New IR Reforms Explained
iFreelance has researched and collated the information for this article from information obtained from the Attorney General’s Department website. All information is correct as at the date of posting this blog, however as with all proposed bills, it is possible or likely that the outcome may be different to what is presented below.
Reasons for Industrial Relations Reform
On 9 December 2020, the Australian Government introduced its Industrial Relations Reforms - Supporting Australia's Jobs and Economic Recovery package and introduced the Fair Work Act (Supporting Australia's Jobs and Economic Recovery) Bill into the Australian Parliament.
The Federal Government established working groups to discuss reforms across the following areas:
Award simplification – cutting red tape, improving flexibility in 12 Awards covering the retail and hospitality sectors.
Casual employment – ending confusion and uncertainty surrounding the legal status of casuals, while providing a clearer pathway for those working regular shifts to convert to permanent roles after 12 months if they wish.
Compliance and enforcement – reducing the risk of wage underpayments by helping employers to comply with their obligations and provide mechanisms to rectify underpayments where they do occur; and protecting employee entitlements by introducing a new criminal penalty for the minority of employers who deliberately underpay their employees.
Enterprise agreements – reversing the decline in agreement making by simplifying the BOOT test and setting a 21-day approval deadline to help drive productivity gains and real wage growth.
Greenfields agreements – boosting investment in mega-projects by making them more attractive to global investors through new eight-year, life-of-construction agreements complete with appropriate safeguards.
Proposed IR Reform Changes
1. Award Simplification
Flexible Work Directions
The JobKeeper flexibilities in the Fair Work Act 2009 are due to expire in March 2021. It is proposed that affected Industry Awards will allow employers to continue to direct employees to perform different duties that are consistent with their skill or competence, or work at locations different from their normal place of work.
These new ‘flexible work directions’ will be available for a period of 2 years where employees are covered by affected awards and where the employer reasonably believes that the direction is a necessary part of a reasonable strategy to assist in the revival of their business.
Important safeguards will apply, including a requirement for employers to consult employees before giving a direction, protection of employees’ base rates of pay and a requirement that the directions be reasonable in all the circumstances.
Flexibility for part-time employees
The restrictions on part-time employment in some awards make it an unattractive choice for both employers and employees. Complex and inconsistent rules in awards make it difficult for employees to agree to work additional hours without automatically triggering overtime payments.
New provisions will be introduced into the Fair Work Act to allow employees to agree to work additional hours at their ordinary rates of pay on an ad-hoc or standing basis only with the agreement of the part time employees.
Additional hours agreements will also only be available to part-time employees working at least 16 ordinary hours per week with a minimum shift time of 3 hours. Overtime will still be payable where employees work outside their span or spread of hours, or in excess of daily or weekly maximums contained in their award. Other amounts that would become payable for those hours, such as penalty rates or allowances, are unaffected.
Simplified Classifications, Loaded Rates and Exemption Rates
Complex pay and classification structures in awards create an unnecessary administrative burden on employers and make it harder for employees to understand their entitlements.
Some employers want the option of paying a single higher rate that includes all extra payments rather than working out multiple rates for a single shift. The Government is supportive of the Fair Work Commission commencing an urgent process to consider implementing simplified classifications, loaded rates or pay and high salary exemption rates.
Consolidation of standard award terms in the National Employment Standards (NES)
The Attorney-General’s Department will undertake a review to identify common terms from modern awards that could be consolidated into the NES. Greater consistency in entitlements for all employees and awards that are easier for employers and employees to read and implement are vital to a simpler award system.
2. Casual Employment
In an attempt to end the confusion surrounding the legal status of casuals, the following is proposed:
An statutory definition of ‘casual employee’ which incorporates the key common law principle that a casual is someone who ‘has no firm advance commitment to ongoing work’.
If this test is met at the commencement of employment, the casual status will remain unless the employee converts to full-time or part-time employment.
If an employee commences employment with a firm advance commitment to ongoing work, they will not be classified as a casual employee under the statutory definition.
A new casual conversion entitlement in the National Employment Standards (NES) will provide eligible casual employees with a clear pathway to convert to ongoing full-time or part-time employment.
After 12 months of employment, employers will be required to assess all casual employees and, in the absence of any known or foreseeable reasonable business grounds, offer eligible employees conversion to full-time or part-time employment.
Casual employees who choose not to convert, or are not made an offer, can access a residual right to request casual conversion once every six months, provided they meet the eligibility criteria.
A statutory offset rule that requires a court to take into account a casual loading amount paid to an employee who is later found not to be casual under the statutory definition, so as to avoid employers having to pay the same entitlements twice.
