Innovation in the workplace under the Fair Work Act

James Zeng, Senior Associate

Innovation in the workplace has been linked to increased productivity, profitability and improved workplace outcomes. Innovative workplaces are workplaces that are flexible and successfully adapt to change. Organisations are reminded time and time again that the failure to innovate will result in a decline in productivity and ultimately their demise in a competitive global market due to a failure to adapt and change to meet emerging challenges.

The Fair Work Act 2009 (Cth) (“FW Act”) has been criticised by many for inhibiting innovation and at times described as an impediment to increased productivity.1  However, employers should aware be that there are a number of opportunities for organisations to take advantage of the existing legislative framework and recent amendments to drive innovation in the workplace. This article examines some of the areas of employment law that businesses can explore when looking at driving innovation in the workplace in 2016.

INNOVATION IN ENTERPRISE BARGAINING 

During enterprise bargaining cycles, many organisations merely update their existing enterprise agreement to bring remuneration in line with, or slightly above rates under the applicable modern award. Rather, enterprise bargaining should be seen as an opportunity to insert provisions that help drive innovation in the workplace. Organisations often bargain with unions and employees based on information and statistics on past performance and at times fail to take into consideration the potential for innovation driven productivity improvements.

The FW Act permits enterprise agreements to contain a number of terms pertaining to the relationship between employer and employee including terms relating to wages and allowances, hours of work and shift patterns, as well as clauses that help drive innovation in the workplace. Accordingly, organisations should not limit the contents of their enterprise agreements to the matters contained in the modern award that would have otherwise applied to their workforce but should consider introducing innovative clauses that help promote increased productivity and flexibility.

For example, an organisation might include a clause mandating the multi-skilling of the workforce and thereby improving flexibility and reducing or eliminating the strict demarcation of roles. Organisations can, during bargaining, also take the opportunity to tie additional payments, sometimes referred to as productivity allowances, or pay rises higher than those sought by unions, to productivity achievements by the workforce during the life of the enterprise agreement.

IMPROVING WORKFORCE SKILLS

Past research2 has shown that improvements in innovation can occur if organisations improve the skills and knowledge of their workforce. An employee who considers that they have a future in their organisation is more likely to be engaged and drive innovation than a disengaged employee. Whilst very few modern awards provide for study leave, training or study assistance, an organisation can offer skills training for its workforce as part of its suite of employee benefits and in the place of other direct monetary benefits. Organisations have recognised in the past that offering skills training and study assistance are key retention tools and assist in career advancement within the organisation. However, this should not be limited to any particular industry or to one part of an organisation’s workforce (such as professionals) but offered to the whole workforce.

Further, skills training is an additional benefit that might be provided to employees during enterprise bargaining and considered by the Fair Work Commission when it is undertaking the better-off-overall test and deciding whether to approve an enterprise agreement.

INCENTIVISING INNOVATION

Organisations should look at ways of incentivising innovation in the workplace. Whilst tying bonus payments and other additional remuneration to innovation will certainly do this, there are ways to incentivise innovation on a long term basis including through issuing of shares linked to the performance of the organisation. As a result of changes to legislation implemented by the Federal Government in June 2015, incentivising innovation is not limited to merely payment of bonuses, productivity allowances, or providing share interests for employees of listed companies. Now, all types of organisations can adopt share plans as a way of incentivising innovation.

Those changes reversed a number of unpopular provisions in respect of taxation on employee share interests that have been acquired at a discount. The amendment to the existing legislation introduced additional generous tax concessions on employee share interests, where previously employees were subject to complex rules and adverse tax consequences. Favourable tax treatment has made employee share arrangements and plans more attractive as a means of recruiting and retaining key team members and rewarding hard working employees who help drive innovation in the workplace. Start up companies and small and medium business enterprises should be aware and take advantage of additional tax concessions for employees with employee share interests in their organisations.

ENCOURAGING DIVERSITY IN THE WORKPLACE

Innovation in the workplace has been shown to be driven by employees approaching challenges from different angles, and finding more varied solutions. Organisations should look towards recruiting and retaining employees with values that align with the vision of the business but who come from different backgrounds and experiences. Organisations should introduce policies and procedures that encourage diversity and help retain employees from diverse walks of life. This goes beyond merely implementing policies that deal with unlawful discrimination and paid parental leave and extends to implementing policies that deal with gay, lesbian and transgender employees, recruitment policies that avoid discrimination based on “pedigree” (such as university education) and policies that provide flexibility for employees who may need to work from home for a variety of reasons.

HIGH-INCOME GUARANTEE AND ANNUALISED SALARIES

Finally, organisations that pay employees above the high-income threshold (currently $136,700 per annum, until at least 1 July 2016) should take advantage of the high income threshold guarantee to allow greater workplace flexibility and avoid certain limitations under the modern awards. A high-income employee who is provided a written guarantee of annual earnings is not covered by a modern award. This allows employers to implement innovative and flexible arrangements including the ability for the employee to determine their own hours of work. Organisations should also take advantage of annualised salary provisions in modern awards for salaried employees where possible.

