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BAKING INDUSTRY GROUP LTD

Submission to the Fair Work Act 2009 Review Panel

On

The Fair Work Act Review

17 February 2012

Submission to the Fair Work Act Review of 35

CONTENTS

1. INTRODUCTION TO THE BAKING INDUSTRY GROUP 3

2. OVERVIEW 3

3. BACKGROUND AND PURPOSE OF THIS SUBMISSION 4

4. SUMMARY OF RECOMMENDATIONS 5

5. PRODUCTIVITY IN THE BAKING INDUSTRY 7

6. THE NATIONAL EMPLOYMENT STANDARDS 8

7. PRESERVATION OF CERTAIN STATE AND TERRITORY INDUSTRIAL

LAWS AND IT’S IMPACT ON THE FAIR WORK ACT, ESPECIALLY THE

NES

13

8. TRANSFER OF BUSINESS 14

9. UNFAIR DISMISSAL 19

10. ADVERSE ACTION 25

11. INDIVIDUAL FLEXIBILITY ARRANGEMENTS 31

12. CONCLUSION 35


1. INTRODUCTION TO THE BAKING INDUSTRY GROUP

1.1 This submission is made by the Baking Industry Group Ltd (the Baking Industry Group).

1.2 This submission is not intended to be comprehensive nor will it canvass each of the 69 questions posed in the attachment to the Fair Work Act Review Background Paper. This submission focuses on the key issues that affect the Baking Industry. Due to the small profit margin within the industry the level of Enterprise Bargaining is miniscule therefore the areas pertaining to this have been omitted from this submission. According to the Productivity Commissions Report “Economic Structure and Performance of the Australian Retail Industry” 22% of all employees in the Retail Industry had their pay set by award. For the retail section of the Baking Industry this would be much higher. Whilst the Baking Industry Group acknowledges that enterprise agreements are one mechanism for tailoring work practices for small businesses the imposition of penalty rates and the requirement to meet the Better Off Overall Test (BOOT) together with small profit margins and inability to have economies of scale make Enterprise Bargaining an impossible option. In order for small bakeries to enter into Enterprise Bargaining, in addition to the BOOT there would also need to be a corresponding productivity test to ensure that the business would become more productive.

1.3 The Baking Industry Group Ltd, together with its other entities Baking Industry Association of Queensland Union of Employers and its marketing arm, National Baking Industry Association Pty Ltd, is a not for profit organisation whose role is to provide industry leadership to develop, support and protect the principles of efficiency, quality and best practices in the Baking Industry.

1.4 With membership in every State of Australia, the Baking Industry Group prides itself on being the national body for the Baking Industry, playing a vital role in the development, promotion, education, training and protection for Business owners within this industry. The Baking Industry Group’s membership ranges from small corner store bakeries to large milling companies. While our membership is diverse, all members are committed to safeguarding the industry and continuing its viability.

1.5 The Baking Industry Group and Baking Industry Association of Queensland Union of Employers, workplace relations vision is for a workplace relations system in which employer and employee parties are empowered to enter freely into appropriate and lawful workplace arrangements that suit the particular enterprise, and to increase productivity.

2. OVERVIEW

2.1 The Baking Industry is of the opinion that the Fair Work Act 2009 whilst it has largely met its objectives there are areas which need further clarification and amendment.


2.2 Concerns are expressed by our members that the Act restricts flexibility and limits productivity, and that the pendulum has swung too far in favour of Employees. Employers had hoped to improve productivity and flexibility through the use of individual flexibility agreements under the Fair Work Act but in our members opinion this has not eventuated.

2.3 The Baking Industry Group is a member of the Australian Chamber of Commerce and Industry and as such has given input to its review submission, which we support.

3. BACKGROUND AND PURPOSE OF THIS SUBMISSION

3.1 This submission is made in response to the review (the Review) into the Fair Work Act 2009 being undertaken by the Review Panel comprising Dr John Edwards, Professor Emeritus Ron McCallum AO and the Hon Michael Moore. The Review was foreshadowed in the Explanatory Memorandum to the Fair Work Bill 2008 in which the Government stated that ‘consistent with best practice regulation requirements, the Australian Government… commits to undertaking a post-implementation review within two years of the full implementation of [the Fair Work Act] on 1 January 2010’.

3.2 The Baking Industry Group strongly supports the Review into the Fair Work Act. As expressed in the Explanatory Memorandum, the Review is intended to be broad ranging, providing a ‘comprehensive analysis’ of both the practical mechanics of ‘how the Government’s new workplace relations system is operating’ and of its ‘impact on employers, employees, the community and governments’.

3.3 The Baking Industry Group analysed the Fair Work Act against:-

(a) achieving the Government’s expressed policy objectives – this fits in with the principal terms of reference of the Review which is ‘the extent to which the Fair Work legislation is operating as intended’;

(b) adversely affecting productivity – this fits in with the terms of reference that asks if the operation of the Fair Work legislation could be improved consistent with the objects of the legislation.

(c) overly complicated, uncertain or unfairly balanced against employers in the Small business sector. When measured, particularly against small retail businesses, in our member’s opinion the Act is overly complicated and weighted in favour of the Employee.

3.4 The above criteria are interrelated and arise from the Government’s own expressed objectives in enacting the Fair Work Act, namely to ‘balance the needs of employees, employers and unions and… allow workplaces to become more productive and competitive without taking away workplace rights and basic conditions.’ The Baking Industry Group is concerned that the Fair Work Act in a number of ways represents an expansion of workplace rights, without a corresponding productivity gain or reasoned rationale.


3.5 Other issues addressed in this submission outline the need for simplicity and clarity in the law. There are a number of uncertainties in relation to employees’ basic terms and conditions, some of which flow from a failure to make a ‘clean’ transition from State and Territory legislation, an issue addressed in section 7 of this submission.

4. SUMMARY OF RECOMMENDATIONS

4.1 This section summarises the recommendations arising from the matters covered in this submission.

4.2 The background to and rationale for the recommendations follows in the subsequent sections.

Recommendation 1 That the criteria for reasonable additional hours be amended to ensure that it can be assessed objectively.

Recommendation 2 That s90(2) of the Fair Work Act be amended to show that leave loading is not paid out on termination.

Recommendation 3 That legislative notes be added to s87 (2) and s96 (2) referencing the definition of service in s22.

Recommendation 4 That Small Business Employers should be exempt from the requirement to transfer a pregnant employee to a safe job.

Recommendation 5 That payment for public holidays only be available where an employee is providing service as defined under s22.

Recommendation 6 That Part 2-2 Division 10 of the Fair Work Act be amended to specify that an employee is only entitled to receive payment at the base rate of pay for either the specified day or the substituted/additional day, not both.

Recommendation 7 That leave entitlements should not accrue nor be available to an employee on a compensated absence, unless a modern award or enterprise agreement says otherwise, with no State or Territory exceptions.

Recommendation 8 That clarification on apprentice and trainee arrangements in Queensland be provided in the form of specifying an end date for these arrangements.

Recommendation 9 That notice of termination under the NES be excluded from all employees, to whom training arrangements apply, including apprentices, or it is made more explicit that an apprentice is an employee on a fixed-term contract that concludes at the completion of the apprenticeship.

Recommendation 10 That special provisions be included in the Fair Work Act for the transfer of business between a franchisee, the franchisor and another franchisee.


Recommendation 11 That the transfer of business rules be limited to circumstances where a business has actually been transferred.

Recommendation 12 That the previous transmission of business rules, based on the transfer of a business, be reinstated. Attempts to expand the scope of transmission of business rules beyond this common sense limitation injure employment prospects rather than protect them.

Recommendation 13 That an analysis on whether the appropriate balance is being struck in relation to transfer of business be undertaken.

Recommendation 14 The time limit for lodging an unfair dismissal claim be reduced to 7 days.

Recommendation 15 Extensions of time should only be granted in truly exceptional circumstances, remaining true to the test used in Shields v Warringarri Aboriginal Corporation.

Recommendation 16 That the definition of genuine redundancy should be limited to an assessment of whether a person’s job is still required to be performed by anyone.

Recommendation 17 That the definition of a small business return to the previous definition of fewer than 15 FTE employees rather than 15 employees in total.

Recommendation 18 That unfair dismissals claims against small businesses should be able to determined ‘on the papers’ and should only proceed to a hearing if there is a lack of evidence to demonstrate compliance with the Code.

Recommendation 19 A greater onus must be placed on unfair dismissal applicants to demonstrate that they have reasonable grounds for their claims.

Recommendation 20 That adverse action and workplace rights should be removed from the Fair Work Act and placed solely under the anti-discrimination legislation.

Recommendation 21 If adverse action and workplace rights remain under the Fair Work Act then s341(1)(c)(ii) of the Fair Work Act be removed and that adverse action claims in relation to complaints be limited to employees and be heard within Fair Work Australia and that the legislation ensure that it can only be heard in one jurisdiction.

