[WS: 2150333v2]
© Maddocks November 2005
23-25/11/2005
2005 National Local Government Human Resources Conference
Briefing notes:
IR Reform – Practical Implications
Darren GardnerLLB(Hons) LLM(Hons)
Accredited Specialist in Employment & Industrial Law
Partner
Kate O'Connor LLB(Hons) MLLR
Senior Associate
Maddocks Lawyers
Level 28, Angel Place 123 Pitt Street SYDNEY NSW 2000 Telephone (02) 8223 4100 Facsimile (02) 9221 0872
Email [email protected] Email [email protected]
1. PRELIMINARY NOTE ... 3 2. OVERVIEW ... 3 3. THRESHOLD ISSUE–WILL THEWORKPLACE RELATIONS AMENDMENT
(WORK CHOICES) BILL2005 (WORK CHOICES LEGISLATION) APPLY TO LOCAL GOVERNMENT COUNCILS ? ... 3 4. STATE AWARDS... 4 5. STATE AGREEMENTS ... 9 6. FEDERAL WORKPLACE AGREEMENTS UNDER WORK CHOICES
LEGISLATION ... 9 7. UNIONS AND DISPUTES ... 11 8. DISMISSALS ... 12
[WS: 2150333v2]
© Maddocks November 2005
1. PRELIMINARY NOTE
The provisions of the Work Choices legislation relating to transitional arrangements for State awards have been significantly amended since 24 November 2005. Our briefing notes are updated to reflect the amended provisions.
2. OVERVIEW
Award transitioning
Collective agreement changes
Disputes/unions
Dismissals
3. THRESHOLD ISSUE –WILL THE WORKPLACE RELATIONS AMENDMENT (WORK CHOICES) BILL 2005 (WORK CHOICES LEGISLATION) APPLY TO LOCAL GOVERNMENT COUNCILS ?
3.1 Constitutional Issue –Work Choices legislation will apply to "constitutional corporations". Are local government councils "constitutional corporations"?
It is more likely than not, on the balance of case law, that local government councilswillbe considered trading corporations for the purposes of section 51(xx) of the Constitution, despite only High Court decision on this issue finding to the contrary.
Under the Local Government Act 1993, a local council is a statutory"body corporate".1 Paragraph 51(20) of the Constitution enables federal Parliament to make laws with respect to "foreign corporations, and trading and financial corporations formed within the limits of the Commonwealth".
The High Court in The Queen v Trade Practices Tribunal; Ex parte St George County Council (St George Council case)2 found that a local government council was not a trading corporation.
However, in more recent times the High Court has expressly disapproved of (but technically has not over-ruled) the view taken in the St George Council case that local councils are not trading corporations.3
1 Section 220.
2 See The Queen v Trade Practices Tribunal; Ex parte St George County Council(1973) 130 CLR 533.
3 State Superannuation Board v Trade Practices Commission (1982) 150 CLR 282 at 303- 304.
In cases subsequent to the St George Council case, the High Court has explained that it is not correct to focus on the purpose for which a corporation exists, and that any corporation whose trading activities take place so that it may carry on its primary or dominant non-trading purpose is still a trading corporation. Sporting clubs and charitable organisations have accordingly been found to be trading corporations.4
For example, in Burrows v Shire of Esperance5, it was held by the Australian Industrial Relations Commission that the Shire of Esperance was a constitutional corporation because a significant proportion of its revenue was derived from trading activities.
3.2 Can you separate the trading function of a council and keep the core council business activities?
Even if more obvious trading activities are outsourced, it is likely that council will still be engaging in some sort of trading activity. A corporation can only be divided so far. Hard to separate and claim to be only running local government activities.
Accordingly, subject to a High Court test case, the Work Choices legislation will apply to local government councils.
4. STATE AWARDS
4.1 What happens to state awards when the Work Choices legislation takes effect?
State awards become "notional agreements preserving state awards" in circumstances where employees are not covered by a state enterprise agreement.
