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The new industrial relations system - top 10 transitional tips

On 19 March 2009, the federal government introduced into Parliament the Fair Work (Transitional Provisions and Consequential Amendments) Bill 2009, which clarifies how employers and employees will transition from the existing Workplace Relations Act 1996 (WR Act) into the new Fair Work system.

Our previous bulletin summarised the substantive content of the government’s Fair Work Bill 2008 (FW Bill).

Employers should note the following key points to ensure a smooth changeover to the new regime:

1. Implementation timeline

The bulk of the FW Bill is intended to commence on 1 July 2009. The National Employment Standards (NES), modern awards and minimum wage provisions in the FW Bill are intended to commence on 1 January 2010.

2. What happens to existing industrial instruments?

Existing instruments (such as awards and collective agreements) will become “transitional instruments” from 1 July 2009 and will continue in force as if the WR Act had not been repealed.

Existing agreements (including AWAs) will continue to operate past their nominal expiry dates until they are terminated or replaced (they will not ‘drop dead’ under the new regime).

Existing collective agreements will prevail over the terms of modern awards. However, all employees (even those covered by transitional instruments) must receive at least the minimum rate of pay contained in a relevant modern award.

The NES will apply as minimum standards for all employees (even those covered by transitional instruments).

Notional Agreements Preserving State Awards (NAPSAs) (former State Awards) will expire on 1 January 2014 unless new regulations prescribe otherwise.

If a modern award comes into operation and covers an employee, any applicable unmodernised award or NAPSA will cease to cover that employee.

If a collective agreement is made before 1 July 2009, it can be lodged before or after 1 July 2009 provided it is lodged within 14 days of it being made. The agreement will then be assessed against the no-disadvantage test in accordance with the existing rules under the WR Act.

3. How will enterprise bargaining be affected?

Bargaining under the WR Act will cease on 30 June 2009 and bargaining under the FW Bill will commence on 1 July 2009.

Importantly, if bargaining is taking place as at 1 July 2009, the parties will in most cases need to start the bargaining and industrial action processes again. Protected action ballots that were held prior to 1 July 2009 will cease to have effect and new ballots will need to be conducted, even if protected industrial action is already taking place.

Despite these provisions, Fair Work Australia (FWA) may take into account the conduct of bargaining representatives prior to 1 July 2009 when deciding whether to make a bargaining order or determining the terms to be included in a workplace determination under the FW Bill.

Enterprise agreements made between 1 July 2009 and 1 January 2010 will be assessed against the current no-disadvantage test, rather than the new “better off overall test”, using a reference instrument such as an unmodernised award.

4. Award modernisation

Employees will continue to be covered by unmodernised awards if the modern award for their industry is not completed by 1 January 2010.

An employer covered by an enterprise award must apply to FWA to modernise its award before 31 December 2013, otherwise it will cease to operate.

As soon as practicable after 1 January 2012, FWA will conduct a review of all modern awards (except modern enterprise awards) to ensure they are operating effectively and in accordance with the modern awards objective.

5. Take-home pay orders

FWA will be empowered to make a “take-home pay order” on application by an employee or union if an employee’s take-home pay is reduced as a result of the award modernisation process.

A take-home pay order will only be made where:

  • the employee is employed in the same or a similar position before and after the modern award applies
  • the take-home pay for particular hours or quantities of work is less than it would have been but for the modern award, and
  • the reduction in pay is attributable to the award modernisation process.

6. Conditional termination of individual agreements

Prior to the nominal expiry date of an individual agreement such as an AWA or ITEA, the parties can make a “conditional termination” agreement. After the nominal expiry date, either party can unilaterally effect a “conditional termination” of the agreement.

A conditional termination will allow the employee to participate in the bargaining process for an enterprise agreement, including participating in industrial action and voting on the agreement. If an enterprise agreement then comes into operation, the individual agreement will be automatically terminated.

7. FWA representation orders

The Bill allows FWA to make a representation order that grants a union the right to represent employees in a particular workplace or exclude another union from that right. While the WR Act currently allows the Australian Industrial Relations Commission (AIRC) to make representation orders, the Bill expands the circumstances in which this may occur.

The WR Act requires the AIRC to be satisfied before making an order that a “demarcation dispute” is on foot and that the conduct or threatened conduct of a union is restricting the performance of work or harming an employer’s business. In addition, the Bill enables the making of representation orders where there is a dispute regarding the entitlement of a union to represent employees in the absence of proof of harm or interference with work. FWA must consider a range of factors before making such an order, including the:

  • history of award coverage and agreement making for the employees
  • wishes of the employees, and
  • consequences of not making the order for any employer, employees or union.

8. Continuation of orders and proceedings

The WR Act will continue to govern most orders made and conduct that occurred before 1 July 2009. The WR Act will also continue to apply after 1 July 2009 to disputes relating to:

  • matters arising under a transitional instrument
  • the Australian Fair Pay and Conditions Standard, and
  • entitlements to meal breaks, public holidays and parental leave under the WR Act.

After 1 July 2009, any applications, including in relation to unfair dismissal claims, or appeals that could have been made to the AIRC must be made to FWA. However, if the AIRC is already dealing with a claim or dispute as at 1 July 2009, it can continue to do so.

9. Institutional changes

The AIRC will continue the award modernisation process in accordance with the WR Act. The AIRC is intended to cease operation on 31 December 2009.

The Australian Fair Pay Commission will cease on 31 July 2009, after its final minimum wage review.

The Fair Work Ombudsman will take over from the Workplace Ombudsman on 1 July 2009. It will also take on the advisory role performed by the Workplace Authority, which will cease to operate on 31 July 2010.

The Bill also creates new Fair Work Divisions of the Federal Court and the Federal Magistrates’ Court.

10. Miscellaneous transitional issues

There are a number of additional points to note:

  • Entry permits, notices to produce documents and other relevant instruments that were in force prior to 1 July 2009 for purposes of union rights of entry will continue in force under the FW Bill.
  • Other provisions of the WR Act will continue to apply between 1 July 2009 and 1 January 2010, including the Australian Fair Pay and Conditions Standard, notice of termination provisions, and employee entitlements to meal breaks, public holidays and parental leave.
  • If a transfer of business is completed before 1 July 2009, most of the transmission of business rules in the WR Act will continue to apply as if they had not been repealed. The new transfer of business rules under the FW Bill will apply to transactions that are completed after 1 July 2009.
  • Schedule 1 and Schedule 10 of the WR Act, which deal with registered organisations, will be retained and renamed the Fair Work (Registered Organisations) Act 2009.

Another transitional Bill will be introduced into Parliament in the week commencing 25 May 2009. This Bill will deal with consequential amendments to other Commonwealth legislation. Both transitional Bills will be examined by the Senate and there may be amendments proposed as a consequence of that process. Stay tuned for further developments in this area.

Fair Work (Transitional Provisions and Consequential Amendments) Bill 2009

Who does this affect?
All Australian employers
What do you need to do?
Ensure you are updated on recent developments



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