Committee Majority Report
Reference
1.1
On 21 October 2009, the Hon Julia Gillard MP, Minister for Employment
and Workplace Relations, introduced the Fair Work Amendment (State Referrals
and Other Measures) Bill 2009 (the bill) in the House of Representatives. On 29
October 2009, the Senate referred the provisions of the bill to the Senate
Standing Legislation Committee on Education, Employment and Workplace Relations
for report by 16 November 2009.
Conduct of the inquiry
1.2
Notice of the inquiry was posted on the committee's website and
advertised in The Australian newspaper, calling for submissions by 6
November 2009. The committee also directly contacted a number of interested
parties, organisations and individuals to notify them of the inquiry and to
invite submissions. Seven submissions were received as listed in Appendix 1.
1.3
The committee conducted a public hearing in Canberra on 11 November
2009. Witnesses who appeared before the committee are listed at Appendix 2. The
committee thanks those who assisted with the inquiry.
Purpose of the bill
1.4
The bill will complete the framework to provide a national workplace
relations system for the private sector. It will give effect to the references
of power to be made by South Australia, Tasmania and any other state[1]
that refers its workplace relations powers to the Commonwealth on or before 1
January 2010.
1.5
The bill amends the Fair Work Act 2009 (FW Act) to enable the
states to refer workplace relations matters to the Commonwealth for the
purposes of section 51(xxxvii) of the Constitution.[2]
The bill also amends the Fair Work (Transitional Provisions and
Consequential Amendments) Act 2009 to establish arrangements for employees
and employers transitioning from referring state systems to the national
workplace relations system; and makes consequential amendments to other
Commonwealth legislation required as a result of these arrangements.
Background
1.6
The bill gives effect to the Australian Labor Party's election
commitment detailed in Forward with Fairness to deliver a uniform
national system for the private sector either by state governments referring
powers for private sector workplace relations or other forms of cooperation and
harmonisation.[3]
The introduction of the Fair Work (State Referral and Consequential and
Other Amendments) Act 2009 in May 2009 was the first stage in implementing
this national system. This Act supported a renewal of Victoria's referral of
workplace relations powers from 1 July 2009. The Minister for Employment and
Workplace Relations indicated that the framework of the Act would be adapted in
future Commonwealth legislation to accommodate anticipated further reference of
workplace relations powers from other states.[4]
Consultation
1.7
Although the bill was not subject to a specific Committee on Industrial
Legislation (COIL) process,[5]
the committee majority notes that the government has undertaken negotiations
for a national system as part of the development of the Fair Work legislation.
This has been supported by extensive consultation with state governments
through the Workplace Relations Ministers’ Council (WRMC) and the High Level
Officials’ Group (HLOG), and bilateral discussions continue. DEEWR described
the detail of the consultation process:
The Government had led negotiations for a National System
through extensive consultation with the States and Territories and through
ongoing consultation with other major stakeholders, such as the Australian
Chamber of Commerce and Industry, the Australian Council of Trade Unions and
the Australian Industry Group. This consultation has been supported through a
number of committees such [as] the Workplace Relations Ministers’ Council
(WRMC) which comprises Commonwealth, State and Territory Ministers for
workplace relations and the High Level Officials’ Group (HLOG) which comprises
senior officials from Commonwealth, State and Territory workplace relations
departments.[6]
1.8
In addition, jurisdictions consulted on the issue of referral to the
Commonwealth formally and informally with their employer and employee
representatives.[7]
The ACTU commended the consultative approach taken by the government in working
with the referring states to determine the scope of their referrals and the
transitional arrangements that will apply to employees and employers transferring
from the state systems.[8]
State positions
1.9
The committee majority notes that the referral of matters to the
Commonwealth under s. 51 (xxxvii) of the Constitution is a significant
undertaking which has been carefully considered by each party.
1.10
DEEWR explained that a referral does not transfer power to the
Commonwealth indefinitely. In 1964, the High Court stated that there is no
reason that the words ‘matters referred’ in s. 51 (xxxvii) of the Constitution
‘cannot cover matters referred for a time which is specified or which may
depend on a future event even if that event involves the will of the State
Governor-in-Council and consists in the fixing of a date by Proclamation’.
Consistent with this, state referral laws generally provide for references to
be terminated by the Governor-in-Council on a date fixed by Proclamation.[9]
Progress so far
1.11
Following extensive consultations through the development of the FW Act,
at the June 2009 meeting of the WRMC, Ministers from South Australia, Tasmania
and Queensland joined Victoria in indicating their intent to make referrals to
the Commonwealth. South Australia, Tasmania and Queensland have introduced
referral legislation into their Parliaments during 2009 to support referrals.
