BILLS DIGEST NO. 115, 2016–17              19 June 2017

Fair Work Amendment (Repeal of 4 Yearly Reviews and Other Measures) Bill 2017

Jaan Murphy and Andrew Cameron
Law and Bills Digest Section

Date introduced:  1 March 2017

House:  House of Representatives

Portfolio:  Employment

Commencement: Schedule 1 will commence on 1 January 2018. Schedules 2, 3 and 4 will commence the day after the Bill receives Royal Assent.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at June 2017.

Purpose of the Bill

The purpose of the Fair Work Amendment (Repeal of 4 Yearly Reviews and Other Measures) Bill 2017 (the Bill) is to amend the Fair Work Act 2009 (the FW Act) and the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (the FW Transitional Act) to:

•       repeal the requirement for the Fair Work Commission (FWC) to conduct four-yearly reviews of modern awards from the beginning of 1 January 2018

•       allow the FWC to overlook ‘minor procedural or technical errors’ when approving an enterprise agreement, where those errors were not likely to have disadvantaged employees, including errors related to the Notice of Employee Representational Rights (NERR) requirements

•       ensure that the existing complaint-handling powers of the Minister for Employment and the President of the FWC apply to FWC Members who formerly held office in the Australian Industrial Relations Commission (AIRC) and

•       apply, in a modified form, the Judicial Misbehaviour and Incapacity (Parliamentary Commissions) Act 2012 (the JMIPC Act) to FWC Members.[1]

Structure of the Bill

The Bill’s measures are contained in four Schedules:

•       Schedule 1 deals with the repeal of the four yearly reviews of modern awards by the FWC

•       Schedule 2 deals the factors considered by the FWC when approving an enterprise agreement

•       Schedule 3 deals with the modified application of the JMIPC Act to FWC Members and application of the FW Act to FWC Members who formerly held office in the AIRC and

•       Schedule 4 provides for application and transitional provisions in relation to the amendments made by Schedules 1 to 3 of the Bill.

Background

As the Bill deals with three broad areas of reform, the background to each is provided separately below.

Repeal of the four-yearly reviews of modern awards by the FWC

Current law

Currently section 156 of the FW Act requires the FWC to review all modern awards every four years. The reviews may result in the FWC making new modern awards, or varying or revoking (cancelling) modern awards.[2]

When reviewing or varying a modern award, section 134 of the FW Act provides that the FWC must take into account the modern award ‘objective’. Relevantly, this includes ‘relative living standards’, the need to provide additional remuneration for employees working on weekends and public holidays, and the likely impact on productivity and employment costs.[3]

In relation to a four-yearly review of a modern award, the FWC may only make a determination to vary a modern award’s minimum wage where it is satisfied that the variation is justified by ‘work value’ reasons—that is reasons related to the nature of the work, the skill and responsibility attached to it and the conditions under which it is performed.[4]

Given the large number of modern awards, four-yearly reviews of modern awards are often complex, protracted and controversial processes involving large numbers of participants and submissions for various interest groups, including employee organisations, industry groups and employers.

2012 review of the Fair Work Act

In relation to the four-yearly review of modern awards, the Labor Government’s 2012 Fair Work Act Review noted:

On recommendations for amendment to the provisions relating to award variations, the Panel notes the Government’s policy intention of establishing a stable safety net, including by only providing for four-yearly reviews and otherwise limited capacity for variation. Given that the first four-yearly review of modern awards is still some time away and [Fair Work Australia] FWA’s interim award review has yet to be finalised, the Panel is unable to justify making recommendations that would upset arrangements for general reviews of modern awards.[5] (emphasis added)

In relation to ‘calls for increased ability to seek variations outside of general reviews’ the Expert Panel stated ‘such a move would be counter to the policy of maintaining a stable safety net’ and would be ‘likely to result in increased speculative claims to deal with short-term concerns of both employers and employees’ and therefore did not recommend any amendments in that area.[6]

Changes proposed by the Productivity Commission

The Productivity Commission’s Report on Australia’s Workplace Relations Framework (the PC Report) examined the role of modern awards within Australia’s workplace relations framework. The Productivity Commission noted that:

… awards are an Australian idiosyncrasy with some undesirable inconsistencies and rigidities, but they are an important safety net and a useful benchmark for many employers.[7]

The Productivity Commission recommended that the FW Act be amended to:

•       remove the requirement for continued four yearly reviews of modern awards (recommendation 8.1)

•       add the requirement that the wage regulator review and vary awards as necessary to achieve the revised modern awards objective specified in recommendation 8.3, namely that modern awards, together with the National Employment Standards, provide a minimum safety net of terms and conditions, which promote the overall wellbeing of the community, taking into account:

–      the needs of the employed

–      the need to increase employment

–      the needs of employers

–      the needs of consumers and

–      the need to ensure modern awards are easy to understand.[8]

The Government argues the Bill ensures that the framework for the making, varying and revoking of modern awards outside of the four-yearly reviews will continue to provide ‘a balanced, fair and sensible safety net of terms and conditions of employment’.[9] As the FW Act already provides that the FWC ‘must ensure that modern awards, together with the National Employment Standards, provide a fair and relevant minimum safety net of terms and conditions’.[10] Schedule 1 of the Bill gives partial effect to the Productivity Commission’s recommendation 8.1, because the Bill does not replace the current modern awards objective in section 134 of the FW Act with the recommended revised modern awards objective specified in recommendation 8.3 (as set out above).

What is an enterprise agreement?

An enterprise agreement is a collective agreement dealing with certain permitted matter (such as wages) made between employees and an employer made at the enterprise level. They are enforceable under the FW Act, and set out terms and conditions of employment, as well as the rights and obligations of the employees and the employer covered by the agreement.[11]

An enterprise agreement must meet a number of requirements under the FW Act before it can be approved by the FWC.

How is an enterprise agreement made?

The process for making enterprise agreements is set out in Part 2-4 of the FW Act. The diagram below sets out this process in simplified form.

Figure 1: making an enterprise agreement

Source: Fair Work Commission, Benchbook: enterprise agreements, Fair Work Commission website, 3 April 2017, p. 68.

