Workplace Relations And The Federal Election

As you are aware, the Prime Minister yesterday announced that the election will be held on Saturday 24 November 2007.

And workplace relations is shaping up to be one of the major issues in the election.

In this special election edition of the HR & IR Update, we examine both the Government and ALP workplace relations policies in depth. Because the Government’s workplace relations policy has already been implemented, and no major changes have been flagged, most of this Update focuses on what would happen if the ALP were to win the upcoming election.

What will happen if the Government wins?

The Government has indicated that it will not be making any major changes to Work Choices. However, this is not to say that nothing will happen.

Most importantly, the process of award rationalisation will start. As part of award rationalisation, the number of federal awards will be dramatically reduced.

Also as part of the rationalisation, the old state award system will be subsumed into the federal award system – for employers covered by Work Choices, anyway. As you will be aware, state awards have become Notional Agreements Preserving State Awards (or NAPSAs, as they are commonly known) – which are due to expire on 27 March 2009, three years after Work Choices commenced.

Originally, there were suggestions that the number of federal and state awards might be reduced from 4000 to as few as 20 – but this now seems unlikely.

In a parallel process, the Fair Pay Commission will be involved in the rationalising of Australian Pay and Classification Scales – which contain minimum hourly wage rates based on federal and state awards. As the legislation currently stands, this process is meant to remove all state based differences in minimum wage rates by 27 March 2009. However, this may change.

There are also likely to be further ‘fine tuning’ amendments. In this regard, the new Fairness Test is likely to be a prime candidate. It wouldn’t be surprising if the Government also extended the life of NAPSAs, given the slow progress of award rationalisation.

What will happen if the ALP wins?

The ALP policy adopts some significant aspects both of Work Choices and the Howard Government’s previous industrial relations system in the Workplace Relations Act 1996.

Examples include:

• the national system – based on the use of the ‘corporations power’;

• restrictions on award content; and

• the retention of various restrictions on industrial action – including secret ballots for protected action.

And in some respects, at least on the surface, it goes beyond Work Choices – including abolishing the Australian Industrial Relations Commission (‘AIRC’) altogether.

The notable exception is, of course, the abolition of AWAs.

The big ‘wild card’ is the Senate. Only half the Senate is up for election – with the new Senators to take their seats on 1 July 2008 (except for the Senators from the ACT and NT who will take up their seats immediately after the election). It is entirely possible that, even if the ALP wins the election, either the Coalition will retain control of the Senate or the Greens and other minor parties will hold the balance of power.

The ALP policy envisages two main phases:

• a transitional phase, starting shortly after the election, with a transitional bill being introduced into Parliament. The most significant part of this phase will be the abolition of AWAs – assuming, of course, that the Senate co-operates; and

• the main phase, starting with consultation over a draft exposure bill in 2008 and running through to 2010. Some of the key changes will start on 1 January 2010 – but there may be other changes which start earlier.

We examine the policy in detail below – dealing first with the transitional phase, then the main phase. We also spotlight particular issues in the boxes accompanying the text.

ALP Policy: Ten key issues What happens if the Senate, which will probably remain under control of the Coalition until 30 June 2008, blocks the ALP's transitional bill? What happens if the ALP does not gain control of the Senate from 1 July 2008? Will some of the main changes start before 1 January 2010? The abolition of AWAs (see 'ALP Policy: AWAs’ box). How will the collective bargaining system operate – especially with good faith bargaining orders and compulsory bargaining with unions (see 'ALP Policy: Collective bargaining and industrial action’ box). The introduction of a universal entitlement to severance pay on redundancy, starting 1 January 2010. What does the National Employment Standard for 'flexible work for parents’ involve? What will happen with the new 'fast track’ unfair dismissal system – with cases to be decided on the basis of an informal conference without a hearing, witnesses, cross examination or lawyers? Will fewer cases be settled? And will reinstatement of dismissed employees become more common? Will the guarantee against 'unfair treatment’ become a de facto unfair contracts jurisdiction allowing employees to obtain monetary compensation for any unfairness in the workplace? The award simplification and modernisation process. What will it mean for employers – especially if multiple awards are consolidated (raising the risk of the highest common denominator applying)?

First Stage: Transitional Bill and Award Simplification Process

Transitional Bill

The most significant part of the Transitional Bill is the abolition of AWAs. However, ‘individual transitional employment agreements’ (or ITEAs) will be available for two years. These will be available where:

• the employer has any employee engaged on an AWA as at 1 December 2007;

• the employee either:

• engages a new employee; or
• wants to enter an ITEA with an existing employee on an AWA.

