Fate of awards & the new IR system

Analysis

Fate of awards & the new IR system

As the Federal Government has now provided more detail regarding its proposed workplace relations legislation, a number of issues have arisen if the current proposals become law.

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As the Federal Government has now provided more detail regarding its proposed workplace relations legislation, a number of issues have arisen if the current proposals become law. For example, the fate of awards has changed since the Government's original announcement some months ago.

Originally, the Government indicated its wish to remove awards as a source of minimum entitlement to employees, with the emphasis on individual or workplace agreements as the only alternatives available to employers and employees. However, from information released this week by the Federal Government, awards, including state awards and state agreements, will remain as an alternative in regulating minimum conditions of employment.

Application of proposed legislation

An important aspect of the federal government's proposed workplace relations system is that, as the Government is using its 'corporations' powers under the Australian Constitution, the legislation can only apply to incorporated companies.

An unincorporated legal entity, such as a sole trader, will not be covered by the proposed legislation.

This article is written on the presumption that an employer is an incorporated business, unless otherwise specified.

Fair pay & conditions standard underpins awards

The legislation intends to provide a Fair Pay and Conditions Standard (FP&CS), which will contain minimum standards for certain conditions of employment. These are:-

  • a minimum wage (currently $484.40 per week) to be set by the Fair Pay Commission, probably next year;
  • four weeks annual leave per year and five weeks for 7-day continuous shift workers, of which two weeks may be cashed out by written agreement;
  • personal/carers leave of 10 days per year (of which sick leave is cumulative), including 2 days bereavement leave per year;
  • parental leave, ie. maternity, paternity and adoption leave, which is up to 52 weeks of unpaid leave;
  • a maximum of 38 ordinary hours per week, although this can be averaged over one year.

If the award differs from the FP&CS, the more generous of the two conditions will apply. In some instances, the standard weekly hours condition (38 hours) could affect some industry awards, eg. pastoral industry, which still prescribe a 40 hour week, although the ability to average the weekly hours over a one year period may mitigate the effect.

However, where more generous award hours conditions, eg. 35 hour week, are prescribed, this condition will still apply to employees under the relevant award.

Federal award conditions

Existing federal awards will continue to apply in their current form, although jury service leave, long service leave, notice of termination and superannuation will not be allowed to be inserted into new awards.

Superannuation provisions in all awards will cease to apply after 30 June 2008. Where current award entitlements are more generous than the legislated minimum standards of annual; personal/carer's and parental leave, they will remain as under the award.

Award v agreement

Certain other award conditions, referred to as 'protected award conditions', will continue to apply to employees under an agreement unless explicitly altered in an agreement. These are:

  • public holidays (excluding union picnic day);
  • rest breaks;
  • incentive-based payments and bonuses;
  • annual leave loading;
  • allowances; and
  • overtime penalty rates

Are 'protected award conditions' protected?

These 'protected award conditions' can be the subject of negotiation with respect to a collective agreement or AWA, though they can only be modified or removed by specific provisions in an agreement. If these entitlements are not mentioned in the agreement, the relevant 'protected award provision(s)' will continue to operate.

Conversely, where an agreement is silent on an employment condition prescribed by an award which is not a 'protected award condition', eg. redundancy pay, the condition will not apply to employees under the agreement. In the absence of an agreement, the condition will continue to apply to employees who remain covered by the applicable award.

The Australian Industrial Relations Commission will continue as the tribunal to vary minimum conditions prescribed under an award, subject to an application by any party respondent to the award.

State awards/agreements become transitional federal agreements

The Government is proposing that any current state award or agreement will become a transitional federal agreement until replaced by a new agreement. Some provisions in former state awards and agreements, eg. union preference, or those conditions currently prohibited under the federal system, eg. provision of an unfair dismissal procedure, will not be enforceable.

It is still unclear as to the status of transitional federal agreements (ie. old state awards and agreements) if they are subsequently terminated by the relevant federal authority. The Government's information booklet states that when an agreement is terminated and not replaced by another agreement, the minimum terms and conditions of employment will be those in the Fair Pay and Conditions Standard, however, it is possible that the 'protected award conditions' described above will eventually prevail in old state awards and state agreements.

Unincorporated businesses not covered

As the basis of the proposed legislation is restricted to 'constitutional corporations', the federal system will not be able to cover unincorporated bodies, such as sole traders.

Consequently, where an unincorporated body is currently respondent to a federal award, the federal award will apply for a period of five years, after which the relevant state award will automatically apply. An unincorporated body which currently employs people under a state award or state agreement will remain under the relevant state industrial relations system.

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