Employment and Industrial Relations

27 June 2008

Finalised national employment standards introduced

Overview

On 16 June 2008 Prime Minister Rudd released the final version of the Labor Government’s ten national employment standards (NES). From 2010 these will provide the minimum working conditions that cannot be ‘stripped away’ and will replace the Australian Fair Pay and Conditions Standards (AFPCS) that were introduced by Work Choices.

The standards will apply to all employees who will be covered by the federal system when the NES commence in 2010. The exact extent of the coverage of the NES will be finalised in the Government’s substantive workplace relations reforms which will be in the form of a Bill to be released in Parliament in the latter half of this year. Presumably, the minimum standards will apply to all employees of trading corporations in Australia.

Interplay with modern awards

The NES are also a key step towards the Australian Industrial Relations Commission’s (AIRC) overhaul of the award system. As with the NES, modern awards will become operative on 1 January 2010. These awards can contain industry specific minimum conditions that must be applied on top of the NES, which in many cases may significantly heighten employment conditions and standards.

Some of the NES can also be changed by awards to allow, for example, ‘cashing out’ of annual leave and personal leave entitlements, or for an averaging of working hours over a longer period than one week, but any changes can only take place so long as they are not ‘detrimental to the employee’.

NES

The minimum standards relate to:

• hours of work
• requests for flexible work arrangements
• parental leave
• annual leave
• personal carer’s leave and compassionate leave
• community service leave
• public holidays
• long service leave
• notice of termination and redundancy, and
• the provision of a ‘Fair Work Information Statement’.

Maximum weekly hours

As with Work Choices, the full time working week under the NES will be defined as 38 hours plus reasonable additional hours. In determining what ‘reasonable additional hours’ are, the list of factors that employers can rely on as grounds to add to employees working hours has increased. These additional factors include:

• the usual patterns of work in the industry
• the nature of the employee’s role, and the employee’s level of responsibility, and
• whether the additional hours are in accordance with averaging provisions included in a modern award.

The inclusion of the additional factors will likely allow established lengthy rosters, such as those used by ‘fly in, fly out’ workers in the mining industry to continue unimpeded as well as high income earners who may work longer hours but are already rewarded for their effort.

In contrast to Work Choices, the NES does not provide rules for averaging hours as this arrangement will be dealt with in modern awards. When an award includes an averaging provision, this will only be relevant to determining reasonable additional hours, as hours in excess of 38 a week will still be treated as additional hours.

For non-award employees and managerial employees, no averaging arrangement has been provided for.

Flexible working arrangements

The right to request a flexible working arrangement arises for employees who have a child under school age. For casual employees, the employees must have been engaged on a regular and systematic basis for at least 12 months and have a reasonable expectation of continuing engagement on that basis. For other employees, they must have completed at least 12 months of continuous service with the employer. This requirement has been added following complaints by business groups about the potential for new recruits to demand unusual working patterns immediately after being hired.

An employer can refuse a request for a flexible working arrangement by providing a written response outlining ‘reasonable business grounds’ for the refusal, a term which remains undefined. While this lack of definition may mean the employer has a wide and indeterminate scope to reject requests, the employer must remain mindful that anti-discrimination laws provide that an employee cannot be treated less favourably than any other employee of similar circumstance because they have a family responsibilities.

Under a similar scheme in the UK, flexible work requests must relate specifically to hours of work, times or work and places of work. A request cannot be based on anything else. Under Australia’s NES however, no limitations are imposed on the types of flexible arrangements that an employee may request. The Australian proposal therefore leaves it open for employees to request additional flexibilities such as term-time working (i.e. taking paid or unpaid leave during school holidays), flexi-time or compressed hours arrangements.

When similar legislation was introduced in the UK there were serious fears that a flood of claims to the IR Tribunal would follow but this proved to be unfounded. In fact, employee requests in the UK are rarely litigated, nor initially met with arbitrary refusals from employers.

Parental leave

Both parents will be entitled to separate periods of 12 months unpaid parental leave once they have completed 12 months continuous service with the employer. Mothers may request an additional 12 months but this can be refused by the employer on ‘reasonable business grounds’.

A new obligation exists, which requires that if the employee is on unpaid parental leave, the employer must take reasonable steps to consult the employee about changes that will have a significant effect on the status, pay or location of the employee’s pre-parental leave position.

New types of parental leave have been created:

• ‘special maternity’ leave, where a female employee is unfit for work because she has a pregnancy-related illness or has suffered a miscarriage, which would be deducted from the employee’s 12 month parental leave entitlement, and
• ‘no safe job’ leave, where a female employee who wishes to continue at work but whose pregnancy related illness requires her to be transferred to an appropriate ‘safe job’, if no safe job is available, she must be placed on leave and paid her base rate of pay for ordinary hours worked.

