Local Governments to move to State IR System from 1 January 2023

3 minute read 04.11.2022 Kylie Groves and Kathy Reid

The State Minister for Industrial Relations has announced that WA local governments who have been declared not to be National System Employers will move to the State IR system from 1 January 2023.

Key takeouts

The IR Act has already been amended to include specific provisions which will apply to facilitate the move of WA local governments from the Federal to the State IR system. The main features of these provisions are set out below.

Disappointingly, these provisions are not as comprehensive as we had hoped and at this stage it seems unlikely any significant further legislation (including regulations) will be forthcoming.

Local governments therefore have a relatively short period in which to now grapple with the changes that need to be made. The main implications of the changes are set out below.

This significant move means from this date the Fair Work Act 2009 (FW Act) will no longer apply to WA local governments, the Industrial Relations Act 1979 (IR Act) and the Minimum Conditions of Employment Act 1993 (MCE Act) will apply to WA local governments and certain pre-existing federal instruments will move with WA local governments to the State IR System and become new State instruments.

This will require WA local governments to carefully consider their current employment arrangements and systems and identify what changes will need to be made to ensure it is ready for the move.

The Industrial Relations Legislation Amendment Act 2021 (WA) (IRLA Act) was proclaimed on 11 February 2022 to provide a mechanism for Local Governments in Western Australia to be declared not to be national system employers in accordance with s 14(2)(b) of the Fair Work Act 2009 (Cth) (FW Act). The IRLA Act amended the Industrial Relations Act 1979 (WA) (IR Act) including by inserting Part IIAA – Employers declared not to be national system employers.

Section 80A(2) of the IR Act provides that the regulations may declare an employer not to be a national system employer for the purposes of the FW Act.

The Industrial Relations (General) Regulations 1997 (WA) (Regulations) (see regulation 7) have been amended to provide for the purposes of section 80A(2) of the IR Act all WA local governments (other than the Shire of Cocos (Keeling) Islands and the Shire of Christmas Island) are declared not to be national system employers for the purposes of the FW Act.

In order to effect this declaration, the Federal Minister for Industrial Relations was required by section 14(2) of the FW Act to endorse this declaration. While the Federal Minister will endorse the declaration as required, to date that endorsement has not been made.

Section 80A of the IR Act provides for regulations to be made fixing a day for the purpose of the declaration (the relevant day). While the regulations have not yet been made, the State Minister has announced the relevant day will be 1 January 2023.

This means that from 1 January 2023 WA local governments will operate in the State IR System and not the Federal IR System and any Federal IR System instruments such as the LGI Award and enterprise agreements made under the FW Act, will become State IR System instruments.

New State instruments

The LGI Award, as at the date of transition, will become a separate agreement for each relevant WA local government (known as a new State instrument - which is a type of industrial agreement under the IR Act). The new State instrument will have the same terms as the LGI Award and will be subject to the MCE Act The nominal expiry date of this instrument will be 1 January 2025.

Any Federal IR system enterprise agreement a WA local government has will become a new State instrument with the same terms on 1 January 2023. It will also be subject to the MCE Act. If the nominal expiry date of the enterprise agreement was before 1 January 2025, then the nominal expiry date of the new State instrument will be the same. However if the nominal expiry date the enterprise agreement was after 1 January 2025, the nominal date of the new State instrument will be 1 January 2025.

A new State instrument can be varied on application to the Western Australian Industrial Relations Commission (WAIRC) and will otherwise operate until it is replaced by a new industrial agreement or one of the parties retires from the agreement.

Implications for moving to the State IR System

Minimum entitlements

While the Federal IR system and the State IR system both have minimum terms and conditions that are relatively similar, the National Employment Standards (NES) in the FW Act and the minimum conditions of employment in the MCE Act are not identical and WA local governments will need to carefully consider their new State instruments to ensure they can comply with the MCE Act. For example under the MCE Act a casual employee is entitled to two days of paid bereavement leave whereas under the NES the entitlement to two days' of paid compassionate leave does not apply to casuals.

WA local governments should carefully review the MCE Act and understand their obligations under this Act.

Bargaining

Bargaining for an industrial agreement in the State IR system is significantly different to bargaining in the Federal IR System. There are less rules around bargaining and agreement making in the State IR System therefore WA local governments need to be aware of the differences and what to expect.

The most significant difference in bargaining between the Federal and State IR Systems, is that bargaining for an industrial agreement in the State IR System is with the relevant union and does not involve employees. While there are obligations to bargain in good faith in both IR systems, under the State IR Systems, the WAIRC has the power to make an enterprise order, which contains provisions that would otherwise be contained in an industrial agreement.

Awards

WA local governments should also carefully consider the differences in the entitlements under the LGI Award and the relevant State awards - the Local Government Officers' Award 2021, and the Municipal Employees Award 2021. Unlike the LGI Award, the State awards have not been modernised and contain entitlements that are different to entitlements of the same nature in the LGI Award or which are not in the LGI Award.

Steps to take now

For WA local governments that are currently bargaining for a Federal IR system enterprise agreement, unless bargaining can be concluded quickly, there may be little utility in having employees approve the enterprise agreement and lodging it for approval with the Fair Work Commission. Consideration should be given to pausing bargaining and recommencing after 1 January 2023.
Conduct an audit of policies and procedures and other employment related documents and systems (including payroll rules) to assess what will need to be updated to reflect the move to the State IR system.
Consider how additional or different entitlements in the State IR System may affect the WA local government's obligations and liability.
Start training HR teams and other relevant staff on the State IR system or employ staff with relevant experience in the State IR System.
Prepare communications to send to employees to provide them with information about the move to the State IR System.

MinterEllison can assist WA local governments with the move to the State IR system in a number of ways. This includes by conducting an audit process, by providing guidance on which documents should be reviewed or conducting training on the State IR system.