There are some common myths about modern industrial awards in our system of employment law;
1. Employers can agree with employees to “opt out” of an industrial award. Not correct. Awards apply as a matter of law and not choice. An employee can agree not to be subject to award requirements if an employer provides a high income guarantee in writing which guarantees the employee will be paid over the high income threshold (currently $162,000pa excluding superannuation – this is indexed from 1 July each year). Otherwise, award provisions must be complied with for the positions covered by the award.
2. If an employer pays above award rates, they don’t have to pay overtime or penalty rates. Not necessarily. An employer can pay a flat above award rate but must:
a. ensure that employees are paid the same or more overall than under the Award for all hours of work;
b. keep time records;
c. ensure the employment contract contains an appropriate “offset” clause;
d. follow award requirements for non financial items such as breaks.
3. Employers don’t have to keep records if they pay above the award. Incorrect. It is necessary to be able to demonstrate that employees are being paid more than award rates for all hours and at least an annual comparison is usually necessary.
4. There is no obvious award for an employee so they mustn’t be covered. Not true. The Fair Work Commission (FWC) has clarified that the Miscellaneous Award will cover all lower skilled and modestly paid employees of the type most suited to award coverage, even if there is no specific award coverage. And you can’t always tell the extent of an award’s coverage from its title.
5. High income earners cannot bring unfair dismissal claims. Not necessarily. Award free employees who are paid over the high income threshold cannot bring a statutory unfair dismissal claim. However, an employee subject to award coverage can still bring an unfair dismissal claim even if paid above the threshold or even if given a high income guarantee. Many shift workers and fly in fly out workers will for instance still be able to bring unfair dismissal claims. And general protections claims are not subject to these requirements.
6. Most senior managers and professionals are award free. True, but even that general statement needs to be qualified. For example, banking branch managers and retail store managers, engineers and architects are generally award covered.
7. None of the employees of a business are union members so the award doesn’t apply. Not true. If an employer falls within the coverage clause of an award and there is a classification to cover one or more employees, then the award applies. It is not a matter of union membership (although an employer cannot stop an employee from joining a union).
8. An employer has a common law contract with its employees so it doesn’t need to worry about awards. Not true. Any common law contract is subject to the overriding provisions of the NES and an applicable award. Employment contracts must be read in conjunction with an award.
The fact is that industrial awards play a central part in our system of employment law; they are given force by legislation and are made by the relevant industrial tribunal. For most private sector employees, this will be the FWC. Whilst the National Employment Standards (NES) contain a basic safety net for employees, industrial awards contain more detailed provisions relating to particular industries or occupations. So, it pays to check award coverage for all employees. The Fair Work Ombudsman award finder is a good place to start – www.services.fairwork.gov.au/find-my-award. There is also a list of all modern awards on the FWC website – www.fwc.gov.au/agreements-awards/awards. And there are many professional advisers who can help with these issues.
If you think an award might apply, the starting point is to review the coverage clause of the award to see which industries or occupations are covered by the award. The next step is to review the position classifications subject to the award. This will also mean checking the definition provisions. The coverage clause and definitions are always found at the start of an award whilst the classification descriptions are usually found in a schedule at the end of the award. Don’t just assume from the title of the award that it applies or not. For instance, the Professional Employees Award does not apply to all professionals. And engineers performing project management work rather than professional engineering duties are not covered under this award.
Assessment of the appropriate award classification does not involve application of a precise formula but rather a practical judgment of the level that best fits the particular skills required for the job in question. It is always wise to err on the side of caution in this assessment because each classification level is associated with a minimum pay rate under the Award. And don’t rely completely on the electronic tools or the Fair Work Ombudsman for an answer, unless it is in writing.
If an award applies to your business and employee, then there will be detailed provisions about things like hours of work, minimum wages and allowances, overtime and penalty rates, breaks, leave, TOIL, consultation, dispute resolution and more which must be complied with. Payment of an annual salary with a contractual ‘offset” clause can make things a bit simpler, as can compliance with an award “annualised wage” clause. The important thing to remember is that awards are not static and change from time to time so it is important to keep up to date and subscribe to the FWC’s award update service – www.fwc.gov.au/subscriptions. Please contact us if you would like any further information or help.
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