After unpaid parental leave, employees will have a right to return to:

• the employee’s pre-parental leave position, or
• if that position no longer exists - an available position for which the employee is ‘qualified and suited nearest in status and pay to the pre-parental leave position’. This wording replaces the Work Choices test of ‘nearest in status and remuneration to the former position’.

The provisions relating to parental leave have been further amended to reflect that employees taking parental leave may be in same sex relationships.

Redundancy pay

All employees who are made redundant and are employed in workplaces with 15 or more employees will be entitled to redundancy pay in accordance with the scale determined by the AIRC in the 2004 Redundancy Test Case. The right to redundancy will apply to all employee’s of constitutional corporations in Australia excluding:

• employees under a contract of employment for a specified time or task
• employees in their probation or qualifying period
• employees terminated for serious misconduct
• casuals
• trainees, and
• seasonal employees.

The redundancy pay entitlement may be reduced if the employer obtains suitable employment for the employee. As ‘suitable employment’ is undefined, the definition could encompass employment outside the employee’s organisation.

Genuine financial difficulties of the employer may also be used as a reason to reduce redundancy payment obligations.

Long service leave

Any long service leave entitlements under an existing award or NAPSA have essentially been preserved unless:

• a workplace agreement or AWA applies, or
• another specified agreement (e.g. a pre-reform certified agreement) that deals with the matter of long service leave applies.

If the employee is covered by neither of these, they will be entitled to long service leave under the applicable state or territory law.

Similarly, when an existing workplace agreement or AWA ceases to operate, the employee will be covered by the provisions of a pre-modernised award or NAPSA and if non apply, then the applicable state or territory law.

By addressing long service leave as a national standard, the Labor Government is bringing this entitlement into the federal realm with the view to create a uniform national standard. Previously, Work Choices had left this to the regulation of the States.

Each state has different long service leave arrangements. A truly national standard will involve some rationalisation of current entitlements with the prospect of employers in some States having to fund more extensive leave arrangements. At this time there is no detail on the proposal.

Annual, personal carer’s leave and compassionate leave

The entitlement to annual leave, personal carer’s leave and compassionate leave remains unchanged, however a new approach to the accrual of annual and personal carer’s leave is to be adopted. Leave is to accrue ‘progressively during a year of service according to the employee’s ordinary hours of work’. An employees ordinary hours of work will be determined by a modern award, meaning that employers may have to adopt different accrual arrangements for different employees.

Jury service and community service

An employee is now entitled to leave to perform jury duty or certain community service activities which was an entitlement that was abolished by Work Choices. This leave includes time for reasonable travel and rest time in addition to the activity.

The current Queensland legislative requirement is that the employer pay the employee at the ‘ordinary rate the employee would have been paid if the employee had not taken jury service leave’. The NES clarifies that the employer must pay the employee at the employee’s ‘base rate of pay for the employee’s ordinary hours of work in the period’ and employers are now only required to pay employees for the first 10 days they are absent for jury service.

Under the NES, the amount payable is to be reduced by the ‘total amount of jury service pay that has been paid to the employee’. The current daily allowance for jury service is $97 with a meal allowance of $10 for lunch and $19 for dinner.

As opposed to the Queensland legislative obligation, there is no requirement in the NES for the employee to present for work if the employee is not required to serve on a jury for a day or part of a day in circumstances where the employee would ordinarily be working for the remaining part of the day.

Public holidays

Employees who are absent from work on a public holiday, will be entitled to be paid their base rate of pay for their ordinary hours of work, as determined by a modern award.

In making the assessment of whether it is reasonable to request an employee to work on a public holiday, consideration must be given to the type of employment the employee is engaged in.

Fair Work Information Statement

From 2010 employers will be required to provide all new employees with a ‘Fair Work Information Statement’ (replacing the Workplace Relations Fact Sheet) as soon as practicable after they commence employment. The statement will be published by Fair Work Australia and will contain information about the NES, awards, making agreements, freedom of association and Fair Work Australia.

Application of minimum standards

The NES will apply to all employees covered by a modern award, agreement or contract which essentially means all employees under the federal system, including managerial and professional staff who are not covered by awards.

In a similar development that extends the application of minimum standards, the AIRC has provided scope for a future ‘catch-all’ award to cover employees who are not covered by another award and who perform work of a nature similar to that which has historically been regulated by awards. From January 2010 therefore, employers will be applying the NES to top end employees and new award minimum standards to bottom end employees, both of which have gone uncovered by minimum standards thus far.

Impact of the changes

In many respects, the NES build on the AFPCS. However, there will no longer be a minimum federal wage. Wage rates contained in Australian Pay and Classification Scales will be returned to modern awards.

As a result of the NES, employers will need to review and update their employment contracts, workplace agreements and policies.

For further assistance or enquiries please contact:

Tim Longwill on 07 3233 8974.