Proposed changes to the Fair Work Act – what will this mean for employers?

The changes to the Fair Work Act will have significant implications for employers and employees. Employers should ensure they are well-informed about the proposed changes prior to them taking effect.

What employers need to know

The amendments to the Fair Work Act will have significant implications. Employers should note that the changes introduce:

• a crack-down on fixed term contracts, especially rolling fixed term contracts
• new prohibitions on pay secrecy clauses
• changes to multi-employer agreements that will particularly affect those industries that may have difficulty bargaining at a single-enterprise level, such as aged care, disability care, early childhood education and care industries
• new bargaining rules for single interest enterprise agreements, possibly broadening the use of multi-employer agreements generally within the Australian economy.

As an upside, there are changes to simplify some enterprise bargaining processes.

What are the changes?

On 6 December 2022, the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Amending Act) received royal assent.  The amendments within the Amending Act will be implemented over the next 12 months, with some having commenced on 7 December 2022.

The Amending Act makes a number of changes to the Fair Work Act 2009 (Cth) and its associated legislation to:

• improve job security by limiting the use of fixed term contracts
• amend several enterprise bargaining rules to reduce onerous processes
• expand options for multi-employer bargaining to promote wage growth
• strengthen the protections against sexual harassment and discrimination
• prohibit the use of pay secrecy clauses in employment contracts
• abolish the Australian Building and Construction Commission (ABCC).

This article provides an overview of these key changes.

Improving job security by limiting the use of fixed term employment contracts

Fixed term employment contracts are contracts that terminate after a specified period of time (e.g. two years) or after the completion of a specific task or project. At the end of the specified time, task or project, the employment contract automatically comes to an end, giving employers the ability to ‘end’ an employee’s employment at the specified time, without needing to give a reason for termination, provide notice of the termination or to pay any redundancy if the position is no longer required to be performed by anyone. The validity of long-term fixed term contracts has been the subject of significant legal scrutiny over the years.

The Amending Act limits the use of these contracts, particularly when those contracts are simply for arbitrary periods of time and not linked to identifiable funding, the performance of distinct identifiable tasks or linked to training arrangements. Subject to the Amending Act’s listed exceptions, the Fair Work Act will from 6 December 2023 prohibit employers from engaging employees under the terms of a fixed term employment contract that:

• is for the same role for longer than two years, or under consecutive fixed term contracts for the same role that exceed two years in total; or
• can be extended or renewed more than once for the same role.

Employers who wish to retain employees for periods of over two years will need to engage these employees under permanent ongoing contracts, which will have major implications for many employers currently relying on rolling fixed‑term contracts.

Amending enterprise bargaining rules to reduce onerous processes

The Amending Act makes significant changes to several enterprise bargaining rules in the Fair Work Act. The amendments include:

• requiring an employer to initiate bargaining if it receives a request from an employee bargaining representative to commence bargaining, in circumstances where the employer has a single enterprise agreement in place that has passed the nominal expiry date (now in effect)
• simplifying the requirements that must be met after 6 June 2023 for the Fair Work Commission to be satisfied that an agreement has been ‘genuinely agreed to’ by the employees by removing some of the strict pre-approval steps currently in place including:
  • the arbitrary seven day ‘access period’, which requires specific steps to be taken within that time period;
  • the requirement for employers who are making a single-interest employer agreement, supported bargaining agreement or cooperative workplace agreement to issue employees with a ‘notice of employee representational rights’ and removing the limitation that the vote for that agreement can only be taken 21 days after bargaining has been initiated (those bargaining for a single enterprise agreement will still be required to comply with the current NERR requirements); but instead
  • requiring the Fair Work Commission to be satisfied that employees being asked to approve an enterprise agreement have sufficient interest in the terms of the agreement and are sufficiently represented (this may impact agreements being made with limited employees in circumstances where it will cover larger numbers of employees)
• removing the complexity of the Better Off Overall Test (BOOT) and instead focussing on a global assessment of whether each employee would be better off overall if the enterprise agreement is applied (from 6 June 2023 or an earlier date by proclamation)
• limiting the circumstances where a unilateral application can be made to terminate an enterprise agreement after its nominal expiry date to prevent the reduction of employees’ entitlements (now in effect)
• empowering the Fair Work Commission to amend or remove a term in an enterprise agreement that does not meet the BOOT and enabling the Fair Work Commission to reconsider an enterprise agreement upon application by a party (now in effect)

Expanding options for multi-employer bargaining to promote wage growth

More contentious amendments to enterprise bargaining relate to the significant changes being made to the current multi-employer agreement provisions. The Amending Act will from 6 June 2023 create:

• supported bargaining agreements (which effectively extends the low paid bargaining agreement provisions to a wider category of employees)
• cooperative workplace agreements
• single-interest employer agreements.

