What’s this week’s IR policy?

IR policy changes by both sides of politics are leaving small business operators frustrated and confused. By PETER VITALE.

By Peter Vitale

Recent policy changes by both the Federal Government and the Opposition to workplace policies and laws are driving small business to distraction.

The latest move by the Government, to introduce a “fairness test” for all Workplace Agreements, will add another layer of complexity under WorkChoices. Last Friday, Prime Minister John Howard announced that all agreements lodged with the Office of the Employment Advocate on or after May 7 will be subject to the test.

What is the fairness test? In essence it is a softer version of the old “no-disadvantage test”, which applied under the pre-WorkChoices legislation.

The first key thing to note about the fairness test is that it will only apply to employees who are paid less than $75,000 a year. The Government’s announcement also makes clear that it will be applied both to Australian Workplace Agreements and to Collective Workplace Agreements, although it appears no salary limit will apply to Collective Agreements.

One of the significant changes made by WorkChoices was the ability for employers and employees to negotiate agreements to modify or exclude conditions such as penalty rates, shift loadings and allowances. These are known as “protected award conditions”. The new fairness test will be applied to any agreement that modifies or excludes a protected award condition.

The Office of the Employment Advocate, which will be renamed the “Workplace Authority”, will determine whether there is adequate compensation in the agreement for the removal or modification of protected award conditions. It will give a written assessment of whether the agreement passes or fails the test.

The assessment will take into account monetary and non-monetary benefits. It will consider an employee’s usual work patterns, including shift rostering or overtime. The employer and the employee will be given an opportunity to discuss the matter with the Workplace Authority and make changes to get pass the test before agreement takes effect.

So what’s the problem?

In the long term the changes are likely to have practical impact on businesses that are struggling with costs. Industries that are heavy users of AWAs, such as mining, typically pay well above minimum conditions and are unlikely to have any difficulty meeting the fairness test. Industries that are taking advantage of the new laws to reduce employees’ conditions will have to demonstrate that their agreements are fair.

But the real question is how much red tape this will add to the implementation of AWAs and Collective agreements.

The Government’s decision is designed to blunt the Opposition’s attack on WorkChoices, but in the short term it will lead to some pretty challenging times for SMEs.

Currently there is no legislative provision for the fairness test, meaning the the Office of the Employment Advocate/Workplace Authority technically has no legal basis for knocking back any agreement, even though the Government’s May 7 start date has passed. Some reports indicate that the amending legislation may not get to Parliament before June, leaving a month’s worth of agreements in limbo.

These agreements might be made in good faith, but ultimately be of no effect if they later fail the fairness test.

Until there are some firmer guidelines it will be impossible to determine whether an agreement will pass the Fairness Test. So far the Office of the Employment Advocate has posted information on its website that essentially merely repeats the Prime Minister’s announcement.

The other concern for business in the Federal Government’s changes is the footnote indicating that a new employer taking over a business, for example after an asset sale, cannot make it a condition of the transfer of employees that they sign an AWA.

On one reading of the extensive WorkChoices changes to the transmission of business rules, this was a quite intentional and legitimate measure to overcome a decision of the Federal Court pre-WorkChoices. SMEs, particularly those that are struggling, and insolvency practitioners charged with selling businesses that are not viable, will not welcome this change.

Opposition announcements

In the meantime, SMEs are not much the wiser on some of the detail of the Opposition’s policy, with some judicious announcements from their industrial relations shadow minister, Julia Gillard.

The latest example is a statement from her office that: “… things like union preference clauses in hiring or promotion, bargaining fees and preference for particular highly-unionised contractors will not be lawful”. The statement came after prominent unionists, such as the ETUs Dean Mighell, said they expected bargaining fees would be lawful under Labor’s policy.

Discussions also continue between the Opposition and the mining industry as to what exactly what will replace AWAs after a Labor government abolishes them.

For a comparison of the Government and Labor’s IR position, see your briefing.

Peter Vitale is a solicitor, the General Manager of Workplace Relations Services at VECCI and a principal at CCI Victoria Legal.

See more articles by Peter Vitale here.