The Post-reform Workplace: New trends, challenges and opportunities - Employee Rights/ Labour Relations

The next 12 months are shaping up to be full of challenges and opportunities in many workplaces, following two significant rounds of workplace reforms in the last 14 months (the 'Secure Jobs, Better Pay' and 'Closing Loopholes' legislation). For an overview, see our publication on the latest reforms.

Meanwhile, other trends impacting workplaces include growing economic headwinds, a stabilisation in hybrid work and technological developments including artificial intelligence (AI).

Corrs' Employment & Labour team has identified what it sees as the significant issues and trends employers would be well-advised to prepare for.

1. Greater complexity and compliance burden

One of the biggest challenges that employers face in the aftermath of the federal government's workplace reforms is an increasingly complex industrial landscape and a heightened compliance burden.

Prior to the reforms, freedom of contract was given primacy. Employers were able to rely on well-drafted agreements to negate any credible suggestion that a worker was anything more than a casual employee or independent contractor. There were also no blanket restrictions on how and when fixed-term employees were engaged.

Fast forward to 2024, and changes relating to the definition of 'employee' and 'casual employee', as well as the new concept of 'employee-like worker', will now require employers to be cognisant of multiple factors that extend beyond the terms of engagement to how the contract is performed in practice. Similarly, the new restrictions on fixed-term contracts limit the extended use of these contracts unless the employer can avail itself of an exception.

The risk profile associated with the use of non-direct, non-permanent labour is enhanced by substantially increased civil penalties for employers who misjudge the application of opaque legislative tests.

To avoid the very real risk of misclassifying a casual employee or independent contractor, or breaching the restrictions on fixed-term labour, employers who wish to engage these categories of worker will need to substantially broaden existing compliance measures.

2. Tighter constraints on flexibility

With the introduction of the reforms, we expect employers to encounter some difficulty in balancing the need to retain a degree of flexibility in the composition of their workforce while minimising compliance risk. Historically, several sources of flexible labour for employers have been casual employees, fixed-term employees and labour hire.

In addition to the changes instituted by the reforms regarding casual and fixed-term employees discussed above, the introduction of the 'same job, same pay' regime will pose challenges to employers' ability to utilise labour hire for more than a short period of time in a cost-effective manner. Broad anti-avoidance provisions (which apply retrospectively) add a further layer of complexity. Consequently, businesses will have a diminished capacity to compliantly maintain productivity by 'right-sizing' their workforce through expansions and reductions in line with supply and demand.

As a result, employers will be forced to rethink existing labour models and workforce organisation strategies, and be willing to find new and innovative ways of ensuring that a degree of flexibility is embedded within the workforce without falling foul of the new reforms.

3. Greater demands at the bargaining table

Over the coming months, we expect to see employees and their bargaining representatives make greater claims at the bargaining table.

The government's industrial relations changes have reduced employer leverage in bargaining. Important alterations to the intractable bargaining regime now mean that employees' existing terms and conditions cannot be downgraded through the arbitration process without their agreement.

The effect of this 'no less favourable' test is to eliminate any downside risk for employees and unions who insist on their claims. Bargaining dynamics are further complicated by the fact that employers will be bound to any terms agreed at the time an intractable bargaining application is made, prejudicing their position at arbitration and reducing the incentive to make bargaining concessions due to the risk of being blindsided by an application.

Additionally, the ability for employers to terminate existing agreements has been effectively removed, reducing the incentive for employees to proactively reach agreement as the preservation of their existing terms and conditions (pending a new deal) is almost guaranteed. Despite these challenging dynamics, unions have a range of mechanisms to bring employers into a bargaining process, including multi-employer bargaining and the ability to unilaterally trigger negotiations for a replacement agreement.

The combined effect of these changes will enable unions and employees to make enhanced claims and adopt a stubborn approach to negotiations, knowing that they are unlikely to be any worse if agreement cannot be reached. This is likely to translate to increased labour costs.