3. Compliance and Enforcement
Supporting business to comply
new funding for the Fair Work Ombudsman to establish a new Employer Advisory Service for small businesses to receive free, tailored advice on their workplace obligations; and new funding to improve awareness of the FWO and its role and to review and enhance its education activities;
Deterring non‑compliance (AKA Employer Penalties)
Reforms to deter non‑compliance include:
introducing new criminal penalties for dishonest and systematic wage underpayments, with a maximum penalty of $5.55 million (25,000 penalty units) for bodies corporate, and $1.11 million (5,000 penalty units) and/or 4 years’ imprisonment for individuals. Individuals convicted of this or an ancillary offence would be subject to automatic disqualification from managing corporations for 5 years under the Corporations Act 2001;
increasing the maximum civil penalties for underpayment contraventions by 50% - increasing the maximum fine to $19,980 for individuals (90 penalty units) and $99,900 for bodies corporate (450 penalty units);
introducing a new ‘benefit obtained’ approach for entities other than small business employers, whereby the maximum civil penalty for underpayment contraventions will be the higher of either twice the ‘benefit obtained’ or $99,900 (450 penalty units). For serious underpayment contraventions (i.e. knowing and systemic underpayments), the maximum civil penalty will be the higher of either 3 times the ‘benefit obtained’ or the current maximum civil penalty of $666,000 (3,000 penalty units);
increasing the maximum civil penalties for sham contracting by 50% - increasing the maximum fine to $19,980 for an individual (90 penalty units) and $ 99,900 for a bodies corporate (450 penalty units);
increasing the maximum civil penalties for non‑compliance with a compliance notice by 50%, to $9,990 for individuals (45 penalty units) and $49,950 for bodies corporate (225 penalty units);
increasing the maximum penalties available under infringement notices by 50%, to 15% of the maximum penalty a court can impose;
introducing a new contravention to prohibit employers from advertising jobs with pay rates below the national minimum wage, attracting a maximum penalty of $13,320 for individuals (60 penalty units) and $66,600 for bodies corporate (300 penalty units); and
clarifying that courts can make adverse publicity orders where appropriate.
Supporting employees to recover unpaid entitlements
The Government is reforming the small claims wage recovery process by:
allowing claims up to $50,000 of unpaid wages entitlements (increased from $20,000);
providing a role for the Fair Work Commission in resolving disputes through conciliation, and consent arbitration if conciliation is not successful; and
allowing court filing fees to be awarded as costs to successful employees by the courts and, in an arbitration matter, the Fair Work Commission.
Supporting implementation of the reforms
The Government will provide new funding to support these reforms, including $47.3 million over 4 years for the Fair Work Ombudsman to:
improve awareness of the Fair Work Ombudsman and its role and to review and enhance its education activities ($11.3 million)
establish an Employer Advisory Service (from 1 July 2021) to provide free, tailored advice to small business employers about their obligations ($12.9 million), and
establish a dedicated Corporate Sector Assurance team to identify, investigate and respond to non-compliance by large corporates ($22.3 million).
4. Enterprise Agreements
Improving the application of the Better Off Overall Test (BOOT)
The BOOT will continue to apply but a time-limited discretion to approve an agreement that doesn’t comply with the BOOT is designed to assist some COVID19 impacted businesses. This provision builds on provisions that have been in the Fair Work Act since its introduction in 2009 and includes strong protections: the agreement must be agreed by employees, it is subject to a public interest test, and takes into account the views and circumstances of employers, employees and unions. Any agreement approved under this provision will expire after two years at most.
Setting an Enterprise Agreement approval timeframe
The Fair Work Commission will be required to determine an application for approval within 21 working days, as far as it is practicable to do so.
Clarification between National Employment Standards and Enterprise Agreements
Clarification is proposed to include:
development of an online guidance tool for parties involved in bargaining
amending pre-approval requirements
limiting termination during bargaining in the 3 month window following expiry
modernising the Notice of Employee Representational Rights
clarifying casual employees’ voting requirements
removing red tape for voluntary employee moved between associated entities
streamlining how new franchisee employees can join existing EBA’s
Ending ‘zombie’ agreements (with rates and allowances below modern awards) and transitioning to new agreements by 1 July 2022
5. Greenfield Agreements
The reforms will increase the maximum nominal term from 4 years to 8 years for Greenfields agreements that cover the construction of a major project. A major project will have an expected capital expenditure of $500 million or more.
For projects with capital expenditure between $250 million and $500 million, a project can be declared to be a major project if it meets certain criteria (including consideration to whether it has national or regional significance and the extent to which it will create jobs).
The Fair Work Commission must also be satisfied that the agreement contains guaranteed annual wage increases for employees for the nominal life of the agreement.
Having worked through the many complexities and practicalities of IR reforms previously including Work Choices and Fair Work, iFreelance is well positioned to assist business owners with implementing these changes when passed and planning for these changes. One thing is for sure, as soon as there is Industrial Relations reform, their is human resources management activity.
Business owners should be on the front foot of ensuring that they are already complying with Award pay and requirements. I work extensively with business owners, calculating what they must pay in terms of above Award hourly rates (loaded rates) and providing them with the tools to enable them to calculate this for themselves. The last thing you want to face is an underpayment claim under the new protections.
If you haven't embarked upon ensuring your workplace is compliant, my HR Compliance Essentials Package can assist in this regard. See HR Compliance Essentials | iFreelance (ifreelancework.com.au)
Disclaimer: The information provided in this blog is intended to provide helpful information on the subject discussed. The information shared is not meant to be used, nor should it be used without professional advice being given to individual situations. The author is not responsible or liable for damages or consequences for any treatment or action taken as a result of reading this blog. References are provided for information purposes only.