Jurisdiction - Australia
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Australia – An Overview Of Employment Regulation.

24 February, 2014

Overview


Australia has comprehensive laws governing employment at both state and federal levels that cover minimum terms and conditions, occupational health and safety, privacy, discrimination, superannuation, long service leave and other matters.


The terms and conditions of employment and industrial relations obligations of most employers are regulated at the federal level under the system established by the Fair Work Act 2009 (Cth) (FW Act). This federal legislation has effectively displaced a myriad of state laws. However, certain employment-related matters such as occupational health and safety, workers compensation, long service leave and equal opportunity continue to be regulated at the state and territory level.


The previous Labor government introduced a number of amendments to the FW Act which have commenced operation since the last edition of this Guide was published. The most significant legislative change was the introduction of a new federal bullying jurisdiction which came into effect on 1 January 2014. Under the new laws, the Fair Work Commission (FWC) is empowered to make an order to prevent a worker from being bullied. Although the FWC cannot impose a financial penalty, the types of orders it could make are incredibly broad. It remains to be seen how the new jurisdiction develops.


In September 2013 a new federal Coalition government was elected to replace the previous Labor government. Despite calls from the business community for substantial reform, it is not expected that the newly elected Coalition government will amend the FW Act in any significant way during 2014.


This introductory chapter provides a general overview of employment regulation in Australia.


State And Federal Systems Of Regulation


Although the FW Act is the primary piece of legislation governing employment in Australia, employers need to be aware of certain matters that are still the responsibility of each state and territory, and understand how the two levels of regulation interact.


The FW Act generally ‘covers the field’ and overrides state and territory laws that deal with the same subject matter. However, certain matters are specifically excluded from the scope of the FW Act. These matters include:

 

  • workers compensation
  • occupational health and safety
  • matters relating to outworkers
  • long service leave (other than for a limited number of employees who have a preserved award or agreement-derived long service leave entitlement), and
  • equal opportunity and discrimination.

 

Not all employers are covered by the federal system.

 

Employers who are not ‘constitutional corporations’ (trading, financial and foreign corporations) or federal government bodies will not necessarily be covered by the substantive provisions of the FW Act. A corporation will be considered a trading corporation if it engages in ‘substantial or significant’ trading activities. State and territory industrial laws regulate employers not covered by the FW Act.


National Employment Standards


The National Employment Standards (NES) are 10 minimum conditions that apply to all employees covered by the FW Act.


The NES are contained in the FW Act and have applied since 1 January 2010.
The 10 minimum conditions that comprise the NES are:

 

STANDARD GENERAL EXPLANATION
Hours of work maximum 38 ‘ordinary’ hours each week plus ‘reasonable’ additional hours
Annual leave 4 weeks a year, with an extra week for continuous shift workers
Personal/Carer’s leave 10 days of paid personal (sick/carer’s) leave per year plus 2 days of unpaid carer’s leave (per occasion required)
Parental leave up to 52 weeks of parental/adoption leave and related entitlements, with the ability to request a further 52 weeks leave
Public holidays the right to be absent from work on public holidays and the right to refuse to work on a public holiday on reasonable grounds
Flexible working arrangements employees who are parents, carers, have a disability, are aged 55 or older, are experiencing domestic violence or provide care or support to a family member who is experiencing domestic violence have the right to request flexible working arrangements
Community service leave eg jury service and voluntary emergency management activity (eg fire fighting)
Long service leave state and territory long service leave entitlements retained, subject to award and agreement entitlements being preserved in limited circumstances
Fair work information statement must be issued to all new employees
Notice of termination and redundancy pay dependent on length of service, up to 5 weeks notice and up to 16 weeks redundancy pay

 

Some NES entitlements are subject to employment status (eg permanent or casual) or length of service (eg parental leave).


The NES also include rules about how these entitlements apply in practice (eg when annual leave can be taken, what documentation is required for personal leave, whether the leave is paid leave etc).


Employers and employees are free to negotiate other terms and conditions not covered by the NES or in excess of the NES. All enterprise agreements made under the federal system after 1 January 2010 must comply with the NES. All common law contracts of employment are also subject to the NES. The provisions of the NES cannot be traded off or bargained away. New modern awards, which also took effect from 1 January 2010, are also underpinned by the terms of the NES.


Mimimum Wages


How Are Minimum Wages Set?