The ITEA must pass a no disadvantage test against the employer’s collective agreement or, if none, the award and Fair Pay and Conditions Standard. Importantly, the current Fairness Test (and the old no disadvantage test before that) is tested against the applicable award – not against a collective agreement (with the limited exception of old state agreements). So, the bar is being raised.

ITEAs can have a nominal expiry date of 31 December 2009, at the latest.

Existing AWAs will be able to run their full term. As AWAs may have a term of up to five years, this means that the last AWAs will expire around 2012.

The Transitional Bill will also include the ALP’s 10 National Employment Standards – but they will not come into effect until 1 January 2010. We examine these standards in detail below, when we discuss the Second Stage.

Of course, it is very unlikely that Labor will have control of the Senate, even with the help of minority parties or independents, until 1 July 2008. Territory Senators change immediately after the election, but State Senators do not change until 1 July 2008. So if it wins, the ALP will be relying on its electoral mandate to try to persuade the Coalition not to oppose the Transitional Bill in the Senate.

Timetable Under An ALP Government
Late 2007 or early 2008	Transitional Bill introduced abolishing AWAs and making transitional arrangements Other changes (e.g. changes to the Regulations, the Building Industry Code etc)?
1 January 2008	Award simplification process commences
2008 – 2009	Draft exposure bill released & legislation ultimately passed Will any changes start before 1 January 2010?
1 January 2010	New simplified awards, Fair Work Australia and National Employment Standards commence. Awards cease to apply to new employees earning over $100,000 ITEAs will cease to apply Will this be the start date for the remainder of legislation, as well?
31 January 2010	ABCC subsumed into Fair Work Australia and Building and Construction Industry Improvement Act 2005 ceases to apply
Late 2010	Next election?
Late 2012	Last AWAs expire

Award Modernisation and Simplification

The award ‘modernisation and simplification’ process will commence on 1 January 2008. This might be taken to suggest that the process will take place under the Work Choices legislation but, in actual fact, it is likely the transitional bill will deal with the process.

The simplification process will start with a priority list of key awards – including:

• awards in industries with a high numbers of AWAs (which is likely to include hospitality, retail, mining and the Commonwealth public sector); and

• occupations which have been traditionally covered by state awards (such as clerical employees).

Enterprise awards will only be reviewed where requested by the parties – question if one party could seek a review over the objections of another.

It appears that this process will involve at least some rationalisation of awards (i.e. reducing the number of awards) – not merely simplifying the content of existing awards. The process will also need to deal with the old state award system – i.e. NAPSAs.

ALP Policy: AWAs The ALP has taken some steps to counterbalance the abolition of AWAs. They include: existing AWAs may run their full nominal term – meaning the last AWAs will expire around 2012; as a transitional matter, 'individual transitional employment agreements’ (‘ITEAs’) which will be available for employers using AWAs for two years until 1 January 2010; awards will be simplified – reducing the need for AWAs to overcome inflexibilities in the award system; from 1 January 2010, awards will no longer apply to new employees earning more than $100,000 (indexed) – reducing the need for AWAs for high earning employees (which will include blue collar employees in some industries such as mining). Awards will continue to apply to existing employees earning over $100,000 – unless they opt out; and awards and collective agreements will include a flexibility clause allowing an employer and individual employee to make a 'flexibility arrangement’.

Other changes

There is also the possibility of other changes during this time – although these have not been announced. Most importantly, these include changes to the Regulations – both repealing or amending existing regulations and making new ones. Such changes could be disallowed by the Senate. These regulations could significantly change key parts of how the Work Choices system operates.

Regulations could be made which:

• remove, or substantially modify, any or all of the types of ‘prohibited content’ (which cannot be included in workplace agreements) – or even create new types of ‘prohibited content’; and

• allow State industrial laws, or parts of them, to operate and no longer to be overridden.

Other changes could include:

• changing, or even abolishing, the Implementation Guidelines for the National Code for the Construction Industry;
• NAPSAs are due to expire on 27 March 2009 – this will presumably be extended.

Second Stage: The New System

The Process

In 2008 and possibly 2009, an ALP Government would consult on its main industrial legislation – including releasing a draft exposure bill. From this, it seems that the main legislation will be passed in late 2008, at the earliest.