4. An emboldened union movement

According to the Australian Bureau of Statistics (ABS), union membership has generally declined since the early 1990s and as of August 2022, sat at only 12.5% of the workforce. Nevertheless, a raft of changes are designed to revitalise and embolden the union movement, by giving unions a central role in the workplace relations system. Unions have also recently enjoyed significant financial gains (including windfalls from worker entitlement funds), meaning that they have the resources to take full advantage of their new central role.

One of the most important legislative changes in this regard is the inclusion of union delegates' rights in the Fair Work Act 2009 (Cth), giving delegates entitlements to paid leave to attend union delegate training, reasonable communication with employees (including non-union members), and reasonable access to workplace facilities to represent worker interests. Union officials also enjoy expanded entry rights, and in some cases are no longer required to comply with standard entry requirements (e.g. to produce an entry permit or provide notice of entry).

As these changes take effect over the course of 2024, we are likely to see increased union presence in traditionally non-unionised industries, and more workplace disputation and industrial conflict.

5. Businesses will spend more time in the FWC

In 2024, employers will be subject to more litigation before the Fair Work Commission (FWC), which is now vested with an expanded jurisdiction ranging from day-to-day 'business as usual' issues to powers to interfere with big picture strategic matters.

At the granular workplace level, reforms furnish the FWC with the jurisdiction to determine disputes regarding flexible working arrangements. Similarly, as a result of the 'right to disconnect' reforms introduced by the Closing Loopholes legislation, the FWC will be able to make 'stop orders' restricting disciplinary action in response to an employee's refusal of contact. Meanwhile, the Commission's new unfair contracts jurisdiction means that its powers have expanded beyond the employment sphere to independent contracting relationships.

These reforms shift the emphasis away from dispute resolution at the workplace level and provide new avenues for the FWC to influence micro-level workplace issues, with the potential for significant knock-on effects on everyday working arrangements.

On a broader scale, changes brought about by the reforms give the FWC the power to exercise influence over matters within senior managerial remit. Strategic decisions such as the use of external labour (or potentially even intra-group arrangements) are vulnerable to FWC intervention through regulated labour hire arrangement orders. The Commission will also play an increased role in resolving industrial disputes by overseeing compulsory post-PABO conferences and through its expansive intractable bargaining powers to set enterprise conditions. The FWC's other significant responsibilities include:

setting minimum standards for employee-like gig workers and road transport contractors;
establishing guidelines on 'same job, same pay' and the right to disconnect;
authorising multi-enterprise bargaining processes; and
creating new modern award terms (on matters including delegates' rights and the right to disconnect) and model enterprise agreement terms (consultation, flexibility and dispute resolution).

Employers may, in the light of above changes, be required to allocate additional resources towards participating in FWC processes and/or seek to devise new dispute resolution procedures to help avoid costly litigation.

6. New challenges and opportunities as remote working debate enters new phase

This year, employers should expect to see important contributions from the Commission on the topic of remote working.

Consistent with experiences internationally, the aftermath of the COVID-19 pandemic in Australia has been characterised by tension between management calls for a return to the office and staff pushback. In 2023 there was some stabilisation in hybrid working arrangements: according to ABS data, approximately 37% of workers are working regularly from home (as of August 2023), down from the height of the pandemic (40%) but well above pre-pandemic levels (32%). However, as businesses have grown accustomed to remote working practices and enforceable minimum attendance requirements, the FWC's new jurisdiction to arbitrate flexible working arrangement disputes — in conjunction with the Commission's modern award review — means that the debate is set to enter a new phase.

