Proposed amendments to the Fair Work Act 2009

Definition of “casual employee”

The Omnibus Bill introduces a statutory definition of a casual employee to be included in the FW Act. This is the first time a definition has been included.

The proposed definition provides that a casual employee is a person:

• who is offered work with no firm advance commitment to continuing and indefinite work according to an agreed pattern of work,

• who accepts the offer of work on that basis, and

• who is employed as a result of that acceptance.

There are a number of limited circumstances that must be considered to determine whether the employer makes no firm advance commitment to continuing and indefinite work according to an agreed pattern of work. We expect this provision will lead to disputes and litigation between employers and employees, with the FWC and courts being called upon to adjudicate. 

Casual conversion

The Omnibus Bill includes provisions that enable offers and requests for casual conversion to permanent employment.

Under the proposal, an employer may offer or an employee may request conversion in certain circumstances.

Both options require a casual employee to have been employed for 12 months, and during at least the last six months, the employee must have worked a regular pattern of hours on an ongoing basis which, without significant adjustment, they could continue to work as either a permanent full-time or part-time employee.

An offer or request need not be made or can be rejected where there are reasonable grounds based on facts that are known, or reasonably foreseeable, at the time. The “reasonable business grounds” exception is also likely to be subject of dispute and litigation.

Casual Employee Information Statement

In order to increase awareness of these new provisions relating to casual employees, the Omnibus Bill requires the Fair Work Ombudsman to prepare a Casual Employee Information Statement that must be given by an employer to each casual employee before or, as soon as practicable, after the employee starts their employment as a casual. This is a similar arrangement for the provision of Fair Work Information Statements by employers.

Payment of casual loading and prevention of “double-dipping”

The Omnibus Bill includes several provisions that provide for orders relating to casual loading amounts to prevent so called double-dipping.

The Omnibus Bill provides that:

• where a person is employed in casual employment, and

• the person is paid an identifiable amount to compensate them for not having a relevant entitlement (being an entitlement to paid annual leave; paid personal/carer’s leave; paid compassionate leave; public holiday pay; payment in lieu of notice of termination; or redundancy pay), and

• during the employment period, the person was not a casual employee (e.g. where a court makes this determination), and

• the person (or their representative) make a claim to be paid an amount for one or more of the relevant entitlements

a court must reduce (but not below nil) any amount payable to the person for the relevant entitlements by an amount equal to the loading amount.

There are also other proposed options available to a court to deal with the interplay of the loading paid and the claim made.

This proposed amendment is a direct result of recent Federal Court decisions. These decisions have determined that persons employed as casual employees are not, in fact, true casual employees, with a finding that these persons are not double-dipping when paid entitlements, which are usually intended to be covered by a casual loading.

Another key element of the Omnibus Bill is the extension of two temporary JobKeeper flexibilities to businesses in identified industries that have been significantly impacted by the pandemic. The aim is to provide flexibility for an extended period to facilitate ongoing employment and economic recovery in the identified sectors.

The amendments in the Omnibus Bill propose to, for a period of two years:

• continue the ability of employers covered by identified awards to direct employees to work at different locations, including at home, and to perform a broader range of duties, and

• introduce part-time flexibility provisions across identified awards. These provisions will enable employers and employees to agree on additional hours of work for part-time employees who already work at least 16 hours per week. Under the proposed provisions, those additional hours can be paid at ordinary rates of pay rather than overtime rates.

These flexibilities will only be available to employers and employees covered by identified awards. Not all awards have been included. At present, there are only 12 awards which have been proposed to include these new provisions. These awards have been identified because they cover industries that have suffered disproportionately as a result of the COVID-19 pandemic and associated lockdowns.

The Omnibus Bill provides the FWC with jurisdiction to vary these awards to resolve any ambiguity arising from the implementation of these new clauses. The FWC is also imbued with jurisdiction to deal with any disputes that may arise from these new clauses.

Flexible work directions

The COVID-19 pandemic forced employers and employees to adapt to rapidly changing environments. For many, this included fundamentally changing the nature of their business (including particular areas of the business growing while other areas contracted) and rethinking how work could be done safely. For many employers, conditions of employment, including the FW Act and awards, did not allow them to unilaterally implement flexible working arrangements to deal with temporary changes to working conditions.

The proposed amendments in the Omnibus Bill will allow an employer to give two types of flexible work directions:

• Flexible work duties directions that allow an employer to give a direction to an employee to perform any duties during a period that are within the employee’s skill and competency, provided those duties:

  • can be performed safely

  • are within the employee’s qualifications or the employee holds the requisite licence, and

  • are reasonably within the scope of the employer’s business operations.

