What does ‘flexibility’ mean in the context of the Fair Work Act?

Analysis

What does ‘flexibility’ mean in the context of the Fair Work Act?

There has been some debate over the 'flexibility' provisions in the Fair Work Act. Claims have ranged from 'toothless' to 'AWAs via the back door'. While some industrial relations players want to restrict their scope as much as possible, others are seeking broad interpretations of the provisions.

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There has been some debate over the ‘flexibility’ provisions in the Fair Work Act 2009. Claims have ranged from ‘toothless’ to ‘AWAs via the back door’. While some industrial relations players want to restrict their scope as much as possible, others are seeking broad interpretations of the provisions.
 
It could well prove to be one of the ‘sleeper’ issues of the Act. It hasn’t had a lot of publicity compared to many other provisions, but might create a lot of work if it has a high take-up rate.
 
This article is the first in a series that looks at the Act’s ‘flexibility’ provisions and explains what they mean in practice.
 
The definition of ‘flexibility’
 
‘Flexibility’ provisions appear in s144 of the Act, in relation to modern awards, and s202, in relation to collective agreements.
 
Section 144 states that all modern awards must include a ‘flexibility term’ that enables the employer and any individual employee to agree to an ‘individual flexibility arrangement’. That arrangement will vary specified provisions of the award ‘to meet the genuine needs of the employee and employer’. Note: each variation will not affect the terms of the award in relation to any other employees, it only affects the one who made the agreement.
 
NES
 
In addition, the National Employment Standards (NES), which commence on 1 January 2010 and cover all federal system employees, contain a provision (s65) that enables individual employees to apply for variations in their work arrangements, which includes more flexible working hours. Section 65 is a very different provision from ss144 and 202; it applies only to parents or carers of children and has different requirements for approval and compliance. See discussion below for further details.
 
What the flexibility clause must comply with
 
Compliance requirements for flexibility clauses are as follows:
 
Awards
 
For awards, a flexibility clause must meet the following requirements:
  • be stated in writing and signed by both parties (and also by a parent or guardian if the employee is aged under 18), with the employee to receive a copy
  • be genuinely consented to by the employee and employer
  • clearly identify the provisions of the award that it modifies
  • the employee must be better off than if the standard award provisions applied — in other words the better off overall test (BOOT) applies
  • specify how either party can terminate the arrangement.
 
Apart from parental or guardian approval for young employees as described above, a flexibility clause cannot specifically require the prior approval of any other person, for example other employees or a union.
 
Enterprise agreements
 
The compliance requirements for flexibility clauses in enterprise agreements are similar to those above for award clauses. However, the employer must ensure that the provisions of the clause only cover ‘permitted matters’ (as per s172(1) of the Act and must not include any unlawful terms (as per s194.
 
NES
 
Only employees who comply with the following requirements can make a request for flexible work arrangements:
  • parent or carer of a child under school age, or a disabled child aged under 18
  • the employee has completed at least 12 months of continuous service with the employer, or is a ‘long term’ casual employee 
  • the employee makes a formal written request to the employer that sets out the reasons for wanting a change to working arrangements
 
Provided the employee complies with these requirements, he or she may be covered by either an award, collective agreement or separate employment contract.
 
In return, the employer must reply in writing within 21 days. If rejecting the employee’s request, the employer must state the reasons for refusal. Note: the employer can only refuse a request on ‘reasonable business grounds’.
 
Scope of flexibility clause
 
The NES provisions state that examples of changes in working arrangements may include changes in hours of work, patterns of work and location of work (eg working from home).
 
The flexibility clauses in awards and agreements have potentially broader scope than this. Agreement clauses can cover any issue that is a permitted matter, but cannot cover matters that are ‘unlawful’. Note: the definition of ‘permitted matter’ is broader than it was under WorkChoices, because the latter contained a specific list of ‘prohibited content’ matters that could not be covered by agreements.
 
‘Unlawful’ in this context means one of the following:
  • discriminatory terms
  • ‘objectionable’ terms — basically, terms that would allow a breach of Pt 3-1 of the Act (which covers general protections, such as workplace rights, adverse action, taking part in industrial action, and sham ‘contracting’ arrangements), or permit payment of a bargaining services fee
  • ‘permitted matters’ is defined in s172(1), but basically covers any matter pertaining to an employment relationship
 
In practice, however, the scope of matters that a flexibility arrangement can cover will be more restricted than this, because ‘standard’ provisions will apply in most cases — see discussion below.
 
‘Model’ provisions are more restrictive
 
The Act states that if an award or enterprise agreement does not contain a flexibility clause, a standard ‘model’ clause will automatically be included in it. The model clause for enterprise agreements appears in Sch 2.2 of the Fair Work Regulations. It states that the parties may agree to make an individual flexibility agreement if the agreement deals with one or more of the following matters:
  • arrangements about when work is performed
  • overtime rates
  • penalty rates
  • allowances 
  • leave loading
 
Model award clause
 
Fair Work Australia has also issued a model award clause along similar lines. It will be necessary to check the relevant award in each case, but if the standard clause is adopted, it will mean that the parties only have the power to vary provisions in respect of the five matters listed above.
 
In both awards and agreements, if the parties want to make an arrangement to cover matters other than those five, they will need to draft their own clause for it.
 
Early information suggested that the model clause is being adopted in enterprise agreements in about 75% of cases, with some of the remainder confining it to less than the five basic provisions.
 
Some union opposition
 
Some unions have attempted to prevent employers from using the flexibility clause to negotiate one-on-one with individual employees. Sometimes this has led to a compromise solution where negotiating terms with teams of employees has been agreed to. This situation was discussed in a previous WorkplaceInfo article.
 
It has been suggested that some unions believe that the clauses will be used to undermine their influence at workplaces, and perhaps to ‘force flexibility’ onto employees who are not in a strong bargaining position. However, in such cases, the provisions of the Act requiring ‘genuine agreement’ by the employee will be relevant.
 
Summary
 
Parties covered by the Fair Work Act can agree to implement for flexible working arrangements rather than the standard provisions in three ways:
  1. by varying the terms of an award — only for employees covered by the award
  2. by varying the terms of an enterprise agreement — only for employees covered by the enterprise agreement
  3. by using the provision under the NES to make an individual arrangement — only for employees who are parents or carers and who meet the other qualifying conditions.
So an employee not covered by either 1 or 2 above could still make a request under 3 (if eligible), and the employer can only refuse it on ‘reasonable business grounds’. Conversely, an employee who fails to qualify under 3 (eg has not accrued the minimum period of service) but is covered by an award or enterprise agreement could use 1 or 2 to attempt to meet his or her needs.
 
Coming soon …
 
Further articles in this series look at the following issues:
  • the logistics of implementing one of these ‘flexibility’ arrangements
  • compliance and enforcement issues of the provisions — note: some parties have expressed concerns that these will not be stringent enough
  • setting up your workplace to deal effectively with flexibility requests and arrangements.
 
Source: Mike Toten, HR writer.
 
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