Australia: Employment Update

Last Updated: 30 November 2006
Article by John Pesutto

On Monday 13 November 2006, the Federal Minister for Employment and Workplace Relations, Kevin Andrews, announced important changes to the Workplace Relations Act 1996 (the Act) and Regulations.

In general, the changes involve the following:

  • Protecting employee redundancy entitlements in workplace agreements.
  • The capping of annual leave and personal/carer's leave entitlements and changes to payment rules for personal/carer's leave and compassionate leave.
  • A legislative right to stand down employees.
  • The ability to cash-out personal/carer's leave.
  • Easing record-keeping requirements.

Changes To Workplace-Based Redundancy Entitlements

Essentially, where an employer unilaterally terminates a workplace agreement (whether it is a postreform workplace agreement or pre-reform workplace agreement) redundancy entitlements under that workplace agreement will continue to operate for 12 months after termination of the agreement unless a new agreement is made. This is designed to prevent an employer terminating an agreement and then retrenching staff, thus avoiding the payment of severance pay.

Importantly, the changes will only apply to those employees employed at the time the workplace agreement is terminated. The changes are similar to the rules that apply when a business is transmitted from one employer to another. For example, it will not be possible for an employer to terminate an agreement without notifying affected employees that their redundancy entitlements will continue beyond the date of termination unless a new agreement is entered into.

Where an employer acquires the business of another employer bound by a preserved redundancy clause, the new employer will be bound by the transmitted redundancy clause unless it enters into a new workplace agreement afterwards.

Capping Of The Accrual Of Annual Leave And Personal/Carer's Leave Under The Australian Fair Pay And Conditions Standard (The Standard)

This change delivers substantial savings for employers.

Essentially, employees will only accrue annual leave and personal/carer's leave under the Standard on the basis of a 38-hour week.

Consequently, the annual leave and personal/carer's leave entitlements will not accrue based on the total number of hours employees work. Many employees, of course, work substantial hours in excess of 38 hours per week.

Under existing provisions, employees who take sick leave, for example, will be entitled to be paid for their absence at the rate they would have been paid had they been at work. Such a requirement includes penalty rates or overtime rates if such rates would have been payable to the employee during the period of absence.

The proposed changes will mean that an employer will only be liable to pay employees their basic rate of pay, ie excluding penalty rates and overtime, for the duration of the absence.

The Right To Stand Down Employees

The Act will be amended to give employers, not otherwise possessing the right, the power to stand down employees when they cannot usefully be employed and therefore not pay them during the period of the stand down. This might apply when an employer's business is affected by a natural disaster, industrial action or other factors beyond the employer's control.

The change is important because unless the right is conferred on the employer by a workplace agreement, employment contract or legislation, there is no right at common law to stand down employees.

Cashing Out Personal/Carer's Leave

Employees will be able to cash out personal/carer's leave so long as:

  • They request the right to cash out leave in writing and the employer agrees to that change before any cashing out occurs; and
  • No full-time employee working 38 hours per week is left with less than 15 days paid personal/carer's leave after any cashing out.

Therefore employees do not have the right to be paid out their personal/carer's leave except with their employer's agreement.

The changes will not affect the parties' ability to cash out leave that accrued prior to the introduction of Work Choices on 27 March 2006.

Record Keeping Requirements

Record keeping requirements will be eased for employers.

The aim of this change will be to require employers to maintain records only to the extent necessary to demonstrate compliance with the Standard, a relevant workplace agreement or protected award conditions.

Ultimately, the change will bring the record keeping requirements in the Act closer to the requirements applying prior to the introduction of Work Choices.

Although the details are not yet entirely clear, the Government is proposing that employers only be required to record hours for employees who are entitled to overtime or penalty rates and not all hours worked. This might mean that the Government is limiting the recording of hours only to employees who are entitled to overtime or penalty rates under an award or workplace agreement and not staff only employed under a contract and who are not entitled to these benefits under an award or workplace agreement.

Where casuals and irregular part-time employees are concerned, however, employers will still need to record all hours worked.

Ultimately, employers will still need to keep records:

  • That show the basic periodic rate of pay or piece rate of pay for each employee.

  • That allow the determination of protected award conditions including penalty rates, loadings, allowances or incentive-based payments.

  • That enable a determination of the accrual of leave, the taking of leave, the balance of leave at any point in time and any election to cash out leave.

  • That show the hours entitling an employee to overtime or penalty rates.

  • That record the payment of superannuation contributions for each relevant period.

  • That record any agreement for the cashing-out of leave or averaging of hours.

  • That show that payslips have been in accordance with the new record-keeping requirements.

Phillips Fox has changed its name to DLA Phillips Fox because the firm entered into an exclusive alliance with DLA Piper, one of the largest legal services organisations in the world. We will retain our offices in every major commercial centre in Australia and New Zealand, with no operational change to your relationship with the firm. DLA Phillips Fox can now take your business one step further − by connecting you to a global network of legal experience, talent and knowledge.

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 and no liability will be accepted for any losses incurred by those relying solely on this publication.

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