KEY TAKEAWAYS 

  • Organisations should take the opportunity to include clauses that drive innovation in the workplace in their enterprise agreement and bargain with a forward thinking outlook. 
  • Organisations should consider implementing policies and procedures that attract and retain employees from a diverse range of backgrounds. 
  • Organisations should take advantage of the high-income guarantee under the FW Act and annualised salary provisions in modern awards, where possible, to drive innovation in the workplace.

1. Towards more productive and equitable workplaces, An evaluation of the Fair Work Legislation [9-27], [72].

2. Workforce Skills and Innovation: An Overview of Major Themes in Literature, OECD [7-9], [30-33].

Changes to the Fair Work Act: what they mean for you

The Government’s Fair Work Amendment Bill 2014 (Cth) (the “Bill”) has been passed after months of protracted cross-bench negotiations. While pared back significantly from the original bill presented to Parliament in February, the Bill has introduced three changes which employers should be aware of.

1.  Enterprise agreements

Employers negotiating single-enterprise greenfields agreements (that is, enterprise agreements in relation to a new enterprise which has not yet employed any employees) may now apply to the Fair Work Commission (“FWC”) to have the agreement approved if negotiations have been ongoing for six months and not resulted in agreement.

2.  Protected action ballot orders

An application for a protected action ballot order (required before industrial action can be taken lawfully) may no longer be made by a bargaining representative unless bargaining has commenced (for example, because the employer has agreed to bargain or a majority support determination has been obtained from the FWC). This change is intended to ensure that employees do not “strike first, bargain later”.

3.  Unpaid parental leave

If an employee on a period of unpaid parental leave makes a request to extend the period of his or her leave, an employer may no longer refuse the request unless the employee has been given a reasonable opportunity to discuss it. This is in addition to the existing requirement that an employer may only refuse such a request on reasonable business grounds. There is still no right of appeal by an employee if their request is refused.

The Government was unable to secure enough support to pass many of its proposed changes. Amendments in relation to the following were rejected:

  • annual leave – an amendment to make clear that annual leave is to be paid out as provided by any applicable industrial instrument;
  • leave accruals – an employee cannot take or accrue leave during a period that they are absent from work and in receipt of workers’ compensation;
  • right of entry – including provisions to repeal the transport and accommodation arrangements and default meeting place;
  • individual flexibility arrangements – including requiring a statement of acknowledgment that an employee is better off overall under the arrangement and changes to how such arrangements may be terminated; and
  • transfer of business provisions – will not apply to an employee who, at his or her own initiative, seeks employment with an associated entity of his or her former employer without his or her employment having been terminated first.

For advice on what these changes might mean for your organisation, contact one of the PCS Team on (02) 8094 3100.

Getting more than you bargained for: enterprise bargaining for your brand

Alison Spivey, Associate Director and David Weiler, Associate

The enterprise bargaining process is a minefield of legal, financial and reputational risks. However, if done properly, it can also be a very effective way of reflecting and enhancing your business’ brand. What can your business do to manage the risks and get the most out of the bargaining process in terms of branding?

Employers and employees have been engaging in enterprise bargaining at the workplace level for more than 20 years. For some, it has become the norm, the way in which their employment rights and obligations are formed. For others, it is a relatively new process, and one they may not have engaged in voluntarily.

Irrespective of a business’ relative experience in enterprise bargaining, what often gets overlooked is that the way that employers engage in bargaining, and the resulting enterprise agreement (particularly if the terms and conditions in that agreement are unique or innovative), form an important part of the recruitment, selection and retention strategy for a business.

This article explores:

  • why an employer might engage in enterprise bargaining, as opposed to choosing another way of regulating the employment relationship with its employees; and
  • what steps an employer can take to manage the risks posed to their brand by enterprise bargaining and how they may use the enterprise agreement process to enhance their business’ brand.

WHY BARGAIN?

There are a number of means available to employers to regulate their relationship with their employees including individual employment contracts, or reliance on award terms and individual flexibility agreements, and enterprise agreements, to name a few.

The reasons as to why employers bargain for an enterprise agreement will differ from business to business. What sets an enterprise agreement apart from the other options from an industrial perspective is that an enterprise agreement:

  • allows you to tailor the terms and conditions of employment that you apply to your employees to your business needs;
  • showcases the terms and conditions of employment offered by your business in a way that is not typically possible in a job advertisement or interview;
  • provides consistency and certainty for your business for the life of the agreement, not only in terms of employee costs, but also in an industrial sense, because parties are prevented from taking industrial action prior to the nominal expiry date of the agreement;
  • encourages employee engagement, as employees are provided with an opportunity to have their say about their terms and conditions of employment, whether they actively participate in the bargaining process or choose only to vote on the agreement;
  • can be a vehicle of organisational change, if change is on the horizon for your business; and
  • can be used to promote a business’ values and culture.

