Important Update | What Does the Secure Jobs, Better Pay Legislation Mean For Employers?

The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (“Amending Act”), which passed both houses of Federal Parliament on 2 December 2022 and received Royal Assent on 6 December 2022, introduces a number of broad and substantial amendments to the Fair Work Act 2009 (Cth) (“Act”). These amendments, some of which have already come into effect, constitute arguably the biggest alteration to Australia’s industrial relations legislative framework since the inception of the Act.

This alert provides a summary of the key amendments to Australia’s workplace laws, in addition to practical guidance on steps that employers need to take to ensure they are compliant with the Act.

Fixed Term Employment

The Federal Government has identified rolling fixed-term contracts (in other words, where the same employee is put on a series of consecutive fixed-term contracts in substantially the same role) as an area of concern requiring legislative reform. Part 10 of the Amending Act introduces limitations on the use of fixed-term contracts, by prohibiting the use of such contracts that:

• span a period of greater than two years, including any potential extensions or renewals of the contract where the employee continues to perform substantially the same role; or
• may be extended or renewed more than once.

A number of exceptions to these limitations apply, for instance where an employee is engaged to perform a distinct task involving specialised skills, in relation to a training arrangement, during peak demand periods or temporary absences of other employees, or where the employee earns more than the high income threshold (currently $162,000 per annum).

The Amending Act also identifies, and prohibits, a number of potential tactics that the Government anticipates will be used to avoid these provisions, such as terminating or delaying the re-engagement of an employee for a period, artificially changing the work duties of the employee, or otherwise altering an employment relationship with a view to avoid compliance with the fixed term employment provisions.

In the event that an employer breaches the new provisions regarding fixed term contracts, the contract will continue to operate but for any provisions relating to the termination of the contract at the end of the term – meaning that the employee will be considered a permanent employee at law, and the employer will be unable to rely on any such clause to terminate that individual’s employment.

These provisions are a “civil remedy provision” – which means that failure to comply with these provisions may result in a Court imposing penalties on parties involved in a contravention, including any individuals that were knowingly concerned in relation to a corporation’s breaches.

These amendments will have a broad practical impact on employers, and as such, will not take effect until 7 December 2023.

Practical Tip: Employers that engage employees on fixed-term contracts of employment will need to review their current and future practices to ensure that it is compliant with these legislative changes. The reasons for engaging employees on a first or second fixed-term contract should be documented. If an employer is reliant on fixed-term contracts due to their specific needs, it should consider whether one of the exceptions apply. If not, the employer has a 12-month period to prepare for the amendments to take effect.

The Fair Work Ombudsman will be releasing a Fixed Term Contract Information Statement shortly. This document will need to be provided to all new fixed-term contract employees, in addition to the Fair Work Information Statement.

Flexible Work Arrangements

The Federal Government has formed the view that current provisions relating to flexible work arrangements are outdated, particularly in light of the changing work patterns that have come about in response to the COVID-19 pandemic. Currently, employees may request a flexible work arrangement on certain grounds pursuant to section 65 of the Act, such as changes to their hours, patterns or locations of work. An employer must advise the employee in writing within 21 days of the request being made whether they grant or refuse the request, and if they refuse the request, the reasonable business grounds for doing so; however, there is no mechanism under the current legislation for the employee to dispute a refusal.

The amendments made by the Amending Act, introduce a number of additional reasons for which a flexible work arrangement may be requested, including where the employee has a disability or a member of the employee’s immediate family or household is experiencing family or domestic violence. Employers will be required to provide a more detailed explanation where a request is refused, setting out the reasons for the refusal, how these business grounds apply, and any alternative arrangements that the employer would be willing to accommodate. Additionally, the Amending Act empowers the Fair Work Commission (“FWC”) to deal with disputes brought by an employee when an employer refuses, or does not respond in time to, a flexible work arrangement request.

Amendments relating to flexible work arrangements will take effect from 7 June 2023.

Enterprise Agreements

The Amending Act makes significant changes to the existing legislative framework that deals with enterprise agreements, both with respect to bargaining negotiations and to the actual operation of such agreements. With the use of enterprise agreements dwindling in recent years, the Federal Government has identified the current framework as inadequate to encourage the use of such agreements. In summary, the amendments seek to make it easier for employees to bargain where they wish to do so, and make it more difficult for employers to resist attempts to bargain in such circumstances.

One of the most controversial amendments, is the significant expansion of multi-employer bargaining, which is currently allowed under the Act under very limited circumstances. The Amending Act seeks to increase the use of multi-employer enterprise agreements, particularly in industries with low agreement coverage and in which low pay rates prevail, or where there is an “identifiable common interest” between the employers that are proposed to be covered by the agreement.

The Amending Act expands the powers of the FWC in dealing with applications for single interest employer authorisations, including to compel bargaining without an employer’s consent if:

• a majority of employees support the introduction of a multi-employer agreement;
• the employers have common interests, such as geographical location or the nature of the enterprises that will be covered by the agreement; and
• it would be in the public interest to grant a multi-employer authorisation.

