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What does the Fair Work Bill mean for small business?

The Fair Work Bill has been passed by the House of Representatives and is now subject to a Senate inquiry in the first half of 2009. Assuming it passes through this stage relatively unchanged, most of the major changes will be implemented on 1 July 2009, with the remainder fully operational January 2010.

So how does The Fair Work Bill differ from Work Choices? In particular, how does it affect the smaller business?

New definition of small business

The first issue to consider is what constitutes a ‘small business employer’, according to Mary-Jane Ierodiaconou, partner at Justitia Lawyers and Consultants. Previously, a ‘small business employer’ was defined as a company with 100 employees or fewer. Under the new bill, this has changed to fewer than 15 employees, and that includes part-time and long-term regular casual staff and employees who are employed by related companies (associated entities). Under the new legislation, the Government defines a small business solely on the number of employees, regardless of the revenue the company earns.

Unfair dismissal

The new legislation proposes some major changes to unfair dismissal laws, always an interesting and contentious topic. Under the Howard Government’s Work Choices legislation, small businesses were exempt from unfair dismissal claims, but employees can make a claim under the new laws, under some circumstances.

Employees who have worked for a small company (with fewer than 15 employees) for more than 12 months can make an unfair dismissal claim. The same goes for people who have worked for a larger company for more than six months. However, workers who earn more than $100,000 a year won’t be able to make unfair dismissal claims unless they are covered by an industrial award or enterprise agreement.

Confused? Don’t be; the Government has published a Small Business Fair Dismissal Code of Practice. As long as small business owners comply with the code when they dismiss a staff member, the dismissal will be deemed to be fair. The Code is at  – see fact sheet number nine.

If you need to make a position redundant for a genuine reason, the employee can’t make a successful unfair dismissal claim.

“You should have a paper trail with regards to retrenching that explains the business case, including the organisational charts before and afterwards,” says Ierodiaconou.

Union power

Employer groups have warned us the new legislation will give more power to unions and collective bargaining.

“Collective bargaining generally refers to the negotiation of a collective industrial agreement between the employer and employees and often the union on behalf of the employees,” explains Ierodiaconou. “These agreements usually cover a particular enterprise and contain detailed terms and conditions governing employment, such as redundancy pay, notice of termination, pay rates, classification scales, and some types of leave, such as family flexibility leave.

“The Fair Work Bill requires employers and employees to bargain in good faith. Once the employer and employees agree to the terms of the enterprise agreement, and it is approved by the Australian Industrial Relations Commission (which will be renamed Fair Work Australia), then the agreement will be in effect until its expiry date, which will be a maximum of four years under the Fair Work Bill. The agreement continues to operate past its expiry date unless it is terminated or replaced by another agreement.

“However, it is unlawful for any industrial action to occur before the agreement expires.”

It is more common for larger businesses to have enterprise agreements than it is for smaller businesses, which usually operate on individual contracts.

“The fundamental framework regarding unions’ right to enter workplaces under the Work Choices laws has not substantially changed in the new legislation,” says Ierodiaconou. “There are some changes that expand the type of workplaces that unions can enter. However, unions can’t just enter a workplace at any time, there are rules that they need to comply with.”

Awards and parental leave

The new legislation is also set to shake up the Award system of workplace entitlements.

“There will continue to be awards, which will be called Modern Awards,” says Ierodiaconou. “At the moment there are thousands of awards and we anticipate the number will be greatly reduced.”

One change that is likely to have a major impact on small business and will doubtless cause a stir is parental leave. Under current laws, one parent is entitled to take up to 12 months of unpaid leave, provided he or she has worked for the employer for at least a year.

“Under the Fair Work Bill, both parents will be entitled to take a total of 12 months unpaid leave between them,” says Ierodiaconou.

“This leave must be taken by the parents consecutively, except for the three weeks after the birth or adoption, when both parents may take leave. Alternatively, one parent can request to extend their leave by a further 12 months, taking a total of two years unpaid leave.

“The employer may only refuse the request of an eligible employee on reasonable business grounds. The employer must otherwise agree to the employee’s request. This obligation applies to all national system employers, including small businesses, and to same-sex couples.”

Overall, it looks like we’re in for some fundamental changes, which will no doubt have a significant bearing on small businesses. We will see as they unravel in the year to come.

The Fair Work Bill timeline

Early 2009 Senate inquiry
1 July 2009 Key elements implemented
Bargaining framework
Unfair dismissal and arbitration
January 2010 New employment standards come into operation
New institutional structures established: Fair Work Australia
Modern Awards reviewed every four years
Current five minimum employment standards will be extended to 10. New standards will cover:
  • Maximum weekly hours of work
  • Requests for flexible work arrangements
  • Parental leave
  • Annual leave
  • Personal or carers leave and compassionate leave
  • Community service leave
  • Long service leave
  • Public holidays
  • Termination and redundancy pay
  • The right to receive the Fair Work Information Statement (to be published by Fair Work Australia)
Minimum wages and casual leave loadings reviewed every year

This Article originally  appeared in NETT Magazine January 2009