Victoria
1.12
Victoria has already referred its workplace relations matters. The Fair
Work (Commonwealth Powers) Act 2009 (Vic), which replaced Victoria’s
existing reference under the Commonwealth Powers (Industrial Relations) Act
1996 (Vic) was passed by the Victorian Parliament on 9 June 2009 and received
Royal Assent on 23 June 2009. The Victorian Minister for Industrial Relations,
the Hon Martin Pakula MLC, noted:
Australian workplaces will benefit from a simplified award
system, balanced unfair dismissal laws, and bargaining laws that focus not on
conflict but on facilitating fair agreements that contribute to workplace
productivity. The Minister also noted the new system will provide the greatest
possible protection to the maximum number of employees and employers across
Victoria, including outworkers.[10]
South Australia
1.13
The Fair Work (Commonwealth Powers) Bill 2009 (SA) was passed by the
South Australian House of Assembly on 13 October 2009 and is currently before
the Legislative Council. When introducing the bill into the South Australian
Parliament, the South Australian Minister for Industrial Relations, the Hon
Paul Caica, MP, stated:
There are many benefits for South Australians resulting from
the referral of IR powers. A streamlined national system of industrial
relations will result in significant red tape reductions for business and
greater administrative efficiency by eliminating regulatory overlap and
duplication. Businesses will no longer have to deal with complex jurisdictional
questions about which system of industrial relations they are operating in.[11]
Tasmania
1.14
The Tasmanian government introduced the Industrial Relations
(Commonwealth Powers) Bill 2009 into the Tasmanian Parliament on 7 October
2009. The bill was passed by the Tasmanian House of Assembly on 14 October 2009
and by the Legislative Council on 28 October 2009. The Tasmanian Minster for
Workplace Relations, the Hon Lisa Singh MP, noted that the Tasmanian referral
has broad support and will enable all Tasmanian private sector workers to be
dealt with under one system.[12]
Queensland
1.15
On 27 October 2009 the Fair Work (Commonwealth Powers) and Other
Provisions Bill 2009 (Qld) was introduced into the Queensland Parliament.[13]
The Queensland Attorney-General and Minister for Industrial Relations, the Hon
Cameron Dick MP, stated:
The Queensland government has not taken this step lightly and
not without extensive consultation with Queensland employers and unions. The
current State industrial relations system, embodied in the Industrial
Relations Act 1999, has fairly balanced the interests of employers and
employees. However, a national system can achieve comparable results, and that
is why Queensland has taken the step to refer State’s power on this
issue...This bill today is a giant step forward in establishing a cooperative
system that respects State rights, but also creates an overarching national
industrial relations system which is in the best interests of business and
workers...[14]
New South Wales and Western
Australia
1.16
The committee majority notes that New South Wales is yet to decide about
participation in the national workplace relations system for the private
sector. Western Australia has indicated that it will not refer its industrial
relations powers to the Commonwealth. Instead, the Western Australian Minister
for Commerce, the Hon Troy Buswell MP, has indicated that the approach of the
Western Australian government will be ‘to work co-operatively with the
Commonwealth to build a harmonised industrial relations system without handing
over Western Australia’s long-held, constitutionally established role and
powers’.[15]
1.17
The ACTU noted the difficulties created for employers and employees in
Western Australia who wish to be covered by the national laws:
...The practical out-working is that employees of non-trading
corporations in Western Australia who now rely on referral workplace relations
instruments will be excluded from the national system despite their desire to
remain within it. Unless the Western Australian government abandons its
opposition to referral, employees of non trading corporations in that State
(potentially parts of local government and the social and community services
sector) whose federal awards will cease to operate in March 2011, and for whom
there is no comparable State safety net will be severely disadvantaged.[16]
1.18
The ACTU has previously proposed that the government should provide an
avenue for employees to opt in to the federal system where a state government
does not refer the employees, despite the wishes of the workforce. It submitted
that this could be achieved by the use of the conciliation and arbitration
power and external affairs powers as an alternative combination of
Constitutional power to the corporations power which the FW Act relies on.[17]
Governance arrangements
1.19
There are three components to the governance arrangements for the
national system: the referral bills, the multilateral inter-governmental
agreement and bilateral intergovernmental agreements. The provisions of the
bill are underpinned by the multilateral inter-governmental agreement, which
outlines the principles of the national workplace relations system for the
private sector and the roles and responsibilities of those participating. At
the 25 September 2009 meeting of the WRMC, the Inter-Governmental Agreement
for a National Workplace Relations System for the Private Sector (IGA), was
signed by Ministers from Victoria, South Australia, Tasmania, the Northern
Territory and the Australian Capital Territory.[18]
1.20
In addition to the multilateral IGA, the governance framework for the
national system provides for the establishment of bilateral agreements between
the Commonwealth and individual jurisdictions. These are intended to set out
state and territory specific arrangements for service delivery; tribunal
related matters and other arrangements relevant to the referral of powers in
the individual jurisdictions concerned.[19]
1.21
Although the IGA is not yet a public document,[20]
employer groups expressed concern about the IGA on the basis of what state
governments have said about it when introducing referral bills into their
parliaments.[21]
DEEWR explained that the aspect of the IGA in question provides for a
Commonwealth proposal or amendment to the Fair Work legislation to be
considered by the WRMC referring states and territories subcommittee if the
proposal or amendment is considered to undermine one or more of the key
principles outlined in the IGA. The IGA provides that:
...such matters will be resolved by endorsement of a
two-thirds majority of that subcommittee. Where a two-thirds majority does not
endorse a Commonwealth proposal or amendment, the intergovernmental agreement
provides that the Commonwealth will not proceed with the proposal or amendment
until identified issues are resolved.[22]
1.22
Australian Industry Group (AiG) argued that through this mechanism, the
states are being given the power to potentially delay and frustrate important
amendments, which could cause disruption and confusion for businesses. Mr
Stephen Smith, Director, National Workplace Relations, AiG, acknowledged
that this aspect is not contained in the bill. However, to the extent that it
‘reflects the understandings that surround the bill’, at the hearing he argued
that the bill should not be passed.[23]
The committee majority notes that this is not the position stated in AiG's
written submission.
