Forward with Fairness Regime – Summary of the Fair Work Act

The Fair Work Act, 2009 was introduced on 25 November 2008 as part of the
Government‘s Forward with Fairness Regime, passed through the Senate on 20 March
2009 and received Royal Assent on 7 April 2009.

Two transitional bills (one on the 19 March 2009 and one on the 27 May 2009) have
been introduced in the House of Representatives making consequential provisions to
transition the operations of the Act and repeal the 1996 Workplace Relations Act.

The Act introduces significant changes to the industrial relations arena particularly in the
following areas:

 New rules for unfair dismissals

 National Employment Standards
 Modern awards
 Return of good faith bargaining in the workplace

The changes to unfair dismissal laws and bargaining rules will take effect from 1 July this
year, ahead of the remaining reforms taking effect six months later, from 1 January
2010.

Unfair Dismissal

Under the new legislation, for all unfair dismissals from 1 July 2009, regardless of the
size of the employer:

 reinstatement will be the remedy unless it is not the interests of either party.
Otherwise, compensation is capped at the lesser of six months salary or half the
high income threshold (approximately $53,200).

 unfair dismissal claims will not be available in cases of a genuine redundancy;

and

 unfair dismissal claims must normally be lodged with Fair Work Australia within
seven days.

A Fair Dismissal Code will apply to small business. A specialist information and
assistance unit for small and medium size enterprises will be established within the
Office of the Fair Work Ombudsman.

There will no longer be a 100 employee exemption and unfair dismissal will be available
to employees after a six month probationary period, or a period of one year for
employees of small businesses that is, those engaged by companies with less than 15
employees.

1
Transitional legislation will amend the definition of ―small businesses‖ to mean those
businesses with fewer than 15 employees on a full-time equivalent basis from 1 July
2009, with the Government's original definition of fewer than 15 on a headcount basis
taking effect 18 months later, on 1 January 2011.

From 1 July 2009, the number of full-time equivalent workers will be calculated by
averaging the ordinary hours worked by all employees in the business over the four
weeks prior to the employee being sacked, and dividing that by 38 (ordinary weekly
hours).

Rights to unfair dismissal remain unavailable to employees engaged on fixed term

contracts, trainees engaged for specific tasks and when a demotion occurs that does not
involve a significant reduction in remuneration or duties if the employee remains in the
employment of the employer.

The Act clarifies that a dismissal can occur in two instances:

1. if a persons employment has been terminated by the employer; or

2. if a person resigns as a result of being forced to do so because of the conduct of
the employer (constructive dismissal).

Specific criteria have been outlined for Fair Work Australian to consider when deciding
whether a dismissal is harsh, unjust or unreasonable which include:

 if there was a valid reason for the dismissal which can relate to capacity or
conduct including safety and welfare issues;

 whether the employee was notified of the reason and given an opportunity to
respond in relation to capacity or conduct;

 whether there was the ability for the employee to have a support person
present in any discussions;

 whether the person had actually been warned about their performance if the
dismissal related to the unsatisfactory performance; and

 the size of the employer's business and whether there are dedicated human
resources staff are employed.

Unlawful Dismissal

The Act significantly changes how laws relating to unlawful dismissal are outlined and
extends employees rights. Employees have the right to make a claim for unlawful
dismissal if their employment is terminated for reasons which include:

1. a temporary illness or injury (that is one that lasts less than three months);
2. membership (or not being a member) of an industrial association;

2
 3. engaging or proposing to take industrial activity;
4. acting (or not acting) as an officer of an industrial association;
5. the persons race, colour, sex, sexual preference, age, physical or mental
disability, marital status, family or carer's responsibilities, pregnancy, religion,
political opinion, national extraction or social origin; and
6. taking or proposing to exercise a workplace right including:

 initiating a process or proceeding against the employer;

 making a complaint or inquiry to a person or body about compliance with
workplace law; or
 seeking information as to the correct workplace entitlements owed to the
employee.

The Act enables employees to instigate proceedings against an employer for actions
which injure an employee's prospects with the employer, including any prejudicial action.
The employment relationship will no longer need to be terminated before an employee
can seek a remedy for the above actions.

Initial applications for unlawful dismissal will be dealt with by conference in Fair Work
Australia.

Remedies available to the court include reinstatement, compensation and injunctions.

Additionally, the Court may order a penalty of up to $6,600 for individuals and $33,000
for corporations who are found to have breached there obligations.

A review by Fair Work Australia is scheduled for 2012 of the experiences of employers
and employees with the new unfair dismissal system.

National Employment Standards

From 1 January 2010, employees will be entitled to minimum employment conditions set
out in the ten National Employment Standards (NES).

The NES are:

1. Maximum weekly hours of work

2. Request for flexible working arrangements
3. Parental leave and related entitlements
4. Annual leave
5. Personal/carer‘s leave and compassionate leave
6. Community service leave
7. Long service leave
8. Public holidays
9. Notice of termination and redundancy pay
10. Fair Work Statement

Details of each of the above minimum employment conditions are explained in further
detail below.

