|
A new national industrial relations system called Fair Work commenced on 1 January 2010. Some of the laws under Fair Work, such as unfair dismissal and agreement-making, came into force on 1 July 2009 but important aspects, such as minimum conditions of employment and a modernised award system, commenced on 1 January 2010. The system covers most of the employees in private industry.
This commentary provides employers with a handy summary of your legal obligations regarding dismissals and agreement-making, as well as the minimum employment conditions prescribed under the National Employment Standards (NES) and modern awards.
Back to Top
What types of employers are affected by Fair Work?
Most employers are affected by Fair Work as it applies to any employer that is referred to as a ‘national system employer’. ‘National system employer’ refers to a ‘constitutional corporation’ (in layman’s language this means an incorporated commercial trading business) and an employer ‘referred’ under federal industrial relations coverage by state legislation.
In all States and Territories, except Western Australia, Fair Work covers all private sector employers and their employees. In Western Australia, those employers who are not incorporated, such as sole traders and partnerships, remain covered by the state industrial relations system.
Back to Top
What types of employees are affected by Fair Work?
All employees of constitutional corporations are affected by Fair Work. Importantly, all States except for Western Australia now have referred their industrial relations powers relating to private industry to the Commonwealth, with the intention of creating a national IR system, This means that employees of all private industry businesses (whether incorporated or not) are covered by the Fair Work System, except for non-incorporated businesses in Western Australia.
Note also that high income employees can be excluded from the modern awards, as explained below.
High income employees
A new feature of the Fair Work Act is that an employee who is deemed to be a ‘high income employee’ can be excluded from modern awards under certain circumstances. A high income employee is an employee who has guaranteed annual earnings above the high income threshold of $113,800 pa (indexed from 1 July each year). The threshold includes wages and the value of non-monetary benefits (which must be related to the performance of work and have an agreed monetary value which is reasonable).
Amounts which cannot be determined in advance, such as overtime that is not guaranteed, bonuses, reimbursements or statutory superannuation contributions, are not included in the threshold. However, this exclusion is not automatic and a number of conditions must be met (including guaranteeing earnings in writing and in advance, the employer not applying undue pressure and ensuring that the employee understands the modern award will not apply to him/her).
A written guarantee of earnings ceases to operate if an enterprise agreement starts to apply to an employee or at the end of the period covered in the guarantee.
Minimum conditions of employment — NES
Since WorkChoices commenced on 27 March 2006, minimum conditions for the majority of Australian workers have been determined by the Australian Fair Pay and Conditions Standard (AFPCS). This is now replaced by new National Employment Standards (NES) from 1 January 2010. The NES apply to all private sector businesses from 1 January 2010. Existing award or agreement rates continue to apply until 1 July 2010 when a phasing in of new rates will commence. For those employers who are not incorporated there is a grace period of 12 months (until 1 January 2011) before the currently applicable award or agreement will be replaced by a federal instrument, but note that the NES will override (from 01/01/10) any current award or agreement condition that is not better than the relevant NES condition.
The NES conditions override any provisions in an existing agreement or modern award that prescribe a less beneficial entitlement than the NES. The NES operates in conjunction with modern awards and enterprise agreements and cannot be excluded from those industrial instruments. Modern awards and enterprise agreements are allowed to include terms that are ancillary or incidental to the application of the NES, or supplement the NES, provided the terms are not detrimental to an employee compared to the NES.
The NES apply to all employees of national system employers. There is no ‘high income’ exclusion in this respect.
NES minimum entitlements
The NES are made up of 10 minimum employment conditions. Some aspects of the NES are comparable to the minimum standards under the previous legislation (eg annual leave). However, the NES expand the range of employer obligations towards employees. Notable among these new standards are those concerned with redundancy pay, parental leave, and the right of working parents to request flexible working arrangements.
The NES are minimum provisions that may be bettered by provisions in modern awards. The NES should be read in conjunction with the applicable modern award.
The minimum entitlements under the NES are:
-
Hours of work — as was the case under the AFPCS, the maximum weekly hours which a full-time employee can be required to work will be 38 plus reasonable additional hours. An employer and an award/agreement-free employee also may agree in writing to averaging hours of work over a maximum period of 26 weeks. Modern awards and enterprise agreements may also include terms regarding averaging hours of work over a specified period.
