New IR Reform Bill – key proposals

IR Minister, Christian Porter has introduced the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 (the “IR Reform Bill”) to Parliament. As the name suggests, the bill, which is expected to be the subject of lengthy parliamentary debates in early 2021, is the Government’s response to the surge in the unemployment rates since the COVID crisis and uncertainty created by some recent significant judgments.

The IR Reform Bill was drafted following the conclusion of discussions which commenced in early June 2020 with various stakeholders including business leaders, employer groups and unions. We detail in this blog the more significant changes being proposed.

Statutory definition of casual employee

The IR Reform Bill if passed will introduce a definition of a “casual employee” into the Fair Work Act 2009 (Cth) (“FW Act”) which is designed to remove the uncertainty and exposure of employers to significant underpayment claims highlighted by the recent Full Federal Court decision in WorkPac Pty Ltd v Rossato [2020] FCAFC 84 (now on appeal to the High Court and due to be heard in 2021). Under the proposed definition, if an employer makes an offer of employment to an employee where there is no firm advance commitment to continuing and indefinite work according to an agreed pattern of work, and the employee accepts such an offer, he/she will be a casual employee.

Casual conversion

Under the IR Reform Bill, a right to be offered casual conversion, will now be included in the National Employment Standards (“NES”). A right to request casual conversion is a common feature of modern awards however, this right will apply to all NES employees and creates a positive obligation on employers to make the offer in certain circumstances. That is, where casuals who have over the last six months of a 12-month period “worked a regular pattern of hours on an ongoing basis which, without significant adjustment, the employee could continue to work as a full-time or part-time employee (as the case may be).” Employers will have to agree to such request unless they have reasonable grounds not to. Examples of reasonable grounds include, where:

• the employee’s role will cease to exist after 12 months;
• the employee’s hours will be significantly reduced; or
• the days and/or times on which the employee is required to work will be significantly changed.

Employers will also be required to provide casual employees with a “Casual Employee Information Sheet” (to be prepared by the Fair Work Ombudsman) when they commence employment.

No “double dipping”

An additional issue which arose in Rossato is also addressed by the IR Reform Bill which provides that where a casual employee is “misclassified” as such and a court finds the employee is owed entitlements because they perform regular, permanent work the casual loading already paid to compensate for entitlements (such as annual leave and personal/carer’s leave), will be deducted from the employer’s liability.

Increased flexibility of part-time work under Award

Under the proposed changes to the following modern awards, the IR Reform Bill would allow employers to offer part-time employees additional shifts without having to pay overtime rates:

• Business Equipment Award 2020;
• Commercial Sales Award 2020;
• Fast Food Industry Award 2010;
• General Retail Industry Award 2020;
• Hospitality Industry (General) Award 2020;
• Meat Industry Award 2020;
• Nursery Award 2020;
• Pharmacy Industry Award 2020;
• Restaurant Industry Award 2020;
• Registered and Licensed Clubs Award 2010;
• Seafood Processing Award 2020; and
• Vehicle Repair, Services and Retail Award 2020.

This may incentivise employers covered by these modern awards to prefer permanent part-time employees rather than relying on casual employees. The proposed provisions apply to part-time employees who work at least 16 hours but less than 38 hours a week and whose shifts are for at least three hours (which may include an additional hour).

The Government recognises that organisations covered by these modern awards have been hit hard by the COVID crisis and employers are likely to welcome the increased flexibility if it becomes law. There are specific requirements around these agreements with part-time employees. They must be recorded before the hours are worked, identifying the additional hours to be worked and the agreement must be retained. Termination of such agreements can be made on seven day’s written notice.

Easing the BOOT test and model NES interaction term

One of the more controversial reforms will allow for the better off overall test (the “BOOT”) (used to compare whether employees are better off under the terms of the proposed enterprise agreement or the relevant modern award) to be relaxed. Under the IR Reform Bill, the Fair Work Commission (“FWC”) will be able to approve enterprise agreements under which some employees may be disadvantaged when compared with the relevant modern award.

In a move to streamline the process, enterprise agreements will have to be approved within 21 days. The FWC will only be able to approve the agreements if it is appropriate in all of the circumstances which will allow the FWC to consider the impact of COVID-19 on the employer’s business and where approving the agreement would, in light of these circumstances not be contrary to the public interest. If the agreement is approved by the FWC and the employees, it will remain in place for two years.

The Government has stated that the aim is to deliver a more efficient bargaining system which hopefully can promote productivity and growth noting that of recent times there has been a decline in the utilisation of enterprise agreements, part of which may be related to the stringent application of the BOOT pursuant to which many enterprise agreements have either been rejected or undertakings given by employers. Unions are concerned that this mechanism will allow pay deals to be approved which will leave employees worse off and so strongly oppose the proposed reform.

Additionally, enterprise agreements will be required to have another “compulsory term” (the existing ones being coverage, nominal expiry date, flexibility, consultation and dispute resolution) being the model NES interaction term (which will be set out in the regulations).

Extension of job keeper flexibilities

The IR Reform Bill seeks to extend the JobKeeper flexibilities introduced in March 2020 around duties and location of work. The “flexible work directions” will only apply to employers and employees who are covered by the 12 modern awards mentioned above. The aim is to continue the support, particularly for small businesses in industries impacted by COVID-19. It is proposed that the measures will be in place for two years.

Jail time for serious wage theft

The IR Reform Bill introduces jail time for those who exploit their employees in cases of serious wage theft. Under the proposed law, it will be a criminal offence for an employer to dishonestly engage in the systematic underpayment of employees with a maximum penalty of four years in prison and $5.55m fine for a corporation and up to $1.11m for an individual.

The maximum civil penalty for wage underpayments by bodies corporate will be increased (from $66,600 to $99,900). Big business may face the higher of three times the benefit obtained or $666,600 in cases of serious underpayments.

Other changes which may apply to your organisation

The less significant or less widely applicable and possibly less contentious changes include:

• clarification about transfers of business;
• provisions in relation to greenfields agreements;
• the increase in jurisdiction for small claims and the role of conciliation in relation to small claims;
• prohibitions on certain types of employment advertisements (those below the national minimum wage).

It is reported that the Government wants the IR reforms passed by March 2021 which is when JobKeeper and JobSeeker will finish. However, given the vociferous opposition to this bill already, this timeframe could be ambitious depending on the extent to which the Government is prepared to negotiate, something which has already been flagged.

The new IR Reform Bill can be accessed here.

People + Culture Strategies