Importantly, an enterprise agreement does not operate, and has no legal force, until it is approved by the FWC.[12]

Factors considered by the FWC when approving an enterprise agreement

Section 188 of the FW Act deals with when an enterprise agreement (EA) has been genuinely agreed to, a prerequisite for any EA being approved by the FWC.[13]

As noted in the figure above, one important step in the process of making an enterprise agreement is the employer issuing a Notice of Employee Representational Rights (NERR) within 14 days of the commencement of bargaining.[14] As the name suggests, a NERR notifies each employee of his or her bargaining rights.[15] The content of the NERR is prescribed by regulation.[16] NERRs are intended to inform employees of their right to appoint a bargaining representative to negotiate on their behalf during the making of an enterprise agreement, and where an employee is a union member, to advise them that the union will be their bargaining representative by default (unless the employee appoints another representative).[17]

Importantly, the FWC and courts have strictly interpreted certain procedural requirements imposed by the FW Act, especially in regards to the issuing of a NERR.[18] This had led to criticism that ‘form’ unduly dominates over the substance of key steps in negotiating and ultimately, approving an EA.[19] For example, the Productivity Commission noted one infamous case where an employer:

… provided three pages — stapled together — to all of the employees to be covered by a proposed enterprise agreement. Some bargaining ensued, an agreement was struck and the agreement was lodged with the FWC. However, by attaching the three documents together, the employer contravened requirements about the form of notice to be given to employees. The FWC had no real discretion in the matter, and was obliged by the Fair Work Act to reject the agreement. So, absurdly, the employer had to recommence the agreement process. There is a convincing variety of similar examples.[20]

As a result, the Productivity Commission recommended that the FW Act be amended to:

•       allow the FWC wider discretion to overlook minor procedural or technical errors when approving an agreement, as long as it is satisfied that the employees were not likely to have been placed at a disadvantage because of an unmet procedural requirement and

•       extend the scope of this discretion to include minor errors or defects relating to the issuing or content of a notice of employee representational rights.[21]

Schedule 2 of the Bill gives effect to this recommendation.

Handing alleged misconduct or incapacity of FWC Members

On 19 October 2015, Peter Heerey was appointed to inquire into and report on complaints about FWC Vice President Michael Lawler.[22]

The review was to inquiry into and report on complaints about Vice President Lawler, and related issues, including:

•       the processes of the FWC to investigate complaints and allegations made against members of the FWC, including those appointed under previous workplace relations legislation

•       the appropriateness of any process in the FWC to manage conflicts of interest and

•       whether there was a reasonable basis for both Houses of Parliament to consider requesting the Governor-General to remove Vice President Lawler from the FWC on the grounds of proved misbehaviour or incapacity.[23]

Relevantly to this Bill, the Inquiry report (the Heerey Report) found:

•       the complaint investigation processes of the FWC are adequate, and are consistent with those recently provided by statute for other comparable federal judicial and quasi-judicial bodies and

•       the current arrangements in the FWC for managing conflicts of interest are appropriate.[24]

However, Mr Heerey recommended that the provisions of the JMIPC Act ‘should be extended to apply to termination proceedings against persons who are not judges but hold office subject only to termination by the Governor-General on addresses of both Houses of Parliament’.[25] This recommendation was not made in response to identified deficiencies with the current processes of the FW Act, but to create consistency between Chapter III judges under the Australian Constitution and FWC Members in response to the policy developments that had applied to the former since the introduction of the JMIPC Act in 2012.

The amendments proposed by the Bill give effect to that recommendation, but also deal with the issues identified by Mr Heerey regarding sections 581A and 641A (and related provisions) of the FW Act.

Section 581A empowers the President of the FWC to deal with a complaint about the performance of another FWC Member, and ultimately allows for each House of the Parliament to consider whether to present to the Governor-General an address praying for the termination of the appointment of the FWC Member. Section 641A provides the same power to the Minister. Mr Heerey identified that sections 581A and 641A probably did not apply to FWC Members who were appointed to the AIRC pursuant to the Workplace Relations Act 1996 (like Vice President Lawler), although they were subject to preserved provisions that essentially provided both the President and the Minister (when read together with sections 61 and 64 of the Constitution) with the same powers.[26] As of 2 December 2016 there were 12 serving FWC Members who were appointed under the Workplace Relations Act.[27] Mr Heerey recommended:

… because of the uncertainty surrounding the applicability of sections 581A and 641A to former AIRC Members, there would be some utility in amending the present legislation to ensure (so far as is constitutionally possible) that these provisions apply to all Members of the FWC, irrespective of when they were appointed.[28]

The Bill gives effect to that recommendation.

Committee consideration

Senate Education and Employment Legislation Committee

The Bill was referred to the Senate Education and Employment Legislation Committee for inquiry and report by 22 May 2017. Further details of the inquiry and the Committee’s report are available on the inquiry homepage.

The Committee received 14 submissions, primarily from industry bodies and unions.[29] The Australian Chamber of Commerce and Industry made concise submissions outlining its support for the Bill, while the Australian Council of Trade Unions (ACTU) supported only the provisions in Schedule 3 of the Bill, which relate to the investigation of alleged misconduct by FWC Members. The ACTU’s opposition to the repeal of the four yearly reviews was based on concerns regarding the transitional provisions, as well as opposition to the default requirement for variations to modern awards to be made by the Full Bench of the FWC only. However, the ACTU supports the repeal of the four yearly reviews in principle.[30]

The FWC also made submissions to the Committee and primarily addressed the proposed discretion to be granted to the FWC to approve enterprise agreements where there have been minor procedural or technical errors in complying with procedural requirements of the FW Act. The FWC identified that Schedule 2 would not apply retrospectively to applications made before its commencement. The FWC proposed that significant delay, inconvenience and expense could be avoided if the Bill were amended to apply the Schedule 2 items retrospectively to applications made prior to its commencement.[31]

The Queensland Law Society (QLS) made brief submissions in relation to proposed section 641B identifying several concerns with the approach taken by the Bill in modifying the JMIPC Act to apply to FWC Members. It recommended that instead a separate Bill be introduced to amend the JMIPC Act to extend its application to quasi-judicial officers.[32]

On 22 May 2017 the Committee published its report on the Bill.[33] The Committee recommended that the Bill be passed, subject to amendments to the Bill to ‘provide for the new approval discretion to apply to applications made prior to the commencement of Schedule 2’.[34] This is a reference to proposed item 2 of Schedule 2 of the Bill that expands the definition of ‘genuinely agreed’ under the FW Act to include cases where there have been ‘minor procedural or technical errors’ in complying with the FW Act’s procedural requirements for the approval of enterprise agreements. The amendment recommended by the Committee was sought by the Fair Work Commission in its submission to the Committee.[35]

Additional comments by Opposition Senators

Whilst ‘expressing in-principle support for improvements to the enterprise bargaining process’ proposed by the Bill, the Opposition Senators raised three concerns about the Bill.

