Major legislative changes and their possible impact on organisations have placed workplace relations firmly back on the boardroom agenda.
Brent Ferguson, head of national workplace relations policy at AI Group, describes the recent changes to workplace industrial relations (IR) laws as the most significant suite of amendments to Australia’s workplace relations laws in more than a decade. Passed via the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 on 2 December, they amend the Fair Work Act 2009. Many of their changes began on 7 December, but others start later.
Brendan Milne, a partner at specialist workplace lawyers Kingston Reid, explains that the new legislation is, as its name suggests, designed to enhance job security and boost employee pay. “It does so by introducing additional flexibility, implementing new safeguards and making collective bargaining more accessible and straightforward,” he says.
Anna Booth, a director of mediation company CoSolve and a former deputy president of the Fair Work Commission (FWC), says most experts are probably not across every fine detail of the legislation. “As far as I'm aware, there's no consolidated legislation available yet,” she says. “It’s designed to give a fillip to enterprise bargaining, not only to multi-employer bargaining, but also to single-enterprise bargaining.”
Among its targets are companies that pay low wages and offer very insecure work, she says.
Ferguson believes the most controversial reform is the shake-up of rules relating to collective bargaining, including the significant expansion of union rights to require employers to engage in “multi-employer bargaining” or to coordinate industrial action across workforces in support of this.
“There will also be scope for unions to obtain orders from the FWC extending the coverage of such agreements to employers that had not been a party to negotiating them, even if the employer opposes it,” he says.
Ferguson adds the ultimate impacts of these changes will largely depend on how unions use them. “The new provisions have the potential to dramatically reshape the workplace relations system,” he says.
“Although the ‘care economy’, which includes the aged, disability and childcare sectors, has been identified by proponents of the changes as particularly warranting the availability of multi-employer bargaining, unions covering a much broader range of sectors have expressed enthusiasm for the amendments. The biggest immediate change is likely to be employers seeking to renegotiate expired enterprise agreements or engage in enterprise bargaining for the first time in order to avoid being part of the new multi-employer bargaining regime. The system has been specifically designed in a way that will encourage this.”
A particularly significant change that has received limited media attention, according to Ferguson, is the creation of a pathway for unions, or employers, to get the FWC to “arbitrate” what are described as “intractable” bargaining disputes. “This will see the FWC intervening to directly set conditions in a way that really hasn’t been a part of our system for decades,” he says. “It will no doubt change the strategies that unions and some employers pursue at the bargaining table.”
Wearing the BOOT
The new legislation includes changes to the way the Better Off Overall Test, commonly referred to as the “BOOT”, is applied by the FWC when comparing a proposed agreement to an award.
Ferguson says the FWC will obtain new powers to amend a proposed agreement to address any concern over whether it passes the BOOT. “In short, the FWC will be able to change or ‘rewrite’ terms of an agreement that is lodged with it, even if the employer doesn’t agree to the alteration.”
He believes this change will potentially colour the approach employers take to drafting agreements and become a risk that will need to be factored in by businesses when assessing changes to operations.
Ferguson says the legislative changes expand the role and powers of the FWC and unions. “The FWC will be empowered to intervene in a whole range of workplace relations issues in a much more substantial way than is presently the case,” he says. “This ranges from dealing with disputes over bargaining and dealing with complaints over sexual harassment to added powers to resolve disputes concerning employee requests for access to flexible working arrangements. Unions will similarly be given a raft of new or expanded rights in relation to bargaining and representation of employees.”
In the past, employers could terminate enterprise agreements without the consent of employees and sometimes used this as a tactic to advance bargaining. But, according to Milne, a new safeguard means they can no longer do this unless the continued operation of the agreement would be unfair to employees or would pose a significant threat to the viability of the business.
He adds that as another safeguard, old “zombie” agreements — that is, certain agreements made before 2010 — will automatically terminate on 7 December 2023, meaning that the updated terms and conditions in modern awards will apply to the employees involved.
And, in a move aimed at moving more employees into permanent employment, most employers will no longer be able to use fixed-term contracts for the same or similar roles that extend for more than two years (individually or cumulatively from December 2023), except in very limited circumstances.
Ferguson says it’s wise to review your employment practices and the wording of standard employment contracts because there are significant “anti-avoidance” requirements underpinning the changes.
Changes aimed at boosting pay and reducing gender-based pay differences mean that employees can no longer be prevented from discussing their pay with others.
