Regulatory remedies and pitfalls
Thursday, 24 January 2008
Last Updated: Friday, 25 January 2008
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The Federal Opposition has finally unveiled its draft industrial relations plans ahead of the election, and business had better be prepared for significant change. By PETER VITALE of VECCI.
The Federal Opposition has released its draft industrial relations policy for the upcoming federal election. The policy will be voted on at Labor’s National Conference in late April.
The policy, if implemented, will represent a significant re-regulation of the labour market, particularly given the impact of the Howard Government’s WorkChoices legislation and companies can expect compliance costs to rise.
The Opposition’s draft policy is substantially the same as the policy platform adopted for the 2004 federal election and has managed to attract criticism from several quarters.
While deputy Labor leader Julia Gillard is working on the detail of the election policy, the ACTU has made it clear that it will oppose any compromise on the re-introduction of unfair dismissal laws that apply to businesses of all sizes.
For business, the news is essentially a return to the pre-WorkChoices industrial regime, with the addition of some Labor policy imperatives.
Key features of the ALP’s policy are:
- Expanding the range of safety net of award terms and conditions and putting pay and award determination back in the hands of the Australian Industrial Relations Commission.
- Abolishing AWAs, making a collective bargain the only means for business to legitimately introduce flexibility in key areas, such as hours of work.
- A suggestion that a “good faith bargaining” regime will be introduced.
- Reintroducing the “no disadvantage test”, when compared to award standards, for agreements.
- Enhancing the rights of unions in workplaces, presumably in relation to site access and rights of representation of employees and allowing “pattern bargaining” across industries.
- Reintroducing access to unfair dismissal laws for the majority of employees now excluded by WorkChoices. There has not yet been any indication of whether Labor will retain a small business exemption of any kind. As indicated earlier, the ACTU has already indicated its opposition to such a measure.
- Expanding the scope of industrial relations regulation to cover groups who are now classified as independent contractors. It is not yet clear how far this aspect of the policy will reach.
Overall for business, the ALP’s policy suggests a return to familiar territory.
As has been discovered with WorkChoices, the devil is absolutely in the detail.
The Opposition would apparently use the full scope of the corporations power, highlighted by the High Court in the challenge to the WorkChoices legislation.
This means that the scope for a return to comprehensive state-based systems is probably limited. Further, with state Labor governments across Australia, a full referral of industrial powers to the Commonwealth, based on the Victorian model, is politically a more realistic proposition. Business will welcome that prospect.
There is however little doubt that the compliance burden will increase for small business.
The prospect of good faith enterprise bargaining, a legal concept recognised in the United States, is likely to add a layer of significant complexity to negotiation of agreements.
The re-expansion of the unfair dismissal jurisdiction is also unlikely to be welcomed by business. What remains to be seen is whether the changes proposed by the Opposition will result in a gentle swing of the regulatory pendulum or a return to a much more litigious and adversarial-based system.
The lessons for business? Hold your breath. The ALP in government will need a lot of legislative skill to get the balance right between its policy agenda and the stake that business now has in Howard’s 10-year legislative program.
Peter Vitale is a solicitor, the General Manager of Workplace Relations Services at VECCI and a principal at CCI Victoria Legal.
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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.
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A new survey of employers has found that WorkChoices has not been all that it was cracked up to be for employers. The new laws have provided labour flexibility, but significantly increased red tape and complexity.
A third of the 1000 human resources managers surveyed by Deakin University for the Australian Human Resources Institute said WorkChoices has made their job more difficult. Only 3% said it had made it easier.
And 40% thought the new laws added complexity of employment arrangements – 55% reported it increased their need for legal advice, and 54.5% increased record keeping.
Peter Wilson, the chief executive of Australian Human Resources Institute, says while there are some very positive results in terms of flexibility for employers, there is a rub for employers. “The rub is the cost and complexity. It’s a very comprehensive piece of legislation. People are needing help to understand it and comply. Over half are getting advice from lawyers and advisers… that is proving to be a bit of expensive.” And 15.8% said their labour costs had increased.
Tony Steven, CEO of COSBOA, denies he has heard complaints from employers on complexity. He says if there is complexity, it is worth it. “In the same way, the GST introduced an extra level of professionalism to financial management in small business, and probably saw an increase in the number of bookkeepers employed and contracted.
“Over time the new workplace relations system will concentrate small business on best practice in human resources.”
Scott Driscoll, workplace relations manager for Queensland Retail Traders Association, says he is not hearing complaints from employers on WorkChoices. “Essentially the retailers we represent are embracing the flexibility.
“There is more involved, but at end of day you’re getting an agreement that relates to the needs and wants of your business and staff, rather than an antiquated awards system.”
The survey also found that employers had allowed their employers more personal, carer and sick leave days since WorkChoices was introduced, with 38.7% increasing personal carer days allowed. On the other hand, 11.1% reported that staff were working longer hours.
Despite many employers allowing more carer and personal leave, and 20% of employers increasing overall remuneration for employees, 17.2% reported declining workforce morale. Some business groups are blaming this on the union advertising campaign and the confusion and fear around worker rights.
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By Peter Vitale
Recent cases show that employers should be warned against putting any pressure on employees to sign workplace agreements. The consequences of a “sign or else” approach can include an invalid agreement and a large fine.
Similarly, unions who use their muscle to force employers to enter into collective agreements can also fall foul of the law.
Two Tasmanian employers in the hotel industry were recently punished by the Federal Magistrates’ Court for trying to impose Australian Workplace Agreements (AWAs) on their employees.
In one of the cases, the Court found that the owner of the Granada Tavern in Hobart had breached the Workplace Relations Act by imposing duress in trying to force casual waiting staff into signing an AWA.
