Whether you're an employee or an employer, it's important to know whether you/your employee's position is award covered and, if so, by which award.
Award coverage is relevant to determining monetary and non-monetary entitlements, as well as availability of/exposure to unfair dismissal claims on termination of employment and breach of award claims.
If you're an employer, you should consider getting advice on award coverage before:
- issuing an employment contract;
- terminating an employee's employment; and or
- bargaining an enterprise agreement.
If you're an employee, it may be useful to know whether you're award-covered if:
- you think you may not be receiving your correct entitlements (monetary and non-monetary - such as meal breaks); and or
- you are facing potential or actual termination of employment.
The consequences of not knowing award coverage can be costly. Employees may miss out on significant employment entitlements, negotiating leverage and potential claims. Employers may face underpayment and breach of award claims, which can attract significant financial penalties. Furthermore, employers can be exposed unwittingly to risk of unfair dismissal claims.
This article discusses the significance of award coverage for employees and employers and the reasons you might consider getting legal advice about it.1
What are awards?
Modern awards set out the minimum terms and conditions of employment for national system employees who are covered by the award and to whom the award applies.
Modern awards can be industry or occupation based. For example, the Mining Industry Award 2020 covers a variety of employers and employees in the mining industry, whereas the Architects Award 2020 covers only employers of architects and architects (including Graduates of Architecture, Experienced Graduates of Architecture and Registered Architects).
Broadly, an award covers a person if their position falls within its scope.
However, an award only applies to that person if it has the effect of conferring rights or imposing obligations on them and that application is not excluded by another instrument (such as an enterprise agreement or a high-income guarantee).
Determining award coverage
It won't always be immediately apparent whether an employee is award-covered and, if so, by which award. In any event, it's rarely sufficient merely to consider the employee's job title. For example, an employee wholly engaged in clerical work in the private sector would, on the face of it, appear to be covered by the Clerks - Private Sector Award 2020 (Clerks Award). However, such an employee is unlikely to be covered by the Clerks Award if they are doing clerical work for an employer in the aged care industry, in which case they would probably fall within the coverage of the Aged Care Award 2010. In order to determine award coverage, and particularly where an employee appears to fall within the scope of more than one award, it is necessary to consider the specific duties the employee performs and the context in which they perform them.
Importantly, the Miscellaneous Award 2020 (Miscellaneous Award) operates as a catch-all award covering employers and employees not covered by any other modern award and who are not excluded from coverage by the Miscellaneous Award.
Traditionally, certain types of employees have been considered not to be award covered because of the nature or seniority of their role, including managerial employees and certain professional employees. However, as the case of Arundell & Ors v Macquarie Bank Limited (No. 2)  FCCA 3313 (Macquarie Bank) shows, employers should not assume that roles which are award-free in one industry will necessarily be so in others. In that case, the Court found that a group of senior wealth advisors, some of whom earned close to a million dollars per year, were covered by the Banking, Finance & Insurance Award 2020. Because the employer did not pay the employees' award entitlements, and their contracts of employment did not adequately offset those entitlements, the employer was ordered to pay significant amounts in compensation and penalties.
Consequences of award coverage
If an employee is award-covered, the employer must ensure that the employee is remunerated at a rate at least commensurate with that of their classification level under the award. The employer must also ensure that the employee receives the entitlements owing to them under the award, both monetary and non-monetary. Some, but not all, award entitlements may be offset by higher rates of remuneration however, as the case of Macquarie Bank demonstrates, employment contracts must be appropriately and carefully drafted to achieve this.
Non-monetary entitlements (such as meal breaks and consultation provisions) can vary between awards, so employers whose workforce is covered by multiple awards should not assume that a 'one size fits all' approach will satisfy their award obligations. Employers should bear this in mind if they use standard template contracts of employment (rather than tailored templates for each category of employee in their workplace), and or when negotiating an enterprise agreement.
Award-covered employees are eligible to bring unfair dismissal claims, irrespective of their level of income. This can create an unexpected risk of a legal claim for employers, and an option for employees to dispute termination of their employment at the Fair Work Commission. For this reason, employees and employers alike should get advice on award coverage in circumstances where termination is a possibility and award coverage is unclear.
Even if an employee is covered by a modern award, the award may not apply to them if, for example, its application is excluded by an enterprise agreement, or a guarantee of annual earnings. If the award does not apply to the employee, the employee will not be entitled to the benefits, or subject to the obligations (if any), contained in the award.
Where award application has been excluded, or monetary entitlements under the award are offset against higher-than-award remuneration, employers must nevertheless ensure ongoing compliance with their statutory obligations, particularly vis-à-vis any amendments to the award (especially the annual increases to award rates of pay) so as to avoid potential underpayment claims.
What to do next?
Contact MDC Legal for award-coverage advice if you are:
- an employee, unsure of your award coverage, and:
a) think you might not be receiving your employment entitlements; and or
b) are facing actual or potential termination of employment; or
- an employer, unsure of award coverage of your workforce, and looking to:
a) draft/issue an employment contract;
b) terminate an employee's employment; and or
c) bargain an enterprise agreement.
1 The information contained in this article relates exclusively to federal system employees and employers. However, similar principles apply to employees and employers in the WA state industrial relations system. If you are an employee or employer covered by the WA state industrial relations system, you may wish to seek advice on award coverage in circumstances of potential or actual termination of employment and or in circumstances where a contractual benefit has been withheld/denied.
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.