THE IR SYSTEM FORMERLY KNOWN AS WORKCHOICES

Simon Dooley, Dooley & Associates

Introduction

Labor has threatened to tear up AWAs and the Coalition has banished the word, "Workchoices" and introduced the new fairness test. In this discussion we examine what has changed and what remains the same.

Australian Workplace Agreements (AWAs)

What is the new "fairness" test?

The new "fairness" test is not a reincarnation of the old "no disadvantage test". Under the no disadvantage test employers had to convince The Office of The Employment Advocate that the employee had better terms and conditions under the new AWA compared to their Award.

This was an extremely onerous test for employers and many AWAs did not meet the criteria. Subsequently, the no disadvantage test was removed and employers were able to come up with any arrangement provided that it complied with the “five conditions protected by law” under the Australian Fair Pay & Conditions Standard ("The Standard"). Employee groups argued that employees were being forced to give up too many of their rights and that they needed more protection over and above that provided by The Standard

Election Year Amendments

As part of the ongoing political maneuvering regarding Industrial Relations (IR), the Federal Government introduced the new “Fairness Test”. Unlike the no disadvantage test the new fairness test does not apply to every employee and only relates to AWAs that remove “Protected Award Conditions”. (For information on AWAs and Protected Award Conditions generally see Dooley & Associates 21 Questions on Workchoices http://www.dooley.com.au/forbusinesses.asp).

Who does the new Fairness Test apply to?

The new Fairness Test applies to Award covered employees who earn up to $75,000 (not including overtime and other benefits). This covers about 7 million Australians.

The Fairness Test only applies to new AWAs. That is, all AWAs in existence up until 6 May 2007 are exempt.

The new Fairness Test only applies when the AWA affects “Protected Award Conditions” including:

• penalty rates, including for working on public holidays and weekends;
• shift and overtime loadings;
• monetary allowances;
• annual leave loadings;
• public holidays;
• rest breaks;
• incentive-based payments and bonuses; and
• other “protected award conditions” as set out in the specific Award that relates to the employment.

Under the new Fairness Test employees must be “fairly” compensated for trading away “protected award entitlements” or public holiday pay.

What is fair compensation?

Compensation does not have to be in the form of wages. It can be both monetary and non-monetary. Therefore, unlike the old “No Disadvantage Test”, employers don’t have to pay employees more for relinquishing their “protected award conditions.”

Employers can provide non-monetary compensation such as:

• the provision of a job in circumstances where the employee would otherwise have been unlikely to obtain a job;
• the provision of jobs in rural and regional areas;
• the provision of a parking space;
• child care;
• company car;
• mobile and home phone;
• laptop computer for personal use;
• shares in the company;
• other “value added” benefits.

Some of the factors that the Workplace Authority (formerly The Office of The Employment Advocate) take into account when administering the new Fairness Test include:

• the employee’s work obligations (eg weekend/shift work);
• the industry, location and economic circumstances of the business;
• the employee’s employment circumstances and opportunities;
• working arrangements and entitlements including any family friendly conditions.

Who is not affected by the new “Fairness Test”?

The following employees are not covered by the “Fairness Test”:

1. Employees employed under pre 7 May AWAs;
2. Non-Award employees;
3. Employees earning more than $75,000 a year.

Additionally companies with financial problems can apply for an exemption from the “Fairness Test” provided the exemption is not contrary to the public interest. It is very unclear as to how this exemption test for financially strapped companies will work

How is 'fairness' determined?

The new “Fairness Test” only relates to the release of “protected award conditions” by employees earning less than $75,000 a year. It still allows employers to remove all “protected award conditions” in return for either monetary or non-monetary compensation. So, in some cases employees could give up all of their “protected award conditions” in return for non-monetary compensation only.

The new “Fairness Test” does not stop businesses from requiring employees to work on weekends or to carry out shift work or abnormal hours.

Employees and Employers continue to be able to tailor most of their employment arrangements to their specific circumstances under an AWA subject to the limitations imposed by:

1. The Standard; and now,
2. The new “Fairness Test.”

Therefore, AWAs continue to offer employers and employees considerable scope to improve their workplaces.

Ensuring the legality of your agreement

Certainty is one of the primary aims of any contract. Therefore, you should ensure that your AWA is sent to the Workplace Authority to review first, before you seek to implement it.

