Treatment of existing industrial instruments
Continuation of instruments
The Bill provides for all existing WR Act instruments to continue as ‘transitional instruments’ until they are terminated or replaced by a Fair Work Act instrument.
Awards and NAPSAs will become ‘award-based transitional instruments’ and all WR Act agreements will become ‘agreement-based transitional instruments’. Different rules apply to agreement-based transitional instruments depending on whether they are derived from individual or collective agreements.
New rules governing variation and termination
New rules will govern the ways in which transitional instruments can be varied or terminated.
The circumstances in which transitional instruments can be varied will be limited. In short, they can be varied:
- to remove an ambiguity or uncertainty
- resolve an uncertainty or difficulty about how they interact with a modern award, and
- remove terms that are inconsistent with the general protections.
One surprise in the Bill is the continued operation of the provisions allowing pre-reform certified agreements and preserved State agreements to be varied and extended. These rules, which allow the extension of the agreement’s nominal expiry for up to thre years from the variation, will continue to operate until 31 December 2009. They will provide employers covered by such an instrument with a real alternative to bargaining in the Fair Work system.
Collective agreement-based transitional instruments will be able to be terminated in the same was as enterprise agreements under the FW Act — by agreement, or after the NED if it is not contrary to the public interest.
Individual agreement-based transitional instruments (ie, AWAs, pre-reform AWAs, ITEAs and individual PSAs) will be subject to new uniform rules that allow them to be:
- terminated by agreement at any time
- terminated by either party unilaterally after the NED – the termination takes effect 90 days after FWA approves it, or
- terminated conditionally on an enterprise agreement that covers the employer and employee coming into operation unilaterally (if the TIN has passed its NED) or by agreement (if it has not passed its NED).
Entering a conditional termination is significant where an individual agreement has not passed its NED because it allows the employee fully to participate in bargaining — including taking protected industrial action and voting on an enterprise agreement.
Interaction rules
The existing interaction rules as between transitional instruments are preserved.
The interaction rules between transitional instruments and Fair Work instruments can be summarised as follows:
- individual agreements continue to override all collective agreement-based instruments, including enterprise agreements
- enterprise agreements can replace collective agreement-based transitional instruments (whether or not the instruments nominal expiry date has passed)
- modern awards replace award-based transitional instruments
- modern awards will not apply to employees covered by an individual agreement-based transitional instrument or by an enterprise agreement made under the FW Act
- modern awards will, however, apply to employees covered by a collective agreement-based transitional instrument such as a pre-reform certified agreement. The agreement will prevail over the modern award to the extent of any inconsistency. This may cause some surprising outcomes and employers covered by such an agreement should review the interaction of these instruments carefully.
Dispute resolution
Disputes arising under transitional instruments continue to be dealt with under the relevant Workplace Relations Act provisions, with any reference to the AIRC being taking to be a reference to FWA. So, for example, a dispute under a pre-reform certified agreement would continue to be governed by s.170LW of the pre Work Choices Act but the powers of the AIRC in relation to such a dispute could be exercised by FWA.
The safety net
The new safety net of modern awards and the NES will not start operating until 1 January 2010. In the meantime, the Australian Fair Pay and Conditions Standard will continue to operate and interact with other industrial instruments much as it does now.
Current awards and NAPSAs will continue as transitional instruments until they are replaced by modern awards. The transitional rules governing enterprise awards/NAPSAs are discussed further below.
From 1 January 2010, the NES will apply to all employees whatever other instruments also apply. This is different to the way in which the Australian Fair Pay and Conditions Standard was introduced. It means that where an employee is covered by an instrument that provides terms that are detrimental to the employee compared to the NES, the NES will override the instrument. FWA will have power to resolve difficulties or uncertainties arising from this rule.
When calculating NES entitlements, an employee’s service prior to 1 January 2010 will generally count as service for the purposes of accruing entitlements under the NES.
Slightly different rules apply to paid annual leave, paid personal/carer’s leave and redundancy pay.
Generally the NES rules will apply to accrued paid annual and personal/carer’s leave. This includes the rules about taking leave and cashing out such leave. However, rules that applied to this leave that are more favourable than the NES (for example, providing for leave to be paid at an employee’s full, rather than basic, rate of pay) can still apply.
Pre 1 January 2010 service will count as service for the purposes of the NES entitlement to redundancy pay but only where the employee had an entitlement to redundancy pay under their ‘terms and conditions’ immediately prior to 1 January 2010. The practical application of this rule will not always be clear, particularly where redundancy entitlements are contained in an employer’s policy rather than a written contract.
