Today, the Labor Government’s Secure Jobs, Better Pay Bill (Bill) has passed Parliament. The Bill, which will become law upon being signed by the Governor General, is promoted by the Government to deliver Australian workers “a better deal and a better future.”

The Bill introduces various amendments to the Fair Work Act (Cth) 2009 (FW Act) which are significant and requires all employers to act in a number of ways – a penalty regime has been introduced for those that fail to do so. In this respect it is important for all business owners, and managers, to be across all of the details and nuances of the Bill to ensure your business remains compliant and up to date with the changes.

We will now take a deep dive into the changes and discuss how the changes will impact employers and employees alike.

A. Objects of the Fair Work Act

Job security and gender equity are now primary objects of the FW Act in an effort to promote fairer wages and equal remuneration for work of equal value.

The inclusion of gender equity as an object of the FW Act will set a clear expectation that the Fair Work Commission (FWC) must take into account the need to achieve gender equity when performing all its functions, including in setting minimum wages, considering changes to awards, and in all other decisions it makes.

The changes will be supported by establishing a pay equity expert panel and a caring and community sector expert panel within the FWC along with a dedicated research unit.

B. Prohibiting pay secrecy

In line with the primary objective of gender equity, there is now a new positive right for employees (regardless of any contractual term) to disclose (or not disclose) information concerning their own remuneration structure to others. It is hoped that openness and transparency in the workplace will eliminate pay bias between genders or other groups.

Relevant terms and conditions in relation to an employee’s remuneration include the number of hours an employee is contracted to work and any information concerning bonus payments.

Since these new rights constitute workplace rights, employers must not engage in adverse action against an employee for choosing to disclose or not disclose their remuneration or for asking another employee about their own remuneration. Adverse action can include anything from demotion, disciplinary action or termination.

Employers need to ensure that all new contracts of employment do not include any terms which prohibit an employee from disclosing the terms of their agreement. It is an offence to include such terms in all new contracts. For all existing contracts, any term within the agreement prohibiting employees from discussing their remuneration and related terms and conditions of employment will have no effect.

Significant penalties may apply where an employer continues to insist upon pay secrecy.

C. Prohibiting sexual harassment at work

The newly introduced provision in the FW Act will be modelled on the clause contained within the Sex Discrimination Act but will be slightly broader as it will extend to prospective workers. The provision provides that a person (the first person) must not in connection with the workplace sexually harass another person (the second person) who is:

• a worker in a business or undertaking;
• seeking to become a worker in a particular business or undertaking; or
• a person conducting a business or undertaking.

The prohibition will also include sexual harassment perpetrated by third parties, such as customers or clients.

The definition of “worker” is an individual who performs work in any capacity, including as an employee, a contractor, a subcontractor, an outworker, an apprentice, a trainee, a student gaining work experience or a volunteer.

Employers will be vicariously liable for any sexual harassment perpetrated by their employees or agents if the harassment was done in connection with the employment or engagement. This ensures an aggrieved person can obtain a remedy from the principal in addition to, or instead of, the perpetrator and is consistent with the approach to addressing sexual harassment under the Sex Discrimination Act, ensuring a coherent federal framework.

However, an employer will not be vicariously liable if the employer proves that it took all reasonable steps to prevent the employee or agent from engaging in sexual harassment. Employers who fail to take all reasonable steps to prevent workplace sexual harassment may be held to be vicariously liable as well as be subject to enforcement action in accordance with the new positive duty that will be inserted in the Sex Discrimination Act.

In this respect all employers are required to consider and implement timely steps to address the possibility of sexual harassment in the workplace if they are to possibly avoid future liability.

In relation to dealing with sexual harassment disputes, applications can be made for the FWC to deal with a dispute and aggrieved individuals may make joint applications. The intent of this is to provide the FWC with flexibility to deal with multiple parties together where appropriate, for example, if there is a common perpetrator or principal or the sexual harassment occurred in the same business or undertaking.

Significant penalties have also been introduced.

D. Anti-discrimination and special measures

A further three protected attributes will be inserted into the anti-discrimination provision in the FW Act to bring the FW Act into alignment with other Commonwealth anti-discrimination legislation.

