That’s a wrap: Dust settles on tumultuous Secure Jobs Bill

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

NOTE: This article is an updated version of our original article “Messianic deliverance or more of the same? A deep dive into the Secure Jobs, Better Pay Bill” published on 2 November 2022, and incorporates commentary arising from significant amendments to the legislation made by both the House of Representatives and the Senate.

On 27 October 2022 the Minister for Employment and Workplace Relations introduced the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022 which, after 157 amendments in the House of Representatives and further amendments in the Senate, passed both houses on 2 December 2022 (Act). The Act received Royal Assent on 6 December 2022.

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:

  1. Perspective on the political climate facing the passage of the Act
  2. Limitations of fixed-term contracts
  3. Pay secrecy clauses
  4. Commencing bargaining: further avenues
  5. Easing up on the ‘better off overall test’
  6. Multi-employer bargaining
  7. Lowering the bar for FWC arbitration in bargaining disputes
  8. Simplifying approvals: the concept of ‘genuinely agreed’?
  9. Correcting errors in enterprise agreements
  10. Protected action: talk first, strike later
  11. Terminating enterprise agreements and ‘zombie’ agreements
  12. Prohibiting sexual harassment in the workplace
  13. Flexible working arrangements
  14. Other odds and ends

Some perspective…

There is no doubt that the Act 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.

Due to not having a majority in the Senate even with the support of the Greens, the Albanese Government required the support of the Senate crossbench.

Because the Government pursued an agenda of passing the legislation in its entirety before Christmas, this imposed a tight timeframe which put some crossbench Senators, in particular the two senators from the Jacqui Lambie Network, off-side. The government therefore focussed its attention on Senator David Pocock to secure passage of the Act.

Although there was speculation that Senator Pocock would insist on the more contentious elements of the Act be removed for more detailed consideration, a deal was announced on 26 November 2022 which would allow the Act to pass both houses.

Political spectators will recall that the last time major industrial relations reform was proposed, by the Morrison Government in late 2020, it was ignominiously rejected by the Senate and the Government had to eject almost all major reforms in order to secure passage through both Houses.

That the Albanese Government has managed to achieve, in relatively short order, what the Coalition could not after nearly ten years in power may be a sign of things to come with further industrial relations reform on the horizon.

Limitations on fixed-term contracts

Commencement: 6 December 2023

An amendment made by the Act which will have a direct impact on hiring and human resources practices is the new statutory limitation on fixed-term contracts (also known as maximum term contracts).

This is one of the very few proposals of the Act that managed to make its way through the parliamentary process substantially unscathed.

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

  1. expressed to be for a fixed term of more than two years;
  2. includes an option for the contract to be extended beyond a period of two years; or
  3. 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 Act includes some exceptions to this prohibition, including where:

  1. the employee is engaged under the contract to perform only distinct and definable tasks involving specialist skills over peak demand periods;
  2. the employee is engaged pursuant to a training arrangement;
  3. the contract relates to a position for the performance of work that is funded by the government;
  4. the employee is (at the time the contract was entered into) paid above the high-income threshold (currently indexed at $162,000 pa); or
  5. a modern award permits a longer period;

but by and large these exceptions are limited to senior executive-style roles.

The Act also prohibits employers from working-around this new obligation, by instilling a ‘substantial continuity’ requirement between periods of employer, which is to prevent employers from:

  1. breaking the continuity of employment by terminating and then re-hiring;
  2. delaying the re-engagement to break continuity; or
  3. altering terms and conditions or duties (presumably to create a ‘new role’) in order to break continuity.

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.

There are ‘anti-avoidance’ provisions (including civil penalties) that also apply, in circumstances where an employer seeks to make changes to the timing or the terms of the fixed-term contract or makes a decision not re-hire the employee, to avoid the operation of this Part.

The FWC is also empowered under the new s.333L to deal with disputes about fixed-term contracts, although it may only arbitrate those disputes by the consent of both parties.

Employers do not, however, need to panic about their existing fixed-term contracts; s.333E will only apply to new contracts entered into after this part of the Act comes into law on 6 December 2023*, although previous fixed-term contracts may be taken into consideration for the purposes of assessing whether a contract is a consecutive contract (as part of a series of contracts).

What this means is that an employer may validly enter into a five-year fixed term contract before 6 December 2023, but this will count for the purposes of determining whether any further fixed-term contract on expiry of the existing one, falls afoul of the new prohibitions (which in this particular scenario, it will).

* The provisions in the Act concerning fixed-term contracts will not commence until 12 months’ following Royal Assent.  The Minster has indicated on 5 December 2022 that he will not proclaim any earlier commencement date.

Outlawing of pay secrecy clauses

Commencement: 7 December 2022

The Act grants to employees an express workplace right, protected by Part 3-1 of the Act, to:

  1. disclose, or not disclose, their remuneration; and
  2. 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).

Taking adverse action against an employee because of their exercise of this workplace right will expose employers to civil penalties under Part 3-1 of the Act.