Recommendation 22 If adverse action and workplace rights remain under the Fair Work Act then s347(b)(v) of the Fair Work Act be removed, as it unfairly excludes union members from legitimate disciplinary action in relation to their behaviour as employees.

Recommendation 23 If adverse action and workplace rights remain under the Fair Work Act then the test for whether adverse action has occurred should require a comparison of whether the action taken against the employee concerned would have also been taken against other employees in the same circumstances.


Recommendation 24 If adverse action and workplace rights remain under the Fair Work Act then s360 should be amended so that an employer will be held to have taken action for a particular reason only if it is the sole or dominant reason.

Recommendation 25 If adverse action and workplace rights remain under the Fair Work Act then the reverse onus of proof at s361 should not apply to small businesses.

Recommendation 26 That the time limit for making an adverse action claim needs to limited so that where it is a single incident, the application should be lodged within 7 days of that incident, or if it is an ongoing situation, no longer than 60 days from the date the last incident occurred, or in any event if the incident leads to the employee terminating their employment or being terminated within 60 days of the termination.

Recommendation 27 If adverse action and workplace rights remain under the Fair Work Act then adverse action applicants must show reasonable grounds for their application during conferences held under s368.

Recommendation 28 If adverse action and workplace rights remain under the Fair Work Act then the ability to obtain an interim injunction under s371(b) without proceeding to conciliation be abolished.

Recommendation 29 That the model flexibility clause allow IFAs about any matter pertaining to the employment relationship and that it be a mandatory term of an enterprise agreement.

Recommendation 30 That the FWO provide an independent approval mechanism to determine whether an IFA passes the better off overall test in relation to a modern award or enterprise agreement.

5. PRODUCTIVITY IN THE BAKING INDUSTRY

5.1 In relation to the Fair Work Act, the Baking Industry Group first considered the primary question of industrial relations policies and linkages with productivity. The Baking Industry Group submits that the Government’s policy objectives must be targeted to reduce business costs and ensure a flexible industrial relations system to deliver higher productivity and enhance the economy’s supply-side responsiveness. The Prime Minister has correctly identified that improving the country’s productivity growth is essential and that it requires strong Government leadership in order to build a new legacy of reform for the future.

5.2 In this context, the Baking Industry Group strongly supports comments made by the Chairman of the Productivity Commission, Report into the retail Industry in recommendation 11.1:

‘The Australian government should, within the context of the current system and consistent with the maintenance of minimum safety net provision for all employees, examine retail employer and employee concerns about the operation of the Fair Work


Act. This should include consideration of options to address any significant obstacles to the efficient negotiation of enterprise based arrangements, that have the potential to improve overall productivity…’

5.3 The Report noted that industrial relations regulation was arguably the most crucial to get right; that it was vital to ensure that regulations intended to promote fairness in Australia’s workplaces do not detract unduly from their productivity; and that if Australia is to secure its productivity potential into the future, the regulation of labour markets cannot remain a no-go area for evidence-based policy making.

5.4 Whilst it is part of the Award Review, the Productivity Commission noted that because Awards are negotiated at the Industry level rather than the enterprise level they are not tailored to the circumstances of individual firms or employees. The Baking Industry Group would argue that there are sub-industry groups – in other words one industry meaning “retail” is too generic and therefore does not allow the award to truly reflect each industry and be tailored for the individual needs of that sub-industry.

6. THE NATIONAL EMPLOYMENT STANDARDS

6.1 The Baking Industry Group supports the introduction of a federal safety net of basic terms and conditions. It increased the clarity and certainty of employee entitlements and employer obligations. The Baking Industry Group is not opposed to the content of the National Employment Standards (NES) (the main provision relating to the NES are set out in Part 2-1 and Part 2-2 of Chapter 2 of the Fair Work Act), except in relation to the restrictions on reasonable additional hours. However, the Baking Industry Group is concerned that the NES in some areas fail to provide for a harmonised basic template of terms and conditions, due to a lack of detail, confusing internal referencing to other parts of the Fair Work Act and because of the preservation of certain State and Territory industrial laws (which we will also address separately in section 7 of this submission).

6.2 Whilst the 38 hours has been preserved, s62(1) of the Act specifies that, unless additional hours are reasonable an employer must not request or require:

A fulltime employee to work more than 38 hours; or An employee, who is not a fulltime employee, to work more than the lesser of

38 hours and the employee’s ordinary hours of work in a week.

6.3 The Act goes on to set a range of factors that must be taken into consideration when determining whether or not the additional hours are reasonable. Due to the wide range of what the Baking Industry would consider are largely subjective factors that are required to be considered, along with other relevant matters, when determining whether or not additional hours are reasonable, it causes disputes and has the potential to cause more disputes between employers and employees. Our members have indicated that they are less likely to approve overtime hours because of the range of subjective matters that must be considered. However, because the employee wants


the additional hours, this quite often results in the employee starting a second job in lieu of overtime.

6.4 Section 90(2) of the Fair Work Act indicates that an employee whose employment is terminated must be paid for any unused accrued leave at ‘the amount that would have been payable to the employee had the employee taken that period of leave’. Historically, the annual leave loading was an extra payment to assist employees whilst on annual leave. It was not an entitlement that was paid out on termination. Some modern awards directly exclude the payment of leave loadings for employees who are paid out for accrued leave on termination. While this is perhaps a matter for consideration during the modern award review, the Baking Industry Group considers that the clarity of the NES should also be improved, particularly in relation to leave accrual and payment for public holidays.

‘Service’ for annual leave

6.5 The manner in which leave accrues under the Fair Work Act is fairly clear. Under the Fair Work Act, annual and personal/careers’ leave accrues during periods of ‘service’, which is defined in s22 as any period during which an employee is ‘employed’ but does not include any unauthorised absences or unpaid leave (except for unpaid community service leave).

6.6 The Baking Industry Group’s concern is that the modern awards and NES do not reference the fact that ‘service’ for the purposes of leave accrual is defined in s22. In our experience, this has led to frustration when unable to refer to an easy definition of service. The Baking Industry Group submits that this should be remedied by including a legislative note to s87(2) and s96(2) of the Fair Work Act which references the fact that service is defined at s22.

Parental Leave – transfer to a safe job requirement

6.7 Section 81 of the Fair Work Act outlines the circumstances whereby an employer is required to transfer a pregnant employee to an ‘appropriate safe job’. If a pregnant worker is entitled to unpaid parental leave, has already complied with the notice requirements under the Act, and provides evidence that she is fit for work but that it is inadvisable for her to continue in her present position during a stated period because of illness or risk arising from her pregnancy, or hazards connected with that position, then the employer must:

Transfer the employee to an appropriate safe job, if one is available, for the specified period and with no other change to the employee’s terms and conditions of employment; or

Provide the employee with paid no safe job leave (which is leave paid at the employee’s base rate of pay for the employee’s ordinary hours of work).

6.8 Whilst we understand that a provision of this kind has been in previous legislation, it none the less is a provision that places an unfair burden on small businesses especially in the retail sector where they have a high proportion of young women serving behind counters where there is an increased likelihood of pregnant women


needing to be transferred to a safe job but where they would not have a position to put them in. The Baking Industry Group believes that small businesses should be given an exemption to this provision based on our recommendation for what constitutes a small business employer.

Payment for public holidays

6.9 The Baking Industry Group also considers there to be uncertainty regarding the operation of s116 of the Fair Work Act, which indicates when an employee is to receive payment for absence on a public holiday. Under s114 of the Fair Work Act, an employee has a right to be absent from work on a public holiday. While an employer may request an employee to work, an employee may also refuse such a request. The request and/or the refusal must be reasonable (having regard to the factors in s114 (4)). Thus if an employee has a good reason to refuse work, they will always be entitled to be absent on a public holiday.

6.10 Section 116 provides that an employee who is ‘absent from his or her employment on a… public holiday’ must be paid at the employee’s base rate of pay. Several restrictions arise on the payment for employees who are absent from work on a public holiday, which are not immediately apparent from the terms of s116.

6.11 The first restriction arises from the fact that under s116, an employee absent on a public holiday only needs to be paid for their ‘ordinary hours of work.’ Some of the implications of this are set out in a legislative note to s116 which indicates that:

If the employee does not have ordinary hours of work on the public holiday, the employee is not entitled to payment under this section. For example, the employee is not entitled to payment if the employee is a casual employee who is not rostered on for the public holiday, or is a part-time employee whose part-time hours do not include the day of the week on which the public holiday occurs.

6.12 This note does resolve ambiguity about the meaning of ‘ordinary hours’ for part-time or casual employees. The legislative note at s116 indicates that it is an employee’s actual usual hours which determine their ordinary hours, such that part-time or casual employees who are absent from work on a public holiday are only entitled to payment where they would have ordinarily worked (or were rostered to work) on the day on which the public holiday falls.

