People + Culture Strategies

Only two years ago, at the same time as a parliamentary review into the Act was being conducted, the Fair Work Commission (“FWC”) was undertaking its inaugural (“transitional”) review of modern awards as required under the Act (“two yearly review”). Fast forward two years and barely has the ink dried on a variety of judgments issued as part of finalising the two yearly review, and the next modern award review has begun (“four yearly review”) with another legislative review looming and overlapping this process. This modern award review, mandated by the Act (s.156) and which must be conducted every four years in the future, carries with it a greater expectation of change, predominantly due to the FWC’s pronouncements in the 2 yearly review “deferring” major changes to the 4 yearly review.

Given that most workplaces will have a proportion of employees covered by modern awards, there will be widespread interest in what types of changes employers can expect as a result of the process and perhaps even how, during the process, they influence the changes they need or desire.

What has happened to date?

Some of the more important aspects of the 4 yearly review are described below but are reminiscent of the process adopted for the 2 yearly review (with the exception of penalty rates which have been relegated from a common issue to an award-by-award issue, noting the enshrined protection of this condition in the Act is a development since the last 2 yearly review with the Act having been amended to provide for this):

In a decision dated 17 March 2014, the FWC set the jurisdictional basis of the review and thus the parameters in which it will operate which will, in turn, manage employers’ expectations of changes. While the FWC has agreed the 4 yearly review will be broader in scope than the 2 yearly review, nevertheless it has implied that awards will not be extensively changed by alluding to the restraints on its discretion. The reason for enforcing such restraints is that the FWC must ensure a ‘stable’ modern award system which the FWC feels implies a need for “a merit argument in support of the proposed variation”. This echoes several FWC decisions in the 2 yearly review, which the FWC has recently referred to in the context of this review, reminding parties of the need for “cogent and probative evidence” in support of an application to vary a modern award.

In this decision the FWC also noted that during the review process:

• the modern awards objective, being to provide a fair and relevant minimum safety net of terms and conditions (with the National Employment Standards) and taking into account various factors, will be applied;
• the modern awards objective dictates that only those variations necessary to achieve it should be made; and
• past contested decisions will be considered.

While this decision does not pre-empt the outcome of the 4 yearly review, it does suggest that the changes will not be as far reaching as some parties would have hoped, including the Federal Government, which has expressed an expectation of significant changes to awards and hopes that they would be simplified.

What is happening next?

• The common issues will be dealt with each on a “stand alone” basis with a review of the process to be conducted in October 2014, including ascertaining any further common issues.
• The scope of the annual leave common issue will shortly be determined (submissions were due 20 March 2014, an issues paper will be released 25 March 2014, a conference will be held 27 March 2014, and a Statement on Scope will be released 2 April 2014).
• The FWC is giving priority to transitional provisions and there will be a further conference on this issue in the week commencing 2 June 2014 preceded by a draft background document to be released in May 2014.
• Each award (minus the common issues) will be reviewed including consideration of its historical context and this will be the phase where penalty rates are dealt with.
• The awards will be reviewed in four sequential stages of 30 each (these have been published) with further information about this likely to be published in April 2014 and a conference on 13 March 2014.
• The consideration of award coverage has been deferred to at the beginning of each award phase.

What do you need to do?

If you consider that your business is significantly adversely affected by the provisions of a modern award you should consider directly or indirectly participating in the 4 yearly review (if necessary with PCS’ advice or representation for you as a sole entity or as part of a broader representative group).

At the very least, if you are not participating in the 4 yearly review, you will need to keep abreast of any changes to the modern awards covering your employees and comply with those remembering that a breach of a modern award will not only attract a heavy penalty to the company but to any individuals involved in the breach, and this may include you.