This workplace right is supplemented, in the new s.333D, by a ban on contractual terms which purport to impose conditions preventing employees from discussing their pay. Such clauses in a contract of employment will be rendered void, and an employer who enters into a written agreement with an employee including a remuneration secrecy clause will be liable for a civil penalty.

The contractual prohibitions will only apply to new contracts entered into, or old contracts which are varied, after this part of the Act comes into law.

An interesting dichotomy of this part of the Act is that only pay secrecy terms in contracts of employment are rendered void by s.333C. Pay secrecy clauses in other agreements, while exposing the employer to civil penalties under s.333D, are not rendered void by s.333C or any other provision.

That being said, industrial relations practitioners will need to be mindful of the breadth of s.333D, which applies not only to contracts of employment but also any “other written agreement” between an employer and employee. This could include a deed of settlement between an employer and employee, so such agreements will need to be carefully drafted to ensure that employers do not, in settling one matter, expose themselves to another.

Employers should also be mindful that this does not abrogate their own obligations at common law to keep confidential information confidential. Because the workplace right to disclose or not disclose remuneration is granted exclusively to the employee, information about the employee’s remuneration remains confidential at common law until such time as the employee themselves chooses to waive this, by word or by deed.

Commencing bargaining: further avenues

Commencement date: 7 December 2022

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

The new s.173(2A) will allow a union, within five years following the expiry of the single-enterprise agreement, to request the employer in writing to commence bargaining without the employer’s consent, as long as:

  1. the proposed agreement will replace the expired single-enterprise agreement; and
  2. 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.

Previously:

  1. the employer unilaterally issued the Notice of Employee Representational Rights;
  2. the parties had to agree to bargain; or
  3. a bargaining representative (union) had to obtain a majority support determination order from the FWC;

to commence bargaining. This amendment now gives unions, in particular circumstances, the unilateral power to start the bargaining process.

Fortunately, this process does not:

  1. apply to initiating greenfields or multi-employer bargaining streams as set out below;
  2. allow a union to force bargaining on an employer who is not already in the bargaining system; or
  3. allow a union to use this process to expand the coverage of enterprise agreements in the workplace.

Employers may contemplate their enterprise agreement renewal strategies in light of this change.  This may include, commencing bargaining with its workforce for a replacement single-enterprise agreement on its own terms prior to the nominal expiry of the existing agreement, to avoid the legal and industrial consequences that may flow from a union exercising this provision.

Easing up on the BOOT

Commencement date: a day to be fixed, but no later than 6 June 2023

 A point of contention

The Act, in its original form, proposed to offer a lifeline to the bargaining system in general by removing the requirement for the FWC to be satisfied that “each prospective award covered employee” would be better off overall before concluding that an agreement passed the Better Off Overall Test (BOOT).

To achieve this, the words “each prospective award covered employee” will be deleted from s.193(1) of the 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 Act similarly removes this element of conjecture.

However, this proposal did not survive, being removed to secure the support of the Greens in the Senate at the very last minute, which was not broadly announced by the Albanese Government. As such, employers will still need to contend with hypothetical future employees and work patterns to demonstrate that an agreement passes the BOOT.

Battered, bruised, but alive

Notwithstanding this, some important amendments survived passage through the Senate and should, hopefully, remove at least some of the roadblocks to the approval of enterprise agreements.

First, the amendments to appease the Greens do not wholly remove the benefit of the original text. When considering prospective employees, the FWC will be limited by the new s.193A(5) to considering only those forms of work and work patterns of a “reasonably foreseeable employee” (replacing the phrase “prospective award covered employee”). The FWC will not be permitted (as it has on occasion been accused) to go off on a frolic to find a work pattern, no matter how unrealistic, that results in an employee not being better off overall.

When applying the “reasonably foreseeable employee” test, the FWC must have regard to the nature of the enterprise to which the agreement relates.  This includes determining whether a particular pattern or kind of work, or type of employment, is reasonably foreseeable if a view about the matter is expressed by the employer(s), bargaining representative(s) or employees.

Second, the Act emphasises in the new s.193A(2) that the BOOT is a global assessment, rather than a line-by-line comparison with the relevant modern award. In recent years, employers have grown increasingly frustrated with the FWC applying what appeared to be a test of “better off in every respect” rather than the BOOT; enshrining this global assessment will, hopefully, direct the attention of the relevant decision makers to the appropriate comparisons.

Third, 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. For the purposes of determining the views of employees, however, only the views of registered unions are relevant – the views of self-represented employees, or employees represented by independent representatives, do not factor into this consideration.

Further, the FWC now has the power to directly amend an agreement term, as opposed to an employer providing an undertaking to remedy the concern.  Where the FWC intends to amend a term, it must seek the views of the employer, bargaining representatives and the employees covered.

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

The compromise

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.

However, the FWC can only do this if, when approving the agreement in the first place, it did not have regard for the relevant types of employment or work patterns that are said to now result in employees not being better off overall.

