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This week, the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 (“the Industrial Relations Bill”) was introduced to the Commonwealth Parliament.

The Industrial Relations Bill follows the discussions and outcomes of the five IR working groups convened by the Minister for Industrial Relations in earlier 2020. These five working groups included representatives from the Government, employer groups and unions.

The Industrial Relations Bill introduces the most widespread and significant changes to the industrial relations system since the introduction of the Fair Work Act 2009.

It is important to note, however, that the Bill is yet to be debated and a number of stakeholders have already expressed concern over some of the proposed provisions. An inquiry into the Industrial Relations Bill is to be conducted in early 2021. What the final version of the Bill will look like, is as yet unknown.

Nevertheless, it is useful to at least flag the significant proposals presently contained in the Industrial Relations Bill. These are the proposals you have no doubt been hearing about in recent days, and will continue to hear more about over the summer months.

Defining casual employment

A legislative definition of casual employment is offered in the Industrial Relations Bill, which has never previously been included in the Fair Work Act 2009. This casual definition has been included on the back of Federal Court decisions in Skene and Rossato. These decisions caused significant confusion for employers around casual employment and entitlements.

Importantly, and appeal against Rossato will be heard by the High Court in the new year after permission to appeal was granted recently. No doubt the High Court’s decision will further inform the discussions around casual employment and entitlements.

The proposed definition of casual employment allows for greater clarity and certainty regarding the status of employees.

The proposed definition states:

(1) A person is a casual employee of an employer if:

(a) an offer of employment made by the employer to the person is made 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; and

(b) the person accepts the offer on that basis; and

(c) the person is an employee as a result of that acceptance.

As may be evident, the definition focuses on the offer and acceptance of employment and draws on long-standing common law principles. To that end, it is not all that different to the definition of casual employment previously included in Awards.

Whilst on the issues of casual employment, the Industrial Relations Bill also seeks to address the issue of ‘double dipping’ that arose in the previously mentioned cases. In circumstances where an employee has been is found to be permanently engaged (and incorrectly identified and paid as a casual), it will be possible for the employer to seek to offset some or all of any casual loading paid to the employee in question in response to an underpayment of wages claim.

If a casual employee has worked for the employer for 12 months, and worked regular hours for at least the previous 6 months, they must be offered the opportunity to convert to permanent employment, or they must be given formal reasons why such an offer is not appropriate. Such reasons will need to be sound and defensible based on legitimate business need. Employers will need to supply to casual employees a Casual Employment Information Statement prepared by the Fair Work Ombudsman (FWO). This is a specific casual employment version of the existing Fair Work Information Statement all employees must be given.

We expect that there will be significant debate on the issue of casual entitlements. Following the cases mentioned earlier, there is the possibility of regular casual employees having access to paid leave as well as retaining their casual loading. Changes that seek to remove this expectation are no doubt going to be hotly debated.

Changes to the BOOT

One of the most controversial proposals appears to be the proposed changes to the Better Off Overall Test. Union officials have been quite vocal about their concerns to these proposals in the days immediately following the Bill’s tabling.

The Better Off Overall Test (BOOT) is a concept introduced to the process of approving Enterprise Agreements (EA). Prior to approving an EA, the Fair Work Commission assesses whether the employees covered by an EA are, on balance, better off than they would be under the relevant award(s).

Whether the employees are in fact better off overall is often contested in the FWC and results in a lengthy and delayed bargaining and approval process.

The Industrial Relations Bill proposes that the BOOT analysis redirects its focus towards the patterns and kinds of work that employees actually engaged in, or are reasonably foreseeable by the employer, in making the assessment as to whether employees may be better off. This is as opposed to hypothetical scenarios which are unlikely to ever occur in the particular workplace.

The proposed changes also allow the FWC to take into account the “overall benefits”, which includes non-monetary benefits. Currently when the FWC performs its BOOT analysis, it is extremely rare for the non-monetary benefits to be relied upon for approval if the monetary benefits fall below the relevant award standard.

Under the proposed changes, the FWC will be able to approve EAs that reduce wages and conditions below award levels for some or all employees, provided it is “appropriate” to do so. Presently, the FWC may approve an EA even when the BOOT has not been satisfied, if the FWC is of the view that exceptional circumstances exist which mean that approval would not be contrary to the public interest. Use of this exception is extremely rare. The Industrial Relations Bill seeks to provide a variation to that exception for a two-year period in direct response to COVID-19.

Whether approval (despite failing the BOOT) is “appropriate” will be determined by consideration of all the circumstances (which need not be exceptional). This will include considering the views of the parties involved, the impact of COVID-19 on the particular enterprise, and the extent of employee support for the EA.

Part-time employment – Ordinary Hours and Rates of Pay

The Industrial Relations Bill proposes that permanent part-time employees who work at least 16 hours a week will be able to agree to work additional hours at their ordinary rate rather than overtime rates.

This has been referred to in media articles and reporting as “flexing up” part-time employees.

This proposal is limited to employees covered by the awards in the following industries:

  • Retail and Hospitality
  • Meat
  • Fast Food
  • Seafood Processing
  • Nursery
  • Pharmacy
  • Registered and Licensed Clubs
  • Business Equipment
  • Vehicle Repair, Services and Retail

Importantly, such an agreement cannot be made for shifts that are less than 3 hours duration; shifts that fall outside the span of ordinary hours specified under the relevant award; shifts that take the employee over certain award limits (for example, 38 hours per week).

Agreements that are made under this proposal will be terminable by either party on 7 days’ notice.

Underpayment – penalties

The Industrial Relations Bill proposes the introduction of a new criminal offence of “dishonestly engaging in a systematic pattern of underpaying one or more employees”.

For employers found guilty of the proposed underpayment of wages offence under the FW Act, the maximum penalty would be:

  • In the case of an individual, 4 years imprisonment, a fine of 5,000 penalty unit (currently $1,110,000), or both
  • In the case of a body corporate, 25,000 penalty units (currently $5,550,000).

An employer will be found to have underpaid an employee if they do not pay the employee in full, in money, and at least monthly.

Other changes

The Industrial Relations Bill proposed various other changes to the Fair Work Act 2009 and the operation of the industrial relations regime. We have decided to focus this article on the changes likely to be of most interest to our clients, the other areas in which changes are proposed include:

  • Award simplification
  • Transfer of employment
  • Flexible work directions
  • Making and approving enterprise agreements
  • Termination and expiry of agreements
  • Greenfields agreements
  • Compliance and enforcement

We will continue to follow the progress of the Industrial Relations Bill through the parliament, and keep you up to date on developments as they occur.

If you have any questions about the impact on your business, please do not hesitate to contact us.