6.13 However, it is unclear on what payment (if any) should be made in relation to employees (whether full-time or otherwise) who are absent from work on unauthorised or extended unpaid leave. It should be noted that where workers are on unauthorised or unpaid leave (except in relation to community service leave) they will not be providing ‘service’ and so will not accrue paid annual or paid personal/carer’s leave. However, payment for absences on public holidays is not tied to whether or not an employee is providing service (in accordance with s22), which means that it is unclear whether employees on unpaid or unauthorised leave need to be paid for public holidays.


6.14 There is some support for the restriction of payment for public holidays to such employees within the terms of s116. Considering first those employees on extended unpaid leave, the Baking Industry Group submits that such workers will not be entitled to payment for public holidays due to the fact that their ordinary hours can no longer be said to include the public holiday. This interpretation is supported by an example given in the Explanatory Memorandum to the Fair Work Bill, which indicates that an employee who is on unpaid parental leave for the first half of 2010 would not be entitled to payment for the public holiday on 26 January 2010, presumably on the basis that they would not ordinarily have worked on that day.

6.15 With regards to employees on unauthorised leave, the Baking Industry Group submits that ordinary hours could not be said to fall on a public holidays because such workers could be considered to have altered their ordinary hours. A further argument arises from the fact that s116 only requires payment where an employee is absent from work ‘in accordance with this Division’, i.e. Division 10 of the NES, comprising s114-116. Accordingly, where an employee is on unauthorised leave because they have unreasonably refused a reasonable request to work on a public holiday, they will be absent from work contrary to Division 10, meaning that payment does not have to be made. Less certain is whether an employee on an extended unauthorised absence, such that they cannot be contacted, would also be absent contrary to s114. While it is clear that an employee must actually provide reasons for not working (where reasonably requested to do so) it is uncertain whether an employee who cannot be contacted to make such a request would be absent contrary to s114.

6.16 The Baking Industry Group submits that s116 should be amended to make it clear that payment does not have to be made to those employees who are on extended authorised unpaid leave, or to those on unauthorised leave.

6.17 While the Baking Industry Group considers that s116 does support the exclusion of public holiday pay to those employees who are either on extended authorised unpaid leave or unauthorised leave, it would helpful to have a subsection added to s 116 to avoid any ambiguities. The entitlement to payment for public holidays is an entitlement for employees who would have otherwise worked on that day. As noted, employees who are on unauthorised or unpaid leave (apart from community service leave) do not accrue paid annual or paid personal carer’s leave, due to the fact that they are not providing ‘service’ as defined under s22 of the Fair Work Act. The Baking Industry Group submits that ‘service’ could be similarly used in s116 regarding public holiday payments, to resolve the ambiguities that we have raised above.

6.18 The payment of penalty rates for work on a public holiday also causes concern with small businesses who would normally (or have to because of shopping centre contracts) open on a public holiday but do not have the capacity to pass these additional charges onto the consumer. Therefore the imposition of penalty rates, which limits the profitability of the small business (especially in the Baking Industry), is not reflective of how that industry can operate.

6.19 Section 115 stipulates the Public Holidays however if a State or Territory law specifies another day in substitution for one of the days that substituted day becomes the public


holiday. What has occurred since the introduction of the Fair Work Act is that State governments have amended their public holiday Acts to take account of additional days.

6.20 Where section 115(3) allows modern awards or enterprise agreements to include terms providing for an employer and employee to agree on the substitution or part day that would otherwise be a public holiday, the interaction with the State legislation on additional days has increased the number of public holidays therefore increasing the cost to employers – as s116 provides that where an employee is absent from his or her employment on a day or part day that is a public holiday, the employer must pay the employee at the employee’s base rate of pay for the employee’s ordinary hours of work. The Fair Work Act should specify that you only receive payment at the base rate of pay for the specified day or the substituted/additional day, not both.

Recommendation 1 That the criteria for reasonable additional hours be amended to ensure that it can be assessed objectively.

Recommendation 2 That s90(2) of the Fair Work Act be amended to show that leave loading is not paid out on termination.

Recommendation 3 That legislative notes be added to s87 (2) and s96 (2) referencing the definition of service in s22.

Recommendation 4 That Small Business Employers should be exempt from the requirement to transfer a pregnant employee to a safe job.

Recommendation 5 That payment for public holidays only be available where an employee is providing service as defined under s22.

Recommendation 6 That Part 2-2 Division 10 of the Fair Work Act be amended to specify that an employee is only entitled to receive payment at the base rate of pay for either the specified day or the substituted/additional day, not both.

7. PRESERVATION OF CERTAIN STATE AND TERRITORY INDUSTRIAL LAWS AND IT’S IMPACT ON THE FAIR WORK ACT, ESPECIALLY THE NES

7.1 The preservation of certain State and Territory industrial relations laws which interact with the NES is producing unnecessary complexity in interpreting the safety net. Preservation of State and Territory legislation under s66 and s112 of the Fair Work Act in relation to flexible working arrangements and community service activity entitlements (where they are more beneficial than the NES) undermines the utility of having a uniform safety net. Requiring reference to multiple layers of regulation significantly increases complexity for very little gain for employees.


7.2 Section 66 stipulates that the Fair Work Act is not intended to apply to the exclusion of laws of a state or territory that provide more beneficial employee entitlements than the entitlements under the NES (i.e. such state and territory laws will continue to apply).

7.3 Employees are not prevented from seeking remedies that are available to them under relevant discrimination legislation if the employee considers that their employer has discriminated against them in connection with a request, for example, flexible working arrangements i.e. remedies under anti-discrimination legislation relating to such subjects as family responsibilities, sex or disability discrimination could be pursued even if a refusal by an employer to grant a request for flexible working arrangements could be challenged directly under the Fair Work Act which because of the effect of s44 cannot.

7.4 Similar concerns arise in relation to s130 of the Fair Work Act, which indicates that leave will not accrue and cannot be taken where an employee is absent from work but receiving workers’ compensation. Because this exclusion is itself subject to State and Territory law, which will apply where it provides accrual to employees on compensated absences, employers must have regard to confusing and often uncertain State and Territory workers’ compensation laws.

7.5 More problematic is that the exclusion at s130 is directed only at leave arising ‘under this Part’, i.e. Part 2-2: the NES. This means that where modern awards or enterprise agreements supplement the NES, any entitlement in addition to that provided under the NES will accrue while an employee is on a compensated absence.

7.6 Section 130 should be redrafted, to make it clear that employees on compensated absences are not able to accrue or take leave, whether arising under the NES, a modern award or an enterprise agreement, unless a modern award or enterprise agreement specifically states otherwise. In order to make the provision simpler and fairer, no State or Territory exclusion should be permitted. Employers should not have to pay employees who are absent from work when they are being separately remunerated under a State or Territory workers’ compensation regime.

7.7 A further problem arising from the preservation of State and Territory industrial laws is the arrangements for Apprentices and Trainees in Queensland. Whilst the NAPSA and Division 2B Awards have been terminated, the provisions for Apprentices and Trainees under the Order – Apprentices’ and Trainees’ Wages and Conditions (Excluding Certain Queensland Government Entities) 2003 (the Order) have been maintained, allowing certain businesses to continue employees under those training arrangements in accordance with the provisions of the Order and subsequently the State Awards.

7.8 Although this has alleviated some of the pressure with regards to wages costs for businesses in the Baking Industry, confusion has arisen with regards to the time frame for these arrangements. Whilst it is understood that once the employee is no longer under the training arrangements they would fall under the scope of the modern awards, Employers are uncertain on how long they are able to continue applying the Order and State award arrangements to future apprentices and trainees as no sunset clause has been acknowledged.


Notice of termination for apprentices

7.9 Section 123(1)(d) of the Fair Work Act indicates that Division 11 of the NES (which deals with notice of termination and redundancy) does not apply to ‘an employee (other than an apprentice) to whom a training arrangement applies...’ The distinction made between apprentices and trainees in this exception could be misinterpreted as meaning that notice of termination benefits are intended to apply to apprentices. This is reinforced by the fact that subsection 123(3), which refers more specifically to the types of employee excluded from notice of termination entitlements, does not mention apprentices. By contrast, subsection 123(4)(a) clearly indicates that redundancy benefits do not apply to apprentices.

Recommendation 7 That leave entitlements should not accrue nor be available to an employee on a compensated absence, unless a modern award or enterprise agreement says otherwise, with no State or Territory exceptions.

Recommendation 8 That clarification on apprentice and trainee arrangements in Queensland be provided in the form of specifying an end date for these arrangements.

Recommendation 9 That notice of termination under the NES be excluded from all employees, to whom training arrangements apply, including apprentices, or it is made more explicit that an apprentice is an employee on a fixed-term contract that concludes at the completion of the apprenticeship.

8. TRANSFER OF BUSINESS

8.1 The Fair work Act introduced a terminology change in the transmission context by introducing the term “transfer of business” thus overturning the long established and well understood laws regarding transmission of business under the Workplace Relations Act 1996 (Workplace Relations Act). These laws operated on the simple premise that a person could not transfer a business and thereby avoid their industrial obligations. The Fair Work Act has expanded the reach of these laws to circumstances where it cannot reasonably be said that a business has actually been transferred.