How can your business manage its risk and enhance its brand through enterprise bargaining? There are a myriad ways that an employer can manage the risks posed to their brand by enterprise bargaining and best ensure that the process is as effective from a branding perspective as it is from an industrial one. Of critical importance are:

  • the proposed content of the enterprise agreement; and
  • the manner in which the employer conducts itself during the bargaining process – not only in terms of how the employer interacts with stakeholders (including its employees and their representatives), but also the commitment of the employer to that process demonstrated by the level of planning the employer has engaged in.

Each of these is discussed further below.

USING THE CONTENT OF THE ENTERPRISE AGREEMENT TO BUILD YOUR BRAND

In recent times, we have witnessed a growing acknowledgement of the enterprise agreement as a potential branding tool, together with an increasing sophistication in how enterprise bargaining and enterprise agreements are used by businesses to meet their strategic objectives. In addition to providing certainty in relation to terms and conditions of employment for the life of the agreement, by including certain terms in an enterprise agreement, an employer can shape and maintain the culture of its business. The terms of the enterprise agreement are in themselves a public statement of what a business stands for and are a reflection of how they intend to treat their employees. This can be a powerful recruitment tool, enticing prospective employees to come and work for your business. These terms can also provide a competitive advantage against competitors seeking to entice employees away from your business whom you otherwise may wish to retain. Another way of building your brand through the content of your enterprise agreement is to include new or innovative terms in that agreement. For the most part, inclusion of these terms tends to be driven by what is happening in society at large when bargaining is occurring. A number of enterprise agreements, particularly those negotiated for large well-known organisations, have sought to introduce additional benefits in relation to such matters as workplace flexibility, parental leave and, more recently, domestic violence leave, as these issues increasingly gain public awareness and understanding.

PROTECTING YOUR BRAND DURING THE BARGAINING PROCESS

Knowing each party’s rights and obligations in the enterprise bargaining process plays a key role in protecting and potentially enhancing your business’ brand. From the outset, it is the employer’s approach to the bargaining process that sets the tone for the negotiations.

There is nothing more potentially detrimental to a business’ brand than when it appears that the employer does not, or is perceived to not, understand their own rights and obligations or the rights and obligations of other bargaining parties in that process. Nothing will undermine an employer’s stated commitment to the bargaining process more than poor planning and preparation.

So what do you need to do? In essence, your business needs good planning and preparation before it engages in enterprise bargaining.

Firstly, it is important that you take steps on behalf of your business to understand the enterprise agreement process and the rights and obligations of the parties in connection with that process.

By way of summary, in order for the Fair Work Commission (“FWC”) to approve an enterprise agreement, each of the following requirements must be met:

  • all mandatory pre-approval steps must be taken (for example, notification of representational rights and an appropriate access period); • the group of employees covered by the agreement must be “fairly chosen”;
  • the FWC must be satisfied that the parties have reached “genuine agreement”;
  • no terms of the agreement may contravene the National Employment Standards;
  • mandatory terms must be included (see below for further detail);
  • unlawful terms are to be excluded;
  • additional requirements relating to shift workers, piece workers, school-based apprentices and trainees and outworkers under the FW Act must be met (if applicable); and 
  • the agreement must pass the “Better Off Overall Test” (BOOT).

In addition, the parties are obliged to bargain in good faith throughout the enterprise bargaining process, as provided for in the legislation.

Secondly, the business must take steps to put in place mechanisms that will allow it to maintain control of the bargaining process to the extent that it possibly can and within the confines of the legislation. Managing the expectations of the stakeholders in the bargaining process, including those of the bargaining representatives at the bargaining table, is crucial to this aspect of your strategy.

There are a number of practical mechanisms that a business can adopt in practice to manage stakeholder expectations, including:

  • establishing bargaining protocols at the outset of the bargaining processes. These protocols are particularly important if there are a number of bargaining parties at the negotiating table. These commitments may deal with issues such as logs of claims, meeting times and places and the rules of engagement between the parties; and
  • developing and committing to an expansive communications strategy. It is preferable that this strategy be developed and in place to the extent reasonably practicable prior to commencing bargaining. However, that strategy will also need to be flexible in order to respond appropriately to developments during the bargaining process, and, above all, ensure precise, concise and transparent communications with stakeholders to avoid any suggestion that the employer is not bargaining in good faith.

Lastly, your business needs to identify its bargaining position – the “yes”, “no” and “maybe” of what will be included in the enterprise agreement – and commit to that position. This includes undertaking appropriate financial modelling to ensure that your business can afford what it is proposing to commit to by way of the enterprise agreement.

While this may seem like a simplistic model, the enterprise bargaining requirements in the legislation are highly technical and can be difficult to navigate for those unfamiliar with the requirements. Failure to adhere to the requirements may ultimately prove to be expensive, with the parties having to potentially renegotiate aspects of the enterprise agreement and then undertake the access and voting periods again.

Whatever your company’s size, an enterprise agreement can provide you with benefits. Building a brand through effective bargaining can set companies apart from the competition while also improving or solidifying an organisation’s culture.

PCS works with its clients to navigate the entire enterprise agreement process in order to ensure that the bargaining benefits both the brand and the business.

