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2.57 Sections 61 and 60 of the FW Act provide that the NES only apply to employees. This excludes non-employee outworkers. In circumstances where it is widely acknowledged that outworkers are employed under sham contracting arrangements and are amongst the most vulnerable workers in the country, it is untenable that so called non-employee outworkers be denied basic minimum entitlements.
Recommendation 9
2.58 The committee majority recommends the following amendment to section 60 of the FW Act:
In this part, 'employee' means:
a national system employee,
an outworker
and 'employer' means a national system employer.
2.59 The term ‘outworker entity’ is misleading as it suggests that outworkers are engaged by the entity. Pursuant to the terms of the definition this is plainly not the case. However, any award and legislative obligations imposed on outworker entities will likely be read by employers as having no application to their business if they do not engage outworkers. As outlined above, as soon as work is given out, award obligations apply regardless of whether or not outworkers are engaged to do the work.
Recommendation 10
2.60 The committee majority recommends that in section 12 of the FW Act the term 'outworker entity' be replaced by 'TCF entity'.
2.61 Subdivision AA of Part 3-4 of the FW Act provides a specific right of entry relating to TCF outworkers. It provides for right of entry in the following circumstances:
1. (a) contravention of the Act, Fair Work Instrument (inc Award) that (b) affects/relates to outworker (c) who is on the premises and (d) where the permit holder has a reasonable suspicion of the contravention (s 483A(1))
2. (a) contravention of a designated outworker term (b) that relates to an outworker (s 483A(2))
3. (a) contravention of Act, Fair Work Instrument (inc Award) that (b) affects/relates to an outworker (c) where permit holder has reasonable suspicion (483D)
2.62 The regime is predicated upon being able to identify an outworker. This means that in the case of sweatshops, the TCFUA will need a member in order to check the pay and conditions applying to sweat shop workers (TCF right of entry regime will not apply in these circumstances). It also means that, in the case of an inspection of premises using the designated outworker terms right of entry, where it is discovered that work is being given out, no access will be permitted to documents relating to minimum wages and conditions (not being within the definition of designated outworker term). There is no means under any of the right of entry provisions for access to these documents where these are not kept by an outworker themselves.
Recommendation 11
2.63 The committee majority recommends the following inclusion as an amendment to section 483A of the FW Act:
(1) A permit holder may enter premises and exercise a right under section 483B or 483C for the purpose of investigating a suspected contravention of this Act, a term of the Textile, Clothing Footwear and Associated Industries Award 2010, or a term of an enterprise agreement, workplace determination or FWA order (where the Textile, Clothing Footwear and Associated Industries Award 2010 covers the employee or outworker), that relates to, or affects, an employee or outworker:
whose industrial instruments the organisation is entitled to represent; and
who performs work on the premises.
2.64 Section 483B of the FW Act outlines that an ‘affected employer’ must allow access to documents when a union official is on the premises. A denial of an employment relationship will prevent access to documents. The definition of outworker in section 12 recognises so called non-employee outworkers, however the provisions do not provide the union with access to documents relevant to his or her engagement.
Recommendation 12
2.65 The committee majority recommends the following inclusion as an amendment to section 483B of the FW Act:
Meaning of 'affected person'
(1) A person is an affected person, in relation to entry onto premises under this Subdivision, if:
the person employs or engages a TCF employee or a TCF outworker whose industrial interests the permit holder’s organisation is entitled to represent; and
the TCF employee or TCF outworker performs work on the premises; and
the suspected contravention relates to, or affects, the TCF employee or TCF outworker.[45]
2.66 The government has committed to introducing national legislation to protect outworkers which is based on best practice state legislation. The three main components of this legislation are:
deeming of all outworkers as employees;
recovery of money by outworkers along the supply chain; and
mandatory codes of practice for industry
2.67 The committee majority notes that these measures are not contained within the FW Act or the current bill. They remain critical aspects of legislation to ensure the protection of outworkers and should be legislated as a matter of urgency.
