Secure Jobs, Better Pay? The employment law key reforms going ahead

The Federal Government has secured passage of a raft of significant changes to the industrial relations system in Australia. The reform proposals have garnered widespread attention and scrutiny. The changes have been the focus of industry groups, politicians and the media before the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) finally passed both Houses of Parliament on 2 December 2022. Four days later, it received Royal Assent.

The changes introduced range from the introduction of multi-employer bargaining (and the eligibility for participating in the bargaining process), amendments to the application of the ‘better off overall test’ (also known as the BOOT), a prohibition on certain fixed-term contracts and pay secrecy, the abolition of the Australian Building and Construction Commission and greater rights to flexible working arrangements. Given the breadth of the reforms, both employers and employees should be on notice as to how these changes will impact their employment arrangements in the future.

This article summarises the existing enterprise bargaining system, includes a high-level summary of the changes and considers the views advanced on both sides of the debate.

What does Australia’s existing enterprise bargaining system look like?

‘Enterprise bargaining’ is a bargaining process whereby wages and other working conditions are negotiated between employees and their employing organisation. During the enterprise bargaining process, employees are typically represented by a trade union, which is their default bargaining representative. In some circumstances, employees can bargain for themselves. Bargaining representatives are required to act in good faith throughout the bargaining process.

Once the bargaining process is completed and the parties agree on the terms and conditions, the enterprise agreement needs to be voted up by the employees. To endorse the enterprise agreement, a majority of all employees who are covered by the agreement must vote for it to be made. Then, an application for the proposed enterprise agreement must be lodged with the Fair Work Commission (Commission).

The Commission has to consider several criteria when determining whether to approve an enterprise agreement. These criteria include:

• whether the agreement has been genuinely agreed to by the employees covered by the agreement
• whether the employer has satisfied various procedural requirements
• whether the agreement meets the Better Off Overall Test. The BOOT requires employees subject to the enterprise agreement to be ‘better off overall’ under the new agreement rather than the relevant underlying modern award that would typically cover them and prescribe their working conditions.

If the Commission approves an enterprise agreement, it comes into operation seven days later. After this date, an employee’s terms and conditions are derived from the enterprise agreement.

What kind of reforms are going ahead?

There are a number of reforms being implemented with the new amendments. 

Enterprise bargaining

The Act is introducing a suite of changes that will reform the enterprise bargaining system in Australia.

Most significantly, the ability for employees to engage in ‘supported bargaining’ or industry-wide bargaining is being broadened. Employees will be able to engage in multi-enterprise bargaining if their organisations have a sufficient ‘common interest’. Organisations must be ‘reasonably comparable’ in terms of the industry they operate within, their size, geographical location, business activities and operations. The Government intends for these changes to increase the bargaining power of low-paid and female-dominated sectors and enable more employees to access the benefits of enterprise bargaining. Importantly, employers can be ‘roped in’ to an existing multi-employer agreement if certain tests are satisfied in accordance with the reasonably comparable test, and the Fair Work Commission considers it is not contrary to the public interest. It will be interesting to see how these provisions unfold.

When the Bill was first introduced, there was widespread concern that the multi-employer bargaining reforms would be too far-reaching and would apply to all types and sizes of organisations. Following the Government making considerable concessions in the Senate, multi-employer bargaining will no longer be available to small businesses with fewer than 20 employees. In addition, there will now be greater scope for small businesses with fewer than 50 employees to exit the process.

The reforms also include several substantial amendments to the bargaining process. Employees who vote on an agreement will need to have ‘sufficient interest’ in the agreement and must be ‘sufficiently representative of its coverage’. The Government intends for this to limit circumstances when a small cohort of employees might vote up an agreement. In addition, employers will no longer have to provide certain materials and explanatory information to employees for the ‘access period’ of seven days that precedes the vote on an enterprise agreement. Now, there will be an overarching requirement that the Commission be satisfied there has been genuine agreement. These reforms attempt to respond to criticisms that bargaining has become overly complex, time-consuming and difficult.

