WorkChoices: implications for new IR laws

16 March 2006

By Joe Catanzariti

The WorkChoices legislation makes a number of significant changes to employment and industrial law in Australia. For the first time, the Federal Government has attempted to legislate a system of employment law that will cover the entire nation. Approximately 85 per cent of Australian employees will fall within the scope of the federal system. This article considers the nature of the WorkChoices reforms to the Workplace Relations Act 1996 (Cth) (the Act).

Unfair dismissal

One of the most publicised aspects of the WorkChoices legislation is the increased restrictions on making a claim for unfair dismissal. Presently, employees engaged for a fixed term or specified task, probationary employees, short-term casual employees, trainees engaged for a specified period of time and employees that earn more than the statutory cap of $94,900, are unable to make a claim for unfair dismissal. After WorkChoices comes into force, a number of new grounds in addition to existing restrictions will limit the availability of a remedy.

First, there can be no claims of unfair dismissal if the employee was employed by an employer that employed 100 or fewer employees. "Related bodies corporate" will be interpreted as one entity for the purpose of determining the number of employees that are employed. This will ensure that corporate restructuring cannot be used to exploit the 100-employee threshold.

Secondly, a person will no longer be able to claim that they were unfairly dismissed if the reasons for dismissal include "genuine operational reasons". Thirdly, the qualifying period, which is currently three months, will be increased to six months, so that no employee engaged for less than six months will be able to make an unfair dismissal claim. Lastly, seasonal employees will also be unable to claim that they have been unfairly dismissed. This effectively reverses the approach taken by the Australian Industrial Relations Commission (AIRC) in SPC Ardona v Esam and Organ.

Thus, the unfair dismissal jurisdiction of the AIRC will be significantly decreased, and it is likely that, as a result, the number of alternative claims, including unlawful termination claims, common law actions for breach of contract, and claims based on anti-discrimination and trade practices law, will increase.

The Australian Fair Pay and Conditions Standard

Another significant change is the introduction of the Australian Fair Pay and Conditions Standard (the Standard). Currently, when employers and employees enter into agreements they must meet the "no disadvantage test", which involves comparing the applicable award with the agreement to ensure that the employee is not worse off overall. The introduction of the Standard will replace the no-disadvantage test with a set of absolute guarantees that cannot be overriden by agreement. These include:

basic rates of pay and casual loadings;
maximum of 38 ordinary hours per week plus "reasonable additional hours";
four weeks paid annual leave per year (with an extra week for shift workers);
ten days paid personal/carer's leave after 12 months of service, with a further two days of unpaid carer's leave if paid leave has been exhausted and 2 days of compassionate leave for each "permissible occasion"; and
52 weeks unpaid parental leave at the time of birth or adoption of a child.

The conditions in the Standard will be adjusted from time to time by the Australian Fair Pay Commission (AFPC), the new wage-fixing body established by the WorkChoices legislation.

Public holidays

As part of the Senate amendments to WorkChoices, a limited right to a day off on public holidays was added to reforms. Employees may be requested to work on public holidays; however, if they have reasonable grounds for doing so they may refuse the request. The reasonableness of any refusal will be determined by a range of factors, including the nature of the employee's job and operational requirements of the employer, the amount of notice given, reasons for refusal and personal circumstances, emergency circumstances and whether the employee could have expected to be requested to work on a public holiday.

Employers may not dismiss an employee, injure their employment or alter their position if they reasonably refuse to work on a public holiday, and they risk being fined up to $33,000 if they do so.

Workplace agreements

Current forms of agreement, such as collective agreements and AWAs, will be maintained, and one new form of agreement, an Employer Greenfields Agreement, will be introduced. Greenfields Agreements can be made when an employer is starting a new business, project or undertaking.

It will be more difficult for unions to be involved in agreement-making under WorkChoices. If an employee collective agreement (as opposed to a union collective agreement) is made, unions will be explicitly excluded, whereas they may currently apply to be bound by an employee collective agreement.

Further, the actual process of agreement-making will be streamlined. The AIRC will no longer have a role in approving Multiple Business Agreements. That function will be performed by the OEA. Also, the AIRC will no longer certify agreements or conduct the no-disadvantage test. Instead, employers will lodge agreements with the OEA, along with a declaration that all legal requirements have been complied with. Agreements will come into effect once they have been lodged. In addition, employees will only need to be given seven days to consider a workplace agreement (currently the review period is 7 days).

New transmission of business provisions

The WorkChoices reforms clarify the law with regards to transmission of business. If there is a transmission, awards, agreements and AWAs will be binding on a new employer for up to 12 months where there is a "transferring employee".

A transferring employee is someone who:

was employed by the employer immediately before the transmission or was employed within one month of the transmission;
terminated by the old employer; and
becomes employed by the new employer within 2 months of the transmission of business.

It will also be possible for newly created Australian Pay and Classification Scales (APCSs) to be transmitted.

Accrued entitlements may also be transferred where there has been a transmission of business. Parental leave entitlements will be transferred automatically. For all other entitlements, the old employer and new employer will be able to choose whether the new employer will assume liability for the entitlements. However, if the new employer does not accept liability, the old employer will remain responsible for any outstanding entitlements.

The AIRC has the discretion to order that the new employer should not be bound by a collective agreement or award in the transmission context.

