By Daniel White, Partner, and Alexander Millman, Senior Associate

On 27 October 2022 the Minister for Employment and Workplace Relations introduced the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022 (the Bill).

The first broadside of the Albanese Government’s war on the wage price index includes a collection of promises taken to the May 2022 election and ideas arising out of the Jobs and Skills Summit in August 2022.

While some stakeholders will be applauding the legislative move to abolish once and for all the Australian Building and Construction Commission (ABCC) and the Registered Organisations Commission (ROC), it has been apparent over the last week that businesses have been focussing on the many proposed amendments which will directly affect the employment relationship.

This high-level overview will cover:

• Perspective on the political climate facing the passage of the Bill
• Limitations of fixed-term contracts, pay secrecy clauses
• Commencing bargaining: further avenues
• Easing up on the ‘better off overall test’
• Multi-employer bargaining (industry-wide bargaining)
• Lowering the bar for FWC arbitration in bargaining disputes
• Simplifying approvals: the concept of ‘genuinely agreed’?
• Correcting errors in enterprise agreements
• Protected action: talk first, strike later (with extended period)
• Terminating enterprise agreements and ‘zombie’ agreements
• Prohibiting sexual harassment in the workplace
• Flexible working arrangements
• Other odds and ends

Some perspective…

There is no doubt that the Bill proposes some of the most dramatic changes to the industrial relations landscape since the wholescale introduction of the Fair Work Act 2009 (Cth) (FW Act) on 1 July 2009.  This includes limiting freedom of contract, expanding the Fair Work Commission’s (FWC) role in bargaining and proposing a pseudo industry-wide bargaining platform (across three streams).

However, in order for the Albanese Government to have the Bill pass through the Senate, it will need to secure not only the 12 votes from the Greens, but at least one other vote from Pauline Hanson’s One Nation, Jacquie Lambie Network, United Australia Party or ACT Independent, David Pocock.

Media reports over the last week may indicate that, once again, bi-cameral politics of the Senate may prove too challenging for large-scale industrial relations reform, as former Coalition Industrial Relations Minister, Christian Porter, found in March 2021 (after securing only minor reform relating to the definition of casual employment).

At this stage it would appear history will repeat itself, with the Bill looking like it will have to be split, and the more controversial changes around bargaining being dropped, at least for now, in order to secure passage of the broader reforms in the next sitting week of Parliament, being 21 to 24 November 2022.

Limitations on fixed-term contracts, pay secrecy clauses

First and foremost, and likely to be of consternation to many employers, is the statutory limitation on fixed term contracts (also known as maximum term contracts).

The proposed new s.333E of the FW Act will make it unlawful for an employer to enter into a contract of employment with an employee that is:

• expressed to be for a fixed term of more than two years;
• includes an option for the contract to be extended beyond a period of two years; or
• is consecutive to a previous fixed term contract which, taken together, results in the employee being employed on fixed term contracts for more than two years.

The last of these is clearly intended to deal squarely with the issue that arose in Khayam v Navitas English Pty Ltd [2017] FWCFB 5162, in which an employee engaged for eleven years on “rolling” fixed-term contracts was found to have not been dismissed and, therefore, unable to claim unfair dismissal.

The Bill proposes some exceptions to this prohibition, including where the employee is engaged under the contract to perform only distinct and definable tasks involving specialist skills or peak demand periods, the employee is engaged pursuant to a training arrangement, where the contract relates to a position for the performance of work that is funded by the government, where the employee is (at the time the contract was entered into) paid above the high income threshold, where a modern award permits a longer period, but by and large the exceptions are limited to senior executive-style roles.

Perhaps of even more concern to employers is the proposed s.333G(1), which will render clauses which contravene the abovementioned prohibitions invalid. This will, in effect, convert an otherwise fixed-term contract into an ongoing/indefinite contract by force of law. The FWC is also proposed to be empowered to deal with disputes about fixed-term contracts.

Employers do not, however, need to panic about their existing fixed-term contracts; s.333E will only apply to new contracts entered into after the Bill comes into law, although previous fixed term contracts may be taken into consideration for the purposes of assessing whether a contract is a consecutive contract.

