The Federal Government’s industrial relations omnibus bill proposes overdue reform.
The effects of the proposals include:
- limiting a Union’s ability to oppose an enterprise agreement it had nothing to do with;
- loosening the “better off overall test” (BOOT) in very limited circumstances – although this is unlikely to survive the political firestorm it has unleashed;
- allowing 8 year greenfields agreements for major construction projects ($500 million+ expenditure);
- defining casual employment and preventing casuals from “double dipping” if they claim permanent employment; and
- federalising penalties for deliberate underpayments.
Key takeaways for employers if the Bill is approved:
- Unions won’t be able to interfere with enterprise agreements if the employees don’t want them at the table.
- 8 year greenfields agreements on major construction projects will extend protection from industrial action.
- The FWC can approve an enterprise agreement if it doesn’t meet the “Better off overall test” (BOOT) after considering certain criteria, including the impact of COVID-19 on the employer.
Blocking union interference in non-union enterprise agreements
Certain unions “run spoil” on enterprise agreements they haven’t been involved in, particularly in the construction, mining and maritime industries.
They do this by reviewing the list of enterprise agreements that are pending approval, identifying the agreements they want to challenge and applying to be heard at the approval stage, even if the employees don’t want them there.
Unions who adopt this tactic typically take a shotgun to the agreement with a wide range of technical arguments. For example, they might argue that the agreement fails the BOOT because it doesn’t provide for every Modern Award entitlement – such as a laser operation allowance on a construction site that has never used laser equipment (yes, that is a real example).
The legal basis for the unions’ application is a provision of the Fair Work Act that affords the FWC broad discretion to inform itself in any way it considers appropriate. The FWC has tended towards accepting submissions from unions on enterprise agreements if the employees are eligible to be members, even if those same employees don’t want them at the table.
The Bill would put a stop to this with a finite list of matters the FWC can consider in relation to an enterprise agreement approval.
If passed, this amendment will speed up the passage of enterprise agreements between employers and employees who do not want to involve a union.
8 Year Greenfields Agreements for Major Construction Projects
A greenfields agreement is an agreement made for a new enterprise between a union and an employer that does not have any employees yet.
The Bill proposes to allow 8 year greenfields agreements for projects where the expenditure is $500 million plus ($250 million plus with government approval). Currently, the maximum term of an enterprise or greenfields agreement is 4 years.
This will give certainty to employers who make enterprise agreements on new major projects with unions (greenfields agreements must involve a union).
It will also give employers the confidence that employees cannot take protected industrial action on the project during the 8 year term of the agreement .
If the project is completed within 8 years it will avoid the renegotiation of an agreement mid-project. Such a renegotiation is often an opportunity for employees to threaten protected industrial action given their significant bargaining power mid-project, particularly if that project is already behind schedule.
Loosening the BOOT
Unions and Labor have condemned the Bill’s proposal to allow the FWC to approve an enterprise agreement that does not meet the BOOT.
The Bill only permits the FWC to do so if it has considered certain criteria including:
- the parties’ and bargaining representatives’ views;
- a union’s views (if they apply to be covered by the agreement);
- the impact of COVID-19 on the employer;
- the extent of employee support for the agreement; and
- the public interest.
The former ACTU secretary characterised the proposal as a Hannibal Lecter dinner party: “Thank you for your co-operation. You’re the next guest. I’m going to eat you, mate”.
It is the amendment that has drawn comparisons to the Howard Government’s WorkChoices legislation.
WorkChoices completely removed the BOOT (known then as the “No Disadvantage Test”). The proposed IR reform Bill reiterates a discretion the FWC already has – to approve an enterprise agreement that does not meet the BOOT in exceptional circumstances. The amendments add further criteria that must be met and the amendment has a two year lifespan.
Still, because of the political backlash, it is unlikely this proposed amendment will survive.
Key takeaways for employers if the Bill is approved:
- A new statutory definition of casual employment manages the risk of casuals claiming permanent employment entitlements.
- Casuals won’t be able to “double dip” if they claim permanent employment entitlements, but their casual loading should be properly described in their employment contract.
New definition for casual employee
After 11 years of the Fair Work Act, we have a proposed statutory definition of a casual employee.
The Bill proposes that a person is a casual employee if they accept an offer of employment made by an employer:
…on the basis that the employer makes no firm advance commitment to continuing and indefinite work according to an agreed pattern of work for the person.
The Bill identifies several factors to determine if the employer has made a “firm advance commitment to continuing and indefinite work”, including whether the:
- person can elect to accept or reject work;
- person will work only as required;
- employer describes the job as casual; and
- person receives a casual loading.
This definition focuses on the objective interpretation of the employment at the time it is offered and accepted, which is a back-to-basics contractual law approach. It may limit a casual employee’s ability to argue that a regular and systematic pattern of work that develops after the employment commences entitles the employee to the benefits of permanent employment.
Earlier this year the Federal Court determined that if an employer is found to have misclassified a permanent employee as casual the employer cannot deduct casual loading from the permanent employment entitlements claimed.
The Bill responds to this by permitting a Court to make that deduction, having regard to certain criteria, including the term of the employment contract that specifies what the casual loading compensates the employee for and the proportion of the loading amount attributable to each entitlement.
Employers should update their casual employment contracts to make this clear.
Following Victoria’s and Queensland’s lead, the Federal Government proposes to criminalise wage theft with a jail term of 4 years (including for directors) and fines of up to $1.1 million for individuals and $5.5 million for companies.
The penalties will only be triggered if the employer dishonestly engaged in a systematic pattern of underpaying one or more employees.
Where to next?
The Bill is unlikely to be passed as it is, particularly because of the BOOT amendment which has triggered some sensationalist commentary.
The bill is not a complete overhaul of the system, but an incremental change in the right direction. It will avoid union interference in enterprise agreements when the employees don’t want them there, provide a statutory definition of casual employment and better protect employers from “double dipping” claims for permanent employment entitlements.
The Bill is slated for approval in March 2021.