Australia: 1 January 2010 (Fair Work Act changes) - is your workplace ready?

Last Updated: 6 January 2010

1 January 2010 marks the date on which many of the amendments contained in the Fair Work Act 2009 commence. Employers can no longer afford to sit back and passively watch the industrial relations landscape transform. The changes about to take effect are those that will impact upon the day-to-day running of almost every business and accordingly, employers must plan and implement the necessary changes for their business.

The commencement of the National Employment Standards (NES) and Modern Awards will result in many practical outcomes for which employers need to be well prepared. In this newsletter, we alert you to some of the main areas in which thorough planning should be occurring now.

1. New entitlements to flexible work arrangements and increased leave entitlements

Requests for flexible work arrangements

Employees who care for young children will have the right to request flexible work arrangements until their children reach school age or until the age of 18 in the case of a child with a disability. Such requests could include working part time instead of full time, changing start and finish times and/or changing the location of work. Requests must be made in writing, stating the change sought and explaining why it is needed.

Only employees who have 12 months continuous service with an employer or who are long term casual employees with a reasonable expectation of continuing employment, can make such requests.

Employers must respond to requests in writing within 21 days of receiving a request. Employers can refuse such requests only on "reasonable business grounds". Factors likely to be taken into account include: the effect of accommodating the request on the workplace and the employer's business; cost; impact on efficiency, productivity; customer service; the employer's ability to reorganise work arrangements; and the needs of the business. Written reasons for refusing a request must be given to an employee.

Entitlement to unpaid parental leave increases

Employees will be entitled to request up to 12 months parental leave for each parent with primary care of a child. Alternatively, one parent will have the right to request an extra 12 months unpaid parental leave (that is, up to two years of unpaid leave) when the first year of leave has been completed. Such requests must be made in writing.

Employers can refuse these requests on "reasonable business grounds" such as, the cost of accommodating the request, the employer's ability to reorganise work arrangements and the needs of the business. Employers must provide a written response outlining the reasons for refusal within 21 days of receiving the request.

In addition, the entitlement to concurrent parental leave for couples, will increase from 1 week to 3 weeks.

Annual leave arrangements

All employees will be entitled to four weeks paid annual leave per year and five weeks for certain shift workers. Under the NES there is more scope for employers to require employees to take accrued annual leave. An employer can direct an employee to take annual leave in circumstances such as an annual Christmas/New Year shutdown or when an employee has a large accumulated leave balance.

In certain circumstances employees may request to cash out up to two weeks annual leave in any one year, provided that they have a remaining entitlement balance of four weeks. Importantly, employers cannot pressure or require an employee to do so.

Personal/carer's leave and compassionate leave

Each full time, non-casual employee is entitled to ten days paid personal/carer's leave. All employees including casual employees, will be entitled to two days unpaid personal/carer's leave.

In certain circumstances, employees can request to cash out some of their paid personal/carer's leave provided a balance of at least 15 days is maintained. Employers cannot pressure or require an employee to make such a request.

Employees are entitled to two days paid compassionate leave when a member of the employee's immediate family or household sustains a serious illness, serious injury or dies. Casual employees will now have access to two days unpaid compassionate leave.

Community service and jury service

Employees will now be entitled to unpaid leave for prescribed community service activities and voluntary emergency management activities and up to ten days paid jury service leave. Employees must comply with specific notice and evidence requirements in order to qualify for this entitlement.

2. Preparing for the new flexible environment and changed leave entitlements

Employers should prepare flexible workplace policies setting out procedures for dealing with requests for flexible work arrangements. In addition, existing contracts of employment and policies specifying leave entitlements need to be reviewed, amended and updated and new policies created.

All managers and supervisors should be trained about the new entitlements and how to respond and deal with requests from employees when they arise. Managers and supervisors should be educated not to make decisions on discriminatory grounds and to make decisions in an objective, reasonable and procedurally fair manner and in accordance with the NES. In doing so we recommend that forms and checklists are formulated so as to assist managers to apply the new policies in a timely, lawful and consistent manner.

Statutory entitlement to redundancy pay

There will be a statutory right to receive a redundancy payment of up to 16 weeks pay, where an employee's job is terminated either owing to restructuring, insolvency or bankruptcy of the employer. This entitlement is currently provided in many awards but will now be a statutory requirement for all employees covered by the NES, who have more than 12 months continuous service and who work for an employer that employs 15 or more employees. The entitlement does not extend to casual employees, those employed for a specified time, task or season, employees to whom a training arrangement or apprenticeship applies or to an employee covered by an industry-specific redundancy scheme in a modern award or enterprise agreement or is terminated because of serious misconduct.

Importantly any service prior to 1 January 2010 does not count as service for the purpose of calculating an employee's redundancy entitlement unless the employee had a redundancy entitlement immediately before 1 January 2010.

Redundancy pay is calculated using an employee's base rate of pay and by reference to his/her length of service. An employee will not be entitled to redundancy pay under the Fair Work Act where the employee rejects an offer of employment made by another employer that is on terms and conditions substantially similar to and considered on an overall basis to be no less favourable than the employee's existing terms and conditions and recognises the employee's service with the first employer for the purpose of calculating redundancy entitlements. Fair Work Australia can order a lesser amount of pay if the employer finds the employee similar alternative employment or is unable to pay.

Fair Work Information Statement

Employers will be required to provide a copy of a Fair Work Information Statement to all new employees before or as soon as practicable after, the commencement of employment. The Statement will set out employee rights regarding NES, modern awards, agreement making, termination of employment and the role of the Fair Work Australia and the Fair Work Ombudsman. The Statement will be published by the Fair Work Ombudsman.

3. Modern Awards

New modern awards will commence operation from 1 January 2010 replacing current award coverage. Accordingly, employers need to check which awards will apply to them in the new year.

Transitional arrangements provide that any changes in wages, loadings and penalty rates will be phased in from 1 July 2010 so as to allow affected parties time to make appropriate changes. However, all other entitlements under modern awards will begin to apply from 1 January 2010.

Modern awards apply to employers and employees covered by the national system. Modern awards will not apply to employees who:

  • are covered by an enterprise agreement
  • are managerial or senior employees who have not traditionally been considered award employees
  • high income employees who earn over $108,300 per annum and who have entered into a guarantee of annual earnings.

Preparing for Modern Awards

Employers need to determine which modern award will apply to them and to ensure that they are aware of the substance and timing of the new terms and conditions that will apply to their business.

All policies and contracts of employment should be reviewed to ensure that they do not provide entitlements less favourable than the relevant modern award.

If employers want to exclude high income earning employees from award coverage they must enter an agreement to do so.

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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