The Fair Work Commission has today adopted the Fair Work Act Review Panel's recommendation to extend the notice period for terminating IFAs, but has refused to expand their subject matter, in the latest modern award review ruling.
Justice Iain Ross, Senior Deputy President Ian Watson and Commissioner David Gregory said it was appropriate to give effect to the review panel's proposal to extend the notice period from 28 days to 90 days (see Related Article), but decided to express the period as 13 weeks as it was "simpler and easier to understand and administer".
The full bench indicated the "significant change in circumstances" hurdle for considering award amendments had been met in the case of the IFA model clause.
It said the introduction of s145 of the Fair Work Act after a full bench decided on the content of the model award clause in 2008 (see Related Article) constituted the "significant change in circumstances" within the meaning of the June 2012 full bench decision on the transitional review (see Related Article).
Section 145 provides a 28-day notice of termination period if a purported IFA does not meet the s144 requirements, which include that it meets the BOOT and was genuinely agreed.
The bench said the introduction of s145 was significant because it provided a legislative safeguard which addressed the central rationale for the 2008 full bench decision to include the right to terminate an IFA with 28 days' notice.
It accepted that s145 would not apply to all situations said to justify the shorter notice period.
"For example, it would not give rise to a right of termination if circumstances changed after the IFA was made such that it no longer operated to the mutual benefit of both parties."
But the bench said this consideration needed to be balanced against "the greater certainty afforded to both parties by a longer notice period".
"The fact that a review of the model flexibility clause was specifically contemplated by the AIRC at the time it was determined is also an important factor", the bench said.
It said the model clause would be amended to insert a note to ensure parties to IFAs were aware of s145(4).
The full bench was dealing with 15 applications to vary the standard award flexibility provision in 10 modern awards.
Cinema operators Greater Union and Birch, Carroll & Coyle asked for a 16 week notice period, with general support from other employer organisations and opposition from the ACTU and unions.
But the bench said "no particular rationale was advanced in support" of 16 weeks, and opted for the review panel's recommended period instead.
Bench refuses to expand IFA content
The full bench rejected employer applications to allow IFAs to vary the application of all award clauses, not just the five provisions specified in the model clause.
However, it accepted employer arguments that greater clarity was required on the meaning of one of those provisions – "arrangements for when work is performed".
While concluding that the term did not – and should not – include minimum engagement periods, it said the task remained "to provide greater clarity as to the award terms that do fall within that expression", but said this should be done on an award by award basis. The bench invited interested parties to make separate applications.
It said any variation to minimum engagement periods "should only be by application to vary the relevant modern award or by enterprise agreement".
"This will ensure that the variation is subject to appropriate scrutiny. It is not appropriate to permit such variations by IFAs, which are effectively self-executing. In our view, the inclusion of such terms within the scope of the model flexibility term would not be consistent with the modern awards objective," the bench concluded.
The commission also rejected VECCI's application to extend IFAs to cover a "preferred hours option". The bench took this to be a reference to employees voluntarily working varied or additional hours and not receiving the penalty or overtime rates that those hours would ordinarily attract.
It said while such arrangements could be agreed under the existing model flexibility clause, there was "a real issue as to whether such arrangements would result in the individual employee being better off overall in relation to their terms and conditions of employment".
The bench said on the basis of current authorities including the Bupa full bench decision (see Related Article), a purported IFA which contained a preferred hours arrangement would not, of itself, result in the employee being better off overall.
"The IFA would need to contain a corresponding benefit that outweighs the detriment of the preferred hours arrangement in order to meet the requirements of the BOOT," the bench said.
BOOT a matter for another case
Responding to more general arguments about the application of the BOOT to non-monetary benefits, the full bench said these observations were "best made in the context of a particular case, rather than in the abstract".
"Any reconsideration of the Bupa decision should be in an appropriate context, such as an application to approve an enterprise agreement, and any party seeking such a reconsideration should make application to have the matter referred to a Full Bench, pursuant to s.615A of the FW Act," the bench said.
In a small win for employers, however, the FWC said the model term would be amended to make it clear that the BOOT is assessed only at the time the IFA is made, and not later.
But it also said evidence from FWC's s653 report tabled in Parliament on February 13 indicated that IFAs were being used as a condition of commencing or continuing employment, contrary to clause 7.2 of the model flexibility term that the employer and employee must have genuinely agreed to make the IFA, without coercion or duress.
To deal with this issue, the bench said it would add words to clause 7.2 to specify that an IFA could only be entered into after the employee had commenced employment.
It rejected changes proposed by the Accommodation Association of Australia for the FWO or the FWC to approve IFAs and by Hair and Beauty Australia for employers to conduct annual reviews of IFAs to ensure they continued to meet the BOOT.
The Housing Industry Association's bid for IFAs to be able to cover frequency of wage payments was also thrown out, with the bench stating that this was "best dealt with on an award by award basis in the context of either the Transitional Review or the 4 yearly review of modern awards".
The bench said determinations giving effect to its decision would be settled by Senior Deputy President Watson, after a decision is made on the applications dealing with annual leave aspects of the model award flexibility term (see Related Article).
Modern Awards Review 2012—Award Flexibility [2013] FWCFB 2170 (15 April 2013)