The new safety net, the 10 National Employment Standards (NES) and modern awards, commenced operation on 1 January 2010. The safety net sets the minimum terms and conditions of employment for all employees captured under the federal system. An employer must comply with the NES in relation to each of its employees or risk prosecution.

The terms and conditions addressed by the NES and modern awards are:

NATIONAL EMPLOYMENT STANDARDS

MODERN AWARDS

Maximum weekly hours of work – for full time employees it is 38 hours. An employer can request or require an employee to work additional hours if they are reasonable and the employee can refuse to work the additional hours if they are not reasonable.

 Minimum wages – sets the minimum weekly wage for all employees to whom the award applies.

Requests for flexible work arrangements – applies to parents or persons with responsibility for a child under school age or under 18 with a disability.

 Types of employment – full time, part time and casual arrangements.

Parental leave – the total period of leave that may be taken has been increased to 24 months. The entire period may be taken by one employee or by each parent taking separate periods of leave that collectively totals up to 24 months.

 Overtime rates – employer may require an employee to work reasonable overtime and an employee may refuse if the requirement is unreasonable. Different overtime rates apply depending on when it is worked.

Annual leave – standard entitlement to four weeks' annual leave for each year of service that accrues progressively during the year. There are also provisions for the cashing out of leave.

 Work arrangements – breaks, hours, rosters etc.

Personal/carer's leave – entitlement to 10 days' paid leave for each year of service. Entitlement accrues progressively during the year.

 Penalty rates – weekend work, public holidays, shift work etc

Compassionate leave – employees who engage in an eligible community service activity are entitled to be absent from employment eg jury service or voluntary fire service.

 Annualised wages – as an alternative to penalty rates.

Long service leave – current provisions are transitional to be replaced when a national standard is agreed.

 Allowances

Public holidays – an employee is entitled to take off a public holiday subject to a reasonable request from an employer that the employee work.

 Leave loading – an additional annual leave loading of 17.5% may apply.

Notice of termination and redundancy pay the minimum notice periods continue. In addition, employees also have a minimum entitlement to redundancy pay. Where the entitlement did not previously exist, only service after 1 January 2010 counts.

 Superannuation – supplements existing legislative requirements and identifies default funds into which contributions are to be made if an employee does not choose a fund.

Fair Work Information Statement – the Fair Work Ombudsman has prepared the form to be given to all new employees. It can be found at http://www.fairwork.gov.au/pay-leave-and-conditions/Conditions-of-employment/Pages/Fair-Work-Information-Statement.aspx

 Consultation and dispute settling procedures – includes the obligation to consult about major workplace change and the process to deal with disputes about matters under the award or the NES.

Any attempt to exclude the NES or provide less favourable entitlements will not be effective as the NES entitlement will simply prevail. Such an attempt may also put the employer at risk of breaching the NES which may result in court proceedings, the imposition of a penalty and/or an order to make good any shortfall.

An employer can agree to supplement the NES by providing more favourable entitlements.

Machinery terms that are ancillary or incidental to a NES entitlement are also permitted, for example, enabling an employee to take their entitlement to paid annual leave at half pay or specifying the manner in which an employee must apply for annual leave. Terms that are ancillary or incidental to the NES or that supplement the NES must not be detrimental to the employee.

Specific provisions in the NES allow modern awards or enterprise agreements to deal with issues that may otherwise be contrary to the NES, for example, allowing for the cashing out of paid annual leave.

TRANSITIONAL ARRANGEMENTS FOR THE NES

Transitional arrangements have been put in place to enable the transition, on 1 January 2010, from existing employment arrangements to arrangements under the NES.

The no-detriment rule

If a term of a transitional instrument that continues to apply after 1 January 2010 (eg a workplace agreement or a pre-WorkChoices certified agreement) is 'detrimental' to an employee, in any respect, when compared to the corresponding entitlement under the NES, the term of the transitional instrument will be of no effect and the corresponding entitlement in the NES will apply instead.

If the term of a transitional instrument is at least as beneficial as the corresponding NES entitlement or is more favourable than the NES entitlement, the term in the transitional instrument will continue to apply.

The no-detriment test is to be applied on a 'line by line' basis. This could mean applicable provisions relating to a particular entitlement being found in both the transitional instrument and the NES.

Any difficulties or disputes about the application of the nodetriment rule can be resolved by Fair Work Australia (FWA).

MODERN AWARDS

Modern awards form the second element of the new safety net.

Who is covered?

The modern awards replace pre-modernised federal awards (save for enterprise awards), notional agreements preserving state awards (NAPSAs) and state reference transitional awards.

The majority of Australian employees are likely to be covered by a modern award. The modern awards apply to employees and employers on an industry wide or occupational basis. However, modern awards will not generally cover those employees who, because of the seniority of their role, have not traditionally been covered by awards. Modern awards will also not apply to high income employees who have 'guaranteed annual earnings' in excess of a threshold amount (currently $108,300 and adjusted each year on 1 July). This exemption will only apply if the employer provides a written guarantee to pay the employee annual earnings at or in excess of the threshold.

Another important aspect of modern awards is the scope to make 'individual flexibility agreements' (IFAs) with any award covered employees. IFAs can contain individual arrangements that could address, for example, overtime, penalty rates, hours of work and allowances in terms different from the modern award. There are strict conditions that apply to the making of these agreements.

Important to the BOOT

Modern awards will also underpin the collective bargaining process for award covered employees, providing the benchmark against which enterprise agreements will be tested for the 'better-off-overall' test.

COMPLIANCE CHECKLIST

  • Have you reviewed your employment entitlement and leave policies and procedures to ensure they are compliant with the new laws?
  • Have you made arrangements to communicate the changes to entitlements and respond to queries?
  • Have you reviewed the modern awards that apply to your workers?
  • Have you considered amending your contracts for high income staff to provide for 'guaranteed annual earnings' in excess of the threshold?
  • Are your managers informed of the factors which may determine whether an employee's request for flexible working arrangements or additional parental leave is reasonable?
  • Are your employment contracts up to date with the new changes?

GUIDE

We have prepared a guide to help our clients understand these changes - The Workplace Guide to the New Safety Net. If you would like to receive a copy of this guide please contact Rebecca Veli at rebecca.veli@dlaphillipsfox.com

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This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances.