The changes to the Fair Work Act on 1 January 2010 will not only affect businesses currently operating under the Fair Work Act, but will also affect private sector employers currently operating in the State industrial relations jurisdiction of Queensland, South Australia, New South Wales, and Tasmania.

Transfer of remaining State’s private sector employers to the Fair Work Act 2010

The States have recently passed legislation, similar to the legislation that has been operating in Victoria for some years, referring the remaining private sector employers to the Fair Work Act. Western Australia as the only Liberal State Government has resisted joining the national system at this time.

What else is new on 1 January 2010?

The New Year will see the introduction of the following measures:

• The National Employment Standards (NES) - 10 minimum standards which will apply to all employees. For more details about the NES, please click here. Included in the NES is the obligation to consider reasonable requests for flexible work arrangements for certain employees.
• Modern Awards - will replace the preserved state award (NAPSA’s) and preserved federal awards. For more information in relation to the application of modern awards, please click here. However, in order to assist employers with the impact of modern awards, a number of awards include transitional provisions which will phase in award increases and decreases in regard to some benefits over a five year period. Employers will need to check the modern award/s that apply to their business to check if transitional provisions apply them. 
• The Better Off Overall Test (BOOT) - a new test replacing the ‘no-disadvantage test’ for Enterprise Agreements.

My employees are employed under the terms of a NAPSA or Preserved Award. What do I need to do to comply with the changes?

On 1 January 2010, all employees covered by a NAPSA or preserved award will become bound by the Modern Award which applies to their employment. In the event that there is no Modern Award which applies to an employee, then the employee Miscellaneous Modern Award may apply to the employee in certain circumstances.

• In many cases, Modern Awards contain a 25% casual loading.
• Modern Awards also include award flexibility, allowing employers to enter into an individual written agreement with an employee to bargain out specific award conditions.
• Any award flexibility agreement must meet strict procedural requirements under the Fair Work Act in order to be effective.
• New minimum rates of pay in most Modern Awards will be introduced on an incremental basis from 1 July 2010.

My employees are employed under the terms of a collective agreement / enterprise agreement.What do I need to do to comply with the changes?

On 1 January 2010 the terms of the NES will be imported into collective agreements and enterprise agreements made before 31 December 2009, if the agreement contains terms that are less favourable than the terms of NES.

Key features of the NES which are likely to affect those agreements include:

• an entitlement to redundancy pay; and
• a right to request flexible working arrangements to care for a child under school age, or under 18 if the child has a disability.

Businesses must also ensure that the minimum rates of pay in an agreement meets the new minimum rates of pay under the relevant Modern Award that would have applied to the employee, but for the agreement.

My employees are currently award/agreement free. Do the amendments still impact my business?

Award/agreement free employees will be:

• bound by the terms of the NES;
• entitled to a new minimum wage; and
• may be covered by the terms of a Modern Award.

Modern Awards are more extensive in their application than ever before. There is a strong likelihood that an employee who is currently award free and who is not a high income earner or in particular occupations will be covered by a Modern Award after 1 January 2010.

I am currently a State employer. What do I need to know?

If you are a partnership or sole trader, as from on 1 January 2010, your business will be covered by the Fair Work Act and the NES, and in some cases a Modern Award. Some public sector employees will also transfer to the Fair Work Act.

State Awards

To assist with the transition State employers will be able retain the current State Award applying to their employees for a period of 12 months. On 1 January 2011 Modern Awards will replace those preserved State Awards.

Preserved State Awards will nevertheless be rationalised against the terms of the NES to ensure the award is not less favourable than the NES. A new model dispute resolution clause will also be imported into State Awards.

State Agreements

If you are a business currently employing employees under the terms of a State Agreement, after 1 January 2010, your State Agreement will be preserved. Preserved State Agreements will also be rationalised against the NES to ensure that the State Agreement is no less favourable then the NES.

Preserved State Agreements will only be subject to the wage rates contained in a Modern Award. These rates will set the minimum rate of pay. No other Modern Award terms will apply.

Preserved State Agreements do not expire after 12 months, but continue to operate as a federal instrument until they are:

• replaced by an enterprise agreement made under the Fair Work Act;
• terminated by agreement of the parties (with approval from Fair Work Australia); or
• terminated by Fair Work Australia after the expiry date on application by one party.

For more detailed information about how these changes will impact on your business and the strategies you can implement to reduce the impact of these changes please contact a Cooper Grace Ward Lawyers workplace relations team member.