FIRST PHASE OF LABOR’S CHANGES

The first phase of the Labor Government’s reform agenda was passed by the Senate and the House of
Representatives late last week. When the Workplace Relations Amendment (Transition to Forward with
Fairness) Bill 2008 was passed by the Senate, 37 amendments to the Bill originally passed by the House of
Representatives were made by the Government in response to submissions made to the Senate Committee.
The Bill is yet to receive Royal Assent but this is expected to occur as early as March 27 and no later than
early April. The Bill will then become an Act and will commence operation.

Contrary to media statements that WorkChoices has been abolished, the transitional legislation only abolished
AWA’s and replaces the Fairness Test with the old ‘No Disadvantage Test’. It also kick starts the award
modernisation process that was also to take place under the Howard Government but in a slightly different
format.

AUSTRALIAN WORKPLACE AGREEMENTS

From the date of commencement no new Australian Workplace Agreements (AWA’s) will be able to be
made. Existing AWA’s will continue to operate for their full nominal terms (of up to 5 years) and will be
able to be terminated on 90 days notice by either party once their nominal term has expired.
Any AWA made prior to the commencement of the legislation, but not lodged, must be lodged with the
Workplace Authority within 14 days of the legislation commencing. Any AWA’s not lodged within this
time will not be accepted by the Workplace Authority and will not come into operation.

Any AWA made prior to the commencement of the legislation and lodged within 14 days of the legislation
commencing will continue to operate for its full term and terminated on the same basis as mentioned above.

Transitional Arrangements for AWA’s

Employers who have at least one employee employed under an AWA as at 1 December 2007 can continue
to offer statutory individual employment agreements similar to AWA’s to new employees until 2010.

These agreements are known as Individual Transitional Employment Agreements (ITEA’s) and their
nominal term must expire on 31 December 2009. ITEA’s may be terminated on 90 days notice by either
party once their nominal term has expired.

ITEA’s can only be made with:

• new employees where the employer has employees on AWA’s as of 1 December 2007; or
• existing employees employed under the terms of a current AWA as of 1 December 2007; or 
• former employees provided that their original employment was not terminated in order to force
  them to sign an ITEA.

Except for the case of new employees, ITEA’s and Collective Workplace Agreements will commence
operation 7 days from the date the Workplace Authority has issued a notice of approval. This differs
from the previous situation where agreements operated from the date they were lodged with the
Workplace Authority unless they were subsequently failed to gain approval. ITEA’s for new employees
and Greenfield Collective Workplace Agreements commence operation upon lodgement.

ITEA’s and Collective Workplace Agreements will be subject to a ‘No Disadvantage Test’. This test
replaces the ‘Fairness Test’ introduced under WorkChoices. The no ‘No Disadvantage Test’ differs from the
Fairness Test in that it is a holistic test against all of the terms and conditions of the underpinning award
(or a designated award if there is no underpinning award) and the Australian Fair Pay and Conditions
Standard. ITEA’s are also assessed against any relevant workplace agreement applying to the workplace
at the time. By way of contrast, the Fairness Test only applied to certain protected award conditions.
Interestingly, State Long Service leave provisions will be taken into account by the Workplace Authority
when determining whether or not the ‘No Disadvantage Test’ has been met.

An ITEA and a Collective Workplace Agreement will pass the ‘No Disadvantage Test’ if on balance the employee(s)
will not suffer an overall reduction in the terms and conditions of their employment against an award or other
industrial instrument designated by the Workplace Authority.

AWARDS MODERNISATION

The legislation allows for the commencement of the award modernisation process. Awards will be simplified based
on the 10 National Employment Standards to be implemented from 2010 and the following 10 allowable matters:

1. Minimum wages
2. Classification of employees
3. Work arrangements (hrs of work, meal breaks, etc)
4. Allowances
5. Consultation procedures (including dispute settling)
6. Leave
7. Penalty rates
8. Provision of annualised salaries
9. Superannuation
10. Overtime

They will also include a flexibility clause. This will allow arrangements to be made in common law contracts of
employment and workplace agreements to meet the individual needs of employers and employees within the following
parameters:

• Hours of work and rostering 
• “all inclusive” rates of pay 
• Exclusions of certain award provisions once remuneration reaches a certain level above award rates 
• Early start and finish times for child care reasons

Main implications for Employers:

• No new AWA’s can be made from the date the legislation commences. 
• Eligible employers can make ITEA’s with their employees. 
• Those employers who did not employ employees under AWA’s prior to 1 December 2007 will not be able to
  enter into ITEA’s with their employees. These employers are able to negotiate Collective Workplace
  Agreements or enter into common law contracts with them. Common law contracts cannot override
  statutory or award conditions. 
• Those employers and employees who will not have access to ITEA’s and wish to enter into an AWA should
  make their AWA prior to the commencement of the legislation. Any pre-reform AWA’s must be lodged within
  14 days of the commencement of the Act. 
• At this point in time no changes to the federal unfair dismissal jurisdiction have been made. These changes
  will be made with future legislation and are expected to commence from 1 January 2010 with the balance of
  Labor’s ‘Forward with Fairness’ Policy.

If you would like further information in relation to the information provided in this Employment Update please
contact Aitken Legal.

This Update has been prepared by Aitken Legal. We recommend that you seek legal advice before applying the information to particular circumstances.