Minimum wages, including casual loadings, are set and adjusted by the Minimum Wage Panel of the FWC (now called the Expert Panel for annual wage reviews).


The 2013 Wage Review


Effective 1 July 2013, the Minimum Wage  Panel:

 

  • increased the National Minimum Wage to $622.20 per week (based on a 38-hour week) or $16.37 per hour, and
  • increased the casual loading for award/ agreement-free employees to 24%.
 

The Role Of Awards


What Are Awards?


The new federal system of simplified ‘modern awards’ came into operation on 1 January 2010. Modern awards establish a safety net of terms and conditions of employment that are broader than the NES. Most modern awards are industry-based. Some modern awards are occupation-based (eg clerical).


Unmodernised enterprise awards (ie awards that applied to a single enterprise or enterprises under the same franchise) automatically ceased to exist on 31  December 2013, unless an application for modernisation was made before then. Employers who were covered by unmodernised enterprise awards are now covered by the relevant industry or occupational modern award.


Awards were once the main source of regulation of employee terms and conditions. However, since the early 1990s Australia’s industrial relations landscape has been progressively reformed to make enterprise agreements the main focus. That being the case, awards do not apply to employers or employees who are covered by an enterprise agreement. Importantly, an enterprise agreement must be at least as favourable overall to all employees covered by it as the relevant modern or enterprise award.


Since the introduction of enterprise bargaining in the early 1990s, awards are intended to be a minimum safety net only, with enterprise bargaining being the primary means of determining actual terms and conditions. Modern awards continue this trend and are limited only to the 10 matters covered by the NES, plus a further 10 terms and conditions. Every modern award also includes a flexibility term that enables an employer and an individual employee to agree on an arrangement varying the effect of certain terms in the award. Unfortunately, the standard flexibility term is not practically flexible at all and relatively few employers and employees have sought to make individual flexibility agreements.


Minimum Wages And Modern Awards


Each modern award includes terms dealing with minimum wages and skills-based pay scales for employees covered by the award. The minimum wages in modern awards are adjusted by the Expert Panel of the FWC for annual wage reviews each year.


Enterprise Agreements


An Introduction


Enterprise agreements are collective agreements made by employers and their employees under the FW Act. In most cases, employees are represented by unions which are allotted a legal status as ‘bargaining representatives’.


All enterprise agreements can operate alongside common law contracts of employment, however a contract of employment can only supplement (not undercut) enterprise agreement terms and conditions.


Under the FW Act, three types of enterprise agreements are available to  employers:

 

  • single enterprise agreements (covering one employer, or two or more employers who are ‘single interest employers’ (such as related bodies corporate))
  • multi-enterprise agreements (two or more employers who are not all single interest employers), and
  • greenfields agreements (single or multi-enterprise agreements covering a genuine new enterprise and made with one or more unions).
 

A union is the default bargaining representative for its members who will be covered by the new agreement. A union bargaining representative has the right to participate in negotiations with the employer, and is also entitled to be covered by the agreement. A union must be covered by an enterprise agreement before the agreement can apply to the union. If an enterprise agreement applies to a union, that union has the right to take legal proceedings to enforce its terms.


Are There Any Benefits In Using Enterprise Agreements?


There may be benefits in using enterprise agreements, although this will depend on the particular workplace and the terms and conditions that currently apply to employees.


Potential benefits include:

 

  • the implementation of workplace arrangements that are adapted and suitable for a specific business
  • the ability to exclude or modify award conditions that might otherwise apply to the employees. Excluding or modifying these award conditions may provide more flexibility, although a ‘better off overall test’ (BOOT) must be satisfied to ensure employees receive adequate compensation for excluded or modified conditions, and
  • protection from industrial action, which will be unlawful during the nominal life of an enterprise agreement.

 

What Must Be Included In An Enterprise Agreement?


All enterprise agreements must meet the minimum conditions of the NES. Wage rates in agreements must also be at least equal to the relevant award rates or national minimum wage order.


There are also a number of terms that are mandatory for all enterprise agreements. These include:

 

  • a nominal expiry date, which can be a maximum of four years from the date of commencement
  • a dispute settlement procedure flexibility term, which enables the employer and an individual employee to vary a specific term of the agreement to meet their genuine needs, and
  • a consultation term regarding major workplace change or changes to working hours or rosters.
 