2.68 The TCFUA noted that Clause 22 of Schedule 7 provides that the reference in section 263(3) of the bill to ‘enterprise agreement’ is to be read so as to include reference to a collective agreement-based transitional instrument. It pointed out that the definition of collective agreement-based transitional instrument in Clause 2(3) of Schedule 3 will severely limit access to the low-paid stream and argued:
It cannot be contended that in circumstances where an enterprise in the low paid sector has not had an enterprise agreement in place for some time that workers have sufficient bargaining strength such that they do not require the assistance of the low paid stream.[46]
2.69 The TCFUA provided examples of companies in their sector which have not had an enterprise agreement in many years and argued their workers should not be prevented from accessing the low-paid stream where they are otherwise eligible.[47]
2.70 It recommended that the definition of ‘enterprise agreement’ for the purposes of section 263(3) of the bill be confined to enterprise agreements concluded pursuant to the Fair Work Act and Clause 22 of Schedule 7 should be amended accordingly.[48]
2.71 This was supported by the SDA which also noted the intention of Clause 22 of Schedule 7 to exclude any employer who has ever been covered by a collective agreement-based transitional instrument. The SDA recommended that in the event that Clause 22 of Part 5 of Schedule 7 is not deleted, it should provide that where s263(3) of the FWA would be triggered solely on the basis that the employer had previously been covered by a collective agreement-based transitional instrument, then FWA should have the discretion to either grant or refuse the making of a low-paid workplace determination, having considered all the circumstances.[49]
2.72 The ASU also argued that the additional limitation imposed by Clause 22 of Schedule 7 is inappropriate as the agreement may:
be unfair and have been imposed on the employees during the WorkChoices period;
have long passed its nominal expiry date;
have been made a long time ago.[50]
2.73 The ASU and the ACTU also submitted that this provision will encourage some employers to seek to make agreements between now and 30 June 2009 to ensure there is no possibility of a low-paid determination applying to them in the future.[51]
2.74 The ACTU agreed that employers who were covered by a collective agreement quite some years ago should not be excluded. It noted that the provision includes employers who negotiated single-issue agreements but have never been party to a comprehensive workplace agreement and provided the following example:
Just one example is the Oroton group. In 1992, the employer was facing financial difficulties. The award required the employer to negotiate a shorter working week with the LHMU, in order to avoid redundancies. The result was the Oroton Leather Goods Pty Ltd Industrial (Hours of Work) Agreement 1992, which commenced on 29 October 1992 and ceased operating on 18 December 1992 – a period of six weeks.[52]
2.75 To address these issues, the ACTU submitted that FWA should have a discretion to ignore the effect of agreements initiated by employers with the intention of avoiding the low-paid bargaining stream.[53]
2.76 The committee majority is concerned that employees are not unfairly excluded from accessing the low-paid bargaining stream in circumstances where unfair agreements were made, or where they were made a long time ago or rushed through before 30 June by employers in an attempt to avoid the determination.
Recommendation 13
2.77 The committee majority recommends that FWA be given the discretion to grant or refuse a low-paid workplace determination after considering all the circumstances in which they were made.
2.78 The Australian Fair Pay and Conditions Standard will continue to apply to national system employees until 31 December 2009 (Schedule 3, Item 22). From 1 January 2010, the National Employment Standards (NES) and minimum wages will apply to all national system employees, including those covered by instruments made before commencement of the new system.
2.79 A provision in a transitional instrument (an instrument made before 1 July 2009, or an ITEAs made before 31 December 2009) will have no effect if it is deficient when compared to the NES under the 'no detriment rule' (Schedule 3, Item 23). The Minister has clarified that this provision:
...means that from 1 January 2010, Australian employees who were required to make 'take it or leave it' substandard Australian Workplace Agreements under Work Choices will receive the benefit of the ten minimum National Employment Standards where their current agreement contains inferior conditions and minimum 'safety net' wages.[54]
2.80 Under Schedule 9, Item 14, FWA will have the scope to make a determination to ‘phase-in’ the effect of increases in base rates of pay if it is satisfied this is necessary to ensure the ongoing viability of the employer's enterprise.
2.81 Schedule 4, Item 5 sets out the general rule that an employee's service with an employer before the FW (safety net provisions) commencement day counts as service for the purpose of determining the employee's NES entitlements, except redundancy pay. Subitem 5(4) of the bill provides that an employee's service prior to 1 January 2010 does not count for the purpose of accruing an entitlement to redundancy pay, if, the terms and conditions of employment that applied immediately before that date, do not provide for an entitlement to redundancy pay. The ACTU pointed out that this provision essentially ratifies the effect of workplace agreements that purport to stop the employee accruing redundancy pay entitlements for the period up to 31 December 2009. It explained:
If those workplace agreements had fully compensated employees for the loss of redundancy rights, then this provision would merely operate to prevent 'double dipping', and would be uncontroversial. However, the reality is that most of the agreements made in the post-Work Choices period removed employees' redundancy rights without compensation. For example, as outlined above, in the retail and hospitality sectors, 75% of non-union Employee Workplace Agreements and 64% of AWAs excluded the employee's entitlement to redundancy pay – with no, or no significant, compensation.[55]
2.82 The ACTU submitted that to address this issue, Schedule 4 Item 5(4) should be deleted and instead the bill should provide employers with the right to apply to FWA for an order that time served by an employee under a workplace agreement not count towards the calculation of redundancy entitlements under section 119(2) of the FW Act. This should also apply where the agreement removed the right to redundancy pay and where the employer can show that the employee was fully compensated for that loss.[56]
2.83 While supporting the intention of the provision, Master Builders Australia pointed out that, in the building and construction industry, the application of Clause 16 of the National Building and Construction Industry Award is currently before the full Federal Court. In addition, the rule may not cover service in relation to accruals under 'industry specific redundancy schemes' which fall outside the NES. It recommended that the provision ensure the exclusion from Subitem 5(1) which encompasses industry specific redundancy schemes.[57] The CFMEU responded to the MBA evidence regarding redundancy provisions and stated that they believed the concern about double counting would not be realised.[58]
2.84 The Chamber of Commerce and Industry, WA, told the committee that in the mining industry it is common for redundancy provisions to be rolled into an hourly rate. So despite the fact that an employee is receiving a monetary benefit in lieu of the entitlements, the no-detriment rule in the provisions of section 119 will take effect. It advocated that agreement-based instruments should continue until they are replaced or terminated without the requirement of the NES interaction. Alternatively FWA should determine that a provision of the NES has no effect while the agreement exists.[59]
2.85 The committee majority notes that under Schedule 3, Item 26, a party to a transitional instrument may apply to FWA to clarify interaction with the NES.
2.86 Schedule 5, Item 6 provides for FWA to conduct an interim review of modern awards after two years of operation from 1 January 2012, ahead of the regular four-yearly review cycle. This will allow any operational difficulties to be identified and addressed quickly.[60] The EM notes that the interim review will enable FWA to examine individual flexibility clauses in modern awards to ensure they are being used for the purpose intended. This addresses a concern raised by the committee majority in its report on the Fair Work Bill[61] and it is pleased to note the inclusion.
2.87 The NSW Government suggested that there would be merit in allowing FWA to have the capacity to review all transitional arrangements in modern awards to determine whether they are operating effectively and fairly.[62]
2.88 Outside the initial two year review, witnesses were concerned that, given the complexity of the process, there should be additional scope to address any unintended consequences arising from the award modernisation process.[63] The committee notes the provision to resolve ambiguity but beyond that believes there is a need for a mechanism to address any genuine unintended consequences such as the omission of a particular classification or the failure to set a pay rate for a classification, without opening the floodgates to grievances about the process and its outcomes. The committee asked Professor Stewart to investigate this issue. In a supplementary submission the committee was reassured to note his advice that:
...there is indeed scope to deal with such issues. Section 160 allows FWA to vary a modern award, not just to resolve any ambiguity or uncertainty, but to ‘correct an error’. In addition, s 157(1) confers a general power to vary modern awards, wherever that variation is ‘necessary to achieve the modern awards objective’ set out in s 134.[64]
2.89 In response to concerns about award modernisation and questions from the committee, witnesses said that the place to ensure award modernisation issues are addressed is through the award modernisation process.[65]
2.90 The committee notes a particular unintended consequence identified by the ASU whereby the AIRC has determined that, in the modern Clerks – Private Sector Award 2010 at a salary of $44,000, these employees are not entitled to certain award protections.[66] The original intention was that, in the interests of flexibility, modern awards would not apply to employees earning over $100,000, although they would still be covered by the NES. The committee majority was concerned to hear that at half this salary, clerks suffer a loss of protections such as access to dispute resolution procedures, consultation regarding significant change, shift penalties and no right of access to a copy of the award. The committee majority considers that the AIRC decision conflicts with government policy which makes it clear that only those employees earning over $100,000 should be exempted from award protections and believes this issue should be addressed.
