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Fairness Test for workplace agreements
On 7 May 2007 the Federal Government introduced the Fairness Test for
workplace agreements. The stated aim of the test is to guarantee that protected
award conditions, such as penalty rates and annual leave, are not traded off
without adequate compensation.
Employers and employees who are currently making an agreement need to be
aware of the Fairness Test, if they are considering removing or modifying any
or all protected award conditions.
Only <a href="http://www.rosendorff.com.au/">workplace
agreements</a> lodged on or after 7 May 2007 will be subject to the
Fairness Test. The test will apply to all AWAs lodged for employees who would
otherwise have been entitled to the benefit of protected award conditions, such
as penalty rates under an industrial award, and are earning less than $75,000
per year and to all collective agreements in industries covered by an award.
The current prohibition on reducing the special protections afforded to
outworkers in the Workplace Relations Act 1996 (the Act) will remain unchanged.
An agreement will pass the Fairness Test where the newly renamed Workplace
Authority (previously called the “Office of the Employment Advocate”) is
satisfied that fair compensation has been provided for modifying or removing
any or all protected award conditions. These conditions are:
• > Penalty rates
including for working on public holidays and weekends
• > Shift and overtime
loadings
• > Monetary allowances
• > Annual leave loadings
• > Public holidays
• > Rest breaks, and
• > Incentive-based
payments and bonuses
Since the introduction of the Work Choices legislation on 27 March 2006
which, among other changes, abolished the No Disadvantage Test, these
conditions have only been protected in the sense that they apply by default. In
other words they only apply to the extent that a workplace agreement does not
specifically override their operation. The rationale behind the fairness test
is to prevent employers from implementing workplace agreements that strip
employees of these otherwise applicable award entitlements without offering
adequate compensation in return.
The assessment process
The Workplace Authority will conduct the Fairness Test by considering both
the monetary and non-monetary compensation offered, relative to what would have
been payable under the relevant award. In most cases this will mean a higher
rate of pay in lieu of protected award conditions that have been modified or
removed.
All workplace agreements must still be lodged with the Workplace Authority
and, as before, they will start to operate on lodgement.
Outlook
We expect the operation of the Fairness Test to be substantially similar to
the pre-Work Choices No Disadvantage Test. The No Disadvantage Test used to
determine whether, on the whole, an employee was no worse off under a workplace
agreement as compared to his/her award. Our view is that what the Federal
Government has essentially done is re-instated the No Disadvantage Test albeit
under a different name for political expediency.
Employers should be mindful that there are a host of other issues to
consider when examining their business’ compliance with the new legislation and
their employment situation in general. In particular, non-compliance with the
legislation could not only expose your business to a fine of up to $33,000 for
each breach, but also to “wages and conditions” claims by disgruntled
employees. The newly renamed Workplace Ombudsman (previously called the Office
of Workplace Services) has the power to investigate both (i) your Work Choices
compliance and (ii) wages and conditions claims by both current and former
employees.
Warning
A common misconception among employers is that the reforms only apply to
their business if they are an incorporated entity. This is manifestly incorrect
and could end up costing you thousands. The Work Choices legislation, together
with the recently (re)introduced Fairness Test apply to virtually all Victorian
businesses, regardless of whether or not the business is incorporated or not.
This is because
industrial relations powers to the Commonwealth in 1996 - meaning that the
usual Constitutional limitation on the Commonwealth only being able to
legislate in respect of companies does not apply in
legislation is concerned.
As a firm with a wealth of Employment and Industrial
Law expertise, <a
href="http://www.rosendorff.com.au/staff-david-natenzon.html">Rosendorff
Lawyers</a> can assist your business with all aspects of compliance with
the new industrial relations legislation and can take you through the entire
agreement-making process from beginning to end.
