Uncertainty surrounds fairness test

Legislation is heading through Parliament, but a lack of detail is giving way to speculation and angst among SMEs about what’s in store.

By Peter Vitale

What has been revealed so far about the Federal Government’s new Fairness Test leaves unanswered many questions about how the test will operate in practice. Amendments being made to the Fairness Test bill as it passes through the Parliament this week are also giving rise to more angst for SMEs.

The latest changes proposed by the Government will require employers to give all current and new employees a copy of a fact sheet to be issued by the Workplace Authority (currently known as the Office of the Employment Advocate).

The Workplace Relations Fact Sheet must contain information about the Australian Fair Pay and Conditions Standard, protected award conditions, the Fairness Test and the role of the Workplace Authority director and the Workplace Ombudsman. It seems that the requirement will apply to every employee from the most senior down. A failure to comply will result in penalties of up to $110 for every employee that does not receive the information.

Speculation about what will and won’t be considered to be fair compensation for trading off award benefits in an AWA is rife and looks unlikely to subside until the Workplace Authority puts firm guidelines in place. The authority has said that it will making the guidelines public.

Payments that have so far been put into the “uncertain” basket by a range of legal and IR practitioners, employers and commentators include performance-based pay and bonuses. There is also uncertainty about what effect future increases to minimum wages will have on agreements that have been found to pass the Fairness Test. Another question could arise if an employee’s days of work or shifts change significantly over time, for example, if their agreement provides for a fixed annual salary. The value of non-monetary benefits is also bound to cause confusion.

In hearings conducted by the Senate Standing Committee on Employment, Workplace Relations and Education into the Fairness Test bill, representatives of the Department of Workplace Relations have given a little guidance about some of the issues of concern.

In response to a question from Family First Senator Steven Fielding, a representative of the department stated that an agreement that reduces the cash component of the wage by $50 a week but includes a $100-a-week shopping voucher to be used at the employer’s supermarkets would not pass the Fairness Test.

The wording of the bill is not so clear, however. Arguably a voucher such as that could fit into either the category of “monetary” or “non-monetary compensation with a substantial benefit to the employee”.

Other comment has focused on what exactly will be contained in the list of “protected award conditions” in future. With the Opposition’s proposal to broaden the conditions to be contained in the Australian Fair Pay and Conditions Standard and increase the number of protected award conditions, the Fairness Test would arguably amount to a dead letter.

As the no-disadvantage test proved in practice with the vast majority of pre-WorkChoices certified agreements, there would be few agreements that reduce or modify a single award condition to the employee’s disadvantage.

One thing the department has promised is quicker turnaround times, stating that agreements will be approved within a seven to 10 day timeframe. It seems that the objective is also to reduce the time for prohibited content checks and other pre-lodgement steps to take seven to 10 days.

The lesson for employers is that the debate isn’t generating a lot of hard and fast lessons.

If you are implementing AWAs or collective agreements and wonder whether they are going to pass the Fairness Test, safety first is your best option: make sure that guaranteed payments under your agreement are capable of meeting any penalty and loading obligations, or that they provide a mechanism for the employer to calculate shortfalls on a reasonably regular basis and provide the employee with make-up payments.

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.