First, it was argued that whilst the purpose of item 26(1) of Schedule 4 of the Bill (a transitional provision) is to allow incomplete four yearly reviews ‘to be completed if they are still on foot at the time the abolition comes into effect’, the provision appears only to apply to the ‘award stage’ of such reviews and not the ‘common issues’ stage.[36]

Second, the Opposition Senators noted:

… the requirement for a Full Bench of the Fair Work Commission to be constituted to make, vary or revoke a modern award is unnecessarily cumbersome. Given the government's enthusiasm for reducing the burden on resources of the FWC and bargaining parties, this provision should be amended so that only a single member is required.[37]

Third, the Opposition Senators noted that the use of the term ‘disadvantaged’ in the provision allowing the FWC to disregard minor technical or procedural issues when approving enterprise agreements does not reflect the ‘intent of the procedural requirements, which is to ensure the enterprise agreement is genuinely agreed to’.[38]

As a result, the Opposition Senators recommended that the Senate amend the Bill to address the three issues discussed above.[39]

Senate Standing Committee for the Scrutiny of Bills

The               Senate Standing Committee for the Scrutiny of Bills considered the Bill and noted that the JMIPC Act establishes a framework for the conduct of investigations by a Parliamentary Commission, with powers to hold hearings and take evidence on oath, require the production of documents and issue search warrants.[40]

It noted that proposed section 641B, at item 1 of Schedule 3 to the Bill, would apply the JMIPC Act to FWC Members in a modified form to allow a Parliamentary Commission to be established by the Houses of Parliament to investigate and report on alleged misbehaviour or incapacity of a FWC Member. The application of the JMIPC Act to FWC Members follows Peter Heerey’s recommendation in the Heerey Report for the provisions of the JMIPC Act to ‘be extended to apply to termination proceedings against persons who are not judges but hold office subject only to termination by the Governor-General on addresses of both Houses of Parliament’.[41] Practically, section 641B introduces a third mechanism for the investigation and handling of alleged misbehaviour or incapacity of FWC Members (the other mechanisms being the FWC President’s powers under section 581A and the Minister’s powers under section 641A).

The Committee noted that it had raised a number of concerns in relation to the Judicial Misbehaviour and Incapacity (Parliamentary Commissions) Bill 2012 (JMIPC Bill) when it was before the Parliament.[42] The Committee noted that as the Bill ‘seeks to expand the ambit of the JMIPC Act to include FWC Members’, the Committee referred to its previous comments about the JMIPC Bill in relation to:

•       the power of a Commission to issue search warrants

•       balancing privacy and reputational interests of persons subject to investigation by a Parliamentary Commission

•       the reversal of the evidential burden of proof where a person wishes to use a 'reasonable excuse' defence to offences relating to failure of a witness to appear or failure of a witness to produce a document or thing and

•       the abrogation of the privilege against self-incrimination.[43]

The Committee concluded that whilst the provisions in Schedule 3 ‘may be considered to trespass unduly on personal rights and liberties’, it left consideration of ‘the appropriateness of expanding the ambit of the JMIPC Act to include FWC Members’ to the Senate as a whole.[44]

Policy position of non-government parties/independents

The Opposition appears to support the Bill in general terms, but recommended three amendments to the Bill.[45] As the Greens Senators on the Senate Education and Employment Legislation Committee inquiry into the Bill did not issue a dissenting report or make additional comments, it would appear that the Greens support the Bill, subject to the recommendations made by the Committee.

At the time of writing, the policy position of other non-government Members and Senators was not known.

Position of major interest groups

The Government advises that in November 2016 the Australian Chamber of Commerce and Industry (ACCI), the Australian Industry Group (AIG) and the Australian Council of Trade Unions (ACTU) jointly wrote to the Minister for Employment, asking the government to abolish the four-yearly reviews of modern awards.[46] The Government states that this suggests ‘there is broad support for reforms to repeal four-yearly reviews’.[47]

In their submissions to the Senate Education and Employment Legislation Committee inquiry into the Bill, the ACCI and AIG both expressed general support for the Bill, although the ACCI suggested various technical amendments.[48] The ACTU expressed support for Schedules 1 and 3 of the Bill (whilst suggesting various technical amendments) but opposed Schedule 2 of the Bill on the basis that ‘the provisions run counter to the objective that bargaining is inclusive, fair and well informed’.[49]

Financial implications

The Explanatory Memorandum advises that the financial impact of the Bill to government is nil.[50] However, the Government has stated:

Employee groups, employer groups and the Fair Work Commission spend an enormous amount of time and money in undertaking these reviews. Their abolition will save employers and unions about $87 million over the next 10 years. This amount represents a significant regulatory burden.[51]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[52]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights considers that the Bill does not raise human rights concerns.[53]

Key issues and provisions—Schedule 1

As noted above, currently Division 4 of Part 2-3 of the FW Act requires the FWC to review all modern awards every four years, and provides that the FWC can only vary modern award minimum wages for ‘work value’ reasons.

Issues with the four-yearly review model

The Productivity Commission noted that in practice the ‘current four yearly review appears to be an expensive exercise requiring extensive investment from interested parties’[54] due in part to the fact that ‘the FWC is required to review every clause in every award’.[55] Further, the Productivity Commission noted:

… due to the breadth of the issues before the FWC, the current review is likely to take at least two years to be completed. After this, the system should remain relatively ‘stable’ for two years before the next review is due to commence.[56]

Proposed replacement model

The Productivity Commission recommended that instead of four-yearly reviews of modern awards, the FW Act should be amended to use a more targeted approach to reviewing awards, with efforts focused on aspects of awards that are the source of greatest problems.[57] In essence the Productivity Commission suggested that the four-yearly award reviews be replaced with a process for reviewing modern awards that can be initiated by affected parties or by the FWC itself.