-
Requests for flexible working arrangements — an employee who has responsibility for a child under school age may request a change in working arrangements to assist the employee to care for the child. This entitlement only applies to an employee with at least 12 months continuous service with the employer or, in the case of casual employees, to long term casual employees who have a reasonable expectation of continued employment with the employer. An employer is entitled to refuse an employee’s request for flexible working arrangements on reasonable business grounds but must provide written reasons for such a refusal.
-
Parental leave — an employee is entitled to 12 months unpaid parental leave, ie maternity, paternity or adoption leave, provided the employee has completed at least 12 months continuous service with the employer. An employee may also extend the leave period by an additional 12 months unpaid parental leave (total of 24 months) under certain circumstances. Such extension may only be refused on reasonable business grounds.
-
Annual leave — a permanent employee (full-time or part-time) is entitled to 4 weeks paid annual leave for each completed year of service with the employer. Continuous shift workers are entitled to 5 weeks annual leave each year (pro rata for an incomplete year).
A part-time employee is entitled to a proportionate amount of leave based on their ordinary hours, while there is no entitlement to annual leave for casual employees.
Annual leave accrues month to month and accumulates if it is not taken. An employee does not have to wait 12 months before being able to take any accrued annual leave.
The NES allows an ‘award/agreement-free’ employee to enter into an agreement to cash out a portion of their annual leave. The employee will need to have at least 4 weeks annual leave remaining after the cashing out of leave has occurred. An employee is to be paid at their ‘base rate of pay’ for the period of annual leave, but modern awards often provide for ‘ordinary pay’ and the award provision would prevail.
Cashing out — The applicable modern award or enterprise agreement may contain a term that allows cashing out of annual leave but, if there is no award/agreement provision, cashing out is not permissible. Any cashing out provisions in a pre-Fair Work agreement continue subject to the provisions of the NES.
-
Personal/carer’s leave and compassionate leave — a full-time employee is entitled to 10 days paid personal/carer’s leave for each year of continuous service with the employer and up to 2 days paid compassionate leave for each occasion where a member of an employee’s immediate family or household dies or has an illness or injury that poses a serious threat to his or her life.
Personal leave accrues on the basis of the employee’s ordinary hours of work and can be taken at any time subject to the employee providing reasonable evidence to the employer, on the employer’s request.
In addition, all employees (including casual employees) have an entitlement to take two days unpaid carer’s leave when a member of an employee’s family or household (as specified in the legislation) requires care or support because of illness, injury or unexpected emergency.
-
Community service leave (including jury service) — an employee is entitled to take unpaid leave to engage in designated community service activities, such as a voluntary emergency management activity. In addition, permanent employees who take leave to provide jury service will be entitled to ‘make up pay’ for a period of up to 10 days.
The make up pay represents the difference between the amount an employee receives for attending jury duty and the base rate of pay for his/her ordinary hours of work.
-
Public holidays — an employee is entitled to a paid day off when a designated public holiday falls on a day the employee is ordinarily required to work. An employer can reasonably refuse to work on a public holiday. Penalty rates for work on a public holiday are determined by the applicable modern award or agreement.
The prescribed public holidays under the NES are: 1 January (New Year’s Day), 26 January (Australia Day), Good Friday, Easter Monday, Anzac Day, the Queen’s Birthday holiday (as determined by the relevant state or territory government), 25 December (Christmas Day), and 26 December (Boxing Day), plus any other day or part-day proclaimed as a holiday by a state or territory government for the state or territory or a region.
-
Termination of employment
Notice of termination — the employer must give a minimum period of notice of termination, based on the employee’s period of continuous service with the employer. The maximum period of notice is 5 weeks for employees who have completed 5 years service or more and who are aged over 45 years.
Redundancy pay — the NES also provides an entitlement of up to 16 weeks redundancy pay, based on the length of the employee’s continuous service with the employer. The redundancy pay obligations do not apply to an employer who employs less than 15 employees at the time a redundancy occurs. An employer can apply to vary the amount of redundancy pay if it is unable to pay the amount or if it obtains other acceptable alternative employment for the employee.
