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Fair Work (Transitional Provisions and Consequential Amendments) Act 2009
Sch. 5, Item 6 - Modern awards review
Modern Awards Review 2012—Award Flexibility
(AM2012/8, AM2012/51, AM2012/172, AM2012/177, AM2012/178, AM2012/179,
AM2012/180, AM2012/199, AM2012/204, AM2012/210, AM2012/228, AM2012/240,
AM2012/245, AM2012/250, AM2012/287)
JUSTICE ROSS, PRESIDENT
SENIOR DEPUTY PRESIDENT WATSON
COMMISSIONER GREGORY 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:
insert the words ‘at the time the agreement is made’ into clause 7.3(b)
delete ‘four weeks’ from clause 7.8(a) and insert ‘13 weeks’
insert a note at the end of clause 7.8:
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
[2013] FWCFB 8859
DECISION
E AUSTRALIA FairWork Commission
[2013] FWCFB 8859
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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:
employer concerns that provision for termination on notice will lead to an unsatisfactory
level of uncertainty for employers; and
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providing some protection for employees who make an agreement which materially
disadvantages them.
....
[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.”
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[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:
those which expressly provided that they could be unilaterally terminated by four weeks
notice; and
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
1 [2013] FWCFB 2170 at para 174
http://www.ccsa.org.au/
[2013] FWCFB 8859
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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
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.
[2013] FWCFB 8859
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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.
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Price code C, PR544408
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