Australia: Workplace Relations Update

Workplace Relations Amendment (Transition to Forward with Fairness) Act 2008

The Workplace Relations Amendment (Transition to Forward with Fairness) Act 2008 (Act) was passed through Parliament on 19 March 2008 and to took effect from 28 March 2008.

Employers and employees will no longer be able to make AWAs however are able to continue to make employee collective agreements, union collective agreements, union collective greenfield agreements and employer greenfield agreements, but these agreements will be subject to the new no disadvantage test.

AWAs made prior to the commencement of the Act will remain in force until they are terminated in accordance with the current rules. Existing AWAs will only be able to be varied in limited circumstances, for example, to remove prohibited content or if the AWA is discriminatory.

Where an AWA, or any other workplace agreement, is terminated or is not replaced, the award or collective agreement applicable to the employee will apply, as opposed to the AFPCS and protected award conditions.

An employer and employee will be able to make an ITEA if, as at 1 December 2007, the employer employed at least one employee on an individual statutory agreement (such as an AWA, a pre-reform AWA, a preserved individual state agreement or a Victorian employment agreement). However, an employer will not be able to make an ITEA with an employee unless:

1. the employee is a new employee and the ITEA is made within 14 days of the commencement of the employee's employment; or
2. the employee is an existing employee whose employment relationship is regulated by an AWA, pre-reform AWA, a preserved individual state agreement or a Victorian employment agreement; or
3. the employee is a previous employee and that employee's employment was not terminated in order to re-engage that employee on an ITEA.

ITEAs can be offered to new employees as a condition of their employment. They will have a nominal expiry date of no later than 31 December 2009 and will be subject to the new no disadvantage test.

Key implications for employers

Employers will need to ensure that they make ITEAs with new employees within 14 days of the commencement of their employment.

ITEAs can only be offered to an existing employee where the existing employee's employment relationship is regulated by an ITEA, an AWA, pre-reform AWA, a preserved individual state agreement or a Victorian employment agreement.

Employers will not be able to reduce the terms and conditions under a collective agreement or award applying to employees by making an ITEA.

In circumstances where a workplace agreement is terminated and not replaced, the award or collective agreement will apply to employees, as opposed to the AFPCS and protected award conditions.
Article by Carly Neylan and Mark Sant

What Are The National Employment Standards?

In February 2008, the Government released a draft of its National Employment Standards (NES) for public consultation. Workplace Relations Minister Julia Gillard has indicated that a draft bill on the NES will be introduced sometime later this year. The NES will introduce a system of 10 minimum employment standards, which will replace the current Australian Fair Pay and Conditions Standard (AFPCS) when the Government's full reforms come into effect in January 2010. The draft standards are outlined below.

Maximum weekly hours

Consistent with the provisions in the current AFPCS, the draft NES provides for a standard working week for full time employees of 38 hours plus reasonable additional hours.

The draft NES does not include provision for the averaging of hours however will allow awards to deal with the averaging arrangements which can set out industry specific arrangements.

Requests for flexible working arrangements

The draft NES allow parents or carers of children under school-age to request a change in working arrangements for the purpose of being able to care for the child.

Significantly, an employer may only refuse a parent's request for a change in hours, patterns, location of work or other working arrangement on the basis of reasonable business grounds.

The employer must also respond to the employee's request for flexible work arrangements in writing within 21 days of any such request, stating the reasons for refusal if the request is refused.

Parental leave and related entitlements

The draft NES envisage a right of both parents to request up to 12 months unpaid parental leave. This can be taken sequentially, allowing a child to have a parent at home for the first two years of life. Alternatively, where the family prefers one parent to take a longer period of leave, that parent will have the right to request up to 12 months' additional unpaid parental leave.

Annual leave

The draft NES does not propose any significant changes to the current entitlement to annual leave under the AFPCS however:

• the definition of "shift worker" is not defined in the NES and will be worked out in awards so as to allow for an industry-specific approach. Consistent with the current AFPCS, shift workers are entitled to an additional week of annual leave;
• there is an express right for employees on annual leave to be re-credited with their annual leave and take the time off as personal/carer's leave or community service leave in specific circumstances;
• there will no longer be a right to direct an employee to take annual leave unless provided for in an award.

Personal/carer's leave and compassionate leave

The draft NES does not propose any changes to the current personal/carer's leave or compassionate leave entitlements under the AFPCS however:

• there is no cap on the amount of carer's leave that an employee can take each year. Under the AFPCS, employees can only take up to 10 days of their personal/carer's leave as paid carer's leave in any year;
• casuals will be entitled to unpaid compassionate leave.

Community service leave

The draft NES allows employees to take leave (paid or unpaid, depending on the circumstances) for prescribed community service activities including jury duty and unpaid emergency services duty.

Long service leave

The Government has indicated its desire to establish a uniform system for long service leave, although it has not yet drafted a national standard in relation to the entitlement. The draft NES currently recognise the rights of a employee to take long service leave in accordance with other industrial instruments.

Public holidays

The Government has shown its intention to restore penalty rates for public holidays to their pre-Work Choices form. Employers will only be able to request employees to work on public holidays where such a request is reasonable in the circumstances, and an employee will only be able to refuse such a request if either the request is unreasonable or the refusal is reasonable.

Notice of termination and redundancy pay

Notice for termination of employment remains the same under the draft NES.

