Employee Relations Express 16 June 2008

On 16 June 2008, the Prime Minister, Kevin Rudd, and the Minister for Employment and Workplace Relations, Julia Gillard, released the new National Employment Standards (NES). A first draft of the NES had previously been released in February 2008 for public comment.

The NES contains details of the 10 minimum conditions which will apply to Australian employees, whether or not covered by awards or workplace agreements. As minimum conditions, the NES will form the foundation of Australian employees’ entitlements.

The 10 NES are:

1. maximum weekly hours of work
2. request for flexible working arrangements
3. parental leave and related entitlements
4. annual leave
5. personal/carers leave and compassionate leave
6. community service leave
7. long service leave
8. public holidays
9. notice of termination and redundancy pay, and
10. fair work information statement.

The NES are not intended to commence until January 2010. However, in the meantime, the NES will form an important part of the award modernisation process currently being undertaken by the AIRC. This is the case because ‘industry relevant detail’ of the NES can be incorporated into awards as part of the modernised awards which will commence in 2010.

More detail about the NES is likely to become available later this year when the government proposes to introduce legislation to give effect to the NES and the other reforms which form part of Labor’s ‘Forward with Fairness’ policies.

Further information about the NES is available from the government’s media release dated 16 June 2008. The government’s 50 page document containing the details for each of the standards can be accessed via the Workplace website.

What is award modernisation?

The idea then is that the awards in each group will be collapsed together so that they reduce in number. There is no set number of awards which should remain in each group. The role of modernised awards will be to operate as a safety net of minimum terms and conditions of employment in conjunction with the expanded set of legislated minimums, the National Employment Standards. Modernised awards might contain provisions which relate to the application of the National Employment Standards in particular industries or occupations.  

Background to recent award changes

Changes to the nature and scope of awards has been a constant topic of attention throughout the significant reform over the last 20 years. 

Many of you might recall:

• as early as 1989, the AIRC, essentially through its national wage case procedure, embarked on a process of award rationalisation. This saw significant changes to awards particularly their classification structures (with the implementation of concepts such as ‘broad banding’)  
• legislation in 1993 required awards to be varied so that they ‘operated as safety nets’ rather than instruments which specified actual terms and conditions of employment 
• the Coalition’s legislative changes in 1996 gave rise to a process of ‘award simplification’ which focused upon reducing the number of matters dealt with in awards, and 
• the Work Choices changes in 2006 further reduced the number of allowable award matters, and for the first time created a new source of safety net terms and conditions in legislation—the Australian Fair Pay and Conditions Standard. The Work Choices reforms also contemplated a more significant process of award rationalisation which was designed to reduce the number of awards. 

What the current process will not do

The fact that the federal legislation is now based on the corporations’ power in the Commonwealth Constitution (rather than the industrial disputes power) means that it is possible for awards to apply to a specified class or classes of employer, rather than merely individually-named employers.

The modernisation process recognises the potential for significant change, but is subject to conditions that:

• modern awards must not disadvantage employees nor increase costs for employers
• the creation of modern awards is not intended to extend award coverage to classes of employees such as managerial employees, but modern awards may cover new industries or new occupations where the work is similar to work that has historically been performed subject to awards (including state awards), and
• the award modernisation process should not result in the modification of enterprise awards.

How is it happening?

The AIRC has been directed by the Minister for Employment, Education and Workplace Relations, The Hon Julia Gillard, to modernise awards. The President, Justice Giudice, has convened a Full Bench for this purpose.

The nature of the proceedings is significantly different, however, from proceedings traditionally taken to vary awards. There will be no applications or evidence in the traditional sense, and the AIRC will not necessarily decide between competing contentions of various parties.

Rather, the AIRC will conduct a series of ‘consultations’ and receive submissions which it will consider in the process of making modern awards.

The following is a summary of the process which is already underway:

1. the Transitional Act which amended the Workplace Relations Act 1996 (Cth) and included provisions in relation to award modernisation commenced operating in March 2008
2.  the Minister made an award modernisation request to the president of the AIRC on 28 March 2008
3. the AIRC conducted high level consultations with the ACTU, the Australian Industry Group and the Australian Chamber of Commerce and Industry, as was required by the Minister’s request, concerning the best process to be followed by the AIRC when creating modern awards
4. the President of the AIRC issued a statement on 29 April 2008 outlining a process for progressing award modernisation and identifying some priority tasks. The three priority tasks to be completed by the AIRC by 30 June 2008 include:
   
   • the establishment of a list of priority industries or occupations for which modern awards are to be made by the end of 2008
   • the publication of a model award flexibility clause to be included in modern awards, and
   • the establishment of a timetable for completion of the process.
5. members of the Full Bench established for the process have now sat in ‘Consultation Session’ in all capital cities and the AIRC has received written submissions and suggestions in relation to the three priority tasks.

Whilst the submissions and suggestions in relation to the priority tasks were due by 6 June 2008, the AIRC has recently indicated its preparedness to receive submissions in reply to these submissions.

More information in relation to the process can be found on the AIRC website.

Implications for employers

1. The Federal Government’s substantive ‘Forward with Fairness’ reforms will be released in draft legislation format later this year. These reforms will promote collective bargaining so that enterprise agreements will be the primary source of terms and conditions of employment. Enterprise agreements under this new system will be subject, however, to a stringent no disadvantage test where the terms of the agreement are measured against the terms of applicable safety net awards.
2. Hence, the award modernisation process will produce modern awards that are likely to have real relevance for employers in enterprise bargaining under the new system commencing 1 January 2010.
3. The National Employment Standards will be an expanded statutory set of minimum terms and conditions of employment. They will also commence on 1 January 2010. Industry-specific detail about the National Employment Standards can be included in awards, in addition to content which forms part of the 10 allowable award matters.
4. As the reach of the statutory minimum increases, there is likely to be an increased role for awards to make particular provisions about how the statutory minimum terms apply at particular workplaces and in particular industries. There are, for example, industries which have typically had improved minimum conditions in areas such as redundancy, long service leave and personal leave. The way in which modern awards go about dealing with these issues will likely have significant importance for employers.
5. As mentioned above, it is possible that awards might apply to a larger number of employers within each industry occupational sector. Hence, it is possible that many employers who have not been subject to awards in the past, might become subject to modern awards.

Freehills is acting for a number of clients during the award modernisation process. We will be following developments and reporting to our clients regularly over the coming months.

This article was written by Anthony Longland, Partner, and Tony Wood, Partner, Melbourne.

More information

For information regarding possible implications for your business, contact