Better Off Overall Test


To be approved by the FWC, all new enterprise agreements must pass the  BOOT.
Under the BOOT, each employee covered by an enterprise agreement must, on balance, be better off overall than he/she would be under the applicable modern  award.


The BOOT allows award conditions (but not NES conditions) to be traded off or modified as long as the total remuneration and/or benefits received by the employee under the proposed enterprise agreement leaves them better off overall than if the relevant award applied.


Is There Anything That Can’t Be Included In An Enterprise Agreement?


Yes. An enterprise agreement must be about ‘permitted matters’: matters that pertain to the relationship between the employer and employees subject to the agreement, or matters that pertain to the relationship between the employer and any union(s) covered by the agreement. The inclusion of terms in an enterprise agreement which are not about permitted matters will not invalidate the entire agreement, however the non-permitted content is not legally enforceable.


Further, certain matters are deemed ‘unlawful terms’ and cannot be included. These include terms that are discriminatory; terms that breach the ‘general protections’ provisions of the FW Act, that deal with such matters as freedom of association and workplace rights; terms that purport to permit employees to ‘opt out’ of coverage of the agreement; and terms that allow for union entry to workplaces in a way that is not consistent with right of entry rules under the FW Act. The FWC must not approve an enterprise agreement which contains an unlawful term. In some cases, the FWC may approve an agreement by accepting an employer undertaking about the operation of a term which the FWC has concerns about.


Negotiation And Approval Of Agreements


The FW Act introduced significant reforms to the bargaining process for enterprise agreements. Two significant changes are the role of ‘bargaining representatives’ and the obligation to bargain in ‘good faith’.

 

Under the FW Act, any employee who will be covered by the enterprise agreement that is being negotiated may appoint a bargaining representative of his/her choice. If any such employee is a valid union member, then that union becomes the employee’s default bargaining representative and is entitled to participate in negotiations.


The FW Act requires an employer, and all other bargaining representatives, to bargain in good faith. The good faith bargaining obligations are spelt out in the FW Act, and the FWC is empowered to make bargaining orders if a party fails to negotiate in good faith.


Employees cannot be asked to vote on a proposed enterprise agreement before an employer has complied with a number of pre-approval steps, including giving employees at least seven days to consider the proposed agreement before being asked to vote on it.


The new bargaining rules are explained in greater detail in Chapter 10, ‘Enterprise bargaining’. It remains unlawful to use duress or coercion in making, varying or terminating enterprise agreements, or to disadvantage or dismiss an employee because they refuse to agree to a new enterprise agreement.


Industrial Action


When Can Employees Take Lawful Industrial Action?


Employees can only take lawful industrial action where certain procedural requirements are met. These requirements include that:

 

  • they are genuinely trying to reach agreement about permitted matters
  • the nominal expiry date of any existing agreement has passed
  • the industrial action has been authorised by a protected action ballot, and
  • the required written notice of the action has been given to the employer.
 

What Remedies Are Open To Employers If Employees Take Unlawful Industrial Action?


Where employees take or threaten unlawful industrial action, their employer can seek an order from the FWC that the industrial action stop, not occur or not be organised.


In certain circumstances, action may also be available in the Federal Court of Australia or state/territory courts.


Can Employers Pay Employees Who Take Industrial Action?


No. In almost all cases it remains unlawful for an employer to pay employees who take industrial action, whether or not the industrial action is lawful. Special rules apply to the payment of employees who participate in lawful partial work bans.


If employees engage in any type of ‘unprotected’ industrial action, the employer must deduct a minimum of four hours pay from employees who participate. This applies even if the length of the industrial action is shorter than four hours. Complications as to the amount of strike pay that must be withheld may arise where the unprotected industrial action is in the form of bans on working overtime.


Bullying


The new federal bullying jurisdiction commenced on 1 January 2014. The jurisdiction empowers a ‘worker’ who reasonably believes that he or she has been bullied at work to apply to the FWC for an order that bullying stop. The definition of ‘worker’ is not limited to employees, and includes an individual who performs work in any capacity, including as a contractor, a subcontractor, an outworker, an apprentice, a trainee, a student gaining work experience, or a volunteer.


Bullying has a particular meaning for the purposes of the FW Act. A person is relevantly ‘bullied at work’ if an individual repeatedly behaves unreasonably towards the worker, and that behaviour creates a risk to health and safety. The legislation makes it clear that reasonable management action carried out in a reasonable manner is not taken to be bullying behaviour.


