Understanding The New Fair Work Industrial Relations Laws

Big changes came to Australia’s workplace on July 1^st 2009 when the Rudd Government’s Fair Work industrial relations changes came into effect.

The new IR laws meant big changes for every employer and in particular, small and medium employers. For example, protection against unfair dismissal claims that SME’s enjoyed under WorkChoices is gone and while there is some protection for companies with 15 employees or less, there are still traps these small employers need to dodge.

The Fair Work Act 2009 sets out the minimum employment conditions that all employers, including small ones, need to be aware of. Employers that don’t know what their rights and obligations are under the new laws are simply maximising risk to their business.

When Did This Start?

The Fair Work Act commenced operation on July 1^st 2009.

Initially it dealt with unfair and unlawful dismissal rules, agreement making obligations, transfer of business rules and workplace rights as outlined in the Fair Work Act 2009. The Fair Work Ombudsman was established and they were given powers to enter businesses and launch investigations.

On January 1^st 2010 the new Modern Award system and National Employment Standards came into effect.

From January 1^st 2011 a small business is now determined by a simple headcount of full time, part time and regular systematic casual employees.

Who Does the Fair Work Act Apply To?

The passage of the state and federal legislation to effect referral of all state industrial relations powers, excluding WA, is now complete. From 1 January 2010 all private sector workers in Australia, except Western Australia, are covered by the Fair Work system.

Following the passage of the Fair Work Amendment (State Referrals and Other Measures) Bill in the Senate on 2 December 2009, state referrals of industrial relations power are now in place.

The referrals of power bring small business and non-profit organisation employees under the national regime.

States maintain their industrial relations powers in relation to state government and agency employees and matters not covered by the Fair Work Act 2009, such as occupational health and safety, discrimination and workers compensation.

So what are the bits that you should be concerned about?

Ideally you would be concerned about every aspect of the modern awards and national employment standards and compliance with them. But here is a brief outline of the major parts that you should be across.

Unfair Dismissals:

It is important that businesses understand the new rules relating to unfair dismissals which commenced on July 1^st 2009.

Under WorkChoices, small businesses were not bound by the unfair dismissal laws. An employee of a small business who was dismissed was prevented by law from lodging a claim for unfair dismissal. This exemption has been abolished and the laws now apply to all businesses covered by the Fair Work laws, no matter how many employees.

However, for businesses which employ fewer than fifteen full-time, part time or regular systematic casual employees, a new Small Business Fair Dismissal Code and Checklist has been introduced. If a business complies with the requirements set out in the Checklist then the dismissal may be classed as fair by Fair Work Australia.

Penalties: If the dismissal is found to be unfair then the remedy favoured by Fair Work Australia will be for the employee to be re-instated. If this is not reasonable, the employer can be required to pay compensation up to the maximum of the lesser of twenty six weeks pay or $59,050.

NB: Be aware that redundancy is no longer an automatic bar to an unfair dismissal claim.

Suggested Action: If you are thinking of terminating an employee contact HR2You and ask for our help to make sure you exit an employee in a proper manner that reduces your risk to an unfair dismissal claim. Document any and all performance related discussions with employees!

Modern Awards:

As a key plank of the new Fair Work laws, the Commonwealth Government replaced more than 4000 existing State and Federal awards with approximately 130 new ‘Modern Awards’ on January 1^st 2010. These build on the National Employment Standards and are tailored to the needs of specific industries and occupations.

Businesses must check now to confirm whether a Modern Award will apply to their business and take all steps necessary to achieve compliance.

Modern Awards may include an additional ten minimum conditions of employment relating to:

Minimum wages
Types of Employment – casual, part-time etc...
Arrangements relating to when work is performed
Overtime and penalty rates
Annualised wages or salary arrangements
Allowances
Leave related matters
Superannuation
Consultation procedures
Dispute representation and settlement

All Modern Awards will be reviewed every four years.

An arrangement called an ‘Individual Flexibility Agreement’ is a flexibility clause in the Modern Awards which will assist employees and employers to agree to new arrangements which meet their specific needs.

Also the new system should not result in any employee taking home less pay than they took home before the Modern Awards was introduced. If it does, they may apply to Fair Work Australia for a ‘Take Home Pay Order’ which will restore their take home pay to the previous level.

The new Modern Awards will not apply to anyone earning more than the ‘high income threshold’, which is currently set at $113,800 per year.

The Awards are both industry and occupation based. So if you don’t have an award for your industry, your employees will be covered under an occupation based one. Some awards will cover various occupations in the award.

