No-disadvantage test - new agreements

Analysis

No-disadvantage test - new agreements

The federal Workplace Relations Act 1996 now requires a new workplace agreement to comply with the ‘no-disadvantage test’ (NDT) before the agreement can be legally enforceable.

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The federal Workplace Relations Act 1996 now requires a new workplace agreement to comply with the ‘no-disadvantage test’ (NDT) before the agreement can be legally enforceable.

Federal Parliament recently passed an amendment to the Workplace Relations Act titled Workplace Relations Amendment (Transition to Forward with Fairness) Act 2008 (effective 28 March 2008) that varied certain aspects of the agreement-making process under the federal workplace relations system.

In some respects, the amendment contains conditions similar to those that existed prior to WorkChoices, one of which is the re-introduction of a NDT as part of the agreement-making process.

This article looks at some of the criteria to which the employer must comply before an agreement passes the NDT.

The test

The recent amendment introduced a NDT that all workplace agreements (including Individual Transitional Employment Agreements (ITEA)) made after the commencement of the amendment Act (28 March 2008) must pass.

It will also apply to variations to agreements lodged after the commencement date of the amendment.

As a general rule, an agreement will pass the NDT if the Workplace Authority is satisfied that the collective agreement does not result (or would not result), on balance, in a reduction in the employees’ overall terms and conditions under any ‘reference instrument(s)’, or in the case of an ITEA, the employee’s overall terms and conditions under any reference instrument.

Guidelines

The Workplace Authority has published an NDT Policy Guide that provides information on the steps involved in an NDT and what the Workplace Authority will take into consideration is assessing an agreement.

‘Reference instrument’

The amendment refers to a ‘reference instrument’ with respect to meeting the requirements of the NDT.

In the case of collective agreements, a reference instrument refers to any underlying award or NAPSA that applies to the work the employee performs or, if there is no relevant award/NAPSA or collective instrument, the Workplace Authority may designate an award.

In the case of ITEAs, a reference instrument refers to any underlying collective agreement (including pre-reform instruments) that applies to the work the employee performs or, if there is no underlying collective instrument, any underlying award or NAPSA that applies to the work the employee performs or, if there is no underlying collective instrument or award/NAPSA, a designated award.

Designated awards

An employer may apply to the Workplace Authority, prior to lodging an agreement, to determine that an award is a designated award for an employee or class of employees under the agreement. Different awards may be designated in relation to different employees covered by the same agreement.

Enterprise awards cannot be designated awards. Where there is no reference instrument, the agreement will be deemed to have passed the NDT.

Exceptional circumstances

An employee collective agreement or union collective agreement may still be judged to have passed the NDT in exceptional circumstances (eg if the agreement is dealing with a short-term downturn in business) if the Workplace Authority is satisfied that approval of the agreement would not be contrary to the public interest. However, such an agreement will have a maximum nominal life of two years.

Long-service leave

A law of a State or Territory that provides for long-service leave will be taken to be a reference instrument if it applied to the employee(s) subject to the agreement immediately before the agreement was lodged with the Workplace Authority.

Fair Pay and Conditions Standard

The Workplace Relations Act provides for five basic entitlements, referred to as the Australian Fair Pay and Conditions Standard. They relate to minimum rates of pay and casual loading, hours of work, annual leave, personal/carer’s leave (including compassionate leave) and parental leave.

The Standard applies to all employees whose employer is a constitutional corporation and underpins workplace agreements unless the agreement provides the employee with a more favourable outcome.

Any provision in an agreement that contravenes the Standard has no effect.

NES

It is anticipated the Standard will be superseded by the proposed National Employment Standards (NES) (comprising 10 minimum employment conditions) from 1 January 2010.

Operative date

The Workplace Authority will administer the NDT as soon as an agreement is lodged, although the majority of agreements will only operate after the NDT assessment has occurred.

In the case of a union collective agreement, employee collective agreement or ITEA with existing employees, the agreement will operate seven days after the Workplace Authority issues a notice that the agreement has passed the NDT. However, in the case of an ITEA with a new employee, union greenfields agreement or employer greenfields agreement, the agreement will operate from the date of lodgement of the agreement.

Failure to pass NDT

Workplace agreements that fail the NDT must be reprocessed as a variation to a workplace agreement under the Workplace Relations Act, and formally lodged with the Workplace Authority.

This will require union and employee collective agreements to be submitted for new votes. The Regulations require that the parties to a varied collective agreement sign the varied document.

For ITEAs, the employee must sign the varied document. If the ITEA fails to pass the NDT, the employer will be given an opportunity to vary the agreement using the appropriate declaration form. If the agreement does not pass the NDT, the Workplace Authority must notify the relevant parties.

The notice issued by the Workplace Authority must contain advice as to how the agreement could be varied to pass the NDT.

Fall-back agreements

In failing the NDT, an employee will be bound by the industrial instruments that would have applied if the agreement had not come into operation.

Compensation may also be payable, where the employee is engaged on an agreement that came into operation on lodgement.

Workplace Authority

The Workplace Authority is the body that administers the agreement-making process with respect to the NDT.

When the Workplace Authority makes decisions in relation to the NDT, notice is provided to the ‘relevant parties’. These are the employer, the employee (if the agreement is an ITEA) and, in the case of collective agreements, any organisation(s) bound by the agreement (eg union(s)).

Forms

A number of forms relate to the NDT process - falling into two categories: 1. ‘Employer Declaration Forms to vary an agreement in response to the no-disadvantage test’; and 2. ‘application for no-disadvantage test award designation’.

These forms can be downloaded from the NDT forms webpage of the Workplace Authority website.


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