• Flexible work location directions that allow an employer to give a direction to the employee to perform duties during a period at a place that is different from the normal place of work (including the employee’s home), provided:

  • the place is suitable for the duties

  • the place does not require the employee to travel an unreasonable distance in the circumstances, and

  • the performance of work at the place is safe and reasonably within the employer’s business operations.

Many safeguards have been built into the proposed amendments, namely:

• the flexible work directions are not intended to allow employers to unilaterally implement permanent changes to an employee’s work or work location, and will only have effect for a maximum period of two years 

• employers must consult with employees prior to giving the direction, and

• employees must be paid the greater of their usual base rate or pay or the base rate of pay that would be applicable for the duties the employee is performing under the direction.

Importantly, flexible work directions will only have effect if they are a necessary part of a reasonable strategy to assist in the revival of the employer’s enterprise. This qualifier provides a critical connection to the policy objectives of the Omnibus Bill, and also when the flexibilities were initially implemented in response to the pandemic.

How such provisions around the effectiveness of a flexible work direction play out in the course of disputes or litigation remains to be seen.

Part-time work agreements

Under most awards, a part-time employee will be entitled to penalty rates where they are required to work hours that are in addition to their usual, agreed hours of work.

The only way a part-time employee can work additional hours at ordinary rates of pay would be to formally alter the regular pattern of hours, usually by written agreement.

While providing stability to the part-time employee, this requirement can serve as a disincentive for employers to offer additional work to part-time employees and increases the likelihood of employers engaging casual employees.

The proposed provisions in the Omnibus Bill will attempt to address this by enabling employers and part-time employees who already work at least 16 hours per week to agree on additional hours of work. Under the agreement, additional hours can be paid at ordinary rates of pay rather than overtime rates.

The objective of the proposed provisions is to encourage more employment in recovering businesses by offering additional hours of work for existing permanent part-time employees who want to work the additional hours. These arrangements must be by agreement, and an employer cannot require an employee to enter into such agreement.

Specific administrative arrangements will apply, including that overtime will be payable for additional hours worked if:

• the work is outside the spread of hours specified in the applicable award or

• the total hours of work exceed 38 hours per week, or

• the total hours of work would exceed the maximum that could be worked in a day under the award without incurring overtime rates.

Crucially, for the purposes of payment of annual leave, personal/carer’s leave, and superannuation, any additional agreed hours are deemed to be ordinary hours.

There are several other requirements built into the Omnibus Bill dealing with simplified additional hours agreements and their termination. Further, the rights to enter into or not enter into, terminate or  not terminate a simplified additional hours agreement are recognised as workplace rights for the purposes of the general protection provisions of the FW Act.

The Omnibus Bill contains proposed amendments to the enterprise bargaining provisions in the FW Act that relate to:

• extending the nominal length of greenfield agreements from four to eight years for major projects

• simplifying the enterprise agreement making and approval process, including revising the BOOT

• introducing a COVID-19 hardship exception enabling enterprise agreements that do not pass the BOOT to be approved and operate for a period of two years

• extending the operation of single-enterprise agreements for new franchisees

• providing that applications for the termination of enterprise agreements after their nominal expiry date can only be made more than three months after that date, and

• introducing a sunset date to terminate legacy instruments.

Greenfield agreements

The proposed amendments would allow a greenfield agreement for major construction projects to have a nominal expiry date of up to eight years from the date the FWC approves the agreement. This is subject to the agreement including at least an annual increase of the base rate of pay payable to each employee for the nominal life of the agreement.

A project will qualify as a major project if the project is worth:

• $500 million or more, or

• $250 million but less than $500 million, and the project is declared by the responsible Minister to be a major project because either it is nationally or regionally significant, it is expected to contribute to job creation or because of other relevant matters.

The new laws are aimed at attracting greater global investment in major projects in Australia by providing more industrial relations certainty for major projects. From a practical point of view, this change will have little impact on the majority of employers and employees as greenfield agreements make up only 4% of all enterprise agreements approved by the FWC.

Simplifying agreement-making and approvals

Since 2014, there has been a decline in applications made to the FWC for approval of enterprise agreements. Over the same period, there has been an increase in enterprise agreements approved with undertakings, as well as an increase in the time taken by the FWC to approve these enterprise agreements. Despite the decrease in approvals, enterprise agreements currently set terms and conditions for the highest proportion of workers in Australia (38% as at May 2018)—mainly due to several large agreements in the retail and education sectors.  

Recently, there has also been increased concerns that the BOOT was being applied as a forensic, clause-by-clause assessment against the relevant award, rather than a more global test against the award, weighing up the monetary and non-monetary elements of the proposed enterprise agreement.

