What major changes should an employer make to their operations now that we have the Fair Work Act?

July 2009

Fair work Act 2009

What major changes should an employer make to their operations now that we have the Fair Work Act?

...None

The much debated new legislation is now with us.

The usual suspects from the “dispute industry” have had their say.

For example, life will apparently never be the same because union officials can come to a place of business on a minimum of 24 hours notice (and maximum of 14 days notice) and address the staff (or more exactly, those who want to be addressed), in an assigned room, at lunch time.

Nothing may be done to either encour-age or discourage staff from attending during said lunch time.

For most workplaces, though, this “change” (like many of the others) is completely irrelevant.

For many years, the reality has been that the only workplaces that actually have “industrial relations” (either good or bad) with unions, are those where the employer positively chooses to have them. It’s not a matter of “pro or against”, but simply a fact which reflects the declining role of trade unionism in the community.

The Opposition tell us that the new legislation and the thinking behind it will cost thousands of jobs. The Government tell us that many wrongs have now been righted.

Let’s look at some facts, and spot the differences.

Workchoices is dead.

This is the main theme. Workchoices enabled collective agreements and registered individual agreements which undercut award conditions.

During the period of the operation of this function – March 2006 to May 2007, some did. Most did not. It was not readily seen by most employers, during the boom that was then going on, how cutting pay and conditions was a prudent way to attract and retain staff.

Then, Workchoices was killed. Not by the ACTU, not by Julia Gillard, but by John Howard. In May 2007, when panicked by the community reaction to legislation which was specifically intended to make his very constituency (“the Howard battlers”) poorer, he introduced the “Fairness Test”. This “new” test was in all practical ways, exactly the same as the “No-Disadvantage Test”, which had been abolished just 14 months before, when Workchoices commenced. It prevented awards being undercut. John Howard, workers’ saviour.

The John Howard “Fairness test” is for all intents and purposes, identical to the Julia Gillard “Better Off Overall “ test. That is, you can’t use registered agreements to undercut awards. Except for that “14 month attack” by the Liberal party on the very people who kept electing them, you never could. The non-union agreement regime was first introduced by the Keating Government in 1994, with a “No Disadvantage” test, and it has been in place ever since, except for that period of folly.

So, the new Act continues the “post-Workchoices” system introduced (albeit in response to opinion polls ) by John Howard.

Collective agreements are still going to be largely non-union. AWAs have gone, but personal “flexibility agreements” have replaced them. Really, not much has changed.

National Minimum Standards and what can go in Awards

Workchoices ads back in ’06 and ’07 made much of the “minimum standards” and “guarantees”. Annual leave, personal leave, 38 hour week (albeit with many, many exceptions) etc.

National Employment Standards have now replaced them. These are the same, but with two “additions”.

One, an employer has to give a new employee an “information statement”. A form.

Two, where an employer has more than 15 employees, and redundancy occurs, they have to pay out a for-mula that is based on the award standard that exists anyway. No effect at all if the employee is covered by an award. If they are not covered by an award, then, yes, there is now a redundancy obligation. HOW-EVER, the “accrual” commences from zero, next January. If an employee has been working for an em-ployer with more than 15 employees for, say, 10 years, and they have been one of the few Australians with no previous access to a redundancy scheme, then under the new “standard”, their entitlement will commence next January at nothing, and grow annually. A rather small “revolutionary change”, you might say.

Workchoices restricted what could go in awards. As far as changes go, Fair Work hasn’t done much here either. The only additional things that can be included in awards are an entitlement to agree on flexibility (couldn’t you do that before?), defined ordinary hours of work (not new), rates of pay for piece workers, provisions for those entitled to five weeks annual leave, and automatic variation of allowances.

The award system has had a large group cut from it. That is anyone paid over $108,300 indexed annually. Doctors (employed ones), pilots, headmasters, oil refinery operators. Such people will be “covered” by awards if they are already, or if the new “modern awards” embrace what they are doing, but the awards will not “apply” to them. That actually means that, unlike before June 30 this year, such people will not have access to underpayment of award claims. Other than that, they will have a very much “not different” experience. Outside the state public service, it is not usual to see persons on “high middle incomes” and above “fighting it out before the Commission”, anyway. These “high income earners” are still covered by the wrongful dismissal jurisdiction, though (see below).

A lot of politico speak about not much, one would think.

The State Systems are Dead.

Indeed they are. Most State Governments are surrendering the powers to Fair Work Australia. NSW is the hold out.

There was a bit of forlorn hope held out in some quarters in this State, that the Rudd Government would reinstate the State Legislation which had been overridden by Workchoices. They simply didn’t. Perhaps they would have appointed members of the State tribunals to Fair Work Australia. They may, but they haven’t.

The NSW Industrial system which has existed in roughly its current form since 1928 (not 1902, as some people have suggested) is now largely a NSW public service dispute tribunal. It duplicates many func-tions of the Government and Related Employees Appeals Tribunal, and perhaps the Transport Appeals Board. It has duplicated the Anti-Discrimination Board and the Administrative Decisions Tribunal for many years.

