Government concessions ensures pre-Christmas passage of IR Bill

The Albanese Government unexpectedly secured passage through the Senate of its Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022 (the Bill) in the final sitting days of Parliament for 2022. However, the insistence that the legislation be passed urgently has come at a cost, with Independent Senator, David Pocock, indicating that his critical support necessitated a “stack of changes” to the Bill that passed the House of Representatives in October.

To pass the Bill, the Government required the votes of the 12 Greens, and one further Senator, from the Crossbench or Opposition. In confirming his support, Senator Pocock said he “worked with the government to push them as far as they would go, and then a step further to ensure they addressed key concerns raised with me”. Ultimately, Senator Pocock indicated he was satisfied that all of the agreed measures would strike the right balance between ensuring people start receiving long overdue wage rises, maintaining productivity and protecting the most vulnerable.

With the Bill, as amended, having passed both Houses of Parliament as of 2 December 2022, it headed to the Governor General, receiving Royal Assent on 6 December 2022. The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 subsequently became operative 7 December 2022, however, many elements of the new legislation have delayed operation and will not be in force for some time.

NOTE:  The following summary highlights elements of the Bill of main interest to Employer Services Clients. Employers seeking a comprehensive overview of the new legislation can access the Explanatory Memorandum.

Multi-enterprise Bargaining

Having attracted the most attention of all the incoming changes, multi-enterprise (multi-employer) bargaining is designed to facilitate enterprise bargaining across various businesses that are otherwise unrelated entities but are operating in the same industry. The intent of multi-employer bargaining is to achieve uniform terms and conditions of employment (by way of an enterprise agreement) which would be binding across different workplaces where similar work is performed, with the ultimate outcome being to achieve higher wages for workers.

Small employers with less than 20 employees (on a headcount, including casuals engaged on a regular and systematic basis) will be excluded from participation, representing one of the major concessions made by the Government to secure passage of the Bill through the Senate. Originally, the exclusion had only applied to employers with less than 15 employees.  

Multi-employer agreements will be able to be varied to add businesses that were not originally captured when the agreement was made however, Workplace Relations Minister, Tony Burke, has confirmed that it will be easier for businesses that have fewer than 50 employees to argue that they should be permitted to exit multi-employer bargaining, if they are not reasonably comparable to the other businesses within the bargaining process.

Labor Senator, Tim Ayres, has explained that for employers bargaining together the FWC would have to be satisfied that “it is a common interest employer and the operations and business activities of that employer are reasonably comparable with those of other employers that would be covered by the proposed agreement”. This means employers of different size and scale might, depending on all the circumstances, be found to have clearly identifiable common interests for the purpose of bargaining together. Senator Ayres went on to say the FWC “must be also satisfied the operations and business activities of an employer are reasonably comparable with the other employers” and that, “It may be open to the [FWC] to conclude that, despite two employers of a similar size, scope and scale operating in the same industry, they are not reasonably comparable” (and therefore shouldn’t bargain together).

Multi-employer bargaining will not be accessible to employers within the construction sector.

In theory, making multi-employer bargaining easier and more accessible means multiple businesses in a particular industry – e.g. manufacturing or hospitality – could end up being bound by the same enterprise agreement which is more beneficial to workers than the relevant modern award. It remains to be seen though, how functional and successful multi-employer bargaining will be in practice.

Supported Bargaining (formerly, Low-paid Bargaining)

The Explanatory Memorandum identifies the supported bargaining stream is intended to assist those employees and employers who may have difficulty bargaining at the single-enterprise level, such as those in low paid industries including aged care, disability care, and early childhood education and care along with employees and employers who may face barriers to bargaining, such as employees with a disability and First Nations workers.

The supported bargaining process will operate similarly to the existing low-paid bargaining process but is intended to be “easier to access”, acknowledging the “limited take-up [historically] of the low-paid bargaining process”. Supported bargaining is similar to multi-employer bargaining but requires a supported bargaining authorisation from the FWC and affords the FWC additional powers to assist parties in coming to an agreement.

To make a supported bargaining agreement the employees of each employer to be covered must vote as a separate cohort. If a majority of employees of one employer do not ‘vote up’ the agreement (i.e. a majority of those who cast a valid vote do not vote to approve the agreement), then that employer will not be covered by the agreement.

Supported bargaining will not be accessible to employers within the construction sector.

Time will tell whether supported bargaining will be more widely utilised than the low-paid bargaining process currently in existence.

Sunsetting of “Zombie” Agreements

These changes have been designed to “automatically” sunset workplace agreements made prior to 1 January 2010 (when the Better Off Overall Test – the BOOT – was established for the approval of enterprise agreements by the FWC).

Any form of workplace agreement, e.g. collective agreements and individual agreements, such as ITEA’s/AWA’s, that remains in operation but was made before 1 January 2010 (collectively referred to as “zombie” agreements), will automatically cease to apply after a default grace period of 12 months (i.e. expiring 7 December 2023).

