James Murphy HR/IR

The new Industrial Relations omnibus Bill introduces reform in key areas, such as a new definition of casual employment and a move to criminalise wage theft.

On 9 December 2020, the Federal Government introduced the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 into Federal Parliament. This omnibus industrial relations Bill set out several key industrial relations reforms to the Fair Work Act 2009 (Cth).

Since May 2020, the Federal Government has undertaken working groups with employers, industry groups and unions to collectively discuss reforms, including those relating to casual and fixed-term employees, enterprise agreements, compliance and enforcement, modern award simplification and greenfields agreements. 

At present, the industrial relations system is not working. It has become bogged down, overly complex, out of date and does not reflect the realities of modern workers and workplaces. It is riddled with crippling inflexibilities, particularly for small business, and its antiquated design has contributed to Australia’s low rates of productivity.

It is unknown when these changes will be passed as there is likely to be some pushback from certain groups. Many people feel the sense of togetherness shown between the Union, industry groups and the Government has dwindled since they first “called a truce” at the peak of the pandemic – some argue that a few of the reforms will heavily disadvantage employees – and others supporting the reforms saying that the changes are neither revolutionary, nor extreme; a sensible, middle ground package which seeks to solve the worst problems in the system, especially for small business.

Among other things, the Bill will seek to:

  1. introduce a new definition of casual employee into the Fair Work Act, and provide greater job security
  2. impose larger penalties on employers who deliberately underpay employees; and
  3. propose flexibility arrangements into certain modern awards mirroring those introduced under the JobKeeper legislation.
  4. allow a 21-day timeline for the Fair Work Commission to approve workplace pay deals and clarification of the better off overall test.

The Bill will enable the Fair Work Commission to vary modern awards in the retail, accommodation, and food services industry so that employers may pay loaded rates (which will be higher than an ordinary hourly rate) instead of penalty rates, and allowances under awards.

Award Simplification

Twelve key awards in the retail, accommodation, and food services industry will be amended to enable permanent part-time employees to agree to work extra hours at their ordinary rates of pay as required without employers paying overtime, which is intended to lead to less reliance on the casual workforce.

The legislated flexibility will be available to permanent part-time employees if:

  • the employee is engaged to perform at least 16 regular hours per week (or an average of 16 hours if the relevant award provides for the employee’s hours to be averaged over a period e.g., a roster cycle)
  • the total work hours are less than 38 per week, and within the daily maximums and/or span of hours contained in the relevant award (otherwise, overtime is payable); and
  • normal penalty rates apply
  • one of the 12 awards applies to their employment
  • the employee agrees to work the additional hours and the agreement is recorded
  • the shift length is at least three continuous hours.

Casual and Fixed-Term Employees

Casuals will have a clear definition and a proper pathway to become permanent. Employers must offer casual staff working regular hours the option to convert to more secure permanent employment after 12 months. If employers fail to provide this option, they are in breach of the Act.

Part of Bill’s changes aim to provide greater job security with more clarity around casual workers and a new definition of a “casual employee” will be inserted into the Fair Work Act.

Under the new definition, a person is a casual employee if they are offered employment on the basis that the employer makes no firm advance commitment to continuing and indefinite work, according to an agreed pattern of work for the person, and the employee accepts the offer on this basis. 

For example, if an employee is offered work with no promises made about receiving regular, ongoing shifts in the future – such as working the same hours every weekend moving forward – then the employee is likely to be considered a casual employee.

Employers must also provide casual employees with a Casual Employee Information Statement, to be prepared by the Fair Work Ombudsman, which may be similar in form to the Fair Work Information Statement. 

Under the new changes, employers must offer casual employees who have been employed for more than 12 months, part-time or full-time roles if the employee has worked a regular pattern of hours on an ongoing basis for the preceding six-month period.  

Employers are not required to make such an offer if there are reasonable grounds not to. Reasonable grounds could include:

  • The employee’s position will cease to exist in the 12-month period after the time of deciding not to make the offer. 
  • The hours of work which the employee is required to perform will be significantly reduced in the 12-month period after the time of deciding not to make the offer. 
  • If, in the 12-month period after the time of deciding not to make the offer, there will be a significant change in the days on which the employee’s hours of work are required and/or the times at which the employee’s work hours are required to be performed, which cannot be accommodated within the days or times the employee is available to work during that period.
  • Making the offer would not comply with a recruitment or selection process required by or under a law of the Commonwealth or a State or a Territory.

