Workplace Reforms

Thursday, 01 March 2007


    The Federal Government’s WorkChoices policy has resulted in a major shift in workplace relations in Australia. As Domini Stuart discovered, while the policy does not specifically mention directors’ duties, there is a need for directors to be informed on this issue.

    What directors need to know about WorkChoices

    With 130 different pieces of industrial relations legislation, over 4,000 different awards and six different systems operating across the country, Australia’s workplace relations legislation was certainly ripe for simplification. Last year the Federal Government responded with WorkChoices, a national workplace relations system designed to cover up to 85 per cent of all Australian workers.

    “The new laws fundamentally alter the workplace relations landscape,” says Philip Copeland, partner at Deacons. “Historically, Commonwealth laws regulating aspects of industrial relations relied on the Commonwealth parliament’s constitutional power to enact legislation relating to ‘conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one State’. WorkChoices has used the corporations’ power of the federal constitution effectively to take over the majority of the states’ jurisdiction in relation to employment.”

    Some laws such as occupational health and safety, workers’ compensation, trading hours, public holidays and long service leave remain regulated by the states. However, Kevin Andrews, Minister for Employment and Workplace Relations, says that the use of the corporations’ power will allow the Australian Government to guarantee minimum wages and conditions in law for the first time at a national level.

    WorkChoices covers primarily, but not exclusively, those employed by constitutional corporations. Generally, this means companies and businesses incorporated under state and federal legislation, though the approach to what constitutes a financial or trading activity for this purpose has been broad. Football clubs, a state superannuation board, the Red Cross Society, a city council and a public hospital having all been held to be financial and trading corporations.

    The situation is slightly different in Victoria, where workplace relations powers were referred to the Commonwealth in 1996. Here, employees and employers covered by the referral will be covered by the federal WorkChoices system whether or not the employer is a constitutional corporation.

    What has changed?

    Prime Minister John Howard described WorkChoices reforms as major but not extreme – “sensible and fair steps to further strengthen the Australian economy and bring forth the next wave of productivity improvement which will benefit all Australians”. However, many workers feel that changes relating to unfair dismissal, awards and union powers have favoured employers by eroding their protection.

    Unfair dismissal

    “Workers in a firm with fewer than 100 employees, including part time and casual workers, can no longer make an application for unfair dismissal,” says Copeland. “There are also longer qualifying periods for workers’ eligibility for unfair dismissal in firms with over 100 employees. They now have to wait six months rather than three months before they can make an application.”

    Employees do still have access to Commonwealth unlawful dismissal and anti-discrimination remedies in federal, state and territory legislation including the Human Rights and Equal Opportunity Commission. This provides continuing protection against discrimination in the workplace on the basis of race, colour, sex, sexual preference, age, physical or mental disability, marital status, family responsibilities, pregnancy, religion, political opinion, national extraction or social origin.


    WorkChoices is phasing out existing federal and state-based awards over three years and replacing them with a handful of standardised awards. The aim is a simpler system of negotiating workplace agreements, with minimum wage and employment conditions collapsed to just five national standards covering rates of pay, hours of work, annual leave, personal leave and unpaid parental leave (see page 30). All other aspects of the agreement – for example, public holidays, rest breaks, incentive payments, annual leave loading, allowances, penalties and overtime payments – are now open to negotiation.

    They may also be excluded from an agreement without recourse to the old ‘no disadvantage’ test. Dismissed as absurd and impossible to use by Liberal MP Andrew Robb, the test has the support of Labor’s industrial relations spokesman Stephen Smith, who has described it as the safety net for Australian employees.

    “As an example, before WorkChoices, employers were compelled to pay an overtime penalty rate to employees covered by an award who worked more than 38 hours in a week,” says Copeland. “Under WorkChoices, a workplace agreement can be negotiated such that hours in excess of 38 are only paid at the standard rate.”

    Further, the new policy states that an employer may ‘request or require an employee to work 38 ordinary hours per week and reasonable additional hours’. In determining whether the additional hours an employee is requested or required to work are reasonable, a range of factors must be taken into account, including the employee’s personal circumstances or family responsibilities. However, Smith believes that the abolition of the ‘no disadvantage’ test endangers the things that make the difference between making ends meet and having a sensible work-family balance.


    Under WorkChoices, all employees retain the right to choose whether or not they belong to a trade union. An employer cannot dismiss an employee because they either belong to, or do not belong to a union. All employees also have the right to appoint a bargaining agent to help them in negotiating agreements, whether individual or collective. But it is now harder to go on strike.

    “Under WorkChoices, employees wanting to strike must go to the Australian Industrial Relations Commission (AIRC) and seek a ballot order,” says Dr Shae McCrystal, lecturer in the ANU College of Law. “The commission will then order a secret ballot to be carried out.”

