WorkChoices Update

Consequences for Employers using AWAs

The Fairness Test is of no consequence to an AWA lodged prior to 7 May 2007.  However, employers currently using AWAs must be aware that they can only continue to do so for new employees earning less than $75,000 if the AWA passes the Fairness Test.  In our experience the majority of AWAs lodged since the introduction of WorkChoices do modify or exclude some or all protected award conditions and will not in their current form pass the Fairness Test. 

Employers using AWAs may also face issues relating to equality, given employees doing a particular job prior to 7 May on an AWA that removed or modified protected award conditions will be on different terms and conditions to those who are employed after 7 May who must be compensated for the removal of those terms and conditions. 

The Workplace Authority, Workplace Authority Director and Workplace Ombudsman

The Bill creates the Workplace Authority (formerly the Office of the Employment Advocate) which will be headed by the Workplace Authority Director.  The Workplace Authority Director has the authority to accept the lodgement of workplace agreements.  The Bill also creates the Office of the Workplace Ombudsman (formerly the Office of Workplace Services).  These bodies will jointly have the responsibility of assessing whether relevant workplace agreements meet the Fairness Test.

The Fairness Test - What and who it will apply to?

The Fairness Test will apply to AWAs and collective agreements which were made or varied from 7 May 2007 which cover employees who are employed in an industry or occupation in which the terms and conditions of the kind of work performed are usually regulated by an award.  For the Fairness Test to apply, an AWA or collective agreement, must exclude or modify one or more of the protected award conditions that apply to an employee under an award in relation to the employee. 

In regards to AWAs, the Fairness Test will only apply if on the date of lodgment an employee employed under the AWA was earning a salary of less than $75,000.

The Bill provides that ‘salary’ means gross base salary and does not include:

• incentive-based payments and bonuses;



• loadings (other than casual loadings);



• monetary allowances;



• penalty rates;



• employer superannuation contributions; and



• any other separately identifiable entitlements that are similar to those mentioned above.

The Fairness Test will apply to all collective agreements.

An agreement passes the Fairness Test if:

• in the case of an AWA - the Workplace Authority Director is satisfied that the AWA provides fair compensation to the employee whose employment is subject to the AWA in lieu of the exclusion or modification of protected award conditions that apply to the employee; or



• in the case of a collective agreement - the Workplace Authority Director is satisfied that, on balance, the collective agreement provides fair compensation, in its overall effect on the employees whose employment is subject to the collective agreement, in lieu of the exclusion or modification or protected award conditions that apply to some or all of those employees.

The Bill provides that the Fairness Test would guarantee the following protected award conditions or fair compensation in lieu of those conditions:

• rest breaks;



• incentive-based payments and bonuses;



• annual leave loadings;



• monetary allowances;



• observance of and payment for public holidays;



• overtime and shift loadings; and



• penalty rates.

The protected award conditions that apply to an employee will be those in the federal award which cover the type of work performed by the employee.  If there is no such award, an appropriate federal award may be designated by the Workplace Authority for the purposes of applying the Fairness Test to the workplace agreement.

The Bill provides that in considering whether a workplace agreement provides fair compensation to an employee, the Workplace Authority Director must have regard to:

• the monetary and non-monetary compensation that the employee or employees will receive under the workplace agreement, in lieu of the protected award conditions;



• the work obligations of the employee or employees under the workplace agreement; and



• the personal circumstances of the employee or employees, such as family responsibilities of the employee or employees.

The Bill also provides that in exceptional circumstances the Workplace Authority Director having regard to the industry, location or economic circumstances of the employer and the employment circumstances of the employee or employees, can consider whether a workplace agreement provides fair compensation.  An example of this would be where the workplace agreement is part of a reasonable strategy to deal with a short-term crisis in, and to assist in the revival of, the employer’s business. 

‘Non-monetary compensation’ in relation to an employee is defined in the Bill as meaning compensation (other than an entitlement to a payment of money):

• for which there is a money value equivalent or to which a money value can reasonably be assigned; and



• that confers a benefit or advantage on the employee which is of significant value to the employee.

If the workplace agreement fails the Fairness Test, the Workplace Authority must notify the relevant parties and advise how the agreement could be varied to pass the Fairness Test.  The notice must also state that compensation may be payable by the employer to the employee or employees.

An employee would be entitled to recover by way of compensation, any shortfall in entitlements during the Fairness Test period.  A shortfall in entitlements arises if the total value of the entitlements to which the employee was entitled under the agreement is less than the total value of the entitlements to which the employee would have become entitled if, during the Fairness Test period, their employment was covered by the applicable instrument or by protected award conditions contained in a designated award.  The Fairness Test period begins on the day in which the workplace agreement is lodged and ends on either:

• the day on which the workplace agreement ceases to operate; or



• if a failed workplace agreement is varied in such a way that it passes the Fairness Test - the day on which the variation was lodged.

Variations to workplace agreements that do not pass the Fairness Test

If the Workplace Authority Director determines that a workplace agreement fails the Fairness Test, the employer who is bound by the workplace agreement may:

• in the case of an AWA - lodge a variation of the AWA with the Workplace Authority Director; or



• in the case of an AWA or collective agreement - lodge a variation of the workplace agreement by giving to the Workplace Authority Director a written undertaking in relation to the AWA or collective agreement.

If the employer fails to take the action referred to above within 14 days beginning on the date of issue specified in the notice the effect will be that:

• the workplace agreement ceases to operate; and



• the employee or employees whose employment was at any time subject to the workplace agreement are, after the end of the relevant period in relation to the workplace agreement, entitled to any compensation payable to the employee or employees.

Applicable employment arrangements that apply if a workplace agreement does not pass the Fairness Test

If a workplace agreement does not pass the Fairness Test, the employer and the employees who were bound by the workplace agreement are taken, on and from the day the workplace agreement ceases to operate, to be bound by:

• the instrument or instruments that, but for the original workplace agreement having come into operation, which would have bound the employer and the employees on and from the day the workplace agreement ceases to operate; or



• if there is no such instrument, the designated award in relation to that employee or those employees, but only to the extent that the designated award contains protected award conditions. 

Further amendments

The Bill provides that an employer is not permitted to dismiss or coerce an employee or threaten to dismiss an employee if the sole or dominant reason for the employer dismissing or threatening to dismiss the employee, is that a workplace agreement does not pass the Fairness Test.  

FURTHER ENQUIRIES