by John Chalker
A little background first:
In Victoria in 1992, the Kennett government brought in the Employee Relations Act which changed the basis of employment by ‘deeming’ that employees had agreements with their employers without even having to have a written agreement, with minimum conditions which started the dissolution of the existing status quo of Industrial Relations Commissions that had been entrenched since around Federation.
In 1996, the state liberal government and the federal liberal government handed over & received the powers of each for industrial relations as they were required to do under the Constitution.
From that time on, Victoria has been controlled in its employment practices by the Federal Government laws. At this time, Australian Workplace Agreements became able to operate and able to take businesses and employees away from the clutches of the Industrial Relations Commission and award based conditions. AWA’s had to go through a “No Disadvantage Test” for approval and then became the basis of employment.
From 1.1.05, the state government introduced laws that made all employers in the state of Victoria ‘respondent’ to a “common rule” award, meaning those who were not beforehand obligated to award conditions now had the obligation by a law bringing everybody to the similar basic obligation of penalties etc, where many had no such obligation previously.
On 27th March 2006, the Workplace Relations Act was amended with major changes being: no more “No Disadvantage Test”, the ability to exclude or modify all or part of protected award conditions, the setup of the Fair Pay Commission and the Australian Fair Pay & Conditions Standard with five minimum conditions of employment being the basis of obligations of employment and AWA’s & other agreements being automatically approved and operational following certain basic requirements.
On 1st December 2006, the first Fair Pay Commission decision commenced increasing minimum base rates by .73c per hour.
From May 7th 2007, the Federal government, following scaremongering by the major opposition party and knowledge of an election not far away, changed legislation from that date obligating each agreement lodged to a “Fairness Test” i.e. if an agreement excludes or modifies award conditions, the newly formed Workplace Authority is to perform a “Fairness Test” ensuring the agreement is fair in relation to those modified/excluded conditions.
The Fairness Test legislation passed through parliament in the last week of June 2007, backdated to obligate all agreements made after May 7th.
From October 1st 2007, the second of the Fair Pay Commission’s decisions increased the base pay rate by .27c per hour.
In early October, while researching something in the new legislation, a light was turned on whilst reading a particular section.
I had, until that time, been quite clear in understanding the following:
· An employer & employee can get together and make an agreement called an Australian Workplace Agreement (AWA) or plurally an Employee Collective Agreement
· An agreement is made when the AWA is approved in accordance with section 340
· It is approved when it is signed and dated by the employee and the employer, when those signatures are witnessed; and, if the employee is under 18, having a parent/guardian at least 18 years old sign on behalf of the employee, when that signature is witnessed
· Section 342 says if an agreement has been approved, the employer must lodge the agreement within 14 days, in accordance with section 344
· Section 344 says (in simple terms) the employer lodges the agreement with the Workplace Authority Director if a declaration is lodged and the agreement is annexed to the declaration; and the employer lodges the declaration if the employer gives it to the Workplace Authority Director and it meets the form requirements mentioned i.e. published in the Government Gazette.
All pretty hunky-dory until the light went on which was when I was reading Division 6 Operation of workplace agreements and persons bound.
The first section of that Division is section 347 When a workplace agreement is in operation
· Sub-section (1) says a workplace agreement comes into operation on the day the agreement is lodged. Yes, that is what we have always recognized.
· Sub-section (2) says a workplace agreement comes into operation even if the requirements in Divisions 3 (maximum ordinary hours of work) and 4 (annual leave) (we are not worried about these) section 342 (lodging the agreement within 14 days, in accordance with section 344) HAVE NOT BEEN MET IN RELATION TO THE AGREEMENT.
Could that be right – let’s see that again.
Section 347 (2) a workplace agreement comes into operation even if the requirements in ………… section 342 have not been met in relation to the agreement.
Wow!!!! That means, clearly, even if you don’t lodge it, an agreement still operates.
So why would you go through the bureaucratic processes and delays and time wasting, when you don’t have to, and still have it all legal?
But first we need to look at what Fairness Tests need to be made.