Model proposed by the Bill

Because of the substantial demands placed on parties by the system of four-yearly reviews, the Government argues that the current four-yearly award review process ‘does not meet the Act’s objective to create a simple, easy to understand, sustainable award system’.[58] Accordingly, the Bill would remove the four-yearly reviews of modern awards and amend the FW Act to allow affected parties to apply to vary a modern award on a case by case basis. This will allow the FWC to not only focus efforts on aspects of awards that are the source of the greatest problems (as identified by the parties bringing such applications), but it will also allow the FWC to conduct its own reviews where it considers it appropriate to do so.

Repeal of requirement to conduct four-yearly reviews

Item 8 of Schedule 1 of the Bill will repeal Division 4 of Part 2-3 of the FW Act and therefore remove the requirement for the FWC to conduct four-yearly reviews of modern awards. Items 1–7 of Schedule 1 of the Bill make consequential amendments to reflect the repeal of the requirement to conduct four-yearly reviews.

Alterations to modern award powers of the FWC

Division 5 of Part 2-3 of the FW Act deals with how the FWC can exercise its powers in relation to modern awards outside of the four-yearly review process. Currently section 157 of the FW Act allows only a Full Bench of the FWC to make modern awards outside of the four-yearly review process (a single Member can vary awards outside of the four-yearly review process).

Proposed subsection 157(2A) inserts an identical definition of ‘work value reasons’ to that used in current subsection 156(4) (which will be repealed by item 8). Read with existing subsection 157(2) (as amended by item 12 of Schedule 1 to the Bill), this amendment will ensure that variations to the minimum wages paid under modern awards can only occur for ‘work value’ reasons, namely ‘reasons justifying the amount that employees should be paid for doing a particular kind of work’ related to:

•       the nature of the work

•       the level of skill or responsibility involved in doing the work or

•       the conditions under which the work is done.[59]

Powers of the Full Bench and single members of the FWC to vary or revoke modern awards

As noted above, currently only a Full Bench of the FWC is able to make a modern award. In contrast, a single member of the FWC may vary or revoke a modern award outside of the four-yearly review process.[60]

Only Full Bench can revoke a modern award

Proposed subsection 616(3B), at item 18 of Schedule 1, provides a default rule that any determination to revoke a modern award must be made by a Full Bench. This is a change from the existing framework under which a single FWC Member could revoke a modern award.[61]

Variation of modern awards by a single Member of the FWC

Proposed paragraphs 582(4)(ab) and (e), at items 15 and 16 of Schedule 1, along with proposed subsections 616(3C) and (3D) at item 18 of Schedule 1, will allow the President of the FWC to direct a single FWC Member to conduct a variation matter for a modern award in various circumstances, as discussed below.

Proposed subsection 616(3C) provides that by default, a determination to vary a modern award must be made by a Full Bench. This is a change from the existing framework, under which a single FWC Member can vary a modern award outside of the four-yearly review process. The Government argues:

In the absence of the 4 yearly review mechanism, where reviews were conducted by a Full Bench, it is appropriate for a Full Bench to consider such matters before making any determinations to vary modern awards.[62]

However, proposed subsection 616(3D) will allow the President of the FWC to direct a single FWC Member to conduct a variation matter for a modern award when it relates to the exercise of a power under:

•       section 159 (variation to update or omit name of employer, organisation or outworker entity)

•       section 160 (variation to remove ambiguity, uncertainty or correct error) or

•       section 161 (variation on referral by Australian Human Rights Commission).

The Government notes that the above reflects that ‘some modern award variations may relate to routine matters’, and hence ‘it would be appropriate for a single FWC Member to perform that function’.[63]

Proposed paragraph 616(3D)(b) will also allow the President to direct a single FWC Member to conduct a variation under section 157 where the President considers it appropriate to do so in relation to:

•       a single award or

•       two or more awards relating to the same industry or occupation.

The Government notes that an example of when proposed paragraph 616(3D)(b) might be used is when an application is ‘made with the support of all stakeholders to repeal redundant references from a single modern award’ but also notes:

Where applications to vary modern awards may relate to more significant or contentious matters, or may potentially present a ‘test case’ that could emerge as a common issue across awards, the default position for Full Bench consideration will prevail.[64]

The Government also notes that appeal and review rights to the Full Bench from single Member decisions to vary a modern award will continue to be available.[65]

Items 10, 12, 14, and 17 are consequential amendments reflecting the above proposed changes.

Key issues and provisions—Schedule 2

Section 188 of the FW Act sets out a list of matters for the FWC to consider when determining whether an EA has been genuinely agreed to by the employees covered by the agreement. An EA must have been genuinely agreed to before the FWC can approve it.[66]

As noted above, the FWC and courts have strictly interpreted certain procedural requirements imposed by the FW Act, especially in regards to the issuing of a NERR, that must be considered under section 188.[67] This had led to criticism that ‘form’ unduly dominates over the substance of key steps in negotiating and ultimately, approving an EA.[68]

Proposed subsection 188(2), at item 2 of Schedule 2, provides that an enterprise agreement will also have been genuinely agreed to if the FWC is satisfied that the agreement would have been genuinely agreed to but for any minor procedural or technical errors made in relation to:

•       the requirements referred to in paragraph 188(1)(a) or (b), namely:

–      the access period during which employees are provided with a copy of the proposed agreement for consideration before voting

–      notification of the time, place and method of the vote for the proposed EA and

–      ensuring that the terms of the proposed EA and the effect of those terms are explained to relevant employees in an appropriate manner (taking into account the particular circumstances and needs of the relevant employees)

–      the requirement that employees are not requested to approve the proposed EA until 21 days after the last NERR was given

–      the agreement was made in accordance to relevant procedures for the type of agreement (single or multi-enterprise non-greenfields agreement) or

•       the requirements related to the NERR under sections 173 and 174.

However, even where the FWC is satisfied that the agreement would have been genuinely agreed to but for any of the minor procedural or technical errors noted above, proposed paragraph 188(2)(b) provides that the FWC must also be satisfied that the employees covered by the proposed EA ‘were not likely to have been disadvantaged by those errors’.

