The genie is out of the bottle proposed reforms to the Fair Work Act

What you need to know

• The Bill makes significant changes to arrangements for enterprise bargaining which risk further shifting the focus away from both improving productivity and achieving mutually beneficial outcomes for employers and their employees.  At face value, the proposed arrangements for bargaining across multiple enterprises could extend well beyond the examples cited in the Explanatory Memorandum and warrant very close scrutiny.
• The Bill includes changes to the Better Off Overall Test directed at simplifying the approval process for single enterprise agreements.  However, we have real doubts about whether the new provisions will achieve this in practice.  
• The Bill also includes a range of other measures that will have very real impacts on day to day management of employees -including limits on fixed term contracts, enhanced rights to flexible work arrangements, and pay secrecy.
• The Bill does not include the foreshadowed "same job, same pay" changes (targeted at contractors and labour hire) or "employment-like" regulation of the gig economy.  Those changes are likely to come next year.

What you need to do 

• The workplace relations landscape is changing.  Start early to consider your workplace relations strategy. 
• Start reviewing contracts, policies and procedures to consider the impact of the proposed changes on your maximum term contracts, flexible work arrangements and pay confidentiality requirements. 

Changes introduced by the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill

The Bill proposes substantial reforms on two fronts: enterprise bargaining and aspects of employment arrangements. The proposed amendments are more wide reaching than foreshadowed in the election policies of the Government and will require detailed consideration to determine whether the changes will have broader and perhaps unintended consequences.

The Bill does not deal with two major changes foreshadowed before the election, being "same job, same pay" (targeted at contractors and labour hire) and "employment-like" regulation (targeted at gig-workers in the delivery and care sectors). Those changes are subject to further consultation and can be expected to be progressed separately next year. 

Bargaining changes

There are a range of changes that are likely to significantly affect enterprise bargaining dynamics.

1.  Changes to the BOOT 

The Bill attempts to address some of the current difficulties in applying the BOOT.  The FWC will be required to undertake a global assessment of the terms that would be both more and less beneficial in respect of each covered employee, and must consider the bargaining representatives' views on whether the agreement passes the BOOT.  

While this goes some way to addressing current concerns about a "line by line" assessment approach, it still creates obstacles to implementing enterprise agreements that may drive significant productivity and mutually beneficial outcomes for most employees, if even a single employee is not better off.

The inclusion of a mechanism permitting an employee or union to apply for reconsideration of the BOOT during the life of the enterprise agreement is a fundamental departure that could remove a key benefit of enterprise agreements – certainty about terms and conditions for the life of the agreement.

2.  Employees can initiate bargaining 

An employee bargaining representative will effectively be able to initiate bargaining for an enterprise agreement to replace an existing enterprise agreement that has nominally expired within the past 5 years, provided the proposed agreement has the same (or substantially the same) scope.

This puts to one side the current requirement for the FWC to be satisfied that there is majority support to commence bargaining for a replacement agreement.

3.  Industrial action developments

The Bill includes a range of changes that will effect how industrial action plays out in practice.  It will be important to work through the implications of these changes in the context of the specific circumstances of your bargaining process. 

4.  Arbitration 

There is a new scheme dealing with circumstances where bargaining has become "intractable".  If bargaining cannot be concluded through a bargaining dispute or a confined negotiating period, the FWC will have the power to arbitrate on the outstanding terms that have not been agreed by the parties.

This scheme echoes current arrangements for workplace determinations made following the suspension or termination of protected industrial action, but expands the circumstances in which compulsory arbitration is available. 

5. Termination of enterprise agreements

The likely effect of the Bill is that employers will not be able to seek to have an enterprise agreement terminated after its nominal expiry date (except in circumstances where there is a significant threat to the viability of the employer's business and other conditions are satisfied).

6. Sunsetting of old agreements

The Bill provides for the automatic termination of pre-Fair Work Act instruments (pejoratively referred to as "zombie agreements") within 12 months. 

There is a mechanism for the FWC to extend the timeframe in limited circumstances.

7.  Bargaining across multiple enterprises

In addition to changes to bargaining for a single enterprise agreement, the Bill introduces the possibility of bargaining across multiple enterprises.

There are two streams:

• "supported bargaining" which replaces the current arrangements for low paid authorisations for lower-paid sectors; and
• "cooperative workplace agreements" which can apply in other sectors.

Both schemes are underpinned by a test involving the identification of a "common interest" between enterprises.  However, this test is framed extraordinarily broadly and could possibly facilitate bargaining across enterprises well beyond the scenarios referred to in the Explanatory Memorandum or other commentary on this proposed change. This will hopefully receive close scrutiny from the Parliament.

Employment arrangement changes

The Bill proposes significant reforms which will have impacts on employment arrangements for all employers. 

8. Fixed term contracts

The proposed laws will limit the use of fixed term contracts for the same role beyond two years or two consecutive contracts, whichever is shorter, including renewals. Contracts which breach these limits will be unenforceable, and employees on fixed-term contracts extending beyond these limits will become permanent employees. 

The Bill contains some exceptions, such as fixed term contracts for specialised skills, training arrangements, peak demand periods, and employees above the high income threshold. Employers will bear the burden of proving that an exception applies.

9. Flexible work

The proposed laws will expand the grounds upon which an employee may seek flexible work arrangements, and will empower the FWC to deal with a refusal to grant flexible work arrangements by the employer.

The rights to flexible working arrangements will be expanded to include circumstances of domestic violence, aligning with circumstances for access to family and domestic violence leave. The process for consideration of a request will require employers to discuss and genuinely try to reach agreement before refusing a request, and to provide detailed reasons for the refusal as well as information on any alternative arrangements that the employer would be willing to accommodate.

Disputes over flexible work arrangement requests may be dealt with by the FWC, who may resolve the dispute by arbitration, and may make orders that an employer grant the employee's original request or make other specified changes to that employee's working arrangements.

10. Respect@Work amendments

Delivering on the Government's commitment to implement the recommendations of the Respect@Work Report, the proposed amendments will provide a number of complementary reforms in the Fair Work Act to those in the Anti-Discrimination and Human Rights Legislation Amendment (Respect at Work) Bill 2022 (see our Alert on that Bill here)  

The reforms aim to strengthen protections against sexual harassment and gender-based discrimination in the workplace.  The reforms include:

• Additional attributes attracting protection against discrimination — breastfeeding, gender identity and intersex status;
• Prohibition on sexual harassment in connection with work, with provisions for employers to be vicariously liable for such conduct by their employees and agents (overlapping with existing prohibitions under discrimination and workplace health and safety laws); and
• New dispute resolution framework in the FWC for sexual harassment matters prior to the commencement of civil proceedings (similar to the general protections disputes regime).

11. Job security, gender equity and pay secrecy

The Bill will introduce new objectives to the Fair Work Act promoting job security and gender equity in the workplace. Those objectives will require consideration by the FWC when making or varying modern awards and setting minimum wages. The impact of considerations of "job security" in an economic downturn when setting wages is unclear.

The Bill also proposes amendments to promote gender pay equity, including:

• Pay secrecy - provisions giving employees a statutory right to disclose their remuneration and related information to others. Contract clauses requiring pay secrecy will be of no effect, and entering into new contracts containing such terms will expose employers to civil penalties; and
• Equal Remuneration Orders - powers of the FWC will be expanded to enable it to make orders on its own initiative, remove the need to undertake any comparison against a traditionally male-dominated group (recognising that an appropriate comparison may not exist), make it clear that sex discrimination does not need to be found to make an order, and require the FWC to consider any historical gender-based undervaluation of the work.