“Over time, these changes may serve to shift the current cultural tendency of employees in Australia to not discuss their remuneration with colleagues,” says Ferguson. “This will no doubt cause many employers to critically assess variances in pay levels between staff. In some instances, this may lead to pay rises, but many employers are suggesting that it will also cause them to be more cautious about providing additional benefits to individual employees, even if this may be justified based on performance, skills or experience.”
The legislation expands flexible working arrangement provisions.
“Presently, employers can refuse such requests on reasonable business grounds and there’s not much an employee can do about it,” says Milne. “From June 2023, employers will be required to genuinely try to reach an agreement with employees about requests and where an agreement cannot be reached, the FWC will be empowered to determine the matter, including through non-voluntary arbitration.”
Milne says this means employees and unions have much more capacity to push for additional flexibility and demand better terms and conditions. “They’ll be able to do this either individually or collectively, and both during and outside of bargaining,” he says. “Because of this, and because the FWC will more readily intervene in the process, employees will be less likely to revert to protected industrial action. Conversely, the strategy of ‘waiting’ employees out and ‘wearing’ industrial action will be less effective.”
Ferguson says under the new provisions, employers will need to follow prescriptive rules dictating how they respond to requests. “Even if there are sensible reasons for not accommodating employee requests, an employer will potentially need to spend substantial time and resources on proceedings before the FWC to justify its position,” he says. “The mere existence of these risks will provide a strong imperative for employers to accommodate employee requests.”
According to Ferguson, “There will also be new protections for employees from sexual harassment and certain forms of discrimination that will create new risks for employers and an expanded ability for employees to access the small claims jurisdiction to seek recovery of amounts up to $100,000, instead of the current $20,000 ceiling.”
The changes allow sexual harassment applications to be made jointly by multiple aggrieved people or by a union, as opposed to a single individual. Plus, they give the FWC powers to investigate and bring civil penalty proceedings against employers or individuals who contravene the law.
Law firm Clayton Utz advises employers to review their sexual harassment policies and procedures. Other steps could include supporting a “safe to speak up” culture, discrimination and harassment training, assessing the organisation’s reward and consequence management frameworks and continually monitoring the workplace environment and culture.
For now, Booth believes boards should have industrial relations on the agenda in the same way they do for work, health and safety. She says they should also be asking management and their legal advisers for thorough briefings on the new framework and how their organisations are affected.
“It'll be different for every board,” she says, noting that some companies have never conducted enterprise bargaining before, while others are only used it for single-employer agreements. “Boards should then be having a strategic discussion about what their risks and opportunities are and be looking at how the human resources and cultural strategies need to be adjusted. It's critical that the strategy fits the culture the organisation wants to have.”
Questions to ask include what the likelihood of the organisation being approached for multi-employer bargaining is and whether that would be in the organisation’s interests. “If it's not, the board should be looking at how it will respond if approached,” says Booth. “The board would also want to know that the management team is thoroughly responsive and in touch with the needs and concerns of the workforce, so that if the organisation is approached to undertake enterprise bargaining, it can have a conversation with the workforce about that.”
Milne adds that while there are plenty of risks associated with the reforms, there are also many opportunities. “For example, in the right circumstances, multi-enterprise agreements might provide an opportunity for businesses to level the playing field with their competitors when it comes to labour costs — or even gain a competitive advantage,” he says. “Businesses may also be able to avoid disputation in bargaining by seeking FWC intervention at an earlier stage, giving them a greater capacity to take firm positions in bargaining.”
According to Ferguson, the government has an ambitious workplace relations reform agenda and the recent changes are only a start. “Employers can expect further changes in areas relating to casual employment, labour hire arrangements, the engagement of independent contractors and the introduction of criminal penalties in relation to what is termed ‘wage theft’,” he says.
However, he adds that little is currently known about the changes coming related to casual employment. “It would, however, be safe to assume that the long-term use of casuals on a regular basis is likely to be targeted,” he says.
“Changes affecting labour hire are expected to centre around the implementation of the ‘same job/same pay’ concept, which will likely require that labour-hire workers receive the same remuneration as employees of a host employer. There are big questions about how this will operate in practice.”
Labor has announced plans to enable the FWC to set terms and conditions for “employee-like” workers engaged as contractors. “This will undoubtedly involve further regulation of the gig sector, but there is the potential that it will evolve to have much broader ramifications for the engagement of contractors in a range of other areas,” says Ferguson.
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