On Friday 4 May 2007, Prime Minister John Howard announced the first major amendments to the safety net for agreement making since the inception of the “WorkChoices” changes to the Workplace Relations Act in March 2006. The amendments include the introduction of a Fairness Test and the re-branding of the Office of the Employment Advocate & Office of Workplace Services as the Workplace Authority and Workplace Ombudsman respectively.
The Fairness Test applies to all individual Australian workplace agreements, covering employees earning less than $75,000 per annum, and all collective workplace agreements in industries covered by an award, where the agreement modifies or removes any or all protected award conditions. The Fairness Test will operate for all workplace agreements lodged on or after 7 May 2007.
The Regulations that will detail how the Fairness Test is to work are yet to be released. We understand that they will be introduced in July and operate retrospectively.
In the meantime, you should consider the information we know, and provide below, when developing and/or implementing workplace agreements in your business.

The Fairness Test

What is it?

The Fairness Test has been developed as a means for the Workplace Authority (previously the Office of the Employment Advocate) to determine whether, on balance, an employee is being fairly compensated for the removal or modification of Protected Award Conditions under a workplace agreement.

What are Protected Award Conditions?

Protected Award Conditions are conditions of a federal award, preserved State agreement, or notional agreement preserving State award (depending on which one applies), which are automatically included in a workplace agreement unless they are expressly modified or excluded within the workplace agreement itself.

Protected Award Conditions are:

Penalty Rates, including those for working on public holidays and weekends
Shift and overtime loadings
Monetary allowances
Annual leave loading
Public holidays
Rest breaks; and
Incentive-based payments and bonuses.

How does it work?

The Fairness Test is administered by the Workplace Authority.

When determining the fairness of the workplace agreement, the Workplace Authority takes into account both monetary and non-monetary compensation offered, relative to what would have been payable under the relevant award. For example you may offer an increased rate of pay or the inclusion of family-friendly or flexible working conditions in lieu of Protected Award Conditions.

The following factors will also be considered:

Industry
Obligations of the employee (eg. Whether the employee is required to work shift work on weekends)
Location and economic circumstances of the business
Specific circumstances or employment opportunities of the employee

What happens if your Workplace Agreement fails the Fairness Test?

Where a workplace agreement does not satisfy the Fairness Test, both you and your employee will be contacted by the Workplace Authority and will be given advice as to how the workplace agreement can be changed to ensure that it is fair and that the employee is appropriately compensated.

You and your employee will have 14 days to make the agreement fair and, where the necessary changes are not made, the agreement will be void.

Despite this process, the workplace agreement will begin to operate from the date it is lodged. Any back payments, for example penalty rates that are required to be paid following the Fairness Test, will be payable from the date the agreement began to operate.

As further details are released on the introduction of the Fairness Test we will ensure you are kept up to date on these developments through Fisher Cartwright Berriman’s Client Alert Service.

If you would like to know more about this announcement, please contact a Partner in Sydney (02) 9922 5188 or Melbourne (03) 9614 3900.

Fisher Cartwright Berriman
Workplace Relations Law Specialists
www.fishcart.com