One way around this would be to ensure that the FWC has all types of employment, and all work pattens, in contemplation in the first instance. In other words, employers may still need to lead evidence of every possible pattern of work – much as they must do now – during 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.”

The consequence of this is 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). This introduces a degree of uncertainty in bargaining and exposes employers to more protracted bargaining processes.

It used to be the case that once an agreement was approved, the focus shifted to the next agreement several years down the road. With this amendment, employers will not have this luxury but may instead be dragged into repeated battles in the FWC to ensure the survival of their agreement for the term of its nominal life (particularly in relation to roster changes not contemplated at time of approval). This of course may make bargaining less, rather than more, attractive to businesses – something that was doubtless not the intention.

Importantly, any post-approval BOOT assessment will be made on the Modern Award and the enterprise agreement at the time of approval.  This means that, if there are any subsequent changes to Modern Awards by the FWC (to hours of work, penalty rates etc.) post-agreement approval, this won’t result in the FWC hauling an employer back before it to then re-assess the BOOT and potentially result in undertakings in this regard. The exception to this is if there is a variation to the agreement, in which case the variation is assessed on the Modern Award as at the time of the application to vary the agreement).

Further, any decision to amend the agreement by the FWC (or undertaking provided by the employer) will usually be effective 7 days after the FWC makes such a decision.  If the decision is made with retrospective effect, the Act provides there is no liability to pay a civil penalty for past conduct (underpayments).  However, any underpayments will need to be rectified.

Multi-employer bargaining

Commencement date: a day to be fixed, but no later than 6 June 2023

The most contentious part of the Act has been, since its inception, the multi-employer bargaining provisions it both amends and creates.

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

There are three avenues of multi-employer bargaining following the passage of the Act:

  • 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 and 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 has been some exemptions from those participants in the general building and construction and civil construction industry from engaging in all multi-employer bargaining streams.  These exclusions are, however, very narrow, and limited to employees who perform work described in paragraph 4.3(a) and (b) of the Building and Construction General On-Site Award 2020, and largely not applying to any employee who is covered by any other modern award (including manufacturing, metal working, joinery and building trades, electrical trades, and the like).

In a departure from the usual process in single-enterprise bargaining, across all multi-employer bargaining streams the employer must first obtain written agreement from each union which is a bargaining representative before the agreement can be put to a vote.

This has the potential to cause significant issues in advancing a vote in light of union demarcations – for example, where one smaller union is holding out on the basis it believes it can obtain more favourable conditions for members, to that of another union with overlapping membership coverage, that accedes to the ‘deal’.

In this circumstance, the only recourse for an employer is to apply to the FWC for an order that the vote proceed (coined a “voting request order”), where the FWC must assess if the union withholding its written consent is doing so ‘unreasonably’ and such an order would not be inconsistent with, or undermine, good faith bargaining for the agreement.

Long-time industrial relations spectators will appreciate that industry-wide bargaining was essentially the old award system – indeed, the term “award” comes from the awards that tribunals would make to resolve disputes between employers and unions. This system was done away with under the Howard Government in 1996 in favour of enterprise level agreements; the Act appears to seek to restore this defunct system by a “back door” method.

Supported bargaining

 The first stream of multi-employer bargaining, “supported bargaining”, is truly a modification of the existing “low paid bargaining” provisions in s.242 of the FW Act.

To initiate multi-employer bargaining under this stream, a party must first apply to the FWC for a “supported bargaining authorisation” (previously a “low-paid authorisation”) under s.243 of the FW Act.

The FWC will be compelled to issue a supported bargaining authorisation if it is satisfied it is appropriate for the employers and employees to be covered by the proposed agreement (which may not necessarily be all the parties named in the application for the authorisation) to bargain together having regard for:

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

Importantly, the consent of the employers in question was never an aspect of this provision. Indeed, the views of the employers who are proposed to be the subject of the authorisation are not relevant to the FWC’s decision.

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.

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.

In and of itself, this seems relatively innocuous – indeed, some employers may well consider there to be strength in numbers.

The sting in the tail of the supported bargaining stream comes in the new ss.216B and 216BA, which allow the FWC to amend a supported bargaining agreement to add an employer and their employees to that agreement without the consent of the employer.

In short, employers who had no input at all in the bargaining process may be forced into a supported bargaining agreement on application by the union.

The union will still need to show that a majority of employees of the relevant employer, who will be covered by the agreement, want to be covered by it; while the FWC must consider the views of the employer in question, the employer’s views are not determinative.

Further, amendments made in the Senate may result in applications to the FWC for supported bargaining authorisations being mere formalities.

Amendments moved by the Government allow the Minister to declare industries, occupations, or sectors for the purposes of supported bargaining, in which case the FWC will be compelled to grant a supported bargaining authorisation upon application. Consideration of the appropriateness of the authorisation will become moot.