    “The ballot provisions are very prohibitive. I think it will be virtually impossible for non-unionised workers in any kind of workplace to take strike action. The new legislation has introduced limitations about what you can strike about, when you can strike, and what kinds of agreements you can strike for. You’re restricted in access and you’re restricted in what you can ask for.”

    What does WorkChoices mean for directors?

    WorkChoices makes no specific mention of director liabilities. “From a helicopter level there’s not much difference in how directors will run their businesses,” says Copeland. “The legislation doesn’t directly affect directors’ personal liability; any difference is in the detail.

    “There’s no question that WorkChoices has made it easier to hire and fire, and that safety net standards have been either abolished or reduced. Theoretically that should make it easier to deal with employees, and also create potential cost savings. But these would only apply in situations where there’s an excess supply of labour. In a tight labour market there won’t be any erosion of conditions. Where demand exceeds supply, labour costs will always be high.”

    In terms of administration, while the stated aim was to reduce complexity, WorkChoices may have added to an employers’ administrative burden. To support the 38-hour week, employers were initially required to record starting and finishing times, plus the numbers of hours worked, for all employees.

    On the day the legislation came into effect, Tim Frost, a Melbourne partner with law firm Allens Arthur Robinson, told The Age newspaper that some of the requirements could prove difficult for many businesses. “If the Government were to respond to the resistance that I expect would arise, then I expect it would be necessary to alter the legislation,” he said. His words were prescient.

    Employer groups argued that the requirements relating to time-keeping were too onerous, particularly for managerial employees who often work flexible and irregular hours. In April, the Government announced amendments. Now, in general, where an employee earns $55,000 or more per year with no provision for overtime, employers do not need to keep a record of the hours worked. (See box). However, for those who are not exempt, detailed records of hours worked, any variations, accrual dates for leave, how payments have been calculated and any conditions negotiated between employer and employee need to be kept for seven years.

    Whatever the legislation allows or disallows, Stepan Kerkyasharian, President of the Anti-Discrimination Board of NSW, makes the point that it is good business sense to ensure that all employees are treated fairly in the workplace.

    Australian Fair Pay and Conditions Standard

    The Australian Fair Pay and Conditions Standard (the Standard) contains the five minimum conditions listed below. By law, no workplace agreement can provide conditions which are less than those in the Standard.

    Guaranteed basic rates of pay and guaranteed casual loadings
    A federal minimum wage or guaranteed basic rate of pay under an applicable Australia Pay and Classification Scale. For casual employees, a casual loading set by the Australian Fair Pay Commission (currently 20 per cent).

    Hours of work
    Maximum ordinary hours of work limited to 38 hours per week (which can be averaged over up to twelve months) and reasonable additional hours.

    Annual leave
    Four weeks paid annual leave per year (five weeks for some continuous shift employees). Up to two weeks of this can be cashed out at the employee’s written election where their workplace agreement permits*.

    Personal leave
    Ten days paid personal/carer’s leave per year and two days paid compassionate leave per occasion.* Where this paid personal leave has been exhausted, two days unpaid carer’s leave per occasion.

    Unpaid parental leave
    For all employees other than certain casual employees, up to 52 weeks unpaid parental leave (maternity, paternity and adoption).

    * These conditions do not apply to casual employees. They are based on a full time employee working 38 hours per week and apply on a pro-rata basis according to the hours worked by the employee. Please note that annual leave and personal leave do not accrue in the respect of hours worked above 38 hours per week.


    Record keeping requirements

    In September, the requirements for keeping records relating to starting and finishing times and total hours worked were amended to those below.

    The original record keeping requirements introduced with the WorkChoices laws in March 2006 came with a six month moratorium period in relation to enforcement. This has now been extended until 27 March 2007. After that time, employers will face penalties if found to be in breach of the record keeping requirements.

    Employee Status Record keeping Requirements
    Where an employee has provisions for overtime and is paid an annual salary of less than $55,000* Employees would be required to keep records of starting and finishing times and total hours worked
    Where an employee as provisions for overtime and is paid an annual salary of $55,000* or more Employees would be required to keep records of starting and finishing times
    Where an employee has no provisions for overtime and is paid an annual salary less than $55,000* Employers would be required to keep records of total hours worked
    Where an employee has no provisions for overtime and is paid an annual salary of $55,000* or more There would be no record keeping requirements under Regulation 19.9


    Domini Stuart has been a writer for over 25 years. As an award-winning advertising copywriter she worked with companies across all industry segments including finance, communications, travel and non-for-profit. As a journalist, she has a regular monthly column in My Business magazine and writes feature articles for a range of publications including export magazine and The Sunday Telegraph.

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