The Bill also proposes to expressly provide that an employee has a workplace right, protected by Part 3-1 of the FW Act, to:

• disclose, or not disclose, their remuneration; and
• ask any other employee (whether employed by the same or a different employer) about their remuneration (including quantum and number of hours the employee works).

Contractual terms which purport to impose conditions of secrecy in this regard will be rendered void, and an employer who enters into a contract including a remuneration secrecy clause will be liable for a pecuniary penalty.

The contractual prohibitions will only apply to new contracts entered into, or old contracts which are varied, after the Bill comes into law. The civil penalty provision will only apply after the Bill has been law for six months.

Commencing bargaining: further avenues

The Bill seeks to make further changes around how bargaining can be initiated in circumstances where there is an existing, but expired, single-enterprise agreement.

Within five years following the expiry of the single-enterprise agreement, a union can request the employer in writing to commence bargaining without the employer’s consent, as long as:

• the proposed agreement will replace the expired single-enterprise agreement; and
• the proposed agreement will cover the same, or substantially the same, group of employees as the expired agreement.

The consequence for employers is that the good faith bargaining obligations will apply to them following the request, with consequential bargaining orders being sought by the union(s) in the FWC.  Further, applications for protected industrial action orders may follow.

This process does not apply for initiating greenfields or multi-employer bargaining streams as set out below.

Easing up on the BOOT

Before too much is said, it should be noted that the Bill does not alter the fact that an enterprise agreement must result in every employee being better off overall before it can be approved.

It does, however, mitigate some of the roadblocks that have impeded enterprise bargaining, particularly in the last few years.

First, the Bill will remove the requirement for the FWC to consider hypothetical future employees when determining whether a proposed enterprise agreement will pass the Better Off Overall Test (BOOT).  There is an express statement that the BOOT should be applied as a global assessment – rather than a line by line approach comparing each agreement clause against the relevant Modern Award(s).

Specifically, the words “each prospective award covered employee” will be deleted from s.193(1) of the FW Act, these being the words that caused much consternation ever since the decision in Loaded Rates Agreements [2018] FWCFB 3610.

In that case, the Full Bench emphasised that an enterprise agreement could not be approved unless the FWC was satisfied that every prospective employee would be better off under the proposed agreement and noted that this required a degree of conjecture. By removing prospective employees from the equation, the Bill similarly removes this element of conjecture.

Second, the FWC will be compelled to give “primary consideration” to any common view between the bargaining parties that the agreement satisfies the BOOT when conducting its assessment. That is, if employer, employees, and unions are in concurrence that the enterprise agreement satisfies the BOOT, the FWC is not to go off on a frolic of its own to prove otherwise.

With any luck these amendments will significantly accelerate the approval of enterprise agreements, at least in the absence of any opposition.

Every rose, however, has its thorn, and this amendment is no different.

In this case, the thorn is that the FWC will be able to reconsider, post-approval, whether an enterprise agreement passes the BOOT if employees start working patterns of work or types of employment that were not contemplated by the FWC when approving the agreement.

The result being the FWC varying the terms of the agreement or the employer providing an undertaking to resolve the BOOT concern, any time after agreement approval.

In other words, employers may still need to lead evidence of every possible pattern of work – much as they must do now – in the course of the approval process if they wish to avoid a post-approval rethink of the BOOT.

As such, while the agreement approval process in the FWC may be faster and easier, the amount of work required of employers may simply switch from “getting it over the line” to “making sure it stays over the line.”

This provides a degree of uncertainty for business. The consequence of this latter BOOT reform being that employers can no longer fix the terms and conditions of employment for the life of the agreement, with the agreement being capable of constant challenge by unions and employees in the FWC (potentially resulting in endless negotiation and compromise).

Multi-employer bargaining

The Bill’s approach to multi-employer bargaining appears in the form of a series of subtle amendments to the FW Act’s existing avenues that permit the same outcome, however with potential dramatic effect.

There are three proposed avenues to this multi-employer bargaining:

• supported bargaining;
• single-interest employer authorisation; and
• co-operative workplaces (the current multi-enterprise agreement system).

