Employment law and industrial relations

Much has occurred since the last edition of the McArdle Legal Newsletter in terms of Employment Law and Industrial Relations. In particular, there are five matters which are significant. Firstly we examine the amendment that will be made to the Workchoices legislation. This includes an assessment of the new fairness test proposed by the Government. Secondly we explore the new independent contractors legislation. This legislation was passed by Parliament last year and came into force on 1 March 2007. We examine who falls into the category of ‘independent contractor,’ what the new legislation states and who it will affect.
Another issue we discuss is the controversial matter of Tristar Steering and Suspension Australia Limited. It appears that numerous employees have been denied their redundancies and told to come to work despite the fact that there is no work
for them to perform. We also discuss the decline in rates of union membership which has occurred over the past few years. We explore the various possible reasons for this decline and whether Workchoices has had an effect on union membership rates.
Finally we examine Australia’s low unemployment figures and whether the Workchoice reforms have really influenced the unemployment rate as much as has been claimed.

The Fairness Test – What does it involve?

What has the Government changed in its Industrial Relations policy?
This week the Senate is debating the Workplace Relations Amendment (A Stronger Safety Net) Bill 2007, which was introduced into Federal Parliament on 28 May 2007. It affects the legislation primarily by introducing a new “fairness test.”
What effect will it have on the community at large, and to what extent does it alter the set of policies formerly known as “Workchoices”? Most employees (and therefore their employers) will not be directly affected at all. The policy miscalculation all along, however, has been the government’s misunderstanding of the significance of the indirect effect the “reforms” have on voters in “middle Australia.”
Anyone already covered by an AWA or a collective agreement will not be affected. Any member of the largest group of employees in the community – those who are award and agreement free and simply employed by a common law contract
(written, verbal, express, implied) or are paid over award rates by private arrangement – will not be affected.
Those who have been embraced by Workchoices (or whatever it will be called in due course), are many of the children of “middle Australia.” ‘Take it or leave it’ agreements put in front of 17 year olds are taken home to parents who the government
thought would not care. Anecdotes of young pizza workers being badly treated by implementation of “Workchoices” are spread about, not by the youngsters themselves, but by their parents – the very people who the government thought
would not care, and who are the ones with the voting power to do something about it. The “fairness test” is the reflex result of this late realisation by Canberra, that Workchoices did worry the community, and the voters in the middle did give a damn.
What does the legislation say, and how is it different to the old “no disadvantage test”?

What is the Fairness Test?

The new Section 346M introduces the fairness test. The “Workplace Authority Director” (“WAD”) who used to be the Employment Advocate (another sullied brand, apparently) must be “satisfied” that an AWA provides fair compensation to the
employee subject to it. In the case of a Collective Agreement, it is more convoluted. The words “on balance” are there, unlike in the paragraph for AWAs, and the Collective Agreement does not simply have to “provide fair compensation,” but
may do so “in its overall effect on the employees.”
In doing this, the WAD must have regard to monetary and non-monetary benefits, and ‘work obligations’ or ‘personal circumstances…including family responsibilities’ of those to be covered by the Agreement.
Then, the WAD can have regard to the “industry location or economic circumstances of the employer or employees,” and in so doing can pass the Agreement as “not contrary to the public interest” even so it fails the fairness test.
This is a bit Orwellian. Since the fairness test is designed to protect the economic interests of the employees, it is hardly likely that the fall back “public interest test” would ever be implemented ‘having regard to’ their economic circumstances.

How Will it be Different to the No-Disadvantage Test?

One significant difference between the pre-2006 test and this, is the identity of the body assessing it. Another difference is what happens if you fail it.
AWAs pre 2006 were assessed by the Employment Advocate (now the WAD). Although they became better in time, they still took weeks and months to reach a decision. Then they had to refer any rejected agreements to the Industrial
Relations Commission. That maligned body was thus responsible for any innovation or reformist implementation of the “public interest test.”
Now, we will still have the months and months, but there will be no Industrial Relations Commission. Instead, after its ‘deliberation period’ the WAD will require changes to be made, almost certainly in the form of “back pay,” and an alteration
from then on, to the terms and conditions under the Agreement. This period of hiatus is known as the “fairness test period.” There is a specific set of provisions for payments to be made to employees pursuant to the fairness test period,
and court sanctions against employers who don’t pay. An employee cannot be dismissed because the Agreement does not pass.
There is apparently no appeal to any court from any decision of the WAD.
This is not practically different to the No-Disadvantage Test. The only difference is that an employer did have a residual right to be heard in the Industrial Relations Commission, and now they won’t.
For Collective Agreements, it is much worse for employers. There was formerly a hearing (within 3 weeks or so of the ballot and lodgement) before the Industrial Relations Commission. The Agreement could not be implemented before it
was ratified by the Commission. If it was knocked back, then there was no back pay risk.
Now, the consideration of a Collective Agreement will take (definitely) longer than 3 weeks. The Agreement, though, will be operating while the consideration is taking place. ‘Having regard to’ the resources, work methods, and past delays
of the Office of Employment Advocate (now the Workplace Authority), together with an assessment workload of about triple, it must be realistically assumed that consideration will take several months.
An employer who is anything but conservative, therefore, risks a considerable contingent liability if faced with a back pay bill and a variation to the Agreement that may not suit its operational needs.

How To Cope with the Fairness Test.

Firstly, any employer, in consultation with their employees, should consider whether the status quo suits, with wage adjustments made on a “private” basis each year. A lot can be achieved by “over award agreements,” “allocation/offset agreements” and the like, which do not have to be registered but are still legal.
It is only if flexibility is lacking, or there is an expectation among the staff, or other factors that make it operationally necessary, that running this new bureaucratic gauntlet should even be considered.
It is early days, but based on past experience, the Fairness Test will make for a slower and more risky version of Workchoices, that suits the interests of neither employers nor employees.