On 17 September 2008, Workplace Relations Minister Julia Gillard announced that the Federal Government’s changes to the Work Choices unfair dismissal laws and bargaining rules will take effect from 1 July next year, ahead of the remaining reforms taking effect six months later, from 1 January 2010.

Unfair Dismissal Laws

• Under the new legislation, for all unfair dismissals, regardless of the size of the employer:
• reinstatement will be the remedy unless it is not the interests of either party. Otherwise, compensation will be up to 6 months’ remuneration;
• unfair dismissal claims will not be available in cases of a genuine redundancy; and
• unfair dismissal claims must normally be lodged with Fair Work Australia within seven days.

The Fair Dismissal Code for small business was released on 17 September 2008.

Under the new regime, employers of fewer than 15 employees would be deemed to have dismissed a worker fairly if they comply with the "simple and short six-paragraph" Code.

The Code sets out the circumstances in which a dismissal without notice or warning is warranted, including cases of theft, fraud and violence.

It states that it is fair for an employer to dismiss an employee without notice or warning when the employer believes on reasonable grounds that the employee’s conduct is sufficiently serious to justify immediate dismissal.

Serious misconduct includes theft, fraud, violence and serious breaches of occupational health and safety procedures. For a dismissal to be deemed fair it is sufficient, though not essential, that an allegation of theft, fraud or violence be reported to the police.

In other cases, the small business employer must:

1. give the employee a warning, based on a reason that validly related to the employee’s conduct or capacity to do the job; and
2. provide a reasonable opportunity for the employee to improve his or her performance.

A small business employer may be required to provide evidence of compliance with the Code if the employee makes a claim for unfair dismissal to Fair Work Australia.

It does not appear there will be a Fair Dismissal Code for medium to large businesses.

The New Bargaining Framework

Collective agreements will be broadly similar to the current system with:

• agreements being subject to a form of ‘better off overall test’ administered by Fair Work Australia;
• employee collective agreements being retained – although an employer can be compelled to negotiate a collective agreement with a union in some cases;
• restrictions on content of agreements; and
• there will be some compulsory provisions – including a flexibility clause allowing an employer and individual employee to make a ‘flexibility arrangement’; dispute resolution (including employee representation) and consultation on major change.

Importantly, the new bargaining framework imposes a requirement on employers and employees to bargain in good faith. Good faith bargaining obligations will be:

• attending and participating in meetings at reasonable times;
• disclosing relevant information in a timely manner, subject to appropriate protection for commercial in confidence information;
• responding to proposals made by a party in a timely fashion;
• giving genuine consideration to the proposals of the other parties and providing reasons for their responses; and
• refraining from capricious or unfair conduct that undermines freedom of association or collective bargaining.

Where a bargaining representative is not bargaining in good faith, Fair Work Australia will be able to make orders to ensure the integrity and fairness of the bargaining process. Any orders made by Fair Work Australia can be enforced by the Fair Work Divisions of the Federal Court or the Federal Magistrates Court.

The framework also intends to make provision for unions or bargaining representatives to be able to apply to Fair Work Australia "to enter a ‘low-paid stream’ to bargain with a specified list of employers”. Fair Work Australia would only be able to make a binding agreement if parties agreed.

Next Phase of the New Workplace Relations System

The legislation for the new workplace relations system known as the Substantive Bill is intended to be introduced into the Parliament by the end of this year.

The Substantive Bill will replace the existing legislation, intended to create a new fair and flexible workplace relations system.

The Government intends to introduce separate legislation in the first half of 2009 to set out transitional and consequential changes, which will explain how existing employers and employees move to the new Forward with Fairness arrangements.

Key elements of the new system including the bargaining framework, unfair dismissal and associated protections are to commence on 1 July 2009, following passage of the Substantive Bill.

Until the modern awards and the National Employment Standards, starts operation on 1 January 2010, existing minimum entitlements will continue to apply.

Implications for employers

Unfair Dismissal

Now that unfair dismissal laws have been brought forward to 1 July 2009, employers ought to address any employee performance issues sooner rather than later.

Following the commencement of the new unfair dismissal laws, employers will be required to provide reasonable opportunity to employees to rectify any performance issues rather than simply being dismissed (essentially a reversion to pre-Work Choices reforms). Consideration will need to be given to performance management processes and dismissal procedures to ensure compliance with the new legislation.

Bargaining Rules

The new bargaining rules will now be introduced 6 months earlier than expected subject to the passage of the Bill through the Senate.

Employers whose agreements expire in mid to late 2009 will now be subject to the new regime (whereas otherwise they may not have been) – including the prospect of good faith bargaining orders and being required to bargain with a union if there is majority employee support.

New Forward with Fairness Regime

From 1 January 2010, employees will be entitled to minimum employment conditions set out in the ten new National Employment Standards. Employers will also need to consider the award system – which is in the process of being modernised and consolidated by the AIRC. Modern awards will not apply to new employees with a guaranteed annual earnings of more than $100,000 (indexed annually and pro-rata for part-time employees). There will be enterprise agreements, Individual Transitional Employment Agreements and pre-existing AWAs.

The system will be administered by Fair Work Australia, which is being described by the Government as a ‘one stop shop’.

For more information or to discuss the implications of these changes to your business, please contact Andrew Bland at [email protected].