The new "Fairness Test" bill is here!

Following Prime Minister John Howard's announcement on 4 May 2007 of amendments to the Workplace Relations Act 1996, the Workplace Relations Amendment (A Stronger Safety Net) Bill 2007 has now been tabled in Parliament. The Bill runs to 80 pages of details and is further supported by a 64 page Explanatory Memorandum.

The Bill sets out to:

• create the Office of the Workplace Ombudsman (formerly the Office of Workplace Services) and the Workplace Authority (formerly the Office of the Employment Advocate);
• introduce the "Fairness Test" to be assessed by the Workplace Authority and to apply to workplace agreements lodged or varied on or after 7 May 2007; and
• establish a compliance framework to oversee the operation of the changes.

Under the Workplace Relations Act 1996, a workplace agreement includes (1) Australian Workplace Agreements ("AWAs"); and (2) Collective Agreements (both union and non-union agreements). Both categories of workplace agreements will be affected in different ways.

When does the Fairness Test apply?

The Fairness Test will apply to all collective agreements and certain AWAs that:

• are lodged or varied on or after 7 May 2007; and
• relate to employees who would otherwise be covered by an Award; and
• modify or exclude protected award conditions, such as:
  • rest breaks;
  • incentive based payments and bonuses;
  • annual leave loadings;
  • monetary allowances;
  • observances of and payment for public holidays;
  • overtime and shift loading; and
  • penalty rates.

An additional requirement for AWAs only is that the Fairness Test will only apply where the employee has a gross base salary of less than $75,000. "Salary" does not include incentive based payments and bonuses, loadings (other than casual loading), monetary allowances, penalty rates and superannuation. While this salary figure has been specified in the Bill, it may be increased from time to time through Regulations.

What is the Fairness Test?

The Fairness Test will be conducted by the officers of the Workplace Authority who must be satisfied that if protected award conditions have been modified or removed:

• in the case of an AWA - provides "fair compensation" overall to the employee; or
• in the case of a collective agreement - on balance, provides "fair compensation" in its overall effect on employees.

In determining if "fair compensation" has been provided, officers of the Workplace Authority must consider:

• the monetary and non-monetary compensation that the employee(s) will receive in lieu of the modified or removed conditions; and
• the work obligations of the employee(s).

In addition, officers of the Workplace Authority may:

• consider the personal circumstances of the employee(s), particularly the family responsibilities of the employee(s);
• consider in "exceptional circumstances" the "…industry, location or economic circumstances of the employer and the employment circumstances of the employee or employees" where it is not contrary to the public's interest; and
• inform themselves in any way they consider appropriate including contacting the employee(s) or the employer.

What if the workplace agreement fails the Fairness Test?

If the Workplace Authority determines that a workplace agreement does not meet the Fairness Test, then the parties will be given:

• advice on how to vary the workplace agreement to pass the test; and
• 14 days to vary the workplace agreement (including by parties giving an undertaking to change a condition).

Compensation can also be ordered to cover any shortfall in conditions that may have occurred, including a direction to pay compensation within a specified time.

If a variation does not pass the test, or if no variation has been made in the specified time the lodged workplace agreement ceases to operate and the employment arrangements return to the pre-lodgement arrangements (whether they be an award, pre-reform AWA, certified agreement or an award designated by the Workplace Authority, for example).

Other points of interest in the Bill

The Bill contains numerous other changes and amendments. Some of the notable changes include:

• the ability for the Workplace Authority to assess a workplace agreement for compliance with the Fairness Test prior to lodgement (that is, a pre-lodgement facility);
• significant requirements for the Workplace Authority to notify parties when a workplace agreement require assessment against the Fairness Test and whether the workplace agreement passes or fails the test and any changes that are required;
• employers being prohibited from terminating an employee's employment because the workplace agreement has failed the Fairness Test;
• confirming that an AWA cannot be a condition of employment in a transmission of business situation; and
• reinforcing that an employee cannot be coerced into signing a workplace agreement or bargaining away protected conditions.

Overall, while the Bill offers further clarification on the new Fairness Test, the practical aspects of the Bill, in particular the details of the Fairness Test will require careful consideration in each case.