How the Fairness Test has affected agreement processing

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How the Fairness Test has affected agreement processing

It is now just over three months since the Fairness Test was added to the WorkChoices legislation. A seminar conducted by the Australian Human Resources Institute (AHRI) in Sydney on 16 October 2007 provided some information on how it has affected the processing of new agreements.

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It is now just over three months since the Fairness Test was added to the WorkChoices legislation. A seminar conducted by the Australian Human Resources Institute (AHRI) in Sydney on 16 October 2007 provided some information on how it has affected the processing of new agreements.

Although the amendments to the Act became law on 1 July 2007, the Fairness Test applies to collective agreements or AWAs lodged from 7 May 2007. Note that it is only applied to agreements that remove or reduce one or more 'protected award conditions'. If none of those conditions is affected, the Workplace Authority does not apply the Test.

Backlog and time delays

The seminar quoted the following statistics relating to the processing of agreements:

  • About 150,000 new agreements have been lodged since 7 May 2007. The Authority has successfully processed about 30,000 of them so far. In that period its staffing has increased from 300 to about 1,200.
  • Current processing time for an agreement is 12-13 weeks. However, an agreement can commence 'in good faith' when it is first lodged; whether it is OK and/or subject to the Fairness Test is determined later.
  • While the Workplace Authority will conduct a pre-lodgement assessment of a proposed agreement against the Fairness Test provisions at the employer's request, the assessment currently takes about nine weeks and it is not recommended that employers do so. Employers should preferably contact the Authority directly for prior advice, then lodge the agreement, otherwise they may have to wait nine weeks for the assessment plus 12-13 weeks before they know whether the agreement is definitely OK.

Note that these time frames are much longer than the goal of the Minister for Workplace Relations of a maximum turnaround time of three weeks for all agreements.

Time to process

It appears that the Workplace Authority can take as long as it requires to process an agreement, but if an agreement fails the Fairness Test, the employer has a firm 14-day period in which to fix it.

Policy and interpretation issues

Although the Workplace Authority is empowered to contact employees who are parties to a proposed agreement to discuss the contents with them, so far it has apparently not contacted a single employee. It appears that employees will only be contacted, if at all, if an agreement is regarded as 'borderline'.

Since 27 March 2006, no provision of WorkChoices had been tested in court for interpretation (apart from the unsuccessful 2006 High Court challenge to the validity of the Act itself). This also means, however, that the interpretation of various words and provisions is not entirely clear and no policy guidelines appear to have been set.

Some examples of the issues are:

  • Increased leave entitlements can be offered as non-monetary compensation for loss or reduction of protected award conditions, but there is no policy on how to assess their value.
  • In relation to the Fairness Test for collective agreements, the Act states that the Workplace Authority must be satisfied, on balance, that the agreement provides fair compensation in its overall effect on employees. 'On balance' has not been defined further.

Editor's note: At previous AHRI seminars, some workplace relations lawyers stated that they usually advised employers to attempt to settle disputes over interpretation of WorkChoices, as they believed that provisions were not clear and it was not in an employer's best interests to become a party to a 'test case' (and lose it).

Other procedural matters

If an agreement fails the Fairness Test, the Workplace Authority must contact both the employer and employee/s. It must tell the employer what alterations are required for the agreement to pass the Test. A signed undertaking by the employer to implement the changes is regarded as sufficient documentation for the agreement then to pass the Test.

However, an employer has no right of appeal against a decision by the Authority that the agreement fails the Test and is therefore void.

Failing the test

In a collective agreement, if one employee's provisions fail the Test, the entire agreement fails. It is not possible for an employee to benefit some employees at the expense of others - each one must be no worse off than before. This means that an employer needs to analyse a proposed agreement by both job classification and employment status of every employee to be covered.

It was estimated that about 75% of agreements had passed the Fairness Test so far. Of those that didn't, it was suggested that 'bad drafting' of contents was the biggest problem, and that employers should perhaps have the wording checked by an expert (eg a lawyer) before lodging the agreement.

Further information

Further information about this seminar is available from AHRI.

Related

The Fairness Test - key points

Fact sheet and fairness documents available

 

 

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