These notional agreements have a maximum duration of three years, unless within that time a federal workplace agreement comes into operation or an employee subject to the notional agreement becomes bound by a federal award.
With some exceptions, State award conditions, other than conditions which constitute "prohibited content" or that are dealt with by the Australian Fair Pay and Conditions Standard (AFPCS), continue in effect while the notional agreement is in operation.
4 For example,E v Australian Red Cross Society(1991) 27 FCR 310
5 Burrows v Shire of Esperance(1998) 86 IR 75.
5
[WS: 2150333v2]
© Maddocks 2005
At the end of the three year period, terms and conditions revert to the AFPCS and applicable State legislation, unless the council has:
applied to be bound by a federal award; or
entered into a workplace agreement.
4.2 What is the difference between "non-allowable matters" and "prohibited content"?
Non-allowable matters relate to federal awards and are those matters which do not fall within the list of allowable award matters set out in the Work Choices legislation. Some non-allowable matters are specified in the Work Choices legislation, including union picnic days, restrictions on the engagement of independent contractors and restrictions on the engagement of labour hire workers. Non-allowable matters may be included in federal workplace agreements, provided they are not prohibited content.
Prohibited content relates to notional agreements, State agreements and workplace agreements and will be set by the Minister in regulations made under the Work Choices legislation. A notional agreement is void to the extent that it contains prescribed prohibited content. Prohibited content may not be included in workplace agreements. It is likely (although not certain) that any matters that do not pertain to the relationship between employers and employees6will be prohibited content, including:
bargaining fees
union dues
restrictions on use of contractors
expanded right of entry provisions
4.3 How are hours of work determined?
The Work Choices legislation provides as part of the AFPCS that an employee must not be required to be required by an employer to work more than either:
38 hours per week; or
6 There have been a large number of cases following on from the High Court decision in Electrolux Home Products Pty Ltd v Australian Workers Union [2004] HCA 40 as to what constitutes a matter pertaining to the relationship between employers and employees.
if the employee and employer agree in writing, an average of 38 hours per week over an "averaging period" of not more than 12 months; and
reasonable additional hours (which term is not defined).
However, the above provisions do not apply to an employee while the employee is bound by a notional agreement. In other words, hours provisions in State-based local government awards will continue to apply during the period the award continues in operation as a notional agreement.
4.4 What if an employee is currently required to work more than the maximum 38 hours?
If the obligation is under a State award, that obligation will be enforceable during the period the State award operates as a notional agreement.
4.5 Does the reasonable hours test case feature in the federal government system?
No.
4.6 Long service leave–will existing award long service leave entitlements cease to have effect or can a council provide for long service leave in a workplace agreement?
According to the Work Choices legislation, long service leave is one of seven "preserved notional terms" that continue in effect during the period the State award operates as a notional agreement.7
After that time, council employees would be subject to the long service leave provisions applying in State legislation (such as the NSW Long Service Leave Act 1955), unless the council enters into a workplace agreement that provided for more generous long service leave entitlements.
4.7 4 weeks annual leave is provided under the Work Choices legislation- What will happen if an award is more generous?
Annual leave is also a "preserved notional term", which means that State award provisions in relation to annual leave will continue in effect for the duration of the notional agreement. After that time, annual leave will be
7 The other preserved notional terms are annual leave, personal/carer's leave, parental leave, notice of termination, jury service and superannuation–Schedule 15, clause 45(1).
7
[WS: 2150333v2]
© Maddocks 2005
governed by the AFPCS, unless the council enters into a workplace agreement that provided for more generous annual leave entitlements.
4.8 How should councils deal with wage rates? What if they are above award?
Minimum rates of pay will be set by the AFPCS. However, rate provisions in State awards that were determined before the commencement of Work Choices legislation will be preserved.
In the future, councils may bargain/negotiate anything over the minimum, either collectively or on an individual level, through workplace agreements or by incorporating wage rates into policies.
4.9 Could each council within a particular state set up its own federal award?
No. There will be no new awards. However, councils may apply to be bound by an existing federal award.