From 1 January 2010, minimum wage rates in all types of agreements – both enterprise agreements and transitional agreements – must not be less than the relevant minimum wage rates set out in modern awards or transitional minimum wage instruments (the former Australian Pay and Classification Scales under the Standard). This new rule may result in an immediate wage increase, particularly for employees on expired agreements that have not had their pay rates updated for some time. FWA has the ability to phase in increases where they would affect the ongoing viability of an employer’s business.
Enterprise award modernisation
As expected the Bill provides a process for enterprise awards and NAPSAs to be modernised. This includes enterprise State awards in New South Wales that became preserved State agreements because of legislation passed by the New South Wales Parliament.
Like other awards and NAPSAs, enterprise awards will become transitional instruments on 1 July 2009. They will continue to operate once modern awards start operating on 1 January 2010. The Bill makes clear that modern awards must be expressed not to cover employees who are covered by an enterprise award/NAPSA.
Any person covered by an enterprise instrument can apply to FWA to have it modernised or terminated. Making an application does not require the consent of all parties to the instrument (so an employer or a union could apply). Applications can be made between 1 January 2010 and 31 December 2013.
There is no obligation to modernise but if an enterprise award is not modernised by 31 December 2013 it ceases to apply. Employees would fall back to the relevant industry modern award.
The Bill sets a range of factors that FWA must take into account when deciding whether to modernise or terminate an enterprise award. It also provides for the making of ‘take-home pay orders’ to ensure that employees whose terms and conditions are directly set by the award do not suffer a reduction in take home pay as a result of the modernisation process. (The Bill also introduces similar provisions for employees affected by the general award modernisation process.)
Making agreements under the WR Act
The Bill allows for agreements to made under the WR Act up until 30 June 2009. These agreements can be lodged with the Workplace Authority — strict deadlines apply. The Workplace Authority will assess these agreements (and any others it has not assessed by 30 June 2009) against the no disadvantage test. The Bill makes some minor amendments to the rules that apply where an agreement fails the no disadvantage test.
Bargaining and agreement-making under the Fair Work system
A clean break
The Bill adopts a ‘clean break’ model for parties who are bargaining as at 30 June 2009. If the parties have not made a workplace agreement by 30 June 2009, they will need to start bargaining again in the new Fair Work system. For example, this will mean that:
- an employer continuing to bargain after 1 July 2009 will need to serve notices of employee representational rights
- a union/employees wishing to take protected industrial action will need to go through a new secret ballot process authorising the action.
The NDT applies to Enterprise Agreements made before 31 December 2009
Because the NES and modern awards will not be operational between 1 July and 31 December 2009, FWA will apply the current no disadvantage test when deciding whether to approve enterprise agreements lodged for approval during this period. The better off overall test will apply from 1 January 2010.
ITEAs can continue to made and lodged
Employers who are able to make ITEAs will be able to continue to do so until 31 December 2009. They will continue to be lodged with the Workplace Authority. However, ITEAs will become transitional instruments immediately, meaning that the new variation and termination rules (outlined above) will apply to them.
Employees on individual agreements and collective bargaining
An employee on an individual agreement-based transitional instrument can participate fully in bargaining if the nominal expiry date of their individual agreement has passed or if the nominal expiry date has not passed but they have made a conditional termination (see above for further details about conditional terminations).
This means that an employee on an individual agreement will not be able to do any of the following unless the nominal expiry date of their agreement has passed or they have made a conditional termination with their employer:
- be represented in bargaining for an enterprise agreement
- vote on the agreement
- be in a group of employees covered by a protected industrial action ballot,or
- have the enterprise agreement apply to the employee (although it can cover the employee – ie, the employee can fall back to the enterprise agreement at a later date if the employee’s individual agreement is terminated).
It is not clear whether an employer, when bargaining in the Fair Work system, can exclude employees covered by an individual agreement from the coverage of an enterprise agreement. FWA must be satisfied that the group of employees covered by an agreement is fairly chosen. Further, a bargaining representative who is unhappy with the scope of a proposed agreement may be able to seek a scope order. It remains to be seen whether FWA would regard an agreement that seeks to exclude from its coverage employees on individual agreements as covering a ‘fairly chosen’ group of employees.
Transfer of business
The new Fair Work rules governing ‘transfer of business’ (formerly ‘transmission of business’) capture a wider range of transactions than the existing rules, particularly some outsourcings and insourcings.
The new rules will apply where a business is sold, an outsourcing/insourcing occurs or employees move between associated companies on or after 1 July 2009. The Bill also extends the rules to cover transitional instruments so that these instruments can cover a new employer in relation to transferring employees.
The existing rules, including the 12 month transmission period, will continue to apply where a transmission of business occurs on or before 30 June 2009.
This article was written by Julian Clarke, Special Counsel.
More information
For information regarding possible implications for your business, contact a member of the
Employee Relations team.