1.23
DEEWR emphasised that in developing the IGA, it was mindful of similar
agreements. Mr John Kovacic, Deputy Secretary Workplace Relations, informed the
committee:
In general terms it would be true to say that the
intergovernmental agreement is consistent with the approach taken in other IGAs
but nonetheless reflects the specifics of the process that has been agreed to
by state and territory ministers and the Commonwealth through Workplace
Relations Ministers Council.[24]
1.24
DEEWR added that it is a usual feature of intergovernmental agreements
to provide for a process of voting or approval of Commonwealth proposals to
amend national law and therefore the processes contained in this IGA are
nothing out of the ordinary.[25]
The committee majority agrees and notes that the views of employer groups fail
to take account of the need to develop new arrangements to deal with referrals
by more than one state and the requirement for a mechanism to resolve any
disputes between them.
Committee view
1.25
The committee majority points out that the area of concern expressed by
AiG is not contained in the bill but in the IGA. The IGA has been developed in
close consultation and cooperation with the state and territory governments.
The committee majority recognises that as the bill deals with the referral and
the acceptance of the referral from various state jurisdictions, the focus of
DEEWR’s consultation has been with the relevant jurisdictions. A referral of
powers is a significant undertaking and the committee majority understands that
extensive consultation was undertaken within jurisdictions with a range of
stakeholders. The views brought by jurisdictions to the discussions would
naturally reflect the views of their stakeholders.
1.26
Responding to the concerns of employer groups regarding states having an
effective power of veto over amendments, the committee majority notes that the
right of veto by states exists already, as each state has the capacity to terminate
references. The committee majority notes with concern the views expressed on
the IGA by employer groups that the Commonwealth has gone too far in making
compromises with the states. It appears employer groups do not wish to
acknowledge the potential of cooperative federalism. The development of the
legislation and the IGA reflect cooperative federalism in action. To that end
the committee majority recognises the following reflections from Mr John
Kovacic, Deputy Secretary, DEEWR, who has been involved in the negotiations:
...My involvement with the Workplace Relations Ministers
Council dates back to the early eighties. It is probably the most significant
and comprehensive level of consultation around a set of workplace relations
reforms that I can recall through forums such as the Workplace Relations
Ministers Council, and I think it would be true to say that the discussions
through the ministerial level and, equally, the officials level, have been the
most constructive and most cooperative that I have been involved with. I think
that is a reflection of the positive approach that all ministers in all
jurisdictions have brought to the ministerial council.[26]
1.27
Regarding the development of the IGA, Mr Kovacic added:
As a general comment, the bill together with the multilateral
IGA reflect the spirit of cooperation and collaboration that have been a hallmark
of the discussions and development of the Fair Work legislation and the
discussions with not only state and territory officials but also state and
territory ministers. That is the spirit that is reflected in the bill. Indeed,
the multilateral IGA is an extension of that cooperative spirit, a continuation
of it and a recognition that, in terms of a national workplace relations
system, a fundamental underpinning of it is the need for a continuation of
those sorts of cooperative arrangements.[27]
Benefits of a national workplace relations system
1.28
A national workplace relations system has received strong support from
key stakeholders in business, unions and academia. Business has called for a
national workplace relations system for the private sector for many years to
end the complexity, duplication, overlap and confusion created by competing
state and federal workplace relations systems. When introducing this bill, the
Minister for Employment and Workplace Relations outlined the benefits of a
national system for business:
The Bill I introduce today answers the many calls made by
business over many years to end the overlap and duplication of state and
federal workplace relations systems; to end the inefficiency, uncertainty and
legal complexity for Australian businesses and employees.[28]
1.29
The Australian Chamber of Commerce and Industry (ACCI) has supported the
development of a national workplace relations system for some time and it
acknowledged that the bill ‘represents a step forward towards the ultimate goal
of achieving a truly national system for all employers across Australia’.[29]
To achieve even greater benefits, ACCI and AiG urged the government to work
towards a full referral by state governments.[30]
1.30
ACCI has estimated that the state industrial relations system costs
taxpayers at least $122 million per year on top of a federal system of at least
$312 million per year.[31]
While noting that there will be significant cost savings for state governments
that refer powers, ACCI submitted that there will be some additional costs and
regulatory burdens on referral employers as most workplaces do not operate on a
collective basis and have no history of bargaining.[32]
The Explanatory Memorandum notes that the state referral of powers for private
sector unincorporated businesses is expected to result in only minor
transitional costs to employers in terms of their understanding and compliance
with the FW Act.[33]
1.31
The Australian Industry Group (AiG) strongly supported the referral of
the state industrial relations powers to the Commonwealth and stated:
Australia's modern economy and the need to remain globally
competitive necessitates that a national system be implemented. All Australian
employees and employers in the private sector should have the same system for
employee entitlements and employment obligations.[34]
1.32
The ACTU expressed support for the bill as providing a mechanism for
state system employees and employers to participate in a truly national system.[35]
1.33
The Regulation Impact Statement accompanying the Explanatory Memorandum
to the bill identified a number of issues that arise under the current
workplace relations system:
-
limitations on the corporations powers under s. 51 (xx) of the
Constitution which contribute to higher levels of uncertainty and legal
complexity in determining jurisdictional coverage, which can be costly and time
consuming to resolve;
-
the maintenance of separate workplace relations systems creates
administrative inefficiencies which can lead to increased compliance costs for
employers due to navigating competing legislation;
-
there is often unclear demarcation between the federal and state
systems where employers must comply with more than one set of workplace
relations obligations. This can lead to inequalities and differences among
businesses and employees resulting from different regulations, wages and
working conditions depending on the state in which they operate or are
employed;
-
the multiplicity of jurisdictions and laws is generally accepted
as a factor which creates barriers to productivity.[36]
1.34
In addressing these issues, DEEWR noted that the benefits of creating a
national system for the private sector will contribute to the creation of a
seamless national economy which is simple, fair and flexible and better able to
adapt to global markets and competition.[37]
1.35
These views were supported by Professor Andrew Stewart, Adelaide
University, who provided a number of reasons to support the creation of a
national system of labour regulation for the private sector. He submitted that
the system would be ‘simpler, cheaper and more efficient than the present
arrangements’ and would set ‘universal standards that are more likely to be
understood and observed’. In addition, he noted that the bill will remove the
uncertainty that currently applies to a large number of not-for-profit organisations:
Since March 2006, many of these organisations have had no
reliable way of knowing whether they are subject to federal or State workplace
laws. As a result they are in constant risk of breaching their legal
obligations as employers.[38]
1.36
The issue of public sector and local government employees is discussed
in more detail below.
