On 11 December 2006, the Independent Contractors Act 2006 (ICA) and the Workplace Relations Legislation Amendment (Independent Contractors) Act 2006 (WRL Act) (making amendments to the Workplace Relations Act 1996 (Cth) (WRA)) received Royal Assent. We have previously reported on these as Bills before they became law.
In summary the effect of the ICA is to quarantine independent contractors with some limited exceptions from the State workplace relations systems and establish a new Federal unfair contracts review procedure for genuine independent contractors.
The new independent contractor regime will commence operation on 12 June 2007 if not earlier by proclamation. Provisions relating to ‘sham arrangements’ (WRL Act) will commence immediately following this.
In November 2006, we reported that the Federal Government announced important changes to the WRA and Regulations intended to clarify aspects of the Work Choices system. These proposed amendments and some additional changes are largely given effect by the WRL Act and are now law. The first part of this Employment Update focuses on the changes to the WRA brought about by the WRL Act.
The second part of this Employment Update looks at the changes made to the Workplace Relations Regulations (Regs) on 13 December 2006. The changes relate to record-keeping and pay slips amongst other things. Some of these changes take effect immediately, whilst others are not effective until 27 March 2007 (one year since Work Choices became effective).
Part 1: Changes to the WRA to accommodate the new Independent Contractors regime
The purpose of this update is not to focus on the substantive changes to the independent contractors regime brought about by the ICA. However, there are a number of amendments made to the WRA by the WRL to accommodate the changes made to the independent contractors regime and to assist in attempting to separate the workplace relations regime from the independent contractors regime.
The amendments, contained in the WRL Act, create provisions that punish the creation of sham independent contractor arrangements and make other amendments to various sections of the WRL Act. The amendments to the WRA in relation to independent contractors essentially deal with the interface between the workplace relations system and the new independent contractor regime.
The WRA is amended to include provisions that prohibit sham independent contractor arrangements and impose penalties on a person who:
- Misrepresents an employment relationship as an independent contractor relationship.
- Misrepresents a proposed employment relationship as an independent contractor relationship.
- Dismisses an employee for the purpose of re-engaging the employee as an independent contractor.
- Knowingly makes a false statement to influence a person to become an independent contractor.
The maximum penalties for these contraventions are up to $33,000 for a body corporate and $6,600 for an individual per offence. The Office of Workplace Services has jurisdiction to enforce these provisions.
The WRL Act also makes consequential and transitional amendments relating to textile, clothing and footwear outworkers, as well as changing some of the provisions relating to unfair contracts in the WRA and the Building and Construction Industry Improvement Act 2005.
Further Amendments to the WRA
The changes, most of which commenced operation on 12 December 2006, include 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.
- Employees covered by pre-reform industrial agreements are now (in certain circumstances) entitled to the minimum entitlements under the Australian Fair Pay and Conditions Standard (the Standard).
- A right of employees to waive the requirement to be provided with the Office of Employment Advocate’s prescribed information sheet and access to a workplace agreement before signing that agreement.
Changes to workplace-based redundancy entitlements
Essentially, where an employer unilaterally terminates a workplace agreement (whether it is a post-reform workplace agreement or pre-reform agreement) redundancy entitlements under that 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 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 for a period of 12 months or until a new workplace agreement is entered into.
Capping of the accrual of annual leave and personal / carer’s leave under the Standard
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.
The changes 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 WRA has been amended to give employers, not otherwise possessing the right, the power to stand down employees without pay, in one or more of the following circumstances:
- Break down in machinery.
- Work stoppage for which the employer cannot reasonably be held responsible.
The change is important because there is no right at common law to stand down employees and employers have, in the past, only been able to stand down employees where the right was conferred on the employer by a workplace agreement, employment contract or state legislation.
In addition, there are significant new remedies to prevent misuse of the stand down provisions by an employer:
- An employer will be prohibited from standing employees down in the specified circumstances unless authorised by the Act, relevant industrial instrument or contract of employment. A court will be able to impose penalties of up to $33,000 on a corporation that breaches this provision.
- An employee who is stood down will be able to seek an injunction where a stand down is not authorised.
