WorkChoices: Where are we 6 months on?

By Stephen Booth, Partner
Coleman & Greig Solicitors

Since WorkChoices came into effect on 27 March 2007, its effects, great and small, have been felt by most employers. The High Court challenge to the laws has not yet been decided, but the consensus is that it will probably fail.

With the benefit of 6 months experience, we can now identify areas of practical significance for employers, and common misconceptions of which to be aware.

This is an overview of practical issues, with the usual disclaimer not to rely on this summary but to get advice whenever a possibly serious issue arises.

TO AWA OR NOT?

Many employers are under the impression that Workchoices means they must develop AWAs. That is not the case. The legislation has made AWAs easier to use and certainly encourages formal individual contract making to displace awards. AWAs offer opportunities for reduction of wage costs, and introduction of incentive-based or productivity-based pay arrangements rather than the rigid pay structures of awards.

But whether that is necessary or desirable depends on whether an award covers your workers, and if it does, whether that presents any problems which an AWA could resolve. If there are inconveniences, inflexibilities or other problems arising from an award then an AWA may be a good idea. If not, then you need to consider whether the (simplified) administrative burden of using AWAs (or other forms of workplace agreement such as collective agreements) are worthwhile.

The paperwork for AWAs is now simpler than before (but there are still specific requirements regarding information provided to employees, time periods, and registration), and the test for approval has reduced (meeting minimum requirements rather than being no worse than all the terms of an award). Whether to use AWAs or not is still a complex strategic and commercial issue on which employers should take advice before proceeding.

TERMINATION OF EMPLOYMENT

The outlook for employers has improved markedly with the removal of the right to claim unjust dismissal where the employer has less than 100 employees (on a grouped basis), and the virtual abolition of unfair contracts claims for corporate employers.

However, unjust dismissal claims remain for larger employers – although there is now a defence of “genuine operational reasons” for termination. Case law on this issue has shown this is not as simple as it seems: the operational reasons must be rationally related to the termination – it is not sufficient to show that some reduction in workforce was necessary without showing why that meant the particular employee’s job had to go.

And the unlawful termination jurisdiction (relating to discriminatory termination, termination for union involvement or failure to pay statutory notice period) remains.

The removal of unjust dismissal rights means that applicant’s lawyers are looking closely at employment contracts to find breaches for which they can sue in the ordinary courts. While there are costs disincentives which deter such claims, they remain a significant risk, particularly as court decisions explore the extent to which workplace policies form part of the employment contract so that damages can be awarded if the policy is breached by the employer. For example, employers who fail to follow their policies on termination processes or their anti-harassment policies have had damages awarded against them. This is a “hot issue” for employment lawyers at the moment and means that employers should be careful what they promise in policy documents and be careful to stick to their policies.

So while risks have reduced, employers should still follow prudent procedures including warnings when managing the performance of employees.

RECORD KEEPING

The amnesty for record-keeping requirements has been extended to 27 March 2007, but at some point, most employers are going to have to come to grips with this. Because WorkChoices emphasise hourly rates of pay and reasonable hours, it follows that accurate records of work time are necessary. So, the regulations require that employers keep time records for employees earning less than $55,000 base annual salary, or employees entitled to overtime.

Who is entitled to overtime? Anyone whose job description comes within an award, however much above the award they are paid. So many people who do not conceive of themselves as award employees, and who work flexible hours are, strictly speaking, entitled to overtime beyond 38 hours a week at whatever their hourly rate is. And the record keeping requirements may well focus their attention on this entitlement.

So employers need to work out how best to keep the records required, or adopt AWAs to exclude the overtime entitlement of award employees.

How must records be kept? This is a practical issue for each employer. IT solutions, time sheets, or employee reports of excess hours may all work – but the obligation to keep accurate records rests on the employer. And there are fines for failing to keep the required time records.

LEAVE ENTITLEMENTS

The legislation introduced a number of changes to the details of leave entitlements, including:

annual leave accruing monthly rather than annually, and being available to be taken within the first year of employment
sick leave and carer’s leave being combined in personal leave, and 10 days per annum replacing the usual “5 days in year one and 8 days per annum thereafter”
parental leave being available to long term casual workers.

Employment policies and contracts, and payroll leave accrual systems, need to be amended to catch up with these changes.

AWARD RATIONALISATION AND NEW INDUSTRIAL INSTRUMENTS

As part of taking over the State industrial systems and simplifying the vastly extended Federal system, WorkChoices has turned state awards into NAPSAs (notional agreements preserving state awards), has extracted the pay provisions which will become APCSs (Australian Pay and Classifications Scales) set by the AFPC (Australian Fair Pay Commission), not to be confused with the AFPCS (Australian Fair Pay & Conditions Standard) set by the legislation. There are also “protected entitlements” which in fact are not protected if overridden by an AWA.

This means that between now and 2009, there are a plethora of transitional arrangements, meaning that entitlements may arise from a bewildering array of sources. In the long run, things will be simpler, but as Bette Davis said “Hang on, it’s going to be a bumpy night” while all this sorts itself out.

TRANSMISSION OF BUSINESS

The legislation limits the extent to which a business acquiring another business becomes fixed with the industrial instruments applying to that business. However, the rules require information to be given to employees of an acquired business as to their applicable conditions (within 28 days of transmission), which need to be drawn from the morass described above. A nice challenge for HR departments and employment lawyers!

EMPLOYMENT CONTRACTS AND POLICIES GENERALLY

Even if you do not use AWAs, the advent of WorkChoices means that now is a very good time to review employment contracts and policies with a view to complying with changes from WorkChoices, and minimising the prospect of back pay claims for overtime or other penalties or allowances where awards have not been strictly adhered to, and implementing any improvements which are feasible. WorkChoices is both a reason and an occasion to do this.

Policies also need to be reviewed to make sure that you are not promising things which are hard to deliver and that your discrimination policies are up to scratch.

The climate of concern around WorkChoices means that employees are sensitised to changes to entitlements and may become aware of technical breaches which have never previously come to their attention. Being prepared for this and acting to avoid it are very important matters for all businesses, and present an opportunity to sharpen up employee management.

WHAT TO DO?

If in doubt, get advice. At Coleman & Greig, we aim top provide practical advice in plain language so you can decide what you need to do taking account of your strategic and practical realities. If you would like to talk about the issues outlined above or any other employment law issues, call or email:

Stephen Booth, Partner 9895 9222 sbooth@colgreig.com.au

Amanda Harvey, Solicitor 9895 9253 aharvey@colgreig.com.au

Stephen Booth has been practicing law for over 20 years and is the Head of Coleman & Greig’s Litigation and Dispute Resolution Team. He has substantial expertise in the area of employment law and has written and presented widely on the topic.