Fair Work Act changes passed by Parliament - What does this mean for employers?
On Wednesday 28 November 2012, Federal Parliament passed the Fair Work Amendment Act 2012 (Cth) (Amendment Act) which implements a number of recommendations of the Fair Work Act Review Panel.
The Government has indicated that the Amendment Act reflects a consensus among workplace relations stakeholders on the implementation of around one-third of the Review Panel’s 53 recommendations. Consultation with employer organisations, unions and other interested parties over a second implementation bill is continuing.
The changes to the Fair Work Act 2009 (Cth) (FW Act) implemented by the Amendment Act are mostly administrative and technical in nature, and to that extent will not make a major difference to employers’ workplace arrangements.
However, there are some significant changes to the FW Act provisions dealing with unfair dismissal and general protections claims, certain aspects of agreement-making, and ballots for protected industrial action that employers need to be aware of. Changes have also been made to the structure and operation of Fair Work Australia (FWA), and the tribunal has been given new functions in relation to default superannuation funds in modern awards.
The commencement date of the changes introduced by the Amendment Act is currently unclear (the various provisions have differing commencement dates, mostly linked to the proclamation date and the date of Royal Assent).
Agreement-Making and Protected Industrial Action
The Review Panel found that the FW Act bargaining framework is operating largely as intended, and does not require wholesale change. However, the Amendment Act implements a number of recommendations of the Review Panel aimed at fine-tuning the agreement-making provisions, by:
- Prohibiting the inclusion of “opt-out” clauses in enterprise agreements, through which some employers have sought to reach agreement with individual employees that an otherwise applicable agreement will not cover them. Following inconsistent tribunal and court decisions about the legitimacy of opt-out clauses, a five-member Full Bench of FWA recently determined that such clauses were not permitted as they undermine bargaining certainty and could result in no employees being covered by an agreement (contrary to the objects of the FW Act). The Amendment Act makes an opt-out clause an unlawful term under s 194 of the FW Act, so that the tribunal cannot approve an agreement which includes “a term that provides a method by which an employee or employer may elect (unilaterally or otherwise) not to be covered by the agreement” (new s 194(ba)).
- Clarifying that an enterprise agreement cannot be made with a single employee (new s 172(6)). This is also intended to address mixed FWA authority on the issue, which has raised similar concerns to those relating to opt-out clauses (e.g. the argument that an enterprise agreement under the FW Act must be collective in nature given the abolition of statutory individual agreements, and that an agreement with only one employee undermines the statutory purpose of promoting collective bargaining).
- Requiring employers to issue the notice of employee representation rights at the commencement of bargaining only in the form prescribed in Schedule 2.1 of the Fair Work Regulations 2009 (Cth) (new s 174(1A)-(1B) of the FW Act). This change is a response to the practice of some employers, identified by the Review Panel, in issuing notices of representation rights that do not properly or fully inform employees of their rights under s 176 (including the right to union representation in bargaining).
- Confirming that a union, or a union official (acting in that capacity or otherwise), “cannot be a bargaining representative of an employee unless the [union] is entitled to represent the industrial interests of the employee in relation to work that will be performed under the agreement” (new s 176(3)). This is intended to address attempts by officials of some unions to obtain representation rights over employees whose work falls within the coverage rights of a rival union, by arguing that the official is acting in an “individual” or “private” capacity.
- Clarifying that an applicant for a scope order need only take “all reasonable steps” to notify the other relevant bargaining representatives of the concerns which have motivated the application (new s 238(3)(a)).
The Amendment Act also makes a few minor changes to the processes for conducting protected industrial action secret ballots under Part 3-3, Division 8 of the FW Act, i.e. enabling ballots to be conducted by electronic voting methods; ensuring that an employee bargaining representative who is a union member and applies for a ballot order can vote in the ballot; and requiring that ballots be conducted expeditiously.
Unfair Dismissal and General Protections Claims
The Government’s intention in changing the unfair dismissal provisions of the FW Act is “to ensure the right of an employee to bring an unfair dismissal claim is better balanced against the right [of] an employer to ensure they are required to respond to applications that are genuine, and to ensure that [FWA] has the power to deal with unreasonable conduct in relation to a claim”.