Marginalisation of awards

Awards will no longer be the safety net for workers as the Standard will outline the minimum entitlements of employees. The Award Review Taskforce will simplify and rationalise awards so that there is less overlap and they are easier to understand. The number of "allowable matters" will be reduced and, as a result, entering into workplace agreements will become increasingly desirable.

If an employer was bound by a particular award before the WorkChoices reforms are introduced, certain terms relating to annual leave, personal/carer's leave, parental leave, long service leave, notice of termination, jury service and superannuation from pre-refrom awards will be preserved. This means that employees of these employers will still be entitled to the benefits that they were previously receiving where those benefits are more generous than the minimum conditions imposed by the Standard. A workplace agreement can, however, expressly override the operation of a preserved award term.

The new s116B lists a number of non-allowable matters that can no longer be included in an award. These include provisions for automatic union representation in the dispute resolution for process, the amount of employees that may be employed in a particular type of employment , union picnic days and restrictions on the engagement of independent contractors and/or labour hire workers. If such provisions already exist in awards, they will no longer have effect once the WorkChoices package comes into force.

Registered organisations

The number of members required to form an "enterprise association" will be reduced from 50 to 20. This reflects the Howard Government's intent to move workplace relations in Australia away from large industry-wide trade unions.

The WorkChoices reforms also create a number of new ways in which the registration of an organisation can be cancelled. Most importantly, it can be cancelled for hindering "Parliament's intention". Also, officers and employees of organisations may face fines, or be required to compensate parties that have suffered a loss, if they disobey the orders of the AIRC or Federal Court.

Industrial action

Once WorkChoices takes effect, it will be much harder for employees to engage in "protected" industrial action. To be protected, industrial action must take place in a bargaining period and be approved by a majority of employees via voting in a secret ballot. At least half of the employees eligible to vote must vote. Three days notice of the action will also be required. Employers and employees must genuinely try to reach agreement before any industrial action can occur and no action will be permitted during the life of a workplace agreement, even if the action relates to issues that are not covered by the agreement. Action will not be able to be taken to support claims for prohibited content to be included in agreements or to support pattern bargaining claims.

Freedom of association

The WorkChoices reforms expand upon the existing freedom of association (FOA) provisions. There are provisions that prohibit industrial associations acting against employers or employees in a manner which prevents FOA, and also prohibitions on advising, inciting or encouraging others to do so. There are also new FOA protections for independent contractors. The new laws also outlaw discrimination based on the fact that an employer's employees are covered or not covered (or are proposed to be covered or not covered) by the Standard, or a particular type of industrial instrument or an instrument made with a particular person.

There are also new general provisions relating to FOA that prohibit coercion, false and misleading statements about membership of an association and industrial action related to membership of an industrial association.

In an important change to interim injunctions in the FOA context, the party alleging the breach of FOA provisions will now bear the evidentiary burden of proving their claim. This should reduce the possibility of unwarranted interim injunctions being issued.

The reforms also list new "objectionable provisions" that cannot be included in a workplace agreement. These include claused that either encourage or discourage union involvment and provisions that indicate support for membership or non-membership of an industrial association.

Right of entry

The WorkChoices legislation introduces a number of new procedural requirements that must be satisfied before a person may be issued with a right of entry permit. Most importantly, anyone who wishes to hold a permit must be deemed to be a "fit and proper person" by the Industrial Registrar. The Registrar may also impose conditions on the use of a permit.

Employers will also have more control over officials who are exercising their right of entry. A permit holder may be required by the employer to comply with reasonable OHS requirements. Employers will also be able to designate the room in which interviews and inspection of documents must take place and the route that the permit holder must take through the premises to get to the room.

The AIRC has also been given greater powers to deal with proceedings taken pursuant to the right-of-entry provisions and inspect any work or facilities and interview any employees.

School-based apprentices

The WorkChoices package makes provision for school-based apprentices and trainees. In this way, secondary school students are able to receive on-the-job training in a vocation that interests them. The legislation details the pay and conditions that school-based apprentices are to receive. These changes have already taken effect as they commenced when the Act received royal assent (December 2005). This means that students in the 2006 school year will be able to enter into school based apprenticeships.

Constitutional challenge

While the reforms will most likely come into force this month, there will be a lingering uncertainty hovering over the legislation for sometime because of the constitutional challenge being launched by the States. The High Court will most likely hear the case in May and will therefore not deliver judgement until later in the year.

Conclusions

The WorkChoices legislation streamlines many areas of employment law so that legal obligations will be easier for both employers and employees to understand. This is evident from the creation of the Standard and the plans to simplify and rationalise awards.

The reforms are likely to increase the number of workplace agreements entered into, as the Standard only involves five minimum conditions and employers and employees may wish to negotiate other terms and conditions of employment.

Furthermore, it will be far easier (procedurally) to enter into such agreements.

There will also be benefits to small and medium sized employers who will no longer be bound by unfair dismissal laws. However, while some protections for employees will be removed, there are also new laws in the WorkChoices package, such as limited guarantee to public holidays, that will assist employees.

The laws aim to decrease the number of disruptions to the workplace. It will soon be far more difficult to engage in protected industrial action. Furthermore, employers will have more control over the manner in which permit holders exercise their right of entry powers. This should increase productivity and efficiency.

A majority of employers and employees will finally be able to consult a single legal system in order to identify their rights and obligations. It is hoped that in time this will facilitate greater compliance with employment laws and improve employment outcomes for all.

Joe Catanzariti is a senior partner of Clayton Utz. This article (including footnotes) appears in the Law Society Journal March 2006 edition.

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