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Client Update: Workplace Relations – 28 March 2008

Impact of the Workplace Relations Amendment (Transition to Forward with Fairness) Bill

In brief: The Rudd Government has completed the first phase of its labour reforms, with the Workplace Relations Amendment (Transition to Forward with Fairness) Bill 2008 (Cth)¹ receiving Royal Assent on 25 March 2008. Partner Peter Arthur (view CV) and Senior Associate Veronica Siow outline the key features of the new legislation.

• At a glance – the changes
• Individual Transitional Employment Agreements (ITEAs)
• No-disadvantage Test (NDT)
• Procedural differences
• Transitional arrangements
• The next step

At a glance – the changes

The principal changes introduced by the new legislation are:

• the abolition of new Australian Workplace Agreements (AWAs) (existing AWAs will remain in force until their nominal expiry date);
• the introduction of Individual Transitional Employment Agreements (ITEAs); and
• the replacement of the fairness test with the no-disadvantage test (NDT) for ITEAs and collective agreements.

This Client Update highlights the major changes that will affect employers from 28 March 2008.

Individual Transitional Employment Agreements (ITEAs)

ITEAs will be available to employers who had at least one employee on an AWA as at 1 December 2007. They can be made until, and will automatically expire on, 31 December 2009.

ITEAs may be made:

• when re-engaging previous employees (provided their employment was not terminated in order to re-engage the employee on an ITEA); and
• with existing employees and new employees (either before they commence their employment² or no more than 14 days after they commence employment).

ITEAs must pass the NDT. They will:

• pass the NDT if the federal Workplace Authority is satisfied that the ITEA will not result, on balance, in a reduction in the overall terms and conditions of the employee's employment; and
• be taken to pass the NDT if there is no award relating to the employee. If there is, the ITEA will be compared with the award terms.

For existing employees, ITEAs become operative after they pass the NDT (seven days after the date of the notice issued by the Workplace Authority³). For new employees, they become operative when lodged with the Workplace Authority but would cease to operate if they subsequently fail the NDT.

No-disadvantage Test (NDT)

To pass the NDT, the Workplace Authority must be satisfied that the ITEA will not result, on balance, in a reduction in the overall terms and conditions of the employee's employment.

The key difference between the NDT and the fairness test is that under the NDT, the entire ITEA will be compared against the whole of an applicable award (whereas the fairness test focused on the value that was being provided in relation to the modification and removal of protected award conditions).

Long service leave under state and territory laws will be taken into account as part of the NDT if these laws would have applied to the employee immediately before the ITEA was lodged⁴.

When testing the ITEA, the Workplace Authority:

• must have regard to the actual work obligations of the employees under the ITEA (eg rostering arrangements or shift patterns of the employee); and
• can inform itself about these matters in any way (eg by contacting the employer, the employee or their bargaining agent directly).

Procedural differences

Changes to procedures under the new law include the following:

• Employers will no longer be required to provide a copy of the Workplace Relations Fact Sheet to employees.
• The Workplace Authority can contact the employee directly when testing the ITEA.
• The Workplace Authority must issue a notice to both the employer and the employee, notifying of its decision as to whether or not the ITEA passes the NDT.
• If the ITEA fails the NDT:
  • the parties may lodge a variation within 30 days; and
  • new employees covered by an ITEA that has failed the NDT will be entitled to compensation⁵ from seven days after the issue of the notice by the Workplace Authority⁶.

Transitional arrangements

Transitional arrangements under the new legislation with respect to AWAs include the following:

• AWAs continue in force until their nominal expiry date.
• AWAs cannot be varied after 14 days from commencement of the legislation, except in exceptional circumstances (Schedule 7A).
• An employee on an AWA that has passed its nominal expiry date can make and approve a collective agreement (without the AWA having to be terminated first).

The next step

The second phase of reforms will follow later this year, with legislation that introduces the new 10 National Employment Standards and the 10 subject matters that can be included in awards.

Footnotes

1. Act No 8/2008.
2. s326(5).
3. s346M.
4. s346D(2A)(a) – supplementary amendments.
5. Compensation will be the shortfall between (a) the total value of entitlements under the ITEA and any other arrangement or agreement that operated in conjunction with the ITEA during the NDT period; and (b) the total value of entitlements that would have been available (under an award or other reference instrument) in respect of the same period. NDT period means the date the ITEA was lodged and the date on which the ITEA ceased to operate.
6. s346ZG.

For further information, please contact:

• Peter ArthurPartner, Sydney
  Ph: +61 2 9230 4728
  Peter.Arthur@aar.com.au
• Tim FrostPartner, Sydney
  Ph: +61 2 9230 4930
  Tim.Frost@aar.com.au
• Adam LunnPartner, Melbourne
  Ph: +61 3 9613 8481
  Adam.Lunn@aar.com.au
• Jamie WellsPartner, Brisbane
  Ph: +61 7 3334 3268
  Jamie.Wells@aar.com.au
• Rowan KellySpecial Counsel, Perth
  Ph: +61 8 9488 3804
  Rowan.Kelly@aar.com.au
• Gavin MacLarenPartner, Singapore
  Ph: +65 6535 6622
  Gavin.MacLaren@aar.com.au

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