Mandatory Terms of an Enterprise Agreement: 

  • The dispute resolution term provides a mechanism to resolve disputes between the parties in relation to the agreement and the National Employment Standards. 
  • The flexibility term provides employers and employees covered by the agreement with the ability to reach an agreement about the operation of specific aspects of the agreement to better suit their individual circumstances. 
  • The consultation term of the agreement imposes obligations not only in relation to “significant changes” that may affect employees, but also in relation to proposed changes to rosters and hours of work. 
  • The regulations contain model dispute resolution, flexibility and consultation terms for the parties to rely on. 
  • A nominal expiry date, which can be no more than four years from approval. 
  • A coverage term that sets out precisely which of the employees employed by the employer will be covered by the enterprise agreement. The Commission must be satisfied that the group of employees proposed to be covered by the enterprise agreement has been “fairly chosen”.

 

Bargain for your brand: Enterprise Agreements that protect your brand inside and out

As a business you invest a considerable amount of time, money and effort in order to build a strong brand and maintain its status. Commercial reputation takes years to develop but can be destroyed with a few poor decisions and bad luck. Enterprise bargaining presents a situation that can at worst damage your brand beyond repair and at best offer a chance to solidify the hard work put into creating goodwill. Most businesses recognise the possible risks associated with enterprise bargaining and work to merely manage it throughout the process. Others avoid them altogether and rely solely on modern awards and individual contracts to govern their employment relationships. Instead, we encourage businesses to embrace the opportunity of entering into an enterprise agreement as a way to strengthen and protect their brand.

For example, an enterprise agreement can form an important part of the recruitment, selection and retention strategy by showcasing the terms and conditions of employment offered by your business, especially if it contains innovative clauses. Not only do such terms potentially attract talented employees to come and work for your business, they also provide a competitive advantage over competitors who may be seeking to entice your employees away from your business. 

While enterprise agreements do offer an opportunity for creativity, the Fair Work Commission (“FWC”) must approve them before they become operational. The FWC’s annual report shows that while only a relatively small number of enterprise agreement were not approved last year, there was still a two-thirds increase in the number of applications that were not approved. This highlights the need to understand all of the requirements under the Fair Work Act 2009 (Cth) (“FW Act”) before beginning negotiations. 

In addition to the stipulations around the content of an enterprise agreement contained in the FW Act there are several important rules that must be adhered to during the bargaining process. There is nothing more potentially detrimental to a business’ brand than when it appears that the employer does not, or is perceived to not, understand their own rights and obligations or respect the rights and obligations of other bargaining parties in that process. Issues such as employers giving employees notice of their representational rights, following good faith bargaining requirements and providing a proper access period and voting procedure can stall negotiations and reflect poorly on the employer even after an agreement is reached. 

If bargaining does hit a standstill, employers face the further risk of industrial action being taken by the employees which can be very public and very costly to the organisation, particularly if that industrial action is ongoing. Preventing protected industrial action largely depends on effectively managing the stakeholders involved in the process. 

The best way to ensure that your business is in a position to appropriately manage the stakeholders throughout the process is to know and understand your own position inside and out. There are a number of practical mechanisms that your business can also adopt, including through establishing bargaining protocols at the outset of the bargaining processes. These protocols are particularly important if there are a number of bargaining parties at the negotiating table. 

We often advise clients to consider and document their expectations about how negotiations will progress, including whether the parties are to exchange written logs of claims setting out their respective positions, whether draft enterprise agreements will be prepared from which the parties are to work from, how matters discussed at meetings are to be recorded (notes and/or transcription), expectations around timeliness of responses and how responses will be delivered. A further way of managing stakeholders is to develop an expansive communications strategy that is flexible, precise, concise and transparent. 

Enterprise agreements not only reduce administrative complexity and add commercial certainty to a business. They also represent a clear strategy for a business to improve its brand and to differentiate itself from its competitors. At PCS we work everyday to achieve these goals for our clients, and we would be happy to assist your business with implementing an enterprise agreement. 

Bargaining for your brand: Enterprise Agreements that protect your brand inside and out

A properly negotiated enterprise agreement can bring about significant productivity improvements and flexibility to your workforce as well as protecting your brand and organisation. Almost half a decade on from the approval of the first batch of enterprise agreements under the Fair Work regime, we look back at some key trends as well as what you can do to negotiate an agreement that works for your organisation.

This webinar explores:

  • trends in enterprise agreements;
  • how to introduce productivity improvement and flexibility into your agreement;
  • the Enterprise Bargaining process – key steps and common mistakes; and
  • how to effectively manage the relationship with bargaining representatives (including unions).

Innovation in Enterprise Agreements: How to stay ahead of the game

Erin Lynch, Senior Associate

Enterprise agreements (in a variety of forms) and their use has ebbed and owed over time, swaying one way or the other depending on the persuasion of the Government of the time. Not only is the use of enterprise agreements, particularly versus the use of statutory or common law individual contracts of employment, a source of debate in Australia, but also the content in enterprise agreements has come under significant scrutiny.