The cumulative effect of these changes shifts the focus towards industry level bargaining, away from the enterprise level, including forcing employers to bargain without consent, and becoming subject to agreements after they have been approved by the FWC.

There appear to be some powers for the FWC to exclude some unions from participating in multi-employer bargaining if there is a history of non-compliance with the FW Act (which has been attributed in the media towards the CFMMEU).

Supported bargaining

Specifically, “low paid bargaining” under s.242 of the FW Act will become known as “supported bargaining”, which first requires that a party must apply for a “supported bargaining authorisation” (previously a “low-paid authorisation”) under s.243 of the Act.

The FWC will be compelled to issue a supported bargaining authorisation if it is satisfied that it is appropriate to do so having regard to:

• the prevailing pay and conditions within the relevant industry or sector;
• whether the employers have clearly identifiable common interests; and
• whether the number of likely bargaining representatives makes for a manageable bargaining process.

The FWC will also need to be satisfied that at least some employees will be represented by a union.

It is possible to foresee, in at least some industries, that the restriction on the number of bargaining representatives may cause demarcation disputes between unions.

Certainly, where union coverage overlaps it may well be that the most significant impediment to multi-employer bargaining will be refining the scope of the supported bargaining authorisation to minimise those disputes.

Of concern, is that the Bill proposes to allow unions to make an application to force other employers to be subject to a supported bargaining agreement – once it has been approved by the FWC (with or without consent of that employer).

Single-interest employer authorisation

Perhaps the most concerning matter for employers to come out of these amendments is the new stream of multi-employer bargaining, which on application to the FWC by an employer(s) or union(s), a ‘single-interest employer authorisation’ can be granted.

This will require an employer to bargaining with other employers (i.e. on an industry basis), if:

• the employers the subject of the application have “common interests” (such as geographical location of the employers, the regulatory regime such as common Modern Awards, the nature of the enterprise to which the agreement will relate and the terms and conditions of employment in those enterprises);
• the group of employees who will be covered by the agreement was fairy chosen;
• at least some employees that will be covered by the agreement are represented by a union;
• the employer and any unions affected have the opportunity to express their views to the FWC on the application; and
• it is not against the public interest to make the authorisation.

There are limited circumstances for an employer to abstain from being ‘roped in’ to this multi-employer bargaining arrangement, including:

• small business employers;
• the employer is already covered by a single-interest employer authorisation or a supported bargaining authorisation in relation to those relevant employees (or an application is on foot in the FWC, yet to be decided); or
• the employer is covered by an ‘in-term’ enterprise agreement that has not passed its nominal expiry date at the time the FWC makes the determination.

The immediate high-level concerns arising from this are:

• the ability for unions to seek an order that an employer, and its employees, be covered by a supported bargaining agreement without the consent of the employer or the employees (i.e. no vote required) – employers can be subsequently added by order of the FWC;
• compulsion to then participate in bargaining, including being subject to good faith bargaining obligations to attend meetings etc.;
• the ability for industrial action to be taken in relation to proposed supported bargaining agreements; and
• the inability for employers to exit a supported bargaining agreement without the consent of employees or unions.

Employees will also be able to take protected industrial action in support of this stream of multi-enterprise agreement.  Depending on the scope of the single-interest employer authorisation granted by the FWC, industrial action relation to a proposed agreement may well close down large sectors of the economy (such as the resources sector).

The FWC will be compelled to order employer and employee parties to attend mediation or conciliation before voting concludes in relation to the protected action ballot order, and the parties must attend those sessions, before any protected industrial action can take place.

This would seem to do little to mitigate the potential impact of industrial action if a party is truculent and wanting to flex their industrial muscle (noting the new three month limitation on taking protected action per PABO as noted below).

Co-operative workplaces

It should be noted that the existing multi-employer bargaining processes for businesses in a common enterprise continue unaffected, although these will be referred to elsewhere in the FW Act as “cooperative workplace agreements.” Enterprise agreements made subject to single interest employer authorisations will, however, be liable to have employers (and their employees) added to them on application of a union.

