Summary of proposed reforms to the Fair Work Act

15 December 2020

A graphic illustration of a pencil finishing off a drawing of the justice scales

The Morrison Government introduced legislation last December proposing sweeping reforms of the Fair Work Act 2009 (Cth) (FW Act).

The National Retail Association has long campaigned for and significantly contributed towards the development of many of these reforms including to introduce flexibility into part-time employment, defining casual employment and changes to enterprise bargaining.

The National Retail Association played an important role in advocating for these issues in the Attorney-General’s industrial relations working groups which identified these key issues, and had direct input in the drafting of key provisions.

NRA Legal has prepared the below summary of key changes proposed by the legislation.

Please note that the final wording of the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 (Cth) may change before it is passed into law, and this should be taken as a guide only.

Certainty over casual employment

Casual employment has been thrown into a tailspin in recent years following the case of Workpac v Skene and Workpac v Rossato. In both cases a “casual” employee was held to be a permanent employee because a long-term, regular roster was held to amount to a “firm advance commitment” of work.

The result of this was that the employees were entitled to paid leave entitlements and the employer was not allowed to reduce the amount owing to the employees by the amount of casual loading “paid in error”.

The legislation will address these issues by:

creating a definition of casual employment based on the terms of employment at the time it commences, notwithstanding whether a casual employee works regular hours over the course of their employment; and
compelling courts to offset any casual loading already paid “in error” to an employee against entitlements owing to permanent employees.

Casual conversion, as featured in many modern awards, will also now feature in the National Employment Standards, with employers required to proactively consider offering permanent employment to regular casual employees at least once during their tenure.

Finally, employers will be required to give casual employees a new Casual Employment Information Statement, to be prepared by the Fair Work Ombudsman, in addition to the existing Fair Work Information Statement.

Flexibility for part time employment

The legislation also addresses issues with offering part-time employees additional hours under certain modern awards such as the General Retail Industry Award 2020 and the Fast Food Industry Award 2010.

Under the proposed changes, employers will be able to enter into a “simplified additional hours agreement” with a part-time employee working additional hours without having to pay overtime rates of pay.

The new process will be available for part-time employees who already work at least 16 hours per week with only an informal record of the agreement being required, such as a text message.

Other restrictions include that the employee must be informed that it is a “simplified additional hours agreement”, the number of additional hours is specified, and the employee must still receive at least three hours of continuous work per shift regardless of whether this is part of a simplified agreement.

Termination of zombie agreements

Any pre-reform collective agreements entered into prior to the commencement of the FW Act (that is, anything entered into before 1 July 2009) that are still in operation will automatically terminate on 1 July 2022.

Employers who may be affected by this change should start preparing to revert to the modern award system or recommence bargaining over the next two years, and NRA Legal will be making resources available over this period to assist with the transition.

Changes to enterprise bargaining

In response to criticisms of the existing enterprise bargaining system from both unions and employer groups, the legislation also aims to streamline the negotiation process and allow the Fair Work Commission (FWC) greater scope to approve enterprise agreements that receive overwhelming support despite some technical challenges.

The legislation will permit the FWC to approve enterprise agreements that do not meet the “better off overall test” for a period of two years in limited circumstances having regard to the impact of the COVID-19 pandemic on the business.

The changes also allow members of a franchise network to “opt in” with a vote of their employees to be covered by an enterprise agreement that applies to a different member of the franchise network.

Additionally, the proposed legislation will require approval of enterprise agreements within 21 days of lodgement, and the FWC will be required to provide written notice of the “exceptional circumstances” that resulted in the delay.

Finally, the changes also prevent the “intervention” of non-parties to an enterprise agreement which has been responsible for delaying the approval of some enterprise agreements in the past.

Compliance and enforcement

In response to the increasing visibility of the issue of large-scale underpayment of wages, the legislation will make several changes to how the FW Act is enforced.

Key among these is the introduction of a “wage theft” offence, which will punish deliberate underpayments to employees with fines of up to $5,500,00 for companies and, in the case of individuals, fines of up to $1,100,000 and imprisonment for up to four years. Individuals convicted of such an offence will also be disqualified from being an officer of a company.

The legislation is expressed to override any State laws specifically criminalising “wage theft”, such as Victoria’s Wage Theft Act 2020, however it remains to be seen how it will interact with Queensland’s more nuanced amendments to its Criminal Code.

The proposed legislation also seeks to make the following amendments to the existing compliance and enforcement framework:

increasing maximum civil penalties (whether order by a court or by FWO infringement notice) by 50 per cent;
introducing a new maximum penalty for larger businesses; and
prohibiting the publication of job advertisements featuring non-compliant pay rates.

Claims for underpayments

In addition to the above mechanisms, the claims process through the Federal Circuit Court will be streamlined by:

increasing the “small claims” jurisdiction of the court from $20,000 to $50,000;
allowing the Court to award successful applicants in small claims matters with their filing fee; and
allowing the court to refer underpayment claims to the FWC for conciliation and, if the parties consent, arbitration.

The increase to the size of claims that can be brought under the Federal Circuit Courts “small claims” jurisdiction has already caused concern among legal commentators that the court may swiftly become overwhelmed if it is not granted additional resources to deal with the additional case load. Whether this concern will come to fruition remains to be seen.

Next steps

NRA Legal will be carefully following the progress of the legislation and engaging directly with Parliament during any consultation process, and will provide further information to members once the content of the final version is known.

In the meantime, it is important for employers to:

take action to familiarise themselves with the proposed changes and any potential impact on their business; and
seek advice from NRA Legal about what immediate action, if any, is required in advance of the proposed laws taking effect in 2021.

IMPORTANT INFORMATION

The information in this post is of a general nature. It is not intended to be a comprehensive summary of the law and should not be relied upon as legal advice.