The Amendment Act implements several recommendations of the Review Panel aimed at improving the process for resolving unfair dismissal applications, including by:
- expanding the tribunal’s powers to dismiss an application based on unreasonable behaviour by the applicant, e.g. where the applicant fails to attend a conference or hearing, fails to comply with a direction or order, or fails to discontinue the claim once a settlement is reached (new s 399A);
- enabling the tribunal to order costs against a party in an unfair dismissal matter, where that party has caused the other party to incur costs by acting unreasonably, e.g. by failing to agree to a settlement that could have resolved the claim (new s 400A);
- providing a stronger deterrent against lawyers or paid agents encouraging applicants to pursue speculative unfair dismissal claims – lawyers and paid agents may be the subject of an adverse costs order, even if they have not formally been granted the right to represent a party under s 596 (new s 401(1)-(1A)).
In addition, the time limit for lodging an unfair dismissal claim has been extended from 14 to 21 days from the date that the dismissal takes effect (new s 394(2)(a)). The time limit for lodging a general protections claim based on dismissal has also been changed to 21 days, from 60 days (new s 366(1)(a)). This should be welcomed by employers, as employees will now need to decide whether to lodge an unfair dismissal or a general protections claim (rather than one, followed by the other; or the pursuit of a general protections claim that should properly have been brought as an unfair dismissal claim).
Two recommendations of the Review Panel relating to applications to vary modern awards have been implemented by the Amendment Act, i.e.:
- clarifying that applications to vary an award to remove an ambiguity or uncertainty, or to correct an error, may be brought by an employer organisation or union that is entitled to represent the industrial interests of the employers or employees covered by the award (new s 160(2)(c)-(d));
- enabling the tribunal to strike out an award variation application that is not made in accordance with the legislation/regulations, is frivolous or vexatious, or has no reasonable prospects of success (new legislative note to s 158(1)).
These amendments respond to concerns identified by the Review Panel that some award variation applications have been made without merit, wasting the time and resources of the tribunal and relevant stakeholders; and that in other instances, stakeholders with an interest in award variation proceedings did not technically have standing to appear and make submissions.
From ‘Fair Work Australia’, to ‘Fair Work Commission’
The Amendment Act also makes several important changes to the structure and operation of FWA, and re-names the tribunal as the Fair Work Commission (FWC). The Fair Work Review Panel recommended the removal of the words “Fair Work” from the tribunal’s name, due to the considerable confusion caused by having a number of agencies with similar names (e.g. FWA, the Fair Work Ombudsman (FWO), and more recently Fair Work Building and Construction (FWBC)). The Government opted instead for FWC, indicating that the word “Commission” more accurately reflects the tribunal’s functions.
Two other recommendations of the Review Panel relating to the tribunal, which are implemented by the Amendment Act, are:
- allowing any Presidential member of FWC to make a stay order in an appeal proceeding (previously, only the Full Bench dealing with the appeal or the senior member of that Bench could issue a stay order);
- allowing the appointment of acting Commissioners, where necessary.
Several further changes effected by the Amendment Act were proposed by the President of FWA, Justice Iain Ross AO. These include:
- creating two statutory positions of Vice President of FWC (previous provisions for the appointment of Vice Presidents of the tribunal were removed under the FW Act, so that the two current Vice President positions have existed in name only; the Government has stated that an open, merit-based selection process will be adopted for the appointment of the new Vice Presidents of FWC);
- introducing a transparent process for the handling of complaints against members of FWC (overseen by the President with discretion to refer a complaint to an independent third party), and new arrangements to improve the process for disclosure by FWA members of conflicts of interest;
- expanding the circumstances in which the President may direct that a function be performed or a power exercised by a Full Bench of FWC, rather than a single member (including where the parties in a matter request that it be referred to a Full Bench, and such a reference is in the public interest).
It can be expected that these changes will enhance the independence and accountability of FWC. This follows the implementation of another recommendation of the Review Panel, to extend the role of the various Fair Work agencies in promoting more productive workplaces, through a memorandum of understanding entered into by FWA, FWO and FWBC. One practical measure to be introduced by the tribunal will be the capacity to search the content of current enterprise agreements, enabling employers and unions to identify “best practice productivity enhancing provisions” which they can adopt in agreement negotiations.
Default Superannuation Funds
As well as recommendations of the Fair Work Act Review, the Amendment Act implements the Government’s response to the Productivity Commission’s recent Report into Default Superannuation Funds in Modern Awards.
