Major workplace change
December 7, 2010
Consult with your staff or there may be a price
In a recent Federal Court decision, a large employer was found to have breached their applicable workplace instruments on numerous occasions, by failing to follow the consultation provisions when implementing major workplace change. It was ordered that the employer pay the maximum penalty of $33,000 for each individual breach, totalling penalties of close to $700,000.
This decision is a timely reminder of why it is important to understand what is required of you when undertaking major change and also to seriously consider what obligations you want to be bound by when bargaining for a new Enterprise Agreement.
The Fair Work Act 2009 (the Act) makes the inclusion of consultation provisions for major change, mandatory in Enterprise Agreements. The Act requires that the consultation provisions contain two key elements:-
- A requirement that an employer consult with their employees about major workplace changes that are likely to have a significant effect on their employment; and
- A requirement that employees be allowed representation for the purposes of consultation.
Where an Enterprise Agreement does not contain the required consultation provision, the model consultation term (included in the Fair Work Regulations 2009) is considered to be included in the Agreement. This model term provides some guidance in relation to what may be considered as major change and further provides guidance on when such major change may be considered to have a significant effect on employees. Specifically, the model clause identifies that significant effect may include:
- termination of the employment of employees; or
- major change to the composition, operation or size of the employer's workforce or to the skills required of employees; or
- the elimination or diminution of job opportunities (including opportunities for promotion or tenure); or
- the alteration of hours of work; or
- the need to retrain employees; or
- the need to relocate employees to another workplace; or
- the restructuring of jobs.
Although the consultation provisions contained within your Agreement may differ from those contained within the model clause, any such clause must contain as an absolute minimum the obligation to consult and the right to representation.
The most important questions for you to consider in drafting a consultation on major change clause are:
When do you need to consult?
You must consult with employees about a major workplace change that is likely to have significant effect on those employees. We would recommend that you be very clear when consultation is to occur. In our experience most employers seek to make it clear that consultation is to occur after a definite decision has been made to introduce change. A poorly drafted clause may result in consultation obligations arising when you merely contemplate a change occurring.
Who do you need to consult?
Your consultation provisions must allow for the representation of employees for the purposes of consultation. It is of critical importance that should an employee appoint a representative for the purposes of consultation, you recognise and include that representative in the consultation process.
How should you consult with staff?
The method you chose for consultation may vary from time to time depending on the nature of the change and the number of employees involved. However, is important to remember that the obligation to consult with employees is not met merely by consulting with nominated representatives of some employees. It is unlikely that all of your employees will nominate a representative in the consultation process and therefore you, as the employer, need to ensure that you are inclusive in your consultation processes.
The risks of failing to comply with your consultation obligations can, as the Federal Court has just pointed out, be expensive. But the direct financial penalties are only one cost. Failure to properly consult with employees about major change is likely to result in disputation and disruption and may leave employees with an ongoing distrust of you as an employer.
Therefore, when negotiating your next Agreement, take the time to consider what you want as your consultation obligations so that if you need to use them you won't feel burdened or constrained and employees won't have unreasonable expectations that you cannot meet.
If you would like further information regarding consultation clauses and when they apply, or if you would like such a clause drafted or reviewed for your upcoming Enterprise Agreement, please contact your Livingstones Consultant.