The effect of proposed subsection 188(2) is that an enterprise agreement will have been genuinely agreed to (and therefore able to be approved by the FWC) despite any minor procedural or technical error if the employees were not likely to have been disadvantaged by those errors. This will prevent the types of cases identified by the Productivity Commission as being ‘absurd’ from occurring in the future.[69]

Key issues and provisions—Schedule 3

Schedule 3 responds to issues identified in how incapacity and misbehaviour of FWC Members is dealt with under the FW Act identified by Peter Heerey in the Heerey Report.[70]

Background to incapacity and misbehaviour of judicial officers and equivalent offices

Currently sections 641 and 642 of the FW Act allow for the termination (section 641) and suspension (section 642) of Members of the FWC by the Governor-General on the grounds of ‘proved misbehaviour’ or being ‘unable to perform the duties of his or her office because of physical or mental incapacity’. As such, they reflect the wording of section 72 of the Constitution (which deals with, amongst other things, the removal of judicial officers).

Current process for terminating or suspending a Member of the FWC

Section 581 of the FW Act provides that the President is responsible for ensuring that the FWC performs its functions and exercises its powers in a manner that is efficient and adequately serves the needs of employers and employees throughout Australia.

In turn, section 581A empowers the President to deal with complaints about the performance of another FWC Member, and to take any measures that the President believes are reasonably necessary to maintain public confidence in the FWC, including (but not limited to) temporarily restricting the duties of the FWC Member. Importantly, a complaint will only trigger section 581A if it about the performance by a FWC Member of his or her duties (performance being decisions or conduct in relation to cases, although it can also extend to non-performance of duties).[71]

The President must refer a complaint about a FWC Member to the Minister if they are satisfied:

•       one or more of the circumstances that gave rise to the complaint have been substantiated and

•       each House of the Parliament should consider whether to present to the Governor-General an address praying for the termination of the appointment of the FWC Member.[72]

Subsection 581A(5) provides that the Minister must then ‘consider whether each House of the Parliament should consider the matter’, with section 641A providing the necessary powers to the Minister to ‘handle’ the complaint for the purpose of:

•       considering whether the Houses of Parliament should consider whether to present to the Governor-General an address praying for the termination of the appointment of the FWC Member and

•       considering whether to advise the Governor-General to suspend the FWC Member.[73]

Section 641 then provides that the Governor-General may terminate the appointment of an FWC Member if an address praying for the termination is presented by each House of the Parliament on one the following grounds:

•       proved misbehaviour or

•       the Member being unable to perform the duties of his or her office because of physical or mental incapacity.

Section 642 allows the Governor-General to suspend the appointment of an FWC Member (other than the President) on the advice of the Minister.[74] Suspension can only occur (subject to the process outlined below) on the basis of one the following grounds:

•       misbehaviour or

•       the Member being unable to perform the duties of his or her office because of physical or mental incapacity.

As such, the process leading to the suspension or termination of a FWC Member (other than the President) is as follows:

•       the Minister makes a recommendation to Governor-General to suspend a FWC Member under paragraph 641A(b) or the FW Act

•       the Governor-General may suspend the FWC Member at this time, on the basis of the advice provided

•       if the Governor-General does suspend the FWC Member, the Minister must, within seven sitting days of suspension, table a statement identifying the Member and setting out grounds for suspension in each House of Parliament

•       if both Houses resolve that the appointment of the FWC Member should be terminated, then the Governor-General must terminate the appointment of the FWC Member and

•       if one of the Houses of Parliament does not pass a resolution to terminate within 15 sittings days, the suspension of the FWC member ends.[75]

This means that both the House of Representatives and the Senate must agree in order for the appointment of a FWC Member to be terminated. If one House disagrees or fails to pass the resolution calling for the termination of the FWC Member, subsection 642(4) provides that the suspension terminates.

Note that there is no requirement to suspend an FWC member before termination. The Minister may decide to proceed directly to termination under section 641 of the FW Act, the difference being that the Governor-General does not have discretion to refuse the resolution of the Parliament calling for the appointment of a suspended FWC member to be terminated.

Gaps in current system for terminating or suspending certain Members of the FWC

The Heerey Report identified gaps in the current system for terminating or suspending certain Members of the FWC, specifically Members appointed to the AIRC under the Workplace Relations Act.[76] Mr Heerey noted:

Section 581A of the Fair Work Act probably does not apply to FWC Members like Vice President Lawler who had been appointed to the AIRC under the Workplace Relations Act. While there is some doubt about this matter, the better view is that s 581A cannot properly be viewed as a mere supplementary or machinery provision which can sit together with the preserved terms and conditions of former AIRC Members. As such, it would be unsafe for the President to utilise powers under the section against a former AIRC Member unless the Fair Work Act were amended to make the position clear.[77] (emphasis added)

After examining the options for dealing with complaints about FWC Members appointed under previous legislation, Mr Heerey concluded that although FWC Members appointed under the Workplace Relations Act have ‘the rank and status of a Federal Court judge’ such persons are not ‘a Chapter III judge’ and hence the JMIPC Act could not (in its current form) apply to investigations involving them. Nonetheless:

… there would seem to be logic in extending the provisions of the Judicial Misbehaviour and Incapacity Act to cover termination proceedings against persons like Vice President Lawler who are not judges but hold office on Act of Settlement terms. Further, because of the uncertainty surrounding the applicability of sections 581A and 641A to former AIRC Members, there would be some utility in amending the present legislation to ensure (so far as is constitutionally possible) that these provisions apply to all Members of the FWC, irrespective of when they were appointed.[78]

The amendments proposed in Schedule 3 of the Bill give effect to the two issues identified above, namely:

•       doubt about the applicability of sections 581A, 641, 641A and 642 of the FW Act to FWC Members appointed under the Workplace Relations Act and

•       the inapplicability of the JMIPC Act (in its current form) to investigations of persons ‘who are not judges but hold office on Act of Settlement terms’, including FWC Members.

Amendments related to complaints against FWC Members

Item 2 of Schedule 3 to the Bill inserts proposed clause 6A into Schedule 18 to the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (the FW Transitional Act).

Proposed clause 6A will ensure that the powers of the FWC President and the Minister under sections 581A and 641A of the Act (described above) will apply in relation to complaints made about an FWC Member who was appointed to the AIRC under the Workplace Relations Act 1996.

