On Friday, 4th May, the federal government announced the introduction of a ‘Fairness Test’ for workplace agreements (both collective and individual), explaining that:

“The goal of Work Choices was to achieve better outcomes for both employers and employees through greater flexibility in employment arrangements in the workplace.”

“That is why such things as penalty rates were not mandated by inclusion in the minimum standard (the Australian Fair Pay and Conditions Standard). Such a step would have limited flexibility.”

“It was never the intention that it should become the norm for penalty rates to be traded off without proper compensation, although it was accepted that in some limited cases a job without penalty rates was better than no job at all.”

The "Test"
From 7th May all agreements lodged will now be vetted by the Workplace Ombudsman ( the renamed, Office of Workplace Services), to determine if it removes or modifies “protected award conditions” going to:

• Penalty rates, including for working on public holidays and weekends;
• Shift and overtime loadings;
• Annual Leave Loadings;
• Public Holidays;
• Rest breaks; and
• Incentive-based payments and bonuses.

It will fall to the employer to demonstrate that all new or existing employees covered by an application for an agreement and receiving less than $75,000 per annum, receive “fair compensation” for any or all of the above award-based conditions. The parties will have 14 days in which to amend the agreement to bring it into line with the requirements of the Workplace Ombudsman, in regard to what is ‘fair’ in light of the specific circumstances.

N.B The employee will be entitled to retrospective adjustment to the level of their award-based conditions, to the point of the agreement being signed.

In the event that the agreement is not amended it will become void.

Some Shortcomings:
The federal government’s new initiative appears to have several inherent flaws:
It potentially creates two groups within the workplace:

• Employees covered by agreements prior to 7th May 2007. Even though this group maybe parties to an agreement that prima facie fails the ‘Fairness Test’, they will not have entitlements to any retrospective adjustments.
  
• New or existing employees who become a party to an agreement after 6th May 2007. These individuals will be entitled to claim retrospective adjustments, if subsequently it is demonstrated that the agreement does not pass the ‘Fairness Test’. Concurrently they must be paid any more generous arrangement needed to bring the agreement up to the level of the preserved award conditions.

It will be unlawful to terminate an employee for declining to be a party to an agreement that fails the ‘Fairness Test’.

• As there are no draft amendments to the Work Choices legislation available at this point, it is difficult to anticipate the processes in the “pricing ‘of the various award entitlements, for the purpose of comparison in regard to monetary or non-monetary benefits provided by an agreement. This provides a significant obstacle going forward, and would have been avoided in the event that more notice of the proposals (together with a comprehensive framework of legislative amendments) had been given BEFORE the operative date of the ‘Test’.
  
• The “safety net” sought by the federal government is somewhat illusory as at the conclusion of an agreement, employee(s) entitlements default to the Australian Fair Pay & Conditions Standard, NOT THE PRESERVED AWARD ENTITLEMENTS.
  
• There will inevitably be lags in the process from the date the employee signs (or commences employment) and when or if, the Ombudsman gets around to advising the parties that there are deficiencies in the agreement (and commensurately, back payments). As a gauge, it is presently taking the Office of the Employment Advocate 10 –15 working days to provide written posted acknowledgement of their receipt of AWAs.

What Must be Done:
The changes to the Work Choices legislative package have considerable potential to create workplace disharmony and uncertainty.

As the federal election draws closer, and the political debate heightens, further amendments can reasonably be expected to the WorkChoices rules and regulations. Clients should therefore take immediate steps to ensure that the contents of a current agreement (particularly AWAs) comply with the new ‘Fairness Test’. Equally, all Clients currently negotiating either a collective or individual workplace agreement should undertake a pre-lodgement check with the Workplace Ombudsman’s Office, BEFORE signing.

Source: Michael Taylor, Principal Consultant, HMT Consulting, Queensland.

Note: HMT Consulting is based in Queensland, and articles provided may come from a Qld state perspective.

Any information provided is not intended, nor can it be regarded as a substitute for professional, legal or operational advice and no responsibility is accepted for any errors or ommissions. Whilst every care has been taken to ensure accuracy, the articles are not intended to be a definitive statement of the law or liability in any state or territory, or to apply to you specifically in any particular situation.