The proposed amendments intend to streamline and improve the enterprise agreement making and approval process to encourage participation in collective bargaining, such as:

• the time limit for an employer to provide the notice of employee representational rights (NERR) will be extended from 14 days to 28 days from the notification time

• the FWC will be required to publish the approved form of the NERR on its website

• the pre-approval “genuinely agreed” test is amended to require employers to take reasonable steps to ensure employees are given a fair and reasonable opportunity to decide whether to approve a proposed enterprise agreement. Where an employer provides access to the agreement, notifies employees of the voting time and method, and explains the terms of the agreement, they will have taken reasonable steps

• the BOOT will be modified to:

  • permit the FWC to take into account only patterns or kinds of work, or types of employment, that employees currently perform or could reasonably be foreseen to perform and not hypothetical working arrangements

  • enable the FWC to have regard to overall benefits employees would receive under an enterprise agreement (including non-monetary benefits, such as flexibility) compared to a relevant award, and

  • require the FWC to give significant weight to any views of the employees, the employer and bargaining representatives for the enterprise agreement that have been expressed

• any casual employees who perform work during the access period for the proposed enterprise agreement will be entitled to vote

• non-bargaining parties to enterprise agreements will have limited ability to intervene in applications for approval before the FWC

• the FWC will be required to approve enterprise agreements, as far as practicable, within 21 working days, and

• the FWC will no longer need to be satisfied that the proposed enterprise agreement does not exclude the National Employment Standards (NES). Rather, a new model “NES interaction term” will need to be included, explaining the interaction between the NES and enterprise agreements.

Non-BOOT compliant agreements

The FW Act currently provides that the FWC may approve an enterprise agreement that does not pass the BOOT if it is satisfied that, because of exceptional circumstances, the approval of the enterprise agreement would not be contrary to the public interest. 

This provision has had very limited application since the FW Act commenced, with only 21 enterprise agreements being approved under these provisions. 

The Omnibus Bill proposes to introduce a new provision that will only operate for a two year period before being repealed, and permit the FWC to approve an enterprise agreement (other than a greenfield agreement) that does not pass the BOOT, if it is satisfied that:

• it is appropriate taking into account all the circumstances including:

  • the views of the employees, employer and bargaining representatives covered by the enterprise agreement

  • the circumstances of the employees, employer, and bargaining representatives covered by the enterprise agreement, including the likely effect that approving or not approving the agreement will have on them

  • the impact of COVID-19 on the employer’s enterprise, and

  • the extent of employee support for the proposed enterprise agreement, and

• because of those circumstances, the approval of the enterprise agreement would not be contrary to the public interest.

Enterprise agreements made under these provisions must have a nominal expiry date of two years from approval.

These proposed amendments have been strongly opposed, including by the ACTU, and have been compared to the earlier WorkChoices amendments. This is despite there being similar provisions already in the FW Act, and the eligibility requirements for the new provision requiring employee and union approval, evidence of COVID-19 related distress and also the approval to “not be contrary to the public interest”. In response to the opposition, the Minister has indicated that he would either further tighten the eligibility criteria for the exemption or remove the proposed new provision from the Omnibus Bill.

Terminating agreements after nominal expiry date

The current laws enable either an employer, employee or union covered by an enterprise agreement to apply to the FWC for the enterprise agreement to be terminated after it has passed its nominal expiry date. This generally results in employees returning to being covered by the terms and conditions in the applicable award. The process has the potential to be used as a bargaining tactic by employers if they are renegotiating a new enterprise agreement with employees.

The proposed amendments will prevent an application to terminate an enterprise agreement after its nominal expiry date from being made until three months after the date the agreement has expired. This is intended to promote good faith collective bargaining during the period immediately following the nominal expiry of an enterprise agreement.

Legacy agreements

Transitional arrangements put in place at the time the FW Act started operating preserved a number of enterprise agreements and workplace instruments that were in operation at that time. Many of these legacy agreements continue to operate as they have not been replaced or terminated.

These legacy agreements set the pay and conditions for between 300,000 to 450,000 employees, and many provide terms and conditions of employment that are inferior to those provided by the relevant award. While the FW Act provides that employees’ base rates of pay under these legacy agreements must be at least equal to the base rates of pay in the relevant award, other non-NES conditions in the legacy agreements such as penalty rates, casual loadings and allowances do not need to (and many do not) meet award standards.

This can create unfair competitive advantage where certain employers with legacy agreements have been able to pay employees less than a business operating under terms and conditions in the relevant award.

The Omnibus Bill proposes to introduce a sunset date for the remaining legacy agreements of 1 July 2022. Employees covered by these agreements will revert to being covered by the applicable award in full unless a new enterprise agreement is bargained for and approved that covers their employment and replaces the legacy agreement.