Currently sections 82 and 86 of the Workplace Relations Act 1996 (preserved by clause 2 of Schedule 18 of the FW Transitional Act in relation to AIRC Members who transferred to the FWC) provide for the ‘removal from office’ of such FWC Members on the grounds of proved misbehaviour or incapacity.[79] The Heerey Report raised doubts about the powers of Minister and President in relation to Members of the FWC appointed to the AIRC under the Workplace Relations Act, based on the apparent inability of the preserved terms under the Workplace Relations Act to ‘sit together’ with the corresponding FW Act provisions (namely, sections 581A and 641A).[80]

Proposed clause 6A of Schedule 18 of the FW Transitional Act will apply sections 581A and 641A of the FW Act as if they were amended to refer to preserved provisions of the Workplace Relations Act that govern the removal from office of a Presidential Member (section 82) or a Commissioner (section 86) who was an AIRC Member who transferred to the FWC. This ensures that the terms and conditions of appointment for and other arrangements pertaining to former AIRC Members (including termination) are dealt with together under the new framework.[81]

Extending the JMIPC Act to FWC Members

The JMIPC Act only applies to Chapter III judges. It provides for the appointment of ad hoc commissions to investigate and report to Parliament on the alleged misbehaviour or incapacity of a ‘Commonwealth judicial officer’ so that Parliament may be ‘well informed to consider’ whether to pray for removal of the officer under section 72(ii) of the Constitution.[82]

The JMIPC Act enables the Parliament to establish a Commission of inquiry, comprised of members nominated by the Prime Minister and appointed by both Houses of Parliament.[83] Whilst Commissions appointed under the JMIPC Act are given various coercive investigative powers,[84] section 20 of the JMIPC Act contains detailed natural justice provisions. However, as noted in the Explanatory Memorandum, a Commission constituted under the JMIPC Act:

… does not determine whether facts are proved or make recommendations to the Parliament about the removal of a judge. A Commission only considers the threshold question of whether there is evidence of conduct by a judicial officer that may be capable of being regarded as misbehaviour or incapacity, and reports on these matters to the Parliament. It is for the Houses of Parliament to determine whether they regard particular conduct as proved misbehaviour or incapacity.[85] (emphasis added)

As noted by Mr Heerey, the definition of ‘Commonwealth judicial officer’ used in the JMIPC Act ‘in effect is confined to judges appointed under Chapter III of the Constitution’.[86] Mr Heerey noted that although the Workplace Relations Act provided Members of the AIRC ‘the rank and status of a Federal Court judge’, such persons are ‘not a Chapter III judge’ and the JMPIC Act cannot apply to investigations of such persons.[87]

Nonetheless Mr Heerey formed the view that there was ‘some logic’ in extending the JMIPC Act to cover persons ‘who are not judges but hold office on Act of Settlement terms’.[88]

The proposed amendments would align the preparatory procedures for removal under section 641 of the FW Act more closely with those in the JMIPC Act.

Proposed section 641B of the FW Act, at item 1 of Schedule 3 to the Bill, would apply a modified version of the JMIPC Act to FWC Members, regardless of when they were appointed to the FWC. Paragraphs 56 to 59 of the Explanatory Memorandum contain a detailed explanation of how the JMIPC Act will be modified to apply to FWC Members. In summary, however, the effect of proposed section 641B will be that the Parliament can establish a Commission to investigate and report on alleged misbehaviour or incapacity of an FWC Member, with a view to considering whether to request the Governor-General to either:

•       remove a FWC Member appointed under the Workplace Relations Act or

•       terminate the appointment a FWC Member appointed under the FW Act.

The amendments are consistent with the recommendations of the Heerey Report that the FW Act should adopt (in modified form) the procedures under the JMIPC Act. Consequently, the interpretation of terms and concepts in the FW Act that are (or are proposed to be) shared with section 72(ii) of the Constitution and the JMIPC Act (such as ‘proved misbehaviour’ and ‘incapacity’) can be informed by existing constitutional jurisprudence and jurisprudence on the interpretation of the JMIPC Act. However, this jurisprudence will only be of persuasive value only, since the constitutional and JMIPC Act provisions are not of direct application.[89]

In its submission to the Senate Committee’s inquiry into the Bill the Queensland Law Society (QLS) expressed concern with proposed section 641B and the approach of applying modified provisions of the JMIPC Act to FWC Members. The QLS stated that the approach:

-          arguably makes the precise legal position difficult to identify as it requires reference to two Acts in order to determine the law;

-          means that when subordinate legislation is proposed, it will be necessary for Parliamentary drafters to refer to both the JMIPC Act and this legislation to ensure that any subordinate legislation is appropriate for both Acts and considers all issues; and

-          generally complicates the statute book.[90]

The QLS also stated that the approach appeared to increase the risk of unintended consequences such as inconsistent interpretations of the two pieces of legislation. Despite the criticism the QLS did not express opposition to the reform generally, and suggested that a separate amendment to the JMIPC Act to apply it to FWC Members would be appropriate to avoid the problems it had identified.

Key issues and provisions—Schedule 4

Schedule 4 provides for application and transitional provisions in relation to the amendments made by Schedules 1 to 3 of the Bill.

Incomplete 4-yearly reviews of modern awards

Item 1 of Schedule 4 inserts proposed Part 5 into Schedule 1 of the FW Act, consisting of proposed clauses 25 to 29. Proposed clause 26 provides that if the FWC has active four-yearly review matters that have commenced but have not yet been concluded when Schedule 1 to the Bill commences (1 January 2018), current Division 4 of Part 2-3 of the FW Act (which deals with four-yearly reviews) and necessary related provisions will continue to apply in relation to those matters. This will ensure that reviews that are on foot when the amendments commence are able to be completed.

Approving enterprise agreements

Proposed clause 28 of Schedule 1 to the FW Act provides that proposed subsection 188(2) (at item 2 of Schedule 2 to the Bill), which avoids minor procedural or technical errors in EA processes automatically resulting in the rejection of the EA, will apply to applications for approval of an EA that are made to the FWC after the commencement of Schedule 2 to the Bill. This means that minor errors occurring before commencement that relate to an EA that is submitted for approval after commencement can benefit from the more relaxed approach provided in the Bill.

