Changes to the Fair Work Act: An Overview
On 6 December 2022 the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 passed into law (Amending Legislation). The Amending Legislation made significant changes to the Fair Work Act (Act) and related legislation. Some of these changes have already taken effect, while others will take effect throughout this year. It is imperative employers be across these amendments and implement necessary change to achieve compliance.
The Amending Legislation is intended to address various issues that have arisen in workplace relations in recent years, including enterprise bargaining, the recommendations in the Australian Human Rights Commission’s Respect@Work report of 2020, the promotion of gender equality and job security, boosting wages, and to “restore fairness and integrity to Fair Work institutions”.
This article briefly summarises some of the key changes in the Amending Legislation.
Objects of the Fair Work Act
On 7 December 2022, the objects of the Act were amended and expanded to include the promotion of job security and gender equality. The aim is for employees to enjoy ongoing, stable and secure employment and for people of all genders to have equal rights, opportunities and treatment in the workplace.
The Amending Act changes the Act to give practical effect to these new objects.
Prohibiting Pay Secrecy
Either by a term in the employment contract, or by employer direction, it has been common practice for employers to require employees to keep their rate of pay confidential.
The foundation of the prohibition on pay secrecy is a new workplace right for employees to disclose or not disclose (as they elect) their remuneration and, importantly, any terms and conditions of the employee’s employment that are reasonably necessary to determine remuneration outcomes (Remuneration Disclosure Right).
An example given in the Act of the terms and conditions reasonably necessary to determine remuneration outcome is the number of hours worked. The intention is to enable employees to make meaningful and informed comparisons about their respective remuneration.
As well as the Remuneration Disclosure right, the Amending Legislation also implemented a right for an employee to ask another employee about the remuneration and any terms and conditions of the other employee’s remuneration (Remuneration Enquiry Right). (The terms Remuneration Disclosure Right and Remuneration Enquiry Right are terms adopted for convenience in this article rather than appearing in the Act – that said, in general protections applications in the future there is little doubt similar terms will be used to describe a workplace right allegedly breached.)
The Remuneration Enquiry Right is an obvious corollary to the Remuneration Disclosure Right. It has, however, been somewhat overlooked and is a bit of a trap for employees and employers alike to fall into. Some employees might find enquiries from colleagues about pay to be somewhat gauche or inappropriate. While it is both the prerogative of an employee to hold that view, and to not disclose their remuneration if they do not wish to do so, it is imperative that adverse action (such as disciplinary action of any kind) is not taken against an employee for having exercised the Remuneration Inquiry Right. Employers will need to manage any disquiet between employees arising from the question in a way that is consistent with these new rights.
To give effect to these new rights, the Amending Legislation also invalidates any terms of either an industrial instrument (such as an enterprise agreement) or a contractual term that is inconsistent with either the Remuneration Disclosure Right or Remuneration Enquiry Right, in other words, a clause that imposes pay secrecy on employees (described in the Act as employee rights relating to pay secrecy).
From 7 June 2023 there is a prohibition on terms being included in employment contracts that are inconsistent with the Remuneration Enquiry Right or Remuneration Disclosure Right, with the possibility of penalties for a breach of this prohibition.
While existing pay secrecy provisions in contracts don’t need to be removed it is imperative employers do not add such terms to employment contracts or otherwise engage in conduct inconsistent with these new pay secrecy rights.
Limitation on Fixed Term Contracts
There has been concern that the use of fixed term contracts by employers has undermined job security for employees, denying long term employees some of the protections associated with permanent employment. The government has sought to address this problem in the Amending Legislation.
The new amendments will take effect on 7 December 2023. Fixed term contracts are prohibited if:
- the contract is for two or more years;
- the term of the contract and the period of any option for renewal and extension in the contract exceeds 2 years; or
- the contract provides an option or right to extend or renew the contract more than once.
The prohibition also applies for a new contract if there was a previous fixed term contract and:
- the previous fixed term contract was for the employee to perform the same, or substantially similar, work for the person as the employee is required to perform under the new contract; and
- there is substantial continuity of the employment relationship between the employer and employee during the period between the new contract and previous contract; and
- the sum of the period the previous contract was in effect and the term of the new contract exceeds two years;
- the new contract contains an option for renewal or extension;
- the previous contract contained an option for extension that has been exercised; or
- the previous contract came after another earlier contract (Initial Contract) which was for a fixed term performing the same or substantially the same work and there was a substantial continuity of the employment relationship between the Initial Contract and previous contract.
There is an important point to note in relation to this prohibition. While it is expressed to apply to ‘fixed term’ contracts, it also applies to maximum term contracts, that is where the contract can be terminated during the term by the giving of notice. Specifically, the Amending Legislation states the prohibition applies “whether or not the contract also includes other terms that provide for circumstances in which it may be terminated before the end of that period”.