Provisions of the Bill
1.37
All submissions indicated general support for the bill notwithstanding
the AiG’s sudden change of position from its submission at the hearing.
However, as covered above, AiG’s main concern is not with the bill but with the
IGA. A couple of minor or technical issues were raised by witnesses who
emphasised that they did not want these issues to hold up passage of the bill.
State references of workplace relations matters
1.38
The bill creates a legislative mechanism for states to make three
referrals of powers: the ‘initial reference’, ‘amendment reference’ and
‘transition reference’; and allows states to refer and terminate each of these
references under proposed clause 30L of Schedule 1. These references will
enable the Commonwealth to:
-
extend the FW Act in referring states to cover unincorporated
employers and their employees; outworker entities, and extend the operation of
the general protections (initial reference);
-
amend the FW Act so that it applies uniformly in referring states
(amendment reference); and
-
establish arrangements for the transition of referral employees
and employers from state industrial or workplace relations systems to the new
national system (transition reference).[39]
1.39
The ACTU supported the use of referrals of power as the primary means
for the Commonwealth to regulate industrial relations matters as this mechanism
provides the greatest flexibility to clarify the scope of the legislation.[40]
Initial reference
1.40
To give effect to Victoria’s workplace relations reference, the first
referral Act inserted Division 2A into Part 1 to 3 of the FW Act. Schedule 1
will insert a new Division 2B into Part 1 to 3 of the FW Act to give effect to
further state references of workplace relations matters to the Commonwealth
after 1 July 2009 but on or before 1 January 2010. The framework reflects
that states are referring workplace relations matters to the Commonwealth at
different times.
1.41
Like Division 2A, Division 2B extends the meaning of ‘national system
employee’ and national system employer’ (new sections 30 M and 30 N) to cover
all employees and employers in referring states subject to exclusions relating
to state public sector and local government employment. Division 2B also
extends the definition of ‘outworker entity’ (new section 30 Q) and extends the
operation of the FW Act’s general protections in referring states (new section
30R).
Amendment reference
1.42
Schedule 1 would give effect to references enabling amendment of the FW Act
in respect of specified subject matters, to the extent that such amendments
would otherwise be outside Commonwealth power. The amendment reference
provisions would enable the FW Act to be amended to apply to all employers and
employees in referring states uniformly. Consultation on amendments will be
governed by the supporting inter-governmental agreement.
1.43
Some subject matters reflecting areas of state responsibility, such as
equal opportunity and discrimination, occupational health and safety, public
holidays and workplace surveillance, are excluded from the subject matter of
the reference. However, these exclusions will not prevent the Commonwealth from
amending the FW Act in relation to any of these matters to the extent that the
FW Act as originally enacted deals with them or enables modern awards and
enterprise agreements to deal with these matters.[41]
Termination of reference
1.44
Proposed subsections 30L(7) and (8) would enable referring states to
terminate their amendment references and remain in the national system in the
following circumstances:
-
by proclamation of the State Governor with six months notice, if
the amendment references of other referring states all terminate on the same
day; or
-
by proclamation of the State Governor with three months notice,
if the Governor considers that an amendment to the FW Act is inconsistent with
the fundamental workplace relations principles.[42]
1.45
DEEWR explained that the six month notice provision is the standard
provision that exists in Commonwealth referral schemes and the three month notice
provision reflects the understanding between the Commonwealth and the states on
the operation of the system in the future.[43]
1.46
ACCI expressed concern about the ability for states to terminate an
‘amendment reference’ and remain a referring state. It noted that Victoria has
not had such provisions since 1997 and this has not caused any problems to
date. It argued that:
If the termination of an amendment reference is ever invoked
by a State Government, this will cause confusion and unnecessary dislocation
for referral employers, as non-referred employers continue to be bound by the
fair work laws, but their referral counterparts do not. It also appears to
indicate that State Governments are not fully committed to achieving a national
system for the private sector.[44]
1.47
DEEWR responded that when combined with the arrangements in the IGA, the
termination of amendment reference provisions:
...protects states’ long-term interests in a cooperative
workplace relations system and addresses states’ concerns that unwelcome
changes to workplace relations laws could be forced upon them without any
consultation by a future Commonwealth government. The amendment reference
provision was developed in close consultation with the states and provides an
assurance of the Commonwealth’s intention to work cooperatively with them on
amendments into the future. However the provision is not anticipated to be used
in any but the most extreme circumstances.[45]
Committee view
1.48
The committee majority notes the need to provide incentives and address
the disincentives for the states to join a national system. To achieve this the
Commonwealth recognises the need and the right for states’ to protect their
long-term interest from the imposition of unwanted changes to workplace
relations laws by a future Commonwealth government. The Commonwealth
acknowledges the historical role of the states in industrial relations and
values working with them cooperatively to reach a national system to provide
certainty and stability for private sector employers and employees. This
arrangement was developed in close consultation with the referring states. It
recognises the cooperative nature of the approach being taken by the
Commonwealth and the states on these issues and provides assurance of the
Commonwealth’s intention to work cooperatively with them on amendments in the
future.