These attributes are breastfeeding, gender identity and intersex status.

E. Flexible working arrangements

The circumstances on which an employee is eligible to make a flexible working request have been extended. Employees experiencing family or domestic violence or who are required to provide care or support to a member of their family or household who is experiencing family or domestic violence, are now eligible to make a flexible working request under the FW Act. Pregnant employees may now also make such a request.

The FW Act will also be amended to provide a more detailed procedure, which is consistent with the procedure set out in modern awards, for how employers must respond to requests for flexible working arrangements. The provision will strengthen existing procedures in the FW Act, requiring employers to discuss requests with the employee and genuinely try and reach agreement prior to refusing an employee’s request. The employer would also be required to provide detailed reasons for any refusal and inform the employee of any alternative working arrangements the employer would be willing to make instead to accommodate the employee’s circumstances.

An employer will only be permitted to refuse a request for flexible working arrangements if:

–  the employer has:

• discussed the request with the employee; and
• genuinely tried to reach an agreement with the employee about making changes to the employee’s working arrangements that would accommodate the employee’s circumstances; and

–  the employer and employee have been unable to reach agreement; and

–  the employer has had regard to the consequences of the refusal for the employee; and
– the refusal is based on reasonable business grounds.

An employer must respond to an employee’s flexible working request within 21 days otherwise they will be considered to have breached this provision of the FW Act and liable for a civil penalty. If an employer refuses an employee’s flexible working arrangement request, the response must:

• provide details of the reason for the refusal, including how the particular business grounds being relied on apply to the request;
• set out other changes to the employee’s working arrangements that the employer is willing to make and which would accommodate the employee’s circumstances, or state that there are no such changes the employer is willing to make; and
• provide information about the dispute resolution provisions.

Reasonable business grounds for refusing a request include:

• the new working arrangements requested would be too costly for the employer;
• there is no capacity to change the working arrangements of other employees to accommodate the request;
• it would be impractical to change the working arrangements of other employees, or recruit new employees, to accommodate the request;
• the new working arrangements requested would be likely to result in a significant loss in efficiency or productivity; and
• the new working arrangements requested would be likely to have a significant negative impact on customer service.

Where a dispute arises between the parties, the Fair Work Commission (FWC) now has the power to arbitrate and make orders in relation to flexible working arrangements. However prior to going to arbitration, the FWC is required to attempt to resolve the dispute through dispute resolution mechanism, such as conciliation.

F. Fixed-term contracts

There are now strict limits on the use of fixed-term and maximum-term contracts.

Employees can now only be engaged pursuant to a fixed-term or maximum-term contract for a maximum of two years and such contracts for the same role can only be renewed once. This means if an employee is on a fixed-term contract for two years, you cannot extend this. However, if an employee is on a fixed-term contract for one year, you have the ability to extend this contract for an additional year.

In the event a fixed-term contract exceeds the limitation period, employees may have entitlements to claim permanent ongoing employment.

Exceptions to this include:

• the employee has specialised skills that the employer does not have, but needs, to complete a specific task;
• the employee is engaged as part of a training arrangement (for example, an apprentice or a trainee);
• the employer needs additional workers to do essential work during a peak period, such as for fruit picking or other seasonal work;
• the employer needs additional staff members during an emergency, or needs to replace a permanent employee who is absent for personal or other reasons, for example parental leave, sabbatical, or long service leave, or absence relating to workers’ compensation;
• the employee earns over the high income threshold for the first year of the contract;
• the employer is reliant on government funding to directly finance the employee’s position either in whole or in part–the employer must receive the funding for more than two years, and there must not be any reasonable possibility that the funding will be renewed;
• the employee is appointed under governance rules of a corporation or other association, where those rules specify the length of time that the appointment can be in place; and
• the employer is permitted to enter into the fixed term contract by a term specified in a modern award that covers the employee.

Employers are now also required to issue employees engaged on a fixed-term or maximum-term contract with a Fixed Term Contract Information Statement in addition to the Fair Work Information Statement.

G. Supported bargaining

The introduction of the supported bargaining stream is said to be intended to assist those who have difficulty bargaining at the single-enterprise level for example low paid industries such as disability and childcare and industries which are predominately award reliant such as the retail industry.