Retrospective extension of the JMIPC Act to FWC Members

Proposed clause 29 of Schedule 1 to the FW Act provides that proposed section 641B (at item 1 of Schedule 3 to the Bill, which extends a modified version of the JMIPC Act to all FWC Members) will apply in relation to alleged misbehaviour or incapacity of a FWC Member that occurred before or after the commencement of Schedule 3. This means that a FWC Member may be subject to scrutiny by a commission appointed by the Houses of Parliament in relation to the FWC Member’s conduct at a time when they were not aware that they could be subject to scrutiny in this way. (FWC members would, however, have been aware that their conduct could be scrutinised by the President, Minister and Houses of Parliament under the current provisions.)

No justification is given in the Explanatory Memorandum for the retrospective application of proposed section 641B. Although laws that retrospectively alter the rights of individuals are not necessarily unjust, and the Parliament undoubtedly has the power to make laws with retrospective application, justification for such measures is usually explicitly provided.

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[1].              Explanatory Memorandum, Fair Work Amendment (Repeal of 4 Yearly Reviews and Other Measures) Bill 2017, p. i.

[2].              Fair Work Act 2009, subsections 156(2).

[3].              Ibid., subsection 134(1).

[4].              Ibid., subsections 156(3)–(4).

[5].              RC McCallum, Towards more productive and equitable workplaces: an evaluation of the Fair Work legislation, (Fair Work Act review), Department of Education, Employment and Workplace Relations (DEEWR), Canberra, 15 June 2012, p. 112.

[6].              Ibid.

[7].              Productivity Commission (PC), Workplace relations framework, Inquiry report, vol. 1, 76, PC, Canberra, 30 November 2015, p. 3.

[8].              Ibid., p. 53 (recommendations 8.1 and 8.3).

[9].              Explanatory Memorandum, Fair Work Amendment (Repeal of 4 Yearly Reviews and Other Measures) Bill 2017, p. i.

[10].              Fair Work Act 2009, subsection 134(1).

[11].              Fair Work Commission, Benchbook: enterprise agreements, Fair Work Commission website, 3 April 2017, pp. 22, 26-36.

[12].              FW Act, section 54.

[13].              Ibid., subsection 186(1).

[14].              Ibid., section 173.

[15].              PC, Workplace relations framework, Inquiry report, 1(76), op. cit., p. 652.

[16].              FW Act, section 174.

[17].              See for example: Fair Work Commission, Notice of employee representational rights (from 3 April 2017), Fair Work Commission website, p. 1: ‘If you are a member of a union that is entitled to represent your industrial interests in relation to the work to be performed under the agreement, your union will be your bargaining representative for the agreement unless you appoint another person as your representative or you revoke the union’s status as your representative.’

[18].              See for example: Peabody Moorvale Pty Ltd v Construction, Forestry, Mining and Energy Union (2014) 242 IR 210, [2014] FWCFB 2042; Serco Australia Pty Limited v United Voice and the Union of Christmas Island Workers [2015] FWCFB 5618; Cement Australia Pty Limited [2011] FWA 6917 and Re Transit (NSW) Services Pty Ltd T/A Transit Systems [2016] FWC 2742.

[19].              PC, Workplace relations framework, op. cit., pp. 34–35, 663–667.

[20].              Ibid., p. 34.

[21].              Ibid., p. 667 (recommendation 20.1).

[22].              M Cash (Minister for Employment, Women and Minister Assisting the Prime Minister for the Public Service), Appointment of the Hon Peter Heerey AM QC to undertake independent review, media release, 19 October 2015.

[23].              P Heerey, Report of inquiry into complaints about the Honourable Vice President Michael Lawler of the Fair Work Commission and related matters, (Heerey Report), February 2016, pp. 1–2.

[24].              Heerey Report, op. cit., pp. 10–12.

[25].              Ibid., pp. 10–11.

[26].              Ibid., pp. 47–48; the Workplace Relations Act 1996 became the Fair Work (Registered Organisations) Act 2009.

[27].              This figure has been calculated by comparing the list of AIRC members as at 15 October 2009 and published on the AIRC website and the list of FWC members as at 26 May 2017 and published on the FWC website.

[28].              Heerey Report, op. cit., p. 51.

[29].              Submissions to Senate Education and Employment Legislation Committee, Inquiry into the Fair Work Amendment (Repeal of 4 yearly reviews and other measures) Bill 2017.

[30].              Australian Council of Trade Unions, Submission to the Senate Education and Employment Legislation Committee, Inquiry into the Fair Work Amendment (Repeal of 4 Yearly Reviews and Other Measures) Bill 2017, 7 April 2017, pp. 4–5.

[31].              Fair Work Commission, Submission to Senate Education and Employment Legislation Committee, Inquiry into the Fair Work Amendment (Repeal of 4 yearly reviews and other measures) Bill 2017, 12 May 2017.

[32].              Queensland Law Society, Submission to the Senate Education and Employment Legislation Committee, Inquiry into the Fair Work Amendment (Repeal of 4 Yearly Reviews and Other Measures) Bill 2017, 20 April 2017, p. 2.

[33].              Senate Education and Employment Legislation Committee, Inquiry into the Fair Work Amendment (Repeal of 4 yearly reviews and other measures) Bill 2017, The Senate, Canberra, May 2017.

[34].              Ibid., p. vii.

[35].              Fair Work Commission, op. cit.

[36].              Labor Senators, ‘Labor Senators' Additional Comments’, additional comments, Senate Education and Employment Legislation Committee, Inquiry into the Fair Work Amendment (Repeal of 4 yearly reviews and other measures) Bill 2017, op. cit., pp. 17–18.

[37].              Ibid., p. 18.

[38].              Ibid.

[39].              Ibid.

[40].              Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 3, 2017, The Senate, 22 March 2017, p. 23.

[41].              Heerey Report, pp. 10–11.

[42].              Senate Standing Committee for the Scrutiny of Bills, Alert digest, 4, 2012, The Senate, 21 March 2012, pp. 8–11.

[43].              Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 3, 2017, The Senate, 22 March 2017, pp. 23–24.

[44].              Ibid., p. 24.

[45].              Labor Senators, ‘Labor Senators' Additional Comments’, additional comments, Senate Education and Employment Legislation Committee, Inquiry into the Fair Work Amendment (Repeal of 4 yearly reviews and other measures) Bill 2017, op. cit., p. 18.

