Australia: HR & IR Update

Last Updated: 19 February 2008
Article by Andrew Cunningham

Australian Government Releases Draft National Employment Standards

On 14 February 2008, the Australian Government released an exposure draft of the proposed National Employment Standards.

The National Employment Standards (NESs), once finalised and introduced through legislation, will underpin the modern award system as well as applying to award-free employees. The start-up day for both the NESs and modernised awards will be 1 January 2010. They will be administered by Fair Work Australia – which will open its doors on 1 January 2010, as well.

The Government has released a discussion paper, together with the draft NESs, which describes the NESs in detail and invites public comment on a number of specific issues. The Government is particularly interested in comment concerning atypical working arrangements and how they would sit with the NESs. The closing date for submissions is 4 April 2008.

Although the discussion paper runs to 89 pages, the draft NESs themselves are only 21 pages. This can be contrasted with the current Australian Fair Pay and Conditions Standard (Fair Pay Standard), which takes up more than 100 pages of the current Workplace Relations Act.

Implications For Employers

  • It is not yet clear how the flexibilities are to be offered to award-free employees, such as those earning more than $100,000 per annum. It seems that a 'Better Off Overall Test' will apply. But how that test will operate is yet to be determined.
  • Employers – especially in industries with atypical employment arrangements - would be well advised to read and consider the NESs and the discussion paper, and to give thought to how the proposed NESs would work in their particular industry.
  • The Government's call for submissions offers a rare opportunity for employers to be consulted now, before legislation is presented to Parliament, in relation to the detail of the National Employment Standards. The legislative process is being engaged in carefully and deliberately, which suggests that changes and reversal might not be so likely once the legislation is in place. If employers wish their voices to be heard on the detail of the National Employment Standards, the time to make submissions is now.
  • The proposal that the NESs leave much of the detail of certain entitlements to be worked out on an industry-by-industry basis in awards makes the award modernisation process vital to the interests of employers and employees.
  • Assuming that the Transitional Bill (see our HR & IR Update of 14 February 2008) is not passed until after June 2008, most of the award modernisation process will need to be completed over about 18 months (before 1 January 2010). The Australian Industrial Relations Commission has already foreshadowed that it will take a proactive approach to award modernisation. If employers wish their voices to be heard, they should take an active role in that process and consider what flexibilities they want in awards. This is especially true for employers using AWAs.
  • Employers need to start reviewing their employment contracts now, in anticipation of the NESs. A classic example is severance pay with senior executives – where employers may want to reduce other termination benefits payable if the executive is entitled to severance pay.
  • Just like 2005, 2006 and 2007, this year promises to be a hectic year for workplace relations in Australia! So too does 2009, as the new workplace relations system is bedded down before its commencement on 1 January 2010.

The main reason for the brevity of the NESs is that they leave much of the detail to be contained in modern awards, on an industry-by-industry basis. This approach may be welcomed by many who were frustrated by the 'one size fits all' approach of the Fair Pay Standard, which led to complexity and also uncertainty where employment arrangements were atypical. A new test, called the 'Better Off Overall Test' will be applied when comparing an award and an NES.

As foreshadowed by the ALP in its Forward with Fairness policy announcements, the NESs deal with the following matters:

  • Maximum ordinary hours: 38 hours per week, plus reasonable additional hours.
    • Averaging of hours will be allowed, but only if provided for in an award. This, of course, raises the problem of how averaging might work for employees who are currently award free.
    • Averaging will work in a different manner to that under the Fair Pay Standard, for example so that an employer may not be able to require an employee to work 20 hours in one week and 56 hours in the next week.
    • Hours worked at the employee's 'own volition' will not count toward the calculation of additional hours.
  • Requests for flexible working arrangements: Employees with children below school age will be able to request flexible working arrangements, and employers must not unreasonably refuse such a request. However, Fair Work Australia will not require the employer to comply with such a request. Fair Work Australia will provide guidance and advice, instead.
  • Parental leave and related entitlements: The basic entitlement remains 52 weeks' unpaid leave. However, there will be some changes when compared to the Fair Pay Standard:
    • The amount of concurrent parental leave that will be able to be taken by both parents will be extended from one week to three weeks.
    • Once one parent finishes the first 52 weeks' parental leave, the other parent can take a further 52 weeks.
    • If the second parent does not take the next 52 weeks' parental leave, the first parent can request an additional 52 weeks' parental leave. The employer may not unreasonably refuse this request. Fair Work Australia will not require the employer to comply with such a request, but it will provide general information and assistance to employers as to what would constitute reasonable business grounds for refusal.
  • Annual leave: This will remain at 4 weeks per annum for full-time workers, plus an additional week for shift workers (pro-rata for part-time employees). However:
    • The complex crediting, accrual and record-keeping rules will be removed from the Act and Regulations.
    • The definition of 'shift worker', to whom an extra week's annual leave is provided, will be left to be worked out on an industry-by-industry basis in awards.
    • Cashing-out of annual leave will not be available as of right, but it may be provided for on an industry-by-industry basis in awards. It is not clear whether this same flexibility will be provided to award-free employees.
    • Employees who take annual leave, who fall sick or are required to attend to emergency services duties or jury duty during their annual leave period, may be re-credited with their annual leave and take the time off as personal/carer's leave or community service leave.
    • One problem is that there is no right to direct an employee to take annual leave.
    • This is left to awards. Work Choices has a power to direct the taking of excessive annual leave or for a shutdown. Some State legislation has a general power to direct the taking of annual leave.

This is a matter which, no doubt, will be raised in the consultative process.

  • Personal/Carer's leave: This entitlement remains at 10 days' personal/carer's leave per annum for full-time employees (pro-rata for part-time), plus 2 days per occasion for compassionate leave. However:
    • There will be no cap on the amount of carer's leave that an employee can take each year, as long as he/she has accrued personal/carer's leave. Under Work Choices, only 10 days' personal/carer's leave can be used for carer's leave every 12 months.
    • An entitlement to unpaid compassionate leave will be provided to casual employees.
    • The complex crediting, accrual and record-keeping rules will be removed from the Act and Regulations.
    • There is no requirement to provide medical certificates – but simply reasonable substantiation of illness etc in all the circumstances. The Government has indicated that it regards compulsory medicate certificates for all absences as unnecessarily expensive and burdensome for employees.
  • Community service leave: Employees will be able to take unpaid community service leave to attend to voluntary emergency management activities like the SES and the CFA.

Employees will also be entitled to their ordinary pay if they require time off, and make up pay (so that they receive their ordinary pay once jury service pay is included), if they are called up for jury service.

Employees will also be entitled to 'reasonable rest time' immediately after performing emergency duties. This may cause specific issues for shift workers.

  • Long service leave: The Government has committed to discussions towards a national standard of long service leave. In the meantime, the NESs will protect existing long service leave entitlements under awards, NAPSAs and State and Territory laws.
  • Public holidays: Like under the Work Choices, public holidays will be protected. Employees will be able to refuse to work public holidays, on reasonable grounds, and will be entitled to be paid if they take the day off. Public holiday penalties, and substitution of public holidays for particular industries, are to be dealt with in awards.
  • Notice of termination and redundancy pay: The current provisions for notice of termination or payment in lieu are to be retained. In addition, employees will have a statutory entitlement to redundancy pay if they are terminated by reason of redundancy:
    • Redundancy pay will be based on the scale determined by the Australian Industrial Relations Commission in its 2004 Termination Change and Redundancy Decision (a maximum of 16 weeks' pay at 9 years' service, which goes back down to 12 weeks after 10 years' service).
    • Employers with fewer than 15 employees will be exempt from redundancy pay obligations. This is a departure from the AIRC's 2004 decision, but is consistent with the approach taken under Work Choices.
    • Exceptions will apply in transmission of business situations and – subject to an application to Fair Work Australia - where suitable alternative employment is arranged, and in cases of 'genuine financial difficulties'. These exceptions are long-standing under the standard award redundancy pay provisions.
    • The introduction of a universal redundancy standard is new and very significant. At the moment, employees are only entitled to redundancy pay if they are covered by an industrial instrument or the employer adopts a redundancy policy.