3
1. Maximum weekly hours of work

Include a standard 38-hour week for full-time employees, with provision for requiring
employees to work additional hours within the week, but not unreasonable additional
hours.

2. Request for flexible working arrangements

Reinstates the former "right to request" flexible work until children reach school age,
with employers only able to refuse on reasonable business grounds. The request
must be in writing and set out the details of the changes sought and reasons for the
change.

An employee is not entitled to make a request unless the employee has completed at
least 12 months of continuous service immediately before making the request (for
casual employees, the employee needs to have been engaged by the employer on a
regular and systematic basis for a sequence of periods during a period of at least 12
months immediately before making the request and has a reasonable expectation of
continuing engagement).

3. Parental leave and related entitlements

Parents to have a right to separate periods of 12 months unpaid leave, up to a total

of 24 months (if parents want one parent to take a further 12 months after they have
taken the first 12 months, then they must make a request, with employers only able
to refuse such requests on reasonable business grounds).

If one of parent takes a period of unpaid parental leave, the other parent employee
may take a period of unpaid parental leave (concurrent leave) during the first
parent‘s period of leave, only if:
(a) the concurrent leave must be for a period of 3 weeks or less; and

(b) the concurrent leave must not start before, and must not end more than 3 weeks
after the date of birth of the child (or the day of placement of the child if the leave is
adoption related),
Unless the employer agrees otherwise.

A female employee is entitled to a period (the actual period has not been specified in
the standards) of unpaid special maternity leave if she is unfit for work during that
period because:
(a) she has a pregnancy-related illness; or

(b) she has been pregnant, and the pregnancy ends within 28 weeks of the
expected date of birth of the child otherwise than by the birth of a living child.

4. Annual leave

4
Four weeks paid annual leave for full-time employees, pro rata leave for part-time
employees and an additional week's leave for shift workers.

A modern award may include provisions for the cashing out of paid annual leave,
requiring an employee (or allowing for an employee to be required) to take paid
annual leave in particular circumstances or otherwise dealing with the taking of paid
annual leave.

5. Personal/Carer’s leave and compassionate leave

10 days a year of paid personal/carer's leave for full-time employees (pro rata for
part-timers), plus 2 days a year of paid compassionate leave on the death or serious
illness of a family member or a person the employee lives with, plus 2 days a year of
unpaid personal leave for "genuine caring purposes" and family emergencies.

A modern award may include provisions for the cashing out of paid personal/carer‘s
leave.

6. Community service leave

Paid leave for prescribed community service activities, such as paid leave for jury
service and reasonable unpaid leave for emergency services duties. Other eligible
community service activities are to be prescribed in the regulations.

An employee who engages in an eligible community service activity is entitled to be

absent from his or her employment for a period if:
(a) the period consists of one or more of the following:
(i) time when the employee engages in the activity;
(ii) reasonable travelling time associated with the activity;
(iii) reasonable rest time immediately following the activity; and

(b) unless the activity is jury service—the employee‘s absence is reasonable in all
the circumstances.

7. Long service leave

Long service leave entitlements will reflect arrangements in current state laws or
federal awards or agreements, while employees who accrue leave under the
transitional arrangements won't be disadvantaged.

8. Public holidays

Guarantees 8 national public holidays, plus public holidays prescribed in State law
and local public holidays.

9. Notice of termination and redundancy pay

5
 Minimum notice requirements of up to 4 weeks notice (progressing from 1 week for
employees with less than 12 months service to 4 weeks for workers with more than 5
years service) for all employees plus an extra week for workers aged over 45.
Employees in workplaces with 15 or more employees are also entitled to severance
pay of up to 16 weeks after 9 years service and 12 weeks after 10 years service.

10. Fair Work Information Statement

Employers to provide all new employees with a Fair Work Information Statement
containing prescribed information about rights and entitlements.

Award Modernisation

Modern Awards will commence from 1 January 2010 and will replace all existing Pre-
Reform Federal Awards and NAPSAs (Notional Agreements Preserving State Awards),
with the exception of single enterprise awards.

The modern award process remains on foot with the AIRC publishing, on 30 January
2009, a full list of the 39 industries and occupations, and their relevant awards and
NAPSAs, to be dealt with.

Fair Work Australia must make a national minimum wage order which will cover those
employees who are award-free (those currently covered by the federal minimum wage).
The order will also have to set special national minimum wages (for example for non-
award covered junior employees) and a casual loading.

A Minimum Wage Panel of Fair Work Australia will be required to adjust the national
minimum wage and award wages annually, with adjustments generally taking effect from
the first pay period after 1 July each year.

Modern awards will not apply to new employees with agreed guaranteed annual
earnings of more than $100,000 (indexed annually and pro-rata for part-time
employees).

The full bench of the AIRC will sit in June and July for final consultation on the exposure
drafts, with September 4 being the final date for making stage three modern awards.

