[2013] FWCFB 8859 |
FAIR WORK COMMISSION |
DECISION |
Fair Work (Transitional Provisions and Consequential Amendments) Act 2009
Sch. 5, Item 6 - Modern awards review
JUSTICE ROSS, PRESIDENT |
MELBOURNE, 12 NOVEMBER 2013 |
Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 - Transitional Review - model award flexibility term - settlement of variation determinations arising from the decision in [2013] FWCFB 2170 - whether the variations apply to IFAs made before the commencement of the new flexibility term.
1. Introduction and Background
[1] In a decision issued on 15 April 2013 ([2013] FWCFB 2170) we dealt with
15 applications to vary the standard award flexibility provision in 10 modern awards. Those applications were made in the context of the review of all modern awards required by the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009. We rejected applications to vary the scope of the model flexibility term but made a number of other variations to the model term. In particular we determined that the model flexibility clause would be varied in the following respects:
Note: If any of the requirements of s.144(4), which are reflected in the requirements of this clause, are not met then the agreement may be terminated by either the employee or the employer, giving written notice of not more than 28 days (see s.145 of the Fair Work Act 2009 (Cth)).
[2] In addition to these variations one further variation was adopted in order to improve the level of compliance with the requirements of the model flexibility term. The evidence suggested that a significant proportion of IFAs were entered into before the individual employee has commenced employment, contrary to the intent of the model flexibility term and the Act. To address that issue we decided to insert the following words in the model flexibility term:
‘An agreement under this clause can only be entered into after the individual employee has commenced employment with the employer.’
[3] The most significant change to the model flexibility clause determined in our 15 April 2013 decision was to vary the period of notice required to unilaterally terminate an individual flexibility agreement (an ‘IFA’). The model clause previously provided,:
“7.8 The agreement may be terminated:
(a) by the employer or the individual employee giving four weeks notice of termination in writing, to the other party and the agreement ceasing to operate at the end of the notice period; or
(b) at any time, by written agreement between the employer and the individual employee.”
[4] In our 15 April 2013 decision we decided to vary paragraph 7.8(a) of the model clause by increasing the period of notice required for unilateral termination, from four weeks to 13 weeks. In those proceedings the parties who supported a notice period of more than four weeks contended that the existing notice period acted as a disincentive for employers to enter into an IFA. This contention formed part of our consideration in deciding to extend the notice period. The reasons for that change are set out at paragraphs [160] to [188] of our 15 April 2013 decision. The following paragraphs are particularly relevant for present purposes:
“[174] For our part, we accept that the provision of a longer unilateral termination notice period would provide greater certainty to the employer and individual employee parties to IFAs. A longer notice period would also reduce an existing disincentive for employers entering into IFAs.
[175] But these considerations need to be balanced against the factors cited by the 2008 AIRC Full Bench in support of their adoption of a four week notice period, that is:
● unforeseen developments can render an IFA unacceptable to one of the parties and substantially unfair; and
● it provides some protection for employees who through ignorance or for some other reason make an IFA which materially disadvantages them.
[176] Hence, while a longer notice period provides greater certainty it also reduces the ability of parties to adapt to changing circumstances, such as those identified by the 2008 AIRC Full Bench. In other words a longer notice period increases certainty but reduces flexibility
....
[178] The central issue for us is the balance between the considerations identified by the 2008 AIRC Full Bench (see paragraph [175] above), that is:
....
[187] We are persuaded that it is appropriate to increase the period of notice specified in clause 7.8(a) of the model flexibility term. No particular rationale was advanced in support of the 16 week notice period proposed by Greater Union and Birch, Carroll & Coyle. A period of 16 weeks equates to 112 days, which is greater than the 90 day period recommended by the Panel in the Review Report. In our view it is appropriate to give effect to the Panel’s recommendation. However, we think it is simpler and easier to understand and administer a notice period which is expressed in weeks rather than days. Accordingly, we propose to vary clause 7.8(a) of the model flexibility term by deleting the reference to ‘four weeks’ and inserting a reference to ‘13 weeks’. We are satisfied that such a variation has merit, will enhance the operational effectiveness of the model term and is consistent with the modern awards objective.”
[5] Our 15 April 2013 decision concluded as follows:
“[211] The variations proposed are necessary to remedy the issues identified in the Transitional Review and to ensure that the model award flexibility term and modern awards are operating effectively, without anomalies or technical problems arising from the award modernisation process. We are also satisfied that the variations proposed are ‘necessary’ (within the meaning of s.138) to achieve the modern awards objective and will ensure that modern awards provide a fair and relevant minimum safety net of terms and conditions having regard to the matters set out at paragraphs 134(1)(a)-(h). In particular, the variations proposed will provide flexible modern work practices and reduce regulatory burden while taking into account the needs of the low paid and making the model flexibility term simpler and easier to understand.
[212] The determinations giving effect to our decision will be settled by Senior Deputy President Watson, with recourse to the Full Bench if necessary. After the Full Bench dealing with the annual leave aspects of the model award flexibility term has decided the applications before it, a statement will be issued setting out the process of implementing our decision (and the decision of the Annual Leave Full Bench insofar as it deals with the model award flexibility term) in all modern awards.”
[6] On 9 September 2013 we issued a Statement ([2013] FWCFB 6670) setting out the draft determinations to vary all 122 modern awards to give effect to our decision of 15 April 2013.
