Overaward ruling ‘common sense’, say employers

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Overaward ruling ‘common sense’, say employers

A major employer group has welcomed as ‘common sense’ a FWA decision clarifying that employers are generally entitled to absorb modern award entitlements into overaward payments.

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A major employer group has welcomed as ‘common sense’ a FWA decision clarifying that employers are generally entitled to absorb modern award entitlements into overaward payments.
 
FWA will now be asked to re-issue a Guidance Note with the correct interpretation, so as to remove ambiguity on the issue.
 
Clarifies absorption
 
Ai Group chief executive Heather Ridout said the decision relates to its application to clarify the following absorption clause which has been inserted into modern awards:
‘The monetary obligations imposed on employers by this award may be absorbed into overaward payments. Nothing in this award requires an employer to maintain or increase any overaward payment.’
Ridout said clarification was necessary because on 1 June the Fair Work Ombudsman (FWO) released a Guidance Note interpreting the clause as requiring that an employer obtain the agreement of each individual employee before absorbing any additional costs arising under modern awards into overaward payments.
 
Individual approval unworkable
 
Ai Group argued in the FWA proceedings that such an approach is unworkable and would result in an unfair, costly and complex burden being imposed on business.
 
Ridout said a Full Bench of FWA has decided that it is not necessary to vary the absorption clause, as applied for by Ai Group, because the intent of the clause is clear.
 
The Full Bench had ruled:
‘... the intent of the clause is that where monetary obligations increase as a result of the implementation of modern awards, employers should be able to absorb those increases into existing overaward payments.’
No such entitlement
 
It noted that there may be some cases where an employer and employee have agreed in a contract of employment to maintain overaward payments but ‘in the vast majority of cases, it is likely no such entitlement will exist’.
 
‘Given the Full Bench decision, Ai Group will be seeking that the FWO re-issue its Guidance Note with the correct interpretation included,’ Ridout said.
 
‘Ai Group’s application was heard jointly with a union application to phase-in changes in overtime penalties under modern awards.’
 
‘This union’s application was rejected and the overtime provisions in modern awards remain excluded from the transitional arrangements which phase in higher or lower wage rates, penalties and loadings.’
 
‘Ai Group’s success in these proceedings continues our successful defence of industry’s interests in relation to the Fair Work Act.’
 
Successful appeals by employers
 
‘Ai Group has pursued appeals in its own right, or intervened in proceedings initiated by others, in many cases since the Fair Work Act came into operation, including the following:
  • An appeal against the decision of Commissioner Greg Smith to reject an agreement negotiated between Woolworths and the SDA because the dispute settlement clause did not include compulsory arbitration. (Result: Decision overturned.)
  • An appeal, filed by Ai Group, against the decision of Commissioner John Ryan to approve an agreement applicable to Dunlop Foams containing an allegedly unlawful term relating to union right of entry. In his decision, Commissioner Ryan interpreted the right of entry and unlawful term provisions in the Fair Work Act in a manner which will cause problems for industry. (Result: Decision overturned.)
  • An appeal against the decision of Commissioner John Ryan in a case involving TriMas in which the Commissioner interpreted the provisions of the Act, which require a flexibility term to be included in all enterprise agreements, in a very narrow manner. (Result: Decision overturned.)
  • An appeal against the decision of Commissioner Donna McKenna to reject an enterprise agreement negotiated between McDonald’s Restaurants and the SDA, covering 80,000 employees. Ai Group was concerned that most employers who negotiate an enterprise agreement would not be able to meet the extremely onerous procedural requirements and approach to applying the no disadvantage test adopted by the Commissioner. (Result: decision overturned).
  • An appeal against a decision of Senior Deputy President Hamberger which held that an enterprise agreement clause requiring all contractors and labour hire providers used by Airport Fuel Services (a Caltex operation) to have an enterprise agreement with the TWU, could be the subject of protected industrial action. (Result: Decision overturned.)’
Practical
 
‘Employers are facing a big challenge from 1 July in implementing new wage rates, penalties and loadings under modern awards,’ Ridout said.
 
‘The Full Bench’s decision will assist in ensuring that a practical and sensible approach can be taken to implementation.’
 
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