Consequently, clauses in enterprise agreements must evolve and change to reflect varied legislative requirements as well as changing needs in the economy. As such, it is important that, rather than simply “rolling over” employers consider the productivity improvements that can be gained through innovative use of enterprise agreement terms.

As we come to the end of the fifth year since the commencement of the Fair Work Act 2009 (Cth) with many enterprise agreements having a nominal expiry date of not more than four years and the advance release of the Building and Construction Industry (Fair and Lawful Building Sites) Code 2014 it is timely to reflect generally on the use and content of enterprise agreements and look forward to what we expect in the future.

Consistent with this theme the Fair Work Commission is establishing a database of model enterprise agreement clauses adopting one of the themes under the Commission’s Future Directions of “productivity and engaging with industry”, as detailed in Future Directions 2014–15: Continuing the Change Program.

It is important that employers regularly review their enterprise agreements as there can be times where Award conditions may be in fact be more beneficial to employees, as is the current case with a national retailer. Enterprise bargaining negotiations failed between the national retailer and the Shop, Distributive and Allied Employees’ Association, with the union convincing the Fair Work Commission to terminate the retailer’s first ever collective agreement that had a nominal expiry date of September 2012. As a result of the failed negotiations and taking a hard line stance, the retailer must now follow the conditions set out in the Modern Award, giving the retailer less flexibility and control in determining the terms and conditions of employment for employees.

Construction industry clients be aware – building and construction industry (fair and lawful building sites) code 2014

On 17 April 2014, the Minister for Employment, Senator Eric Abetz, published an advance release of the Building and Construction Industry (Fair and Lawful Building Sites) Code 2014 (the “Code”). The Code provides the Commonwealth Government’s expected standards of conduct for all building industry participants that seek to be, or are, involved in Commonwealth funded building work.

The Minister announced that the Code will come into effect when the Building and Construction Industry (Improving Productivity) Bill 2014 commences and has said that enterprise agreements and other “procedures” will no longer be able to contain “restrictive work practices” or “discriminatory provisions”.

Once the Code commences then entities covered by it that have enterprise agreements made after 24 April 2014 that do not meet the Code will not meet the key criteria for eligibility to tender for, and be awarded, Commonwealth funded building work.

For example, clauses and practices that will not be permitted by the new Code include:

  • an agreement or practice that prohibits or limits the employment of casual or daily hire employees;
  • an amount paid that nominally incorporates payment for ordinary time and other matters such as overtime and allowances in one loaded rate;
  • an arrangement or practice whereby employees are selected for redundancy based on length of service alone; and
  • “one in, all in” clauses where, if one person is offered overtime, all the other workers must be offered overtime whether or not there is enough work.

PCS recommends that any employer in the construction industry that intends or may bid at any time for Commonwealth projects or other work, carefully consider the terms of any agreements about which they are bargaining with their employees.

“It is important that employers regularly review their enterprise agreements as there can be times where Award conditions may be in fact more beneficial to employees.”

Beneficial leave provisions

An employer recently had an enterprise agreement approved which allows employees access to six days of compassionate leave per year. The clause is said to recognise that when this type of leave is taken it usually requires employees to travel long distances. The provision of six days’ compassionate leave is three times the statutory standard for compassionate leave.

In addition to the increased flexibility around compassionate leave the enterprise agreement also allows long-serving employees to cash out personal leave if they retain at least 30 days of accrued personal leave. After completing ten years of service an employee will be able to cash out ten days of personal leave and a further five days after 15 years’ service and then every five years thereafter.

With the recognition of domestic violence as a reason for requesting flexible working arrangements we may also see an increase in clauses entitling victims of domestic violence to paid leave. In 2010 a Victorian employer agreed on a groundbreaking clause entitling victims of domestic violence to 20 days’ paid leave each year. Since then Sydney University’s Professor Marian Baird who has undertaken a study says that similar rights had been included in more than 100 agreements or state public service awards covering more than one million workers.1

Increases in pay

The Department of Employment’s “Trends in Federal Enterprise Bargaining”2 report shows that the agreements approved by the Fair Work Commission in the December 2013 and March 2014 quarter paid an average 3.6% increase to employees.

On an industry basis construction (4.7%) and education (3.7%) increased the average and health and community services (3%) and finance and insurance services (3.3%) pushed the private sector average down.

What does this mean for us?

PCS encourages those employers with enterprise agreements or those thinking about adopting an enterprise agreement to use clauses such as the ones described above as a way to have terms and conditions of employment that suit their operation and give employees something more beneficial than the award. Clauses such as the ones discussed above can also be used to attract and retain key staff.


  1. An equality bargaining breakthrough: Paid domestic violence leave Marian Baird, Ludo McFerran and Ingrid Wright, JIR published online 23 January 2014
  2. “Trends in federal enterprise bargaining December quarter 2013”, http://employment.gov.au/trends-federal-enterprise- bargaining

 

 

 

The Royal Commission into Trade Union Governance and Corruption: A Brave New World

Sina Mostafavi, Senior Associate

The Abbott Government’s Royal Commission into Trade Union Governance and Corruption is in full swing and will result in a brave new world for trade unions and employers.

