Happy 2017! The start of a new year is usually a time many of us reflect on what we would like to achieve in our personal lives in the year to come. However, many of us don’t take the time to reflect on our work or professional lives in the same way. With the new year in full swing, we thought now was a perfect opportunity to consider some of the leading themes emerging in the employment law arena already this year, with a view to discussing some of the steps you can take to ensure your business stays on the right track.
Contract and Remuneration Reviews
It is important for businesses to consistently review their staff employment contracts to ensure they are still relevant to the employee’s position and are up to date with changing laws. This can be especially noteworthy if you have an employee who has been with the business for a substantial amount of time or whose employment has significantly evolved through the expansion of duties or a change in position. In this regard, employers should check that contractual terms are up to date and accurately reflect the level or seniority of the employee’s position, and consider if appropriate contractual measures are in place such as restraint of trade obligations and gardening leave provisions, to protect confidential business information and the company’s legitimate commercial interests.
Furthermore, in light of a recent decision handed down by the Western Australia Industrial Relations Commission, employers should also carefully review annualised salary arrangements for their salaried employees. This has become increasingly important following the decision of Magistrate Cicchini in Stewart v Next Residential Pty Ltd [2016] WAIRC 00756, which concerned Ms Stewart who was employed by Next Residential Pty Ltd (“Next Residential”) as an Administration Coordinator on a salary of $78,000 per annum. In the proceedings, Ms Stewart claimed Next Residential failed to pay her overtime and compensate her for working through her lunch breaks which amounted to backpay of $28,984, as required by the relevant award, being the Clerks Private Sector Award 2010. However, according to the contract the annual salary was intended to be inclusive of any award provisions and entitlements that may be payable under an award or industrial instrument. Next Residential argued that Ms Stewart was not directed to work overtime or through her lunch breaks and this was done on her own initiative. Next Residential also submitted that any additional hours worked were offset against early finishes, late starts and greater flexibility in working hours generally.
In his decision, Magistrate Cicchini found against Next Residential on the basis that Ms Stewart’s employment contract was uncertain in its terms and did not clearly indicate that the annual salary included overtime, penalty rates and the like. As such, it was held that Ms Stewart’s claim was not excluded by her employment contract and could proceed as an underpayment of wages claim. This decision highlights the importance of drafting clear employment contracts and in particular specifying the terms and provisions of any applicable modern award which are intended to be satisfied by an “all-up” annualised salary approach. To avoid any doubt, it is advisable that employment contracts identify the specific modern award provisions intended to be covered by an annualised salary clause.
Cashing Out of Annual Leave Procedures
In July 2016, the Fair Work Commission brought into effect a change that allows annual leave to be cashed out under most modern awards. The newly implemented changes mean that employees covered by a modern award that contains a cashing-out clause, can now cash out up to 2 weeks’ annual leave in any 12 month period, as long as they have not less than four weeks’ accrued annual leave remaining, and the agreement is formalised in writing between the employee and employer.
Under the new regime, employees can now also direct employees who have excessive annual leave, to take one or more weeks paid annual leave on the basis that the remaining annual leave entitlement is not less than six weeks. Before issuing the direction, an employer must first meet with the employee to try and agree on a plan to reduce the excessive leave accrual.
In addition, the change also allows an employer and employee to agree to paid leave in advance of the employee actually having accrued the entitlement to take the leave. Any such agreement must be recorded in writing.
If, however, the applicable modern award is silent on this issue, the employee will notbe entitled to cash-out their accrued leave and any agreement to do so will be a breach of the Fair Work Act 2009 (Cth) and the modern award. In addition, if the moderns award does not allow an employer to direct an employee to take leave or deal with the leave as set out above, the employer will not be entitled to do so.
For employers who have annual leave policies already in place, we recommend these policies be carefully reviewed to reflect the new reforms. Likewise, employers who do not have an annual leave policy in place should consider implementing a clear and well-worded policy that is suited to business needs and deals with the annual leave process and the ability to cash out annual leave. Employers should also review any relevant provisions in their employment contracts in order to ensure the contract reflects the changed provisions and/or any revised workplace policies.
Thinking About Redundancy for Small Business Employers
The new year is often a time of year where businesses re-evaluate their goals and budgets as they come into the second half of the financial year. Accordingly, employers should be aware of the requirements surrounding redundancy, specifically if you are a small business.
As a general rule, a small business employer is not required to pay redundancy pay, however there are some circumstances where a small business may be required to make these payments. A ‘small business employer’ is defined in section 23 of the Fair Work Act 2009 (Cth) as an employer who employs fewer than 15 employees at that time.
If your organisation falls within the definition of a ‘small business employer’ then you should be aware however, that there are a small number of modern awards that require a redundancy payment to be made to employees working within particular industries. The payment is calculated on a sliding scale typically outlined in the relevant modern award, and is less than the minimum scale under the National Employment Standards. Commonly, the scale for such payments is as follows:
o Less than one year’s continuous service – Nil
o At least 1 year but less than 2 years continuous service – 4 weeks pay
o At least 2 years but less than 3 years continuous service – 6 weeks pay
o At least 3 years but less than 4 years continuous service – 7 weeks pay
o At least 4 years and over of continuous service – 8 weeks pay
In addition, small business employers should also note that industry-specific redundancy schemes may apply to all employers covered by certain modern awards, including small business employers. If you are a ‘small business employer’ we recommend a review of the modern awards applicable to your business to ensure that all redundancy obligations are met when carrying out change management or restructuring activities.
Paid Parental Leave and Supporting Working Parents
An astoundingly 4.1 million or nearly two in five employees are said to be either parents of a child under 15 years old or have caring responsibilities. It is for this reason that it is vital employers understand their obligations relating to pregnant employees, employees on parental leave and working parents.
We recommend businesses review their internal policies and procedures in this regard and ensure your organisation has adopted an updated pregnancy policy. As a way to assist both employers and employees, the Australian Human Rights Commission has recently released a new website to promote the mutual understanding of rights and obligations in the workplace around pregnancy, parental leave and returning to work which may assist your business establish strong foundations and compliance in this area.
Furthermore, the Federal Government has sought submissions regarding the Fairer Paid Parental Leave Bill 2016 (Cth) which will prevent new parents from “double dipping” into paid parental leave. The consequence of this Bill being passed is that parents will not be able to claim paid parental leave from both the government’s scheme and their separate employer. As a result, employers should review paid parental leave policies and the benefits offered to employees when the change takes place.
If you wish to discuss any aspect of this article or require specialist advice or assistance in relation to an employment law issue this year, please do not hesitate to contact us. Otherwise, we wish all our readers all the best for a successful and productive 2017!
This alert is not intended to constitute, and should not be treated as, legal advice.