-
Long service leave — in most cases, long service leave will continue to be provided by the relevant state or territory long service leave legislation. This is a transitional arrangement until a national long service leave standard is developed. State or territory law does not apply to an employee whose entitlement to long service leave is derived from an award or agreement that continues under transitional arrangements.
-
Fair Work Information Statement — employers are required to issue a Fair Work Information Statement to all new employees as soon as practicable after commencing employment. The Statement includes information about the NES, modern awards and agreement-making under the Fair Work Act and is published by Fair Work Australia. The Statement does not need to be provided to existing employees employed prior to 1 January 2010.
Back to Top
Modern awards and their application
Modern awards operate from 1 January 2010 and together with the NES, form the safety net of terms and conditions of employment for employees. Modern awards will not differ greatly from the minimum conditions provided under pre-WorkChoices federal awards and Notional Agreements Preserving State Awards (NAPSAs) which were created under WorkChoices.
A modern award may contain provisions that are more beneficial to the employee than the provisions of the NES. Modern awards will apply automatically to the category of employees covered by the award, although existing workplace agreements continue to apply until their expiry date (see Agreements — new and existing). There are 122 modern awards which have replaced the 1500 federal and state awards which operated under the previous system.
Allowable matters
Modern awards include 10 allowable matters, relating to annualised salary arrangements, arrangements for when work is performed, overtime and penalty rates, allowances, leave and leave loadings, superannuation and procedures for consultation, dispute resolution and the representation of employees.
Other terms may relate to the period of notice of termination required to be given by an employee, payment of wages, transitional redundancy pay and types of employment, eg full-time, part-time, and casual.
Non-allowable matters
Matters that are not allowed in modern awards include terms that:
-
are objectionable or discriminatory
-
are about union right of entry to workplaces
-
allow for payments or deductions for the benefit of the employer or
-
contain state-based differences.
New wage rates to be phased-in in most cases
The wage rates under modern awards are to be phased-in over four years, commencing from 1 July 2010. The effect will be that, where ‘transitional provisions’ are included in a modern award, the pre-modern award conditions relating to minimum wages, loadings, penalties and shift allowances will continue to apply until 1 July 2010. There will be a further four instalments on 1 July each year concluding on 1 July 2014 as part of the phasing-in process.
IMPORTANT: Phasing-in of wage rates can only occur where the modern award has a 'transitional provisions' clause, otherwise the minimum wage rates under the modern award will apply from 1 January 2010.
A National Minimum Wage Order will be issued by Fair Work Australia, which will set the minimum wage and special national minimum wage orders for:
-
all award/agreement-free employees classed as junior employees
-
employees to whom training arrangements apply
-
employees with a disability, and
-
the casual loading for award/agreement-free employees.
Back to Top
Because the Fair Work Act does not provide for the making of new individual employee agreements, modern awards, and enterprise agreements contain a provision which allows flexibility in the workplace to be achieved by agreement between an employer and an individual employee.
All modern awards are required to contain a flexibility term. The Fair Work Regulations contain a model flexibility clause but this can only vary certain award provisions (relating to arrangements for when work is performed, overtime rates, penalty rates, allowances and leave loading) and the agreement must result in the employee being better off overall than if the agreement had not been made.
The agreement must state the date the agreement commences to operate. A copy of the flexibility agreement must be given to the individual employee and a copy must be kept by the employer as part of the time and wage record requirements under the Act.
Back to Top
Modern awards also contain a ‘facilitative provisions’ clause which allows certain terms of the award to be varied. Generally, the terms of an award that may be varied by agreement between an employer and an individual employee include:
-
minimum engagement for part-time employees
-
variation to hours of part-time employees
-
minimum engagement for casuals
-
annualised salary arrangements
-
tool allowance
-
make-up time
-
meal break
-
time off in lieu of payment for overtime
-
rest period after overtime, and
-
rest break.
A number of terms of an award may be varied by agreement between the employer and majority of employees or an individual employee. These terms include:
-
period for casual election to convert
-
payment of wages
-
ordinary hours of work for day workers on weekends
-
variation to the spread of hours for day workers
-
methods of arranging ordinary working hours
-
variation to the spread of hours for shift workers
-
working in excess of five hours without a meal break
-
substitution of public holidays.