Recommendation 14
2.91 The committee majority recommends that the Minister amend the award modernisation request to ensure that the AIRC refrains from depriving employees of modern award protections where their salary is under the $100,000 threshold in line with government policy.
2.92 Schedule 5, Item 9 enables FWA to remedy a reduction in take-home pay that has resulted from award modernisation for one or more employees or outworkers. This will be known as a 'take-home pay order' and the scope will be tightly constrained.[67] The order can only be made where:
there is an actual reduction in take-home pay – if award rates fall, but an employee's pay does not decline (because pay is maintained by their employer), an order cannot apply; and
award modernisation is the operative or immediate reason for a reduction in take-home pay.[68]
2.93 The intention is to allow FWA to deal with cases in which an employee suffers a reduction in their take-home pay, for working the same hours or performing the same quantity of work, due to the award modernisation process.[69] However, Subitem 10 (1) provides that an order would not be made if FWA is satisfied that the modernisation-related reduction is minor or insignificant or the employee has been adequately compensated in other ways for the reduction.[70]
2.94 The ACTU raised a number of concerns regarding take-home pay orders, namely:
the orders only remedy financial forms of disadvantage and do not compensate employees for non-financial forms of disadvantage such as loss of control over rosters and working hours and submitted that FWA should be able, in appropriate cases, to make orders remedying these forms of disadvantage. This was supported by the ASU[71] and Asian Women at Work[72];
the orders are only available if the employee remains in the same or comparable position after 1 January 2010, and an award-dependant employee may be worse off as a result of a promotion as award modernisation reforms are to be phased in over five years and many employee's jobs are likely to change through promotion and job restructure;
although it would be a breach of the general protections provisions, the bill should make it clear that it is unlawful for an employer to demote or dismiss an employee because of award modernisation or because they seek a take-home pay order; and
the link between award modernisation and a loss of take-home pay will be difficult to prove in many instances and submitted that the burden of proof should fall on the employer to show that any loss of pay was not attributable to award modernisation.[73]
2.95 The ASU also raised the following concerns with take-home pay orders:
the provisions only relate to current award-covered employees employed on 1 January 2010 whereas those engaged on 2 January may be permanently disadvantaged;
employees must remain in the same or a comparable position with the employer so if they are transferred to a non comparable position or go to work for another employer but is otherwise still covered by the modern award, they can suffer disadvantage;
an employer may make lawful changes such as new rostering arrangements;
employees may be able to obtain only one take-home pay order but their circumstances may change and require further consideration and a new order or orders;
the protection offered does not take into account: reductions in the level of disadvantage by a new employer commencing operation after 1 January; the reduction in the level of the safety net which will affect the next round of bargaining; and loss of non-quantifiable protections such as the loss of access to dispute settling procedures.[74]
2.96 The ASU emphasised that employees will suffer non-financial losses which cannot be addressed by a take-home pay order including:
the extension of ordinary hours of work to include Saturday morning work as the 25 percent loading does not compensate employees for having to work unsocial hours on weekends;
employers can roster employees for periods of work over extended spreads of hours for which penalties used to be paid;
employees paid above the exemption rate in the Clerks – Private Sector Award will no longer have access to even limited dispute settling processes as they are exempted; and
casual employees may have limited or no access to such protections depending on how their employment is structured.[75]
2.97 Many of these points were also made by the Qld Council of Unions.[76] While welcoming the orders, the NSW Government noted that it will be important to monitor the operation of these provisions, particularly where FWA is satisfied that the employee has been adequately compensated in other ways and therefore declines to make an order. There is a need to be assured that the intention of the provision is achieved.[77]
2.98 On the other hand employers have criticised the take-home pay orders as 'one sided', claiming they will result in increased labour costs for employers which is contrary to the Minister's award modernisation request. Restaurant & Catering Australia submitted that, given the direction in the award modernisation request, the bill should have a reciprocal provision for employer costs.[78] It also suggested that the bill should provide the capacity to defer any cost increases to the end of the transitional period.[79] ACCI took this a step further, suggesting a number of additional limitations on take-home pay orders.[80]
2.99 DEEWR responded to these concerns:
The creation of new modern awards necessarily involves the alignment of current terms and conditions applying across the states to a new standard. The scope to phase in modern award provisions over five years ensures that employers have access to an appropriate adjustment period. The commission will include provisions within modern awards that provide for transition to the new industry standard.[81]
2.100 The committee received various complaints and concerns about the award modernisation process and its outcomes as well as recognition of its work so far on this mammoth task. The committee majority notes that this is a process being undertaken by the AIRC. It emphasises that the process is continuing and the next important step is the creation of transitional provisions. The committee majority encourages organisations to participate in the process established by the AIRC to propose transitional provisions.[82]
2.101 However, the committee majority also notes that employers have been urging for some time for a rationalisation of awards to address their number and complexity. This is now occurring and should result in changes benefiting WorkChoices employees paid at the lowest possible base and who now have ground to make up. It is a convenient argument for employers to use that now is not the time to be putting in place reforms. For instance, the committee notes the response by the LHMU to the RCA claims in which it is pointed out that the employer group's submission overstates the effect of award modernisation for restaurants in some states and ignores the benefits accruing to employers in other states.[83] The committee majority also notes the examples provided by the SDA of employers obtaining advantage through the award modernisation process.[84]
2.102 The committee majority also notes that the scope for take-home pay orders will be tightly constrained. The Workplace Relations Amendment (Transition to Forward with Fairness) Act 2008 allows for any differences between current state award conditions and the new federal standard to be phased in over five years. This will provide employers with a lengthy adjustment period in which to plan for a new standard.
2.103 The committee majority believes there is a need to emphasise the obvious: that the take-home pay orders protect only the take-home pay of an employee. All other matters such as rostering and spread of hours[85] are not included and the committee is concerned about the potential for non-financial disadvantage which can be just as serious for employees as financial disadvantage.
Recommendation 15
2.104 The committee majority recommends that FWA should be able, in appropriate cases, to make orders remedying significant non-financial disadvantage.
2.105 Schedule 6, Item 4 of the bill provides for a process to modernise or terminate existing enterprise awards.
2.106 The ACTU noted that while FWA has the discretion to terminate inferior enterprise awards and/or refuse to make a new modern enterprise award on substandard terms, the bill does not prohibit substandard enterprise awards. It submitted that FWA should be directed to terminate enterprise agreements that are substandard and should be prohibited from making modern enterprise instruments that are inferior to the modern award that would otherwise apply.[86]
2.107 The ACTU were also concerned that the bill tolerates a double standard in relation to the treatment of franchises. It pointed out that, for the purposes of bargaining, the presumption is that franchises are not running a single enterprise and franchisees must apply to be treated as a single business by applying for a 'single interest employer declaration'. However, regarding the safety net, franchises are treated as a single enterprise and may be covered by a single enterprise award. It informed the committee that the major fast food chains have hundreds of franchises which together employ around one third of the sector and:
Most of these employees are covered by enterprise awards that are inferior to the general award. For example, the basic wage at McDonalds in Victoria is only $14.18 per hour, compared to $15.86 under the general award – a discount of 11 %. On Sunday's, the minimum adult wage at a McDonalds restaurant is $15.50 compared to $27.76 at other fast food establishments – a discount of 44%.[87]
2.108 The ACTU explained that this is a disincentive for enterprise bargaining and submitted that enterprise awards should be restricted to closely linked employers.[88]
2.109 The SDA expressed concern that the bill extends the definition of an enterprise award to include awards that apply to franchise systems or parts of a franchise. It pointed out that franchise systems predominate in the fast food industry and it has the most franchise brand specific awards.[89] This change means:
...that employees of an employer affected by the extended definition, who today can aspire to be covered by the Modern Fast Food Award determined by the Australian Industrial Relations Commission and effective from 1 January 2010, will be denied this by the terms of this Bill.[90]
2.110 The SDA also submitted that the inclusion of franchise system awards in the definition of enterprise awards is at odds with the provisions of the FWA which treat collective agreements made in relation to a franchise system as multiple employer agreement making. The SDA argued that the awards which the fast food industry seeks to be considered as enterprise awards were never intended to be awards in the usual sense of the term as each of the existing fast food industry brand specific awards was made as an enterprise agreement.[91]