Undoubtedly, the enhanced scope for the tribunal's intervention poses a threat to managerial prerogatives and the setting of expectations around hybrid work. The FWC's consideration of 'the right to working from home' as part of its modern award review (on the topic of work and care) likewise presents a potential challenge, as unions seek to standardise WFH rights. However, the tribunal's new powers may also result in greater clarity on the policies employers can introduce and enforce. Indeed, several decisions handed down in the second half of last year provided much-needed guidance and reassurance for business on the parameters of employees' remote working rights.¹

In addition, the WFH landscape may be further complicated by the government's consideration of 'enhanced privacy protections' for workers, following the Attorney-General's recommendation to introduce such protections in its review of the Privacy Act. It remains to be seen whether these protections ultimately result in restrictions on employers' enforcement of their remote working policies, including through the monitoring of staff working remotely and collection of location data.

Business should stay tuned, and be prepared to modify expectations of staff and update policies for compliance.

7. Continued momentum for the four-day working week?

After a year in which calls for the four-day work week gathered momentum, business should expect more of the same in 2024.

The concept of a four-day work week made inroads into a number of Australian workplaces in 2023, with several businesses offering it to staff (including in enterprise bargaining), while more unions were prepared to include it in their claims. These developments came as a growing number of studies and trials took place, while a Labor-Greens Senate inquiry urged the government to request a FWC review of the 38-hour working week and undertake a four-day week trial based on the '100:80:100 model' (100% of the pay, 80% of the hours, 100% productivity).

As the trend shows few signs of slowing, employers should cautiously consider what a four-day work week could look like and whether it would be desirable or feasible. While some see it as an opportunity to attract talent and reduce inefficiency, for others the benefits may be outweighed by financial and operational impacts. The full range of potential consequences — be it longer working days, a diminution in employee benefits or more limited opportunities for meetings and collaboration — should become clearer as the year progresses and uptake increases.

8. Challenges associated with AI revolution

With more and more businesses looking to take advantage of AI to eliminate inefficiencies and revolutionise the workplace, we expect industrial challenges to arise as unions raise concerns about the impact of automation on workers.

Last year the Australian Labor Party policy platform was amended to endorse changes to workplace laws including restrictions on the use of generative AI. This included a commitment for its AI policies to have regard to 'the importance of meaningful, secure jobs for Australian workers' and support for 'retraining and skills development for sectors impacted by generative AI developments'. Other policy initiatives endorsed included enhanced obligations on employers to proactively support their workers to identify and access reskilling opportunities, in order to avoid unnecessary redundancies due to automation.

Given the rapid pace of the development of AI, the impacts of the technology will be ongoing, and will continue to influence government policy. While employers should embrace the opportunities presented by such technological advancements, they will need to actively manage expectations, as well as the various industrial risks associated with implementation.

9. Regulatory spotlight shines on Respect@Work positive duty

With the Australian Human Rights Commission's (AHRC) enforcement powers under the Respect@Work legislation taking effect in December 2023, we expect to see plenty of enforcement activity on the positive duty front in 2024.

The AHRC's new functions and powers include:

inquiring into compliance with the positive duty under section 47C of the federal Sex Discrimination Act (to take reasonable and proportionate measures to eliminate, as far as possible, sex discrimination and harassment);
issuing enforceable compliance notices if it finds a person is not complying;
requiring persons to give information or produce documents; and
accepting and enforcing undertakings relating to compliance with the positive duty.

The AHRC is expected to take a robust approach to enforcement and use the full array of its powers in appropriate circumstances. As a result, organisational responses to sexual harassment and sex discrimination are set to face a stern test. Prudent employers will remain abreast of developments and update compliance measures as regulatory expectations and trends emerge.

10. Creative solutions take on new importance in war for talent

Despite the nation's unemployment rate recently climbing to a two-year high, labour shortages remain a pressing issue across a broad spectrum of industries. Meanwhile, inflationary pressures and cost of living challenges continue to dominate headlines and contribute to a growing divergence between staff expectations and financial sustainability. Further, competition for the best and brightest may be intensified by the spectre of regulation of non-compete clauses, which the government will consider with a view to facilitating the free movement of workers between enterprises.

