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The following article was published in the January edition of 'Procure' E-newsletter

A raft of changes to the Fair Work Act will put more power in the hands of workers this year.

Just before Christmas, Federal Parliament passed the biggest changes to the Fair Work Act since it was introduced more than a decade ago.
But the magnitude of some changes may have flown under the radar for SME owners, according to employment law specialist John Love, a partner at Mellor Olsson.

“I imagine most business owners are probably flat-out running their business. They might have heard there's some changes, but they might not be across deadlines, dates, and exactly what it means for them,” Mr Love says, with the firm focused on informing SME clients.

Media coverage has focused heavily on changes to multi-employer enterprise bargaining provisions, which, while significant, would impact mainly larger businesses. Meanwhile, changes to workplace laws impacting the majority of SME employers received comparatively little publicity, although they will have a broader impact.

The key amendments for SME owners to note were changes that will:

  • Outlaw pay secrecy clauses in employment contracts, giving employees the right to ask colleagues what they are paid, but also protecting the right of those workers to choose not to reveal this information.
  • Crack down on potential misuse of rolling fixed-term contracts in a move aimed at delivering greater job security.
  • Give eligible employees the chance to have flexible work requests arbitrated by the Fair Work Commission if an employer rejects them.

Mr. Love says: “These are really significant changes in terms of small and medium-sized businesses who don't have to deal generally with unions and are dealing on a contractual basis one-on-one with their employees.”

Pay Secrecy

Employment contracts that require workers not to reveal their remuneration are relatively common, particularly at higher pay rates, Mr Love says.

Fair Work amendments to ban these pay secrecy clauses came into effect on December 7 last year, but employers had six months before they would be enforced.

“The grace period is to help employers get their ducks in a row to make sure that by June 7, they're not issuing any contracts with pay secrecy clauses because if they are, they'll then be effectively breaking the law,” Mr Love says. Contracts entered into before December 7 may still contain valid secrecy provisions, creating something of a two-speed workplace.

“Strategically, what that means for an employer will be tricky because some employees will still be bound by a pay secrecy clause, and some won't. Employers will need to think about how to handle that. Certainly, people can ask colleagues what they are paid without fear of disciplinary action. But it's not a mandatory requirement for employees to disclose that information.”

The impetus for change was a commitment to closing the gender pay gap.

Mr Love says Mellor Olsson advises clients to:

  • Review and update employment contracts as necessary.
  • Assess gaps in employee remuneration levels and ensure they're based on merit.
  • Draft, or update, policies in relation to enquiries about pay ensuring workers understand they have a right to ask, but colleagues equally have a right to refuse to tell.

Fixed-term Contracts

New restrictions on the use of fixed-term contracts are probably the most impactful and important reforms for SMEs to understand, Mr Love says.

Fixed-term arrangements are generally used to employ staff for a particular project or time period. However, the Government is concerned about the misuse of rolling contract arrangements to avoid obligations attached to employing permanent staff, such as long service leave and redundancy pay.

Under the amended Act, fixed-term contracts cannot span more than two years, with limited exceptions. It also prohibits the same employee from being offered contract renewals beyond this period.

“The anti-avoidance provisions are very strict too,” Mr Love says, explaining employers will be blocked from filling the same position with different employees under new contracts. The message to business is blunt: it's a permanent position, or it's not.

“This really is aimed at job security, and it's a very significant change because a lot of employers - whether through habit or history - have just continued to use them.”

Mr Love says, anecdotally, he had not seen the misuse of fixed-term contracts, particularly in a tight labour market where workers looking for ongoing employment could simply go elsewhere.

Mellor Olsson advises clients to:

  • Consider the use of fixed-term contracts very carefully before entering into any arrangements and read the fine detail of new requirements.
  • Look at potential alternative options such as casual employees, labour-hire and sub-contractors.
  • Seek legal advice early if you believe your business needs to continue to use fixed-term contracts and/or if you believe an exemption may apply to your business.

Flexible work

“These changes are actually quite significant and, again, probably went under the radar,” Mr Love says of changes which effectively give some employees (such as carers and parents of young children) the right to appeal an employer's denial of flexible work requests.

“Up until these changes, if an employee who was permitted to request flexible work arrangements under the (Fair Work) Act did so, all the employer had to do was provide a written response within 21 days either accepting or rejecting the request. They had to provide reasons, but there was no way that the employee could challenge those reasons if they didn't get what they wanted. So that was the end of it.”

Recent amendments allow eligible employees to take a case to the Fair Work Commission, where a binding decision can be made on whether the rejection was reasonable.

So, it has shifted from a right to request to a right to arbitration, which can be hugely costly for employers, even if they successfully defend a decision, Mr Love says.

This right to arbitration has also been extended to employees requesting extended unpaid parental leave, while the right to request flexible working arrangements has been extended to pregnant women.

Mr Love recommends:

  • Employers work closely and constructively with staff to negotiate flexible work requests.
  • Seek legal advice early if they feel requests cannot be reasonably met.