HR&IR Update | Australian Industrial Relations Commission releases final stage 4 awards

7 December 2009

On Friday, the Australian Industrial Relations Commission (AIRC) released the final stage 4 awards – which largely completes the award modernisation process – with the new modern awards starting on 1 January 2010.

It's been a herculean task with the AIRC consolidating and rationalising thousands of federal and former state awards into a little over a hundred industry and occupation based awards. It's also been something of thankless task. As with any consolidation of diverging employment conditions, there will inevitably be some losers. And, the endeavour to make the introduction of the modern awards as smooth as possible has resulted in some nightmarishly complicated transitional provisions, which phase in the changes over 5 years.

Miscellaneous Award

For many employers, the most important part of Friday's decision concerns the Miscellaneous Award 2010 – which, as its name suggests, has the potential to apply to a wide range of employees. The original draft provided that the award applied to employees who would otherwise be award free unless the employee is either:

  • in an industry covered by a modern award (but not covered by the classification structure), or
  • in a class exempted from the operation of a modern award.

Problematically, many of the modern awards are occupation based rather than industry based.

This would mean that – if an employer is not covered by an industry award (which is common) – potentially all of their 'award free' employees would be subject to the Miscellaneous Award. Of course, there are some exceptions to this – most notably, employees who earn more than the high income threshold and sign a 'high income guarantee'.

And, of course, the Miscellaneous Award includes not only minimum wages – but, more importantly, overtime, penalty rates and annual leave loading entitlements.

To overcome this problem, the AIRC has now also excluded employees who 'because of the nature or seniority of their role, have not traditionally been covered by awards including managerial employees and professional employees such as accountants and finance, marketing, legal, human resources, public relations and information technology specialists.'

Unfortunately though, this does introduce some significant uncertainty into the coverage of the award.

The AIRC has also changed the annual leave loading provision.

Clerks and Banking, Finance and Insurance Awards

Last month, the AIRC also introduced new provisions into the Clerks Private Sector Award 2010 and the Banking, Finance and Insurance Award 2010 – which replaced the exemption provisions. They permit an employer to pay an employee an annualised salary in lieu of annual leave loading, allowances, overtime and penalty rates – provided the employee does not receive less than their award entitlements over 12 months. However, the employer must advise the employee of this and there are also some doubts about the ability of an employer to change existing arrangements unilaterally.

Many employers are still struggling with award modernisation, what it means for them and how to deal with some of the difficult issues it gives rise to. And time is fast running out, with the modern awards starting in just under 4 weeks, on 1 January 2010.


Implications for employers of award modernisation

Employers need to determine which employees will be covered by which modern awards from 1 January 2010 and whether the terms of the award are different to the employees' current terms. If there are differences, then the employer will need to consider what action to take.

Importantly, even with pay related conditions being phased in from 1 July 2010, the introduction of modern awards will still have payroll and cost implications from 1 January 2010.

Employers should check the specific 'phasing in' provisions in the relevant awards and monitor take home pay orders. Importantly, some modern awards do not contain 'phasing in' provisions.

Employers cannot disregard modern awards simply because they have an enterprise agreement. If the employer is covered by a modern award and the wage rates in the enterprise agreement are below the wage rates in the modern award, the employer will be required to pay the modern award wage rates.

Employers covered by the Clerks Private Sector Award 2010 and the Banking, Finance and Insurance Award 2010 must issue a notice to employees who are paid an annualised salary in accordance with those awards – on or before 1 January 2010.

An employer who breaches a provision in a modern award may be fined and be required to make good any underpayments.


The New National IR System

In other news, each of the States (except West Australia) have now passed legislation referring industrial relations powers to the Federal Government and the Federal Government has, in turn, passed its enabling legislation – the Fair Work Amendment (State Referrals and Other Measures) Act 2009.

Amongst other things:

  • the Fair Work Act 2009 (FW Act) will extend to all employees within the state – except that the state governments may elect to exclude the state public sector and local governments. Amongst others:

    • the New South Wales Government is excluding local governments and the state public sector. However, employees of state owned corporations will be covered by the FW Act, but this does not include former employees of state owned corporations who were transferred to the Government service in 2006,

    • the Queensland Government is excluding the local government and the state public sector. However, government owned corporations and various other entities will be covered by the FW Act,
  • state awards and agreements will continue to apply under the FW Act (note that this does not apply to Notional Agreements Preserving State Awards, which are already part of the federal system). However, within 12 months, Fair Work Australia must consider incorporating the state awards into the federal modern award system.

  • state industrial tribunals may continue to exercise powers under dispute settlement provisions in state agreements,

  • there is a complex range of transitional provisions – including the power to make take home pay orders to prevent employees suffering a reduction in take home pay.

In New South Wales:

  • 7 non judicial members of the New South Wales Industrial Relations Commission (NSW IRC) will appointed to Fair Work Australia – as well as retaining their positions on the NSW IRC (3 Sydney based and 4 based in Newcastle and Wollongong),

  • the New South Wales Industrial Court will have jurisdiction over matters under the FW Act.

Fair Work Information Statement

Finally, the Fair Work Ombudsman has now released the Fair Work Information Statement. It must be provided to all new employees from 1 January 2010.