Employment Update - Labor's Ongoing Rollback of WorkChoices

On 28 August 2007 the ALP announced further changes to its IR policies in its Forward with Fairness Policy - Implementation Plan which would radically change industrial relations in Australia.

Australian Workplace Agreements (AWAs) would be phased out and Interim Individual Transitional Employment Agreements (ITEAs) would be introduced.

Labor proposes a two year transitional period during which awards would be simplified to provide a safety net for individual common law contracts. However employers would be able to make individual common law contracts with employees earning above $100,000 per annum without reference to awards, but subject to ten National Employment Standards. Labor would retain existing laws for industrial action and right of entry.

AWAs and Transitional Arrangements

Labor is standing firm on its policy of phasing out AWAs.

During a two year transitional period commencing 1 December 2007 employers would have two options in relation to individual workplace agreements:

1. Continue with existing AWAs; or

2. Enter into a special instrument called an ‘Individual Transitional Employment Agreement’ (ITEA)

Existing AWAs

AWAs made prior to the implementation of new Labor IR legislation would remain in force and could only be terminated in accordance with the current rules. Under the current rules a party to an AWA may terminate the AWA after the nominal expiry date by giving 90 days notice. During the life of the AWA, awards and collective agreements would not be able to override an AWA or an ITEA.

Importantly, if an AWA is terminated and the employer and employee have not made new arrangements, then the employee would return to the award and Fair Pay and Conditions Standard or a collective agreement in that workplace. It is unclear what the position would be if neither party seeks to terminate the AWA after the nominal expiry date. Would the AWA continue to operate? This does not seem to be the intention of the Labor policy.

ITEAs

Employers with at least one employee on an AWA at 1 December 2007 could make an ITEA during the transitional period with:

• A new employee; or
• An existing employee whose terms and conditions are already governed by an AWA.

The nominal expiry date for ITEAs would be no later than 31 December 2009. A no disadvantage test would apply to ensure that an employee is no worse off under an ITEA compared to a collective agreement, or in the absence of a collective agreement, the applicable award and the Fair Pay and Conditions Standard.

This means that the ITEA would replace any AWA. It is hard to imagine that many employers on AWAs would be attracted to ITEAs. Although it is by no means clear, presumably the terms and conditions of the ITEA would continue to apply after the nominal expiry date until replaced by another industrial instrument. It is unclear whether entering into an ITEA is, like with an AWA, a bar to taking lawful industrial action during the life of the ITEA.

Common Law Contracts

On a limited basis Labor has provided that award-free individual common law contracts may be an option for business. Employers would be able to enter into individual common law contracts of employment with employees earning above $100,000 per annum without reference to awards. Although awards would not apply, the individual common law contract would be subject to ten National Employment Standards. Those ten standards would be:

• Hours of Work
• Parental Leave
• Flexible Work for Parents
• Annual Leave
• Personal, Carers and Compassionate Leave
• Community Service Leave
• Public Holidays
• Information in the Workplace
• Notice of Termination and Redundancy
• Long Service Leave

$100,000 Cap

The $100,000 cap would be calculated on the basis of an employee’s guaranteed ordinary earnings which would include pay received for ordinary hours of work, guaranteed overtime and any other monetary allowances that are a guaranteed part of an employee’s normal remuneration arrangements. Special rules would apply in relation to excessive overtime.

The vast majority of Australian employees earn less than $100,000 per annum. These special arrangements would only apply to limited sectors of the Australian economy such as the mining and resources sector. All other individual common law contracts would be regulated by the new award system.

Unfair Dismissal

Labor's previously announced proposal to change the unfair dismissal laws remains a central plank of its policy. This will be a continuing concern for small business.

Industrial Action Right of Entry and Secondary Boycotts

Existing restrictions on taking industrial action would be maintained, including mandatory secret ballots to be conducted in workplaces before protected industrial action could occur. Existing right of entry laws and existing secondary boycott provisions in the Trade Practices Act would be retained.

Award modernisation

Labor has committed itself to modernising and simplifying awards by 1 January 2010 using the services of the Australian Industrial Relations Commission (AIRC). It would seem that the AIRC will continue in existence until the establishment of Fair Work Australia, Labor's new industrial umpire on 1 January 2010. The AIRC will prepare new draft awards after taking submissions about what industries and occupations need separate awards, what industries use AWAs extensively, how to address former State awards and how to provide for family friendly provisions.

Enterprise awards will continue. Each award will contain a flexibility clause to enable the award to be varied by agreement with an employer and an employee such as to deal with rostering and hours of work, start and finish times (without the employer paying penalty rates) and the non-application of certain award conditions where an employee is paid above a fixed percentage.

What does this mean for Employers?

 The proposed Labor policy is a radical departure from WorkChoices. This current announcement may add further complexity and uncertainty for employers. Labor has stood firm on its policy of eliminating AWAs. The introduction of interim ITEAs would offer little relief for employers.

Employers with employees earning in excess of $100,000 per annum may entertain individual common law contracts with protection against awards, but subject to ten National Employment Standards. All other individual common law contracts would be subject to a new award system.

Employers, in formulating their industrial and employment strategies, should now factor in the real risk of seismic changes to the industrial landscape in Australia, yet again.

For further information, please contact the authors:

Allan Drake-Brockman, Partner
Tel +61 8 6467 6205
allan.drake-brockman@dlaphillipsfox.com

Craig Boyle, Lawyer
Tel +61 8 6467 6211
craig.boyle@dlaphillipsfox.com