8.2 Under the Workplace Relations Act, employment entitlements would transfer only where a new employer became the ‘successor, transmittee or assignee' of another ‘business’ and an employee of that business employed immediately prior to the transfer (or recently made redundant) was engaged by the new employer within two months. Whether a person was a successor, transmittee or assignee of another business was settled in Federal and High Court cases, where a reasonably broad but common sense view of what constituted a business was set out. In these cases, courts would look to the character of the business of the old employer and new employer and, where the character was the same, there was likely to be a transmission.

8.3 The changes to transfer of business laws under Part 2-8 of the Fair Work Act represent an evident shift away from the principles established in those cases, which


have created a legal minefield. Indeed, as the Explanatory Memorandum to the Fair Work Bill indicates:

Although the provisions of… Part [2-8] use the term transfer of business, they are not intended to require the focus under [the Workplace Relations Act] on what the ‘business’ of the old employer is and whether the new employer has in some way taken over that ‘business’. They instead focus on whether there has been a transfer of work between two employers and the reason for the transfer of that work or, viewed another way, the connection between the two employers.

8.4 What is evident is that certainty in business transfers has been replaced by uncertainty and risk. This uncertainty affects the employment prospects of workers, as businesses (especially small, risk averse businesses) tend to shy away from complex laws. There was no mention of this policy change in either the Forward With Fairness or the Forward With Fairness Policy Implementation Plan policy documents.

8.5 The Fair Work Act in s311(1) specifies when a transfer of business occurs:

311(1) There is a transfer of business from an employer (the old employer) to another employer (the new employer) if the following requirements are satisfied:

(a) The employment of an employee of the old employer has terminated;(b) Within 3 months after the termination, the employee becomes employed by the

new employer;(c) The work (the transferring work) the employee performs for the new employer is

the same, or substantially the same, as the work the employee performed for the old employer;

(d) There is a connection between the old employer and the new employer as described in any of subsections (3) to (6).

8.6 Sections 311(3) to 311(6) go on to explain the various connections between the old and new employers:

Transfer of assets from old employer to new employer

311(3) There is a connection between the old employer and the new employer if, in accordance with an arrangement between:

(a) the old employer or an associated entity of the old employer; and(b) the new employer or an associated entity of the new employer;

the new employer, or the associated entity of the new employer, owns or has the beneficial use of some or all of the assets (whether tangible or intangible):(c) that the old employer, or the associated entity of the old employer, owned or had

the beneficial use of; and(d) that relate to, or are used in connection with, the transferring work.

Old employer outsources work to new employer

311(4) There is a connection between the old employer and the new employer if the transferring work is performed by one or more transferring employees, as employees


of the new employer, because the old employer, or an associated entity of the old employer, has outsourced the transferring work to the new employer or an associated entity of the new employer.

New employer ceases to outsource work to old employer

311(5) There is a connection between the old employer and the new employer if:

(a) the transferring work had been performed by one or more transferring employees, as employees of the old employer, because the new employer, or an associated entity of the new employer, had outsourced the transferring work to the old employer or an associated entity of the old employer; and

(b) the transferring work is performed by those transferring employees, as employees of the new employer, because the new employer, or the associated entity of the new employer, has ceased to outsource the work to the old employer or the associated entity of the old employer.

New employer is associated entity of old employer

311(6) There is a connection between the old employer and the new employer if the new employer is an associated entity of the old employer when the transferring employee becomes employed by the new employer.

8.7 Based on the above, the Baking Industry Group’s concerns arise in relation to the vague nature of the ‘connection’ required between the old employer and the new employer.

8.8 If any of the above connections are made out, the prior industrial instrument will apply to the transferred employee and to potentially later workers engaged to perform the transferred employee’s role. Complex rules about accrued ‘service’ for the purposes of annual leave and redundancy also apply. Due to the fact that the transfer of business rules apply automatically, unless FWA orders otherwise, this results in Employers going through an expensive process where they seek a tribunal order that a prior industrial agreement not apply to the transferred employee.

8.9 The Productivity Commission’s report on the retail industry stated:

The submission by Woolworths also identified the business transfer provisions of the FW Act (Part 2-8) as a constraint on flexibility. The effect of these provisions is to provide that enterprise agreements and certain modern awards and other instruments that covered employees of the old employer continue to cover those employees if they accept employment with the new employer.

According to Woolworths, this hinders the ability of retailers to harmonise labour and employment relationships and to flexibly move team members across business divisions. More specifically, Woolworths stated:

The effect of these provisions is that they inhibit the extent to which Australian retailers can increase their scope and capacity to achieve economies of scale through purchasing other businesses. This is because many of the synergies underpinning such acquisitions arrive


from harmonising the employment arrangements between the target and acquiring business. Alternately, the associated entity provision, means that if an employee is transferred between businesses, in their new role their employment will still be governed [by] the industrial instrument from their pervious role. This creates the situation where the two employees undertaking the same role will have different benefits (and potentially pay rates) where one employee’s role is still governed by the industrial agreements from their previous role. From a retailer’s perspective, this creates a number of operational and administrative difficulties as well as limiting the ability to provide employees with flexible work opportunities across the whole business (where there may be an incentive to avoid transferring staff between retail brans). (sub. 110, attach., pp.45-46).

8.10 The Baking Industry Group supports the statement made by the Productivity Commission when it said ‘Whether, in the application of the Act, the appropriate balance is being struck, is a question that requires further evidence based on the experience of employers and employees and a careful weighing of the costs and benefits’ and the Baking Industry Group recommends that this analysis be undertaken.

8.11 The concerns of the Baking Industry Group related especially to franchise arrangements. For example, if a franchisee goes into liquidation and the franchise reverts back to the franchisor and the franchisor then re-enters into another contract with a different franchisee for the same business, because there is not a direct transfer in this situation, the transfer of entitlements is confused.

8.12 Redundancy payments is also an issue if an employer decides to recognise prior service of an employee for the purpose of section 122, is the employee merely disentitled to NES redundancy pay or is the employee also disentitled to any redundancy pay? More specifically, does the employer still have to pay redundancy entitlements applicable under an enterprise agreement but not the NES redundancy entitlements? The current view of the Fair Work Ombudsman is that section 122 only disentitles an employee to NES redundancy entitlements. Equally, if a new employer recognises prior service under section 91 is the old employer in breach of the Act if it pays out accrued annual leave on termination of employment to employees who request a payout?

8.13 In relation to Personal/carers leave accrued with the old employer is all of the Personal/carers leave required to be recognised by the new employer or only the Personal/carers leave which accrued under the NES?

8.14 The Baking Industry Group considers that in its attempt to expand the coverage of transmission of business laws, the Government’s policy has led to outcomes which discourage employers from employing workers in a range of scenarios which would not normally be recognised as a transfer of business. For example, in order to reduce costs the use of assets of other business owners creates contractual problems between the parties.

8.15 The small business section of the Baking Industry especially in tourist areas and rural and remote areas is characterised by intermittent work and an itinerant workforce. As a result many employees are engaged on a casual basis. Some casual employees regularly move from one employer to another, depending on which employer has work


available. In this circumstance, all necessary elements of the ‘transfer of business’ rules are met, other than having the requisite connection. The Baking Industry Group submits that the fact that a connection can be made out simply based on a transfer of assets or association between entities leads to poor outcomes for both employers and employees and should be changed.

8.16 In relation to a transfer of assets connection under s311(3) of the Fair Work Act, it is common practice for a retailer who has excess equipment e.g. coffee machines to sell those to another retailer. There is no guidance in the Fair Work Act as to what constitutes ‘assets’ for the purpose of s311(3), but a plain reading of the word asset would include materials, as stock and inventory are considered assets at least in an accounting sense. This creates an absurd situation where competing businesses with no real connection could be exposed to a transfer of business situation simply by employing a person from their competitor only to find that they are obliged to pay the employee based on the previous industrial instrument.

Recommendation 10 That special provisions be included in the Fair Work Act for the transfer of business between a franchisee, the franchisor and another franchisee.

Recommendation 11 That the transfer of business rules be limited to circumstances where a business has actually been transferred.

Recommendation 12 That the previous transmission of business rules, based on the transfer of a business, be reinstated. Attempts to expand the scope of transmission of business rules beyond this common sense limitation injure employment prospects rather than protect them.

Recommendation 13 That an analysis on whether the appropriate balance is being struck in relation to transfer of business be undertaken.

9. UNFAIR DISMISSAL

9.1 The objectives of the Fair Work Act in relation to unfair dismissals are set out in Part 3-2 (“Unfair Dismissal”) in s138(1) of the Act:

(a) to establish a framework for dealing with unfair dismissal that balances:(i) the needs of business (including small business); and(ii) the needs of employees; and

(b) to establish procedures for dealing with unfair dismissal that:(i) are quick, flexible and informal; and(ii) address the needs of employers and employees; and

(c) to provide remedies if a dismissal is found to be unfair, with an emphasis on reinstatement.