A number of award terms may be varied by agreement between the employer and by the majority of employees. These terms include:
The award usually requires that unions that have members in the workplace covered by the award must be informed by the employer of the intention to use the facilitative provision and be given reasonable opportunity to participate in negotiations regarding its use.
Back to Top
Agreements — new and existing
New enterprise agreements
Under Fair Work, if a majority employees wish to collectively bargain, the employer is required to bargain with them. An employee’s bargaining representative is able to apply to Fair Work Australia (FWA) — the federal government body which administers the Act — for an order which will require the employer to bargain in good faith and not to refuse to enter into discussions with employees about a collective agreement.
The Fair Work Act does not provide for the negotiation or approval of agreements with individual employees. Enterprise agreements must be made through collective bargaining, although there is no distinction between union and non-union enterprise agreements. Agreements are required to have a nominal expiry date no later than 4 years after the date of operation. An agreement must also contain a dispute procedure which provides for Fair Work Australia or another independent person to settle disputes about any matter arising under the agreement or the NES, and must allow for the representation of employees.
Flexibility arrangements in enterprise agreements
An agreement is required to include an individual flexibility arrangement and a consultation clause where major change is being considered. Unlike awards, there is no limit on the provisions in the agreement which can be subject to the flexibility term. If an enterprise agreement doesn’t contain a flexibility term, a model flexibility term in the Fair Work Regulations is taken to be a term of the agreement. The flexibility arrangement is similar to that under a modern award, ie the terms of the agreement that may be varied, genuine agreement between the parties is required, the agreement must be in writing and signed by both parties and be capable of termination on 28 days notice or by agreement.
The BOOT
A new enterprise agreement also has to pass the ‘Better Off Overall Test’ (BOOT). The BOOT is applied to ensure that each employee covered by the agreement is better off overall in comparison to the relevant modern award and the NES.
Minimum wage provisions in awards or the National Minimum Wage override less generous provisions in an enterprise agreement. This means that where minimum award rates increase during the life of an agreement to above the agreement rates, employers will have to make up any difference. Also, the NES automatically overrides any condition in an enterprise agreement that is less generous.
NES and legislation override
An enterprise agreement cannot include provisions which are inconsistent with the NES or which attempt to contract outside the provisions of the Act, discriminatory provisions and provisions which breach OHS laws.
Lodgement
All enterprise agreements must be lodged with Fair Work Australia (FWA), along with statutory declarations by the parties setting out details of the agreement, for approval before commencing operation. FWA will then assess the agreement in relation to unlawful content, mandatory content, whether it complies with the NES and to apply the BOOT. Generally, FWA will approve an agreement without a hearing. The agreement will commence 7 days after approval.
Existing agreements
An agreement made prior to Fair Work will continue to operate until terminated or replaced by a new agreement. Examples of such an agreement include a pre-reform certified agreement, a preserved state agreement, a union and non-union collective agreement, and an individual agreement such as an Australian Workplace Agreement (AWA) and an Individual Transitional Employment Agreement (ITEA).
However, it is important to note that all pre-Fair Work agreements are subject to the NES, and the relevant modern award rates of pay. Other terms of a modern award do not apply to an existing agreement. Once a pre-Fair Work agreement has passed its nominal expiry date, either party may terminate the agreement.
Unfair dismissal
All employers covered by the Fair Work Act must ensure fairness when dismissing an employee. A person will be unfairly dismissed if FWA is satisfied that the dismissal is harsh, unjust or unreasonable. The principles determining the unfairness of a dismissal remain unchanged from the previous legislation, although there is also a requirement that FWA must take into account any unreasonable refusal by the employer to allow the employee to have a support person present to assist at any discussions relating to dismissal.
Employers with fewer than 15 employees must comply with the ‘Small Business Fair Dismissal Code’, which is a less rigorous test than that required for other employers. A copy of the code is available at www.fwa.gov.au.
Who can claim?
Not all employees may make a claim of unfair dismissal. An employee must have completed a qualifying period of employment of at least 6 months with the employer (where the employer employs 15 employees or more), or 12 months (where the employer employs less than 15 employees).
