Secure Jobs, Better Pay – significant amendments to the Fair Work Act

The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) received Royal Assent on 6 December 2022, heralding in a raft of changes to the Australian employment landscape.

A summary of some of the most significant amendments, as well as the dates the amendments commence, are set out in the table below.

In practical terms, employers need to be aware of the following:

  1. Pay secrecy clauses are now unlawful. While it is not necessary to amend existing employment contracts, employers should be aware that pay secrecy clauses included in those contracts are now unenforceable. Employers should also ensure that any new employment contracts issued to employees do not include pay secrecy provisions. Inclusion of pay secrecy provisions in new employment contracts will result in a breach of the Fair Work Act 2009 (Cth) (FW Act), which could expose an employer to pecuniary penalties.
  2. The Australian Building and Construction Commission (ABCC) has been abolished. While its functions have largely been assumed by the Fair Work Ombudsman (FWO), employers in the building and construction industry may experience an increasing incidence of right of entry disputes and unlawful industrial action as union officials “test the waters”.
  3. The Code for the Tendering and Performance of Building Work 2016 has been repealed.
  4. Aggrieved employees will be able to seek compensation and the imposition of pecuniary penalties in relation to sexual harassment in the workplace. In addition, employees will be able to make claims jointly with other employees aggrieved by the same or similar conduct, and unions will be able to make claims on behalf of members. The FWO will also have power to investigate and prosecute employers and individuals for sexual harassment.
  5. The strict procedural time frames which currently apply to enterprise agreement negotiations will be scrapped and replaced with a requirement that employees “genuinely agree” to an enterprise agreement. This will see far fewer enterprise agreements rejected for failure to comply with strict procedural requirements. In addition, the better off overall test (BOOT) will be applied on a less granular scale, and will instead look more holistically at whether employees are better off under the proposed enterprise agreement. The Fair Work Commission (FWC) will have power to amend or remove terms in an enterprise agreement which do not satisfy the BOOT, avoiding the need for the agreement to go back to an employee vote.
  6. Employees will have greater rights to request flexible work arrangements, employers will need to undertake certain procedural steps before refusing a request (including making genuine efforts to identify an alternative arrangement if the arrangement requested by the employee cannot be accommodated), and the FWC will have power to arbitrate disputes regarding flexible work requests.
  7. Employees who request a period of unpaid parental leave in excess of 12 months will be entitled to have their request granted unless there are reasonable business grounds for refusing the request. An employer refusing a request must provide written reasons, as well as details of any alternative period the employer would be willing to agree to. The FWC will have power to arbitrate disputes regarding unpaid parental leave.
  8. Subject to limited exceptions, it will be unlawful for an employer to enter into a fixed term or maximum term contract where the term of the contract is greater than two years; or the original term of the contract plus any renewal period is greater than two years; or there is an option or right to renew the contract more than once (irrespective of the period of the original term and the term of any renewals). If an employer enters into an unlawful fixed term contract with an employee, the contract is taken to be a permanent employment contract, such that the employment will continue beyond the end of the fixed term.
Amendment Commencement date
Prohibition of pay secrecy

Pursuant to this amendment, employees have a workplace right to:

  • Disclose, or not disclose, their remuneration to any other person;
  • Ask any other employee (whether employed by the same or a different employer) about their remuneration;
  • Disclose, or not disclose, or ask any other employee (whether employed by the same or a different employer) about any terms and conditions of employment that are reasonably necessary to determine remuneration outcomes. While the concept of “reasonably necessary to determine remuneration outcomes” is undefined, the Act provides an example that asking about the number of hours worked by an employee may be reasonably necessary to determine remuneration outcomes.
A pay secrecy clause included in an existing employment contract is unenforceable, and it will be a breach of the FW Act for employers to enter into new employment contracts which contain pay secrecy clauses.
7 December 2022
Abolition of the ABCC

The ABCC will cease to exist altogether, with its functions in ensuring compliance with the FW Act in the building and construction industry to be assumed by the FWO.