One desperate dice throw by the State Government this year has been to abolish the Industrial Magistrates Court, and refer all matters to the Industrial Court. The Industrial Magistrates Court had been much by-passed by traffic going to the Federal Magistrates Court anyway.

What we will now have, is judges who are declared by statute to have the same standing as Supreme Court judges, doing Magistrates work. One hopes that the outcome is not that the quantum of judgments will simply (unconsciously of course) go up, and the cases grow more involved, to reflect the seniority of the tribunal giv-ing the ruling. For example, the Chief Industrial Magistrate now does “small claims” cases as part of the juris-diction. Claims under $20,000. Will a “superior court of record” now do them? The amount of extra work involved will certainly not fill the current void anyway.

What is “the current void”? :

The “void” is virtual disappearance of work for the State Commission.

From about 473 new matters commenced in the Section 106 “unfair contract” jurisdiction in 2005 – the last year before Workchoices – commencements went to 51 in 2007, almost a 90% fall off (they went down to 27 in 2008). Wrongful dismissal matters went from about 3750 in 2005 to about 400 in 2007, a number repeated in 2008 (also about a 90% fall). Industrial dispute notifications went from 1100 to 500. Even Occupational Health and Safety prosecutions went from 174 in 2005 to 93 in 2007 (after lobbying of the Government), but came back in 2008.

Of the ten or so Commissioners, three have left in the past year. Two of the thirteen judges and lay deputy presidents have retired. One has now been appointed to the Supreme Court. So, we have had about an 80-90% work reduction, and about 25% personnel reduction.

Change must come soon.

Wrongful Dismissal is not much changed.

We see above, that Workchoices caused a huge fall off in the wrongful dismissal jurisdiction in NSW. That was also the case everywhere else. In fact, though, the overall impact was not as high as you would think.

Australia-wide in 2005-6 March to March (Commonwealth plus states), there were about 12,000 commence-ments. That came back to about 8,000 in 2006-7 March to March. It has sat at about that number since. Out of a workforce of about 10 million, that is not a great impact.

The changes in the Fair Work Act may well cancel each other out, when it comes to numbers of cases com-menced. For example, you now only have 14 days to bring an action. Workchoices gave 21. That 14 day dead-line is “practically” inflexible – the legislation makes a point of restricting the power to extend it. Many cases will be prevented simply by the application of the deadline, just as many were prevented by the 21 days under Workchoices.

There is no change for anybody who employs more than 100 employees. Same obligations, same address for the hearings, same qualifying period of employment (six months) before a person can bring a case. Except for the 14 days, down from 21.

For employers with between 15 and 100 employees, a case may now be brought. That is only so, though, if the person has been employed 6 MONTHS. Same: 14 days deadline.

A small business employer (fewer than 15 employees) is immune from the unfair dismissal system for all per-sons with less than 12 months service (Note: as under Workchoices, the “unlawful” dismissal provisions apply from day one for everyone).

The immunity continues if, prior to termination, they give the person a warning. There is a “checklist form” provided. If the employer can show they have followed the “Small Business Fair Dismissal Code” (say, by stat dec) Fair Work Australia is prohibited from continuing to even hear the case. The employer does not need to go to a hearing – just provide proof of compliance. The stat dec would ideally include a copy of the “check list” signed and dated.

Use of the “dismissal code checklist” is useful for all employers. If it is carefully followed and proven by completing the “checklist”, then the chances of showing the tribunal (“Fair Work Australia”) that you have engaged in “fair go all round”, is greatly enhanced.

One last non-change: Persons earning over $108,300 per year (indexed each July) who are covered by an award, may no longer have that award “apply” to them day to day, but will still have access to the unfair dismissal scheme due to their “coverage” by the award. So, highly paid sales reps, medical practitioners employed by corporate entities, Qantas captains and the like, are still “under the umbrella”.

Summary

There are very few changes. Life in the workplace will go on as before.

A prudent employer will continue to ensure they “meet the market” when it comes to wages and conditions. If a “Modern Award”, when made, embraces their private arrangements, they will enter into a “flexibility arrangement” with individual employees. These will provide greater flexibility, and less controversy than Workchoices.

An employer who is dissatisfied with an employee, will review their position before six months service if more than 15 are employed, and 12 months if fewer than 15.

If fewer than 15 are employed, and dismissal is necessary, and the employee has been there longer than 12 months, following the “procedure” will ensure immunity.

Even where there are more than 15 employees, the “checklist”, if used, will show the Commission (now “Fair Work Australia”) that the principles of “procedural fairness” have been followed.

Unlike previously, a terminated employee has only 14 days to file an action. Under Workchoices , most were filed in the third week so it is likely that this limitation will have a large restraining effect on the num-ber of new matters.

If a union official comes calling (and gives at least 24 hours notice) to recruit members, an employer must let the employees know when they will be there, what room they will be in, and make sure to point out that you neither encourage nor seek to prevent them attending the discussion in the room. Make it your express business to not know who attends or who doesn’t – ignorance will prevent accusations which can otherwise be easily made. This will almost never occur.

The only real “changes” wrought by Fair Work Australia will be felt by those who overreact.

This article is intended to be general information only. It is not presented as legal advice. Since each legal circumstance is different, no action should be taken unless specific prior advice is sought on that action.