The employee was a young student who had a regular pattern of casual shifts. The tavern altered and reduced her shifts after she refused to sign an AWA, which it wanted employees to sign because of concerns about a potential underpayment of wages claim. The employer’s director engaged in a number of lengthy discussions with the employee with the intent to force her to sign the AWA and told staff the hotel would have to be run like a “concentration camp” if the employees did not sign the AWAs.
The Federal Magistrate decided the conduct constituted duress because it amounted to an “illegitimate application of pressure to induce a party to enter into an AWA”. “Illegitimate pressure may include unlawful threats, unconscionable pressure, and, in relevant circumstances, lawful conduct.” The conduct must be “likely and intended to have the effect of denying the exercise of a person’s free will”.
Critically, as the facts and the Court’s decision illustrate, employers should note that specific conduct does not itself need to be illegal to constitute duress. The Court fined the employer company nearly $25,000 of a maximum $33,000 and the director almost $5000 personally of a maximum $6600, even though the employee never actually entered into an AWA or lost any wages.
In another case, the Mornington Inn was fined $170,000 for breaches of the act in relation to 10 separate employees. In that case the employer had reduced and changed the shifts of employees, substantially reducing their income. The employee included two women who were single mothers. The changes meant they couldn’t pick their children up from school. The employer shouted angrily at various employees who refused to sign an AWA.
In a case involving a trainee truck driver working at a Hunter Valley open cut coal mine, the employer reached an out-of-court settlement, paying compensation and legal costs to the employee. The employer made alleged threats in front of other staff to ensure that the employee would not work again in the Hunter Valley and, ultimately, terminated her employment.
Aside from the statutory remedies applying to workplace agreements, the common law also offers remedies to employees who have entered agreements under duress.
Consider circumstances where an employee who has just been terminated is pressured into signing a deed of release, saying he or she will not sue the company.
The circumstances may well provide grounds for a court to say that the employee’s consent to the release was not given freely, with the result that the employer could not rely on the agreement. The employee would then be entitled to proceed with legal action.
Employers should also be aware that unions have obligations to avoid applying duress. Earlier this year SmartCompany wrote about the penalty imposed on the Electrical Trades Union and the owner of the Loy Yang B power station in Victoria for trying to force a subcontractor into entering a collective agreement with the ETU before being allowed on site.
In that case, legal action was initiated by the Australian Consumer and Competition Commission for breaches of the Trade Practices Act. More recently, in a case initiated by the Building Industry Taskforce (the predecessor of the Australian Building and Construction Commission), the construction union CFMEU was found guilty by the Federal Court of unlawful conduct when, among other things, it threatened industrial action unless all contractors on a building site in Wollongong were signed to union agreements.
The lesson for employers:
- An employee’s signature is not necessarily the only thing you need to have an agreement.
- If you want to implement AWAs or other agreement in your workplace, applying pressure to employees, however it’s done, is not the way to do it.
- Illegal duress can arise out of conduct that might otherwise be completely lawful.
- Agreements entered under duress might be invalidated by a court.
- Substantial penalties apply under the Workplace Relations Act for unlawful duress or coercion.
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By Peter Vitale
Industrial relations and workplace arrangements were always in the spotlight for Labor. The new Government is about to put theory into practice.
This Thursday, Workplace Relations Minister Julia Gillard will meet with the Workplace Relations Consultative Committee, consisting of employer and union representatives to discuss the Rudd Government’s first piece of industrial relations legislation. The Government’s initial transmission bill will be introduced into Parliament at its first sittings, beginning in February.
In an announcement just before Christmas, Gillard indicated that the key features of the transitional legislation would be:
- To prevent the making of any new AWAs. The exact date that this part of the legislation will become operative is still to be announced.
- To allow employers and employees to enter into the Labor Government’s interim individual arrangements, to be known as Interim Transitional Employment Agreements (ITEAs).
- Remove the requirement that employers provide all employees with a “workplace relations fact sheet”, introduced in the last months of the Howard government, although it appears that Labor will have its own version, to be known as a “fair work information statement”.
- Replace the fairness test with a new “no disadvantage test”.
- Enable the Australian Industrial Relations Commission to commence the process of “modernising” awards.
Other aspects of Labor’s election policy will be the subject of separate legislation in at least two later stages.
An initial “exposure” draft of the legislation to implement the proposed 10 “national employment standards” (NESs) will also be released soon, with a view to finalising the content of that legislation by mid 2008. The 10 NESs, which will replace the Australian Fair Pay and Conditions Standard, and parts of current award conditions, are as follows:
- A standard 38-hour working week.
- A guarantee of 12 months unpaid parental leave for both parents concurrently, with the right to request an additional 12 months leave for one parent (which can only be refused by an employer on reasonable grounds).
- The right for employees to request flexible working arrangements until a child reaches school age, which can only be refused by an employer on reasonable grounds.
- Four weeks annual leave.
- 10 days personal leave and up to two days compassionate leave.
- Community service leave, such as paid jury service leave and unpaid emergency services leave.
- Public holidays.
- A requirement that employers provide a fair work information statement.
- Notice of termination of employment and redundancy payments.
- Long service leave.
It is proposed that these changes will come into effect in 2010. In the meantime the Australian Industrial Relations Commission will be considering the content of awards, which will consist of other conditions such as:
- Minimum wages.
- Overtime rates of pay.
- Penalty rates of pay, for instance for shift work.
- Classification of work as full time, part time or casual.
- Span of working hours and rest breaks.
- Annualisation of wages, including penalties and overtime pay.
- Allowances and expense reimbursement.
- Leave loading and arrangements for taking leave.
- Superannuation.
- Dispute resolution.
The lessons for employers:
As always, watch out for the detail; you may need to think about reviewing and updating your employment arrangements, especially with individual employees, soon.
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