In this environment, finding creative, cost-efficient and effective solutions to attract and retain staff takes on greater importance. While offsite events, staff discounts and other benefits may continue to be valued and appreciated, we expect factors such as a sense of autonomy and connection to colleagues, career progression, personal development and health and wellbeing to continue to be key drivers of staff satisfaction and retention.

As such, although employers should not lose sight of core issues such as pay, working hours and hybrid work, those that harness a holistic approach are likely to enjoy an edge in the war for talent this year.

11. Growth of the industrial class action

In recent years, employees have made increasing use of class actions, traditionally the domain of shareholders and consumers.

Although registered unions have historically enjoyed standing to bring proceedings on behalf of members (currently provided by Part 4-1 of the Fair Work Act), such actions seldom took the form of representative proceedings.

That trend is now steadily changing, with a number of recent high-profile class actions brought on behalf of workers. These include proceedings brought against several large companies concerning entitlements such as award minimum rates and rest breaks, some of which resulted in substantial settlements.

Of particular note is the Federal Court's decision last year to reject a stay of a class action brought by fast food workers against their employer. In rejecting the union's application to stay the class action (which overlapped with its own competing Fair Work Act proceedings on behalf of a similar group of workers), the Court observed that the group proceedings held several advantages over the union proceedings. These included the Court's supervisory powers over class actions (including in approving settlement terms), the finality achievable in the class action, and the ability to minimise costs and maximise efficiency.

With growing interest from plaintiff law firms and greater scope for compliance breaches in light of complex workplace reforms, we expect to see more class actions lodged against employers over the coming year. While the retail and fast-food industries have to date been the primary area of focus for litigants, risks are present in other sectors including resources, financial services and the public sector.

12. HR and IR spotlight on directors and officers

Against a backdrop of growing complexity and a more active regulatory paradigm, the risk management burdens on directors and officers in the workplace space are greater than ever.

Late last year, Fair Work Ombudsman Anna Booth called on boards to elevate the importance of HR and IR compliance:

"...compliance with workplace laws also needs to be there and needs to be elevated from the people and 'noms' committee to the audit and risk committee and then ultimately to the board."

The Ombudsman's comments reflect a broader trend in which the expectations of company officers to promote compliance and effective governance have been gradually heightened. A failure to meet these raised expectations exposes directors to various avenues of personal liability. Accessorial liability under the Fair Work Act remains a key risk, with courts in 2023 reinforcing the potential for directors to face personal liability even in circumstances where they are not aware that they are overseeing a breach of workplace laws.²

Additionally, another (less-tested) personal liability exposure for officers is the statutory duty to exercise reasonable care and diligence, where a breach may arise indirectly on a 'stepping stone' basis. A common feature of regulatory proceedings in financial services, 'stepping stone' claims seek to establish a breach of the officer's duty of care as a result of some separate breach by the company of its own obligations. Notably, such claims may arise not only in the context of breaches of corporations legislation, but of any law that the company is subject to (including the Fair Work Act, anti-discrimination statutes and WHS legislation).

While we are yet to see these kinds of proceedings emerge in the workplace field, company officers who fail to properly oversee a corporation's affairs and address 'red flags' within their area of responsibility run the risk of committing a breach of duty.

Given these exposures and the increasing risk profile in the workplace context, boards should ensure that appropriate governance arrangements are in place to properly manage workplace risks.

Footnotes

¹ See, e.g. Quirke v BSR Australia Ltd [2023] FWCFB 209; Gregory v Maxxia Pty Ltd [2023] FWC 2768; Cheikho v Insurance Australia Group Services Limited [2023] FWC 1792; Major v Strata Management Group Pty Ltd [2023] FWC 2276; Homes v Australian Carers Pty Ltd (No 2) [2023] FedCFamC2G 714.

² See e.g. Fair Work Ombudsman v Chatime Australia Pty Ltd (No 2) [2023] FedCFamC2G 712.

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