Employers who intend to bargain together must have clearly identifiable common interests. The FW Act will provide a non-exhaustive list of matters that the Commission can consider in determining whether employers have common interests, and these include geographic location, regulatory regime and the nature of the enterprises of the employers, including their terms and conditions of employment.

The FWC will make a Supported Bargaining Authorisation if the common interest test is satisfied and if it considers it appropriate having regard to the prevailing pay and conditions in the industry or sector, including whether low rates of pay prevail. Further, a supported bargaining authorisation cannot be made unless a union represents at least some of the employees who would be covered.

Employees of each employer to be covered must vote as a separate cohort. If a majority of employees of one employer do not ‘vote up’ the agreement, then that employer will not be covered by the agreement. A highly controversial element of the Supported Bargaining area is that once an agreement is made under a Supported Bargaining Authorisation, employers can later be added as parties to the agreement involuntarily. A union can apply to the Commission to add an employer to the agreement. The Commission would need to be satisfied that the majority of employees want to be covered by the Agreement, but importantly there does not need to be a ballot conducted to demonstrate this majority support it can simply be shown through the use of petitions.

H. Sunsetting zombie agreements

All zombie agreements will now automatically sunset after a 12-month grace period. However, the FWC may extend the default grace period if particular conditions are satisfied. This will have particular implications for employers operating under an industrial instrument which were not bargained and approved under the FW Act. Such employers will need to undertake a timely assessment of the implications arising for their business and options available.

I. Enterprise Agreement pre-approval process

The pre-approval requirements of enterprise agreement making will be replaced with one broad requirement for the FWC to be satisfied that an enterprise agreement has been genuinely agreed to by the employees covered by the agreement. Safeguards will be introduced, including the FWC publishing a statement of principles which will contain guidance for employers on how they can ensure employees have genuinely agreed to the agreement.

Such safeguards will include that employees have been informed of the bargaining process, their right to be represented and the terms of the enterprise agreement have been sufficiently explained.

This change is hoped to encourage enterprise bargaining and also eliminate circumstances where the FWC has been forced to reject enterprise agreements because of technical or procedural deficiencies that did not affect how employees voted on the agreement.

For there to have been genuine agreement, the FWC would need to be satisfied that the employees requested to vote on the agreement have a sufficient interest in its terms and are sufficiently representative, having regard to the employees the agreement is expressed to cover. This amendment is in response to the One Key decision.

J. Intractable Bargaining

If either party to the bargaining can demonstrate that they are unable to come to an agreement, the FWC will now have the power to issue an intractable bargaining declaration. Following any post-declaration negotiation period, the FWC can make a workplace determination to resolve any matters on which agreement has not been reached by the parties.

K. Better Off Overall Test

The better off overall test, more commonly referred to as the BOOT, will now be applied as a global assessment instead by a line-by-line comparison, as was historically the case, between the proposed agreement and the relevant modern award.

Other BOOT changes include:

• the FWC to give consideration to the views of specified persons, including primary consideration to any common views expressed by the specified bargaining representatives, when applying the BOOT;
• the FWC to only have regard to patterns or kinds of work, or types of employment, that are reasonably foreseeable at the test time (no longer does the FWC need to consider hypothetical work patterns);
• the FWC has the power to directly amend or excise a term in an agreement that does not otherwise meet the BOOT (where currently an employer is offered the option of giving an undertaking amending the effect of a term); and
• the BOOT can be reassessed (on application to the FWC) if there has been a material change in working arrangements or the relevant circumstances were not properly considered during the approval process (referred to as the reconsideration safeguard).

The FWC will now only apply the BOOT having regard to patterns or kinds of work, or types of employment if they were reasonably foreseeable at the relevant time (not in reference to any prospective engagement type). If these things change, or employees’ circumstances were not properly considered, the reconsideration process provides an important mechanism to have the BOOT reassessed to ensure employees are not left worse off. The intention of the reconsideration process is to permit adjustments to the bargained outcome to the extent necessary to address the FWC’s concerns, not to reduce the entitlements or interfere with the working arrangements for employees who are not affected by the concerns, or unnecessarily disrupt the operations of the enterprise.

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