This means sending the draft AWA to the Workplace Authority to review under its pre-lodgement assessment process. If the draft AWA passes this review it can then immediately be processed under the fast-track filing system. This is similar to what we have already been doing to ensure compliance with the “Prohibited Content” requirements regarding AWAs.

Implementing AWAs in anticipation of the Federal Election

As indicated, AWAs continue to provide businesses and their employees with the best opportunities for tailoring employment terms and conditions to their own specific circumstances. Many awards and employment laws are archaic , but this can be simply and easily overcome through the implementation of AWAs.

Some very simple yet effective improvements that only AWAs can provided include allowing employees to “cash out” all of their Long Service Leave and up to two weeks Annual Leave each year. This can provide significant benefits for employees who may want to pay down their mortgage or personal loans.

It is anticipated that if the Labor Government is successful in this year’s election they will attempt to remove the opportunity to enter into AWAs. It is unlikely that they will impose retrospective legislation to remove current AWAs due to the inviolability of contractual rights. Even if Labor is successful in gaining control of the House of Representatives then it is unlikely that Labor will have control in the Senate.

This leads us to make the following recommendations:

• AWAs are the best way of tailoring employment terms and conditions to the specific operation of your business. There is a significant risk that you may not be able to continue to create new AWAs if Labor win the next election. Therefore, it is recommended that you enter into AWAs before the election.
• Election terms are approximately three years. Under current Workplace Laws you can create AWAs with a nominal expiry period of up to five years. We therefore recommend entering into AWAs for the maximum nominal period of five years in order to extend beyond the next election term.

The new Workplace Authority & Workplace Ombudsman

As indicated, as part of the 2007 electioneering process the following name changes have occurred:

1. The Federal Agency previously known as the Office of The Employment Advocate is now known as the “Workplace Authority”; and
2. The Federal Government’s employment law watchdog, previously known as The Office of Workplace Services is now known as the “Workplace Ombudsman”.

This is simply a name change and their roles will remain the same.

Compliance Issues

Part of the Coalition Federal Government’s philosophy behind its IR Reforms, formerly known as WorkChoices was to create a new system that, amongst other things reduces the relevance of unions.

Traditionally unions have partially carried out the function of “watchdog” to ensure compliance with employment laws. A little publicised aspect of WorkChoices has been the massive imposition of regulation upon employers by the Government.

Through the Office of Workplace Services (now the Workplace Ombudsman) the Government has sought to take the role of workplace compliance review away from unions. As part of the hard sell of its IR Reforms the Government wants to show that WorkChoices has been good for the “worker” and that its IR Reforms are protecting workers.

We believe that through the multimillion dollar funding of the Workplace Ombudsman (formerly The Office of Workplace Services) the Government will be looking for some major corporate scalps to present to the public as examples of how the Government is cracking down on recalcitrant employers and protecting the “worker”.

We are therefore recommending to our clients that they arrange for us to conduct one of our Free Business Health Checks to assist them to ensure that they are complying with WorkChoices reforms and do not get caught out. Of particular importance is compliance with The Standard. Some aspects of The Standard that must be complied with include:

1. Ensuring that casual employees are receiving at least an additional 20% on top of their basic pay;
2. Ensuring that arrangements are set in place so that employees are not required to work more than 38 ordinary hours a week. This is something that can be remedied through agreement to work “reasonable additional hours” and we can assist you to ensure compliance in this regard.

Most pre 27 March 2006 contracts allowed for no more than five or eight sick days per annum, often non-cumulative. This is in breach of The Standard introduced by WorkChoices which entitles employees to ten paid sick/personal carers days off per annum. Again, all of your employment contracts need to be updated to comply with the leave provisions of The Standard.

Breaches of The Workplace Relations Act, including The Standard, can be extremely costly with fines for each offence being as high as $33,000.00.

We believe that the best way to avoid the risk of unnecessary problems is to arrange for us to carry out one of our Free Business Health Checks for you. To arrange a Business Health Check please contact us on (02) 9890 4755 or info@dooley.com.au.

Disclaimer: This paper is indicative only. It is provided for the purposes of encouraging you to realise how complex and important the law is and the legal ramifications that can occur. It is not legal advice and you are not to rely on it. This paper is not an alternative to reading all of the laws, policies and procedures that apply to you. You must read them in their entirety, act in accordance with their requirements & apply them to your situation. The law changes rapidly and this paper may not be up-to-date. Each situation is different and you should seek legal advice regarding any legal matters that arise.