Of course, the legislation will need to get through the Senate – and it is unlikely the ALP will have outright control. Either the Coalition will retain a majority or the Greens and other minor parties will hold the balance of power.

The key date is 1 January 2010. On that date, the new simplified awards, Fair Work Australia and National Employment Standards will commence. Importantly, also from this date:

• awards will cease to apply to employees earning over $100,000 (although the National Employment Standards will apply). This is indexed; and

• ITEAs will cease to apply.

However, it is possible (perhaps even likely) that some of the other changes will start earlier. It would be surprising if an ALP Government waited two full years to introduce its substantive changes. Some changes which might start earlier include changes to:

• collective agreements and the collective bargaining process;

• industrial action; and

• some aspects of unfair dismissals.

If this were to occur, presumably the AIRC would be given powers on a transitional basis before the establishment of Fair Work Australia.

ALP Policy: Collective Bargaining And Industrial Action Existing remedies against industrial action – including return to work orders, section 45D and the common law – will be retained Prohibition on strike pay remains – although 4 hour minimum non payment requirement removed Employee collective agreements remain – but employer greenfields agreements will not Secret ballot required for protected action – but process likely to be simpler Fair Work Australia can make orders requiring a party to bargain in good faith Employers required to bargain collectively with union if one or more union members want the union involved. However, if an agreement cannot be reached, the employer may seek to reach an agreement with employees directly

Proposed System

Fair Work Australia

An ALP Government would establish a body known as ‘Fair Work Australia’, which it describes as a ‘one-stop shop’ – which would open its doors on 1 January 2010. Fair Work Australia would replace the AIRC. It would also incorporate, and replace, various government bodies such as:

• the Australian Fair Pay Commission, which is responsible for national wage increases;

• the Workplace Authority (formerly the Employment Advocate), which deals with workplace agreements;

• the Workplace Ombudsman (formerly the Office of Workplace Services) which is responsible for prosecutions; and

• from 31 January 2010, the Australian Building and Construction Commission (the building industry ‘watch dog’).

It also seems likely that ‘Fair Work Australia’ will take over some functions currently exercised by the Federal Court and Federal Magistrates Court. This would need to be done carefully, to avoid offending the separation of judicial power in the Australian Constitution.

Fair Work Australia will review minimum wages each year. It is not clear whether this will be a process which is more akin to the traditional national wage cases formerly conducted by the AIRC or the reviews conducted by the Australian Fair Pay Commission.

ALP Policy: The Building Industry The Building and Construction Industry Improvement Act 2005 will remain until 31 January 2010; The ABCC will remain until 31 January 2010, when its functions will be subsumed into Fair Work Australia; What will happen with the National Code and Implementation Guidelines?

National Employment Standards

From 1 January 2010 there would be ten National Employment Standards:

• A 38 hour week plus reasonable additional hours;

• Up to twelve months unpaid parental leave – with a right to request an additional twelve months unpaid parental leave, which an employer cannot unreasonably refuse;

• Flexible work for parents;

• Annual leave of four weeks for full time employees and five weeks for shift workers;

• Personal, carer’s and compassionate leave;

• Community service leave;

• Guaranteed public holidays;

• Information in the workplace: employers must provide all new employees with a ‘Fair Work Information Statement’ – with particular information about workplace rights;

• Termination of employment and redundancy: employees will be entitled to notice of termination of between one and five weeks according to age and length of service.
  
  Employees who are made redundant will be entitled to severance pay in accordance with the Australian Industrial Relations Commissions 2004 Redundancy Test Case – a scale of between 0 and 16 weeks, depending on length of service. It does not apply to employers with less than 15 employees. This will be the first time in Australia that there is a universal standard of severance pay. This severance pay scale is different (and in some respects, higher) than some of the existing state severance pay standards in awards.

• Long service leave: initially, existing long service leave entitlements in awards and state legislation will be preserved. However, the ALP will work with the States to develop nationally consistent long service leave entitlements. There may be winners and losers when standardisation occurs, but presumably existing entitlements will be preserved.

The ALP’s proposed ten National Employment Standards do not include minimum wages. As we mention below, it seems that pay and classification scales will be returned to awards.

Awards

Interestingly, an ALP Government will retain reasonably strict limits on what awards can contain. It will not, it appears, abolish the allowable award matters restrictions introduced by the Howard Government in the Workplace Relations Act 1996 then extended by Work Choices.