What is it?

Further to the Coalition’s election promise made prior to the 2013 Federal Election into union “slush funds”, the Government has established the Royal Commission into Trade Union Governance and Corruption (the “Commission”), led by former High Court judge, John Dyson Heydon AC QC (the “Commissioner”).

Terms of reference

The Commission is inquiring into the following:

  1. The governance arrangements of separate entities established by unions or their officers, purportedly for industrial purposes or for the welfare of their members, including so-called “slush funds” (the “Entities”), including a focus on:
    1. how the Entities are financially managed;
    2. whether the Entities are used for an unlawfulpurpose; and
    3. the adequacy of current laws in relation to the:
      1. financial integrity of the Entities; and
      2. accountability of union officers in relation to the use of Entity funds.
  2. Alleged activities of the following regarding setting up or operating Entities:
    1. the Australian Workers’ Union (“AWU”);
    2. the Construction, Forestry, Mining and Energy Union (“CFMEU”);
    3. the Electrical Trades Union (“ETU”);
    4. the Health Services Union (“HSU”);
    5. the Transport Workers Union (“TWU”); and
    6. any other person,association or organisation in respect of which credible allegations of involvement in such activities are made.
  3. The circumstances in which funds are sought from any third parties and paid to the Entities.
  4. The extent to which union members:
    1. are protected from any adverse effects or negative consequences arising from the existence of the Entities;
    2. are informed of the Entities’ existence;
    3. are able to have influence or control of the Entities’ operation; and
    4. have the opportunity to hold union officers accountable for any alleged wrongdoing.
  5. Any conduct which may amount to a breach of any applicable law, regulation or professional standard by any officer of a registered employee association in order to:
    1. procure an advantage for themselves or another person, association or organisation; or
    2. cause a detriment to a person, association or organisation.
  6. Any conduct by union officers responsible for the Entities which may amount to a breach of any applicable law, regulation or professional standard.
  7. Any bribes, secret commissions or other unlawful payments or benefits arising from contracts, arrangements or understandings between unions/ union officers and any other party.
  8. The participation of any persons, associations or organisations other than unions/union officers in relation to any of the above conduct.
  9. The adequacy and effectiveness of existing systems of regulation and law enforcement in dealing with any of the above conduct, including the means of redress available to unions and union members who have suffered a detriment as a result of such conduct.
  10. Any issue or matter reasonably incidental to the above.

How does the Commission operate?

The Heydon Commission has broad terms of reference, with a focus on alleged improper conduct (including the use of “slush funds”) and governance issues associated with unions.

The Heydon Commission is required to prepare its final report in relation to the above by 31 December 2014, however the Government has indicated that this will be subject to the Commissioner’s discretion.

Practice Directions

The Commission has issued a number of practice directions setting out how its hearings will be conducted. Among the procedures set out in those documents is a restriction on cross-examination of witnesses brought before the Commission. Such cross-examination is not automatically permitted, and will only be allowed where (amongst other things):

  • a contradicting witness provides a written statement of evidence, upon which the cros-examination of the Commission’s witness would be based;
  • written grounds for cross-examination of the Commission’s witness is provided in advance; and
  • the contradicting witness is available to be cross-examined.

The effect of the above regime is that in practice cross examination may not take place until weeks or potentially months after the initial examination of the Commission’s witnesses, meaning that ensuing press coverage will in those cases be focused on the evidence obtained by the Commission in the first instance, before any such evidence may be challenged by contradicting witness and/or their legal representative.

Parties who believe they are “substantially and directly interested” in relation to evidence before the Commission have the opportunity to apply for advance warning of such evidence and related documents.

The Commission is empowered to depart from its practice directions where it deems appropriate.

The Commission is not bound by rules of evidence which would otherwise apply in civil and criminal trials, and is able to draw inferences which bodies hearing those trials are not able to draw. Statements made during evidence in the Commission are not admissible in civil or criminal proceedings.

Telecommunications interception powers

In June 2014, the Federal Government granted the Commission the power to intercept and access phone calls and emails, as per similar powers granted to the current Royal Commission into child sex abuse.

Penalties

The law defines a range of criminal conduct in relation to the Commission’s affairs, including:

  • a refusal to attend or enter questions when summoned;
  • intentionally giving false and misleading evidence;
  • failing to produce documents when required; and
  • tampering with, destroying or concealing documents.

The penalties associated with these breaches range from $1000-$20,000, and jail terms of between six months and five years.

What has happened to date?

Pre-hearing

Prior to the commencement of the Commission’s hearings, the Australian Council of Trade Unions (“ACTU”) expressed concern that the Commission would engage in the practice of providing advance release of allegations to the media, as they alleged was done with regard to the Cole Royal Commission into the construction industry, which reported in 2003. The Commission has denied engaging that it engages in these practices.