Amendments to the application of the Better Off Overall Test

The BOOT, which has been subject to significant criticism, is also set to be reformed. When applying the BOOT, the Commission will now only deal with circumstances that are ‘reasonably foreseeable’. This means that the Commission will no longer consider ‘hypothetical’ working arrangements when determining if workers would be ‘better off’ under a proposed agreement.

The Act will also allow parties to seek a reassessment of the BOOT through a ‘reconsideration process’ where there have been material changes in working arrangements during the life of an agreement. Supporters of this change view that this will reduce the number of required undertakings necessary to make prior to the initial approval of an enterprise agreement. However, there is also concern that the reform could lead to further disputes over the BOOT during the life of an agreement.

Abolition of the Australian Building and Construction Commission

Under Part 3 of the Amending Act, the Australian Building and Construction Commission (ABCC) will be abolished. Prior to the passage of the Act, the ABCC acted as the regulatory body that oversaw employment complaints and disputes in the building and construction sectors. However, its powers are now being transferred to the Fair Work Ombudsman (Ombudsman). All proceedings currently on foot at the ABCC will be transferred to the Ombudsman.

Supporters of the ABCC’s abolition argue that it will increase productivity and ensure that workers in the building and construction industries are subject to the same workplace laws and regulations as others. However, critics argue that the move will result in under-regulation of the industry and an increase in union activity on construction sites and, in turn, that may result in disruption to infrastructure projects.

Prohibition on some fixed-term contracts

The Act prohibits employers from engaging an employee on a fixed-term contract beyond two years (including extensions) or contracts that may be extended more than once. However, there are some exceptions to the ban on these agreements. Fixed term or maximum term contracts can continue to be used for:

• contracts with employees only engaged to perform distinct and identifiable tasks involving specialised skills

• training arrangements
• contracts with employees to undertake essential work during a peak demand period
• contracts with employees engaged to undertake work during emergencies or temporary absences
• contracts with high income employees (that is, employees that earn more than $162,000 per year in 2022-23)
• contracts relating to a position for which there is one-off government funding
• contracts relating to a governance position that has a time limit
• fixed term arrangements permitted under a modern award for the Fair Work Regulations.

The Government intends for this change to enhance job security on the basis that continuous fixed-term contracts do not provide for secure jobs. However, there is concern that the changes will instead result in employers turning increasingly to casual workers.

Ban on pay secrecy clauses

The Act prohibits ‘pay secrecy clauses’. This means that employees will have the right to disclose their pay to other employees both inside and outside their workplace. They will also have the right to disclose any terms and conditions of their employment that might help in determining their pay (for example, hours worked).

Proponents of pay secrecy believe that it mitigates the risk of conflict in the workplace and enhances the protection of employees’ privacy. However, the Government’s view is that pay secrecy clauses have often been used to conceal gender pay discrepancies. By introducing a new workplace right to ask each other about remuneration, the Government hopes to better enable employees to assess whether they are being fairly paid. Employers who seek to impose pay secrecy clauses could now be subject to civil penalty proceedings.

Greater rights to flexible work arrangements

Under the Act, employees will have greater capacity to request flexible working arrangements as employers must ‘genuinely try’ to make changes to accommodate flexible working requests received by employees. The Act also clarifies the ‘reasonable business grounds’ to refuse a flexible work request, which includes the size and nature of the employer’s business.

Employees may now raise a dispute in the Commission where parties cannot agree on a change to the employee’s working arrangements, or where the employer does not respond to a request within 21 days. If unable to be resolved, the Commission can resolve the dispute through conciliation in the first instance, and mandatory arbitration if required. The Commission also has the power to order an employer to grant a flexible working request.

These are welcome changes to employees who enjoy the flexibility of working from home and wish to cement this in their working arrangements. However, there are concerns that this may increase disputation about flexible working arrangements. This is concerning for employers who are encouraging a return to the office in the post-pandemic workplace.

More information from Maddocks

For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of the Employment, Safety & People team.