Lowering the bar for arbitration in bargaining disputes

Presently, the FWC generally cannot step and in make determinations on terms to be included in a proposed enterprise agreement except where one party has engaged in serious and sustained contraventions of bargaining orders already made.

Where this occurs, the FWC may make a “serious breach declaration”, following which it may step in to resolve, for itself, any outstanding matters.

The Bill proposes to significantly lower this bar by replacing the need for a “serious breach declaration” with an “intractable bargaining declaration”, which may be obtained if the FWC has already dealt with a dispute about the relevant matters (such as a s.240 application), there is no reasonable prospect of the party’s reaching agreement on the outstanding items and it is reasonable in all the circumstances (taking into account the views of the bargaining representatives).

Once this declaration has been obtained, following a ‘post-declaration negotiation period’ for a specified time, a Full Bench of the FWC may determine for itself, by issuing an “intractable bargaining workplace determination”, the matters in dispute between the parties.  The declaration must include:

• the terms that were agreed between the parties;
• the terms that the FWC determines remain at issue;
• nominal expiry date;
• dispute settlement procedure (which itself, may be an unresolved term between the parties);
• model consultation clause; and
• model flexibility clause.

The change from actual unlawful conduct (in breaching orders of the FWC) to mere disagreement may well see a significant increase in the FWC involving itself in protracted bargaining disputes.

It is readily foreseeable that more militant bargaining representatives may well seek to test the limits of this amendment at the earliest possible opportunity and leverage it as a means to achieve favourable industrial outcomes.

This could well be seen as a fundamental undermining of the very concept of an enterprise “agreement” and usher in a much more combative and disruptive era of bargaining – less a “meeting of the minds” and more “meet you in court.”

However, the risk of an adverse arbitrated outcome imposed by the FWC equally applies to all bargaining participants, which is something that will no doubt be weighed up.

Simplifying approvals: ‘genuinely agreed’?

The Bill proposes a new approach to resolving the myriad of issues concerning the ‘genuine agreement’ test on enterprise agreement approvals.  Under this arrangement, the FWC will be required to develop a ‘Statement of Principles’, which will have to deal with the following matters, in order for it to be satisfied the statutory requirement has been met on approval:

• informing employees about bargaining;
• informing employees of their right to be represented by a bargaining representative (such as a union);
• providing employees with a reasonable opportunity to consider a proposed agreement;
• explain the terms of an agreement and their effects;
• providing employees with a reasonable opportunity to sight an agreement in a free and informed manner; and
• any other matters the FWC considers relevant.

This may in practice simply preserve the status quo approach to agreement approvals.  The Bill does retain the FWC’s ability to disregard minor procedural and technical errors when assessing genuine agreement on approval.

The Bill does however place limitations on employers seeking to make enterprise agreements with a small start-up workforce, which will later apply to a larger one.  The Bill effectively seeks to restrict this approach by deeming such agreements as not being ‘genuinely agreed’.  This may present some significant hurdles to employers in a range of industries that often adopt this approach in circumstances where a union refuses to enter into greenfields discussions in a timely manner, or where the greenfields terms and conditions are simply not viable for the particular project.

Errors in enterprise agreements

The Bill proposes to empower the FWC to vary an enterprise agreement to correct or amend and obvious error, defect or irregularity on its own motion or on application by the employer, union or employee covered by the agreement.

This may assist businesses in dealing with unintended errors in an enterprise agreement that may otherwise cause concern for the agreements’ application and entitlements arising under it.  Whilst there are some current avenues for parties covered by an agreement to remedy unintended errors, this reform would appear to streamline the process.

Protected industrial action: talk first, strike later (with an extended period)

The Bill proposes mandatory conciliation conference for the parties to attend following the close of the protected action ballot order (PABO).  This may be in an effort for the FWC to assist in resolving the bargaining impasse, with resultant protected action being avoided.

In the event a party does not attend the mandatory conference, the protected status of any industrial action will be lost.  This includes an employer’s ability to take an ‘employer response action’ (or a lock out) in the event it fails to attend the conference.