This change could have significant implications for employers who still rely on legacy agreements instead of awards to set terms and conditions of employment as it will require them to engage in the agreement making process, or they will revert to the relevant award.

Franchisees

A new franchisee is currently required to negotiate their own enterprise agreement with employees, even where there is an existing single-enterprise agreement that covers multiple employers that operate under the same franchise. Currently, they can only seek to be covered by the single-enterprise agreement before it is made.

The Omnibus Bill will enable franchisees to opt-in to an already operative single-enterprise agreement that covers a larger group of employers operating under the franchise. Employees of the new franchisee would be required to vote before the enterprise agreement covers them.

This would result in potentially significant time and cost savings for new franchisees in these circumstances, particularly where the employer would be bargaining for a new enterprise agreement that would be broadly identical to the existing agreement.

The Omnibus Bill aims to strengthen the compliance and enforcement framework in the FW Act by:

• more effectively deterring non-compliance with workplace laws

• making it easier to recover wages where there is an underpayment

• ensuring workplace laws promote fair competition, including so that non-compliant businesses do not gain an unfair advantage, and

• encouraging voluntary compliance action by businesses and providing greater certainty about how to rectify inadvertent non-compliance with workplace laws.

The aim of more effectively deterring non-compliance with workplace laws is addressed by the Omnibus Bill in four main ways. The proposed amendments will:

1. Increase the maximum civil penalties that a court may impose on individuals or bodies corporate for certain contraventions. Specifically, the maximum penalties for ordinary remuneration-related contraventions, sham-contracting contraventions, and non-compliance with compliance notices will be increased by 50%. The increases will apply prospectively—only to contraventions committed after the amendments in the Omnibus Bill commence operation.

2. Introduce a new, alternative civil penalty for remuneration-related contraventions by bodies corporate other than small business employers. The new offence will be known as a “value of the benefit” penalty and, where applicable, will allow a court to impose a penalty of up to two times the value of the benefit obtained from the contravention. For example, if an employee was found to have been underpaid $150,000, a court may impose on the responsible employer a value of the benefit penalty of up to $300,000.

3. Create a new criminal offence of an employer dishonestly engaging in a systematic pattern of underpaying one or more employees. The offence will be reserved for conduct that is intentional, dishonest, and systematic rather than circumstances of one-off underpayments, genuine mistakes or miscalculations. Reflecting the fact that the offence involves a level of seriousness above the current civil penalties regime, the maximum penalty for the offence for a body corporate will be $5,250,000 and for an individual offender will be imprisonment of up to four years or $1,050,000, or both.

4. Clarify that a court can make adverse publicity orders if it is satisfied that there has been a contravention of a civil remedy provision. An adverse publicity order is an order requiring a person to disclose or publish information about a contravention in a specified way.

The aim of making it easier to recover wages where there is an underpayment is addressed by the Omnibus Bill in two main ways:

1. The proposed amendments will increase the “cap” on underpayment-related small claims from $20,000 to $50,000. This will provide greater scope for small claims to be brought before the Federal Circuit Court or Magistrates Courts and, by extension, broaden access to the simpler enforcement processes in the small claims jurisdiction where claims are dealt with more informally and efficiently than larger underpayment claims.

2. The Federal Circuit Court and Magistrates Courts will also be empowered to refer underpayment-related small claims to the FWC for conciliation and consent arbitration.

The aim of ensuring workplace laws promote fair competition is addressed by the Omnibus Bill by introducing a prohibition against an employer publishing, or causing to be published, job advertisements with pay rates below the relevant national minimum wage. It is hoped that this will go some way to preventing a non-compliant employer from achieving competitive advantage over employers that are complying with their legal obligations.

The aim of encouraging voluntary compliance action and providing greater certainty about how to rectify inadvertent misconduct is targeted in the Omnibus Bill in two main ways. The proposed provisions will require the Fair Work Ombudsman and the Australian Building and Construction Commission to:

1. Set out when they will institute, or defer instituting, proceedings. In other words, the regulators will be required to publish guidance material providing information about the circumstances in which they will, and will not, commence proceedings against an entity that is alleged to have committed a contravention of workplace laws.

2. Codify the factors they will consider when accepting “enforceable undertakings”. An enforceable undertaking is a written agreement between the regulator and an employer that has failed to comply with a workplace law under which the regulator agrees not to institute proceedings for the non-compliance if the employer is prepared to commit to taking certain measures to remedy the non-compliance (usually at a cost to the employer). The publication of a code in relation to the acceptance of enforceable undertakings will provide clarity for employers about when entering into an enforceable undertaking may be appropriate to address non-compliances as an alternative to litigation.