Friday, 11 December 2020

Proposed industrial relations reforms introduced into Parliament this week

In the final sitting week of the year, the Federal Government has finally unveiled its much-anticipated industrial relations reform package this week in Federal Parliament by introducing the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 (the Bill).

This ‘omnibus’ Bill, if passed, will make significant changes to the Fair Work Act 2009 (FW Act).

The introduction of the Bill follows a long period of consultation with five industrial relations working groups including unions and employer associations formed by the Minister for Industrial Relations, Christian Porter earlier this year.

A summary of the proposed changes are as follows:

Casual employment

The changes to casual employment proposed under the Bill will provide for greater rights for casual employees in respect to ongoing employment, while at the same time attempting to address the uncertainty with recent decisions of the Federal Court regarding casuals who have been found to be entitled to permanent entitlements, and avoiding the consequential risk of underpayments and ‘double dipping’.

(Click here for related articles regarding Workpac v Rossato and Workpac v Skene).

(a) Statutory Definition of Casual Employment

The first major change to casual employment under the Bill will be to introduce a statutory definition of a “casual employee”. Traditionally the definition of a casual employee has been determined by modern awards and case law.

An individual will be considered to be a casual employee if they accept an offer of employment on the basis that the employer makes no firm advance commitment to continuing and indefinite work according to an agreed pattern of work for the person. There will be a number of exhaustive considerations to determine whether the employer makes no firm advance commitment to continuing and indefinite work, including whether the employer can elect to offer work and whether the employee can elect to accept or reject work, if the employment is described as casual and if the employee is entitled to a casual loading.

Whether a person is a casual employee will be assessed on the basis of the offer of employment and the acceptance of that offer – and therefore this determination is time specific. Importantly, any subsequent conduct by either party will no longer be relevant when determining whether an employee is casual, but rather the relevant test is at the commencement of employment. This means that if a casual employee works a regular pattern of hours after the offer and acceptance of employment, this would not in itself lead to satisfaction of the new statutory definition and a finding that they are a permanent employee.

This legal definition of casual employment is aimed at preventing the courts from determining that employees engaged and paid as a casual employee to be permanent based on their work patterns and therefore entitled to permanent entitlements such as paid leave and the like (such as the findings in the recent cases of WorkPac v Rossato and Workpac v Skene).

(b) Statutory Casual Conversion

The Bill also provides for a strengthening of casual conversion rights for casuals employed by the same employer for a period of 12 months, and who has had regular shifts for at least the last six months of the 12 month period.

The right to request casual conversion already exists in many modern awards and enterprise agreements, however under the Bill the right is proposed to be extended to all eligible casual employees at a federal level, and the Bill goes further to require employers to make an offer of casual conversion.

If a casual employee meets the  eligibility requirements set out above, their employer must make them a written offer to convert to permanent employment within 21 days after the employee has met the above criteria. However, it is important to note that an employer will not be required to make an offer of casual conversion on reasonable grounds based on facts that are known, or reasonably foreseeable, at the time of deciding not to make the offer. In such circumstances, the employer must issue a notice to the employee explaining why conversion is not being offered.

If an employer does not make an offer for casual conversion or has not otherwise provided reasons why such an offer cannot be made on reasonable business grounds, then an eligible casual employee will have the right to request to convert to permanent employment, which again can only be refused on reasonable business grounds.

The Fair Work Commission (FWC) will also be given the power to deal with a dispute regarding casual conversion through mediation, conciliation or by expressing an opinion, unless there is an alternative dispute resolution mechanism within the relevant industrial instrument or employment contract, but will only be able to arbitrate if the parties agree.

(c) Statutory offset to address ‘Double Dipping’

The Bill also provides that where an employee has been found to be in fact a permanent employee (rather than a casual) and is therefore entitled to paid entitlements commensurate with permanent employment (such as paid annual leave, personal leave and notice, etc), a Court awarding back payments of such entitlements (claim amount) will be able to reduce the claim amount with respect to any amounts already paid in respect to identifiable casual loadings.

This has been referred to as “statutory offset” and is directed at addressing some of the challenges in the recent case of WorkPac v Rossato, in which the Court found that the employer was unable to set-off the casual loading.

