The new IR: Now for the details

Are we faced with ‘WorkChoices lite’? Or is Labor really going to wind the clock back? PETER VITALE explores the IR nitty-gritty.

By Peter Vitale

Are we faced with ‘WorkChoices lite’? Or is Labor really going to wind the clock back? We explore the IR nitty-gritty.

The Rudd Government has recently announced much anticipated further detail of its “substantive” IR legislation, which it expects to introduce into Parliament probably within weeks.

Much of the detail has been released, and the latest information continues the drip feed. But there are some areas where the detail has not previously been spelled out.

The legislation has already been criticised by unions as “WorkChoices Lite”. What does it all mean for SMEs? And how far is Labor really winding the clock back?

The Government has published a series of “fact sheets” setting out the basics of the changes.

Unfair dismissal changes

One of the most significant areas of change for many small businesses are the changes to unfair dismissal laws. The new laws will come into effect on 1 July 2009, six months before most of the other changes.

The Government will remove the Howard government’s blanket exemption from unfair dismissal for employers with 100 employees or less, and will also remove the exemption for termination for “operational reasons”.

Small business is not left completely in the cold. Employers with less than 15 employees will be able to avoid an unfair dismissal claim by demonstrating that they have complied with the Government’s “fair dismissal code”.

A dismissal that is carried out in accordance with the basic six paragraph code will be deemed to be fair. A non-compulsory checklist has been provided for employers to follow, and which will help to demonstrate compliance with the code. The code requires only one warning for poor performance or conduct and makes termination for serious misconduct a simpler proposition than under the current law.

Employees of small employers who have less than 12 months service will be excluded from making a claim. For larger employers the qualification period is six months.

The key change is the simplification of the process for dealing with claims. As far as possible the claim will be resolved by members of Fair Work Australia (FWA) making informal inquiries and decisions without formal hearings. Professional representation of the parties, by lawyers for example, will be limited.

The Government has promised that employers will not have to pay “go away” money to get rid of unmeritorious claims. How these rules will operate in practice is yet to be detailed. The key is likely to be the attitude and approach of the FWA members charged with determining claims, rather than the actual content of the law.

Fair Work Australia

More detail has emerged about the proposed “one stop shop” for workplace relations. The new super body will house the functions of the Australian Industrial Relations Commission, the Australian Fair Pay Commission, the Workplace Authority, the Workplace Ombudsman and the Australian Building and Construction Commission.

Matters that require determination by courts will be determined in the “fair work” divisions of the Federal and Federal Magistrates courts.

The Government promises a less adversarial system and a user-friendly culture. While it is pleasing to see that the Government did not try to shoe-horn judicial functions into the new body, there are still concerns about the appropriateness of having the same body determine conditions of employment, advising employers and employees about those conditions and then determining disputes.

What employers would really like to see is a body that is empowered to give advice which employers can later rely on as a defence to any claim, such as an underpayment claim. Whether FWA will be given this ability remains to be seen.

Minimum employment standards

Minimum employment conditions will be fixed by a mixture of legislated national employment standards, modern awards reviewed and updated by FWA, which will include minimum wages.

The Government has also indicated that it will broaden the application of the freedom of association and anti discrimination provisions of the act. It seems that these changes may result in legislation which will significantly overlap with specific state and federal anti-discrimination laws. There seems to be real potential here for increased litigation and “forum shopping” for disgruntled employees.

Good faith bargaining

One major area of concern for employers that operate in collective bargaining environments will be the new “good faith” bargaining rules. This is another aspect of the legislation that will come into effect from 1 July 2009.

While an employer or employees cannot be forced to agree to terms and conditions, FWA will be empowered to make orders requiring parties to do things such as:

• Attend and participate in meetings.
• Disclose certain information.
• Provide reasons for responses to particular proposals.

One new feature will be the majority rule provisions. In the event that FWA determines that a majority of employees wish to bargain collectively, perhaps by a ballot of employees, then the employer must bargain collectively.

This scenario resembles the tactics being currently employed by a number of unions faced with employers who refuse to negotiate with them, most notably Telstra Corporation.

The new “low paid” multi business bargaining stream also rings alarm bells for small business, as it seems to have the potential to be a return to pre-enterprise bargaining, industry-based common conditions of employment, as old fashioned “paper dispute” awards were.

The difference now being that this stream will determine conditions of employment above the safety net. This is again a critical area where the approach of FWA members to the application of these rules will be critical and business will be hoping that the Government doesn’t allow this to become another layer of industry minimum conditions.

Agreement making

The new rules will do away with the current “prohibited content” regime, which has proved an administrative bane for both employers and the agencies charged with policing it.

The Government will largely return the law to the pre-WorkChoices rules, that is that agreements must relate to matters which “pertain” to the employment relationship.

The most recent important decision on this issue was in the High Court Electrolux case. Selected matters such as requiring bargaining fees to be paid to a union will still be unlawful – “prohibited content” lite.

Agreements will be approved by FWA provided they pass the “better off overall” test, which it is not expected will differ substantially from the “no disadvantage test” currently in operation.

Industrial action

The Government has maintained its tough line on industrial action, retaining the WorkChoices requirement for a secret ballot before industrial action can take place. The rules regarding the docking of pay for periods of industrial action will be softened.

Once again the test of the legislation will be the tools that the Government gives to FWA to deal with disputes effectively.

The lessons for employers:

• The Rudd Government has produced a carefully considered package of changes that are intended not to scare the horses on either side of the debate.
• Unions are not happy with the changes, believing they do not go far enough; the ACTU continues its advertising campaign to try and convince the Government to go further. Nevertheless they will “test” all of the new provisions of the act, such as good faith bargaining, to their limits.
• Unfair dismissals will be back in a big way – while simplified rules for small business are welcome, the question of whether the Government can deliver on its important promise to eliminate “go away” money is not obvious from the latest announcements.
• Some of the details emerging do give cause for concern that employee will find some new avenues of litigation against employers, some which might go to the core of a range of management decisions.
• Fair Work Australia will be the new industrial relations monolith. How efficiently the message gets from the brain to the moving parts remains to be seen.

Peter Vitale is the principal of CCI Victoria Legal