In addition, the Code for the Tendering and Performance of Building Work 2016 has been repealed.
7 December 2022
Prohibition of sexual harassment in the workplace

In addition to the existing power of the FWC to issue stop sexual harassment orders, the amendments:

  • provide workers with the option to apply for the FWC to deal with the dispute through conciliation. If the matter remains unresolved, the parties can consent to the FWC arbitrating the dispute, or the worker may commence proceedings in the Federal Court or Federal Circuit and Family Court;
  • provide the FWC with power to award compensation and/or lost remuneration to an aggrieved worker;
  • provide the Courts with power to award an aggrieved worker compensation, lost remuneration, and/or pecuniary penalties;
  • provide the FWO with power to investigate and bring compensation and/or civil penalty proceedings against employers or individuals for breaches of the prohibition on sexual harassment;
  • permit applications to be made by multiple workers, or to be made by the union on behalf of one or more workers.
6 March 2023
Enterprise agreement approval and the BOOT

The amendments remove the previous strict procedural requirements regarding notices of employee representational rights, access periods, etc. and instead require that the FWC be satisfied that employees genuinely agreed to the enterprise agreement. The FWC is in the process of developing a “statement of principles” which will enable employers to ensure that employees have genuinely agreed to an enterprise agreement.

The amendments also make significant changes to the BOOT, including:

  • requiring that the FWC undertake a global assessment of whether employees will be better off having regard to the provisions which are more beneficial than the Award, as well as the provisions which are less beneficial than the Award. This is a significant departure from what we have seen in recent years, with each provision of an agreement being scrutinised for its ability to satisfy the BOOT;
  • requiring that the FWC only have regard to reasonably foreseeable patterns or kinds of work. This amendment will ensure that hypothetical arguments, which have previously seen enterprise agreements rejected, will no longer be entertained by the FWC;
  • providing the FWC with power to amend or remove terms in an enterprise agreement which do not satisfy the BOOT, thereby avoiding the need for the agreement to go back to an employee vote.
6 June 2023 (or an earlier date to be fixed by proclamation)
Flexible work and unpaid parental leave requests

In relation to flexible work requests, the amendments will:

  • expand the circumstances in which an employee is entitled to request flexible work arrangements;
  • require that an employer may only refuse a request after they have undertaken certain procedural steps and have provided a detailed written response containing reasons for the refusal;
  • introduce a requirement for employers to make genuine efforts to identify an alternative arrangement if the arrangement requested by the employee cannot be accommodated;
  • introduce a power for the FWC to arbitrate disputes regarding flexible work requests.
In relation to unpaid parental leave requests, employees who request a period of unpaid parental leave in excess of 12 months will be entitled to:

  • discuss their request with the employer;
  • have their request granted unless there are reasonable business grounds for refusing the request (consistent with the current requirements);
  • written reasons from the employer if their request is refused, as well as details of any alternative period the employer would be willing to agree to;
  • make an application to the FWC if their request is refused, with the FWC empowered to arbitrate the dispute.
6 June 2023
Fixed term contracts

Subject to certain exceptions, it will be unlawful for an employer to enter into a fixed term contract with an employee where:

  • the term of the contract is greater than two years; or
  • the original term of the contract plus any renewal period is greater than two years; or
  • there is an option or right to renew the contract more than once (irrespective of the period of the original term and the term of any renewals).
The Act provides that the prohibitions also apply to maximum term contracts (i.e. contracts which terminate at the end of an identifiable period but may also be terminated before the end of the period).

If an employer enters into a fixed term contract with an employee in contravention of the FW Act, any term providing for the contract to terminate at the end of a specified period is taken to have no effect. In other words, the contract is converted to a permanent employment contract, with all other contract provisions remaining unaffected.

The exceptions, where fixed term contracts may continue to be used include where:

  • the employee is engaged to perform only a distinct and identifiable task involving specialised skills;
  • the employee is engaged under a training arrangement;
  • the employee is engaged to undertake essential work during a peak demand period;
  • the employee is engaged to undertake work during emergency circumstances or during a temporary absence of another employee;
  • in the year the contract is entered into, the employee’s earnings under the contract exceed the high income threshold for that year;
  • the contract relates to a governance position that has a time limit under the governing rules of a corporation or association;
  • the contract is for a position which is funded in whole or in part by government funding, the funding is payable for a period of more than 2 years, and there are no reasonable prospects that the funding will be renewed.
6 December 2023 (or an earlier date to be fixed by proclamation)
Lara Radik
Partner

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