However, in order for the statutory offset provisions to apply, the Bill requires that an employer pay the person an “identifiable amount”, which is paid to compensate the person for not having one or more relevant entitlements during the period.

The “identifiable amount” would include a clearly identifiable casual loading as specified in an award, enterprise agreement or employment contract. Importantly, it does not include circumstances where an employee is paid a flat hourly rate and it is not clear from the industrial instrument (award, enterprise agreement or employment contract) that the rate includes a casual loading.

This means that although the proposed Bill provides some protection from the double dipping (i.e. casuals receiving both the casual loading and then paid permanent entitlements), employment contracts will still need to be drafted in a sufficiently clear way to provide for the “identifiable amount”, such as a casual loading, in compensation for the relevant entitlements in order for the statutory offset provisions in the Bill to apply.

Importantly, the statutory offset will also only apply to entitlements that accrue and loading amounts paid on or after the commencement of when the Bill comes into force.

Additional hours for part-time employees which won’t attract overtime

The Bill, once passed, will permit employers covered by certain modern award to offer part-time employees working at least 16 hours per week additional hours of work (of up to 38) within the span of hours outlined in that modern award, without having to pay overtime rates and enter into a “simplified additional hours agreement”.

This will allow employers to flex part time employees’ hours up and down according to business demands, without the need to pay additional overtime rates prescribed by the modern award. Please note, however, that employers will still be required to pay any relevant penalty rates and overtime rates for work outside of the span of hours/maximum hours contained in the modern award, even if a simplified additional hours agreement has been made.

This will only apply to a limited number of modern awards covering industries hardest hit by the COVID-19 pandemic including the Commercial Sales Award, Fast Food Industry Award, General Retail Industry Award, Hospitality Industry Award, Pharmacy Industry Award and the Restaurant Industry Award.

Importantly, paid leave entitlements will accrue on additional hours worked and such hours will be considered “ordinary time earnings” for superannuation purposes.

Flexible work directions

It is intended under the Bill that the flexibilities in respect to changing an employee’s duties and location of work currently available under the Government’s JobKeeper scheme will be extended for a 2-year period for those industries hardest hit by the pandemic, some of which we have referred to above.

Employers covered by these awards will be able to give “flexible work directions” requiring staff to perform different duties or work from a different location, provided such directions are reasonable safe and the employee has been consulted prior to being issued with a direction. Unlike existing JobKeeper flexibilities, it will not be a requirement that such employers are eligible for JobKeeper or demonstrate a reduction in turnover.

Enterprise Agreements

(a) Procedural changes

Employers will now be required to issue the Notice of Representational Rights within 28 days from the date which the employer has agreed to bargain (this timeframe is currently 14 days).

The FWC will also be required to determine enterprise agreement applications within 21 working days, and if this timeframe cannot be reached, provide written notice explaining why.

When considering such applications, the FWC will also be limited to informing itself only in relation to information that is publicly available, and submissions made by those involved in the bargaining process or covered by the agreement. Parties not involved in the bargaining will only be able to make submissions in ‘exceptional circumstances’ which is intended to limit circumstances where parties not involved in the bargaining process delay the process.

Enterprise agreements will also be required to contain a model term explaining the agreement’s interaction with the National Employment Standards, reflecting the FWC’s approach in recent times to require a term or undertakings to this effect.

The Bill provides clarity on which casuals will be able to vote when making an enterprise agreement and provides that only casual employees who performed work at any time during the access period must be given the opportunity to vote on the enterprise agreement.

The Bill will also ensure that industrial instruments do not transfer where an employee may transfer between associated employing entities at the employee’s initiative and enable franchisees to opt-in to an approved single-enterprise agreement that covers a larger group of employers that operate under the franchise.

(b) The BOOT

The process for assessment of enterprise agreements against modern awards will also be clarified by requiring the FWC, in applying the better off overall test (BOOT), to:

  • only take into account patterns or kinds of work, or types of employment, that are currently engaged in or are reasonably foreseeable, not those that are hypothetical or not reasonably foreseeable;
  • have regard to the overall benefits (including non-monetary benefits) employees would receive under the agreement compared to a relevant modern award; and
  • have regard to any views relating to whether the agreement passes the BOOT expressed by employers and employees and their bargaining representatives.