These changes establish a process whereby a new Expert Panel of FWC will review existing modern award provisions which designate a “default” superannuation fund (usually, an industry fund) into which an employer must make contributions for the benefit of employees who have not chosen another fund.
These reviews by the Expert Panel will take place on a four-yearly basis (from 1 January 2014), in conjunction with the four-yearly review of modern awards required under the FW Act. The purpose of the reviews of default superannuation fund provisions in modern awards is to:
“ensure a transparent and contestable process that results in only those superannuation funds which are in the best interests of employees being included as default funds in modern awards. The amendments will operate in addition to the requirement that default funds are authorised by the Australian Prudential Regulatory Authority (APRA) to offer a MySuper product.”
In conducting the reviews, the Expert Panel will assess the eligibility of superannuation funds that offer a generic MySuper product to be included in a list of between 2 and 10 default funds in each modern award. This assessment will be based on criteria including the best interests of the relevant employees, and factors relating to the particular superannuation fund under consideration (e.g. investment return, fees and costs, governance practices, insurance and efficiency).
The new Expert Panel of FWC will also take over the minimum wage-setting function previously performed by the Minimum Wage Panel of FWA.
As indicated earlier in this In Brief, the Government is now consulting with stakeholders over a second piece of legislation to implement the remaining recommendations of the Fair Work Act Review Panel. These include:
- extending the good faith bargaining obligations to the process of varying (as well as negotiating) an enterprise agreement, and providing access to bargaining orders at an earlier stage than they are presently available;
- making the process for reaching greenfields agreements one based on genuine negotiation between an employer and a union, through modified good faith bargaining obligations and access to dispute resolution by the tribunal under s 240 of the FW Act – further, making arbitration available to resolve an impasse in the negotiation of a greenfields deal;
- facilitating the easier use of individual flexibility agreements under awards and enterprise agreements;
- preventing unions from instigating the process for taking protected industrial action until bargaining has commenced (i.e. the employer has agreed to bargain, or the tribunal has made a majority support determination).
The Workplace Relations Minister has indicated that he has an “open mind” on the recommendations that have not yet been implemented. This may mean that some of those proposals will not find their way into a second amending bill – or that other amendments are put forward against the recommendations of the Review Panel (e.g. providing easier access to arbitration of bargaining disputes, or introducing new restrictions on agreement content).
In any event, reaching a consensus on the Review Panel’s remaining recommendations will be much harder to achieve than was the case with the changes reflected in the Amendment Act. The Government will be hard pressed to have a controversial package of reforms passed by the present volatile Parliament before the federal election due in the second half of 2013.
 The Review Panel’s Report, Towards more productive and equitable workplaces: An evaluation of the Fair Work legislation, June 2012, is available here. For a summary, see our previous Corrs in Brief.
 See e.g. CFMEU v Deputy President Hamberger  FCA 719; Queensland Bulk Handling Pty Ltd v CFMEU  FWA 4478; CFMEU v New Oakleigh Coal Pty Ltd and New Acland Coal Pty Ltd  FWAFB 5107.
 CFMEU v Queensland Bulk Handling Pty Ltd  FWAFB 7551. See also CFMEU v New Oakleigh Coal Pty Ltd and New Acland Coal Pty Ltd  FWAFB 8593; Aldi Foods Pty Ltd v TWU and NUW NSW Branch  FWAFB 9398.
 See e.g. Fourth Furlong Motel  FWA 3256; AMWU v Inghams Enterprises Pty Ltd  FWAFB 6106. See also Delcorp (SA) Pty Ltd  FWA 2952, where FWA rejected an agreement applying to a single employee based on the concern that it would subsequently apply to a larger group of employees not yet employed in the business; and AMWU re Structural Site Services and AMWU Metal Engineering On-Site Construction Agreement 2011-2014  FWA 9552, where an agreement covering only one employee who was also a director of the employing entity was not approved.
 For example, some unfair dismissal applicants have encountered problems in determining which agency their claim should be lodged with, resulting in an application being ruled out of time in at least one case: see Warrell v Fair Work Australia  FCA 267; Warrell v Bacto Laboratories Pty Ltd  FWAFB 4700.
 FWA, FWBC and FWO, “Fair Work agencies collaborate on productivity Memorandum of Understanding”, Media Release, 19 October 2012.
 FWA, Future Directions for Australia’s National Workplace Relations Tribunal: Our Plan for the Year Ahead, October 2012, pages 9-11.