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Employers eye new law in Australia

By Aaron Dearden, an employment law partner at Duncan Cotterill, Sydney

The Australian employment law landscape changed significantly this week (July 1), with the introduction of the Fair Work Act 2009 (Cth).

The Fair Work Act restores several traditional rights that employees lost under the Liberal Government’s WorkChoices amendments to the Workplace Relations Act 1996 in March 2006. 

Employers now face the challenge of coming to terms with over 600 pages of new legislation and managing workplaces during the transitional period.

The introduction of the Fair Work Act has parallels in New Zealand with the Employment Relations Act 2000, which replaced the old Employment Contracts Act 1991.

Basically, the Fair Work Act introduces:

• A new institution known as Fair Work Australia;
• New enterprise agreement making procedures;
• A new system of modern awards and National Employment Standards from 1 January 2010;
• Changes to the unfair dismissal jurisdiction and introduces a statutory redundancy pay scale;
• New rights of entry powers for trade unions.

Fair Work Australia

Fair Work Australia will play a role in setting and adjusting minimum wages, facilitating bargaining for enterprise agreements, dealing with the expanded unfair dismissal jurisdiction and dispute resolution under modern awards and enterprise agreements. It will have much greater discretion both as to how it conducts itself and how its powers are exercised than is currently enjoyed by the Australian Industrial Relations Commission.

Fair Work Australia will only have power to make binding decisions in relation to disputes arising under modern awards and enterprise agreements where the parties agree to it. Otherwise, its powers will be limited to conciliation, mediation, recommendations and compulsory conferences.

Agreement Making

Enterprise agreements can be be made with all employees or distinct groups of employees.  Where an employee is a member of a trade union, that union will have the right to act as a bargaining agent for negotiation of the agreement. 

An agreement under the Fair Work Act :

• Must be approved by Fair Work Australia;
• Can be for a nominal term of up to four years; and
• Must satisfy the “no disadvantage test” up to the end of the year and subsequently the “Better Off Overall Test”.This requires that Fair Work Australia is satisfied that each award covered employee is better off overall under the enterprise agreement than compared to the modern award. 
• Agreements must contain a flexibility term that allows for the making of ‘individual flexibility arrangements’ between an employer and an individual employee.

Agreements must also contain a term dealing with consultation about major workplace change and a term allowing for the settlement of disputes about matters arising under the agreement and the National Employment Standards.

National Employment Standards

One of the most notable features of the legislation is the introduction of the National Employment Standards (NES). These are an expanded statutory minimum set of conditions of employment which include traditional matters such as annual leave, parental leave and minimum notice periods. The NES is notable for also including conditions such as:

• The ability for employees to request flexible working arrangements where they have children under school age;
• The right to request up to two years’ parental leave;
• Statutory minimum notice periods; and
• A statutory minimum redundancy formula.

The requirement to pay redundancy pay applies to all employees covered by the Fair Work Act and is capped at 16 weeks.

Modern Awards

From next January a new system of modern awards will apply.  In general, each will have broad coverage and replace a large number of federal and state awards (which were transferred into the federal system with WorkChoices).

One significant effect of the introduction of modern awards is the breadth of their application.  Modern awards apply to any relevant employee who earns less than the high income threshold ($100,000).  In practice, this means a number of employees not ordinarily covered by awards will now be covered.

Employers and employees may agree in writing to exclude modern award terms, but it’s not yet clear how effective this will be in practice.

Unfair Dismissal

Unfair dismissal rights are restored for a large range of employees.

To bring an unfair dismissal claim, the employee must firstly have completed a minimum period of employment. That is usually six months but for employees of small businesses (fewer than 15 employees) they must complete 12 months service before being able to bring a claim.

After passing the minimum period, employees will be able to bring an unfair dismissal claim if they are covered by a modern award, an enterprise agreement or if they earn less than the high income threshold (currently set at $108,300).

Previously, employers had a shield from unfair dismissal claims where the dismissal arose as a result of 'genuine operational reasons'.  This phrase has been replaced by the term ‘genuine redundancy’ which is much narrower in scope. This requires showing:

• The employee’s job is no longer required to be performed by anyone because of changes in operational requirements
• The employer has complied with any consultation requirements in a modern award or enterprise agreement, and
• It was not reasonable in all the circumstances to redeploy the person within the organisation (or an associated entity of the employer).

The requirement to consider redeployment opportunities within the employer’s business or associated entities will be something that many employers will need to be aware of.

Employers with fewer than 15 employees who comply with the Fair Dismissal Code (not yet published) will also be protected from unfair dismissal claims.

For more information, check out www.fairwork.gov.au

Aaron Dearden is an employment law partner in the Sydney office of trans-Tasman law firm Duncan Cotterill. He has also practised in New Zealand. A.dearden@DuncanCotterill.com