1.49
The committee majority recognises that the arrangements to terminate the
amendment reference are not to be used in any but the most extreme
circumstances, and the committee majority notes that this was acknowledged by
employer groups.[46]
This was also acknowledged by the South Australian Minister, the Hon Paul Caica
MP, who stated:
It is envisaged that if all jurisdictions were meeting their
obligations under the intergovernmental agreement, the provisions of this bill
for the termination of the amendment reference because of inconsistency with
the fundamental workplace relations principles would not need to be applied
and, in effect, would only be contemplated in the most extreme circumstances,
where the agreed fundamentals of the national system are threatened.[47]
Transitional reference
1.50
Proposed subsection 30L(5) requires a referring state to refer matters
relating to the transition to the national system. It is anticipated that state
references would enable the Commonwealth to legislate to transition employers
and employees from the state systems, or from the Workplace Relations Act, to
the national system under the FW Act.[48]
Transitional arrangements
1.51
Schedule 2 deals with transitional arrangements for state referral
employers and employees. Part 1 covers current instruments and processes and
deals with federal awards and agreements made with reliance on the conciliation
and arbitration power. The transitional arrangements proposed are as far as
possible similar to the transitional arrangements that were put in place in the
Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 for
the transition of federal instruments to the national workplace relations
system. The key features are:
-
state awards and state agreements will be preserved as federal
instruments in the same terms as the state instrument and will be known as
Division 2B state awards and Division 2B state employment agreements (known
collectively as Division 2B state instruments);
-
Division 2B state awards and state employment agreements will
operate on a ‘no-detriment’ basis with the National Employment Standards and
the national minimum wage order;
-
a Division 2B state award (other than a Division 2B enterprise
award)[49] will
continue to apply as a federal instrument for a period of 12 months from
referral commencement (anticipated to be 1 January 2010). After that time, a
relevant modern award will cover the relevant employees and employers;
-
during the 12 month period, Fair Work Australia (FWA) will be
required to consider whether a modern award should be varied to provide
appropriate transitional arrangements for incoming state employees and
employers;
-
FWA will be able to make remedial take-home pay orders where the
take-home pay of one or more employees is reduced as a result of movement to
the modern award;
-
a Division 2B state employment agreement will continue to operate
as a federal instrument until replaced at any time by a new enterprise
agreement under the FW Act or terminated in accordance with the provisions of
the bill;
-
the bill provides a model dispute resolution term to be
prescribed by regulations which applies in relation to Division 2B state
awards. Dispute resolution terms in state employment agreements will continue
as terms of the referral state employment agreements derived from them. This
means that, where a state agreement nominates a state commission as being able
to resolve disputes arising under the agreement, this provision will continue
to operate;
-
the new transfer of business rules in the FW Act will apply to
transfers that occur on or after the referral commencement. Division 2B state
instruments will be transferable instruments for the purposes of the FW Act
transfer of business provisions;
-
bargaining and industrial dispute processes under state systems
will not be carried over into the new system. Bargaining participants will
either have lodged a state agreement for approval by a state tribunal before
the referral commencement or commence bargaining for a new enterprise agreement
under the FW Act;
-
as a general rule, proceedings in relations to conduct that
occurred before the referral commencement will remain subject to state laws and
be dealt with in state systems;
-
part-heard proceedings commenced before 1 January 2010 involving
the making, variation or termination of state awards will terminate on 1
January 2010;
-
appeals against state tribunal decisions will lapse on 1 July
2010 (other than decisions to make or not make an award which will lapse on 1
January 2010); and
-
if an application to certify or approve, vary or terminate an
agreement has been made in a state system before 1 January 2010 but has not
been finalised by that date, a state tribunal can continue to deal with the application
after 1 January 2010.[50]
1.52
The ACTU supported the provisions providing a transition mechanism from
state systems including:
-
the preservation of state awards for up to 12 months;
-
the preservation of state agreements;
-
requiring Fair Work Australia to consider including terms from
state awards into modern awards; and
-
extending the National Employment Standard safety net.[51]
1.53
ACCI noted that currently award-free referral employees who will be
subject to an applicable modern award, including the miscellaneous award, from
1 January 2010, will not be subject to adequate transitional provisions as it
appears that FWA is only obliged to consider transitional provisions for