However, there will be some changes. Under the ALP policy, an award can contain:

• minimum wages – including classification structures and incentives. As you may be aware, Work Choices established Australian Pay and Classification Scales (‘APCSs’) and moved wages and classifications structures from awards into these APCSs. It appears these will be returned to awards.

• type of work performed – such as full time, part time or casual employment;

• arrangements for when work is performed including hours of work, rostering, rest breaks and meal breaks;

• overtime;

• penalty rates;

• provision for annual wage or salary arrangements; allowances;

• leave, leave loadings and the arrangements for taking leave;

• superannuation; and

• consultation, representation and dispute settling procedures.

On its face, this does not appear to be a significant change from Work Choices. However, there may be some differences of detail.

Awards will also contain a flexibility clause permitting individual agreement, which will be prepared by the AIRC. This clause or agreement could include all up rates of pay and exemption provisions (i.e. that particular clauses of the award do not apply).

What is quite unclear is what powers Fair Work Australia will have to make and vary awards. Under Work Choices, the AIRC’s powers are very limited. It can be expected this will change, but to what degree?

Finally, as noted above, awards will not apply to new employees earning more than $100,000 per year (indexed) from 1 January 2010. This is based on an employee’s guaranteed ordinary earnings and will not include unreasonable overtime. However, there is a ‘grandfathering’ arrangement. Existing employees earning over $100,000 can choose to remain on the award.

Workplace Agreements

Most importantly:

• agreements will be subject to a form of ‘no disadvantage test’ against the award and minimum legislative standards;

• agreements will be approved by Fair Work Australia. They will be approved within 7 days and can be done ‘on the papers’ – i.e. without a formal hearing;

• it can inferred that employer greenfields agreements will be abolished. Employer greenfields agreements are a form of agreement introduced by Work Choices. An employer can make an employer greenfields agreement for a new business, project or undertaking – without the need for agreement with a union or employees. Again, the transitional arrangements will be important;

• a collective agreement can have a nominal term of up to 4 years (as opposed to 5 years under Work Choices);

• employee collective agreements will be retained. Furthermore, there will be no requirement to notify the union or give the union a reasonable opportunity to participate in negotiations;

• however, in some cases, an employer can be compelled to negotiate a collective agreement with a union. We examine this below; and

• all collective agreements will be required to contain a flexibility clause allowing an employer and individual employee to make a ‘flexibility arrangement’. Fair Work Australia will publish a ‘model’ clause – but it does not appear this model clause will be compulsory.

Transmission of Business

Before Work Choices, in a transmission of business (such as a sale), the new employer would be bound by the old employer’s federal awards and agreements.

Under Work Choices, the old employer’s awards and agreements apply only to transferring employees from the old employer and then them only applies for up to 12 months.

It seems likely that the ALP would revert to the old arrangements – although the policy does not say so expressly. The ALP has also talked about making entitlements portable in a transmission of business.

State Systems

Work Choices moved all employers within the Federal Government’s constitutional reach into the new federal system – with State awards becoming NAPSAs. However, there is a ‘rump’ of employees left in the State system – such as sole traders and partnerships.

The ALP is – in one form or another – intending to retain a national system in the private sector. The ALP has said that:

• it will rely on all the constitutional powers available to it to do so – including the corporations power; and

• it will also work co-operatively with the States to achieve national industrial relation laws for the private sector – that is, the ‘rump’ referred to above. This could involve referral of powers for private sector industrial relations or other forms of co-operation and harmonisation.

There is some tension between these two statements and the Federal ALP has met with some resistance from State Governments – it will remain to be seen how it plays out. However, each State will be able to retain its State systems for the state public sector, if it so desired.

Collective bargaining and industrial action

There are two contentious issues with collective bargaining:

Firstly, in collective bargaining, ALP policy states that participants must bargain in good faith. Amongst other things this obligation will involve:

• attending and participating in meetings at reasonable times;
• disclosing relevant information, subject to appropriate protection for commercial-inconfidence information;
• responding to proposals in a timely fashion;
• giving genuine consideration to the needs of the other parties; and
• not engaging in capricious or unfair conduct or conduct that undermines freedom of association or collective bargaining.

Fair Work Australia will have the power to make orders where bargaining participants are not bargaining in good faith; and

• Secondly, if one or more union members want the union involved, then the employer will be required to bargain collectively with the union. However, if an agreement cannot be reached, the employer may seek to reach an agreement with employees directly.

