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Workplace Laws: Key Concepts

The first set of changes brought about by the Fair Work Act 2009 (Cth) (FW Act) came into effect on 1 July 2009 and have had a significant impact on Australian workplaces.

The second wave of legislative changes, due to commence on 1 January 2010, will further affect some fundamental aspects of existing employer/employee relations. This article briefly examines some of the key changes that will commence on 1 January 2010. It then touches on the new transfer of business and good faith bargaining provisions, both of which are already in operation.

Modern Awards and Individual Flexibility Arrangements

Modern awards will apply to all industries and occupations that have historically been regulated by awards. They will deal with minimum wages, types of employment, arrangements for when work is performed, overtime and penalty rates, salary arrangements, leave and dispute settlement and other employment matters.

From 1 January 2010, where a modern award applies, an employee will have a legal right to the entitlements. However, the FW Act has introduced a new concept of Individual Flexibility Arrangements (IFA) which allows an employer and an employee to agree to set off obligations owed by employers to employees under an applicable modern award.

An IFA must be made in strict accordance with the relevant terms of a modern award. In particular, the IFA will have to state each term of the modern award that it will vary, explain this effect and explain how the agreement results in the employee being better off overall.

In addition to IFAs, a recent decision of the AIRC suggests that employees who are employed on common law contracts which include a "set-off" clause will be able to continue to use such arrangements. A set-off clause allows an employer to provide the employee with over-award remuneration in satisfaction of all of the entitlements the employee would have received had the relevant award been applied to the employee's employment.

It is essential with both set-off clauses and IFAs that the employee be better off overall under that arrangement than they would be under the award.

Accordingly, it is important that you review your employment contracts prior to 1 January 2010. If you have any employees who might be covered by a modern award and you pay over-award entitlements, you need to ensure that you have an appropriately worded set off clause in your contracts of employment. However, if you pay employees based on the award, you will need to ensure that you know which modern award will apply. You should also consider making an IFA if there is a particular provision in the modern award which you and an employee wish to vary.

Employers should also not automatically assume that, because their workforce has traditionally been award-free, this will continue to be the case after 1 January 2010. The terms and coverage of the new Miscellaneous Modern Award (which, as its name suggests, is a catch-all general award) is currently in the process of being finalised.

Commencement of National Employment Standards

1 January 2010 also sees the commencement of the National Employment Standards (NES). The NES are a set of minimum statutory entitlements that will apply to all employees. Many of the terms of the NES set out entitlements already enjoyed by employees under the Workplace Relations Act 1996 (Cth), for example annual, parental and personal leave. However, the NES also introduces new entitlements including redundancy pay, long service leave and the right to request flexible working arrangements. Because a contract of employment cannot exclude the operation of any terms of the NES, it is important that contracts of employment of all employees are reviewed to ensure that they comply with the terms of the NES.

Transfer of Business

The transfer of employees from one employer to another was previously covered by the Workplace Relations Act 1996. Under the FW Act a wider, more prescriptive test to decide if a "business transfer" has been introduced.

Under the FW Act, a "transfer of business" requires:

• at least one "transferring employee" who moves to the new employer within three months to perform the same or substantially the same work; and
• a "relevant connection" between the old employer and the new employer - for example where the new employer is an associated entity of the old employer, or where the new employer owns or uses some assets of the old employer and an outsourcing agreement exists.

The new provisions are likely to cover sales of business, mergers and de-mergers of private companies, sales and asset acquisitions, corporate restructures, outsourcing and insourcing. The effect of these provisions will be that industrial instruments will be more likely to transfer from an old employer to a new employer.

Good Faith Bargaining

The FW Act has also introduced a requirement for parties negotiating enterprise agreements to bargain in good faith. The obligations are mutual obligations that apply to the employer and all bargaining representatives, including unions.

These include:

• attending and participating in meetings at reasonable times;
  disclosing relevant information (other than confidential or commercially sensitive information) in a timely manner;
• responding to proposals made by other bargaining representatives in a timely manner;
• giving genuine consideration to the proposals of other bargaining representatives and providing reasons for their responses to those proposals;
• refraining from capricious or unfair conduct that undermines freedom of association or collective bargaining; and
• recognising and bargaining with the other bargaining representatives for the agreement.

Capricious bargaining may include conduct such as failing to recognise or excluding a bargaining representative, preventing a bargaining representative from attending a meeting or engaging in detrimental conduct towards a bargaining representative.

However, Fair Work Australia has found a range of other conduct to be acceptable, including hard bargaining and refusing to budge on important issues, and employers communicating with employees during bargaining or putting an agreement to employees for a vote even though a union representative is conducting a secret ballot.

Summary

Employers, at the very least, need to consider the impact of these changes on the enforceability of their current employment contracts. For those who are involved in enterprise bargaining or are thinking about a restructure involving a transfer of employees, there are new implications to bear in mind.

With many changes having already occurred and further changes about to impact the employment landscape now may be the time to review and update (if appropriate) your employment contracts. If you have any questions, please contact your local William Buck advisor who will assist in putting you in touch with an appropriate employment lawyer.

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