IR Update: Here We Go Again!

4 December 2007

By Kellie Tranter

Work Choices reportedly cost taxpayers about $60 million in ads, not to mention the resources used in drafting, analysing and debating the merits of the legislation. Rather flabbergasting when only 10 per cent of the workforce are on AWAs, many of them employed in the mining industry and earning more than $100,000 a year.

Draft laws phasing out the Australian Workplace Agreements will be ready in time for the opening of federal parliament next February. Unfair dismissal laws will remain unchanged until the middle of next year, unless the Government yields to the recently publicised union demands.

Once the plates have been changed and the workplace relations vehicle re-registered we will see Labor's 'Forward with Fairness' in action. Again there will be 10 statutory minimum conditions, with a further 10 conditions that may be included in Awards. Labor's proposed "Fair Work Australia" will be charged with conducting a process of Award simplification over the next couple of years. And, while "family friendly" initiatives such as the creation of the Office of Work and Family and the promise of $12 million in grants to encourage small business to adopt practices promoting work/life balance will be added to the package, the formalities of workplace relations should stay much the same.

Proposed industrial action must still be approved by secret ballot (to be overseen by Fair Work Australia) and unauthorised industrial action will remain prohibited (although low-income workers and some others may be exempt from this rule); and any agreements, including AWAs, that were negotiated during the Work Choices era and are currently in place will be allowed to run their term. Indeed, under mooted transitional provisions businesses using AWAs will still be entitled to introduce them until 1 January 2009.

Even though State and Labor governments challenged the constitutionality of the federal IR takeover in 2005, the new Labor government has pledged to keep it the way it is. With the labor planets now aligned the Government has already said that it hopes to use a spirit of "Constitutional Co-operation" to bring OHS and workers compensation into the federal sphere. The Government may also decide to bring all Australian workers under the same workplace relations laws.

Given the incredible complexity of the current system, it will take some time to put an alternative industrial relations system in place. The Rudd Government will also have to deal with issues like securing State cooperation on IR matters and award rationalisation.

Labor has said that the bulk of IR changes won't come about until 2010. They are going to have difficulties with the Senate until at least July next year. The Opposition leader (Nelson...for now!) is already making noises about blocking changes to unfair dismissal laws.

What are Labor's proposed IR changes?

Statutory minimum conditions

Labor proposes introducing 10 statutory minimum employment conditions that largely mirror the current "Australian Fair Pay and Conditions Standard" under WorkChoices, but which will also provide for minimum redundancy and long service leave entitlements. These provisions will apply to employers with 15 or more employees and largely accord with existing State and Federal legislation.

Awards and "protected conditions"

Labor will amend the protected award conditions to establish new protected award conditions in relation to: rostering; rest breaks; meal breaks; arrangements for taking leave; dispute settling procedures; type of work performed; arrangements for when work is performed; and provisions for salary arrangements.
Labor will also replace the "fairness test" with a "no-disadvantage test". The difference between the two tests is not likely to be substantial. Furthermore, Labor will introduce legislation by 1 January 2010 to ensure that employees earning above $100,000 a year are "award-free", that is, they may be subject to common law contracts which can exclude protected award conditions.

Australian Workplace Agreements ("AWAs")

Labor says it will phase out AWAs over the next few years, but will allow AWAs that are in operation before its legislative changes to continue to operate for the full length of their terms. Businesses presently using AWAs will have the opportunity to utilise Individual Transitional Employment Agreements ("ITEAs") for a two year period, expiring on 31 December 2009. Although little information is presently available regarding ITEAs, it is likely ITEAs will also allow employers to contract out of protected award conditions.
Employers will eventually be required to shift from employing employees on statutory contracts (such as AWAs and ITEAs) onto either collective agreements or common law contracts. If an employee is employed under a common law contract, the employer will not be able to contract out of protected award conditions unless the employee earns more than $100,000.

Collective bargaining

Fair Work Australia is the "one-stop-IR-shop" Labor proposes to establish to administer a variety of functions under the Act of an administrative and judicial nature. Where a majority of employees wish to bargain collectively, the employer will be required to do so in "good faith". Where a party does not bargain in good faith, "Fair Work Australia" will have the power to make orders to enforce good faith bargaining (which is an interesting concept! Sound a bit like the old compulsory conciliation and arbitration?). Collective agreements will be approved by Fair Work Australia within seven days by an "on the papers" approval process, so bargaining participants will not have to attend any hearing for the approval of a collective agreement.

Unfair Dismissal

Labor proposes to grant all employees access to the Act's unfair dismissal regime, regardless of the size of an employer. Unfair dismissals will be handled by "Fair Work Australia" which will have the power to award a remedy without a formal hearing. For businesses with 15 or less employees, Labor proposes to extend the "qualifying period" to 12 months. However, as is presently the case, in order for an employee to be entitled to seek relief for an unfair dismissal:
the employee's salary will have to fall under a certain "salary cap"; and
the employee will have to serve a "qualifying period" of employment with the employer, which will usually be six months.
Labor also plans to introduce a "Fair Dismissal Code" which will provide business owners with information about their rights and obligations. Employers who comply with the Fair Dismissal Code will not be liable for an unfair dismissal claim.

"Prohibited content"

Finally, it was suggested that a Labor Government would abolish the prohibited content rules.

What action should employers take?

As Labor's intended workplace reforms probably will not be legislated upon until well into 2008, on the basis of what we know so far most employers probably need not take any immediate action (assuming that written contracts of employment are already in place). However, Labor's announcements to date do suggest that employers should consider the following.

AWAs

Employers wishing to introduce AWAs have only a limited opportunity to enter into them. Labor's IR policy presently contemplates that AWAs will continue to be effective for some time after Labor's workplace reforms.

According to the announced policy, the mere entry into one AWA in a business before 1 December 2007 will entitle an employer to later utilise ITEAs in relation to all of its employees until 31 December 2009. As far as we know ITEAs may enable employers to contract out of 'protected award conditions', much like AWAs do now.

Collective Agreements

Non-union agreements may be easier to achieve, from a procedural perspective, before Labor's proposed legislative changes come in. Labor's IR policy contemplates that employers will be required to negotiate in "good faith" if the majority of employees wish to make a collective agreement, and we don't know what that will involve.

Labor's IR policy has not indicated whether employer greenfields agreements will be available after Labor's workplace reform. Employers wishing to make these agreements need to consider the risk that this option may not be available to them in the future.

Important dates

Important dates for Labor's proposed workplace relations amendments (at this stage) are:

1 December 2007: ability to enter into future AWAs ceases.
31 December 2009: ability to utilise ITEAs ceases and all existing ITEAs expire.
1 January 2010: introduction of legislation to ensure employees earning above $100,000 a year are "award-free".
1 January 2010: all employees of a corporation will have a statutory entitlement to severance pay on redundancy (according to the current Federal award scale) where the business employs 15 or more employees.
1 December 2012: all AWAs will have reached their nominal expiry date (and may not have effect after this date).

At the end of the day no changes made to the IR landscape are going to help us deal with developments in the world economy, like the rising cost of Chinese exports or oil, the tightening of global credit, the prospect of a US recession or other non-linear events.

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