The award modernisation process is reaching its final stages, and employers need to be aware that from 1 January 2010 their award obligations may change, and they will be required to comply with modern awards. This includes some employers who were not previously covered by an award.

The take home message for all employers is that they have to know what modern awards will apply to their employees and what their obligations under modern awards will be.

The miscellaneous modern award

Whilst the award modernisation process is expected to be completed by 4 December 2009, some uncertainty remains as to the terms of the 'miscellaneous modern award', which is being created as part of the final stage of the process.

According to the Government's award modernisation request, which sets the parameters of the award modernisation process, the miscellaneous modern award should 'cover employees who are not covered by another modern award and who perform work of a similar nature to that which has historically been regulated by awards'. The miscellaneous modern award has been referred to as a 'catch all' award that could potentially apply to all employees that fail to fit under any other modern award. However, the exact scope and application of this modern award will remain uncertain until it is drafted.

Penalties

Employers that are not prepared for modern awards by 1 January 2010 risk breaching their modern award obligations, and could face penalties of up to $33,000 as well as orders for back-pay.

For employers, the alternatives to strict award compliance are to use an individual flexibility arrangement under a modern award, enter into an enterprise agreement with their employees or use a high income guarantee, where appropriate.

Transitional arrangements

On 2 September 2009, the Commission handed down its decision dealing with the transitional provisions for modern awards created in the priority stage and the second stage of the award modernisation process.

These provisions are designed to assist with the phasing in of new obligations and cost increases under modern awards.

In its decision, the Commission announced that whilst modern awards will commence operation on 1 January 2010, the commencement of some pay related provisions will be deferred until 1 July 2010.

The award provisions that are the subject of the transitional provisions are those dealing with:

  • minimum wages;
  • casual and part-time loadings;
  • penalties for working on Saturdays, Sundays, public holidays or evenings and other penalties; and
  • shift allowances and other applicable industry allowances.

The phasing in period will commence on 1 July 2010, and will continue in stages until 1 July 2014.

In the Commission's own words the transitional provisions 'involve a degree of mathematical complexity'. The phasing in of new rates for payment allows employers to pay incremental increases to employees each year, based on a calculation of the difference between rates under the relevant current award and rates under the relevant modern award.

It is important to note that while the Commission has created a uniform set of transitional provisions, not all modern awards will contain these provisions, and some modern awards will contain only parts of these provisions.

Again the message is clear, that employers need to take care in reviewing modern awards to determine how they apply to their workplaces.

Overaward payments

The Commission also deals with the issue of the absorption of overaward payments into increases resulting from modern awards.

Whilst employee representatives argued that these overaward payments should not be absorbed by, or set-off against, increases under modern awards, the Commission decided to provide that employers may absorb modern award related increases into existing overaward payments.

However, it is not clear from the Commission's decision how the absorption of these increases will work in practice. Hall & Wilcox will keep you updated on this important transitional issue.

Review

Where employers or employees are unhappy with the operation of the transitional provisions in specific cases, they will be able to apply to Fair Work Australia (FWA) for a review and a determination varying the transitional provisions.

Existing employees will also be able to seek 'take home pay orders' from FWA in circumstances where their overall take home pay has been reduced as a result of award modernisation.

More to come

As noted, the Commission's decision of 2 September 2009 deals with transitional provisions for modern awards created in the first two stages of the award modernisation process. Later this year, the Commission will hand down a further decision dealing with transitional provisions for modern awards created in the third and fourth stages of the award modernisation process.