20 tips on the Fair Work Act

In 2009 and throughout 2010 the Fair Work Ombudsmen recouped $26.1 million in employee underpayments and received 1.1 million calls from businesses enquiring how to pay their staff. This was a result of the new Fair Work Act (FWA).

It is important that employers are aware of their compliance obligations under the Fair Work Act and if in doubt, obtain legal advice.

EI Legal has identified 20 important points that you should know about the FWA.

1. Application of Modern Awards. 122 industry and occupational Modern Awards commenced on 1 January 2010. Employers to which the Modern Awards “apply” must abide by the full terms and conditions of the applicable Modern Awards. Employees “covered” by a Modern Award are eligible to bring unfair dismissal claims.
    
2. Guarantee of annual earnings. In order to avoid the application of Modern Awards, employers with Award-covered employees earning more than the high income threshold (currently set at $113,800) should enter into “guarantees of annual earnings” with such employees, which guarantees their wages, non-monetary benefits with an agreed value and amounts paid on behalf of any such employee will exceed the “high income threshold”.
    
3. Transitioning. There is a transitional process under most Modern Awards which provides for the incremental phasing in/out until 2014 of minimum wages, piecework rates, industry allowances, loadings, penalties and shift allowances.  
    
4. Individual Flexibility Agreement (IFA). An IFA lets employers and an individual employee vary certain Modern Award terms to “meet the genuine needs of employer and employee”, provided the employee will be “better off” under the arrangement. An IFA must be in writing and be signed by both parties but an IFA is not assessed by Fair Work Australia to become operational. An IFA can be terminated by either party with four week’s notice or at any time by the written agreement.
    
5. Enterprise agreements. Enterprise Agreements will operate to the exclusion of any relevant Modern Awards and can have a nominal term of four years and are therefore a good way to achieve long-term flexibility within your business. However, enterprise agreements must be approved by 50 per cent of those who vote, and are then assessed by Fair Work Australia to ensure that the employees will be “better off” under the Enterprise Agreement than under the relevant Modern Award/s.
    
6. Set off. An entitlement under a contract of employment can be used to set off monetary entitlements under the Modern Award (such as where an employer pays a higher rate of pay than that required under the Modern Award). However, careful analysis and drafting is required to avoid underpayment claims.
    
7. Salaries. Some Modern Awards have salary provisions which allow a salary of a certain level to absorb certain Modern Award entitlements (provided the employee receives at least what they would be entitled to under the Modern Award).
    
8. Maximum weekly hours of work. The ordinary weekly hours for a full time employee are 38 under the Fair Work Act, plus “reasonable additional hours”. Employees can refuse additional work if extended hours are “unreasonable” (as determined in accordance with factors set out in the Fair Work Act).
    
9. Request for flexible working arrangements. Generally, a parent or primary caregiver of a child who is under school age (or a child under 18 with a disability), who has 12 months’ continuous service with their employer, may request changes to working times and arrangements. Any such request must be made in writing to the employer with details of the change sought and the reasons for the request. The employer must respond within 21 days. Flexible working arrangements can be refused on “reasonable business grounds” with documented reasons as to why the request was refused.
    
10. Parental leave.The primary care-giver of a child or adopted child under 16 is now entitled to up to 12 months of unpaid parental leave (with the option to request a further 12 months of unpaid parental leave) where the employee has 12 months of service at the time of the birth or adoption. The provisions also extend to same-sex de-facto couples.
     
11. Annual leave. Annual leave will now accrue from the day an employee commences employment. Some Modern Awards, Enterprise Agreements or contracts of employment (for Award/Agreement-free employees) may allow for cashing out of annual leave so long as the employee has at least four weeks annual leave remaining after the cash out.
     
12. Community service leave.This is a new entitlement that allows for unpaid leave to participate in eligible community service activities and jury service. Employers are required to make a maximum of 10 days of “make-up payments” to employees who are absent on jury service.
     
13. Notice of termination and redundancy pay. Employers must provide written notice of termination to permanent employees (and should also be in the practice of providing these to casuals). The Fair Work Act introduced a statutory scale of redundancy pay which now applies to most employees. There are some transitional arrangements with respect to redundancy pay, which should be considered before making any such payments.
14. Fair Work Information Statement (“FWIS”). From 1 January 2010, employers have been obliged to provide new employees with a FWIS upon commencement of employment (or as soon as practicable thereafter).
     
15. Probation period. A probationary employee must now be provided with one weeks’ notice upon termination under the Fair Work Act.
     
16. Unfair dismissal. To minimise the risk of a successful unfair dismissal claim brought by an eligible employee, employers must ensure there is a substantive reason for a termination and that the employee is afforded procedural fairness. Subject to some exclusions, an employee who is covered by a Modern Award, or to whom an enterprise agreement applies or who earns less than $113,800 is eligible to submit an unfair dismissal claim if they have reached the “minimum employment period”.
     
17. General protections. Under the Fair Work Act a person (including an employer) must not take an “adverse action” against another person (including an employee) because of their “workplace right”.  Where an employee alleges his or her employer took an adverse action against them, the burden rests with the employer to prove that this they did not take the action for reasons that include the employee’s workplace right.
     
18. Serious misconduct. If an employee engages in serious misconduct (such as safety breaches) an employee can be summarily dismissed, but caution should be exercised before summarily dismissing an employee as there is a very narrow interpretation of serious misconduct.
     
19. Permitted deductions. Generally,a deduction from an employee’s pay must be authorised in writing (under a Modern Award, Enterprise Agreement or law or be for the employee’s benefit) in order to be lawful. 
     
20. Record keeping. Employers must keep records of all employee details for a period of six years from the employee’s termination date.  

    Hannah Mills, advises on corporate and employment law. Her practice focuses on private and public treaty mergers and acquisitions, labour, employment and employee benefits, and general corporate and commercial matters.