referral employers subject to state awards.[52]
1.54
ACCI also drew attention to the timeframe for employers to understand
their applicable modern award, noting that many awards will not be finalised
until 4 December 2009. It asked that additional time be considered for
small business to receive education and assistance to implement any necessary
changes.[53]
The committee majority notes that the Commonwealth will provide additional
services to assist transferring employers and employees to understand the new
system. This will include telephone advice and visits to workplaces which will
be undertaken in cooperation with the referring states.[54]
The provision of additional services was welcomed by ACCI which made
suggestions on the provision of information to assist with overall compliance.[55]
1.55
AiG noted the model term about disputes (Schedule 2, Item 7) and asked
that this be developed in conjunction with industry representatives such as
AiG.[56]
Committee comment
1.56
In response to a concern raised by ACCI about the possible effect on
employers of transitioning to the federal system,[57]
the committee majority notes that the AIRC will have determined transitional
arrangements for employers and employees covered by a Notional Agreement
Preserving a State Award (NAPSAs) which are derived from state awards, so there
will already be a framework in place for translating Division 2B state
reference employers and employees to coverage by modern awards. The government
provided a full five year phase in period so that employers and employees would
gradually move from arrangements in old state and federal awards to a new
modern award. The government envisages that FWA will apply these transitional
arrangements to the transition of Division 2B referral state award-covered
employees to modern award coverage.[58]
1.57
This approach was supported by Professor Stewart who argued that ‘there
is a good deal of sense in the 12-month grace period provided before State
awards applicable to referred employers are supplanted by modern awards under
the Fair Work Act 2009'. He noted that even after this period expires,
it is likely that the transitional provisions in most modern awards will ensure
that those employers do not immediately move to a new set of pay rates and
penalty rules. He expected that the awards would provide for the new rates to
be phased in over the further period of five years.[59]
Coverage of public sector and local government employees
1.58
The bill recognises that referring states can choose the extent to which
matters relating to state public sector or local government employment are
referred or excluded from references. The committee majority notes this is in
line with the government’s commitment in Forward with Fairness that:
Current arrangements for the public sector and local
government can continue with many of these workers regulated by state
industrial relations jurisdictions...State Governments, working with their
employees, will be free to determine the appropriate approach to regulating the
industrial relations arrangements of their own employees and local government
employees.[60]
1.59
Proposed subsection 30L(2) enables a state to exclude matters relating
to state public sector and local government employment from its reference and still
be a referring state (item 39 of Schedule 1). Schedule 3, Item 2 also amends
the FW Act to enable states to exclude certain state public sector and local
government employers over which the Commonwealth currently has jurisdiction
from the FW Act. Such declarations would be able to be made in relation to:
-
entities established for a public purpose by or under state or
territory law, but not universities, electricity, gas, water, rail or port
utilities; and
-
entities established for local government purposes by or under
state or territory law, and their wholly-owned or wholly-controlled
subsidiaries.[61]
1.60
The ACTU supported this mechanism to allow states to nominate which of
its public sector or local government employees are in the state system;
however, it saw no need for statutory limits on which public sectors can be
nominated.[62]
This issue was taken up by the United Services Union (USU), which expressed
concern that the bill does not facilitate the exclusion of state-owned energy
corporations from the FW Act as clause 2(6) of Schedule 3 of the bill
specifically prohibits exclusion of declarations concerning state owned energy
generation, supply or distribution.[63]
This view was supported by Unions NSW, which argued that these entities should
not be exempted from the provisions allowing a state to declare entities not to
be national system employers.[64]
1.61
The committee majority notes that these limitations reflect a
distinction between entities engaged primarily in state public interest or
regulatory activity and those in key areas of importance to the national
economy that should be subject to nationally consistent workplace relations
regulation.[65]
1.62
The declarations would be able to be made in relation to entities that
are integral to state public administration and are appropriately regulated in
state systems. To be effective, a declaration would need to be endorsed by the
Minister administering the FW Act. Schedule 3 of the bill allows the Minister
to make a declaration which would have the effect of excluding the Fair Work
laws applying to certain national system employers.