Single interest employer authorisation

Single interest employer authorisations are not new to the FW Act; however, the Act makes some radical changes to this process.

First, single interest employer authorisations were originally something only sought by employers, usually for the purposes of joint ventures or franchise networks. Unions and employees were not able to seek these authorisations.

The Act does away with this by allowing unions to seek single interest employer authorisations, not just employers.

Second, the FWC could only grant a single interest employer authorisation if the employers to be covered by it had consented to it and had not been coerced into giving their consent. This was originally retained in the Act, but subsequent amendments have now made it that the consent of the employers will be convenient, but not necessary, except where it is an employer seeking the authorisation.

The FWC will be compelled to grant a single interest employer authorisation if:

  1. at least some employees who will be covered by the proposed agreement will be represented by a union;
  2. the employers and bargaining representatives have had the opportunity to express their views on the authorisation to the FWC;
  3. the employers have common interests, expressed in the same manner as in the supported bargaining stream except for the added requirement that the businesses must be “reasonably comparable;” and
  4. it is not against the public interest for the authorisation to be granted.

It is worth noting that while the FWC must be satisfied that the employers and bargaining representatives have had the opportunity to express their views on the authorisation, it is in no way required to take those views into account, nor will it be possible for an employer to object to the proposed agreement/authorisation in circumstances where its views are not acceded to.

Where a union is seeking the single interest employer authorisation, the FWC will also need to be satisfied that:

  1. the employer in question is not a small business employer (defined, for the purposes of the multi-employer bargaining provisions only, as having a headcount of 20 or more employees – including employees of related bodies corporate (as defined by s 50AAA of the Corporations Act 2001 (Cth));
  2. the employer has not made their own application for a single interest employer authorisation that is pending decision in relation to the same group of employees;
  3. the employer is not subject to a supported bargaining authorisation in relation to the same group of employees;
  4. the majority of employees of the employer who will be covered by the proposed agreement want to bargain for the agreement (noting that this is likely to be the group specified by the union – which (for the purposes of varying a single interest employer authorisation/agreement) does not necessarily need to be fairly chosen; and
  5. there is no single enterprise agreement currently in force (within its nominal expiry) or being bargained in relation to that group of employees.

Once the authorisation has been granted, the employers covered by the authorisation are bound by good faith bargaining obligations, whether or not they wanted to bargain.  Further, employers are prohibited from bargaining with employees for any other agreement while they are covered by the single interest employer authorisation.

However, if an employer can demonstrate that it has a history of effectively bargaining, is currently bargaining in good faith, and not less than 9 months have passed since the nominal expiry date, the FWC may opt to exclude the employer from the single interest authorisation (giving it a 9-month grace period to enter into a single-enterprise agreement).  This includes any application to vary the single interest employer authorisation to ‘rope in’ an employer part-way through the process (discussed below).

As with supported bargaining, once an agreement has been reached and approved, there will be an ability for employers and employees to be added to the agreement despite not having had any say in its formation. While the consent of a majority of employees at a workplace will still be required (although again, it is entirely unclear what this group of employees may be, and whether it must be fairly chosen), if a union makes an application to the FWC for an employer to be added to the agreement the consent of the employer is useful, but not essential.

Perhaps more concerning in this respect, Government amendments in the Senate make it much easier for unions to add employers to existing single interest employer agreements/authorisations.

The new provisions create a presumption that where the application to add an employer to a single interest employer agreement has been made by a union, and the employer has at least 50 employees (across all associated entities) at the time of the application, it will be deemed that:

  1. the new employer has clearly identifiable common interests with the employers already covered by the agreement; and
  2. it is not contrary to the public interest for the new employer to be added to the agreement;

unless the new employer can prove otherwise.

The extent of the evidence required to be presented to ‘prove’ that the businesses do not have common interests is unclear. It is likely, however, given this is expressed to be a standard greater than “the Commission is satisfied” – being ultimately discretionary – that this is nothing short of an objective proof of fact – something which will always (on a proper construction) be reviewable by the Federal Court.

Other than as traversed above, there are limited grounds upon which an employer can be excluded from a single-interest authorisation or from being ‘roped in’ to an existing single-interest employer agreement.  That is:

  1. where the employer and the union(s) have agreed to enter into a single-enterprise agreement (which will no doubt attract a ‘premium’ in trade off for being subject to the single interest employer agreement for whatever reason);
  2. the employer has a change of circumstance which results in it no longer being appropriate for them to be covered by the authorisation, and makes an application to the FWC to be removed from the authorisation; or
  3. the employer (who must employer fewer than 50 employees) and the employees jointly apply to vary the single interest employer authorisation to remove themselves as parties (conducted by vote).

The sting in the tail in the later circumstance is that the FWC must approve the variation subject to a number of conditions being met, including the consent of the union parties to the single interest authorisation agreeing to the variation.  This naturally will only occur when the employer and the union agree to a more favourable single-enterprise agreement that may trade some flexibilities, for increased wages.

