Fairness test

The "fairness test" was a concept of the Australian Act of Parliament, the Workplace Relations Amendment (A Stronger Safety Net) Act 2007.

It was given Royal Assent on 28 June 2007 and predominantly came into operation on 1 July 2007. The Act saw the renaming of the then Office of Workplace Services, which became the Workplace Ombudsman, and the creation of the Workplace Authority, combining the former Office of the Employment Advocate and parts of the then Department of Employment and Workplace Relations, now the Department of Education, Employment and Workplace Relations.

The most significant change of the Act was to introduce the Fairness Test, which operated retrospectively from 7 May 2007. The Fairness Test was introduced by the then Howard government as a “fine-tuning” of WorkChoices, but received criticism from both employer associations (due to the complexity and additional burden to businesses)^[1] and trade unions including the Transport Workers Union for not providing adequate protections to employees.^[2]

The Fairness Test applied to all Collective Agreements (CAs) and Australian Workplace Agreements (AWAs) lodged with the Workplace Authority between 7 May 2007 and 10 April 2008 (signed on or before 27 March 2008), where employees earned under $75,000 base annual salary (for AWAs only) and work in industries or occupations usually covered by Awards and where the CA or AWA removes or modifies protected Award conditions. Protected Award conditions include penalty rates and loadings (including overtime penalties, weekend and public holiday rates, shift loadings and annual leave loading), monetary allowances, public holidays, rest breaks and incentive based payments and bonuses.^[3]

Where Protected Award conditions have been varied or removed, agreements must provide ‘adequate compensation’ to employees. The Workplace Authority must take into consideration the particular circumstances of the employee/s, such as their pattern of work. Adequate compensation can include monetary benefits (such as a higher base rate of pay), or non-monetary benefits (such as child care or a parking space) which is of ‘significant value’ to the employee.^[4]

The Fairness Test applied where a business was, prior to 27 March 2006, bound to a State Award, which became a Notional Agreement Preserving a State Award (NAPSA), a Federal Award, or where the work done by the employee is in an industry or occupation which would have been covered by an Award or NAPSA prior to the 27 March 2006. Where the business is not bound to a particular Award or NAPSA, the Workplace Authority may designate a Federal Award for the purposes of the fairness test.

Where an agreement does not pass the Fairness Test, the Workplace Authority will notify the employer and allow them the opportunity to vary the agreement in order to pass. Where the agreement is not varied or the variation does not pass the Fairness Test, the agreement will not apply at all, and the employee will derive their minimum terms and conditions at work from the industrial instrument (agreement, Award or NAPSA) that is otherwise capable of applying to the employee. Where an employee was previously not covered by any industrial instrument (an ‘Award-free’ employee) but had an Award designated for the purpose of the Fairness Test, the protected Award conditions will continue to apply to the employee.

It is also important to note that the Fairness Test does not check agreements for Prohibited Content or compliance with the Australian Fair Pay and Conditions Standard.

The End of the Fairness Test

The Workplace Relations Amendment (Transition to Forward with Fairness) Act 2008 (see Workchoices) (the Forward with Fairness Act) was passed by Parliament on 19 March 2008 and given Royal Assent on 27 March 2008, coming into operation on 28 March 2008.^[5]

The Forward with Fairness Act removed the Fairness Test for Agreements made on or after 28 March 2008 (for AWA’s that were signed on or before 27 March 2008, the 14 day lodgement period remains), and instead introduced the new No Disadvantages Test.

Whilst new agreements will no longer be subject to the Fairness Test, agreements lodged prior to the operation of the Forward with Fairness Act continue to be assessed for the Fairness Test by the Workplace Authority.

References

1. WorkChoices Agreements Now Subject to New Fairness Test
2. Employers are easily able to evade new ‘Fairness Test’
3. Protected conditions and awards
4. How is the Fairness Test conducted?
5. , Workplace Relations Amendment (Transition to Forward with Fairness) Act 2008