1.63
ACCI submitted that this provision would effectively allow local
governments to opt out of the national system and this would ‘have a
destabilising effect on the national system, particularly for those employers
that have been subject to the federal system for a considerable period of
time’. ACCI was also concerned that this mechanism would allow other employers
to be excluded, such as not-for-profit organisations. ACCI expressed its
preference for a referral to cover all employers and employees.[66]
This view was supported by AiG, which also expressed its preference for a
complete referral of powers. However, it noted that some states wish to retain
their powers relating to employees in the state public sector and local
government and accordingly supported the more restricted scope of the bill.[67]
1.64
For most employers their status should be clear as to whether they are
in or out of the federal system. However, Professor Andrew Stewart noted a
recent survey of small business of Western Australia conducted by the Small
Business Development Corporation which found that over one third were unsure of
their status. This is evidence of the need for clear and well understood
demarcation between the federal and state systems.[68]
1.65
The committee majority notes that the treatment of local councils and
not-for-profit organisations has caused confusion. By relying on the
corporations power of the Constitution, the question of whether the federal or
state system applies depends upon whether the business is a ‘constitutional
corporation’ or not. Where this is not clear, Professor Stewart captured the
difficulties that this has created for some employers:
...the situation is different for not-for profit
corporations. Their status depends on the application of an imprecise and
unpredictable test. Since 1979, the High Court has interpreted the Constitution
to mean that even where an incorporated body has not been formed for the
purpose of trading, it can still be a ‘trading corporation’ if it engages in
trading activities to a ‘substantial’ or ‘significant’ extent...Applying this
test, many not-for-profit bodies have been found to be trading or financial
corporations, on the basis that they engage in trading and/or financial
activities to a sufficient degree. The list includes local councils, public
universities, private schools, hospitals, charitable bodies and community
service organisations.[69]
1.66
Professor Stewart stressed that there is no clear or identifiable basis
for determining the point at which an organisation 'has enough of these
activities to qualify as a trading or financial corporation’ and this had left
many not-for-profit bodies in a state of confusion. He suggested that at some
stage this may be resolved by the High Court if a suitable test case reaches
the court but this may take years.[70]
He supported the passage of the bill as the most effective solution to the
present problems facing a large number of employers and noted that if the bill
is not passed then:
The status quo seems certain to prevail – that is, a federal
system founded primarily on the use of the corporations power. That would in
turn mean continuing confusion and difficulty for a large number of
not-for-profit corporations.[71]
1.67
The USU noted that throughout 2006-2008, local government was placed in
a ‘no man’s land’ of jurisdictional uncertainty causing difficulties for
employers and employees. In November 2008 the NSW government passed the Local
Government Amendment (Legal Status) Bill which decorporatised councils and
removed them from federal industrial relations coverage. The USU noted this
interim solution but supported the passage of the bill to reduce uncertainty
and enable workers to maintain entitlements and benefits available through the
NSW industrial relations system.[72]
1.68
The bill will address the difficulties outlined above as it will:
...help create a clear and consistent delineation between
federal and State industrial laws. At least in referring States, all private
sector employers will be subject to the federal system, including the great majority
of the non-for-profit organisations...The uncertainty over the status of
incorporated local government employers, and certain other incorporated
government business enterprises, will also be resolved. Either the power to
regulate them will be referred to the Commonwealth, or they will be declared to
be non-national system employers’ under the mechanisms set out in the proposed
s 14(2)-(7) of the Fair Work Act 2009.[73]
1.69
The ACTU supported the mechanism which will allow the Commonwealth to
retreat from covering any local government entity or state enterprise that is a
trading corporation where the state has determined that it will not refer them
and noted:
This sensible approach draws a ‘bright line’ around the
sector and avoids the difficulties that otherwise would arise in determining
whether a particular council or enterprise is a trading corporation.[74]
1.70
While supporting the bill, ACCI submitted that the current approach
where certain state governments retain control over public and or local
government sectors is a wasteful use of taxpayer’s money. ACCI advocated their
preferred approach for a general referral of IR powers to apply to all
employers and employees without caveats, conditions, or mechanisms to allow
state and territory governments to unduly restrict changes to the federal
system.[75]
Committee view
1.71
The committee majority believes that the bill provides an appropriate
mechanism to resolve the uncertainty that currently exists for some employers
and employees by making clear the demarcation between state and federal
workplace laws.
Technical matters
1.72
The following technical matters were raised in submissions and responded
to by DEEWR.
Excluded subject matter
1.73
AiG drew attention to Schedule 1, proposed item 15 covering the
definition of 'excluded subject matter'. It argued that the definition of
'excluded subject matter' in the bill must align with the definition of
'non-excluded subject matter' in s.27 of the FW Act, noting that the definition
in s.27 of the FW Act was the product of an extensive consultation process. AiG
understood the bill to provide states with increased powers in respect of
training arrangements, long service leave, public holidays and claims for
enforcement of contracts of employment. It argued that the lack of consistency
between s.27 of the FW Act and section 30A would create uncertainty and
potentially an increased regulatory burden for employers. These concerns also
apply to item 39, proposed section 30K.[76]
1.74
DEEWR responded that the amendment does not expand the scope of ‘saved'
state laws but is a technical amendment to more clearly align the scope of the
excluded subject matter with the saving of state laws in section 27 of the FW
Act. States are required to refer matters that enable the Commonwealth to amend
the FW Act (so far as not otherwise within Commonwealth power) in relation
to the referred subject matters. This term is defined in section 30A and covers
the matters dealt with by the FW Act such as terms and conditions of employment
and rights and responsibilities of employees and employers. Certain matters are
excluded from state amendment references. These are reflected in the definition
of excluded subject matter in section 30A.
1.75
The excluded subject matter does not cover a matter that the FW Act as
originally enacted deals with, either directly or indirectly, or that the FW
Act requires or permits instruments made or given effect under it to deal with.
This is necessary because some matters dealt with by the saved state laws are
also dealt with by the FW Act and the Commonwealth needs to be able to
amend these provisions in reliance on a state amendment reference.
-
for example, state anti-discrimination laws continue to operate
but the general protections (Part 3-1) provisions of the FW Act also protect an
employee from adverse action because of discrimination on the basis of the
employee’s race, sex or other characteristics.
1.76
Paragraph 27(1)(c) and subsection 27(2) of the FW Act save the following
state laws, subject to certain exceptions:
-
training arrangements, except in relation to terms and conditions
of employment provided for by the National Employment Standards (NES) or that
can be included in modern awards (paragraph 27(2)(f));
-
long service leave, except in relation to employees who have long
service leave entitlements under the NES (paragraph 27(2)(g)); and
-
the declaration, prescription or substitution of public holidays,
except in relation to rights and obligations of employees and employers on
public holidays, which are dealt with by the NES (paragraph 27(2)(j)).
1.77
The exceptions reflect the intention that matters concerning minimum
terms and conditions of employment for national system employees should be
dealt with exclusively by the FW Act.