Although the FWC does not have the power to impose a financial penalty on an employer, the types of orders it can make to prevent the bullying from occurring are incredibly broad. For example, the FWC could grant an order which requires:

 

  • specified behaviour to stop
  • that certain behaviour be regularly monitored by the employer
  • that the employer develop, review or comply with a bullying policy
  • the provision of information and additional support and training to workers
  • leave entitlements to be re-credited
  • an apology, and/or
  • interpersonal mediation.
 

A failure to comply with a bullying order is a civil remedy, for which penalties can flow for non-compliance.


The FWC is required to start to deal with a bullying application within 14 days of it being made. The statutory timeframe is at odds with the elongated timeline for investigation and prosecution which remains within the realm of federal, state and territory safety regulators. Indeed, the overlap between the new jurisdiction and occupational health and safety laws (which exposes employers and individuals to criminal sanction) is the point of greatest conjecture. For further information on bullying, refer to Chapter 9, ‘Bullying’.

 

Transfer Of Business


The FW Act regulates what happens when an employee takes up employment with a new employer as part of a ‘transfer of business’. The focus of the transfer of business rules is on a transfer of employment. These rules are broad and have been designed to maintain employees’ terms and conditions when the employee and their work are transferred to another entity. If employees do not move to the new employer, then no transfer of business will occur as there has been no transfer of employment.


The key consequence of a transfer of business under the FW Act is that any applicable industrial instruments will transfer to the new employer and apply to the transferring employees, unless the new employer obtains an order from FWC that this not occur. A transfer of business also has implications with respect to the new employer’s recognition of a transferring employee’s prior service and leave entitlements with the old employer.


What Is A Transfer Of Business?


The transfer of business rules under the FW Act will only be triggered if:

 

  • one or more employees of one employer (the old employer) cease employment with the old employer and, within three months, commence employment with another employer (the new employer) (transferring employees), and
  • the transferring employees perform the same or substantially the same work for the new employer as they performed for the old employer, and there is a relevant connection between the old employer and the new employer.
 

A relevant connection includes:

 

  • a transfer of assets from the old employer to the new employer
  • the old employer outsources work to the new employer
  • the new employer insources work from the old employer that was previously outsourced, or
  • the old employer and the new employer are associated entities.
 

Right Of Entry


What Rights Do Unions Have To Enter A Workplace?


Union officials may gain entry to a workplace:

 

  • to hold discussions with employees whose industrial interests the union is entitled to represent (ie within the scope of the union’s rules)
  • pursuant to state or territory occupational health and safety laws, or
  • to investigate a suspected breach of the FW Act or an industrial instrument that applies or applied to a member of the union.
 

There are certain conditions that must be met before a union can exercise rights of entry.


Can Unions Do Anything They Like Once They Enter The Workplace?


No. Depending on the type of entry, unions are limited in what they can do.


For instance, where a union is conducting discussions with employees, it can only hold discussions with employees whose industrial interests it is entitled to represent. Where a union is entering to investigate a breach, it can only inspect work and interview employees for the purposes of investigating the breach, and generally can only view records of employees who are members of the union.


Termination Of Employment


Several remedies are potentially available to employees who are dismissed.


Employees can claim:

 

  • under the common law for breach of contract
  • unfair dismissal under the FW Act
  • general protections under the FW Act, or
  • discrimination under state or federal equal opportunity legislation.
 

Who Can Bring An Unfair Dismissal Claim?


Only an employee whose employment has been terminated at the initiative of their employer, or who has been ‘constructively dismissed’ or demoted can bring an unfair dismissal claim. The unfair dismissal jurisdiction provides a remedy to employees if their dismissal was ‘harsh, unjust or unreasonable’.


Some employees are excluded from bringing claims, including:

 

  • employees who have not completed the minimum employment period of six months (in the case of employers with 15 or more employees) or one year (in the case of employers with fewer than 15 employees)
  • an employee for whom the dismissal was a case of genuine redundancy, and the employer has complied with their redeployment and consultation obligations
  • an employee not covered by an industrial instrument and paid more than the statutory limit (currently $129,300 per annum), and
  • an employee who is pursuing other termination of employment proceedings.