4.10 If an award provides for fixed term contracts –is it allowable?
A provision in a State award providing for fixed term contracts will continue to have effect after the commencement of the Work Choices legislation, during the period in which the notional agreement operates.
The list of allowable federal award matters includes "type of employment".
This is an inclusive definition, which means fixed term contracts could be allowable in federal awards.
4.11 What is the rationale for not allowing certain matters to be specified in awards?
One of the objects of the Work Choices legislation is to ensure that awards provide minimum safety net standards while allowing employers and employees at the enterprise level to bargain for any more generous entitlements.
4.12 Can a council have a general policy that provides for non allowable matters as long as they are not prohibited ?
Yes, there is nothing to prevent councils from doing this.
4.13 Long service leave –Awards provide for portable long service leave in relation to service with different councils. What is the impact of the Work Choices legislation on this sort of provision?
As mentioned above, a long service leave provision in an award is a preserved notional term that will have effect for the duration of the notional agreement.
4.14 Notional agreements –when employing people, can councils negotiate agreements with them directly?
Yes, a council can negotiate a federal workplace agreement with any new employees, although during the period the notional agreement is in operation, any workplace agreement negotiated with an employee are deemed to include certain terms, including rest breaks, annual leave loadings, public holidays and penalty rates.8
4.15 Can councils negotiate different terms and conditions with existing award- covered employees?
Yes, although (as with new employees) during the period the notional agreement is in operation, any workplace agreement negotiated with an employee are deemed to include certain terms.
4.16 Ceremonial leave- what does it mean?
This term is not clearly defined in the Work Choices legislation. We understand that it is directed at leave for Aboriginals and Torres Strait Islanders to attend a culturally significant event.9
4.17 Can a notional agreement contain a non-allowable matter?
Yes, it appears that it can and that such a matter will be enforceable for the duration of the notional agreement's operation.
However, if and when a council becomes bound by a federal award, such an award cannot include a non-allowable matter.
8 The full list is set out at Schedule 15, clause 52(3) of the Work Choices legislation.
9 Explanatory memorandum, paragraph 1590.
9
[WS: 2150333v2]
© Maddocks 2005
5. STATE AGREEMENTS
5.1 What will happen to existing State enterprise agreements?
A State agreement will continue in force as a "preserved State agreement"
until:
the nominal expiry date of the State agreement; or
if the nominal expiry date is more than three years after the commencement of the State agreement, the end of three years after the commencement of the State agreement.
A preserved State agreement will cease to operate if either a (federal) workplace agreement or a "workplace determination" comes into operation, regardless of whether the nominal expiry date has passed.
5.2 Will all terms of existing State agreements continue in effect?
All terms other than prohibited content will continue in effect.
A State agreement will be void to the extent that it contains prohibited content.
A federal award has no effect in relation to an employee during the operation of a preserved State agreement.
6. FEDERAL WORKPLACE AGREEMENTS UNDER WORK CHOICES
LEGISLATION
6.1 What sorts of workplace agreement are available under the Work Choices legislation?
There are six forms of workplace agreement under the Work Choices legislation, being:
Australian Workplace Agreements (AWAs);
employee or union collective agreements;
employee or union "greenfields" agreements; and
multiple business agreements.
6.2 What is the maximum duration of workplace agreements?
Agreements other than greenfields agreements will operate for up to five years, instead of the current maximum of three years.
6.3 What are the consequences of having an agreement that contains prohibited content?
The agreement will be void to the extent that it contains prohibited content –that is, the clauses containing prohibited content will be void.
If a council, on lodging the agreement with the Employment Advocate, is reckless as to whether the agreement contains prohibited content, the council is in breach of the Work Choices legislation and may incur a penalty of up to $33,000.
6.4 What happens if a council negotiates an agreement in good faith and later some of the content is deemed to be prohibited content?
Providing that the council was not reckless as to whether the agreement contained prohibited content, the council will not have contravened the Work Choices legislation.