1.78
The current definition of excluded subject matter in section 30A
cross-references section 27 of the FW Act and therefore by implication the
NES-related exceptions in paragraphs 27(2)(f), 27(2)(g) and 27(2)(e). However,
the current definition of excluded subject matter then goes on to duplicate
these exceptions, by using the words ‘except to the extent that this Act as so
enacted deals with the matter (directly or indirectly).’ This duplication of
exceptions led to uncertainty about the scope of the excluded subject matter.
1.79
A new definition of excluded subject matter is needed to avoid this.
Accordingly, and consistent with the definition of excluded subject matter in
new Division 2B, the bill provides a new definition of excluded subject matter
in Division 2A that sets out the excluded matters expressly, rather than by
cross-referencing the saved state laws. The new definition does not list the
exceptions set out in paragraphs 27(2)(f), (2)(g) and (2)(j) of the FW Act
because these are already covered by the general qualification that excluded
subject matter does not encompass matters that the FW Act as originally enacted
deals with. In that way, the exclusions in the new definition of excluded
subject matter more clearly align with section 27 of the FW Act.
Definition of referred subject
matters
1.80
The Australian Council of Trade Unions (ACTU) expressed concern that the
definition of referred subject matters might not encompass matters that can be
included in an enterprise agreement which pertain to the relationship between
the employer(s) and the employee organisation(s) (rather than the employees)
that will be covered by the agreement.[77]
DEEWR advised that this is not the case. Under Division 2A and proposed
Division 2B of Part 1-3 states are required to refer matters that enable the
Commonwealth to amend the FW Act (so far as not otherwise within Commonwealth
power) in relation to the referred subject matters. This term is defined in
sections 30A and proposed 30K.
1.81
The definition of referred subject matters is a broad statement of the
general subject matter covered by the FW Act with a view to allowing amendment
of the Act into the future without the need to secure additional references of
subject matter from the states. Accordingly, the definition for the most part
avoids using terms that are defined in the FW Act. Section 172 of the FW Act
sets out the matters that may be included in an enterprise agreement,
including:
1.82
Paragraph 172(1)(b) authorises the inclusion of terms in enterprise
agreements that relate to an employee organisation in its capacity as a
representative of employees:[78]
-
an enterprise agreement that is not a greenfields agreement can only
cover an employee organisation if it was a bargaining representative for the
enterprise agreement (ss 53(2)(a), 183(1)). An employee organisation will be a
bargaining representative of an employee for an enterprise agreement if the
employee is a member of the organisation and the organisation is entitled to
represent the industrial interests of the employee in relation to the work
performed under the agreement (section 176).
-
a greenfields agreement can only cover an employee organisation
with which it is made (s 53(2)(b)) and such an agreement can only be made with
an organisation which is entitled to represent the industrial interests of at
least one employee who will be covered by the agreement in relation to the work
performed under the agreement (s 172(2)(b) and (3)(b), and definition of
'relevant employee organisation' in s 12). Before approving such an agreement,
FWA must be satisfied that the relevant employee organisations that will be
covered by the agreement are (taken as a group) entitled to represent the
industrial interests of a majority of the employees who will be covered by the
agreement, in relation to work to be performed under the agreement (subsection
187(5)).
1.83
The phrase ‘terms and conditions of employment’ is broad and would
encompass matters relating to an employee organisation in its capacity as a representative
of employees. The phrase 'terms and conditions of employment' has been found to
have a wide reach, encompassing all of the matters affecting the relationship
between an employer and employee.[79]
Comparison of proposed sections
569A and 597A
1.84
In comparing proposed sections 569A and 597A, the ACTU questioned why a state
or territory minister who has responsibility for workplace relations may
intervene in court proceedings if he or she believes it is in the public
interest of the State or Territory to do so, while the capacity of state or territory
ministers to make submissions to FWA appears to be subject to an objective
public interest test.[80]
1.85
DEEWR responded that proposed new sections 569A and 597A of the FW Act
recognise the cooperation of states and territories in the national system and
the important role that state ministers will continue to have in the national
system. These provisions would extend to state ministers the same rights as the
Commonwealth minister has to intervene in court proceedings (subject to a
subjective public interest test) under s 569 of the FW Act, and to make a
submission in a matter before FWA (subject to an objective public interest
test) under s 597 of the FW Act.
1.86
If a minister intervenes in court proceedings he or she will be taken to
be a party to the proceedings and a costs order may be made against him or her.
Given this provision, a subjective test of what is in the public interest is
considered appropriate. However, FWA may only order costs in very limited
circumstances (see s 611 of the FW Act) so it is appropriate to provide for an
objective test of the public interest to protect the parties to the proceeding
from incurring undue costs themselves as a result of any such intervention.[81]
Conclusion
1.87
The bill received general support. It was developed in close
consultation and cooperation with the states and offers the opportunity to
create a fair, simple, balanced and flexible national workplace relations
system for the private sector. It will provide consistency, certainty of jurisdictional
coverage, reduced legal complexity and reduced compliance costs. A national
workplace relations system will provide administrative efficiencies and deliver
savings which states can direct to other public services and it will contribute
to the creation of a seamless national economy which is better able to adapt to
global markets and competition. The committee majority understands that DEEWR
continues to work with states on the details of their referrals and amendments
may be required to the bill as a result of this process.[82]
Recommendation 1
1.88
The committee majority recommends that this bill be passed without delay.
Senator Gavin Marshall
Chair
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