2.111 Further, the SDA argued that the reason some employers wish to retain their brand specific awards is that they have a package of wage rates and terms and conditions that are lower than the same package in the fast food industry modern award.[92]
2.112 The SDA recommended that should awards applying to franchises be treated as enterprise awards, the definition of an enterprise award-based instrument should be amended so that only those existing awards which apply to the whole of a particular franchise should be considered an enterprise award.[93]
2.113 The SDA was also concerned that the modernisation process does not guarantee that any modern enterprise award will be at least equal to the modern award for the industry.[94] One of the criteria FWA must take into account is whether the modernisation of an enterprise award will have an effect on the continuing viability or competitiveness of the enterprise. The SDA believed that employers will use this to argue for the retention of substandard brand specific awards.[95]
2.114 The SDA explained that the original statements indicating that enterprise awards would not be subjected to award modernisation were in the context of mining industry enterprise awards. To address these concerns, the SDA recommended the inclusion of a provision to ensure that modern enterprise awards do not fall below the total value of the safety net package of the relevant modern award for the industry.[96]
2.115 The SDA also pointed out that Clause 8 of Schedule 6 permits FWA to extend the coverage clause of a modern enterprise award to include franchisees or other businesses which were never covered by the original enterprise award. It permits a modern enterprise award to express the coverage clause as applying to a franchise name. SDA noted the effect is that a modern enterprise award can have a coverage clause that is far broader than the coverage clause of the existing enterprise award.[97]
2.116 In summary, SDA proposed that the broad definition of ‘franchise’ in the corporation code, and the ability of the award modernisation process to permit modern enterprise awards to specify their cover as applying to all employers trading as the brand name, will permit some employers who currently have no relationship to the franchise to gain the benefit of the modern enterprise award by moving to that franchise system.[98]
2.117 Yum! Restaurants, which owns KFC and Pizza Hut, sought to ensure that new or transmitted franchisees can continue to be covered by enterprise awards rather than move to the modern fast food industry award on 1 January 2010. To address this it recommended that the date for making applications to modernise enterprise awards be brought forward to 1 July 2009. Yum was also concerned that their managers, who have not traditionally been award covered, may become covered as the modern Fast Food Award proposed by the AIRC covers managers.[99] Yum admitted that modernising their enterprise awards would mean that their awards are 'made so much like the industry awards that any practical benefit from having an enterprise award will be lost'.[100]
2.118 The SDA believed that the bill fails to consider the situation of unmodernised enterprise awards which may be substandard. The bill permits an enterprise agreement to be tested against unmodernised awards without regard to its status or content. It recommended that where the underpinning award has not been modernised then FWA should designate a modern award for the BOOT.[101]
2.119 The committee majority is concerned to ensure that as with other transitional instruments there are appropriate mechanisms to enable termination of enterprise awards. It notes that a person covered by an enterprise instrument will be able to make an application to FWA to terminate an enterprise instrument until 31 December 2013 (Item 5). However, it is concerned that employees could become locked into instruments that may have rates and terms lower than the modern award until that time.
2.120 The committee majority was also concerned that the bill may enable a modern enterprise award to have wider coverage than the existing enterprise award and the definition of franchise may allow employers who currently have no relationship to the franchise to gain the benefit of the modern enterprise award by moving to that franchise system. The committee majority notes that there should be a level playing field for employers and sees the potential for very large businesses to take advantage of this as troubling.
2.121 The committee majority notes the following advice from DEEWR that:
It is not the intention for modern enterprise awards to undercut the safety net for employees in an industry or to impact on the competitive environment in which business, in this case fast food operations, are carried out.[102]
Recommendation 16
2.122 The committee majority recommends that the government ensure employers/franchises have no power under the bill to extend the reach of substandard enterprise awards to those not covered under the existing enterprise award, and that the government consider strengthening the criteria under Schedule 6 to ensure that enterprise awards not fall below the total value of the safety net package of the relevant modern award for the industry.
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