The Amending Act provides for:

• Supported Bargaining Agreements to be available for employees and employers who have difficulty bargaining at the single-enterprise levels as they lack the necessary skills, resources and power to bargain effectively (the Bill names the aged care, disability care and early childhood education and care industries specifically). The agreements:
  • can only be made after a supported bargaining authorisation is granted by the Fair Work Commission
  • can be bargained with the Fair Work Commission facilitating bargaining in circumstances where the Fair Work Commission will be able to have a degree of control over the employment conditions of the workers to be covered by the agreement
  • allow protected industrial action to be taken by employees in support of the agreement
  • can be extended by the Fair Work Commission once made, by variation to cover additional employers either with the consent of the employer, or without consent, in circumstances where the majority of employees want to be covered by the agreement (but cannot be extended to an employer who has a single enterprise agreement in place that has not passed its nominal expiry date).
• Single-interest employer agreements will allow a union or other employee bargaining representative to seek a single-interest employer authorisation, without an employer’s consent (if supported by the majority of employees) so employees from multiple employers can be covered by a single-interest employer enterprise agreement. The amendments will allow the Fair Work Commission to authorise the bargaining for a single agreement with multiple employers, if it is satisfied that employees want to be covered by one agreement and the nominated employers have a common interest, when considering the geographical location, regulatory regime, the nature of the relevant enterprise and the terms and conditions of employment. However, employers who:
  • already have a single enterprise agreement in place; or
  • have already agreed in writing with an employee organisation to bargain for a replacement single-enterprise agreement,

will not be able to be compelled to bargain for a single interest employer agreement. Small businesses (with fewer than 20 employees) cannot be required to bargain in the stream without their consent and employers and employees undertaking defined type of building and constructions work will be unable to be covered by a single interest employer agreement.

• Both Supported Bargaining Agreements and Single-Interest Bargaining Agreements once made, will also be able to be varied by the Fair Work Commission on the application of an employer or employee organisation, to cover a new employer and its employees, subject to meeting the specified requirements.

Strengthening protections against sexual harassment and discrimination

The Amending Act has implemented more of the recommendations from the Respect@Work Report published in 2020. This includes introducing a broad prohibition against sexual harassment in connection with work that applies to all workers, including prospective workers.

Applications will also be able to be made to the Fair Work Commission from 6 March 2023 to deal with a sexual harassment dispute, which could result in the Fair Work Commission dealing with the dispute by mediation, conciliation or by making a non-binding recommendation.

Once these laws are enacted, it will be more important than ever that employers have up-to-date policies in place that deal with sexual harassment and discrimination in order to avoid intervention by the Fair Work Commission, which can be time consuming, costly and onerous.

You can read more about the Respect@Work recommendations in our article, which discusses the key impacts for Australian employers.

Prohibiting pay secrecy clauses in employment contracts

With many employers being affected by the tight labour market, employers have often use pay secrecy clauses in employment contracts to ensure that employees do not discuss their remuneration with other employees.

The Amending Act now makes it unlawful for new employment contracts (including varied employment contracts) to contain provisions which prevent an employee from disclosing information about their pay to other employees, along with other details about their employment terms and conditions that are reasonably necessary to determine remuneration outcomes.

Furthermore, from 7 June 2023, an employee’s ability to disclose information about their pay to other employees will be considered a ‘workplace right’ within the meaning of the Fair Work Act, therefore making it unlawful for employers to take any ‘adverse action’ (e.g. disciplinary action or dismissal) against employees (both new and existing employees) for discussing their pay or employment terms with other employees.

Expanding access to flexible working arrangements

Under the Fair Work Act, certain employees can request flexible working arrangements, such as changes in their hours of work and location of work. Employees covered by a Modern Award can also request these flexible working arrangements. Employers can only refuse a request for flexible working arrangements on ‘reasonable business grounds’.

The Amending Act will from 6 June 2023:

• expand the coverage of the flexible working arrangements to employees who are pregnant and a broader category of workers who may be experiencing family and domestic violence
• require an employer to genuinely try to reach an agreement with an employee before refusing a request, in addition to providing detailed reasons for any refusal, along with information about possible alternative arrangements
• provide the Fair Work Commission the ability to deal with a dispute between an employer and employee in circumstances where an employer and employee cannot agree on a solution to a flexible working arrangement at a workplace level.

Abolishing the Australian Building and Construction Commission

Since 2005, the ABCC has held a wide range of responsibilities in the building and construction industry. These include providing advice, conducting investigations into alleged legislative contraventions, and instituting legal proceedings in relation to matters such as wages and entitlements.

While amendments were made in July 2022 to the Code for the Tendering and Performance of Building Work 2016 to significantly reduce the functions of the ABCC and the practical application of the laws, the Amending Act will from 6 June 2023, amend the Building and Construction Industry (Improving Productivity) Act 2016 (BCIIP Act) to formally abolish the ABCC and remove provisions providing higher penalties for building industry participants. As a result, the BCIIP Act will become legislation that focuses on promoting work health and safety for building workers.

Next steps for employers

Many of the changes in the Amending Act are ‘civil remedy provisions’, meaning that an employer’s failure to comply with any new requirements may result in high monetary penalties.

Employers should be aware of these changes and consider the impact the changes will have on their current business model. Employers will need to review their employment contracts and any enterprise agreements to ensure that they are compliant with the amended Fair Work Act.

Those currently engaged in bargaining, or seeking to initiate bargaining in the near future, will need to be aware of the impact of the laws as the amendments will create significant changes to the bargaining landscape.

If you have any questions about the proposed changes or require any assistance in relation to these matters, please contact a member of our Workplace Relations & Safety team.

Additionally, please join us on 20 February 2023 for our next HR Forum where we discuss ‘Changes to the Fair Work Act – what employers need to know’. Click here to view more.