Employers will also need to give a Fixed Term Contract Information Statement to employees who enter into a fixed term contract. This statement will inform the employee of their rights under the Act in relation to fixed term contracts. There are also some (limited) exceptions to the prohibition, the most notable of which is that the prohibition will not apply to employees above the high income threshold. Anti-avoidance provisions have been included that seek to prevent employers structuring employment arrangements in a way to seek to defeat the prohibitions.
Anti-Discrimination and Special Measures
Three additional protected attributes have been added to the anti-discrimination provisions of the Act, being:
- gender identity; and
- intersex status.
These terms are defined in Section 12 of the Act.
The inclusion of these attributes aims to bring alignment between the Act and other federal anti-discrimination legislation.
A new provision has been added to the Act which prohibits employers from advertising roles at a rate of pay which would be in contravention of the Act or an industrial instrument.
Prohibiting Sexual Harassment
The Amended Legislation amends the Act to introduce a prohibition on sexual harassment of workers, persons seeking to become workers and anyone conducting a business or undertaking. This will take effect from 6 March 2023. (To be clear, this is in addition to the prohibition on sexual harassment contained in the Sex Discrimination Act (SDA)).
An employer may also be vicariously liable for sexual harassment committed by an employee. As with vicarious liability under the SDA, in order to avoid liability the employer must be able to demonstrate it took “all reasonable steps” to prevent the sexual harassment. On the basis of present authority applying to the SDA, that will not be an easy test to satisfy.
The Amending Legislation also confers powers on the Commission to deal with disputes about sexual harassment. The Commission will be able to arbitrate such disputes by consent. This is in addition to the existing ‘stop sexual harassment’ orders the Commission can make (a power conferred upon the Commission in late 2021).
Flexible Working Arrangements
Under the NES, an employee currently has a right to make a request for a flexible working arrangement in certain circumstances. From 6 June 2023 the Act will be amended to:
- expand the circumstances in which a request for a flexible working arrangement can be made to include circumstances where the employee, or a member of their immediate family or household, experiences family or domestic violence, and pregnant employees;
- impose stricter and more comprehensive obligations on an employer when considering an employee’s request for flexible working arrangements (including a written response which needs to satisfy specific requirements); and
- impose an obligation on an employer and employee to attempt to initially resolve any dispute by discussion between the parties and, if that fails, the FWC is empowered to then deal with disputes where it is alleged an employer has unreasonably refused or ignored an employee’s request or flexible working arrangements.
From 6 June 2023 there will also be additional requirements relating to requests for extension to periods of unpaid parental leave.
Small Claim Procedures
The maximum monetary compensation that can be awarded in small claims proceedings (known as the small claims cap) will increase from $20,000 to $100,000.
A number of amendments relating to enterprise agreements have been, or will be, implemented. In summary, such changes relate to:
- the rules for terminating an enterprise agreement after its nominal expiry date has passed.
- sunsetting of remaining transitional instruments commonly referred to as “zombie” agreements (of which the Commission has recently produced a list).
- the approval process of an enterprise agreement, wherein the previously onerous and complex requirements for approval are now simplified (such simplifications include the removal of stringent timeframes).
- initiating the bargaining process, simplifying the process.
- the Better Off Overall test (BOOT), which will be amended in several ways to ensure it is applied in a simple, flexible and fair way.
- simplifying the process for rectifying errors, defects or irregularities in enterprise agreements.
- supporting the Commission to assist parties in a bargaining dispute, including by allowing it to issue an intractable bargaining declaration, in circumstances where the Commission is satisfied that there are no reasonable prospects of a successful resolution.
- industrial action processes — specifically in relation to protected action ballots, multi-enterprise agreements, notice requirements for industrial action, and mandatory conciliation.
- reform of the low-paid bargaining stream and the creation of the ‘supported bargaining stream’ which will assist employers and employees of low paid industries such as aged and disability care.
- the single-interest employer authorisation stream and lessening the restrictions to accessing it.
- employers and employees jointly varying a multi-enterprise agreement to remove themselves from it, provided the variation is approved by the Commission.
- the introduction of ‘cooperative workplace agreements’.
Goodbye to the ABCC and ROC
The Australian Building and Construction Commission (ABCC) has been abolished, enabling the Fair Work Ombudsman (FWO) to regulate workplace relations in the building and construction industry. Further, the General Manager of the FWC will take over the duties of the Registered Organisations Commission.
After years of relative stasis, workplace relations has now entered a period of substantial reform. A second tranche of changes has been foreshadowed for later this year. Employers need to keep across these changes, not just for the purpose of compliance, but also to reflect upon the opportunities these amendments might present to evolve their organisations.