This prospective new entitlement potentially needs to be taken into account in the drafting of contracts – for example, with a senior executive who may already be entitled to substantial benefits on termination but not severance pay.

There is also the issue that some State tribunals adopted a higher redundancy standard (e.g New South Wales) – which is now contained in NAPSAs.

This will no doubt be an issue in the award modernisation process.

Another issue is the unique redundancy arrangements in some industries – e.g the redundancy funds in the building and construction industry and associated concept of redundancy on leaving the industry rather than being made redundant by a particular employer.

  • Fair Work Information Sheet: Employers will be required to provide all new employees with an Information Sheet, prepared by Fair Work Australia, that contains information about the NES, modern awards, agreement making, freedom of association and Fair Work Australia. Contrary to some expectations, employers will not be required to include information about their own workplace or their employees' entitlements on the Information Sheet. Unlike the Coalition Government's 'Workplace Relations Fact Sheet', employers will not be required to provide the Information Sheet to existing employees.

Wages, which are currently contained in the Fair Pay Standard, will not form part of the NESs because they will be part of modern awards after 1 January 2010.

There is much in the draft NESs, and the accompanying discussion paper, that warrants further consideration and discussion. Just one of these issues is what happens to award-free employees (such as those earning more than $100,000 per annum), who will not be able to access the flexibilities to be offered through the award system for some NES entitlements (subject to the 'Better Off Overall Test'). One option that is discussed in the discussion paper is a 'default' flexibility rule for award-free employees. Another option that is discussed is a 'catch-all' award offering flexibilities to previously award-free employees. There are many issues to be considered with these proposals.

Next Steps

The next step is for employers, employees, organisations and others to make submissions to the Government about the draft NESs, so that the legislation implementing the NESs can be prepared for Parliament to consider.

In the meantime, the Government will be working on a Substantive Bill to implement the remainder of the ALP's Forward with Fairness policy, considering a proposal by the NSW Government for uniform national workplace relations laws based on a 'Ministerial Council' basis, and attempting to navigate the Transitional Bill through a hostile Senate (see our HR & IR Update of 14 February 2008).

In this regard, the Transitional Bill has been referred to a Senate Committee – which is due to report in April. The prospect of the Transitional Bill being passed – or at least the sections relating to AWAs – before 1 July (when the new Senators take office) is becoming increasingly remote.

Changes To Higher Education Workplace Relations Requirements

For a number of years universities have been required to satisfy particular conditions, known as Higher Education Workplace Relations Requirements (HEWRRs), in order to be eligible to receive Commonwealth funding (which comprises a major part of University funding).

The Howard Government used the HEWRRs to drive its agenda for industrial relations change in universities. A key part of HEWRRS was the requirement that universities offer AWAs to employees as a condition of funding and that universities have direct relationships with employees, with unions only being involved at employees' request.

It was therefore no surprise then that, on Wednesday (13 February 2008), Deputy Prime Minister Julia Gillard introduced a Bill abolishing the requirement that universities satisfy the HEWRRs as a condition of funding. The Bill is known as the Higher Education Support Amendment (Removal of Higher Education Workplace Relations Requirements and National Governance Protocols Requirements and Other Matters) Bill.

The repeal of this requirement will not affect basic funding for the 2008 grant year.

In her second reading speech, Deputy Prime Minister Gillard said that while the conditions on funding will be removed, the ALP Government will build more collaborative relationships with Universities, encouraging them to pursue good governance practices and increase productivity and efficiency.

Once more, the issue is whether the Bill will pass the Senate – given it remains in Coalition hands until 1 July 2008. After 1 July, the key issue will be if Senator Nick Xenophon (South Australian Independent) support the Bill – as the Greens will no doubt support the Bill and it is seeming increasingly likely that Senator Fielding will as well.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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