What’s the difference?

As can be seen from the above, the difference between the two forms of multi-employer bargaining which are triggered by the grant of an authorisation are very similar. After multiple amendments, the only real difference appears to be in the matters that the FWC is required to consider before granting the relevant authorisation.

Given how some of these are expressed, the difference becomes even more unclear.

In real terms, the matters required to be considered by the FWC in granting either authorisation are unlikely to be determinative of whether a party seeks a supported bargaining authorisation or a single interest employer authorisation.

It will instead come down to utility, and specifically the leverage provided by the supported bargaining stream in that unlike the single interest employer stream:

  1. the views of the employer/s in the supported bargaining stream are not only unessential but wholly irrelevant;
  2. small businesses can be made subject to supported bargaining authorisations;
  3. the FWC can provide assistance to the parties on its own initiative, however the power to compel parties to attend conferences has been removed; and
  4. the relative ease of obtaining a supported bargaining authorisation in relation to a declared industry, occupation, or sector.

Indeed, given that an application for a single interest employer authorisation must be granted if rather basic administrative matters are complied with, it begs the question if the supported bargaining stream will be used at all, except perhaps in those declared industries and small businesses.

It is worth noting that while the FWC must be satisfied it is “appropriate” for the parties to bargain together before granting a supported bargaining authorisation, the appropriateness or otherwise of the parties bargaining together is irrelevant for the purposes of a single interest employer authorisation.

Indeed, it may be entirely inappropriate for the parties to be permitted to bargain together under a single interest employer authorisation, but this is not a matter that the FWC is permitted to consider.

It is also worth noting that the Act in its original form prohibited protected industrial action in relation to single interest employer bargaining; subsequent amendments removed this distinction so that protected industrial action may be taken in relation to bargaining under both streams.

Issues for businesses

The immediate concerns for businesses arising from these amendments are:

  1. the ability to be forced by a union applicant into bargaining for a multi-employer agreement, either through the supported bargaining or single interest employer streams;
  2. consequently, being bound by good faith bargaining obligations and administrative obligations of employers engaged in bargaining without consent;
  3. the danger of being exposed to protected industrial action taken in relation to proposed supported bargaining or single interest employer agreements; and
  4. the danger of being bound without consent, on the application of a union, to an existing multi-employer agreement in which they had no say, and the inability to exit them without consent of employees or unions (as described above).

The risk of protected industrial action is particularly concerning not just for employers, but for the economy generally. Depending on the scope of supported bargaining or single interest employer authorisations, protected industrial action relation to a proposed agreement may well close down large sectors of the economy (such as the resources sector).

While there has been much rhetoric around unions not intending to undertake sector-wide protected industrial action, there is nothing in the FW Act or these amendments which prevents or prohibits such protected industrial action.

Indeed, the potential for widespread harm arising from protected industrial action is not a matter that the FWC is permitted to take into account when granting authorisation for a protected action ballot – merely something to be taken into account once the protected industrial action so authorised is imminent.

To mitigate this risk, and perhaps in acknowledgement of it, the Act introduces some changes to protected industrial action which are explored in further detail below.

To compound the risk of protected industrial action, the Act in its original form permitted unions to stymy the approval of a multi-enterprise agreement by requiring the written agreement of all bargaining representatives before the agreement may be put to the employees for a vote.

Amendments in the Senate mitigated this somewhat, requiring either the consent of the bargaining representatives or an order from the FWC (a “voting request order”) before any multi-employer agreement can be put to a vote. While not a return to the status quo, it at least provides employers some way around a truculent minority representative.

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.”

These multi-employer agreements, however, will not be exposed to the risk of protected industrial action.

However, employers ought to be careful initiating bargaining for a cooperative workplace agreement. Whilst bargaining for such an agreement can be commenced with relative ease, the fact that bargaining is already occurring may make it near impossible to establish that there is not a common interest (i.e., the only potential defence to being roped into a single interest employer agreement).

Bargaining for a cooperative workplace agreement does not prevent employers being roped into a single interest employer authorisation/agreement.

Lowering the bar for arbitration in bargaining disputes

Commencement date: a day to be fixed, but not later than 6 June 2023

Presently, the FWC generally cannot step in and 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 Act 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:

  1. the FWC has already dealt with a dispute about the relevant matters under s.240 of the FW Act;
  2. there is no reasonable prospect of the party’s reaching agreement on the outstanding items;
  3. it is reasonable in all the circumstances (considering the views of the bargaining representatives); and
  4. the ‘minimum bargaining period’ has expired, being the later of:
    1. 9 months following the nominal expiry date of the existing enterprise agreement covering the employees (if any); or
    2. 9 months after the day bargaining starts being the notification time for the agreement – i.e. the date on which:
      1. the NERR was issued by employer;
      2. a majority support determination comes into effect,
      3. the parties agreed to bargain; or
      4. the relevant union made a written request to bargain (as described above).