Penalties: Employers face stiff fines for not complying with the conditions set out in the modern awards. Their business faces a maximum fine of up to $33,000 per breach and the owner or manager can face a fine of up to $6,600 per breach.

NB: Businesses are required to let their employees know what award applies to them.

NB Part II: The biggest area of action for the Fair Work Ombudsman and their Inspectors is around underpayment of employees. These are generally because of employers who haven’t looked up the award and complied with minimum rates of pay outlined in those awards.

NB Part III: Many awards have transitional arrangements to ease employers from the older pre-modern awards to the new ones. Also be aware that the awards are updated from time to time.

Suggested Action: Look up the modern awards that apply to your employees ASAP. You can click here to access a site that contains all the awards and work them out for yourself. Or contact HR2You for assistance, contact your IR lawyer or call the Fair Work Information line on 13 13 94.

The National Employment Standards:

The National Employment Standards consist of ten legislated conditions of employment which will apply from January 1^st 2010. It is not possible for employees or employers to opt-out of these Standards. Importantly they will override any terms and conditions contained within existing Enterprise Agreements or employment contracts that are less generous than those set out in the ten Standards.

Therefore it is imperative that businesses carefully review any agreements or individual contracts which were written before January 1^st 2010.

The ten National Employment Standards relate to the following matters:

1. Maximum weekly hours

2. Requests for Flexible Working Arrangements

3. Parental Leave and Related Entitlements

4. Annual Leave

5. Personal/Carers Leave and Compassionate Leave

6. Community Service Leave

7. Long Service Leave

8. Public Holidays

9. Notice of Termination and Redundancy Pay

10. Fair Work Information Statement

It is essential that businesses fully comply with all ten Standards.

Penalties: Employers face stiff fines for not complying with the conditions set out in the national employment standards. Their business faces a maximum fine of up to $33,000 per breach and the owner or manager can face a fine of up to $6,600 per breach.

NB: Be aware that since Jan 1^st 2010 employers are required to give new employees a copy of the Fair Work Information Statement when they start employment.

Suggested Action: Contact HR2You and ask us to check over your employment agreements and make sure that you are compliant.

Record Keeping:

Many small businesses come undone in this area. A lack of resources and time see many businesses fail to keep such records and even give out basic payslips to employees. This can be very expensive – just one fine can outweigh the cost of implementing a system or service to administer and maintain records or payslips.

Businesses must make and keep accurate and complete records for all employees. These must be kept for seven years and be in a form (legible and in English) that is readily accessible to Fair Work Inspectors.

Employees must keep the following records: general records, pay records, hours of work records, leave records, superannuation contribution records, individual flexibility arrangement records, guarantee of annual earnings records, termination records and transfer of business records.

Penalties: Fair Work Inspectors can issues on the spot infringement notices for each contravention of your record keeping and pay slip obligations. The fines are a maximum of $1650 per business and a maximum of $330 per individual. Failure to pay within 28 days will lead to court and a risk of much bigger penalties.

NB: Payslips must be given to employees within one working day of pay day, even if they are on leave. These can be in electronic or hard copy and they must contain certain information.

Suggested Action: Conduct an audit all of your employee records to make you are compliant with your record keeping and payslip obligations. If you are not compliant HR2You can help you with a software system for the records and we can put you in contact with a skilled bookkeeper, accountant or payroll organisation to help you with payslips.

Summary: What Should Your Business Be Doing?

Business owners should be trying to reduce risk to their business and make themselves aware of the legislative changes.

If you are a small business owner with employees ask yourself these few simple questions:

a) Do you know what modern awards cover and apply to your employees?

b) Do you maintain accurate records of employee leave entitlements?

c) Do you know what the rates of pay are for your industry?

d) Do your employees get a pay slip that has all of the required information within one working day of them being paid?

e) Have you implemented new compliant workplace agreements?

f) Do you do performance reviews?

g) Do you document everything?

h) Do you have the right advice?

i) Is there someone in your corner helping you?

If you answered no to any of these questions you may get a nasty shock if you come to the attention of Fair Work Australia.

It only takes one disgruntled employee (or ex-employee) to seek advice and suddenly your business is dealing with a team of Fair Work Inspectors and/or unfair dismissal claim instead of trying to make money.

Along with our HR management systems and advice we can connect you to other professionals in the legal and business management spheres that can help your business immensely.

Contact HR2You for a friendly no-obligation chat about how we can help your business overcome any hurdles you have in compliance.

Can you afford not to?