Preliminary hearing

The Commission held a preliminary hearing in April 2014. At this juncture, the Commissioner noted that while the Commission’s terms of reference were broad in some regards, that these terms rested on “certain assumptions which are not hostile to trade unions”. Rather, the Commissioner noted that the Commission would be enquiring into whether unions were performing their role well and lawfully, and how their performance of this role could be improved.

Counsel assisting the Commission, Jeremy Stoljar SC, emphasised at this juncture that the Commission would be looking at both sides of an alleged slush fund-related transaction, that is, both the union and any facilitation and contributions made to the slush fund by employers.

“The Heydon Commission is required to prepare its final report in relation to the above by 31 December 2014”

AWU hearings

The Commission’s public hearings began in Sydney in May 2014. The Commission focused on the allegations relating to the AWU/Workplace Reform Association matter, involving former AWU leader Bruce Wilson and former AWU official Ralph Blewitt. On this occasion, the Commission departed from its practice directions in relation to cross-examination, and allowed for cross- examination of Mr Blewitt by Mr Wilson’s Counsel.

HSU hearings

The Commission commenced public hearings into the HSU in June 2014, including evidence being obtained from former HSU leader Kathy Jackson.

Among the issues considered by the Commission during these hearings were:

  1. how HSU officials treated whistleblowers;
  2. what duties were owed by union officials to HSU members; and
  3. funding of HSU union elections.

TWU hearings

In June 2014, the Commission commenced its hearings in relation to the TWU. Matters heard to date include:

  • whether a TWU enterprise agreement which provided for the payment of superannuation contributions exclusively to a TWU superannuation fund raised potential conflicts of interest; and
  • alleged contributions by Toll Holdings Ltd to a training company established by the TWU, ostensibly on the basis of ensuring that its 2011 enterprise agreement would be approved. This was allegedly done pursuant to a confidential side deed between Toll and the TWU, which also provided for the TWU to “audit” Toll’s major competitors’ operations, including with regard to wages and other compliance measures.

CFMEU hearings

In July 2014, the Commission commenced its hearings in relation to the CFMEU, examining amongst other things allegations into standover tactics and other corrupt conduct.

Issues papers

The Commission has released three issues papers, respectively:

  1. Noting that it would likely be recommending firmer regulation and scrutiny of unions, including providing for greater protection for whistleblowers, such as the ability for police to be able to receive protected disclosures in relation to alleged corrupt or unlawful behaviour by unions or union officials, including on a confidential or anonymous basis;
  2. Seeking comment as to measures that could be undertaken to improve governance mechanisms and laws relating to union officials’ conduct and accountability; and
  3. In relation to the funding of trade union elections, including a consideration of whether unions and union officials should be allowed to accept contributions from employers, and whether a compulsory register of employer contributions should be maintained.

What is happening next?

Submissions in relation to the Commission’s issues papers closed on 11 July 2014. The ACTU has boycotted this process, arguing that the deadline imposed provided them with insufficient time to consult with their members, and that the issues papers had “predetermined” the issues being dealt with.

Hearing schedules for the last of the five nominated unions, the CEPU, are yet to be announced.

The Commissioner is understood to be eager to meet the required timeframe of 31 December 2014.

What does this mean for your business?

The Commission’s broad terms of reference, and focus on employers as well as unions and union officials, and evidence heard to date, strongly suggest that the Commission will be making findings which will have broad implications for employers across Australia.

A key issue for many employers is in the enterprise bargaining sphere. It is more important than ever to ensure that enterprise bargaining with unions and/or employees involves a proper consideration of whether the matters being negotiated legitimately relate to the employment relationship, rather than being measures put in place to “keep the peace” and/or benefit other bodies, for example the payment of funds to union- affiliated training bodies above prevailing market rates.

While commercial imperatives are likely to increase the temptation for employers to agree to union demands simply for the purposes of getting enterprise agreements across the voting line, it is critical that employers always remember that enterprise agreements, and all dealings with unions be compliant with all applicable legislation, and also able to withstand the “front page test”.

2014 Workplace Trends: The Fair Work Amendment Bill 2014 & the Productivity Commission Review of the Fair Work Act

Dimi Baramili, Associate

In line with its 2013 election policy platform, the Coalition Government has set the wheels in motion for reform, with the introduction of the Fair Work Amendment Bill 2014 (the “FW Bill”) as well as the Productivity Commission review (the “PC Review”) of the Fair Work Act 2009 (Cth).

What is the coalition government’s policy for workplace relations?

In an earlier edition of Strateg-Eyes we reported that the Coalition proposed various improvements to the Act with the overriding aim of providing stability and fairness, whilst at the same time protecting the pay and conditions of workers to “restore the balance back to the sensible centre.” The proposed reforms were detailed in the Policy to Improve the Fair Work Laws, released in May 2013 (the “Policy”). The reforms espoused as part of the Policy platform include: improving the Fair Work laws (through changes to greenfields agreements, right of entry, workplace bullying and paid parental leave), the re-establishment of the Australian Building and Construction Commission (ABCC), tightening the rules around registered organisations to hold them to a standard similar to that of corporations, review of the Remuneration Tribunal and implementing recommendations made by the 2012 Fair Work Review Panel report. One major part of this policy platform was also to commission an independent review of workplace laws through the PC Review.

