Alert

Authors
Andrew Gray  
Partner

Murray Kellock  
Partner

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Murray Kellock  
Partner
T +61 3 9643 4172

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Sydney
Andrew Gray  

Perth
Robert Lilburne  

Canberra
Ian Johnson  

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This alert explains what you need to do in preparation for WorkChoices becoming law on Monday 27 March 2006. The substantive amendments are supplemented by the new Workplace Relations Regulations 2006 which were released last Sunday.

Immediate implications

The commencement of WorkChoices has the following immediate implications for all WorkChoice covered employers.

Compliance with the Australian Fair Pay and Conditions Standard

There is an immediate need to review and amend contracts of employment and HR policies to ensure compliance with the minimum terms of employment guaranteed under the new Australian Fair Pay and Conditions Standard. These guaranteed minimum conditions of employment are detailed in our previous WorkChoices review. The Standard applies to employees at all levels from the shop floor to the Chief Executive.

Changes are likely to be required to address the following issues:

• the minimum entitlement to 10 days personal leave (comprising both sick and carer’s leave) which accrues without limitation
• the new statutory entitlement to two days unpaid carer’s leave (once all personal leave has been exhausted)
• the new maximum 38 hour week - contractual provisions permitting averaging of hours and requiring reasonable additional hours beyond the 38 ordinary hours (without further payment) are recommended
• the new statutory entitlement to two days paid compassionate leave which may be taken in the event of a “serious threat to life” of a household or family member - not just their death.

Employers may also consider amending contracts of employment to:

• permit guaranteed basic rates of pay to be paid over a 12 month period (as permitted by the Regulations - see below)
• address the new public holiday “guarantee”
• avoid the default requirement to pay wages fortnightly
• require employees to provide a medical certificate for any period of personal leave
• take advantage of the new rules allowing the cashing out of annual leave and the ability to direct employees to take excessive leave (although any cashing out would need to be agreed in a WorkChoices’ workplace agreement).

State industrial arrangements

Employers not previously regulated by the Federal IR system will need to come to grips with the complex transitional arrangements that apply to State industrial awards and agreements (and also non-award employees) which are transferred into the new Federal system.

• State industrial agreements will become preserved State agreements (PSA) which will incorporate the provisions of underlying State awards and preserved statutory entitlements.
• Employees covered by common rule State awards will be covered by notional agreements preserving State awards (NAPSA) incorporating the terms of the applicable State award and preserved statutory entitlements for a three year transitional period.
• Non-award employees will also be subject to a NAPSA made up of preserved statutory entitlements for a three year transitional period.

Preserved statutory entitlements are those which currently apply to an employee and may include leave entitlements, notice of termination, redundancy pay, loadings and penalty rates.

PSA covered employees are not subject to the Standard. NAPSA covered employees are entitled to either the minimum conditions of the Standard or their NAPSA, whichever is the more generous.

Employers will need to carefully review the matrix of employment conditions for their employees against these complex transitional rules to ensure compliance with the minimum terms of employment prescribed by WorkChoices.

Pre-reform agreements

Employers seeking to finalise certified agreements or AWAs under the current IR system will need to lodge such agreements by close of business today, Friday 24 March 2006.

Annual leave payments

New rules apply to the calculation of payments for accrued annual leave entitlements.

Termination of employment

The protection provided by unfair dismissal legislation is significantly reduced. NSW employers will no longer be exposed to claims in the unfair contract jurisdiction which have frequently been brought by executive employees to challenge the termination of their employment and incentive arrangements such as share option schemes.

Buying a business

Companies buying a business should be aware of the new rules that apply to recognition of an employee’s prior service in the business.

A buyer must notify its new employees of any transmitted industrial instruments that apply to their employment with the buyer within 28 days of completion of a business acquisition.

Union right of entry and industrial action

New rules apply to restrict the right of unions to enter the workplace and take protected industrial action.

Record keeping requirements

The Regulations impose new record keeping requirements on employers which require detailed records of employee information to be kept and retained for up to seven years. Employers must also retain copies of workplace agreements for seven years post termination of the agreement.

There is also a new requirement to record the manner in which an employee was terminated and, believe it or not, the name of the person who acted to terminate the employee! There is also a requirement to record the total hours worked by each employee during each day.

The information to be recorded goes well beyond that required by current legislation. While there is a six month grace period provided for compliance with these new requirements, they are quite onerous and employers should look to develop procedures to capture and record the required information as soon as possible.

Review of employment and industrial arrangements

Employers should conduct a strategic review of their existing employment and industrial arrangements to see if efficiencies and flexibilities can be achieved by entering into workplace agreements under WorkChoices.

Workplace agreements under WorkChoices are a more viable option for avoiding rigidities which may be imposed by existing awards and/or collective agreements. This is due to the:

• primacy given to WorkChoices’ workplace agreements over existing awards and/or collective agreements
• removal of the requirement that workplace agreements pass a “no-disadvantage” test when compared to terms prescribed by underlying industrial awards (WorkChoices’ workplace agreements are measured against the Standard only), and
• simplified approval process.

Implications of the Regulations

The Regulations released last Sunday did not contain too many surprises. The main implications are:

• the preservation of existing unfair dismissal rules to terminations occurring prior to Monday 27 March 2006, and unfair contract applications filed before Monday;
• allowing employers and employees to agree in either workplace agreements or contracts of employment that guaranteed basic rates of pay may be satisfied over a 12 month period (ie an employer will comply with the Standard if an employee is paid at least their guaranteed wage over an agreed averaging period of up to 12 months);
• clarifying who is permitted to issue a medical certificate for purposes of the personal leave provisions of the Standard;
• identifying content which will be prohibited from inclusion in workplace agreements as follows: union deductions; trade union training leave; rights of unions to represent employees in dispute resolution procedures; union right of entry provisions; restrictions on the use of independent contractors or labour hire workers; forgoing of annual leave other than in accordance with the Act; provision of information regarding employees to a trade union, terms that encourage or discourage union membership; terms allowing industrial action; terms dealing with the disclosure of details of workplace agreements; terms providing a remedy for unfair dismissal; anti-AWA provisions; discriminatory terms or matters not pertaining to the employment relationship;
• specifying the qualifications required to be a bargaining agent;
• detailing the procedures that apply to ballots for protected industrial action;
• prescribing a standard notice form that must be provided to Centrelink by an employer terminating the employment of 15 or more employees; and
• new record keeping requirements as detailed above.