Once this declaration has been obtained, following a ‘post-declaration negotiation period’ for a specified time (which may be nil), 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:

  1. the terms that were agreed between the parties;
  2. the terms that the FWC determined in the absence of agreement between the parties;
  3. the nominal expiry date of the determination;
  4. dispute settlement procedure (which itself, may be an unresolved term between the parties);
  5. model consultation clause; and
  6. model flexibility clause.

In addition to the existing criteria the FWC must take into account in respect of the existing “workplace determination”, the FWC must consider the significance of any arrangements of benefits in an enterprise agreement that applies to the employer and employees prior to the determination.

This will make it much harder for employers to argue that inflexible rostering arrangements, costly penalty provisions, shift allowances or call backs are not appropriate to be included in the arbitrated agreement.  No doubt this has been included to dissuade employers from pursuing the “workplace determination” route as an attractive strategy to break a bargaining deadlock.

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. On the other hand, employers in some industries with long-running bargaining stalemates may welcome the increased ease of asking the industrial umpire to break the deadlock.

Conversely, 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’?

Commencement date: a day to be fixed, but not later than 6 June 2023

The Act 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:

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

This may in practice simply preserve the status quo approach to agreement approvals.  The Act also retains, and in some ways expands, the FWC’s ability to overlook minor errors in these processes provided that these errors were not likely to disadvantage employees, in particular by expanding the procedural areas in which minor errors can be overlooked.

The Act 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 Act effectively seeks to restrict this approach by deeming such agreements as not being ‘genuinely agreed’ on the basis that the employees approving it either:

  1. do not have a sufficient interest in the terms of the agreement – for example, they may be working patterns of work which do not attract the operation of penalty or shiftworker provisions; or
  2. are not sufficiently representative of the employees who will ultimately be covered by the agreement – for example, an agreement that is intended to cover miners and drivers is only voted up by drivers because no miners are employed at the time.

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.

Further, as discussed above, the FWC cannot be satisfied that a multi-employer enterprise agreement has been ‘genuinely agreed’ unless each union has approved the agreement going to vote or the employer has obtained a FWC voting request order.

Errors in enterprise agreements

Commencement date: 6 December 2022

The Act 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

Commencement date: a day to be fixed, but no later than 6 June 2023

Talk first, strike later

Where employees seek authorisation of protected industrial action by the grant of a protected action ballot order (PABO), the Act requires that if the FWC grants the PABO is must also schedule mediation/conciliation between the employer/s and employee representatives.

The mediation/conciliation must occur before the close of voting on the protected action ballot, in an effort to allow the FWC assist the parties in resolving their differences without resorting to protected industrial action.

Attendance at this mediation/conciliation conference is compulsory; 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.

No limits on protected industrial action

Under the FW Act as it currently stands, so long as protected industrial action is notified and commences within 30 days of the declaration of the results of a protected action ballot, it may carry on indefinitely subject to any order of the FWC.

In its original form, the Act proposed to limit this by providing that industrial action occurring more than three months after the declaration of the results of the ballot was not protected industrial action.

The effect of this was that if industrial action were to occur over more than three months, the relevant union would need to apply for a PABO and conduct a new ballot of employees every three months in order to keep protected industrial action afoot.

While employers and customers in some industries with long-running disputes would have welcomed this reform, it unfortunately did not survive passage through the House of Representatives.

For those employers in supported bargaining or single interest employer bargaining, an application for a PABO in relation to the proposed multi-employer agreement is taken to be multiple applications by the employees of each employer.

This means that if a majority (50% +1) of eligible voters in one employer votes up the PABO, but the employees of the other employers do not reach this majority, then the PABO will only authorise protected industrial action in relation to that particular employer. That said, given the involvement of unions in multi-employer bargaining, this would appear an unlikely (but not impossible) occurrence.

Again, no protected industrial action can occur in respect of co-operative workplace bargaining (the current multi-employer agreements).

Easing the pathway for commercial ballot agencies

The Act seeks to move away from reliance on the Australian Electoral Commission (AEC) 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 protected industrial action occurring sooner than under current arrangements.

While unions can seek permission to use persons other than the AEC to conduct a protected action ballot, they must convince the FWC each time their nominated agent is a fit and proper person to conduct the ballot.

To get around this, the new s.468A(2) will allow ballot agents to apply to the FWC for a written approval to act as a ballot agent, which will be valid for three years. Ballot agents with this authorisation will then prima facie be able to conduct protected action ballots without having to prove their bona fides each time.

Terminating enterprise agreements and “zombie” agreements

Commencement date: 6 December 2022

The termination, non-termination, and attempts to terminate enterprise agreements have attracted considerable controversy in recent months.

Whether it is an employer seeking to break a bargaining deadlock by applying to terminate their existing enterprise agreement, or Commissioner Hunt’s description of a 22-year-old hospitality agreement which did not provide for penalty rates as “a disgrace,” the life span of enterprise agreements has come under considerable scrutiny.