[7] On 8 October 2013 the Commission received correspondence from the Department of Employment raising a potential ambiguity with the draft determinations. The relevant part of that correspondence states:
“Paragraph B of each draft determination states: ‘The determination comes into operation at the end of the first full pay period commencing on or after XX September 2013.’
In my view, the provision is not clear as to whether the changes will apply to all IFAs (that is, those made under the current flexibility term, as well as those made after commencement of the provisions) or whether they will only apply to IFAs made after the commencement of the new flexibility term. This is a matter that would benefit from clarification before a final decision on the wording of the revised flexibility term is made.”
[8] A copy of the Department’s correspondence was published on the Commission’s website and this matter was relisted for hearing on Thursday 7 November 2013 to provide interested parties with the opportunity to comment on the issue raised in the Department’s correspondence.
2. The issue
[9] The essence of the issue before us is whether the new 13 weeks’ notice period for the unilateral termination of an IFA should apply to IFAs entered into prior to the commencement date of the determinations giving effect to our 15 April decision.
[10] We note at the outset that in the proceedings leading to our 15 April 2013 decision no party contended that the longer notice periods proposed should apply to existing IFAs. That issue was not the subject of any submissions at that time. Further, one of the considerations in varying the unilateral termination notice period was that a longer notice period would reduce an existing disincentive for employers entering into IFAs. 1 In other words a longer notice period would lead to more IFAs being made.
[11] The draft variation determinations did not expressly deal with the application of the
13 weeks’ unilateral termination notice period to existing IFAs. We are satisfied that this issue should be clarified to provide the parties to IFAs with greater certainty. We now turn to the submissions advanced in respect of this issue.
[12] The Australian Council of Trade Unions and a number of individual unions contended that a presumption of prospective application should operate such that the new 13 weeks’ notice period would only apply to IFAs entered into after the commencement of the variation determinations. A number of employer representatives - namely the Australian Chamber of Commerce and Industry, Master Builders Association, Housing Industry Association and Community Connections Solutions Australia - took a similar view, submitting that some clarification of the issue would be useful and that the new notice period should not apply to existing IFAs.
[13] Australian Business Industrial (ABI) and the Australian Industry Group (Ai Group) took a contrary decision. They submitted that existing IFAs fell into two categories:
Ø those which expressly provided that they could be unilaterally terminated by four weeks notice; and
Ø those which made no express provision for unilateral termination.
[14] In relation to those IFAs in the second category the model flexibility term operated to import a term whereby the IFA could be unilaterally terminated on giving four weeks’ notice in writing. ABI and Ai Group submitted that the new 13 weeks’ notice period should apply to existing IFAs which fall within this category. In other words, if an existing IFA expressly provided for unilateral termination on the giving of four weeks’ notice then that IFA would continue to operate according to its terms, unaffected by the variation to the model flexibility term. But if an existing IFA made no express reference to the notice period for unilateral termination then the new 13 weeks’ notice period would apply.
3. Consideration
[15] In our view the 13 weeks’ notice period for the unilateral termination of an IFA should only apply to IFAs entered into after the commencement of the variation. To apply the new provision to existing IFAs would have the affect of varying a fundamental term of those agreements - it would vary the terms of the bargain struck by the parties to the IFA.
[16] Existing IFAs were entered into within the framework of the model flexibility term. That framework provided that an IFA could be unilaterally terminated by giving four weeks’ notice in writing to the other party. We accept that some of the parties to existing IFAs would not have entered into those agreements if they had been subject to unilateral termination on the giving of 13 weeks’ notice. 2
[17] Contrary to the submissions of the ABI and Ai Group, we are not persuaded that there is any relevant distinction between existing IFAs which expressly state the notice period for unilateral termination and those which do not. In each case, it is the model term which sets the notice period. Further, even if such a distinction could be properly drawn the differential treatment of existing IFAs would give rise to unnecessary complexity. Such complexity would be inconsistent with paragraph 134(1)(g) of the modern awards objective, which relevantly provides that the modern award system be “simple, easy to understand, stable and sustainable”.
[18] A draft clause giving effect to our decision will be posted on the Transitional Review section of the Commission’s website shortly. Interested parties will be given an opportunity to comment on the draft determination.
[19] The determinations giving effect to our decision of 15 April 2013 and this decision will be settled by SDP Watson with recourse to the Full Bench if necessary.
PRESIDENT
Appearances:
M. Adler for the Housing Industry Association
E. Baxter for Australian Business Industrial
A. Borg for the Construction, Forestry, Mining and Energy Union
A. Ch’ng for the Australian Chamber of Commerce and Industry and the Masters Builders Association
D. De Martino for the Shop, Distributive and Allied Employees Association
J. Gunn for Community Connections Solutions Australia
M. Nguyen for the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union known as the Australian Manufacturing Workers’ Union (AMWU)
J. Nucifora for the Australian Municipal, Administrative, Clerical and Services Union
B. Tkalcevic for the Australian Council of Trade Unions
G. Vaccaro for the Australian Industry Group
V. Wiles for the Textile, Clothing and Footwear Union of Australia
Hearing details:
Melbourne and Sydney (video hearing)
7 November 2013.
1 [2013] FWCFB 2170 at para 174
2 Transcript of proceedings on 7 November 2013 at paragraph [611], per Mr Gunn; Queen v Commonwealth Conciliation and Arbitration Commission Ex parte Melbourne and Metropolitan Tramways Board (1965) 113 CLR 228 to 249.
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