Employment rights for high income workers

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Employment rights for high income workers

WorkplaceInfo has been receiving a number of enquiries regarding the rights and obligations of those employees who could be categorised as ‘managers and professionals’. These are employees whose salaries, invariably, are in excess of $100,000 per annum. Some employers appear to be of the view that these employees may be exempt from the minimum conditions provided by the Fair Work Act 2009 and the Standard, but also under the prospective arrangements to be introduced under modern awards and the National Employment Standards, from 1 January 2010. What employment rights do these ‘high income’ employees have and what are the legal obligations required to be observed by employers in respect of these employees?

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WorkplaceInfo has been receiving a number of enquiries regarding the rights and obligations of those employees who could be categorised as ‘managers and professionals’. These are employees whose salaries, invariably, are in excess of $100,000 per annum. Some employers appear to be of the view that these employees may be exempt from the minimum conditions provided by the Fair Work Act 2009 and the Standard, but also under the prospective arrangements to be introduced under modern awards and the National Employment Standards (NES), from 1 January 2010. What employment rights do these ‘high income’ employees have and what are the legal obligations required to be observed by employers in respect of these employees?
 
Overview
 
It has been common for workplace relations legislation to only apply certain minimum statutory employment entitlements to those employees deemed to be ‘lower paid workers’. This is because such legislation has been regarded by federal governments as a ‘safety net’ for those employees who may have limited negotiating power over the setting of wages and conditions of employment with their employer. Traditionally, the nature of the work performed by high income employees has not been covered by the award system, while some awards exempt employees from certain award conditions where their salary or wage exceeds a prescribed level. Note: any reference in this article to an 'employer' means an employer whose business is a corporation.
 
Definition
 
For the purposes of applying the Fair Work Act, a high income employee is defined as an employee whose annual salary equals or exceeds the ‘high income threshold’, which is currently $108,300 pa (indexed each July). This amount is worked out annually in a manner determined by the Fair Work Regulations 2009. Section 332 of the Fair Work Act defines an employee’s earnings to include the following payments:
  • the employee’s wages; and
  • amounts applied or dealt with in any way on the employee’s behalf or as the employee directs; and
  • the agreed money value of non-monetary benefits.
 
However, an employee’s earnings do NOT include the following:
  • payments the amount of which cannot be determined in advance
  • reimbursements
  • employer contributions to a superannuation fund.
 
The Standard — bridging period
 
Although the Fair Work Act makes provision for a modern award system and statutory employment standards from 1 January 2010, the minimum conditions of employment for the ‘bridging period’ (ie 1 July to 31 December 2009) are determined by the relevant award-based or agreement-based transitional instruments (pre-reform federal awards, NAPSAs and pre-Fair Work Act agreements) and the minimum entitlements prescribed by the Australian Fair Pay and Conditions Standard (the Standard). An award/agreement free employee employed by an employer will have certain employment conditions governed by the minimum entitlements under the Standard during the bridging period, for example, annual leave, personal/carer’s leave (including compassionate leave), parental leave and maximum weekly hours of work, while there is also a statutory entitlement to specific public holidays, meal breaks and minimum periods of notice of termination of employment by the employer. There is no income threshold at which an award/agreement-free employee is excluded from the minimum conditions prescribed by the Standard or the Fair Work Act.
 
National Employment Standards
 
From 1 January 2010, the minimum conditions of employment for an award/agreement-free employee will be subject to the National Employment Standards (NES). Conditions that all employees will be entitled to include: maximum weekly hours of work, request for flexible working arrangements, annual leave, personal/carer’s leave (including compassionate leave), parental leave, community service leave (including jury service), redundancy pay, public holidays, minimum periods of notice of termination of employment by the employer and fair work statement. There is no income threshold that exempts award/agreement-free employees from the entitlements prescribed by the NES.
 
Modern awards — exemptions
 
The modern award system will apply from 1 January 2010. A modern award will apply to all employees ‘covered’ by the award, unless there is an exemption provision that specifically excludes certain conditions of employment from an employee whose salary or wage exceeds the prescribed level. For example, Cl 17.1 of the Clerks — Private Sector Award 2010 states that except for provisions relating to redundancy, superannuation, annual leave, personal/carer’s leave and compassionate leave, public holidays and community services leave, this award will not apply to employees employed by the week who receive a weekly wage in excess of 15 per cent above the Level 5 wage rate ($740.00 per week); provided the wage is not inclusive of overtime payments and/or shift allowances due to an employee under this award. As a general rule, exemptions will not be inserted into modern awards. The Minister has stated exemption clauses will not be included in modern awards unless there is a history of an exemption provision in a particular industry or occupation.
 
From 1 January 2010, ‘high income employees’ who are covered by a modern award can agree to avoiding or modifying the award. The employer must provide a written undertaking guaranteeing annual earnings at least equal to the ‘high income threshold’. However, these employees remain ‘covered’ by the award and may access unfair dismissal provisions.
 
Unfair dismissal
 
Under unfair dismissal laws, certain categories of employees are excluded from making a claim of unfair dismissal to Fair Work Australia. One such category is an employee who is not covered by a modern award or enterprise agreement whose annual rate of earnings exceeds the ‘high income threshold’. The important point here being that there needs to be both an absence of award coverage for the employee and their salary must exceed $108,300 pa (indexed).
 
Source: Paul Munro, IR consultant.
 
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