Australia: Modern Award changes 2018 / 2019 - Implications for employers

Last Updated: 26 December 2018
Article by Richard Ottley and Nicole Cini

Employers face the constant challenge of trying to keep up with the pace of change to the industrial relations landscape. 2019 will prove to be no exception.

Following the Fair Work Commission (FWC) four-yearly review of Modern Awards, there have been a wide range of changes to some key Modern Awards, including some that have the potential to create serious implications for Australian employers.

In particular, some changes have created positive obligations on employers when ending or altering an employee's employment. This article outlines certain key changes to the positive obligations on employers and discusses some important implications. That is to say, employers will need to take proactive steps to comply, failure to do so leaving them exposed to a claim that they breached the applicable Modern Award. This potentially carries significant penalties.

Casual Conversion

The FWC has determined that all Modern Awards should now contain a model clause for casual conversion. This means that certain casual employees, will have the right to request that their employment be converted from casual to permanent employment. This change is only applicable to persons defined in the Modern Awards as 'regular casual employees' and aims to combat the widespread use of regular and ongoing casual employment.

As of 1 October 2018, 'regular casual employees' may request that their employment be converted to full time or part time employment.

Regular casual employees are casual employees who have in the preceding 12 months, worked a pattern of hours on an ongoing basis which, without significant adjustment, the employee could continue to perform as a full time employee or part time employee under the provisions of the Modern Award.

Where agreement on casual conversion is reached with the employer, the conversion is to take place within the next pay cycle unless otherwise agreed.

There are limited grounds for refusal of such a request. An employer can only refuse such a request on reasonable grounds (after consultation with the employee). Those grounds include where:

  • it would require a significant adjustment to the casual employee's hours of work to be engaged as a full time or part time casual (meaning that the employee was likely not a 'regular casual employee' to begin with);
  • it is known or reasonably foreseeable that the regular casual employee's position will come to an end within the next 12 months (for example, project based work);
  • it is known or reasonably foreseeable that the hours of work that the casual is required to perform will be significantly reduced in the next 12 months; or
  • it is known or reasonably foreseeable that there will be significant changes in the days or times of the employee's work hours in the next 12 months which cannot be accommodated in the hours the employee is available to work.

Each of these grounds of refusal must be based on fact and must be provided to the employee in writing within 21 days of the request being made. A refusal by an employer may ground a dispute which may ultimately be referred to the Fair Work Commission for resolution.

The model term also mandates that employers must provide all casual employees with a copy of those provisions within the first twelve months of their first engagement to perform work or by 1 January 2019 for existing casual employees at 1 October 2018.

The federal government is set to announce the inclusion of casual conversion rights in the NES as part of broader changes impacting casual employees. The purpose of this change is to provide non-award casual employees with the right to request casual conversion, however, it is uncertain as to whether the NES will replicate the model award clause drafted by the FWC.

Termination Payments

On 1 December 2016 the FWC issued a decision dealing with the payment of wages on termination of employment. At the time, only 36 of the 122 Modern Awards contained an express provision providing for the payment of wages and other amounts owing to an employee on the termination of their employment. Of those Modern Awards with a payment on termination clause, the provisions were generally inconsistent.

In December 2016 the FWC also expressed a "provisional view" that each Modern Award should contain a provision for the payment of wages and other amounts owing to an employee on termination of employment. On that basis, the FWC created a model payment on termination of employment clause for all Modern Awards.

Generally speaking, all Modern Awards now have a provision for the payment of entitlements upon termination of employment within a specified time frame. The timeframe for payment varies for some existing Modern Awards (for example, the Nursery Award 2010 now provides for payment of all Award and NES entitlements within 7 days of the last day of work and the Aged Care Award 2010 provides for payment no later than the final day of the formal notice period).

The FWC determined in July 2018 that unless an application for variation was made by an affected party by 10 August 2018, then those Modern Awards that did not contain a provision for payment of wages upon termination of employment (being some 86 Modern Awards), would be amended to include the model term. The model term came into effect on 1 November 2018.

The new model term means that under most Modern Awards, employers must pay employees any amount owed to them under their relevant Modern Award and under the NES, within seven days after the day on which the employment terminates (unless an application is made to the FWC).

This change has the potential to create implications for employers at termination, particularly when the amounts payable to the employee are in dispute. For example, there may be a dispute about whether a termination was masquerading as due to poor performance when it is being claimed it was due to redundancy (with redundancy payments being claimed by the sacked employee).

If at the date of termination, there is a dispute about the wages owed or amounts to be deducted then employers may approach the FWC seeking an order deferring the operation of the Award provision, where the applicable Modern Award is one which contains such a model term. For employers who cannot or choose not to avail themselves of such a provision, then there is a potential risk that failure to pay Award or NES entitlements within the specified time frame will constitute a breach of the relevant Modern Award and NES and result in penalties for employers.

Flexible Work

Many employers are familiar with the flexible work provisions in the Fair Work Act 2009 (Cth) (s65), however, as from 1 December 2018, flexible work is now a model term in all Modern Awards. Under the model term, employers must actually have a discussion with employees who make a request and try to come to a genuine agreement. The obligation to discuss did not exist under the Act. Employers must also provide a written response explaining any grounds for refusal of the request.

This may have implications for organisations who do not have an existing flexible work policy that creates a standardised approach across the organisation, particularly where there is inconsistency in grounds for approval and rejection.

Of particular concern for employers who do not have a sophisticated process for addressing flexible work requests is the potential for General Protections claims. Often employees request flexible work arrangements due to family responsibilities and an inconsistent approach to flexible work requests may result in employees perceiving a decision as discriminatory. This could expose an employer to a General Protections claim.

To mitigate this risk, employers should ensure that the reasonable business grounds are documented clearly and there is little room for doubt that they are objective in the circumstances.

Conclusion

These new model terms create various obligation for employers including to consult with employees and ensure that payment upon termination is managed within a strict timeframe.

Some Modern Awards already contain terms similar to the model terms and are not impacted, so employers should be careful to check each Modern Award on a case by case basis.

There is a dispute resolution term in Modern Awards. Alleged failure to follow certain Award terms may give rise to a dispute and parties may refer the matter to the FWC under the dispute resolution model term. Unless otherwise agreed by the parties, the Act itself does not appear to allow an employee to dispute the merits of reasons for decisions concerning flexible working arrangements (and an extension of unpaid parental leave), only the validity of the process.

To prepare and improve processes in response to the above changes, we recommend that employers be aware of their positive obligations and engage in process improvement to ensure that each timeframe is met. This will help avoid disputes and potential liability.

For further information please contact:

Richard Ottley, Partner
Phone: + 61 2 9233 5544
Email: rbo@swaab.com.au

Nicole Cini, Associate
Phone: + 61 2 9233 5544
Email: nlc@swaab.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.

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