- The model dispute resolution process will apply to disputes about the use of the stand down provisions in the Act.
Cashing out personal / carer’s leave
Employees are able to cash out personal / carer’s leave so long as at least 15 days remain available after cashing out and a number of conditions are met, including:
- The relevant workplace agreement includes a specific provision that entitles the employee to elect to cash out an amount of personal / carer’s leave.
- The employee requests the right to cash out leave in writing and the employer agrees to that change before any cashing out occurs.
- The employee is paid the amount in lieu at a rate that is no less than the employee’s basic periodic rate of pay.
- The employer has not required or pressured an employee to cash out personal / carer’s leave.
- No full-time employee working 38 hours per week is left with less than 15 days paid 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 have been eased for employers.
The aim of this change is 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 WRA closer to the requirements applying prior to the introduction of Work Choices.
The amended regulations require employers to keep records of hours worked only in relation to time when an employee is entitled to overtime rates or penalty rates, and in relation to casual employees and irregular part-time employees.
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 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.
Employees covered by pre-reform industrial agreements are now entitled to minimum entitlements under the Standard
Employees covered by pre-reform industrial agreements will not be entitled to the minimum entitlements under the Standard if the relevant pre-reform agreement deals with that particular matter in the Standard. However, where the pre-reform agreement does not deal with a particular Standard entitlement, that entitlement in the Standard will apply. Previously, employees covered by such pre-reform agreements were exempt from the Standard and this is a significant change.
Employees can waive the requirement to be provided with the Office of the Employment Advocate’s prescribed information sheet and access to a workplace agreement before signing that agreement
The amendments ensure that employees can agree to waive, in writing the requirement to have the information statement and access to a workplace agreement for seven days before approving that agreement or a variation to it. Employers must take reasonable steps to ensure that employees who will be covered by a workplace agreement are provided with a copy of it or ready access to the agreement, and a copy of the Office of the Employment Advocate’s information statement. This clarifies the existing law.
There have also been several minor technical amendments to ensure the legislation operates as originally intended. These amendments include provisions that:
- Require an employer to provide a copy of an AWA to the employee as soon as practicable after the AWA has been lodged.
- Amend the rules which provide for the continuing operation of s 170MX awards for a transitional period where the employer is not a constitutional corporation (this measure applies retrospectively from the commencement of WorkChoices, 27 March 2006).
Part 2: Changes to the Workplace Relations Regulations
The Workplace Relations Amendment Regulations 2006 (No 4) (4th changes) and the Workplace Relations Amendment Regulations 2006 (No 5) (5th changes) were made on 13 December 2006. Both sets of changes amend the Workplace Relations Regulations 2006 (Regs) made under the Workplace Relations Act 1996 as amended by Work Choices 2005. Before these most recent changes, the Regs had previously been amended on three occasions since becoming effective in March 2006.
Part of the first set of amending Regs (the 4th changes) commenced on Friday 15 December 2006. Other parts will commence on 27 March 2007. Briefly, some of the 4th changes to the Regs effective from 15 December relate to:
- Amendments to training arrangements to clarify that a State or Territory industrial law may continue to apply in certain circumstances.
- The effect of ‘protected preserved conditions’ where a Preserved State Agreement is terminated.
- The clarification of what is meant by ‘a more favourable outcome’ in relation to personal / carer’s leave under the Australian Fair Pay and Conditions Standard (Standard).
Some of the 4th changes to the Regs effective from 27 March 2007 relate to:
- Records relating to employees and pay slips. We will report on this in more detail in the New Year – watch this space!
Some of the 5th changes to the Regs relate to:
- The disclosure of information in relation to the restriction on disclosure of parties to an AWA.
- The entitlement to transfer to a safe job or paid leave for pregnant employees.
- Leave entitlements and basic periodic rate of pay in relation to piece rate employees.
- Basic periodic rate of pay for employees on parental leave.
Undoubtedly, those involved in human resources and workplace relations will already have a lengthy ‘to do’ list for 2007. This most recent round of changes will certainly make 2007 another exciting and challenging year.
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