However, there are some important elements of Work Choices about industrial action which will be retained:

• protected industrial action cannot be taken during the nominal term of an agreement. Presumably, this includes industrial action over matters not contained in the agreement – but this will remain to be seen;

• protected industrial action cannot be taken in support of pattern bargaining;

• it appears there will be a requirement that a party taking protected action must be bargaining in good faith;

• it will be unlawful for employers to pay strike pay: this is not new, but it removes the requirement that at least 4 hours’ pay be withheld e.g. for even a 10 minute unauthorised stop-work meeting;

• the current remedies against unprotected industrial action will remain – including orders against industrial action. Nor will there be any requirement for conciliation before an employer can bring proceedings at common law; and

• the secondary boycott provisions in section 45D etc. of the Trade Practices Act 1974 will be retained.

Most importantly, it will continue to be necessary for protected action to be approved in a secret ballot. The ballot process will be supervised by Fair Work Australia. However, it is likely that the current process will be simplified. It might not be necessary to seek an order for a ballot to be held, for example. Fair Work Australia will also be able to conciliate or – by agreement arbitrate to resolve issues in negotiations.

Unions and Freedom of Association

There is relatively little detail in the ALP Policy about unions and freedom of association. Most of the freedom of association laws will be retained and quite possibly extended. However, it will be interesting if the ALP retains the prohibition on discrimination against a person for not being a union member – which, amongst other things, has the effect of prohibiting:

• union preference arrangements; and

• closed shop arrangements.

Existing right of entry laws will be retained – although, presumably, there could be differences of detail.

Employee rights and unfair dismissals

The ALP will enshrine a series of workplace rights:

• collective bargaining (dealt with above);

• freedom of association (also dealt with above);

• the right to representation, information and consultation in the workplace;

• protection against unfair treatment; and

• access to an effective procedure to resolve grievances and disputes.

The protection against unfair treatment could be a ‘sleeper’. Depending on what this means, it could be very significant. Does this mean, for example, that an employee could bring proceedings seeking orders and compensation in relation to any unfair conduct? And will all employees (including managers and executives) have access?

If so, then this could create a national jurisdiction which may rival the New South Wales unfair contracts jurisdiction at its height. The right to access an effective procedure to resolve grievances and disputes could also be significant – especially if orders can be made.

There are also a series of changes proposed in relation to unfair dismissal:

• the ALP policy is that an employee cannot bring an unfair dismissal claim in the first six months if they are employed by an employer employing 15 or more employees, or twelve months otherwise. Under Work Choices, an employee cannot bring an unfair dismissal if they are dismissed during a 6 month qualifying period or their employer has fewer than 100 employees;

• under Work Choices, an unfair dismissal claim cannot be made in relation to a termination due to operational reasons – such as a redundancy. With the exception of small businesses, this exemption will probably be removed;

• unfair dismissal claims will be heard by Fair Work Australia. It seems that there will be a single conference – at which settlement is explored and, failing settlement, Fair Work Australia makes a decision on the claim. Fair Work Australia can ask the parties questions and seek their views on the issues raised. However, there will be no formal written submissions, cross examination or hearing. The parties may have a representative or support person present – but it appears lawyers will not be permitted;

• a ‘fair dismissal code’ will be developed – tailored to the needs of small business. Where a small business employer has genuinely complied with the code, the dismissal will be considered to be fair;

• errors of a procedural technical nature will not automatically result in the finding of unfair dismissal; and

• when Fair Work Australia decides that an employee has been unfairly dismissed, the remedy will be reinstatement – unless the reinstatement is not in the interest of the employee or the employer’s business. Otherwise compensation will be ordered. There will be a cap on compensation – although the ALP do not say what that cap would be. The long established cap on compensation for unfair dismissals is 6 months.

With the bar on lawyers, unions will also have a potential advantage – given that union officials will have considerable experience in these types of matters – and most unions have a number of lawyers on staff, but most employers will not.

With reinstatement as the main remedy, the hearing will be for high stakes. It is true that, under the current system, reinstatement is also the primary remedy. However, the vast majority of unfair dismissals are settled for money. Under the ALP policy, this could easily change – with many more employees electing to have Fair Work Australia decide their cases.

Conclusion

No doubt debate will continue during the election – although we are unlikely to see substantive policy changes.

We will keep you updated on what is turning out to be one of the most important election campaigns for the Australian industrial relations system.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.