Additionally, the Amending Act seeks to reduce a number of barriers that may arise during the bargaining process, especially where an employer and employees or their union representative are bargaining a replacement agreement where an existing agreement is due to expire. These changes include:

• removal of a number of strict pre-approval requirements in relation to the FWC approving an agreement and replacing these requirements with a broad requirement of satisfaction that the agreement has been genuinely agreed to by employees;
• making it easier for employees to initiate bargaining for a proposed new agreement where an existing agreement is in place and the nominal expiry date of said agreement has passed, including the increased capacity for the FWC to issue bargaining orders;
• making it harder for employers to apply to terminate existing agreements that have passed their nominal expiry date and the employer does not want to negotiate a new agreement;
• simplifying the manner in which the FWC may correct obvious errors and irregularities in enterprise agreements;
• increasing the powers of the FWC to deal with bargaining disputes between employers and employees and their representatives;
• amending the process under which protected industrial action may be taken in the context of bargaining negotiations; and
• simplifying the better off overall test, which has been criticised for being unnecessarily onerous and inflexible.

Practical Tip: The majority of amendments dealing with enterprise agreements will take effect on 7 June 2023, although some changes, such as with respect to terminating existing agreements, have already taken effect. As such, we recommend that employers who have an enterprise agreement that has already passed its nominal expiry date consider and obtain advice as to whether they should negotiate a replacement agreement before or after the significant changes come into effect. 

Zombie Agreements

The current legislation allows for the continued operation of collective agreement-based transitional instruments (“Zombie Agreements”) which were made under the Workplace Relations Act 1996 (Cth) and during the Act’s bridging period, despite the fact that the vast majority of such agreements reached their nominal expiry date many years ago.

Under the Amending Act, all Zombie Agreements that have passed their nominal expiry date will be automatically terminated on 7 December 2023 (“grace period”). This means that employers whose enterprises are currently covered by a Zombie Agreement will need to (i) negotiate a new enterprise bargaining agreement with their workforce in accordance with the Act; or (ii) allow the Zombie Agreement to lapse at the conclusion of the grace period, at which time its employees would then be subject to the terms and conditions of any modern award that may apply to their employment. Employers must notify their workforce of the termination date on or before 7 June 2023.

If an employer and its workforce are in the process of negotiating a new agreement but are unlikely to approve this agreement within the grace period, an application may be made to the FWC to extend the grace period for not more than four years.

Pay Secrecy

Another key feature of the Amending Act is the prohibition of pay secrecy clauses from being included in contracts of employment. These clauses have become increasingly prevalent in employment contracts in recent years, as a means for employers to prevent their workforce from openly discussing and comparing salaries. The Federal Government has moved to prohibit such clauses, on the basis that pay secrecy clauses have led to wage inequality and contributes to issues such as the gender pay gap.

The following amendments will be made to the Act with respect to pay secrecy:

• employees will now have a workplace right to discuss and disclose their remuneration and related employment conditions;
• existing pay secrecy clauses contained in employment contracts or other industrial instruments (such as enterprise bargaining agreements) will be unenforceable, effective immediately; and
• from 7 June 2023, it will become a civil remedy provision for employers to enter into a contract of employment that contains a pay secrecy clause.

Practical Tip: To ensure compliance with pay secrecy laws, employers need to review their employment contract templates and remove any provisions that prevent employees from discussing or asking about remuneration. It is not necessary for existing employees to sign a new contract if their employment is currently subject to a pay secrecy clause, as these clauses are now void and unenforceable. 

Workplace Sexual Harassment and Discrimination

Together with the Anti-Discrimination and Human Rights Legislation Amendment (Respect at Work) Act 2022 (Cth), which passed Parliament earlier this year and imposes a positive duty on employers to prevent workplace sexual harassment, the Amending Act will introduce a number of further recommendations from the Respect@Work Report handed down by Commissioner Kate Jenkins in 2020. In particular, the Amending Act:

• introduces a broad prohibition against sexual harassment in connection with work;
• extends this prohibition to all “workers”, including employees, contractors, subcontractors, apprentices, trainees, students and volunteers, as well as third party and prospective employees;
• expands the powers of the FWC in dealing with applications to stop sexual harassment; and
• expands the powers of the Fair Work Ombudsman to investigate and bring civil penalty proceedings against employers or individuals for suspected contraventions of sexual harassment prohibition provisions.

These amendments will come into effect on 7 March 2023.

The Amending Act also expands existing protected characteristics covered by the anti-discrimination provisions of the Act to include breastfeeding, gender identity and intersex status (which are already protected characteristics under the Sex Discrimination Act 1984 (Cth). These amendments have already taken effect.

Practical Tip: the employment law landscape with respect to workplace sexual harassment and discrimination has changed significantly in recent months, and current practices may not be sufficient to comply with new legislative requirements. It is imperative that employers review their current policies regarding these topics, ensure that their workforce is well educated on the business’ expectations, and considers what preventative steps are appropriate to introduce.

Regulatory Changes

The Amending Act makes a number of additionally regulatory amendments in order to achieve its overarching purposes, including:

• abolishing the Registered Organisations Commissioner and Australian Building and Construction Commission;
• increasing the monetary cap that allows employees to take legal action in small claims courts from $20,000 to $100,000 from 1 July 2023;
• requiring that the FWC considers matters relevant to reducing the gender pay gap and other gender-based assumptions when varying modern awards; and
• introducing civil penalty provisions for employers who advertise employment opportunities at a rate of pay that would contravene the Act or an applicable industrial instrument.

Final Observations

The passing of the Secure Jobs, Better Pay legislation constitutes the biggest shake-up to Australia’s national industrial relations framework in over a decade. It is incumbent on employers across the country to review their current practices and policies, particularly with respect to fixed-term contracts, the use of enterprise bargaining agreements, pay secrecy clauses, and workplace sexual harassment and discrimination.

If you require assistance identifying and implementing changes to your business’ current practices, please do not hesitate to contact the writers.

This alert is not intended to constitute, and should not be treated as, legal advice.