the other parties and providing reasons for their responses; and
refraining from capricious or unfair conduct that undermines freedom of association or collective bargaining.

Fair Work Australia will be able to make orders to ensure the integrity and fairness of the bargaining process.

Collective agreements will be broadly similar to the current system with:

agreements being subject to a form of ‘better off overall test’ administered by Fair Work Australia

restrictions on content of agreements

there will be some compulsory provisions - including a flexibility clause allowing an employer and individual employee to make a ‘flexibility arrangement’; dispute resolution (including employee representation) and consultation on major change; and

employee collective agreements being retained – although an employer can be compelled to negotiate a collective agreement with a union in some cases.

Employers will no longer be able to bargain with one union in preference to another, including for Greenfields Agreements. So long as a union has a member in the workplace (or is entitled to represent employees’ interests for Greenfields Agreements), the union can apply to be covered by the agreement.

Fair Work Australia will ensure that collective agreements pass the ‘Better Overall Test” and not in breach of the legislation.

>>Implications for business
For business involved in collective bargaining there a new set of rules in place which will need to be complied with when they commence a new round of negotiations. This combined with the abolition of AWAs means that there a new set of challenges for employers negotiating with unions in relation to workplace agreements. Certainly, the balance of power has shifted away from the employer with these amendments.

Additional changes of significance

Right of Entry
The Bill makes it clear that in the exercise of their powers, union officials investigating alleged breaches may only inspect records relating to non members where the employee has provided written consent or where FWA has determined that the union should be permitted access. The Bill has also been amended to make it clear that information collected is subject to the Privacy Act.

FWA will retain its power to deal with disputes about right of entry.

Transfer of business
The Fair Work legislation makes significant changes to the current circumstances in which a transmission of business (now called a transfer of business) occurs.

A transfer of business will occur where:

an employee changes employer

the work the employee does for each employer is the same or substantially similar

there is a particular ‘connection’ between the old and new employers—either a transfer of assets used in connection with the work, or an outsourcing, or an insourcing or where the two employers are ‘associated employers’.

The types of instrument that can ‘transfer’ are:

enterprise agreements
named employer respondency modern awards (other modern awards would continue to apply on their terms)
guarantees of annual earnings for high income employees.

The legislation returns to the pre-WorkChoices position that an instrument that transfers continues to apply to the new employer until it is terminated or replaced (under WorkChoices they applied for up to 12 months).

Instruments only transfer where the new employer takes on employees, and there is no obligation to do so. Where the new employer does take on employees, the application of the transferred instruments is generally confined to those employees, plus any new employees the employer takes on in the business where the workplace is instrument-free.

The Fair Work legislation gives FWA quite significant power to alter the coverage of instruments following a transfer of business. This includes power to order that an employer’s existing instruments cover the employees instead.

>>Implications for business
This is a return to the pre WorkChoices position.

Employers will need to ensure that they carefully examine all industrial instruments and contracts of employment when looking at purchasing, selling or restructuring a business.

Business will no longer have the luxury of having the option of “tolerating” a problematic collective agreement for 12 months after purchasing a business before they can have it renegotiated. Incoming businesses will now be stuck with the set of terms and conditions governing the employment relationship until the agreement expires, which could be 4-5 years down the track.

Businesses ought to ready themselves for the commencement of the Forward with Fairness Regime starting with the application of the new rules for unfair dismissal and return of good faith bargaining on 1 July 2009.

The following months will provide further clarity as to the impact of these amendments on your business, as the Fair Work legislation comes into force, additional transitional legislation details are released and the award modernization process progresses.

Email Andrew Bland at ABland@blandslaw.com.au

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