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Workplace Reform: The hot issue for 2016

January 29, 2016

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On the back of the Productivity Commission’s final report into the workplace relations framework published in December, expect to see major workplace reform become a hot political issue in the lead up to the 2016 Federal election.

And believe it or not, it’s mostly good news for owners or managers of small and medium sized businesses.

Fair and reasonable workplace reform

In all, the Productivity Commission made just short of 70 recommendations to reform key aspects of the institutions, laws and practices of the workplace relations framework.

The report, which stretches over more than 1200 pages, covers the very structure of the workplace relations system, general protections, adverse action, industrial disputes, awards, wages, and more.

To help you understand some of the key proposed changes, we’ve identified five areas where you’ll benefit should these changes be adopted. These include:

  • Unfair dismissal
  • Weekend penalty rates
  • Sham contracting
  • Enterprise bargaining for small and medium sized business
  • General protections

With a focus on substance over procedure, the recommended reforms propose to rebalance some aspects of the system that have favoured some parties over others.

Unfair dismissal reforms

As one of the most contentious areas of the present system, the recommended reforms focus on substance rather than process. The proposed changes are designed to prevent spurious cases from resulting in financial settlement.

The recommendations include:

  • Introducing a non-refundable fee for the lodgement of unfair dismissal claims, and another if the matter goes on to arbitration.
  • Giving new powers to the FWC to dismiss applications before a conference or hearing.
  • Introducing a two-stage test to determine if there was a valid reason for the dismissal and whether any factors led to the dismissal being harsh, unjust or unreasonable.
  • Changing the penalty regime so that procedural errors by an employer do not result in reinstatement or compensation for the employee. In addition, it’s recommended that eligibility for compensation only applies where there is no reasonable evidence of persistent significant underperformance or serious misconduct.

Weekend penalty rates

Another highly contentious issue is the area of weekend penalty rates. While the Productivity Commission determined that premium rates of pay for long hours or work at night are justified, they also found the penalty rates paid to some Sunday workers are not.

In a sign of the times, the Productivity Commission recommended the need to harmonise penalty rates for Sunday work in line with those applying on Saturday. And specifically for employees in the hospitality, entertainment, retail, restaurant and café industries.

The report said penalty rates “have a legitimate role in compensating employees for working long hours or at asocial times”, however, the existence of higher Sunday rates is problematic as the rates are “inconsistent” across industries and are “anachronistic in the context of changing consumer preferences”.

The report is timely given the Fair Work Commission is currently conducting a review of all modern awards, and is considering applications to reduce Sunday and other penalty rates in the retail, hospitality, restaurants, fast food, clubs and pharmacy industries.  Nick Tindley, Head of Workplace Relations and Advisory for HR Assured, has been managing the case for reduced Sunday penalties for retailers, and is busily putting together the final arguments for change.  Nick also prepared submissions to the Productivity Commission, including making a number of recommendations that have been adopted in the report.

Sham contracting

With the practice of sham contracting all too frequently in the news, exploiting workers and giving perpetrators unfair competitive advantage, the Productivity Commission has recommended that the Government strengthens protections against the practice. Under the current test, only employers who are found to have been reckless are prosecuted.

However, in its report, the Productivity Commission found that the “reckless” behaviour test was too high a hurdle for legal action.

As such, under the proposed changes, a test of reasonableness will be introduced. By strengthening the test against misrepresenting an employment relationship as an independent contracting relationship, and through the regulators’ out-of-court actions, the Commission hopes to significantly discourage the practice.

Enterprise contracts

The Productivity Commission has also proposed the introduction of a new type of workplace agreement for small and medium businesses. It’s called the enterprise contract, and it includes elements of both individual workplace contracts and enterprise agreements.

An enterprise contract would allow you to vary awards for classes of employees (such as casual employees or weekend employees). The Productivity Commission believes this would empower employers to innovate in a way not otherwise available under current awards.

General protections

And finally, in relation to an employee’s workplace right to ‘make a complaint or inquiry’ in relation to their employment, the Productivity commission proposes providing a clearer definition of that right. Specifically, the complaint or inquiry must bear a ‘direct and tangible relation to a person’s employment’.

In addition, the Productivity Commission recommends that costs can be awarded against an employee who unsuccessfully pursues a general protections dismissal claim following a Fair Work Commission recommendation that the claim not be pursued.

The report also recommends significant restructuring of the current Fair Work Commission. This includes the establishment of an independent Workplace Standards Commission to review the national minimum wage and awards. The WSC would be separate from the Fair Work Commission and the Fair Work Ombudsman, which would continue to perform the same functions.

Next steps for workplace law reform

At this stage, all the recommendations set out in the Productivity Commission’s final report are simply recommendations. However, the Minister for Employment, Senator Michaelia Cash, has indicated that the Government will now seek further public stakeholder consultation to consider the case for change.

If it’s compelling, expect to see these changes form part of the Government’s Industrial Relations policy that they take to the next election.

In the meantime, we’ll keep you posted on the outcome of the consultations which are expected to take place during this first quarter of 2016.

Get in touch

If you want more information on the proposed changes outlined in the Productivity Commission’s final report, or to participate in the public consultations please get in touch with the team at HR Assured today.

If many of the fair and sensible changes outlined in the report are taken onboard by the Government, you can expect to see a more balanced workplace relations framework. Without unduly onerous procedures and red tape, you’ll be able to better able to innovate, create jobs and manage your people.