General Protections And Workplace Rights


Under the FW Act, employees cannot be dismissed or subjected to other detrimental conduct because they have certain rights, entitlements or attributes. For example, an employer cannot:

 

  • take adverse action against an employee because of the employee’s workplace rights or industrial activities (including freedom of association)
  • engage in behaviour intended to coerce an employee to exercise, or not exercise, his/her workplace rights
  • take adverse action against an employee because of a particular attribute (eg the person’s race, colour, sex, age, disability, etc), or
  • knowingly or recklessly make false and misleading statements about a person’s workplace rights.
 

The general protections provisions also apply to (and protect) employers, independent contractors, unions and prospective employees in certain circumstances.


The implications of the general protections rights are dealt with in greater detail in Chapter 8,‘Discrimination, diversity and workplace rights’.


Discrimination


Discrimination is regulated at both state and federal levels by legislation in all jurisdictions. Under this legislation, employers must not directly or indirectly discriminate against employees for a prohibited reason, which includes:

 

  • sex
  • marital status
  • pregnancy or potential pregnancy
  • breastfeeding
  • family responsibilities
  • sexual preference or orientation
  • race or nationality
  • religion
  • physical features
  • disability
  • age
  • political opinion or membership
  • trade union membership or activities, and
  • a specified medical history.
 

In most jurisdictions the ‘inherent requirements of the position or employment’ is a defence to a discrimination claim. This allows for discrimination that would otherwise be unlawful if that discrimination relates to a characteristic of an applicant that would prevent that applicant from fulfilling the inherent requirements of the employee’s position or employment. There is often a fine line between separating unlawful discrimination and the need to be able to fulfil the inherent requirements of the position.


In many cases employers will be subject to concurrent state and federal legislation, though the general obligations that these Acts impose are similar. Employers may bring claims in either jurisdiction, though generally bringing a case in one jurisdiction will preclude them from bringing a case in another.


Occupational Health And Safety And Workers Compensation


Occupational health and safety (OHS) and workers compensation continues to be regulated primarily by each state and territory. This has created inconsistency between jurisdictions, especially because of the different rules affecting compliance with OHS.


The federal Model Workplace Health and Safety Act was released in May 2010. The purpose of that Act is to harmonise the disparate OHS laws around Australia. However, for the Act to achieve this purpose it must be adopted by each state and territory.


The governments of New South Wales, Queensland, the Australian Capital Territory, Northern Territory, South Australia and Tasmania have implemented the federal model laws.
The Victorian Government has indicated it will not adopt the model laws, and it is unlikely that Western Australia will do so in the foreseeable future.


Long Service Leave


Long service leave remains primarily regulated by state legislation in addition to the Long Service Leave (Commonwealth Employees) Act 1976 (Cth). The NES preserve, or allow for the preservation of, long service leave entitlements provided by industrial instruments that were in operation on 31 December 2009 in certain limited circumstances.


Whereas previously an employer could ‘override’ state legislation by providing for long service leave entitlements in a federal industrial agreement, enterprise agreements made under the FW Act are subject to state and territory laws dealing with long service leave.
Most state schemes provide for an entitlement of three months after 15 years, with some states allowing this entitlement to be accessed or paid out on termination after a shorter period of time, such as seven or 10 years.


The government’s policy is to ultimately legislate federally to introduce a single national long service leave standard and eliminate state inconsistencies.


Superannuation


Under the Superannuation Guarantee (Administration) Act 1992 (Cth) employers must contribute a minimum of 9.25% of an employee’s ordinary time earnings to that employee’s approved superannuation fund. The minimum contribution is expected to incrementally increase to 12% by 2021.


In some circumstances, employers must provide a choice of superannuation fund for employees (see Chapter 14, ‘Superannuation’).

 

Privacy


The Privacy Act 1988 (Cth) (Privacy Act) governs the collection, use, disclosure and transfer of personal and sensitive information in Australia’s private sector. The Privacy Act sets out the National Privacy Principles (NPPs) which regulate how such information is gathered and stored. 1

 

Some states and territories have enacted health records and/or specific workplace
privacy legislation. (See Chapter 13, ‘Privacy’ for more information).

 

End Notes:

 

1 On 12 March 2014, the NPPs will be replaced by the Australian Privacy Principles. However, this Guide refers to the NPPs.

 

herbert smith Freehills

 

For further information, please contact:

 

Graeme Smith, Herbert Smith Freehills

graeme.smith@hsf.com

 

Herbert Smith Freehills Labour & Employment Practice Profile in Australia

 

Homegrown Labour & Employment Law Firms in Australia

 

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