As of Monday 7 May 2007, a new Fairness Test applies to all newly lodged Australian Workplace Agreements (AWA’s) and collective agreements, following an announcement by the Prime Minister John Howard last week. The move is designed to secure public confidence in WorkChoices following union and ALP allegations that some workers have lost take home pay through inadequate compensation for the giving up of penalty rates, overtime pay and other loadings.
The Fairness Test, which has been referred to as a ‘stronger safety net’, is designed to protect workers on less than $75,000 a year who would otherwise have been entitled to the benefit of protected award conditions such as penalty rates. In principle, if an individual or collective agreement has removed or modified those award conditions, then the employee will be required to receive fair compensation in their place.
- Fairness Test for all new agreements lodged from 7 May
- Agreements lodged before 7 May will not be affected
- The test applies to workers earning $75,000 or less in industries covered by an award where the AWA or collective agreement modifies or removes any protected award conditions
- Removed award conditions such as penalty rates and loadings will need to be fairly and adequately compensated by other benefits
- A new Workplace Authority (formerly known as the Office of the Employment Advocate) will establish what is fair compensation in each case
- A new Workplace Ombudsman (formerly known as the Office of Workplace Services) will conduct random audits to ensure employers comply
- Parties will be able to seek in-principle approval of agreements in advance
- Sanctions against pressure tactics have been strengthened.
The intention behind WorkChoices has always been to allow greater flexibility for workers to choose to trade off award conditions in exchange for conditions or pay increases that they judged to be more beneficial for them and their families.
With the numbers of agreements growing exponentially (the number of AWA’s is expected to reach one million by the end of this year), it has been relatively easy for critics of the new system to allege some individuals in some industries have been short-changed. Rather than be sidelined by these allegations, the government has chosen to mandate the Fairness Test, which is to be administered by existing, but restyled, organs of the public sector.
The government has reiterated its faith in the fundamental elements of the WorkChoices reforms as the key guarantor of continuing growth in real wages, employment and productivity.
The AFPCS already provides a safety net for agreements by mandating the following minimum standards:
- Minimum and classification wages as adjusted by the Australian Fair Pay Commission (AFPC)
- A maximum of 38 hours of work per week (plus reasonable additional hours)
- Four weeks of paid annual leave (plus one week for shift workers)
- Ten days of paid personal/carer’s leave (including sick leave and carer’s leave) plus two days of special leave if required
- Parental leave of 52 unpaid weeks.
Without acknowledging that there is any truth in the union allegations, the government has now moved to allay public fears and perceptions of unfairness in the agreements. The new Fairness Test will mandate adequate fair compensation for the loss of protected award conditions such as:
- Penalty rates (including for working on public holidays and weekends)
- Shift and overtime loadings
- Monetary allowances
- Annual leave loadings
- Public holidays
- Rest breaks
- Incentive-based payments and bonuses.
Agreements are to be lodged with the Workplace Authority, which will be responsible for applying the new test in each individual case. The Fairness Test will build on the protections provided by the AFPCS, and it will resemble the previous ‘no disadvantage test’ in some ways – although it will allow more creative and flexible arrangements that modify award conditions. Special protection is promised for ‘vulnerable’ employees such as young workers and people of non-English speaking background who may not be in a position to bargain as effectively as others.
The criteria to be taken into account will include consideration of:
- the monetary compensation (typically higher rates of pay) and other non-monetary compensation offered in comparison with what the relevant award offered
- the employee’s work obligations, such as weekend work or shift work
- the relevant work arrangements, entitlements and family-friendly conditions
- the worker’s specific employment opportunities, circumstances or prospects
- the location, economic situation and industry circumstances of the employer’s business.
Before agreements are lodged, they can be tested for fairness by the Workplace Authority in order to save time and ensure the parties have considered the relevant protections, entitlements and obligations. A written advice will be provided, with fast-tracking of agreements that are considered satisfactory.
It will still be possible for an employee to agree to remove or modify all or any protected award conditions – as long as the compensation passes the new Fairness Test.
In cases where the compensation is in the circumstances considered to be inadequate or unfair:
- the Workplace Authority will help the employer and employee to arrive at a fair arrangement within 14 days
- employees may seek the assistance of a bargaining agent (such as a union)
- employers will have to make up any unfairness with back pay applicable from the date the agreement was lodged (which the Workplace Ombudsman will be able to recover on the employee’s behalf).
Where the necessary changes to make the agreement pass the Fairness Test are not made:
- the agreement will be considered void
- new employees will be covered by the workplace arrangements that would have applied to them but for the failed agreement
- existing employees will be covered by the workplace arrangements that previously applied to them.
Importantly, the Workplace Authority has not been given the power to arbitrate and impose agreement terms on the parties. The process will be administrative and will not involve expensive and time consuming hearings.
In addition to the already existing prohibition in the Workplace Relations Act against employers forcing employees to accept an individual or collective workplace agreement, the Act will be strengthened in order to:
- make sure an employer cannot force an existing employee to agree to remove or vary a protected award condition
- stop an employer from dismissing an employee because their agreement does not meet the Fairness Test
- remove any doubt that an employer who takes over a business cannot require an employee to sign an AWA as a condition of continued employment.
This independent taxpayer-funded body (formerly the Office of the Employment Advocate) will carry the main responsibility for administering the Fairness Test and making sure it is met. In addition, it will be required to provide the following without cost to the agreement making parties:
- a pre-lodgment service to check whether the agreement will pass the test
- information and advice about agreement making for the parties
- information about pay and conditions issues
- advice specifically targeted at young workers and other groups considered at risk.
The revamped Office of Workplace Services will acquire more power to conduct random audits and checks – although at this stage details are scant and it seems that this will apply, initially at least, to agreements involving young workers. In addition, the Workplace Ombudsman will have the power to:
- investigate alleged breaches of agreements
- undertake compliance audits
- require voluntary compliance from employers in cases of breach
- prosecute employers who fail to comply
- focus on the fair treatment of young people in the workplace.
It has always been clear to employers that the move towards a national industrial relations system will benefit all Australians. It has always been clear that the march from a collective, centralised and regulated regime to a freer world of individual, decentralised and deregulated arrangements is inevitable and a positive development. Employers and employees alike should keep in mind that since the WorkChoices reforms came into effect more than 276,000 new jobs have been created nationally – with 96% of these full-time. Ever since the Workplace Relations Act came into effect in 1996 real wages have grown by almost 20% and industrial conflict has been at historically low levels.
In this context, the new Fairness Test for agreement making under WorkChoices can primarily be seen as a political response to the predictable political assaults geared up against the New Workplace Relations System in an election year.
There seems to be little to justify the move, because WorkChoices did not abolish penalty rates. They still exist in awards, which remain a key element of the system. They could only have been relinquished where informed employees were prepared to do so – clearly if they considered it to their benefit. In that respect, little has changed.
However, the additional regulatory burden for employers by way of red tape and bureaucracy will inevitably add to the cost of agreement making. It should be seen as an unnecessary development in an otherwise favourable agreement making system for employers, employees, the labour market and the national economy.
All employers offering new individual and collective agreements to their workforces must take the new Fairness Test into account as of 7 May 2007. Contact the Employers Hotline™ if you need to know more.