The Fair Work Amendment Bill 2014

On 27 February 2014 the Government introduced the FW Bill into Parliament. The Coalition Government put forward the FW Bill to implement the more pressing workplace relations reforms explicitly raised during their election campaign. The FW Bill is currently subject to second reading debate within the House of Representatives, and is described as implementing elements of the Policy and recommendations from the 2012 Fair Work Review Panel. The First Reading Speech and Explanatory Memorandum accompanying the FW Bill have also been released, providing insight into the nature and scope of the proposed reforms.

FW Bill reforms in response to recommendations made by the Fair Work review panel

  • employer not to refuse extended unpaid parental leave request unless reasonable opportunity given to discuss the request;
  • annual leave to be paid out on termination in accordance with the terms of the relevant instrument such as an enterprise agreement;
  • employees absent from work receiving workers’ compensation payments will not be able to accrue leave under the Act;
  • amendments to individual flexibility terms to ensure:
    • unilateral termination with 13 weeks’ notice;
    • terms in enterprise agreements to deal with when work performed, overtime, penalties, allowances and loadings;
    • benefits other than payment of money to be considered in determining if an employee is better off overall;
    • defence for employers if they reasonably believe the terms have been complied with;
  • a transfer of business situation will not arise where an employee is employed by an associated entity of their former employer where the employee seeks the role on their own initiative;
  • restricting the ability to make a protected action ballot order until bargaining has commenced; and
  • not requiring the FWC, in certain circumstances, to hold a hearing or conference to determine an unfair dismissal claim

Other proposed reforms in the FW bill consistent with the policy

  • creating a more efficient process for the negotiation of greenfields agreements by:
    • applying good faith bargaining principles to these negotiations;
    • introducing a negotiable three month time period with parties table to approach the Fair Work Commission to resolve the dispute if no agreement reached;
  • right of entry reforms including:
    • repealing amendments put in force last year which require an employer to fund transport and accommodation arrangements in remote areas;
    • new eligibility criteria for premises entry for holding discussions or running interviews;
    • repealing amendments made last year and returning to the former position concerning default interview locations;
    • extending the scope of the FWC’s powers in dealing with disputes about frequency of visits; and
    • ensuring the Fair Work Ombudsman pays interest on any unclaimed monies.

As outlined in the Policy, the PC Review is aimed at reviewing the current Fair Work laws and the impact on the economy, employment and productivity. The Coalition acknowledges these questions as crucial given that workplace relations is central to national interest. Further, it is seen to be a response to the ‘weak’ reforms made to the Act by the Labour Government last year in response to the recommendations made by the 2012 Fair Work Review Panel, which in their view was too narrow and did not consider all relevant issues. Rather, the approach favoured by the Coalition is an extensive review after which it will be open to debate by various stakeholders to ensure a viable solution for all. The Coalition has indicated on various occasions that it does not intend to make further changes to workplace relations laws, save for the fact that it will consider any recommendations made by the PC Review.

The PC Review panel will be independent and its composition is yet to be confirmed. It will be tasked with providing recommendations for change whilst balancing the protection of workers against efficient business operations.

Currently, the draft terms of reference for the PC Review are under review and a formal set of terms is yet to be released. However, at the date of writing, the terms of reference for the review had been leaked. It was reported through various media outlets that the review terms concern:

  • economic factors- the impact on employment levels, productivity, responses to economic conditions and investment;
  • impact of strike action on employer’s businesses in terms of work days lost;
  • scope of bargaining around working hours;
  • impacts of the laws on small business; and
  • procedural matters.

The guiding parameters for the PC Review as per the draft terms were also noted by media sources to “maintain fair and equitable pay and conditions for employees, including the maintenance of a relevant safety net”.2

repealing amendments put in force last year which require an employer to fund transport and accommodation arrangements in remote areas;new eligibility criteria for premises entry for holding discussions or running interviews;repealing amendments made last year and returning to the former position concerning default interview locations;

Senator Abetz, Employment Minister, responded to media reports of the leaked draft terms of reference by noting that the PC Review will be consistent with the Policy and will constitute a comprehensive and thorough analysis. Further, he stated the Productivity Commission is the best body for this review given it has a reputation for “social sensitivity and economic robustness”.3

What’s next

A deadline of April 2015 has been flagged for the PC Review report which will mean that it will be sometime before we see any potential reforms implemented, with suggestions by Senator Abetz that they will form part of the Coalition government’s platform for the next federal election which is not scheduled until mid-2016. Until then we will await the passage of the FW Bill within parliament and any ensuing debate. We will keep you up-to-date on the progress of the FW Bill and the PC Review over the coming months.


1 ‘The Coalition’s Policy to Improve the Fair Work Laws’, May 2013.

2 ‘Workplace review to examine penalties’, James Massola, Sydney Morning Herald, 7 March 2014.

3 ‘Sweeping inquiry into Fair Work Act’, AM with Chris Ulman, 7 March 2014