Awards and  agreements — the story from 1 January 2010

Analysis

Awards and agreements — the story from 1 January 2010

Some employers entered into workplace agreements early in 2009 on the misunderstanding that this would avoid any entitlement to provisions introduced by the Fair Work Act.

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Some employers entered into workplace agreements early in 2009 on the misunderstanding that this would avoid any entitlement to provisions introduced by the Fair Work Act.
 
Amendments to the transitional legislation have clarified the situation regarding the interaction of existing workplace agreements and the minimum conditions under the National Employment Standards (NES) and modern awards, which come into effect from 1 January 2010.
 
The following information may also assist those employers contemplating whether to enter into a federal workplace agreement prior to 1 January 2010.
 
 
Workplace agreements have to meet NES
 
From 1 January 2010, the National Employment Standard (NES) will override the relevant provisions in an existing workplace agreement where the NES is more favourable, including an agreement made prior to 1 July 2009.
 
This means that if the agreement provides conditions less favourable than those provided by the NES, the NES conditions will apply, while conditions under the agreement that are more favourable than the NES will prevail over the NES.
 
Audit recommended
 
An employer with an existing workplace agreement is advised to conduct an audit of the relevant employment conditions under any workplace agreement prior to 1 January 2010 to ensure compliance with the NES.
 
The NES provides minimum entitlements for the following employment conditions:
  • maximum weekly hours of work
  • annual leave
  • personal/carer’s leave (including compassionate leave)
  • parental leave
  • community service leave
  • requests for flexible working arrangements
  • public holidays
  • long service leave
  • notice of termination by the employer
  • redundancy pay.
 
Modern award conditions do not override existing agreement provisions
 
It should be noted that a condition in a modern award that is more favourable than the NES does NOT override the relevant provision of an existing workplace agreement.
 
For example, if a modern award prescribes 12 days per annum personal/carer’s leave, this does not prevail over an agreement that prescribes 10 days leave, because the agreement complies with the minimum entitlement provided by the NES.
 
Note: BOOT
 
However, an agreement made from 1 January 2010 is required to pass the BOOT, which means the more favourable award entitlement must be considered when presenting the agreement for ratification before FWA.
 
Modern award wage rates may override existing agreement rates
 
The minimum wage rates of an existing workplace agreement will be overridden by the wage rate of the relevant classification of an applicable modern award where the award wage rate is more favourable than the agreement.
 
Audit recommended
 
As with conditions under the NES, it would be prudent for an employer to perform an audit of wage rates under the agreement prior to 1 January 2010 to ensure the wage rates are more favourable to each individual employee.
 
The wage rate under an agreement must not be less favourable than the relevant base rate of pay for an employee.
 
Section 16 of the Fair Work Act defines ‘base rate of pay’ as the rate of pay payable to an employee for his or her ordinary hours of work, but not including the following:
(a)     incentive-based payments and bonuses
(b)     loadings
(c)     monetary allowances
(d)     overtime or penalty rates
(e)     any other separately identifiable amounts.
Whether item (b) is intended to cover ‘casual loading’ may to open to conjecture.
 
Pre-WorkChoices agreements prevail
 
If an employer is bound by a collective agreement made prior to 27 March 2006 (eg pre-reform certified agreement), the agreement will prevail over a modern award to the extent of any inconsistency.
 
This means the employer will be required to satisfy the conditions set by the relevant modern award if those conditions are not inconsistent with the collective agreement. In other words, the few businesses still operating under pre-WorkChoices agreements would have to take into account both the terms of the agreement and the provisions of the relevant modern award.
 
Modern awards replace awards and NAPSAs
 
From 1 January 2010, the applicable modern award will replace the pre-reform federal award or NAPSA, where relevant.
 
The minimum entitlements of the NES will override the relevant provision in a modern award that is less favourable than the NES, although the likelihood of this occurring is negligible.
 
Modern awards available
 
To assist employers in determining the relevant modern award that will cover their employees, the AIRC has published a list of pre-reform federal awards and NAPSAs that have been absorbed into each modern award involved in Stages 1 and 2 of the award modernisation process.
 
This list appears on its website and will be updated as Stage 3 and 4 modern awards are determined during the course of this year, with the process expected to be finalised by early December 2009.
 
‘Take home pay orders’
 
Where a modern award sets a lower rate of pay for an employee than set by an award-based transitional instrument (ie a pre-reform federal award or NAPSA), the Fair Work Act allows the Fair Work Australia to make an order to require the employer to pay an amount of money to the employee to rectify this. These orders will be known as ‘take home pay orders’.
 
Award/agreement free employees
 
The NES is the minimum entitlement that applies to all employees, including employees who are award/agreement free.
 
‘Catch-all’ award
 
However, the Australian Industrial Relations Commission (AIRC) has indicated it will introduce a modern award in Stage 4 of the award modernisation process that is intended to apply to employees not traditionally covered by an award.
 
This award is expected to be finalised by December 2009, although details such as its scope, classification and wage rates structure have yet to be published.
 
Source: Paul Munro, IR Consultant.
 
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