9.2 There is growing evidence that these core objectives remain aspirational, with the needs of business (especially small business) not being met. The procedures for dealing with unfair dismissal are not quick, flexible, or informal. Compliance is not easy


for business. Employers have no choice but to spend time and money defending often speculative claims, with the vast majority being resolved through financial settlements – remaining a jurisdiction of ‘go away’ money, where reinstatement remains impracticable.

9.3 The process for unfair dismissal, in the first instance, is a teleconference with a conciliator whose key performance indicator is to get the parties to settle. In our member’s experience it seems that conciliators will go to any length to get the parties to settle, often spending significant time at the beginning of the teleconference highlighting the benefits of settling, whilst forcibly detailing the disadvantages of proceeding to arbitration by emphasising the costs, time and effort, as well as the physical and emotional stress associated with proceeding to a hearing. Employees want money to settle and Employers make a corporate decision to settle even if they believe they are right, because the cost of proceeding for the company far outweighs the cost of settlement.

9.4 The introduction of the new unfair dismissal system has increased the administrative costs faced by businesses which may result in the demise of productivity growth and redeployment of labour – which should be a major concern to the Government.

9.5 The Explanatory Memorandum to the Fair Work Bill provides a useful insight into how the Fair Work Act was intended to make compliance easier for business. This was to be achieved by putting the emphasis on reinstatement, by providing a genuine redundancy exemption, by providing small business assistance and by focusing on early intervention and informal processes. These initiatives are considered in turn below.

Emphasis on reinstatement

9.6 Section 394 of the Fair Work Act prescribes the time period for lodging a dismissal application is 14 days from the date of dismissal which is a reduction in the period prescribed under the Workplace Relations Act. However the need to reduce the time limit for lodgement of unfair dismissal claims was recognised as a necessary change in order to enable the quick resolution of claims, and to increase the feasibility of reinstatement as an option. To achieve this objective the time limit was to be reduced from 21 days to 7 days, and the discretion for FWA to accept late applications was to be limited to ‘exceptional’ circumstances outlined in s394(3) of the Act.

9.7 This intent did not eventuate as the Fair Work Bill was amended to increase the time limit from 7 to 14 days. Furthermore, when granting extensions of time there does not seem to be a consistent approach within FWA in relation to what constitutes ‘exceptional circumstances’. The principles are set out in s394(3) of the Act.

9.8 A number of cases have considered the meaning of ‘exceptional circumstances’ although it remains difficult to discern the emergence of a consistent line of authority. For example, in Lim v Downer EDI Mining 2009 Commissioner Williams declined to extend time where a workers unfair dismissal claim was lodged two days out of time. The worker argued that he was a 457 visa holder who was unaware of his legal rights,


he was not a member of a union, and he sought reinstatement or risked deportation. The Commissioner found that his circumstances were not ‘exceptional’.

9.9 Whereas a decision in Simpsons v Patrick Stevedoring Holdings Pty Ltd t/a Patrick Auto Bulk and General where a clerical error by an MUA industrial officer official resulted in Mr Simpson’s application being filed one day late. Commissioner Asbury noted that the ‘mere existence’ of an error by a party’s representative does not amount to an exceptional circumstance and the ‘mere absence of any prejudice’ to Patricks is an insufficient basis upon which to grant an extension of time, the Commissioner nevertheless executed her discretion under s394(3) in favour of the applicant.

9.10 In Stewart v Modern Storage Corporation Commissioner Raffaelli was satisfied that a worker who waited one month for the Fair Work Ombudsman to reply to her complaint following her dismissal, and then filed her application after receiving advice should be granted an extension.

9.11 As a result, the reality is that claims are not resolved quickly. With the initial conciliation conferences generally not being held until well after a month following the termination has taken effect, the position has often already been filled and therefore it is too late for reinstatement. A formal conference or hearing outcome is generally several further months down the track, making reinstatement completely impracticable. This is borne out in the statistics, with only 15 of around 11,000 unfair dismissal applications made in 2009-2010 resulting in a FWA ordered reinstatement, see Table 1.


Table 1 Substantive applications made to Fair Work Australia in 2009/10

Nature of Application No. %

Unfair dismissal remedy 11,517 43

Approval, variation or termination of an enterprise agreement 7667 29

Contravention of general workplace protections involving dismissal 1537 6

Dispute resolution procedure of an industrial instrument 1565 6

Protection industrial action ballot order 1143 4

Bargaining dispute 506 2

Contravention of other general workplace protections 254 1Source: FWA 2010: Table H5

9.12 In the Report issued by Fair Work Australia there were 12,840 applications for unfair dismissal for the financial year 2010-2011, which shows an upward trend from the previous year. If the emphasis of the Fair Work Act is to remain on reinstatement, the time limit for lodging a claim should be reduced to the originally envisioned 7 days. Extensions of time should only be granted in truly exceptional circumstances, remaining true to the test used in Shields v Warringarri Aboriginal Corporation. Without this change there will be no shift away from financial settlements.

Genuine redundancy exemption

9.13 The provisions in the Fair Work Act (s389) are substantially different to the provisions of the Workplace Relations Act concerning termination of employment due to ‘genuine operational reasons.’ The need to protect employers from unfair dismissal claims made in relation to genuine redundancies was also recognised at the time of the drafting of the Fair Work Act. Employers are ‘able to dismiss an employee in cases of genuine redundancy’, however different criterion from the previous ‘operational requirements’ exemption applies.

9.14 Genuine redundancy is defined in s389(1) of the Fair Work Act as a dismissal where:

(a) the person’s employer no longer required the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and

(b) the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.

9.15 Section 389(2) of the Fair Work Act provides an exception, stating that:

A person’s dismissal was not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within:

(a) the employer’s enterprise; or


(b) the enterprise of an associated entity of the employer.

9.16 Section 389(1)(a) has been considered by a Full Bench of FWA which determine as follows:

It is noted that the reference in the statutory expression is to a person’s ‘job’ no longer being required to be performed. As Ryan J observed in Jones v Department of Energy and Minerals (1995) 60 IR 304 a job involves ‘a collection of functions, duties and responsibilities entrusted, as part of the scheme of the employees’ organisation, to a particular employee’ (at p. 308). His Honour in that case considered a set of circumstances where an employer might rearrange the organizational structure by breaking up the collection of functions, duties and responsibilities attached to a single position and distributing them among the holders of other positions, including newly-created positions. In these circumstances, it was said that: ‘What is critical for the purpose of identifying a redundancy is whether the holder of the former position has, after the reorganisation, any duties left to discharge. If there is no longer any function or duty to be performed by that person, his or her position becomes redundant…’ (at p.308).

9.17 Whilst we acknowledge the practical approach taken in that case and other cases where FWA has indicated that s389(1) does not need to be re-formulated but merely applied in a practical way to the facts, the implications of s389(1)(b) and s389(2) are more concerning. Those provisions mean that, even where an employee has been terminated as a result of their position genuinely being made redundant, there may still be jurisdiction to make a claim by alleging that the employer did not meet an obligation to consult, and/or, did not take reasonable steps to redeploy them elsewhere within the employer’s enterprise or any associated entity. The Baking Industry Group submits that these are matters that might go to the fairness, rather than the genuineness, of the redundancy and will generally necessitate a formal conference/hearing. The current extensive definition of ‘genuine redundancy’ provided at s389 therefore does not allow employers the ability to dismiss employees in cases of genuine redundancy.

9.18 The Baking Industry Group submits that the definition of genuine redundancy should be limited to s389(1)(a). An unfair dismissal claim should fail on jurisdictional grounds if the employer can demonstrate that it no longer required the person’s job to be performed by anyone because of changes in the operational requirements of their enterprise.

Small Business Assistance

9.19 Special assistance was to be provided to small business employers through the introduction of a Small Business Fair Dismissal Code and a 12 month minimum employment period for small business employers. This was in recognition of the fact that small businesses tend not to have the resources to employ dedicated human resources professionals to help them manage dismissals.

9.20 Section 23 of the Fair Work Act defines an employer as a small business employer if ‘the employer employs fewer than 15 employees at that time’, including within


associated entities. However, small business in some jurisdictions and at the commencement of the Fair Work Act were defined as having fewer than 15 fulltime equivalent (FTE) employees. The current definition used in the Fair Work Act therefore fails to capture many legitimate small businesses and should therefore be amended. The definition of small business should be changed to a business employing less than 15 FTE employees. The reason for it to be changed back to 15 FTE employees is that, for operational requirements, small businesses in the main recruit part-time or casual staff.