The FWC may, upon application, extend the default grace period by no more than 4 years to ensure the automatic sunsetting of zombie agreements does not operate harshly, including by leaving employees worse off.

Once a zombie agreement ends, it ceases to cover (and can never again cover) any employees, employers or other persons. Employers and employees covered by a zombie agreement that will be subject to sunsetting may make a replacement enterprise agreement. If a replacement enterprise agreement is not in place by the time of automatic sunsetting of a zombie agreement, a modern award may apply from that time, assuming a modern award captures the class of work being performed.

Employers subject to a zombie agreement that will cease to apply from 7 December 2023 are obliged to advise affected employees, in writing, that the agreement will be terminating (unless an application for extension is made to the Commission). The written notice needs to be provided to affected employees before 7 June 2023.

Termination of zombie agreements is explored in more detail in our related news post here.

Limitations on Fixed Term Contracts

The Bill will prohibit an employer from entering into a fixed term contract with an employee for a period longer than two years whilst also prohibiting an employer from entering into a fixed term contract with an employee that either could be extended or renewed for a period that, in total across all contracts, exceeded two years. In addition, employers will be prohibited from entering into a fixed term contract with an employee that could be extended or renewed more than once.

An employer may enter into a contract of employment with an employee that is for longer than two years, contains more than one option for extension or renewal, or is a third or more consecutive fixed-term contract where:

• the employee has specialised skills that the employer does not have, but needs, to complete a specific task;

• the employee is engaged as part of a training arrangement (for example, an apprentice or a trainee);

• the employer needs additional workers to do essential work during a peak period, such as for fruit picking or other seasonal work;

• the employer needs additional staff members during an emergency, or needs to replace a permanent employee who is absent for personal or other reasons, for example parental leave, sabbatical, or long service leave, or absence relating to workers’ compensation;

• the employee earns over the high-income threshold for the first year of the contract;

• the employer is reliant on government funding, or other funding of a kind specified in the FW Regulations, to directly finance the employee’s position either in whole or in part – the employer must receive the funding for more than two years, and there must not be any reasonable possibility that the funding will be renewed;

• the employee is appointed under governance rules of a corporation or other association, where those rules specify the length of time that the appointment can be in place;

• the employer is permitted to enter into the fixed term contract by a term specified in a modern award that covers the employee; and

• the contract is a type of contract, prescribed in the FW Regulations, for which an exception applies.

In the event an employer enters into a fixed term contract which contravenes these new limitations, the term that ends the contract after a certain period would be considered to be invalid. This means that the contract would otherwise apply as to its terms, except that the contract does not end at the nominal expiry date. The employee would not be considered to have been employed for a specified period of time, a specified task, or a specified season for the purposes of unfair dismissal and/or notice of termination and redundancy pay (if applicable). Civil penalties will apply to employers who contravene the new limitations on fixed term contracts.

These changes are likely to have a significant impact on industries such as community services, where contracts are often tied to the length of funding grants which typically roll over year on year, and, education, where it is common for contracts for teachers to be issued annually, according to the school year.

The new parameters limiting the use of fixed term contracts do not become operative for 12 months.

Flexible Work

The National Employment Standards will be amended to expand the circumstances in which an employee may request a flexible working arrangement where they, or a member of their immediate family or household, experiences family or domestic violence, to align the coverage of family violence with the entitlement to family and domestic violence leave.

The changes will also support employee access to flexible working arrangements by strengthening employer obligations when considering an employee’s request, based on the model award term developed by the FWC, and, introduce dispute resolution provisions empowering the FWC to make orders where an employer refused an employee’s request, or did not respond to the request within 21 days, including consideration of whether the employer has reasonable business grounds to refuse a request.

This additional layer of process, which will enable the FWC to scrutinise an employer’s decision-making in respect of refusing requests for flexible working arrangements and has been absent from the existing legislation, was an adjustment to the original Bill insisted upon by the Greens to ensure passage through the Senate.

This element of the new legislation will take effect from 6 June 2023.

Prohibiting Pay Secrecy

The Fair Work Act 2009 will be amended to create new workplace rights allowing employees to ask one another about, and to disclose, their remuneration and relevant conditions. Employees would be able to use this information to assess whether their remuneration is fair and comparable to that of other employees in the same workplace or industry though an employee will not be compelled to disclose this information to another employee. Contract terms that seek to enforce pay secrecy would have “no effect” as a result of this change.  

On the passing of the Bill, Minister Burke observed, “For those who’ve been paid less than their co-workers, but weren’t able to find out because of pay secrecy clauses, the days of forced secrecy are over”.

The new laws surrounding the prohibition of pay secrecy took effect on 7 December 2022.

Even more changes to come in 2023

Minister Burke said in a statement issued immediately after the Bill’s passage that the Government “will deliver a second tranche of workplace relations reforms next year to close the loopholes that are undermining job security and wage growth”.