Good Faith Bargaining

Collective agreements will be broadly similar to the current system with:

 agreements being subject to a form of ‗better off overall test‘ administered by Fair
Work Australia;
 restrictions on content of agreements;
 there will be some compulsory provisions - including a flexibility clause allowing
an employer and individual employee to make a ‗flexibility arrangement‘; dispute
resolution (including employee representation) and consultation on major
change; and

6
  employee collective agreements being retained – although an employer can be
compelled to negotiate a collective agreement with a union in some cases.

Unions are not parties to agreements. However, an employer can be compelled to

negotiate a collective agreement with a union in some cases.

A union is automatically a bargaining representative for an agreement if it has a member

in the workplace whose industrial interests it is entitled to represent, and the member
does not appoint another person. Provided a union is a bargaining representative and
notifies FWA, FWA must order that the union is covered.

In effect, this means that true non-union agreements are only possible:

 in workplaces where there are no union members, or

 where the union chooses not to be covered by the agreement.

Employers will no longer be able to bargain with one union in preference to another,
including for Greenfields Agreements. So long as a union has a member in the
workplace (or is entitled to represent employees‘ interests for Greenfields Agreements),
the union can apply to be covered by the agreement.

Importantly, the new bargaining framework imposes a requirement on employers and

employees to bargain in good faith. Good faith bargaining obligations will be:

 attending and participating in meetings at reasonable times;

 disclosing relevant information in a timely manner, subject to appropriate
protection for commercial in confidence information;
 responding to proposals made by a party in a timely fashion;
 giving genuine consideration to the proposals of the other parties and providing
reasons for their responses; and
 refraining from capricious or unfair conduct that undermines freedom of
association or collective bargaining.

Where a bargaining representative is not bargaining in good faith, Fair Work

Australia will be able to make orders to ensure the integrity and fairness of the
bargaining process. Any orders made by Fair Work Australia can be enforced by the Fair
Work Divisions of the Federal Court or the Federal Magistrates Court.

Fair Work Australia will check the following before approving a collective agreement:

1. there is genuine agreement;

2. the group of employees to be covered has been fairly chosen;
3. it passes the Better Off Overall Test;
4. it has a nominal expiry date and dispute settlement clause;
5. It doesn't contain terms contravening the NES; and
6. it doesn't contain unlawful content.

7
The obligation to bargain in good faith will affect employers who have traditionally used
AWAs or ITEAs, or those who have bargained directly with their employees for a
collective agreement. But even employers who regularly bargain for union collective
agreements are likely to have to adjust the way in which they bargain to meet the new
requirements and still obtain the best commercial outcome.

Bargaining for enterprise agreements can take place under the Act from 1 July 2009.
Before 1 January 2010, enterprise agreements will be assessed by Fair Work Australia
against the no-disadvantage test.

Right of Entry

Unions will continue to have the right to enter premises with the Government committed
to no change in this area however, the circumstances in which right of entry is permitted
will be significantly broader.

For example, unions will have the right to inspect non-member records (where they
relate to a suspected contravention) and a right of entry for discussion purposes where
work is carried out on premises in relation to which the union is entitled to represent
employees, and the employees wish to participate in discussions with the union. Unions
will therefore gain the right to enter premises which are currently award-free.

Terms dealing with right of entry will be permitted in enterprise agreements, but only to
the extent they relate to purposes not dealt with in the Act (for example, to assist with
dispute resolution).

FWA will retain its power to deal with disputes about right of entry, such as whether a
particular room is reasonable.

Transfer of business

The Act makes significant changes to the current circumstances in which a transmission
of business (now called a transfer of business) occurs.

A transfer of business will occur where:

 an employee changes employer

 the work the employee does for each employer is the same or substantially
similar, and
 there is a particular ‗connection‘ between the old and new employers—either a
transfer of assets used in connection with the work, or an outsourcing, or an
insourcing or where the two employers are ‗associated employers‘.

The types of instrument that can ‗transfer‘ are:

 enterprise agreements,
 named employer respondency modern awards (other modern awards would
continue to apply on their terms); and

8
  guarantees of annual earnings for high income employees.

The Act returns to the pre-Work Choices position that an instrument that transfers
continues to apply to the new employer until it is terminated or replaced (under Work
Choices they applied for up to 12 months).

Instruments only transfer where the new employer takes on employees, and there is no
obligation to do so. Where the new employer does take on employees, the application of
the transferred instruments is generally confined to those employees, plus any new
employees the employer takes on in the business where the workplace is instrument-
free.

The Act gives Fair Work Australia quite significant power to alter the coverage of
instruments following a transfer of business. This includes power to order that an
employer‘s existing instruments cover the employees instead.

The transitional bill makes provision for the new rules in the Act to apply to transfers of
business that occur on or after commencement of the Act.

To obtain further information or discuss the implications for your business, please
contact Andrew Bland at [email protected]