9.21 Whilst the 12 months’ minimum employment period has given small business employers some comfort, the assistance promised by the introduction of a Small Business Fair Dismissal Code (the Code) has been unsuccessful. The Code was intended to provide:

a clear process and guidance to follow when dismissing an employee … and provide certainty to small business when they need to dismiss an employee.

9.22 Section 388 provides that a person’s dismissal, if consistent with the Code, will not be held as harsh, unjust or unreasonable.

9.23 Despite these intentions, there has been no clarity or certainty provided to small businesses as a result of the Code. Employers who do take the time and effort to comply with the Code will still find themselves before FWA defending a claim in either a formal conference or hearing (unless a financial settlement following the initial telephone conciliation process was made).

9.24 In considering whether there has been compliance with the Code, Fair Work Australia will consider whether a small business employer has acted with substantive fairness, that is, mere ‘paper compliance’ with the Code may not be sufficient to establish that the termination was not harsh, unjust or unreasonable. For example, in French v Lufra Investments Pty Ltd t/a Best Western Lufra Hotel the Employer sought to rely on the Code to justify terminating the employee on the basis that his conduct was serious enough to warrant instant dismissal. The worker had been subject to conflicting instructions, and the Commission stated that as the workers conduct was neither wilful nor deliberate, the dismissal was inconsistent with the Code and was harsh, unjust or unreasonable. Similarly in the case of Nielson v Cadle Park Pty Ltd, Commissioner Foggo commented that the checklist is ‘not required by FWA or mandatory for employers but rather a guide regarding matters to be taken into account when small businesses do dismiss an employee.’

9.25 The Baking Industry Group believes that the Code is inadequate to protect small businesses endeavouring to act lawfully in terminating the employment of staff from a successful claim of unfair dismissal. In Mr N v The Bakery Senior Deputy President O’Callaghan noted the difficulty experienced by the Employer in completing the checklist in a case of summary dismissal.

9.26 The Code needs to be amended to reflect the original intention of the Fair Work Act. That is, where an employer receives notification that an unfair dismissal claim has


been made against them, they should have the opportunity to have the matter determined on the papers through providing evidence in support of the fact they complied with the Code. The unfair dismissal claim should be dismissed unless the ex-employee is able to demonstrate that there was no compliance or that the employer failed to provide the required evidence. Only in these two instances should the matter progress to conciliation.

Early intervention and informal processes

9.27 The overall focus under the new system was to be on early intervention and informal processes making it ‘simpler and easier for all parties to use’. It was the intention that conferences could be conducted at alternative venues such as the employer’s place of business, thereby minimising the cost in time and lost earnings an employer faces in defending a claim. Fair Work Australia’s application is to undertake this by telephone with a conciliator. Legal representation would only be allowed where FWA deemed it appropriate. This was contrasted with the previous system which required an initial conciliation stage, which then went on to arbitration if not able to be resolved.

9.28 The experience of the Baking Industry is that the previous system of conciliation was more robust. When the Applicant and the Respondent were before a Commissioner, the Commissioner would break the parties and give them insight into the merits of their case, thus ensuring that the parties heard this from another person.

9.29 The question arises as to whether the new system has succeeded in these objectives. From an employer perspective the answer is clearly no. In practice, the only substantive change between the old and new systems has been that more unfair dismissal claims are being made and conciliation conferences are now done by telephone, rather than face-to-face. Where the matter is not resolved by a monetary settlement, the matter then proceeds (months later) to a formal hearing or conference. With those cases reaching appeal stages it is still the norm to have legal representation.

9.30 Furthermore, the objective of early intervention could be achieved by placing a greater obligation on the unfair dismissal applicant to demonstrate in their application (i.e. Form F2) that reasonable grounds are held for asserting an unfair dismissal has occurred. Too often, employers are forced to go to the time and trouble of defending baseless and speculative claims, the details of which are only disclosed at the conciliation stage.

9.31 Putting greater onus on unfair dismissal claimants to demonstrate reasonable grounds prior to a matter going to conciliation is therefore an important first step. This, combined with strict enforcement of deadlines and the ability for jurisdictional matters to be determined on the papers, would enable FWA to deal with legitimate claims quickly. This in turn would significantly increase the likelihood of reinstatement as an outcome.

Recommendation 14 The time limit for lodging an unfair dismissal claim be reduced to 7 days.


Recommendation 15 Extensions of time should only be granted in truly exceptional circumstances, remaining true to the test used in Shields v Warringarri Aboriginal Corporation.

Recommendation 16 That the definition of genuine redundancy should be limited to an assessment of whether a person’s job is still required to be performed by anyone.

Recommendation 17 That the definition of a small business return to the previous definition of fewer than 15 FTE employees rather than 15 employees in total.

Recommendation 18 That unfair dismissals claims against small businesses should be able to determined ‘on the papers’ and should only proceed to a hearing if there is a lack of evidence to demonstrate compliance with the Code.

Recommendation 19 A greater onus must be placed on unfair dismissal applicants to demonstrate that they have reasonable grounds for their claims.

10. ADVERSE ACTION

10.1 Adverse action claims are rapidly becoming the new frontier for litigation by disgruntled employees. Under Part 3-1 of the Fair Work Act, employees can bring ‘adverse action’ claims wherever they have been dismissed or have suffered harm in their employment due to discrimination, the fact they have a ‘workplace right’, or have engaged in union activities. Workplace rights are employee entitlements arising under a workplace law or instrument, such as a modern award or enterprise agreement. The intended scope for adverse action claims was as follows:

the scope of the conduct captured by the concept of adverse action is based on conduct that is prohibited by the freedom of association, unlawful termination and other provisions of the WR Act that have been incorporated into the General Protections.

10.2 However, in practice the scope of adverse action claims under the Fair Work Act creates new rights that are more extensive than those set out by the previous legislation. In particular, there has been a significant broadening of both ‘workplace rights’ and ‘lawful industrial activities’. Combined with a reverse onus of proof and the removal of the ‘sole or dominant reason’ exemption, this raises significant concerns for employers. Add to this uncapped compensation as well as none of the unfair dismissal jurisdictional exemptions and it is no wonder that the applications are increasing and are not being settled prior to bringing adverse action claims in the Federal Court. This trend significantly compromises the positive policy outcomes in having a workplace relations tribunal with an emphasis on being ‘quick, informal and avoid[ing] unnecessary technicalities’.

10.3 The Baking Industry Group considers that the adverse action provisions of the Fair Work Act provide an unnecessary layer of additional and excessive remedies to employees, who are already protected from unlawful or unfair termination and


discrimination under other laws and is the sleeping tiger of this legislation. The Baking Industry Group considers that the adverse action provisions of the Fair Work Act should be abolished. However, if they are to be retained, we submit that they must be rebalanced in order to avoid potential scope for abuse. At the least, the ‘sole or dominant reason’ test should be reinstated, discussed later in this submission.

Broadening of ‘workplace rights’

10.4 ‘Workplace rights’ have been significantly broadened with the introduction of s341(1)(c)(ii) of the Fair Work Act, which ‘specifically protects an employee who makes any inquiry or complaint in relation to his or her employment.’ This provision appears to have been intended to replace s659(2)(e) of the Workplace Relations Act which was restricted to providing protection for employees involved in more formal proceedings, such as:

the filing of a complaint, or the participation in proceedings, against an employer involving alleged violation of laws or regulations or recourse to competent administrative authorities.

10.5 The Baking Industry Group believes that, given the wide protection, many acts or omissions which amount to detrimental treatment of a person with a workplace right will potentially be caught by the new provisions.

10.6 The need to protect employees from termination for filing a formal complaint with a competent administrative authority (e.g. WorkSafe, FWO) is obvious. However, its extension to situations where an employee makes a complaint to their union or employer is less so. This is particularly the case given the employee only needs to be adversely affected, rather than terminated.

10.7 Due to the broad wording used through much of Part 3-1 in many instances there would potentially be more than one cause of action available to aggrieved parties. Whilst we acknowledge that Part 6-1 of the Fair Work Act confirms that in general multiple actions cannot be commenced in respect to the same complaints, which means an aggrieved party will be required to decide which proceedings he/she will pursue and s725 prevents multiple actions in relation to the termination, the Baking Industry Group is still concerned that applications for multiple actions in other jurisdiction occur and then the Employer is forced with seeking an order to discounting one.

Broadening of ‘industrial activities’

10.8 Subparagraph 347(b)(v) of the Fair Work Act has expanded freedom of association relating to participation and non-participation in lawful industrial activities. It extends the concept of ‘lawful industrial activity’ to ‘representing or advancing the views, claims or interests of an industrial association’.

10.9 The definition under ‘industrial associations’ has been broadened under the Fair Work Act to include not only Employer and Employee associations but also employees of


independent contractors who meet informally for a purpose including the protection and promotion of their employment interests.

10.10Whilst the need to protect employees from discrimination on the basis of union membership or non-membership is understandable, extending this to situations where an employee is advancing the views of its union is not so. Whilst union membership is small in the Baking Industry those members who have employees who are members of the union have noted that the union attempts to get involved in policy areas that are outside the industrial arena, or tries to ensure that union policy is adopted in the workplace even when this is not what the employees (their member’s) want.