Subdivision B of Part 8 of Division 5A of the Workplace Relations Act 1996
Workplace agreements to which the fairness test applies
Section 346E Workplace Authority must apply the fairness test to certain workplace agreements
(1) The Workplace Authority Director must decide under section 346M whether an AWA passes the fairness test if:
(a) the AWA is lodged on or after 7 May 2007; and
(b) on the date of lodgment:
(i) the employer bound by the AWA is bound by an award
(ii) the employee whose employment ……………
(c) on the date of lodgment
(i) the annual rate of salary is less than $75,000
(d) the AWA excludes or modifies one or more protected award conditions that apply to the employee
346M When does an agreement pass the fairness test
(1) A workplace agreement passes the fairness test if:
(a) in the case of an AWA – the Workplace Authority Director is satisfied that the AWA provides fair compensation to the employee whose employment is subject to the AWA in lieu of the exclusion or modification of protected award conditions that apply to the employee; or
(b) in the case of a collective agreement
(2) In considering whether a workplace agreement provides fair compensation to an employee, or in its overall effect on employees, the Workplace Authority Director must first have regard to:
(a) the monetary and non-monetary compensation that the employee or employees will receive under the workplace agreement, in lieu of the protected award conditions that apply to the employee or employees under a reference award in relation to the employee or employees; and
(b) the work obligations of the employee or employees under the workplace agreement.
(3) In considering whether a workplace agreement provides fair compensation to an employee or in its overall effect on employees, the Workplace Authority Director may also have regard to the personal circumstances of the employee or employees, including in particular the family responsibilities of the employee or employees.
The legislation goes on further to notify in section 346P that where an AWA is lodged and goes through the Fairness Test, the Workplace Authority Director must notify the employer and employee of the decision.
If the decision is that the agreement does not pass the Fairness Test, the Director must provide advice ‘as to how the agreement could be varied to pass the Fairness Test’ and state ‘that compensation may be payable by the employer to the employee’.
If the Director advises that the agreement does not pass the Fairness Test, the employer has the opportunity within 14 days to provide an undertaking or a variation to the agreement to the satisfaction of the Workplace Authority Director. Should neither happen within the 14 days, the agreement ceases.
Section 346ZB A workplace agreement that has ceased to operate because it does not pass the Fairness Test can never operate again.
Section 347 When a workplace agreement is in operation
(4) A workplace agreement ceases to be in operation if:
(a) it is terminated in accordance with Division 9; or
(b) in the case of an AWA – it is replaced by another AWA;
Section 348 Relationship between overlapping workplace agreements
(1) Only one workplace agreement can have effect at a particular time in relation to a particular employee.
Section 349 Effect of awards while workplace agreement is in operation
An award has no effect in relation to an employee while a workplace agreement operates in relation to the employee
So, where to from here?
All employers, I think, want to make the employment of persons in their business/es as simple as possible, while ensuring that they comply with law and allow them to have a good relationship together.
It is obvious from the above detail that if an AWA is lodged with the Workplace Authority Director it is operational and goes through the Fairness Test. We don’t know the rules of the Fairness Test
It is also clear from the above that an AWA not lodged with the Workplace Authority Director is operational when it is made and approved. We can make some very good assumptions and calculations mathematically to assist a “fairness test” of our own.
The obvious possible problem with this is that it might be a punt if ever a claim was made by an employee and it happened to get to court. But it is possible that the same could be said of an assessed AWA. It boils down to two alternatives, really.
Alternative one
Always go down the ‘safe’ path of lodging AWA’s and Fairness Test, accepting delays bureaucratic processes and opinion without right of appeal.
This, in the early stages of the system and with what is known of decisions already, will almost certainly cost most businesses drastically on what expectations currently exist.
A possible means of going past this process, to a degree, is if AWA’s lodged fail the Fairness Test and cease at the end of 14 days, being able to make & approve a new AWA prior to the 14 days completion, which then becomes operational.
This is fraught with danger as the liability of the employer for back pay up to that time is mandatory and the possibility of the employee refusing to sign a further agreement.
Alternative two
Operate with the policy of making, approving and operating under an AWA process without lodging those agreements and take good, clear management advice and decisions regarding calculations and practices that could only be seen to be “fair” by any reasonable person.
These calculations are made with relative ease for any business practices, even on a seven days a week cycle and taking into account what has been previously acceptable by the bureaucrats under ‘no disadvantage’ and by the Industrial Relations Commission in appeals of some of their decisions.
Conclusion
Most businesses would be practically & more profitably operational by utilizing AWA’s of a sound, professional and well considered manner without lodging those agreements, still maintaining a lawful practice with their employees, but taking them away from the liabilities of award based employment.
The agreements would have a strong basis at law, would be un-bureaucratised, would be acceptable to both parties because both have signed on the dotted line and, it is considered, would have employees more committed to working in partnership with their employer without complaint.
Businesses would need to ensure their practices were sound at all times.