The Act sets out to address the issues arising from the fact that enterprise agreements only nominally, rather than actually, expire in a few ways.

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

Automatic sunsetting of “zombie” agreements

First, agreements made before the commencement of the FW Act on 1 July 2009 or during the ‘bridging period’ of 1 July 2009 to 31 December 2009 (commonly called “zombie” agreements) will automatically expire 12 months after the Act commences (that is, on 7 December 2023).

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.

Given that the reason these agreements hang around for so long is because they provide a considerable commercial advantage to employers (non-payment of weekend penalty rates compared to modern award etc.), it would appear unlikely that any agreement of such age would result in employees being better off.

Limitations on applications to terminate agreements

Second, the Act seeks to address recently alleged controversies surrounding employers applying to terminate expired enterprise agreements during protracted enterprise bargaining.

Applications to terminate enterprise agreements represent very few levers that employers have during protracted negotiations, often when facing extended periods of protected industrial action.

To deal with this, the Act amends s.226 of the FW Act must, in an application for the termination of an expired agreement, terminate the agreement if:

  1. it is satisfied that the continued operation of the agreement would be unfair to the employees; or
  2. it is satisfied that the agreement does not, or us unlikely to, cover any employees; or
  3. all of the following circumstances apply:
    1. 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;
    2. 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
    3. where the agreement contains 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).

This is subject to a general discretion that the FWC must not terminate an agreement if it is inappropriate to do so in the circumstances.

In deciding whether it is appropriate to terminate an agreement, the FWC must also consider whether another proposed agreement covering the same group of employees is under negotiation, and whether the termination of the existing agreement would damage the bargaining position of the employees.

This specifically directs the attention of the FWC to the question of whether the proposed termination of an agreement is merely a bargaining tactic, however, does not make this factor determinative.

Discouraging termination without agreement

In a move that may stymy attempts to terminate expired agreements unilaterally, applications to terminate an agreement which are opposed by any party must be dealt with by a Full Bench of the FWC.

This brings with it the attendant costs of pursuing proceedings before the Full Bench, together with the sheer timing issues of fitting the necessary hearings into the schedules of three Commissioners.

This is likely intended to make the task of terminating an agreement without consent more intimidating and less palatable to those who propose to do it.

What this means for employers is that they are essentially stuck with the terms of the enterprise agreement unless they can implement a replacement enterprise agreement or encourage a majority of those employees eligible to vote, to vote to terminate the existing agreement.

Employers need to think carefully about the terms and conditions in enterprise agreements in light of this new requirement.  Particularly in a challenging economic environment when locking in high wages and conditions into up to a 4 year agreement, may prove very costly from a commercial perspective should the economy turn.

Prohibiting sexual harassment in the workplace

Commencement date: 6 March 2023

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 Act (adopting relevant definitions from the model Work Health and Safety laws, such as the expansive definition of ‘worker’).

The Act inserts a new Part 3-5A to the FW Act which:

  1. expands the application of the FW Act, in relation to sexual harassment, to “workers” rather than just “employees”;
  2. imposes a civil penalty for sexual harassment; and
  3. creates 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 civil penalty is significant, as under existing anti-discrimination legislation the only remedy available is damages. With the inclusion of a civil 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

Commencement date: 7 June 2023

This 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, are dealing with instances of domestic violence (or an immediate family member facing the same) or is pregnant.  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 Act will do away with that objection in two steps:

  1. by requiring employers to set out, in fine detail, the exact business grounds on which the request for flexible working arrangements was refused; and
  2. allow the FWC to arbitrate on whether the business grounds relied on by the employer in refusing the request were, or were not, reasonable business grounds (including the nature and size of the enterprise carried on by the employer in making this determination).

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 civil 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.

Although the FWC’s powers of arbitration will be expanded, the final amendments to the Act eased up on this power slightly, requiring the FWC to attempt to resolve the dispute without arbitration first, leaving arbitration as a last resort (noting consent by the parties for arbitration is not required).

Government amendments in the Senate will also allow pregnant employees to request flexible working arrangements under these provisions. Previously, pregnant employees were only able to access flexibility through the parental leave provisions of the FW Act in very specific circumstances, mostly relating to pregnancy-related illnesses.

This particular amendment might cause some consternation for employers, as in the case of very early pregnancy it may be hard to understand why the employee “needs” the requested flexible working arrangements. However, as the FWC recently emphasised, this is irrelevant for the purposes of deciding whether to grant or refuse a request for flexible working arrangements.

Disputation in parental leave matters

Commencement date: 7 June 2023

Amendments to the Act moved by the Greens and backed by the Government make significant changes to the ability of workers to extend unpaid parental leave for a further period of up to 12 months following the end of available parental leave.

Previously, where employees wanted to extend their period of unpaid parental leave, the employer could refuse this on “reasonable business grounds” but, in the event of a dispute about any such refusal, there was no avenue for this to be disputed before an impartial umpire.

