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20 things you should know about 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 legally pay their staff. This was a result of the new Fair Work Act (FWA). But a quick Twitter poll revealed many of you are still confused, so this may help…

Hannah Mills, solicitor for EI Legal said: “Employers must constantly check that they are complying with the Fair Work Act, and contact Fair Work Australia or a legal consultant if they are unsure of anything.”

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 January 1, 2010. Employees covered under these awards can apply for Unfair Dismissal Claims. These awards replaced thousands of federal and state-based awards to provide one set of minimum conditions for employees and employers across Australia.

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 (in five equal instalments of 20 percent until 2014) of: minimum wages, piecework rates, industry allowances, casual/part-time loadings, weekend and public holiday penalties and shift allowances.  Employers can only use the published Modern Award wage, penalty or loading where it is higher than the equivalent pre Modern Award entitlement.

4. Individual Flexibility Agreement (IFA). Both parties can vary certain Modern Award terms. For example, an employee’s hours of work may differ to the arrangements set out in the applicable Modern Award to suit the needs of the employer and employee. The IFA must be in writing. It may be terminated within the conditions set out in the contract/Award.

5. Enterprise agreements. Can have a nominal term of four years and are a good way to achieve long-term flexibility within your business. Enterprise agreements must be approved by 50 percent of those who vote, and are then assessed by Fair Work Australia to ensure it is in the employee’s best interest.

6. Set off. An entitlement under a contract of the employment agreement can be used to set off monetary entitlements under the Modern Award. Careful analysis is required to avoid underpayment claims.

7. Salaries. Some Awards have salary provisions which allow a salary of a certain level to absorb certain Modern Award entitlements (provided the employee receives what they would be entitled to under the Modern Award). This means that the employer may pay an annual salary in conjunction with the provisions of the Award.

8. Maximum weekly hours of work. Weekly hours for full time employees are 38 under the FWA. There are some provisions that are flexible. Employees can refuse additional work if extended hours are “unreasonable”.

9. Request for flexible working arrangements. A parent or primary care-giver with an underage child, with 12 months’ continuous service, may request changes to working times and arrangements. The request must be addressed to the employer with details of the change sought. The employer must respond within 21 days. This can be refused on “reasonable business grounds” with a detailed document of reasons 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 maternity parental leave where the employee has after 12 months of service at the time of the birth or adoption. An employee is required to give at least 10 weeks’ notice of unpaid parental leave.

11.  Annual leave. Annual leave and personal/carer’s leave will now accrue from the day an employee commences employment. Some Modern Awards, Enterprise Agreements or contracts of employment 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 new entitlement allows for 10 days unpaid leave per year to participate in community service 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. A costly change of the Fair Work Act was the introduction on the statutory scale of redundancy pay which now applies to all employees. EI Legal suggests that you check the employee’s award or contract to see what they are entitled to.

14.  Fair Work Information Statement (FWIS). This came into effect on 1 January 2010. Employers have been obliged to provide upon commencement of a new employees with a FWIS, or as soon as practicable after commencement, of employment.

15.  Probation period. A probationary employee must be provided with one week’s notice upon termination under the Fair Work Act.

16.  Unfair dismissal. To minimise the risk of an unfair dismissal claim, employers must ensure that there is a substantive reason and that they have undergone procedural fairness. 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 application unfair dismissal claim if they have reached the “minimum employment period” of one year for small businesses (i.e. less than 15 employees) and six months for all other businesses.

17. General protections. There is a new type of claim under the Fair Work Act which prohibits certain people from taking an “adverse action” against another person 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 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 or harms the safety of others, 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. A deduction from an employee’s pay must be authorised under a Modern Award, Enterprise Agreement, law or be for the employee’s benefit and must be signed by a parent or guardian if the employee is underage. Payment deduction must be agreed in writing with the employee. This may be unenforceable to the extent it allows a deduction or requires an employee to spend an amount that is for the employer’s benefit or is “unreasonable”.

20.  Record keeping. Employers must keep record of all employee details for a period of six years from the date of termination. Upon request, an employee must receive their records within 14 days.

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Jen Bishop

Jen Bishop

Jen was the publisher at Loyalty Media and editor of Dynamic Business, Australia's largest circulating small business magazine, from 2008 until 2012. She is now a full-time blogger at The Interiors Addict.

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