Employment relationships are set to change with the introduction
of the Fair Work Act 2009. From 1 January 2010 the National
Employment Standards contained in the Fair Work Act, and a new
system of between 100 and 150 modern awards will take effect.
Employers and employees alike need to know how the new system will
affect their rights and obligations.
The Australian Industrial Relations Commission
(AIRC) is finalising its development of a system
of modern awards, set to come into operation on 1 January 2010. Two
phases of award arbitration are complete, with 44 modern awards
handed down to date of a likely total of between 100 and 150 awards
covering industries and occupations. A third group of awards have
been released for public comment, and the fourth group is scheduled
to be issued in September and finalised in December 2009.
Very few, if any, non-managerial employees will not be covered
by a modern award - given that the AIRC has indicated that it will
prepare an industrial award for all industries and occupations.
All modern awards are required to contain a model flexibility
clause, which can be used by employers to tailor flexible
arrangements to individual employees' needs and industry
Modern Awards are read in conjunction with the National
Employment Standards (NES) contained in the
Fair Work Act 2009 (Cth), which also come into operation
on 1 January 2010. In some instances, Modern Awards will modify the
NES to be industry specific - for example, to take into account
rostered days off, or loading payable on annual leave.
Common law contracts that provide for above-award payments no
longer necessarily insulate employers from award obligations to pay
penalty and overtime rates, allowances and annual leave loading. To
achieve this, the contract must contain a carefully worded set-off
and application clause tailored for the employee and the modern
award and referring to particular entitlements.
Given the award will include a "flexibility clause",
it will also be possible to update a contract to include the
flexibility provision, so that an annualised salary amount paid at
a level that incorporates particular award entitlements could
guarantee enforceability of the above-award arrangement.
The difficulty with flexibility clauses, however, is that they
cannot be a pre-condition of employment, and they may be revoked at
the behest of the employee on 28 days' notice. Accordingly,
such arrangements must be treated carefully.
Steps for Employers
Employers should update their understanding of the impact modern
awards will have on their organisation and manage compliance via a
thorough audit of award coverage and the terms of applicable modern
carefully assess which modern awards will
apply to them. It may be the case that employers that have
traditionally not been subject to award coverage will now be
covered by modern awards e.g. the real estate industry in
determine whether it is still viable to require employees to
work after-hours and on weekends, if they have
traditionally used contractual arrangements to pay over-award rates
of remuneration but not otherwise pay overtime rates and weekend
penalty rates. They may no longer be able to do so unless the model
flexibility mechanisms are used - and if the new arrangements are
used, the employer may face increased labour costs and
consider whether any traits particular to their
workplace will make it difficult to use the model
flexibility clause - noting that employees can give 28 days'
notice that they no longer wish the individual flexibility
agreement to apply.
consider mechanisms to "insulate" themselves from the
force of modern awards, such as an enterprise bargaining
agreement, if it appears modern awards would not be a
preferred form of industrial regulation for their workplace.
be mindful of the new "adverse action" and
"workplace rights" provisions of the Fair Work Act
2009 (Cth) in determining how to manage the liability
– e.g. do not subject an employee to a detriment or some
form of discrimination because he or she will now have the benefit
of a modern award.
Deacons is able to assist employers in determining and
implementing an appropriate strategy to deal with the impact of
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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Australian employees receive certain entitlements (such as annual leave and superannuation) where contractors do not.
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