During 2013 a Full Bench of the Fair Work Commission took on the task of reviewing the Award Flexibility provisions of all Modern Awards. On 15th April they determined to vary the model flexibility clause appearing in all Modern Awards after consultation with National Employer and Employee Organisations and other interested parties.
Further consultation and hearings culminated in the issuing of orders on 3rd December, varying all Modern Awards, with consolidated versions of the documents being available from 23rd January 2014.
The Commission was responding to:
- The recommendations of a Board of Review set-up by the previous Federal Government in 2012, charged with reviewing the Entire Fair Work Act after its first three years of operation;
- Evidence that a significant proportion of agreements made under the model flexibility term, (‘Individual Flexibility Agreements’ (IFAs) – previously referred to as EFAs), were entered into before the individual employee has commenced employment, contrary to the intent of the Act;
- Contentions from some employer parties that the existing notice period acted as a disincentive for employers to enter into an IFA.
Reasons & Impact:
The original model flexibility provision, in part, read:
“The agreement may be terminated:
(a) By the employer or the individual 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.”
In summary the Full Bench:
- Took heed of its predecessor, (in 2008), seeing the challenge as the need to balance
- Unforeseen developments that render an IFA unacceptable to one of the parties and substantially unfair; and
- Providing some protection for employees who through ignorance or for some other reason make an IFA which materially disadvantages them.
- Accepted 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.
- Noted that at the 15thApril proceedings no party proposed that the longer notice periods should apply to existing IFAs.
- On and from 4th December 2013:
- Any IFA entered into will have a notice period of unilateral termination of thirteen weeks by either party;
- IFAs entered into prior to that date will still operate as if the requirement of written notice is four weeks, (regardless of the fact that the document may be silent on that point).
- All Modern Awards have been amended to read “An Agreement under this clause can only be entered into after the individual employee has commenced employment with the employer.”
HMT Consulting Recommends
Employers who have entered into IFAs (EFAs) previously, should acquaint the individuals party to them of these recent changes. Further, all Managers directly involved in the process of entering into IFAs should be fully briefed, asap.