The Act does away with this by expressly providing an avenue of dispute resolution that may be pursued from the workplace level to the FWC. The FWC must attempt to resolve the dispute without arbitration first, but may resort to arbitration if this fails.

For businesses, this means that the “reasonable business grounds” (such as cost, capacity to change work arrangements, impractical impacts, significant loss in productivity/efficiency and negative impact on customer service) on which they rely to refuse such requests may be open to scrutiny and dictated outcomes, which has not previously been within the power of an industrial umpire.

Odds and ends

In addition to the above “big ticket” items, the Act looks to insert two new objects into the FW Act including ‘promotion of job security’ and ‘gender equality’ which may influence the Court and FWC interpretation of the FW Act in some cases, resulting in potentially significant implications for the meaning and operation of existing and new provisions of the Act.

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 Act 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, effective 1 July 2023.

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. This is made somewhat more difficult by the fact that the Act does not define the “care and community sector,” so it is perhaps open to debate (and appeal) if variations to certain modern awards are validly made by the correct body.

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 Act 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.

The second abolition of the ABCC will usher in the establishment of the National Construction Industry Forum, with the single role of reporting the Government in relation to work undertaken in the building and construction industry.  The Forum will have no powers, other than the ability to report to Government.  The FWC does not take on any of the ABCC’s powers, like it did following the first abolition of the ABCC, which transferred (some) powers to the previous Office of the Fair Work Building Industry Inspectorate.

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.

And finally, the Act provides that the Minister must cause a review of the operation of the amendments, no later than two years after Royal Assent, with the provision of such a report within six months of the commencement of the review, to be tabled in both Houses of Parliament.  What this may or may not achieve, is completely uncertain (particularly taking into account the pre-determined wording of the terms of reference of the review).

Respect @ Work amendments

Commencement date: the day after 3 months from the date of Royal Assent (not yet assented)

While the debate around the Act has dominated headlines, the passage of the Anti-Discrimination and Human Rights Legislation Amendment (Respect at Work) Act 2022 (RaW Act) should not be overlooked.

The RaW Act makes several key changes to the Sex Discrimination Act 1984 (Cth) which directly affect employers, most notably:

  1. the creation of a new positive duty for employers to take “reasonable and proportionate steps” to eliminate sex discrimination and sexual harassment in their workplaces; and
  2. the creation of the new offence of exposing a person to a workplace environment that is “hostile on the basis of sex.”

The “reasonable and proportionate” steps that employers will be required to take will vary according to the nature of their business, but it is worth noting that the duty is not as high a standard as the requirement to take “all reasonable steps” in order avoid vicarious liability. As such, merely discharging the positive duty is likely insufficient, without more, to also absolve an employer of vicarious liability.

The concept of a workplace environment that is hostile on the basis of sex is defined in terms very similar to sexual harassment. However, it does not require there to be a specific target, and it requires the conduct to be sufficient to taint the workplace as a whole.

What this would look like in reality is unclear, and it seems most likely that allegations of this offence will seldom be pursued on their own but rather coupled with allegations of specific acts of sexual harassment or sex discrimination.

Jump in Federal penalties

Commencement date: 1 January 2023

Finally, in a move that flew largely under the radar, the Albanese Government skipped over indexing the value of a penalty unit in Federal laws and instead legislated a flat increase.

The value of a Federal penalty unit will increase on 1 January 2023 from $222 to $275, an increase of almost 24%.

This means that penalties in the FW Act will see a significant jump, as outlined below:

  2022 2023
Base contravention (individual) $13,320 $16,500
Base contravention (corporation) $66,600 $82,500
Serious contravention  (individual) $133,200 $165,000
Serious contravention (corporation) $666,000 $825,000

Employers and their decision makers should take note of the increased scale of liability to which they may be exposed given this re-jigging of the penalty baseline.

Much yet to be done

What is traversed in this article seems, and is, a lot to take in – and that is only summarising these amendments.

More significantly, the Albanese Government has proven that it can drive significant industrial relations reforms through both houses of parliament – something that hasn’t been seen since the FW Act itself came into being.

It’s worth remembering that when the FW Act was passed, the Rudd Government enjoyed a majority in both houses; the Albanese Government has managed to achieve these reforms despite not being so blessed.

This paves the way for further industrial relations reforms hinted at in Labor’s 2022 election platform, including the creation of criminal wage theft offences at the Federal level, and “same job, same pay” legislation which the government has already foreshadowed will be introduced early next year around labour hire (same job, same pay), reducing casual employment and regulating the ‘gig economy’ (but this might only be the start).

Employers should take what time is afforded to them before key provisions commence to revisit their industrial and employment relations strategies, obtain legal advice on the impact of any changes that affect their business, and develop strategies to respond accordingly, including seeking to preserve current operations – at least until the outer limit of the next Federal election being 2025.

 

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    Workplace Relations, Employment & Safety

    Liability for HR Managers – Being “involved” in Fair Work Act contraventions