10.11In Barclay v The Board of Bendigo Regional Institute of Technical and Further Education (Barclay v Bendigo TAFE) in which a teacher who had been suspended for two weeks following the distribution of a potentially defamatory email to union members (regarding the accreditation of the Bendigo TAFE) was held by the Full Federal Court to have been subject to unlawful adverse action. Although that case is now on appeal to the High Court, it demonstrates the difficulties employers face in appropriately disciplining employees who damage an employer’s reputation, where such damage is caused in affiliation with union membership. What is clear is that s347(b)(v) of the Fair Work Act enables employees to seek redress for behaviour which would otherwise be unlawful (e.g. as a breach of an implied contractual duty of fidelity or good faith, or under defamation laws). Such contradictions do not equate with good policy.

10.12In Barclay v Bendigo TAFE, this was made clear, when the majority of the Court held (after suggesting that the union representative may not have behaved appropriately) that this ‘failure was the failure of a union officer. It was not the failure of an employee and could not have been dealt with as such.’ The Baking Industry Group contends that the Fair Work Act has made it too easy for union members to not follow lawful directions therefore legitimising misconduct under the disguise of ‘industrial activities’.

10.13As noted, the Baking Industry Group recognises the need to protect employees from discrimination on the basis of their union affiliation. However, the scope of s347 should be limited so as to enable employers to appropriately respond to damaging comments made by employees. The Baking Industry Group considers that s347(b)(v), which protects employees who ‘represent or advance the views, claims or interests of an industrial association’ goes beyond what is necessary to safeguard union members from discrimination and opens the scope for abuse. Therefore, we submit that s347(b)(v) should be removed.

Reverse onus and removal of ‘sole or dominant reason’ exemption

10.14The ability of employers to defend adverse action claims is also diminished under the Fair Work Act due to the reverse onus of proof under s361 and the removal of the ‘sole or dominant reason’ exemption. As noted, Barclay v Bendigo TAFE is now on appeal to the High Court. However, it remains the most critically binding judgment about the way in which adverse action provisions of the Fair Work Act operate and demonstrates the particular difficulties employers face when confronted with adverse action claims.


This is particularly the case for small businesses who do not have the human resource or administrative capabilities to document all actions.

10.15Barclay v Bendigo TAFE concerned an employee (who was a union official) who was suspended after potentially defaming their employer as part of a union communication. On appeal, it was held that this constituted adverse action, motivated by the fact that the employer was a union official engaged in an industrial activity, as defined in s347 of the Fair Work Act. The original trial judge (Tracey J) held that the adverse action was not taken for a prohibited reason, essentially on the basis that he was satisfied on the evidence that the employer had not taken any of the actions ‘because’ of a prohibited reason. His Honour found that although adverse action had occurred, the subjective nature of the employer’s intention to engage in that conduct was not for a prohibited reason.

10.16On appeal a majority of Gray and Bromberg JJ in the Full Federal Court disagreed with the reasoning of the Judge at first instance. The majority held that in order to reach a determination about whether the action resulting in adverse action was taken because of a prohibited reason, it was necessary to determine what they termed the ‘real reason’ for that action. On the question of ‘real reason’, the majority said:

The real reason for a person’s conduct is not necessarily the reason that the person asserts, even where the person genuinely believes he or she was motivated by that reason. The search is for what actuated the conduct of the person, not for what the person thinks he or she was actuated by. In that regard, the real reason may be conscious or unconscious, and where unconscious or not appreciated or understood, adverse action will not be excused simply because its perpetrator held a benevolent intent.

10.17The fact that such a decision can be made under the Fair Work Act illustrates the need for change. Coupled with the reverse onus of proof under s361 of the Fair Work Act (which means that an employer will be presumed to have taken adverse action for a prohibited reason unless they can prove otherwise) the imposition of an objective test means that employers now face an even greater challenge in defending adverse action claims. Not only will an employer need to show that an employee’s workplace right was not one of the reasons for the conduct complained of, employers will also need to show that the workplace right was not an unconscious, unintentional reason for the conduct. This means that even if an employer can satisfy to the court that they have consciously taken action for a legitimate reason, they can still be found to have breached the adverse action provisions, if the court believes there may have been some subconscious element which indicates a breach.

10.18The Court in Barclay v Bendigo TAFE noted that the only way the employer can succeed in their defence is to show the reasons for taking the adverse action were ‘disassociated’ from the fact that a person had a workplace right. The Court in Barclay also stated that the Fair Work Act does not require a comparison between the treatment of the employee and any other employee acting in the same way and such a comparison is not to the point of the adverse action provisions of the Fair Work Act.


10.19This shows that the implementation of the Fair Work Act has redefined freedom of association so that it is no longer concerned with whether or not a union member employee is treated differently than a non-union member employee in the same circumstances. The Fair Work Act should therefore be amended to make clear that a comparison between the treatment of the employee and any other employee acting in the same way is a primary consideration.

10.20If the reverse onus of proof is to be retained, the Fair Work Act should be amended so that the alleged ‘prohibited’ reason must be the sole or dominant reason that has consciously motivated the action. In Stephens v Australia Postal Corporation the Court held that an employer took adverse action and discriminated against an employee even though (on the evidence before the Court) it was unable to determine the ‘true’ reasons for the employee’s termination. However, it found that:

the employee’s compensation claim and his disability had either consciously or subconsciously influenced the employer’s decision to dismiss the employee; and

the employer had failed to establish that the real reasons for the employee’s dismissal were disassociated from the circumstances of his workers’ compensation rights.

10.21The Government is currently in the process of consolidating all of the commonwealth anti-discrimination laws. The Baking Industry Group contends that the area of adverse action and workplace rights should be removed in total from the Fair Work Act and placed solely back under the anti-discrimination legislation.

10.22If adverse action remains in the Fair Work Act Small business, which is provided ‘assistance’ when it comes to unfair dismissal claims, has no protection from what is a more legalistic and potentially much more expensive exercise of defending a general protections application.

10.23Accordingly, in addition to the introduction of the sole or dominant reason test outlined above at s360 of the Fair Work Act, the reverse onus of proof provision contained at s361 should be amended to provide an exemption for small business employers.

Role of FWA

10.24The current role of FWA in these matters is limited to holding conferences, which are compulsory where an unlawful termination or a breach of the general protections involving a termination is alleged. The focus of such matters is to deal with a dispute through mediation or conciliation. In practice, these conferences are similar to unfair dismissal conferences where there is a clear focus on resolving the dispute through reaching a financial settlement.

10.25It appears that unions are increasingly using general protection claims where they do not find jurisdiction for an unfair dismissal, i.e. if the claimant is a small business employee of less than 12 months. A small business owner finds themselves with the prospect of settling the matter at conference or running the risk of defending a claim


through the Federal Magistrates Court or Federal Court. Similar to the conciliation stage under the unfair dismissal process, more often than not, the Employer will elect a financial settlement, rather than progressing.

10.26Due to the lack of prescriptive time to lodge a claim which may occur months or even years after the alleged incident occurred, Employers have difficultly remembering all of the circumstances which they require because of the ‘reverse onus of proof’. Whilst an employee has 14 days to lodge an unfair dismissal claim, an employee has 60 days to lodge an unlawful termination or general protection claim and no time limit whatsoever in lodging a general protections application not relating to a dismissal. The Baking Industry Group contends that the timeframe for lodging an adverse action application needs to be limited. While many of the aspects are similar to what lead an employee to making an unlawful or unfair termination application, the same should be taken in adverse action situations. For example, if it is a single incident the application should be lodged within 7 days following that incident, or if it is a situation that is ongoing then it should be no longer than 60 days from the date the last incident occurred or in any event if the incident leads to the employee terminating their employment or being terminated within 60 days of the termination.

10.27The Fair Work Act provides FWA with an obligation to advise the parties if it considers that a general protections court application in relation to the dispute would not have a reasonable prospect of success. Currently this rarely occurs in practice, presumably because even the most speculative claim has a chance given the reasons outlined above. However, should the necessary changes be made, FWA would be able to take a more active role in minimising the number of speculative claims being made. The practice of simply issuing a certificate where the parties have been unable to reach a financial settlement at conference should end. FWA could ensure the integrity of the system by requiring an applicant to demonstrate that they have reasonable grounds for alleging adverse action has occurred and the interim injunction exemption under s371(b) should be abolished.

Recommendation 20 That adverse action and workplace rights should be removed from the Fair Work Act and placed solely under the anti-discrimination legislation.

Recommendation 21 If adverse action and workplace rights remain under the Fair Work Act then s341(1)(c)(ii) of the Fair Work Act be removed and that adverse action claims in relation to complaints be limited to employees and be heard within Fair Work Australia and that the legislation ensure that it can only be heard in one jurisdiction.

