Areas of conjecture and WorkChoices


Areas of conjecture and WorkChoices

Because of the volume and complexity of WorkChoices legislation there are some issues under the new legislation that are unclear or open to debate and so definitive advice is not yet possible.


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Because of the volume and complexity of WorkChoices legislation there are some issues under the new legislation that are unclear or open to debate and so definitive advice is not yet possible.

In writing the series of articles on various matters relating to the WorkChoices legislation on WorkplaceInfo, it has become apparent that there are a number of issues which, at this stage, appear at the very least ambiguous, or more seriously for employers, anomalous. The WorkChoices legislation involved quite complex legislative drafting which may have resulted in some unintended consequences for employers.

This article looks at some of the issues which, at the time of writing, it is hoped, will be clarified after the federal government has received submission from the peak employer organisations.

Termination of employment - notice by employee

The Workplace Relations Act (WRAct) has always provided for certain periods of notice of termination, based on the years of continuous service employees have had with their employers, that are required to be given by an employer when terminating an employee's employment. However, the amount of notice required to be given by the employee when resigning has usually been the period prescribed by the applicable industrial instrument (ie award or agreement).

No notice required

Because of the drafting of the WorkChoices legislation, employees are no longer required to give any notice of termination to their employers. This comes about because the notice of termination provisions in pre-reform awards and NAPSAs have been deleted as an allowable award matter. The drafting means that the WRAct, rather than awards, regulates termination of employment. The problem with this is that the WRAct only applies notice of termination requirements to the employer - there is no similar requirement imposed on employees.

At this stage, this gives an employee a right to exit employment at will without cost, which is at odds with the obligations on employers, subject only to common law requirements of 'reasonable notice'. Under these circumstances, the employer is required to pay the employee for all work performed up to the date of resignation. Seeking relief to require an employee to give 'reasonable notice' would not be a viable alternative for an employer because such matters must be pursued through the common law courts, usually involving considerable legal expense.

Pre-WorkChoices agreements continue to apply

It should be noted that the period of notice required to be given by an employee who is terminating his or her employment, and the provisions are governed by a pre-reform certified agreement, preserved state agreement, a pre-reform AWA or a pre-reform individual state agreement, will continue to apply until the agreement is terminated or replaced by a WorkChoices instrument.

Deduction from termination payments

A common provision in pre-reform federal awards was the ability of the employer to deduct a week's wages 'from all monies due on termination of employment'. This generally included pro rata holiday pay because this provision was contained within the same award.

However, the annual leave Standard under WorkChoices now requires the employee to be paid all accrued annual leave when employment ends. This provides a greater protection of termination payments for employees than was previously the case under pre-reform federal awards. But if no amendment to the legislation occurs, to correct the anomaly regarding no notice of termination being required to be given by the employee to the employer, this provision will add to the cost of employment for employers.

Pre-WorkChoices agreements continue to apply

Once again, where an employee is covered under a pre-reform certified agreement, preserved state agreement, pre-reform AWA or a pre-reform individual state agreement, a provision allowing the employer to deduct from 'all monies due on termination' will continue to apply.

Annual leave - employee entitlements

Where an employee's annual leave conditions are determined by WorkChoices, difficulties have emerged with the definition of nominal hours worked, contained in the annual leave Standard. The agreed or contracted hours of work, which may be in excess of 38, become the level of entitlement for annual leave. Under WorkChoices, the total nominal hours for the working period (say, 12 months) are divided by 13, potentially providing an annual leave entitlement well in excess of 38 per week of annual leave.

Additional hours or overtime taken into account

This could result in employees who work (say) 50 hours per week throughout a year, making a  claim that their annual leave is 200 hours (4 x 50 hours) not 152 hours (4 x 38 hours). They may then claim, based on a 38 hour week, an extra 6 days annual leave. Prior to WorkChoices the maximum amount of leave was based on 38 hours, regardless of the number of additional or overtime hours worked by the employee during a year.

Annual shut-down

Where an employee's annual leave conditions are determined by WorkChoices, employers have had difficulty with the inability to stand employees down without pay during an annual shut down. A common provision, both in annual leave legislation and pre-reform awards, was the employer's ability to close down all, or a section of, the workplace for the purposes of sending the workforce on annual leave.

Close-down leave 'without pay' not available

Annual close down for annual leave is common in many workplaces, particularly the period surrounding Christmas Day and New Year's Day. The problem created by WorkChoices is that an employee can only be sent on any annual leave 'credited' to the employee. Previously, annual close down provisions allowed the employer to send employees on a close-down and, for those employees with insufficient annual leave credits, to be stood down without pay for the balance of the close down.

Workers compensation payments

The WorkChoices legislation may provide an unintended consequence for employees with respect to the level of workers compensation payment that a non-industrial instrument employee will receive, as a result of a workplace-related injury or illness.

Traditionally, a non-award employee, eg an accountant, senior manager or other professionally-qualified employee, usually received a higher amount of workers compensation than an employee covered under an industrial instrument. This was because the level of compensation for a non-industrial instrument employee was quite high.

WorkChoices - impact of minimum wage

For example, in NSW a non-industrial instrument employee could receive up to approximately $1500 per week as workers compensation, based on average earnings. However, as the federal minimum wage is the 'award wage' for the purposes of WorkChoices for this category of employee, the level of compensation may be based on $12.75 per hour. As this usually affects senior management and professional employees, there may be claims for 'make up' pay, similar to accident pay, for these employees, or the inclusion of such provisions in an employee's individual contract of employment or Australian Workplace Agreement (AWA).

Pre-WorkChoices agreements continue to apply

An employee covered by a pre-reform industrial instrument (ie award or agreement) would be unaffected by this, as the level of workers' compensation is usually the relevant rate of pay for the employee's classification under the applicable award or agreement.

Shift workers and annual leave

Under the annual leave Standard in WorkChoices a shift worker regularly required to work on Sundays and public holidays is entitled to an additional week's leave.

Extra leave entitlement available to more employees

The problem with this definition is that an employee whose ordinary hours of work are (for example) from Wednesday to Sunday inclusive, is regularly required to work on a Sunday and could, therefore, qualify for an extra week's leave.

These hours are common in some business sectors, such as retail and restaurant industries, where most of the company's business occurs on weekends and public holidays.

Previously awards and agreements qualified the entitlement by referring to the 'continuous shift work' as a roster that operated continuously for 24 hours per day, over six or seven days of the week, with the employee gaining the additional week's leave where work was regularly rostered to be performed on Sundays and holidays. As it stands, a 'day worker' whose ordinary hours include Sunday and the occasional public holiday could be entitled to five weeks' annual leave under the WorkChoices Standard.


Analysis of Federal Workplace Relations Amendment (WorkChoices) Act 2005



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