Other categories of employee excluded from accessing the unfair dismissal laws include: an employee not covered by a modern award or agreement whose annual rate of earnings exceeds the ‘high income threshold’ (currently $113,800 pa); an employee employed for a fixed term, specified task or specified season; an employee subject to a training agreement and whose employment is limited to the duration of that agreement; an employee dismissed in cases of genuine redundancy; and contractors.
Powers and process
FWA has the power to order reinstatement, which is the primary remedy, or compensation where reinstatement is considered inappropriate. Compensation is capped and cannot include any amount for shock, distress humiliation or other such hurt caused by the dismissal. Applications must be lodged with FWA within 14 days of the dismissal taking effect, although there is some discretion to extend the time in exceptional circumstances. A private conference of the parties will be the commencing point for most matters before FWA.
Redundancy
An employee cannot claim unfair dismissal where the termination was due to a ‘genuine redundancy’. A person’s dismissal will be considered a genuine redundancy if the person’s employer no longer required the person’s job to be performed by anyone because of changes to the operational requirements of the employer’s enterprise; and the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy.
A person’s dismissal will not be a case of genuine redundancy if it would have been reasonable in all the circumstances for the employee to be redeployed within the employer’s enterprise, or the enterprise of an associated entity of the employer.
An employer who employs 15 employees or more may be liable for redundancy pay according to the scale of payments under the NES.
Back to Top
Unlawful dismissal provisions protect all employees (adverse action)
The Fair Work legislation provides that it is unlawful for an employer to take ‘adverse action’ against a current or prospective employee. Adverse action is taken by an employer against an employee if the employer dismisses the employee, or injures the employee in his or her employment, or alters the position of the employee to the employee’s prejudice, or discriminates between the employee and other employees of the employer.
An employer must not take adverse action against a person who is an employee or a prospective employee because of the person’s race, colour, sex, sexual preference, age, physical or mental disability, marital status, family or carer’s responsibilities, pregnancy, religion, political opinion, national extraction, or social origin.
Dealing with the dispute
If a dismissal has not already occurred, but the employee alleges adverse action by the employer, the employee can apply to FWA to deal with the dispute. If the parties agree to participate, FWA must convene a conference to deal with the dispute. Where a dismissal has occurred, an application needs to be made within 60 days from the date of dismissal. FWA must convene a private conference to deal with the dismissal. The mediation process conducted by FWA must have occurred before a person can proceed to court proceedings.
Back to Top
Right of entry of trade union officials
Fair Work allows a union official who holds a permit to investigate a suspected breach of the Act and industrial instruments under the Act, meet with employees and to investigate occupational health and safety laws. Written notice may be required to be given before entering a workplace and should be provided not less than 24 hours before the proposed visit. A visit to a workplace must take place during working hours.
An entry notice should include the following details:
-
the premises to be entered
-
the day of entry
-
the organisation the permit holder works for
-
the section of the Act that authorises the entry
-
details of the suspected breach
-
a declaration by the permit holder that they represent an employee who works on the premises and to whom the suspected breach(s) relates, or who is affected by the suspected breach
-
the provision of the organisation’s rules that details the organisation’s right to represent the employee.
While on the premises, the union official may inspect any work, process or object relevant to the suspected breach; interview any person about the suspected breach whose interests the trade union is entitled to represent and who agrees to be interviewed; and inspect and copy any record or document that is directly relevant to the suspected breach, that is kept on the premises or is accessible from a computer that is kept on the premises.
Disputes about right of entry may be initiated by FWA or upon application by the union official, the union, the employer or the occupier of the premises.
Back to Top
Transfer of business — and transfer of entitlements?
The transfer of business provisions under Fair Work are based on the transferring of an activity and an employee or employees going with that activity. A transfer takes place between the first employer and second employer if:
-
one or more employees is terminated from the first employer
-
the employee(s) become employed by the second business within 3 months doing substantially the same work,
and one of the following applies:
-
the first and second employers are ‘associated entities’ under corporations law
-
the second employer (or an associated entity) owns or has the beneficial use of assets from the first employer (or an associated entity) which relate to the transferring employees’ work
-
the first employer outsourced work to the second
-
the first employer (or an associated entity) undertook outsourced work for the second employer (or an associated entity) which then ceases the outsourcing arrangement so that the second employer (or an associated entity) insources the work and the work transferred back to the second employer is performed by the transferring employees.