The current thirty day period following the declaration of ballot results in order to initiate any protected industrial action, will also be extended to three months.  That means that there is a longer period of time for the union and employees to consider initiating a range of industrial action set out in the PABO, without having to seek an extension to do so from the FWC.

The three month period does however now seek to set an outer limit on industrial action.  As with the current rules, any protected action notified and taken during the initial 30 day period, can subsequently be notified and taken indefinitely.  However the changes seek to limit the taking of any action to three months (including any employer response action).  Once the three month period has expired, the union will need to apply for another PABO to take any subsequent action (even if action was notified and taken in the initial three month period).

The Bill appears to seek to move away from reliance on the Australian Electoral Commission from conducting PABO ballots (currently taking 30 working days to complete), with a move towards a more expeditious process of an established listed of private ballot providers, which will result in PABO results being declared more quickly and subsequent industrial action occurring sooner than under current arrangements.

Terminating enterprise agreements and ‘zombie’ agreements

The Bill seeks to address recently alleged controversies surrounding employers applying to terminate expired enterprise agreements during protracted enterprise bargaining.  The applications to terminate enterprise agreements represent very few levers that employers have during protracted negotiations, often when facing extended periods of protected industrial action.

What the Bill will seek to do is:

• require the FWC to consider the interests of the employees covered by the agreement as opposed to the current public interest test;
• the FWC must have regard to whether bargaining has or is likely to commence, covering the same or substantially the same group of employees, and whether the termination would adversely affect the bargaining position of employees covered by the proposed agreement;
• on application, the FWC must terminate an expired enterprise agreement, where either:
  • the continued operation of the agreement would be unfair to covered employees;
  • the agreement does not and is not likely to cover any employees; or
  • any of the following circumstances apply:
    • the continued operation of the agreement would pose a significant threat to the viability of the employer’s business which is subject to the agreement;
    • the termination of the agreement would likely reduce the potential for termination of employment by way of redundancy, or due to insolvency or bankruptcy; and
    • where the agreement continues termination entitlements the employer has given a guarantee to the FWC in respect of its compliance with those obligations (which last for four years, or another period approved by the FWC).

If a union or employer covered by the agreement oppose the application to terminate, the matter must be dealt with by the Full Bench of the FWC.

These provisions will apply to all new and existing termination applications. So for some employers with current termination applications before the FWC, this could change the strategy and approach it has adopted in bargaining to date.

In a resuscitation of a proposal put forward by the Morrison Government in late 2021, the Bill will legislate an automatic sunsetting of pre-Fair Work collective and individual agreements 12 months after the commencement of the relevant provisions.

Employers will be required to give employees notice of the date on which an agreement will terminate, however may apply to the FWC for an extension of up to four years if the relevant employees will be better off under the agreement in question.

The termination of modern enterprise agreements after their nominal expiry date will also be much more restricted, with contested applications to be determined by a Full Bench of the FWC and expressly requiring consideration of whether the application is related to the bargaining of a new agreement.

Prohibiting sexual harassment in the workplace

The 2021 amendments to the FW Act made by the Morrison Government to imbue the FWC with the power to issue “stop sexual harassment” orders will be rearranged and expanded upon under the terms of the Bill (adopting relevant definitions from the model Work Health and Safety laws, such as the expansive definition of ‘worker’).

A new Part 3-5A will be inserted which will:

• expand the application of the FW Act, in relation to sexual harassment, to “workers” rather than just “employees”;
• impose a pecuniary penalty for sexual harassment; and
• create vicarious liability for sexual harassment under the terms of the FW Act (including not only for direct employers, but ‘persons conducting businesses or undertakings’ – such as principals).

The imposition of a pecuniary penalty is significant, as under existing anti-discrimination legislation the only remedy available is damages. With the inclusion of a pecuniary penalty, an applicant may seek monetary redress even in the absence of any injury or damage.

Harassed persons will be able to apply to the FWC to deal with a sexual harassment dispute (including consent arbitration), however will be unable to take the dispute to Court unless the dispute is not exclusively about sexual harassment.

