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27 August 2009

The Fair Work Act and Transitional Legislation

Clients will be aware that the Fair Work Act 2009 (Cth) (FW Act) and Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (Transitional Act) commenced operation on 1 July 2009. This bulletin outlines, in summary, a number of features of these laws and how they will impact on your business.

Clients will be aware that the Fair Work Act 2009 (Cth) (FW Act) and Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (Transitional Act) commenced operation on 1 July 2009. This bulletin outlines, in summary, a number of features of these laws and how they will impact on your business.

Transitional Act – Between now and 31 December 2009

The Transitional Act has established a transitional phase that runs from 1 July 2009 to 31 December 2009 which is called the “bridging period”.

After the bridging period ends the remainder of the FW Act, namely Modern Awards and the National Employment Standards (NES) begin operation.

What applies during the bridging period?

The bridging period preserves various provisions of the Workplace Relations Act 1996 (Cth) (WR Act), such as the application of Notional Agreements Preserving State Awards (NAPSAs) and Preserved Awards, which will continue to operate until they are replaced by Modern Awards. In most circumstances this will be on 1 January 2010.

In limited circumstances, where there is no applicable Modern Award that applies to an employee who is not “award free”, the employee will continue to be covered by the relevant NAPSA or Preserved Award until either the instrument is replaced by a relevant Modern Award, or alternatively, when the instrument expires on 1 July 2013.

How do I make an enterprise agreement during the bridging period?

As of 1 July 2009, employers who wish to partake in enterprise level collective bargaining with their employees (and with unions) can make a single or multi business “enterprise agreement”.

Despite the FW Act’s introduction of the new “better off overall test” (BOOT), enterprise agreements made during the bridging period will continue to be assessed against the terms of the preserved “no-disadvantage test” and the relevant NAPSA or preserved Federal award the employees would have been covered by, but for the enterprise agreement.

During the bridging period Individual Transitional Employment Agreements (ITEAs) can still be made between an employer and employee. However, ITEA’s must have a nominal expiry date of 31 December 2009. Although this does not mean that the ITEA will automatically terminate on 31 December 2009, once an ITEA has reached its nominal expiry date the employee who was covered by that ITEA can vote for an enterprise agreement.

If the ITEA (or AWA) is not terminated by either the employer or the employee, and where an enterprise agreement is not entered into, the ITEA can continue to operate for five years (assuming that is its length).

Old Collective Workplace Agreements during the bridging period

The FW Act preserves the collective workplace agreement termination provisions from the WR Act for employers who have workplace agreements in place that passed their nominal expiry date before 1 July 2009. However, employers must be aware that the FW Act requires the preservation of any redundancy entitlement from these agreements, if they are terminated.

Collective workplace agreements that reach their nominal expiry date after 1 July 2009 continue to operate until terminated in accordance with the FW Act. Old collective workplace agreements will have the NES automatically imported into each agreement after 1 January 2010.

Continuing Application of the Australian Fair Pay and Conditions Standards

As the NES will not commence until 1 January 2010, the five Australian Fair Pay and Conditions Standards (AFPCS) will continue to operate and apply to employers until the end of the bridging period. This means that in the event that an employment contract, NAPSA or Preserved Award does not provide a greater entitlement employers should ensure that employees’ terms and conditions of employment continue to meet the AFPCS.

Fair Work Act 2009 (Cth)

FWA: the new regulator

The FW Act establishes Fair Work Australia (FWA), the new regulatory body promoted as a “one stop shop” providing information and assistance for federal system employers and their employees. FWA replaces the Workplace Authority, Australian Industrial Relations Commission and Registry, Australian Fair Pay Commission and Australian Fair Pay Commission Secretariat.

A new Office of the Fair Work Ombudsman has also been established to:

  1. provide advice and education on workplace laws in Australia;
  2. monitor compliance and investigate contraventions of national workplace laws;
  3. publish information on workplace rights and obligations; and
  4. provide tools and information for small businesses.

A new “Fair Work” Division of the Federal Court and Federal Magistrates Court (independent of FWA) have also been created and will exercise judicial power under the FW Act.

The making of enterprise agreements and good faith collective bargaining

The FW Act uses the term ‘enterprise agreement’ to refer to an agreement collectively negotiated between an employer and its employees, or both employees and a union.

The FW Act regulates the enterprise bargaining process by advising employees of their right to be represented at the commencement of the bargaining period, including by a union. Employers are required to notify employees of their right to a bargaining representative. In instances where at least one employee is a member of a union, that union may be deemed to be a bargaining representative, if the employee member does not elect an alternative bargaining representative.

The FW Act also requires parties to bargain in good faith by:

  1. attending, and participating in, meetings at reasonable times;
  2. disclosing relevant information (other than confidential or commercially sensitive information) in a timely manner;
  3. responding to proposals made by other bargaining representatives for the agreement in a timely manner;
  4. giving genuine consideration to the proposals of other bargaining representatives for the agreement, and giving reasons for the bargaining representative’s responses to those proposals; and
  5. refraining from capricious or unfair conduct that undermines freedom of association or collective bargaining.