Recommendation 22 If adverse action and workplace rights remain under the Fair Work Act then s347(b)(v) of the Fair Work Act be removed, as it unfairly excludes union members from legitimate disciplinary action in relation to their behaviour as employees.

Recommendation 23 If adverse action and workplace rights remain under the Fair Work Act then the test for whether adverse action has occurred should require a comparison of whether the action taken against the employee concerned would have also been taken against other employees in the same circumstances.


Recommendation 24 If adverse action and workplace rights remain under the Fair Work Act then s360 should be amended so that an employer will be held to have taken action for a particular reason only if it is the sole or dominant reason.

Recommendation 25 If adverse action and workplace rights remain under the Fair Work Act then the reverse onus of proof at s361 should not apply to small businesses.

Recommendation 26 That the time limit for making an adverse action claim needs to limited so that where it is a single incident, the application should be lodged within 7 days of that incident, or if it is an ongoing situation, no longer than 60 days from the date the last incident occurred, or in any event if the incident leads to the employee terminating their employment or being terminated within 60 days of the termination.

Recommendation 27 If adverse action and workplace rights remain under the Fair Work Act then adverse action applicants must show reasonable grounds for their application during conferences held under s368.

Recommendation 28 If adverse action and workplace rights remain under the Fair Work Act then the ability to obtain an interim injunction under s371(b) without proceeding to conciliation be abolished.

11. INDIVIDUAL FLEXIBILITY ARRANGEMENTS

11.1 Individual flexibility arrangements (IFAs) provide employees to whom modern awards or enterprise agreements apply with the option of varying the terms of those instruments in order to meet the ‘genuine needs of the employee and employer’. However, in contrast to the Australian Workplace Agreements which they effectively replaced, IFAs do not exist independently of an award or enterprise agreement, but rather as enforceable terms of those instruments. IFAs must also ensure that the employee is better off overall in comparison to the terms of the relevant modern award or enterprise agreement. Modern awards and enterprise agreements must contain provisions (flexibility clauses) which set the parameters of making IFAs.

11.2 IFAs are a central part of the Government’s workplace relations policy. In its Forward with Fairness – Policy Implementation Plan, it was indicated that the ‘aim of the flexibility clause is to enable individual arrangements which are genuinely agreed by the employer and an individual employee.’ Elsewhere the then workplace relations minister, the Hon Julia Gillard stated that IFAs ‘will remove the need for any individual statutory agreements and the associated complexity and bureaucracy attached to those agreements’. Workplace flexibility for the benefit of businesses and employees is also invoked in the objects to the Fair Work Act. However, as discussed below, IFAs have not provided the flexibility sought.

Content of IFAs

11.3 Under modern awards, IFAs are only able to be made in relation to hours of work, overtime rates, penalty rates, allowances and leave loadings. This restriction impedes


the making of meaningful flexible arrangements. The Baking Industry Group submits that IFAs should be able to be made in relation to any aspect of a modern award. As long as such agreements are required to leave an employee better off overall in relation to the modern award, it is difficult to see why any restriction on IFA content should exist at all. As an example, an issue for many small bakeries was students wanting to work after school as they had in the past where they could only work between the hours of 4.00 pm and 6.00 pm because of the time they were able to get away from school and the closing time of the business. Whilst the minimum shift engagement was three hours, if an employer entered into an IFA and allowed them to only work two hours, they would still have to pay them for three hours. Therefore, many of our members could not afford to have students work. Whilst this is now changed for those under the General Retail Industry Award 2010, it has not changed for some other members who pay under other Awards. In effect, even if an employee wanted to enter into an IFA and only wanted to be paid the two hours, which was more beneficial to them than not having a job at all, the Employer was reluctant because this would bring them into dispute with the Fair Work Ombudsman or because it would mean increased costs for the Employer.

11.4 In theory, enterprise agreements are able to permit the making of IFAs in relation to any matters pertaining to the employment relationship. The Government has indicated that ‘the terms of [flexibility] clause[s] are best decided at the enterprise level in the bargaining process’. However, in practice, flexibility clauses often unduly restrict the scope of IFAs. The box below contains an extract from the Productivity Commission’s recent report on the Australian retail industry. It sets out the major problematic issues with the manner in which IFAs are currently structured in the Fair Work Act.

The Baking Industry Group agrees with the constraints limiting the application of IFA’s as outlined in the Master Builder’s submission which is copied below.



Constraints limiting the effectiveness of IFAs, include:

employers have difficulty assessing, with any certainty, whether a particular IFA meets the ‘better off overall’ test (discussed below).

Employers are discouraged to utilise an IFA in the manner purported in the EM [Explanatory Memorandum] or FWO examples …, as there is an element of risk and they may be breaching the award terms should a court conclude that the IFA does not meet the ‘better off overall test’ as against all award conditions. (ACCI, sub.DR196, p. 23)

… if the terms of the IFA are subsequently deemed to include financial detriment to the employee compared to the Modern Award the business may be subjected not only to retrospective pay adjustments but a monetary penalty of up to $33 000 for breaches of the Fair Work Act 2009. With such high stakes involved R&CA argue IFA’s should be renamed to ‘Inflexible Fake Agreements’. (Restaurant & Catering Australia, sub. DR193, p. 9)

the Fair Work Act prevents employers offering IFAs as a condition of employment

employees can cancel them with just four weeks’ notice:

Few employers would be prepared to reach an IFA with an employee and pay a wage increase in return for certain flexibilities, when the employee can give four weeks’ notice and cancel the agreement. (Ridout 2011, p. 8)

some unions have tried to limit the uptake, or narrowed the scope and potential benefits, of IFAs:

... a number of trade unions have engaged in an industrial strategy of limiting the use of Individual Flexibility Arrangements (IFA) in enterprise agreements and opposing agreements where they contain an IFA that is as flexible as the default regulation model clause or the model clause in modern awards. ...

There are also union IFA clauses that require a majority of the workforce to agree to changing the application of certain conditions in an agreement. This is equally offensive to the principle that IFAs were supposed to be available to individual employees and their employer. …

Unions are limiting the number of matters an IFA can deal with in bargaining and rendering it fundamentally ineffective as a vehicle for promised flexibility. (ACCI, sub. DR196, p. 24)

Ease of termination and restrictions on offers of employment

11.5 Other aspects of the IFA regime under the Fair Work Act make them unattractive and uncertain alternatives to modern awards and enterprise agreements. The fact that IFAs can be terminated at 28 days’ notice (which has an uncertain effect on the subsisting employment relationship and interaction with the notice of termination provisions under the NES) discourages employers from going to the trouble of making special arrangements for individual employees. The fact that IFAs cannot be made a condition of an offer of employment (without breaching the adverse action provisions of the Fair Work Act) also means that flexibility arrangements are less likely to be negotiated. This is particularly problematic for small businesses that have static rosters.

Lack of oversight by relevant authority

11.6 However, the greatest disincentive to making an IFA is the fact that there is no certainty as to whether it in fact leaves an employee better off overall in relation to the modern award or enterprise agreement. IFAs which do not meet that test are not void, but may be terminated by not more than 28 days written notice and expose an employer to breach of the flexibility clause of the modern award or enterprise agreement, which could lead to the imposition of civil penalties under Part 4-1 of the Fair Work Act, or even to an adverse action claim under Part 3-1. However, because there is no external agency via which an employer may verify whether an IFA does leave an employee better off overall, employers are left with significant contingent liabilities about whether they have breached the Fair Work Act. Understandably, this makes employers wary about entering into IFAs.

11.7 The Baking Industry Group submits that there must be an optional independent approval test conducted by a third party of IFAs. The Baking Industry Group considers that the FWO would be best placed to provide such a service, which could act as a guarantee that the FWO would not prosecute an employer in relation to a breach of a flexibility term under a modern award or enterprise agreement. The role of the FWO as the relevant authority with respect to IFAs was recently encouraged by Mr Nicholas Wilson, the Fair Work Ombudsman, who agreed that the FWO was in a good position to provide examples of best practice IFAs. Although there may be some concern that this would unduly delay the making of IFAs, the Baking Industry Group emphasises that the FWO examination would be optional, and that because the better off overall test is a global one, rather than a ‘line-by-line’ test, the FWO should be able to administer request for assessments relatively promptly.

Recommendation 29 That the model flexibility clause allow IFAs about any matter pertaining to the employment relationship and that it be a mandatory term of an enterprise agreement.

Recommendation 30 That the FWO provide an independent approval mechanism to determine whether an IFA passes the better off overall test in relation to a modern award or enterprise agreement.


12. CONCLUSION

12.1 The Baking Industry Group submits that greater balance in the Fair Work Act is required. Introduction of the 30 recommendations made by the Baking Industry Group in this submission will assist to restore the necessary balance that the Fair Work Act currently purports to represent.

12.2 The Baking Industry Group would be happy to elaborate on the specific proposal made in this submission, inclusive of undertaking discussion with the Review Panel.


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