Proposed Industrial Relations reform at a glance

18 December 2020 

In brief

The Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) 2020 Bill was introduced into Parliament on 9 December 2020, proposing amendments to Australia’s existing federal workplace relations regime. It does not appear to have bipartisan support, and a number of non-government stakeholders have signalled opposition to key terms. As such, the extent to which the Bill will become law (in whole or part) is not yet known.

The below summary of key Bill amendments has been prepared for your information. 

In detail

Compliance and enforcement

The increased penalty regime proposed under the Bill will have a significant financial impact where there are underpayments identified by the employer. All employers should review their pay compliance to identify and rectify any wage underpayments prior to the Bill becoming law. 

• The maximum penalty for wage underpayments under the Fair Work Act for employers with 20 or more employees has increased to 200% of the ‘value of the benefit’. This aligns the penalty for wage underpayments under the Fair Work Act with the same quantum of penalty that applies to superannuation underpayments. Any penalty imposed is payable to the Commonwealth. These new penalties will apply from the date the Bill receives Royal Assent.
• Civil penalties for ordinary remuneration-related contraventions and sham arrangements will be increased to $99,900 for a corporation and $19,980 for an individual. 
• A new criminal offence for employers who dishonestly engage in a systematic pattern of underpaying employees, including fines up to $5.5m for the corporation and $1.1m and four years imprisonment for an individual. The criminal sanctions do not apply to one-off underpayments, genuine mistakes or miscalculations, as the conduct must be intentional, dishonest and systematic.
• A conviction under this new offence will lead to automatic disqualification of a person from being a director.

Casual employees and flexible part-time hours

The Bill seeks to remove uncertainty regarding which employees are, and are not, casuals at law. This follows a series of significant Federal Court decisions (Workpac Pty Ltd v Skene and Workpac Pty Ltd v Rossato) in which casual employees successfully sued for historical leave entitlements on the basis that they were in fact permanent employees. The Federal Government has estimated potential exposure of Australian employers to similar ‘clawback’ claims as sitting between $18 and $39 billion. The Bill introduces a number of measures to provide greater certainty over casual employment, and incentives for alternative types of employment as follows:

• A statutory definition of ‘casual’ employee is created: “A person who has accepted an employment offer on the basis that there is no firm advance commitment to continuing and indefinite work according to an agreed pattern of work.” Note that this is based on intention when signing the contract, not a retrospective review of an employee’s pattern of work. 
• Employers will be required to formally offer casual employees the opportunity to convert to permanent employment if the casual employee has been employed for a period of 12 months and has worked a regular pattern of hours on an ongoing basis in at least the last 6 months. The employer would not be required to make an offer where they have reasonable grounds to not make an offer, but the employer must give written notice to the employee that the employer does not intend to make this conversion offer.
• Where an employee is found to have been misclassified as casual, casual loading amounts can be offset against claims for leave. This is intended to address any potential for ‘double dipping’ when recognising the employee’s correct classification and responds to the above mentioned cases.
• Part-time flexibility provisions will be introduced across 12 modern awards (including Fast Food, Retail, Hospitality, Restaurant and Commercial Sales) to allow part-time employees who already work at least 16 hours per week to work additional hours and be paid at ordinary rates of pay, rather than at overtime rates.

In addition, work flexibility provisions are proposed for employees covered by 12 modern awards (including Commercial Sales, Fast Food, Retail, Hospitality and Restaurant) allowing employers to direct employees to perform any duties that are within the employee’s skills and competency or to perform duties at a place that is different from the employee’s normal place of work (including the employee’s home).

Enterprise Bargaining

The Bill introduces a number of measures to streamline and improve the enterprise agreement making and approval process to encourage participation in collective bargaining.

• Changes to the ‘better off overall test’ or ‘BOOT’, which is the threshold assessment for approval of new enterprise agreements. Currently, the BOOT is applied narrowly to assess whether employees will be financially better off under a proposed enterprise agreement. The BOOT will be relaxed to allow consideration of non-financial factors, and exclude purely hypothetical analysis of how terms may apply;
• For a temporary (two year) period, the Fair Work Commission (FWC) will have capacity to approve an enterprise agreement which does not pass the BOOT, provided that the FWC is satisfied that it is appropriate to do so given the views and financial circumstances of employees, the employer(s) and bargaining representatives, the impact of COVID-19 on the employer’s business and the extent of employee support for the agreement (i.e. outcome of the voting process).
• Enterprise agreements and other industrial instruments entered into prior to 2010 will have a sunset date of 1 July 2022. This will see ‘zombie’ enterprise agreements cease and employees will be covered by the applicable modern award after this date, if a new enterprise agreement is not approved; and 
• Where a franchisor has an enterprise agreement, changes will allow new franchisees to join coverage after the making of that agreement where their employees vote for coverage.

Greenfields enterprise agreements

Greenfields enterprise agreements are enterprise agreements that are made before the employment of any employee and are often used for major construction and infrastructure projects. Greenfields enterprise agreements currently have a four year expiry period:

• If the greenfields enterprise agreement relates to a ‘major project, the nominal expiry date of the enterprise agreement will be permitted to extend to eight years, provided the agreement provides for annual increases to rates of pay (although no minimum increase is required).
• ‘Major project’ is defined as being a project requiring total expenditure of a capital nature of:
  • at least $500 million; or
  • between $250 to $500 million, and been declared by the responsible Minister as a major project. 

The takeaway

The need for Industrial Relations reform in Australia is clear, as employers endure an intense scrutiny of their workforce practices by regulators, unions, the media and the Courts.

This Bill introduces a mix of employer favourable and unfavourable initiatives, which will now be debated by Parliament and commented on by interested parties, such as unions and employer groups. While it is unlikely that all of the proposals will make it through this process, there is no doubt that one thing coming out of this Bill is change - whether that be increased penalties for non-compliance, a change to how casuals are employed and considered, or simplifying the enterprise agreement negotiating process. Employers should take this period of debate to consider their current workforces to assess potential areas of complexity of risk that may arise if these proposals are legislated.