[46].              P Dutton, ‘Second reading speech: Fair Work Amendment (Repeal of 4 Yearly Reviews and Other Measures) Bill 2017’, House of Representatives, Debates, 1 March 2017, p. 1875.

[47].              Ibid.

[48].              Australian Chamber of Commerce and Industry (ACCI), Submission to the Senate Education and Employment Legislation Committee, Inquiry into the Fair Work Amendment (Repeal of 4 Yearly Reviews and Other Measures) Bill 2017, April 2017, p. i; Australian Industry Group (AIG), Submission to the Senate Education and Employment Legislation Committee, Inquiry into the Fair Work Amendment (Repeal of 4 Yearly Reviews and Other Measures) Bill 2017, 10 April 2017, p. 3.

[49].              Australian Council of Trade Unions (ACTU), Submission to the Senate Education and Employment Legislation Committee, Inquiry into the Fair Work Amendment (Repeal of 4 Yearly Reviews and Other Measures) Bill 2017, 7 April 2017, p. 3.

[50].              Explanatory Memorandum, Fair Work Amendment (Repeal of 4 Yearly Reviews and Other Measures) Bill 2017, p. i.

[51].              P Dutton, ‘Second reading speech: Fair Work Amendment (Repeal of 4 Yearly Reviews and Other Measures) Bill 2017’, op. cit., p. 1875.

[52].              The Statement of Compatibility with Human Rights can be found at pages i to ix of the Explanatory Memorandum to the Bill.

[53].              Parliamentary Joint Committee on Human Rights, Report, 2, 2017, 21 March 2017, p. 57.

[54].              PC, Workplace relations framework, op. cit., p. 346.

[55].              Ibid., p. 339.

[56].              Ibid., p. 346.

[57].              PC, Workplace relations framework, op. cit., pp. 339 and 346.

[58].              Explanatory Memorandum, Fair Work Amendment (Repeal of 4 Yearly Reviews and Other Measures) Bill 2017, p. iv.

[59].              Proposed subsection 157(2A) at item 13 of Schedule 1; Fair Work Act 2009, subsection 156(4).

[60].              Section 616 of the FW Act.

[61].              Fair Work Act 2009, sections 157, 12 (definition of FWC) and 575; Explanatory Memorandum, Fair Work Amendment (Repeal of 4 Yearly Reviews and Other Measures) Bill 2017, p. 5.

[62].              Explanatory Memorandum, Fair Work Amendment (Repeal of 4 Yearly Reviews and Other Measures) Bill 2017, p. 5

[63].              Ibid.

[64].              Ibid., p. 6.

[65].              Ibid., p. 6.

[66].              Fair Work Act 2009, subsection 186(2).

[67].              See for example: Peabody Moorvale Pty Ltd v Construction, Forestry, Mining and Energy Union (2014) 242 IR 210, [2014] FWCFB 2042; Serco Australia Pty Limited v United Voice and the Union of Christmas Island Workers [2015] FWCFB 5618; Cement Australia Pty Limited [2011] FWA 6917 and Re Transit (NSW) Services Pty Ltd T/A Transit Systems [2016] FWC 2742.

[68].              PC, Workplace relations framework, op. cit., pp. 34–35, 663–667.

[69].              PC, Workplace relations framework, op. cit., p. 34.

[70].              Heerey Report, op. cit., pp. 10–12.

[71].              Ibid., p. 46.

[72].              Subsection 581A(4) of the FW Act.

[73].              Whilst not explicitly stated, the definition of ‘handle a complaint’ in section 12 of the FW Act (which includes considering and investigating) would appear to imply an ability to receive a complaint. As such, it would appear that the Minister can also receive a complaint directly.

[74].              FW Act, sections 641A and 642 generally.

[75].              FW Act, sections 641, 641A and 642.

[76].              Heerey Report, op. cit., p. 47.

[77].              Ibid., pp. 47–48.

[78].              Ibid., p. 51. The Act of Settlement 1701 (Imp) arose from the constitutional battles in England in the 17th Century. It provided the essential foundations of judicial independence, namely that that judges hold office, not at the pleasure of the King (or in the Australian context, at the pleasure of the Executive or Governor-General), but rather held office on the basis of good behaviour (that is, misbehaviour was the only grounds for the Executive removing a judicial officer, not the pleasure of the Crown). However, the Act of Settlement provided that upon the address of both Houses of Parliament it maybe lawful to remove a judicial officer. This preserved the supremacy of the Parliament whilst ensuring the Executive could not summarily dismiss judicial officers, and therefore ensured the independence of the judiciary. See: J King, ‘Removal of judges’, Flinders Journal of Law Reform, 2003, 6(2), pp. 169–172; The Hon Chief Justice Brian Martin AO, MBE, ‘Parliamentary government under threat from the courts?’, Paper presented to the Australasian Study of Parliament Group, Northern Territory Chapter, Annual Conference 18-19 July 2003, pp. 10-15; H Evans (ed), Odgers’ Australian Senate Practice, 14th edn, 2016, The Senate, pp. 679–683.

[79].              See sections 82 and 86 of the Workplace Relations Act 1996, as at 30 June 2009.

[80].              Heerey Report, op. cit., pp. 47–48.

[81].              Explanatory Memorandum, Fair Work Amendment (Repeal of 4 Yearly Reviews and Other Measures) Bill 2017, p. 11.

[82].              Section 3 of the JMIPC Act.

[83].              Sections 13 and 14 of the JMIPC Act.

[84].              Part 3 of the JMIPC Act.

[85].              Explanatory Memorandum, Fair Work Amendment (Repeal of 4 Yearly Reviews and Other Measures) Bill 2017, p. 9.

[86].              Heerey Report, p. 50.

[87].              Ibid., p. 50.

[88].              Ibid., p. 51. For an explanation of ‘Act of settlement terms’ see the discussion above in footnote 78 above.

[89].              This is because the source of the power in relation to FWC Members would be proposed subsection 641B(2), that is, the provisions of the JMIPC Act applied to FWC Members, with the modifications provided for in the table, rather than section 72 of the Constitution or the JMIPC Act itself.

[90].              Queensland Law Society, Submission to the Senate Education and Employment Legislation Committee, op. cit., p. 2.