Unfair and unlawful dismissal

FWA will exercise the power formerly exercised by the Australian Industrial Relations Commission in conciliating and hearing applications for unfair and unlawful dismissal.

Key changes

  1. Applications for unfair dismissal will need to be made within 14 days of the termination occurring (rather than the former 21 days)
  2. Applications for unlawful termination will need to be made within 60 days of the termination occurring (rather than the former 21 days)
  3. The exemption for employers with fewer than 100 employees has been removed. Instead there is a new small business dismissal code (Code) for employers with fewer than 15 employees. A copy of the Code can be accessed at
  4. An employee of a small business will need to have served a minimum employment period of 12 months to lodge an unfair dismissal application. For other businesses the minimum period of employment is six months
  5. If a small business can demonstrate they correctly applied the Code in regard to the termination of an employee’s employment they will, in most cases, have a defence against an unfair dismissal application that the employee may subsequently make
  6. There is no minimum period of service for unlawful dismissal applications.

Right of Entry

The FW Act introduces new right of entry provisions which allow a permit holder (usually a union official) right of entry for the purposes of investigating suspected contraventions of the FWA Act or industrial instrument, or to hold discussions with employees.

A key difference under the FW Act for right of entry, is that right of entry is now linked to a union’s right to represent the industrial interests of the employees at the workplace, rather than predicated upon coverage by an industrial instrument such as an award or enterprise agreement.

New “workplace rights”

The FW Act introduces “workplace rights”, and expands on old provisions concerning freedom of association, coercion and duress.

A workplace right is broadly defined to include:

  1. an entitlement to the benefit of, or role or responsibility under, a workplace law, workplace instrument or order made by an industrial body;
  2. an entitlement to initiate, or participate in, a process or proceedings under a workplace law or workplace instrument; and
  3. a right to make a complaint or enquiry either under a workplace law or instrument, or in relation to the employee’s employment.

The FW Act defines a “workplace law” broadly to mean not just the FW Act but to include other laws of the Commonwealth, a State or Territory that regulates the relationships between employees and employers, including occupational health and safety.

Workplace rights give protection to employees against “adverse action”. Adverse action is broadly defined to include dismissal, injuring the employee in employment or altering the employee’s position to the employee’s prejudice and discrimination. Adverse action also extends to threatening or organising (adverse) action.

Workplace rights are also defined to extend not only to current employees, but to prospective employees. A prospective employer may be regarded as having taken adverse action against a prospective employee if, for example, the prospective employer refuses to employ the prospective employee for discriminatory reasons.

The FW Act also maintains the reversed onus of proof in regard to an alleged breach of a workplace right by an employer.

Modern Awards update

The AIRC is at stage 4 of Award Modernisation, and many Modern Awards have already been made. Some standard clauses in Modern Awards include:

  1. a 25% casual loading;
  2. exemption rates which is a clause that exclude employees who earn above a certain annual salary from various provisions of the Modern Award;
  3. overtime and penalty provisions; and
  4. a 17.5% annual leave loading.

Recently, the Federal Minister directed that exemption rates in Modern Awards are not permissible unless there is a history of exemption rates in the particular industry covered by the Industry or Occupational Modern Award.

Modern Awards must also include provisions that allow an employer and individual employee to agree to vary the application of certain terms of the Modern Award to meet the genuine individual needs of the employer and the individual employee, termed “award flexibility”.

Award flexibility imposes strict procedural requirements on the employer, including that an award flexibility agreement:

  1. be in writing and signed by both parties;
  2. detail the variation to the terms of the Modern Award;
  3. detail how the variation does not disadvantage the individual employee;
  4. include the date on which the variation comes into operation; and
  5. include provision for how the award flexibility agreement can be terminated (usually by either the employer or employee giving 4 week’s notice in writing or some other time).

An employer’s failure to meet the requirements in regard to award flexibility may result in a breach of a workplace right, which is a civil penalty provision under the FW Act.

These are only some of the many changes found in the FW Act. For further advice or information, please contact a member of our workplace law team.

Employers be aware

  • Compliance requirements for employers during the bridging period will differ from the compliance requirements that employers must meet after 31 December 2009.
  • It appears that there will be very few industries and occupations that will not be covered by a Modern Award.
  • There are many and varied workplace rights available to employees, prospective employees and in some cases, independent contractors, under the FW Act. A breach of a workplace right can attract attention from FWA, the Fair Work Ombudsman and the Courts, and can result in civil penalties and compliance orders against an Employer.
  • The Fair Work Ombudsman is proactively enforcing compliance of the FW Act now.
  • Employers can use Award Flexibility and enterprise agreements as a means of allowing greater flexibility in the workplace so as to meet the Employer’s commercial and operational needs.
  • Being prepared now, including becoming aware of what Modern Awards will apply to your business, and how the NES will impact on your operational requirements, will give you a head start and ensure you are fully compliant for the commencement of Modern Awards and the NES on 1 January 2010.

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This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please let us know.

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