Proposed federal IR system - managing the transition


Proposed federal IR system - managing the transition

The impact of the Federal Government's proposed workplace relations system will, in many respects, be the subject of conjecture by all the interested parties until draft legislation is introduced into Parliament later this year.


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The impact of the Federal Government's proposed workplace relations system will, in many respects, be the subject of conjecture by all the interested parties until draft legislation is introduced into Parliament later this year. A big question is - how will the transition from the current system to the new system be managed and what is the new system likely to look like?

Comments made by the Federal Government with respect to its proposed legislation suggest there will be a transitional period whereby current workplace arrangements will exist in conjunction with instruments ratified under the proposed workplace relations system.

Information issued by the Department of Employment and Workplace Relations indicates that while the intention of the new system will be to encourage the spread of workplace agreements, it is expected that existing awards will not be abolished and will run concurrently with existing and future federal certified agreements and Australian Workplace Agreements (AWAs).

Proposed changes

In May this year, the Prime Minister announced the Government's proposals for workplace relations reform. Reforms included:

  • Implementing a single national workplace relations system based on the corporations powers.
  • Establishing the Australian Fair Pay Commission to set the adult minimum wage, and minimum junior, disability and training wages, award classification rates and casual loadings.
  • Simplifying approval of agreements by requiring them to comply with the minimum rates and legislated standards covering annual leave, personal leave (including sick leave), parental leave and maximum ordinary hours, referred to as the Australian Fair Pay and Conditions Standard.
  • Further simplification of awards and reducing the number of allowable matters by removing jury service, notice of termination, long service leave and superannuation.
  • Exempting employers with up to 100 employees from unfair dismissal claims and increasing the qualifying or probationary period to 6 months.
  • Clarifying when industrial action is 'protected' and making non-protected industrial action unlawful and subject to penalties and damages.

Legal basis for proposed legislation

As is currently the case under the existing federal workplace relations legislation, the Federal Government is expected to rely on the 'corporations' power under the Australian Constitution with respect to the proposed legislation, meaning it would apply to incorporated employers only but not other employer entities, such as sole traders.

This commentary is based on the expected ramifications of the changes for an employer who is an 'incorporated body'. Although it is the intent of the federal government to have the one national industrial relations system, there will still need to be employment regulation, presumably at the state level, to cover the employees of these other legal entities (eg unincorporated sole traders).

Proposed transitional arrangements

The Federal Government has already indicated that proposed legislation will accommodate current working arrangements. This would be necessary as existing federal certified agreements and AWAs contain a prescribed expiry date, although any agreement would continue to apply until either party takes action to renew or annul the certified agreement. As a certified agreement or AWA has a nominal expiry date of up to three years, there will be many agreements operating well into the new workplace relations system.

The following transitional arrangements are anticipated to appear in the proposed legislation:

Awards: The Government's information has stated that awards will not be abolished, therefore, the option of employing under awards will continue.

The current 20 allowable matters under federal awards will be reduced so that they would no longer deal with superannuation (superannuation guarantee legislation); long service leave (state/territory legislation); notice of termination of employment (provisions already exist in federal Workplace Relations Act) and jury service (state legislation).

A task force is to be established to review awards and rationalise classifications across the system within 12 months of commencement.

The status of current state awards and their possible role in any proposed national system remains unclear. Existing federal awards do not cover every occupation or industry operating in Australia, therefore, the abolition of state awards without some federal alternative would leave many workplaces without any award coverage. The states have raised the possibility of a High Court challenge to the 'nationalisation' of the industrial relations system, however, published legal opinion seems of the view that a favourable decision for the states from the High Court on this issue would appear unlikely.

For those employers currently under the federal award system, an award would only apply by choosing not to make an agreement. An award would not apply during the operation of an agreement.

Agreements: It is expected that agreements will be assessed against the Australian Fair Pay and Conditions Standard (AFP&CS), rather than against the existing award, with the authority to approve agreements being bestowed upon the Office of the Employment Advocate (OEA), with a commencement date from date of lodgement rather than the date of approval.

Agreements will have a life of up to five years. The AFP&CS would comprise award minimum classification rates plus four legislated standards which could not be reduced (annual leave - with the possible option of buying out up to 2 weeks leave each year; personal carer's leave; parental leave; maximum ordinary hours per week - probably an average of 38 per week).

Federal agreements could also be read subject to other federal legislation, such as superannuation guarantee and equal opportunity legislation and also state legislation (occupational health and safety; workers compensation; training legislation), but that parties could be able to vary some state legislation (long service leave, equal opportunity legislation) in the agreement.

Consequently, agreements will no longer be measured against the 'no disadvantage test', which currently requires the Australian Industrial Relations Commission to compare, overall, the conditions of a certified agreement to the minimum conditions prescribed by the applicable or appropriate state or federal award before ratification is approved.

Employers in certain industries, such as the building and construction industry, are being approached by the relevant union(s) to re-negotiate the existing federal certified agreement to avoid any adverse implications from the proposed legislation.

Australian Workplace Agreements (AWAs): It is expected AWAs will not have to be offered in the same terms to comparable employees.

The Government intention is for AWAs to become more individually tailored, with the employer able to negotiate terms and conditions which more accurately reflect an employee's experience and skill-levels, rather than offering what amounts to a 'pattern bargaining' agreement to a certain category of employee.

As with certified agreements, it will not be a requirement of the OEA to compare the wages and conditions of an applicable or appropriate award, ie. the 'no disadvantage test', to an AWA in order to be ratified, but will be compared to the four legislated standards referred to above.

Variation of future conditions

It is expected that wages (ie. the adult minimum wage) will be set, from time to time, by the Australian Fair Pay Commission (AFPC) under a new process, including other award rates (classification, casual loadings, junior, training and disability rates).

A minimum rate decision by the AFPC is expected to be handed down before the last quarter of 2006, but it seems unlikely that classification rates will increase until classifications have been rationalised.

Industrial action

Access to protected industrial action is expected to remain part of the federal bargaining system but will be subject to tighter regulation. Under the new system, unions seeking to initiate protected industrial action will have to request and undertake a secret ballot, and the proposed protected industrial action will have to receive a majority of support. The legislation is also expected to clarify the difference between protected and unprotected action.

Industrial action will explicitly not be protected industrial action:

  • while a federal agreement, or a deemed federal agreement, remains in its nominal term even if the agreement does not deal with the subject matter causing the industrial action,
  • if undertaken in concert with employees in a related or unrelated company,
  • where the industrial action is part of a pattern bargaining campaign, or
  • if undertaken in concert with those taking non-protected action.

The Australian Industrial Relations Commission will have greater powers to suspend or terminate a bargaining period, including:

  • where there is significant threatened (rather than actual) economic damage;
  • where the Commission feels it can mediate/conciliate the dispute.

Currently protected action can only be undertaken during an established bargaining period, subject to certain notification requirements. A bargaining period can be terminated or suspended if parties were not genuinely trying to reach agreement or if the industrial action is causing significant economic damage.


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