6.5 Other than civil disobedience, can you foresee any loopholes that unions can use to avoid prohibited content?
There are financial penalties for seeking to include prohibited content in a workplace agreement and these apply to unions. Unions have been asking councils to enter into deeds of agreement and memoranda of understanding (MOAs). The legal enforceability of these styles of agreements are highly questionable. Work Choices however does not appear to have any reach in relation to unregistered agreements.
6.6 Are there any consequences for councils if council policies contain prohibited content?
Again, Work Choices does not extend to policies, so technically a council policy could validly contain content that is "prohibited" for the purposes of Work Choices.
11
[WS: 2150333v2]
© Maddocks 2005
7. UNIONS AND DISPUTES
7.1 Can a council be fined for providing for payroll deductions for union dues?
Yes, if union dues are deemed to be prohibited content and a council lodges a workplace agreement with a union dues clause and is reckless as to whether the agreement contains prohibited content.
7.2 Policies–can they be developed in consultation with unions?
There is no reason why councils cannot consult with the relevant unions when developing a policy, but nor is there any obligation on a council to consult with a union in this respect.
7.3 Is there a risk in entering into deeds of agreement with unions? Unions in South Australia have been entering into deeds of agreement for matters not covered in awards or agreements.
As previously mentioned, these styles of agreements are probably not legally binding.
7.4 If state unions will not hand over power to their federal counterparts –can councils just ignore them?
It is not a matter of "not handing over power". Rather, State–registered unions may apply for "transitional registration," which lasts for a maximum of 3 years. The provisions of Work Choices apply to transitionally registered unions in the same way that they apply to federally-registered unions.
7.5 What will happen to the structure of unions after the change in law takes effect? Who will the councils be dealing with?
See above. For a maximum of 3 years, councils may continue to deal with State-registered unions, provided that those unions have applied for
"transitional registration."
7.6 Whatcan people do ifthey don’twantto be partofa union agreement?
Entering into an AWA would be one way of not being part of a union agreement.
7.7 What is the difference between State and federal Commissions?
In terms of rules and procedure, there is not a great deal of difference between State and federal industrial relations commissions.
Under the Work Choices legislation, however, the Australian Industrial Relations Commission (AIRC) will play a reduced role. That is, the AIRC:
will play no role in certifying workplace agreements. Instead, all agreements will be lodged with the Office of the Employment Advocate and will take effect once lodged; and
may not make any new federal awards;
may not arbitrate in relation to disputes.
8. DISMISSALS
8.1 What are the changes?
Under the Work Choices legislation, an unfair dismissal application may only be made by an employee whose employer employs more than 100 employees. There are a number of councils Australia-wide that employ 100 employees or fewer, and employees of these councils will not be able to make an unfair dismissal application once the Work Choices legislation takes effect.
An unfair dismissal application cannot be made where one of the reasons for the termination was the "operational requirements" of the employer's business. That is, if a reason for the employee's termination was the redundancy of the employee's position, the employee will not be able to make an unfair dismissal application.
An unfair dismissal application cannot be made by a person employed for less than six months or by a seasonal employee.
Unlawful termination laws in the Workplace Relations Act 1996 (that is, in respect of a termination alleged to be for a prohibited reason) will continue to apply.
13
[WS: 2150333v2]
© Maddocks 2005
8.2 What about the NSW Employment Protection Act, which amended the Local Government Act?
A State Act that is inconsistent with the Work Choices legislation will have no effect to the extent of the inconsistency.
8.3 What else can a council employee do if unfair dismissal is not available?
It is likely that employees will try other avenues, including:
common law claims in relation to negligence and breach of contract;
claims in the State and federal anti-discrimination tribunals; and
claims under the Trade Practices Act 1974 (although it is likely to be senior executive employees who bring these claims)
complaints made to the State ombudsman, to the State Department of Local Government or its equivalent or (in NSW) to ICAC.
This paper is by way of general information only and is not intended to be a substitute for legal advice in relation to specific circumstances.