Impact of Recent Changes to Fair Work Act on Small Business Employers

In December 2022, the Federal Government introduced the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth). The amendment constitutes the most significant changes to employment legislation since the introduction of the Fair Work Act in 2009. Sweeping changes have been made which impact both employers and employees, and it is important that employers are aware of their rights and obligations in light of the new amendments.

 Of particular interest to small business owners will be changes relating to increased protections for job security and enhanced gender equality measures. We summarise some key changes below under these headings. It should be noted that changes have also been made relating to enterprise agreements and enterprise bargaining which we have not addressed in this article as these issues tend to be less relevant to small businesses.

Increased protections for job security

The first set of changes relevant to both employers and employees relates to increased protections for employees in regard to workplace rights, job security and negotiations regarding work conditions:

1.  Removal of pay secrecy clauses

from December 2022, all clauses within current and existing employment contracts prohibiting the discussion of pay rates or employment conditions (such as hours of work) have been nullified, and employers may be penalised for introducing the clauses into new contracts.  These changes mean that the ability to ask about another employee’s remuneration or conditions, and the ability for an employee to either disclose or not disclose their own has been enshrined as a workplace right. An employer cannot take adverse action against an employee for exercising these rights and if they do, risk being subject to a legal claim under the Fair Work Act.

2.  Job ads

As of 7 January 2023, employers are prohibited from putting out advertisements for jobs which include pay rates which breach the Fair Work Act or any other fair work instrument (i.e. an award or enterprise agreement). In essence, this prevents employers for advertising jobs which would pay under the minimum entitlements required for the role. Employers should note that this legislation now operates retrospectively, so that any ads published prior to the legislation which contain prohibited terms are now in breach of the Fair Work Act. Employers can face fines for non-compliance.

3.  Increased rights for flexible working arrangements

From 6 June 2023, the ability to request flexible working arrangements will be expanded to include employees (or their immediate family) experiencing domestic and family violence, and employees who are pregnant. The new legislation will impose further obligations on employers before they reject a request from an eligible employee and employers will now be required to take additional steps including discussing the request with the employee and making a ‘genuine effort’ to accommodate the employee.

4.  Limitations on fixed term agreements

From 6 December 2023, a number of limitations will be placed on fixed term contracts which can be issued by employers. These limitations include:

  • No contracts to be provided which have a term of two or more years (including any extensions which may have been offered);
  • No contract can be extended more than once; and
  • No “new” contracts can be issued to the same employee with an identical or substantially similar role to previous contracts.

The goals of these restrictions appear to be to afford greater security for employees who have been employed on a fixed term basis for a number of years, and to push employers to make roles permanent if they are essential to a business. As such, employers are prohibited from attempting to avoid the above restrictions.

Enhanced gender equality measures

The next issue which the legislation seeks to address is gender equality in the workplace. According to the Workplace Gender Equity Agency, in 2022 the gender pay gap was 22.8%, with women earning an average of $26,596 less than men per year. The Government considers that pay secrecy clauses are a large reason for this difference, as they have been used as a shield to conceal gender pay discrepancies. However, the legislation seeks to address other underlying issues for women in the workplace with a goal to promote gender equality.

The Commission is now able to issue equal remuneration orders (EROs) on its own initiative as well as on application. The purpose of these powers is to assist the Commission to issue pay increases in traditionally low-paid, female dominated industries. The ERO powers do not need a male comparator or similar work comparison, and allows the Commission to consider the historical undervaluation of the work when making a decision.

Some changes in this regard that small business employers should be aware of include:

  • Expanded anti-discrimination protections: From 7 December 2022, further protections are offered to employees in regard to breastfeeding, gender identity and intersex status. This means that employers are prohibited from taking adverse action against employees on this basis. Workers who suffer discrimination on these bases can make complaints to the Commission, which can start court proceedings on an employee’s behalf.
  • Unpaid parental leave: From 6 June 2023, an employer must treat a request for an extension of unpaid parental leave in the same manner as a request for an individual flexibility arrangement. This means that before an employer can refuse a request for an extension, they must take further steps to try to negotiate a suitable arrangement.

Small business employers should be aware of these extensive changes to employment laws in Australia and be proactive in addressing these changes in existing employment contracts, advertisements and negotiations. Appropriate advice should be sought by any small business owner that is unsure about how these changes may affect their business.

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