This article is current as at 5 December 2022.
The Federal Government has introduced the most sweeping workplace reforms in over a decade to modernise workplace bargaining, address the gender pay gap and increase wages.
Here are the top ten changes:
- Objects of the Fair Work Act
The objects of the Fair Work Act will now include promotion of job security and gender equality. This means that the Fair Work Commission (FWC) and courts will need to take these issues into account when making decisions on pay and conditions.
- Pay equity
There is new guidance about what the FWC can take into account when considering if there is equal remuneration for work of equal or comparable value. These include comparisons within and between occupations and industries to establish whether the work has been undervalued on the basis of gender and whether historically the work has been undervalued because of assumptions based on gender. The FWC cannot take into account gender-based assumptions in the assessment of work value going forward.
- Pay secrecy
Employees will have the right to disclose, or not disclose, to any other person their remuneration or any terms and conditions of their employment that are reasonably necessary to determine remuneration outcomes (such as working hours).
Any clause in an existing employment contract which prevents employees from discussing pay will be invalid; and an employer may be liable for a civil penalty if it includes a pay secrecy clause in a new employment contract.
- Flexible work requests
Employers will be required to genuinely try to make changes to accommodate requests by employees for flexible work arrangements. Procedures for requesting flexible work arrangements, and responding to the requests, have been updated and timeframes have been tightened. If an employer and employee cannot agree, an employer may still refuse a request for flexible work (on reasonable business grounds) but an employee will be able to apply to the FWC to challenge the employer’s decision. Practically some employers will need to more carefully consider such requests and detailed reasons will need to be provided for any refusal. The FWC can then deal with the dispute about a refused request as it sees fit, including through arbitration.
- Fixed term contracts
Employers will be prohibited from engaging an employee on a fixed term contract of more than two years, or certain consecutive contracts where an employee is required to perform the same (or substantially similar) work.
There will be a range of exceptions to this two year rule, including fixed term contracts for specialised skills, training arrangements, peak demand periods, and employees above the high income threshold (currently $162,000 per annum). An employer must be able to evidence that they are relying upon any such exception, and that will be best done by specific reference to an exception in an employment contract.
Where a prohibited fixed term employment contract is entered into, the fixed term will be invalid, but the other terms will remain. The FWC will have power to resolve disputes about an employee’s status as a fixed term employee.
- Sexual harassment and anti-discrimination
There will be a positive duty on employers, under the Fair Work Act, to prevent sexual harassment. It will be unlawful under the Fair Work Act (as it is already unlawful under Federal, state and territory sexual discrimination laws) for a person to sexually harass another person in connection with work. The FWC will have power to deal with a dispute about an alleged contravention of the sexual harassment provisions, including by making a stop sexual harassment order.
Additional attributes will attract protection against discrimination – including breastfeeding, gender identity and intersex status – so that the Fair Work Act is aligned with other Federal anti-discrimination provisions.
- Multi-employer bargaining
The concept of multi-enterprise bargaining will be expanded through “single interest employer authorisations” to provide employees and unions the power to compel multiple employers (possibly including competitors and external companies within supply chains) to bargain for an enterprise agreement, where a majority of employees support it and where employers have clearly identifiable “common interests” (such as the nature of their enterprises, geographical location, and a shared regulatory regime). The FWC will be able to grant an authorisation and compel an employer to bargain in a multi-employer framework without their consent, provided that they are not a “small business employer” (to be defined), the employer does not have a current enterprise agreement (which has not passed its nominal expiry date) and/or the employer is not in the construction industry.
This is the most controversial change and was the subject of the greatest level of criticism and lobbying. These changes will see a move away from enterprise-level bargaining and will result in many employers needing to re-assess their industrial relations and bargaining strategies.
There will also be the potential for multi-employer agreements to be varied by application from a union after they are made to “rope in” additional employers without their consent and without those employers having participated in any negotiation over the terms of the enterprise agreement.
Multi-employer bargaining may also occur through “supported bargaining” in low-paid industries such as aged care, disability care and early childhood education.
- Enterprise Agreements
- Approving Enterprise Agreements: the Better Off Overall Test
Technicalities in the FWC’s assessment of the Better Off Overall Test (BOOT) have been removed. The FWC’s assessment of enterprise agreements will change from a technical line by line comparison against relevant modern awards to a global assessment of current and likely (and not simply hypothetical) work patterns.
Employers, employees and unions can apply to the FWC for a re-assessment of the BOOT during the life of the enterprise agreement, for example, if employees’ work patterns change.
- Terminating Enterprise Agreements
Enterprise agreements continue to apply past their nominal expiry date unless replaced or the FWC decides to terminate the agreement. It will become more difficult for employers to apply to the FWC to unilaterally terminate an enterprise agreement after its nominal expiry date. The FWC will need to consider the views of employees, each employer and each employee organisation covered by the agreement before granting a termination. The FWC can terminate an expired enterprise agreement if its continued operation would be unfair, if the agreement will no longer cover any employees, or if it would have an adverse effect on the viability of the employer’s business. The FWC must also be satisfied that it is appropriate to terminate the agreement in all the circumstances.
Pre-Fair Work Act instruments (known as “zombie agreements”) will be automatically terminated within 12 months, though the FWC can extend this timeframe in limited circumstances.
- Bargaining disputes
At present, there is a very high threshold before the FWC can intervene to arbitrate the terms of an enterprise agreement, and workplace determinations by the FWC are rare.
The reforms will mean that the FWC will have broader powers to intervene and make workplace determinations where bargaining has become “intractable”. The FWC will have a new power to arbitrate enterprise agreements where bargaining has been protracted, the FWC is satisfied that there is no reasonable prospect of reaching agreement, and minimum time thresholds have been met. FWC workplace determinations will become more common. This easier access to arbitration that is enjoyed currently may change the dynamic between and employer and a union, and ultimately result in employers accepting a union’s position so as to avoid an arbitrated result.
- Industrial action
Industrial action will be able to be taken in support of “supported bargaining” multi-employer agreements. “This means that in these industries multiple employers can be subject to protected industrial action by employees as part of the multiple-employer bargaining process.
There will be an obligation on employers, employees and unions to attend mediation / conciliation in the FWC before protected industrial action is taken.
Honourable mentions …
There are a raft of additional changes including the abolition of the Australian Building and Construction Commission and the Registered Organisations Commission, making it easier to correct errors in enterprise agreements, the creation of specialist FWC expert panels on pay equity and for the care and community sector, and enhancements to the small claims process for employees.
We will continue to provide updates as these new laws come into operation. In the meantime, it is a good time to prepare for the reforms, by reviewing your workplace strategy, and considering how the changes will affect employment arrangements in your business.
This article was co-written by Marie Feltham, Special Counsel.
This article is not legal advice. It is intended to provide commentary and general information only. Access to this article does not entitle you to rely on it as legal advice. You should obtain formal legal advice specific to your own situation. Please contact us if you require advice on matters covered by this article.