An industrial instrument may follow the transfer and become binding on the new employer. Service with the first employer will count as service with the second employer, although this does not apply with respect to annual leave or redundancy pay under the NES where the transfer is between non-associated entities and the second employer decides not to recognise the employee’s service with the first employer. This situation will trigger payment of these entitlements by the first employer.
Back to Top
Industrial action — the rules
The right to lawful industrial action when negotiating a new enterprise agreement continues under Fair Work. Employees can only initiate protected industrial action after a protected action ballot has been ordered by Fair Work Australia (on application by one or more representatives), conducted and approved by a majority of those voting. A protected action ballot order may be applied for no earlier than 30 days prior to the nominal expiry date of an enterprise agreement.
An employee or bargaining representative must be genuinely trying to reach an agreement in order for industrial action to be protected. The protected industrial action can be organised by a specified bargaining representative or employee(s) who must give other representatives at least 3 working days notice of the intended action, and what day it will start.
Employer industrial action will only be protected where an employer responds to employee industrial action. An employer cannot initiate a ‘lockout’. If an employer is taking industrial action in response he/she must take all reasonable steps to notify employees who will be subject to the industrial action. FWA may terminate protected industrial action in certain circumstances, including where it is causing or is threatening to cause significant economic harm to the employer covered by the agreement or any of the employees who are covered by the agreement. Likewise, FWA is able to suspend or terminate protected industrial action if a lockout by the employer is causing harm to any of the employees who are subject to the lockout.
Fair Work Australia may terminate or suspend protected industrial action where it threatens to endanger the life, the health, safety or welfare of the population or part of it; or cause significant damage to the Australian economy or an important part of it. Representatives engaging in pattern bargaining cannot undertake protected industrial action. Pattern bargaining occurs when a bargaining representative is a representative for two or more proposed agreements and engages in a course of conduct related to two or more employers to seek common terms in the agreements.
It is an offence for an employer to pay employees for a period of industrial action they have engaged in. Where industrial action is protected, pay must be withheld for the period of the industrial action except in the case of a partial work ban, such as an overtime ban. An employer can refuse to pay employees during a period of industrial action initiated by the employer, ie a lockout.
State and territory laws still applicable
While Fair Work is Commonwealth law and overrides corresponding state or territory employment laws, it also recognises the continuance of certain state or territory employment-related laws. State or territory laws dealing with the following matters will continue to apply in all cases (even where there has been a transfer of industrial relations powers to the Commonwealth):
-
anti-discrimination
-
superannuation
-
workers compensationo
-
ccupational health and safety
-
matters relating to outworkers
-
child labour
-
training arrangements, except conditions governed by the NES and modern awards
-
long service leave
-
leave for victims of crime
-
attendance for service on a jury, or emergency service duties
-
declaration, prescription or substitution of public holidays
-
workplace surveillance
-
business trading hours
-
claims for enforcement of contracts of employment
-
directions to perform, or not perform, work relating to provision of essential services or to situations of emergency
Employers are still required to comply with the above state or territory laws.
Back to Top
Administering Fair Work
Fair Work Australia (FWA) is the federal government body that administers the Fair Work Act, and a related body called the Fair Work Ombudsman. FWA’s main functions include:
-
minimum wage setting and adjustment
-
modern award variation
-
ensuring good faith bargaining
-
facilitating multi-employer bargaining for low paid workers
-
dealing with industrial action
-
approval of agreements
-
resolution of disputes and unfair dismissal matters.
FWA may inform itself any way it considers appropriate and is not bound by the rules of evidence. It may hold conferences (usually in private) or hearings (usually in public) and may deal with disputes by mediation or conciliation, by making recommendations, but may only arbitrate where the Act expressly authorises. The Fair Work Ombudsman has a range of functions, including ensuring compliance with the Act and its instruments.
Back to Top
Further help
Fair Work Australia
Fair Work Ombudsman
Modern awards: The content of each modern award can be viewed at www.airc.gov.au.
Model flexibility clause: This clause is contained in Schedule 2.2 of the Fair Work Regulations.
Fair Work Information Statement: This Statement can be downloaded from the Fair Work Australia website.
| 