If the dispute relates solely to sexual harassment the applicant will be limited, under the FW Act at least, to seeking a stop sexual harassment order; claims for damages through the Courts on the basis of sexual harassment alone will remain the purview of anti-discrimination law.

Based on the drafting of the relevant provisions, it appears that these amendments may provide a means for applicants to avoid the strict 21-day time limit for making adverse action applications post-dismissal, as including a sexual harassment allegation (however spurious) will allow them to access the more generous 24-month time limit for lodging a sexual harassment dispute.

Flexible working arrangements

This proposed amendment relates to existing provisions within section 65 of the FW Act, around employees who are parents with school-aged children, who have a disability, are over 55 or are dealing with instances of domestic violence (or an immediate family member facing the same).  It does not apply more broadly to employees having rights to request flexible working arrangements outside of the current prescriptions in the FW Act.

Unions and other employee advocates have long decried the ability of employers to refuse flexible working arrangements with mere assertions of “reasonable business grounds” with no avenue of review or appeal.

The Bill will do away with that objection in two steps:

• by requiring employers to set out, in fine detail, the exact business grounds on which the request for flexible working arrangements was refused; and
• allow the FWC to rule whether the business grounds relied on by the employer in refusing the request were, or were not, reasonable business grounds.

The FWC will also be empowered to order that the employer grant the request, or a variation of the request, if the dispute is unable to be resolved without the making of such an order.

Employees will also be able to seek pecuniary penalties for a refusal of a flexible working arrangement on anything other than reasonable business grounds, meaning that a ruling by the FWC to this effect will leave an employer at risk of further legal action as a result.

Odds and ends

In addition to the above “big ticket” items, the Bill looks to insert two new objects into the FW Act including ‘promotion of job security’ and ‘gender equity’ which may influence the Court and FWC interpretation of the FW Act in some cases.

There are expanded protected attributes, including to breastfeeding, gender identity and intersex status, aligning the general protection (adverse action) discrimination provisions with broader antidiscrimination laws.

The Bill will also quintuple the value of claims that can be brought under the small claims provisions of the FW Act, from $20,000 to $100,000.

Additional Expert Panels will be set up to deal with:

• pay equity;
• the care and community sector; and
• pay equity in the care and community sector.

Variations to modern awards in the care and community sector will only be able to be made by the relevant expert panel; fortunately, this does not include variations arising out of the Annual Wage Review.

While there may be some merit in setting up dedicated panels to deal with award variation cases still on foot and in industries where equal remuneration is highly contested, the requirement for these panels to have a majority (i.e. at least three) FWC members means that the impost on the FWC’s existing resources is likely to be the same as any current process.

If anything, this change would seem to do nothing more than introduce a new layer of bureaucracy and create new “Expert Panel Member” positions to which certain luminaries may be appointed.

The Bill also proposes some changes to how equal remuneration and work value cases are considered and dealt with by the FWC.

There are also some prohibitions around employment advertisements that indicate a rate of pay lower than that prescribed by the FW Act, a Modern Award or enterprise agreement.

Finally, the abolition of the ROC sees the regulation of unions returned to the FWC, although to its General Manager rather than its members. The General Manager will also, for the first time, be empowered to issue fines through infringement notices and enter into enforceable undertakings with unions, rather than be limited to litigation. Whether this will make a difference to the behaviour of recidivist unions remains to be seen.

Much yet to be done

The above is only a bare scratching of the surface of the Bill, and there is much work to be done both in and out of Parliament.

Certainly, there are some drafting issues that indicate a bit of rush by the Parliamentary draftsman (such an expression being “replaced” four times in a provision where it only appears three times) and which will need tidying-up before the Bill can be passed.  This, amongst other examples, has been picked up as a concern by the Senate cross-bench, reflective of the rushed nature of the Bill.

One thing is clear – the Bill, if passed, will be the most significant shake-up in the industrial relations space since the FW Act itself was introduced.

It will be prudent for employers to reflect on the current and projected industrial relations strategies in light of the proposed amendments in the Bill, to see if any re-alignment or other actions are now required, in anticipation of the changes.

We live in interesting times, indeed.