If an employee declines the initial offer, they will have a further right to request permanent employment for every six months that they remain eligible. Employers may refuse an employee’s request if they consult the employee and have reasonable grounds, which are similar to the reasonable grounds not to make an offer (as outlined above). Employers may also refuse a request for conversion to part-time or full-time work if it would require a significant adjustment to the employee’s hours of work to be made in order for the employee to be considered a full-time employee or part-time employee.

Importantly, this change will not make a substantial difference to employers who engage casual employees who are covered by a modern award that contains a casual conversion clause. Such a clause obliges employers to provide a copy of the casual conversion clause to their casual employees and enables casual employees to request conversion to permanent employment. 

The Bill also introduces new measures to prevent double-dipping by casuals, with the aim of stopping casuals from claiming the 25 per cent casual loading alongside other benefits (i.e., paid leave, public holiday pay, pay in lieu of notice of termination, or redundancy pay). This follows the recent Full Federal Court decision in Workpac v Rossato, which in effect allowed such double-dipping to occur. (We previously covered this case in our June 2020 issue # 105, Michael’s Corner, Article Number 05).

In that decision, the Full Court held that a casual employee was entitled to back pay for annual leave, personal/carer’s leave, compassionate leave, and public holidays because the characteristic of “a firm advance commitment” to offer and accept work meant the employee was a permanent employee rather than a casual.

It is estimated that these changes may save employers from being exposed to billions of dollars’ worth of back-paid entitlements.

Enterprise Agreements

Part of the reason the system is not working is because the enterprise bargaining system has become so slow and technical that it is on the brink of collapse.

The reality is employees on EBAs get paid more, yet the number of people covered by active EBAs has fallen by 20 per cent over the past decade.

The government’s proposed changes will mean EBAs can be approved within 21 days, speeding up the delivery of wage rises and other benefits to workers. The focus will return to co-operation between employers and employees – the foundation of our industrial relations system – and incentivise more ambitious, win-win agreement making.

The Bill proposes a number of key changes to the agreement making and approval processes under the Fair Work Act which are designed to make these processes quicker and easier and also reduce the level of prescription imposed by the Fair Work Act. Key changes include:

  • The timeframe for giving a notice of representational rights to employees will increase from 14 to 28 days after the notification time for the agreement.
  • The pre-approval requirements will be simplified so that the key requirement is that employers must take “all reasonable steps to ensure that the relevant employees are given a fair and reasonable opportunity to decide whether or not to approve the agreement.” this requirement can be satisfied in a number of ways, including if the employer takes all reasonable steps to ensure that, during the access period, the relevant employees have access to the written text of the agreement and any other, non-public materials incorporated into the agreement; are notified of the time, place and method for voting; and have the terms of the agreement explained to them in an appropriate manner.
  • Instead of the requirement for the fair work commission to be satisfied that the terms of an agreement do not exclude the safety net provided by the NES, enterprise agreements will include a term which explains the interaction between the NES and enterprise agreements; and in applying the better off overall test (BOOT), the fair work commission will only be required to take into account patterns or kinds of work, or types of employment, that are currently engaged in or are reasonably foreseeable and not those that are “hypothetical”. Hypothetical examples of disadvantaged employees will not be enough to block an agreement.
  • The fair work commission will also have regard to the overall benefits (including non-monetary benefits) employees would receive under the agreement when compared to the award, as well as any views expressed by employers, employees and their representatives relating to whether the agreement passes the BOOT.
  • The BOOT will be suspended for two years to allow the industrial umpire to consider the impact of covid-19 on businesses to cut workers’ pay and conditions.

To assist with the sometimes laborious and drawn-out process of obtaining approval for enterprise agreements, the Fair Work Commission will now be required to make a decision regarding the approval of enterprise agreements within 21 days of receiving an application.

The Bill also proposes to simplify transfer of business arrangements, so that when employees agree to transfer between employers, the new employer is not necessarily required to take on the obligations under any enterprise agreement which applied to the employees at their former employer.

The Boot is meant to ensure workers cannot be disadvantaged under an enterprise agreement compared with the relevant award.