This provision is in respect to the FWC’s approach in recent times to consider all possible working arrangements for the purposes of the BOOT, rather than the current practice, or working arrangements that are likely in future.

The Bill will also permit the FWC, in limited circumstances, to approve an agreement which may not pass the BOOT taking into account the views and circumstances of the parties covered by the agreement, the impact of COVID-19 and the level of employee support for the agreement, and whether approval is in the public interest.

This is a time-limited measure (which will automatically be repealed two years after commencement), intended to support businesses still recovering from the impact of COVID-19. Agreements approved under this provision would also be limited to two years’ duration.

(c) Pre-approval requirements

Currently employers are required to take all reasonable steps to ensure that during the access period the relevant employees have access to the written agreement and any other material incorporated into the agreement, and to ensure that the terms of the agreement is explained to relevant employees in a manner taking into account the particular circumstances and needs of the relevant employees.

Where the employer has not sufficiently explained the terms of the agreement to employees to the satisfaction of the FWC, this has often led to the FWC finding that the enterprise agreement was not genuinely agreed to.

The proposed change is that employers will no longer be required to take “all reasonable steps”, but rather only “reasonable steps” to ensure that the relevant employees are given a fair and reasonable opportunity to decide whether or not to approve the agreement. An employee will be taken to have complied with this requirement if the employer takes reasonable steps to ensure that employees have access to the relevant documents, notified of the voting details and the terms and the effect of those terms, are explained to the relevant employees in an appropriate manner, taking into account their particular circumstances and needs.

(d) Termination of old collective agreements made prior to 2010

The Bill will also sunset (by 1 July 2022) agreements approved prior to the commencement of the FW Act and during the ‘bridging period’ prior to the commencement of the system of modern awards in 2010.

(e) Greenfields agreements

Finally, the Bill will allow the FWC to approve longer term Greenfields agreements made in relation to the construction of a major project, to specify a nominal expiry date of up to eight years. This is to reduce the risk of an agreement nominally expiring during a period of critical construction during a major project.

Major projects are defined as projects involved in a capital expenditure of at least $500 million, or alternatively, smaller projects of at least $250 million can also be regarded as ‘major projects’, upon the declaration of the Minister.

Compliance and enforcement

This Bill enhances the FW Act compliance and enforcement framework to more effectively deter non-compliance and make it easier for employees to recover underpayments.

As a deterrence measure, the Bill has criminalised dishonest and systematic wage underpayments and introduced significant pecuniary sanctions for serious cases of underpayments of up to $5.6million for corporations and $1.1million and/or imprisonment for individuals for each contravention. This follows the highly publicised underpayment cases involving franchises, supermarkets and restaurants.

Employees will also be able to recover their entitlements more easily, quickly and cost-effectively

through the small claims process, by increasing the small claims cap from $20,000 to $50,000. The Federal Circuit Court and Magistrates’ Courts will also be able to refer small claims matters to the FWC for conciliation and arbitration by consent.

What does this mean for employers?

Generally speaking, the industrial relations reform package is directed at providing employers with more flexibility to determine the terms and conditions of their workforce, whilst imposing heavier compliance and sanctions where employers underpay their staff.

The changes proposed by the Bill will undoubtedly provide some welcomed certainty around casual employment. They will also provide monetary relief for employers if an employee is deemed entitled to permanent entitlements, in that monies will be offset against the casual loading already paid however there is still some grey area in terms of how the proposed casual off-set will operate to avoid similar findings to the Workpac cases where there is no “identifiable” casual loading.

Many employers currently receiving the benefits of more flexible conditions under the JobKeeper Scheme will be able to enjoy extended flexibility in certain sectors which will assist employers remain agile during this period of post-COVID economic recovery and will reduce costs where ordinarily overtime would be payable.

It is important to bear in mind however that the Bill is not yet law, and will likely be subject to scrutiny and change as it progresses through Parliament. There has been robust commentary from unions and labour groups in response to the Bill, which means that some provisions are likely to be amended. Despite this, employers should start to prepare for and consider the implementation of the changes discussed above.

We will provide further updates as to the status of this Bill, including once the Bill comes into effect.

This article was produced by HR Legal. It is intended to provide general information only in summary format on legal issues. It does not constitute legal advice, and should not be relied on as such.