The Government plans to introduce compulsory redundancy pay for employees with an exemption for small businesses who employ less than 15 employees.

Although there are various exceptions in relation the redundancy provision, the current form of the draft NES suggests that redundancy entitlements are intended to apply to all employees including executives and high-income employees. It is yet to be seen whether Government will be persuaded to limit redundancy entitlements to employees earning less than a certain amount.

Fair Work Information Statement

The draft NES provides that, employers will have to give all employee a Fair Work Information Statement at the commencement of employment. The statement will be published by Fair Work Australia and cover such matters as the NES, modern awards, agreement-making, the right to freedom of association and the role of Fair Work Australia.

We will provide you with further updates on the NES once the Government introduces the draft bill later this year.
Article by Nicholas Linke

State Industrial Laws May Be Preserved As Napsas Where Entitlements Are More Generous

In an important decision, the District Court of New South Wales recently held that the provisions of the Annual Holidays Act 1944 (NSW) (AH Act) are preserved as a national agreement protecting state awards (NAPSA) and may override the annual leave provisions in the Workplace Relations Act 1996 ((WR Act) where the terms of the AH Act are incorporated into an employee's contract of employment and/or the provisions of the AH Act are more favourable than the annual leave provisions in the WR Act.

Background

Mr Mason was employed by Citigroup in November 2001 as a financial consultant. His employment was terminated in July 2006. During his employment, Mr Mason received an annual base salary of $50,000 and was also remunerated with substantial commission payments. In the year leading up to the termination of his employment, Mr Mason received $282,088 in commission payments.

Mr Mason's contract of employment contained a clause which stated that he was entitled to "annual leave and long service leave in accordance with legislation".

On termination of his employment, Mr Mason was paid his accrued annual leave entitlements (accrued entitlements) based on his annual base salary only.

Issue in dispute

The issue before the Court was whether, on termination of his employment, Mr Mason was entitled to be paid his accrued entitlements based on his annual base salary or based on his full remuneration package which totalled more than $300,000 that year.

AH Act v WR Act

Section 4 of the AH Act provides that an employee should be paid annual leave at the employee's ordinary rate of pay. The definition of ordinary rate of pay under the AH Act includes payments relating to commissions and bonuses (although bonuses are not taken into account if the annual pay of the employee (excluding bonuses) exceeds $144,000). In contrast, section 235 of the WR Act provides that annual leave is to be paid at the employee's basic periodic rate of pay. The definition of basic periodic rate of pay under the WR Act does not include payments relating to commissions and bonuses.

Mr Mason argued that he was entitled to payment of his accrued entitlements in accordance with the provisions of the AH Act because:

1. the provisions of the AH Act continued to apply as a NAPSA; and in the alternative
2. the provisions of the AH Act were incorporated by reference into his contract of employment.

The Court accepted both of Mr Mason's arguments.

AH Act as a NAPSA

The Court held that the provisions of the AH Act continued to apply as a NAPSA as:

1. under the WR Act, NAPSAs preserve entitlements under state industrial laws; and
2. the AH Act is a state industrial law for the purposes of the WR Act.

The Court also determined that the annual leave provisions of the AH Act were more generous than the annual leave provisions of the WR Act, because in calculating an entitlement to annual leave the AH Act calculates the entitlement on an employee's base salary plus commissions and bonuses, whereas the WR Act does not.

On that basis, the Court held that the employee was entitled to have his accrued entitlements paid to him based on his full remuneration package.

Terms of AH Act incorporated into contract of employment

The Court also held that the provisions of the AH Act were incorporated by reference into Mr Mason's contract of employment because, at the time that the contract of employment was entered into, the parties intended that the provisions of the AH Act would apply to the contract.

Orders

Citigroup was ordered to pay the shortfall in Mr Mason's accrued entitlements, amounting to $57,245.63, plus interest and his legal costs.

Citigroup has appealed this decision.

Implications for employers

This decision may have important implications for employers whose employees are remunerated by way of base annual salary and commission/bonus payments or those employers whose contracts of employment incorporate the terms of state industrial laws, such as the AH Act in circumstances where:

1. prior to the introduction of the WR Act (as amended by WorkChoices), the terms and conditions of the employee's employment were determined, in whole or in part, by the state industrial law; and
2. the provisions of the state industrial law are preserved as a NAPSA; and
3. the entitlements under the state industrial law are more generous than the WR Act.

We will keep you posted on developments in relation to the appeal.
Article by Carly Neylan

Sydney
Kathryn Dent	t (02) 9931 4715	e kdent@nsw.gadens.com.au
Mark Sant	t (02) 9931 4744	e msant@nsw.gadens.com.au
Melbourne
Steven Troeth	t (03) 9612 8421	e stroeth@vic.gadens.com.au
Ian Dixon	t (03) 9252 2553	e idixon@vic.gadens.com.au
Brisbane
John-Anthony Hodgens	t (07) 3231 1568	e jhodgens@qld.gadens.com.au
Adelaide
Nicholas Linke	t (08) 8233 0628	e nlinke@fisherjeffries.com.au
Perth
Tim Masson	t (08) 9223 9223	e tmasson@wa.gadens.com.au
Cairns
Stephen Devenish	t (07) 4031 1622	e sdevenish@cns.gadens.com.au

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.