Due to the impact of COVID-19, the Bill proposes to permit the Fair Work Commission, for a limited period of two years, to approve an agreement which may not pass the BOOT in limited circumstances taking into account, among other things, the views and circumstances of employees and employers covered by the agreement and the impact of COVID-19 on the enterprise.

Registered Organisations Bill

The Federal Government also today introduced the Fair Work (Registered Organisations) Amendment (Withdrawal from Amalgamations) Bill 2020, which seeks to amend the Fair Work (Registered Organisations) Act 2009 to enable sections of amalgamated unions to de-merge. This would, for example, enable a de-merger of the CFMMEU’s mining and energy division from the amalgamated union.

Greenfields Agreements

Agreements for major construction and resources projects will be extended to up to eight years, injecting more certainty into pay and conditions, making investment into major projects more attractive and giving people a wage rise every year.

Greenfields enterprise agreements will now be permitted to have a length of up to eight years if the project in question is worth at least $500 million. This extension of time allowance may also be applied to projects worth at least $250 million, but only if the project is deemed to be nationally or regionally significant, is creating jobs and the responsible Minister makes a declaration that the project is a “major project” for the purposes of the relevant provision.

Where a greenfields agreement specifies a nominal expiry date that is more than four years after the date on which it is approved, the agreement will need to include a term that provides for annual pay increases for the nominal life of the agreement.

Underpayment, Compliance, and Enforcement

Reforms to compliance will help employers identify genuine wage mistakes and fix them. This will especially help small businesses meet their obligations and ensure workers are not underpaid. For deliberate and serious wage theft higher civil sanctions will be introduced, as well as a new criminal offence.

For the most flagrant underpayments, the Bill will criminalise wage theft by introducing jail terms and significant fines for individuals and large businesses.

This will occur where an employer dishonestly engages in a deliberate and systematic pattern of underpaying one or more of their employees. The offence will carry a maximum penalty of four years’ jail and/or $1.11 million for individuals, and up to $5.55 million for a body corporate.

For other contraventions, including wage underpayments (that do not constitute a criminal offence), penalties have increased by 50% to $19,980, and $99,900 for body corporates and small businesses (or, for a body corporate that is larger than a small business employer, two times the benefit obtained as a result of the underpayment, whichever is higher).

For serious civil contraventions, there will be a penalty of $133,200 for individuals, and $666,600 for body corporates and small businesses (or, for a body corporate that is larger than a small business employer, three times the benefit obtained as a result of the underpayment, whichever is higher).

Fines and penalties will increase by 50% for sham contracting and for failure to comply with a Fair Work Ombudsman compliance notice.

Further, an additional $47.3 million in funding will be provided to the Fair Work Ombudsman each year moving forward. Of this, $22.3 million will be used to investigate and address non-compliance by large businesses, and $12.9 million will be used to create a new and free advisory service for small businesses, to assist them with ensuring they are paying their staff correctly under the applicable modern award. Employers who rely on the advice will be able to avoid later prosecution if the advice is shown to be incorrect, although any underpayments will need to be rectified.

An increase will be made to the cap on underpayment matters that are eligible to be dealt with through existing small claims processes (both within the Federal Circuit Court and state and territory courts) from $20,000 to $50,000. This should increase the speed at which such matters are dealt with by the courts. The courts will also have the option of referring matters to conciliation at the Fair Work Commission.

The Bill will also prevent businesses from publishing job advertisements with pay rates below the minimum wage.

To provide greater certainty about how best to rectify inadvertent misconduct, the Bill also requires the Fair Work Ombudsman and the Australian Building and Construction Commission to set out when they will defer litigation in appropriate cases and codifies the factors they may consider when accepting enforceable undertakings.

Jobkeeper Flexibility Extensions

The reforms will also make the awards system less complex. The JobKeeper flexibility provisions that enabled changes to employee duties and location of work during the pandemic will apply to distressed industries for a further two years.

The current flexibility provisions introduced under the JobKeeper scheme which enable employers to vary employees’ duties and locations are proposed to be extended until March 2023.  

These measures are subject to a range of safeguards, such as minimum rates of pay and the ability of parties to have disputes settled in accordance with an identified modern award dispute settlement procedure.