Submission 167 Australian Council of Trade Unions Workplace Relations Framework Public inquiry

Lessons learned?

The 2012 Review Panel recommended that the better off overall test in s. 144(4)(c) and s. 203(4) be amended to expressly permit an individual flexibility arrangement to confer a non-monetary benefit on an employee in exchange for a monetary benefit, provided that the value of the monetary benefit foregone is specified in writing and is relatively insignificant, and the value of the non-monetary benefit is proportionate.

The ACTU is strongly opposed to non-monetary entitlements being used to offset monetary entitlements. The BOOT is a fundamental safeguard that ensures employees have access to genuine flexibility without having to accept a reduction in wages and conditions.

The current legal authorities support the proposition that a purported IFA which contains a preferred hours arrangement (enabling an employee to trade off monetary benefits such as penalties and overtime in exchange for the flexibility to work their ‘preferred hours) does not result in an individual employee being better off overall.⁵⁹⁸ In this respect the advice contained in the FWO’s Best Practice Guide is incorrect.⁵⁹⁹

If the Panel’s recommendation is adopted unfair arrangements that have been the subject of successful prosecution or out-of-court settlements under the existing provisions of the FW Act would become permissible.

Non-monetary benefits are difficult to quantify even on an individual basis and consequently the requirement that such benefits must be relatively insignificant and proportionate to monetary benefits foregone is unlikely to be effective in stopping employers pressuring employees to accept unfair individual arrangements that substantially reduce wages and conditions of employment.

Further, employers that can accommodate a request for flexible work arrangements without incurring any additional costs would be able to use their superior bargaining position to insist on the removal of monetary entitlements under the terms of an IFA. Examples of IFAs that would be permissible if non-monetary benefits are taken into account include arrangements that:

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  Enable employees to work from home in exchange for a reduced rate of pay;
  
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  Enable employees to vary their start and finish times if they agree to forgo overtime payments
  
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  Enable employees to take annual leave in advance if they forgo payment of shift loadings on annual;
  
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  Provide employees with access to a car park or meal voucher in exchange for the suspension of applicable allowances and penalties; and
  
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  Provide part-time employees with a guaranteed number of hours per week in exchange for the suspension of minimum daily engagement provisions.
  

We anticipate that employer organisations will seek to justify the inclusion of non-monetary benefits in assessing the BOOT by reference to arrangements that appear reasonable in the sense that they do not involve significant financial loss for the employee. Employers will conveniently ignore the fact that qualifying the operation of the BOOT provides enormous scope for abuse. The use of AWAs and to a lesser extent IFAs, demonstrates that if the BOOT is modified to allow non-monetary benefits to be taken into account, employers will adopt practices that drive down wages and conditions and undermine collective bargaining.

The 2012 Review Panel also recommended that the FW Act be amended to provide a defence to an alleged contravention of a flexibility term under s. 145(3) or s. 204(3) where an employer has complied with the notification requirements proposed in Recommendation 10 and believed, on reasonable grounds, that all other statutory requirements (including the better off overall test) had been met.

The Fair Work Amendment Bill contains amendments that are loosely based on the Panel’s recommendation. The Bill:

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  requires IFAs to include a statement by the employee setting out why he or she believes that the arrangement meets his or her genuine needs and leaves his or her better off overall at the time the agreement to the arrangement; and
  
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  provides a defence to an alleged contravention of a flexibility term where the employer reasonably believed that the requirements of the term were complied with at the time of agreeing to a particular IFA.
  

The ACTU is strongly opposed to these amendments.

Providing employers with a defence to prosecution clearly undermines the protection afforded to employees by the BOOT, particularly if the content of agreements is not subject to any of form of scrutiny at the time the agreement is made.

Currently, if an IFA is defective, the IFA remains on foot (until withdrawn from) but the FW Act deems that the flexibility term has been contravened.⁶⁰⁰ Prosecutions for breach of the flexibility clause can result in penalties being award against the employer and compensation being paid to workers, where the IFA did not in fact result in the worker being “better off overall’.⁶⁰¹

Under the proposed amendments, a successful defence would result in no exposure to penalty and no requirement to remedy any underpayment. Consequently employees that are compelled to accept an IFA that reduces their terms and conditions of employment, would have no resource under the law to recover payments lost as a result of entering into the IFA.

The proposed “genuine needs” statement is designed to work in tandem with a defence provision. The genuine needs statement is a defence mechanism for an employer which ensures that an employer has no obligation to ensure that an employee entering into an IFA has given informed consent to this course of action. There is no protection offered to an employee through the genuine needs statement, rather the genuine needs statement has the opposite effect, denying an employee the ability to assert that they were not fully informed of what they were agreeing to.

The requirement that IFAs include a testimonial from the worker about how it meets their needs and leaves them better off overall would enable employers to rely on that testimonial to demonstrate their “reasonable belief” for the purposes of the defence. In other words employers would be able to knowingly breach the provisions of the FW Act with impunity.