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Queensland Government flags potential return to fragmented IR system

By Kristin Ramsey20 Dec 2012

Just as businesses thought they were getting the hang of the Fair Work Act, the Queensland Government has stirred up the pot by announcing a review of industrial relations arrangements.

A quick recap on where things are currently at and how we got here…

In March 2006, the Federal Government introduced its controversial “Work Choices” legislation and relied on its external affairs and corporations powers to bring all incorporated businesses into the Federal industrial relations system.

In Queensland, this meant that unincorporated businesses and the public service stayed in the State industrial relations system whilst corporations moved into the Federal system.

At the time, it was estimated that approximately 85% of all Australian workers were covered by the Federal system with only 15% remaining in the various State systems.

Whilst the expansion of coverage of the Federal system by the Howard Government was highly controversial at the time (and subject to a High Court challenge), in 2009 the Rudd Government made a move to not only replace WorkChoices with the Fair Work Act, but also harmonise industrial relations legislation across the country.

Consistent with the move to a truly national system, in November 2009, Queensland’s then Labor Government referred its powers in respect of industrial relations matters to the Federal Government. The result was that from 1 January 2010, all Queensland employees (excluding the public service) were covered by the Federal System. The public service remained under the Queensland system.

Similar arrangements were put in place in all other States (with the exclusion of Western Australia) with the result that the Federal System is now estimated to cover 95% of Australian workers.

The Queensland Government is now reviewing its referral of industrial relations powers

Yesterday the Queensland Government released an “Issues Paper” and announced that it was reviewing Queensland’s referral of industrial relations powers in respect of unincorporated businesses. The paper can be accessed here.

The Government states that the review stems from feedback from small businesses that they are having difficulties with the operation of the Fair Work Act and its impact on workplace flexibility and productivity.

The Government is seeking the views of stakeholders and the business community on whether it should maintain or terminate the referral of its industrial relations powers for unincorporated businesses to the Commonwealth.

If the referral is terminated, sole traders, natural partnerships, trusts (where the trustee is not a trading or financial corporation) as well as other unincorporated entities and non-trading/non-financial corporations would return to the State industrial relations system.

What does this all mean?

Depending on the outcome of the review Queensland could find itself back in the situation it was in prior to 1 January 2010 – that is, a fragmented work force with some businesses being covered by the Federal industrial relations system (Fair Work Act) and others returning to the State system (Industrial Relations Act 1999).

During the period between the WorkChoices legislation (March 2006) and the commencement of the Fair Work Act (January 2010) there was considerable confusion amongst businesses as to which system they were covered by. The referral of Queensland State power eradicated this confusion and provided certainty regarding coverage (as essentially everyone other than the public service fell into the Federal System).

As the Government concedes in the Issues Paper, if Queensland’s referral of it industrial relations powers is terminated, it is likely that there will be renewed confusion as to who is covered by which system (particularly in respect of businesses that operate through trusts, have corporate partners or arguably do not engage in trading or financial activities).

If the termination of the referral does take place, businesses will need to:

a) first assess whether they remain in the Federal system or revert to the State system; and

b) for those reverting to the State system, conduct a thorough review of their industrial relations practices and the terms and conditions of their staff to ensure that they meet State system standards.

It is likely that there will be significant (although possibly only one-off) compliance costs for businesses reverting to the State system.

What can we do?

Hynes Legal will be monitoring the situation and providing updates as further information comes to hand.

Interested parties are invited to make submissions to the Government on this issue. The deadline for submissions is 5pm on Friday 22 February 2013. Further details can be obtained in the Issues Paper.

If you have thoughts on this issue but do not wish to make your own formal submissions you may forward your feedback to Kristin Ramsey (Head of Workplace Relations, Health and Safety) at kristin.ramsey@hyneslegal.com.au. Any feedback provided will be treated in the strictest confidence and will be considered for inclusion in our own submissions to Government.