The Fair Work Regulations 2009 were released on 18 June 2009. The regulations provide answers to many important questions, such as:

  • What is the new remuneration threshold for the unfair dismissal jurisdiction?
  • What is the maximum award of compensation that can be ordered where an employee is found to have been unfairly dismissed?
  • What does the notice of employee representational rights look like, and how can I provide this to my employees?
  • How do I calculate payments relating to industrial action where there are partial work bans in place?
  • What do the model flexibility and consultation terms look like?

High income threshold defined

Under the Fair Work Act, an employee has the protection of the unfair dismissal jurisdiction if:

  • a modern award covers the person, or
  • an enterprise agreement applies to the person, or
  • the employee is not a ‘high income employee’ (that is, their ‘annual earnings’ is less than $108,300).

An employee’s ‘earnings’ includes:

  • wages
  • the agreed value of non-monetary benefits
  • amounts applied or dealt with in any way on the employee’s behalf or as the employee directs, and
  • amounts contributed to an employee’s superannuation fund beyond the legislated minimum.

It does not include:

  • payments which cannot be determined in advance
  • reimbursements, and
  • the minimum legislative amount the employer is required to contribute to the employee’s superannuation or defined benefit fund.

Interestingly, this represents a change from the current method of calculating remuneration for the purposes of exclusion from the unfair dismissal jurisdiction. Under the current method of calculating remuneration, a non-award employee earning $100,000 base salary plus nine per cent superannuation ($109,000 total employment cost) could not bring an unfair dismissal claim. The same employee could now bring an unfair dismissal claim, as the $9,000 paid by the employer to the employee’s superannuation fund is not considered to be the employee’s ‘earnings’. Therefore, although the remuneration cap has been increased, more employees will be able to challenge a termination in the unfair dismissal jurisdiction.

It is not clear from the regulations whether non-monetary benefits are considered to form part of an employee’s earnings where the value of the non-monetary benefit is not agreed. It seems that allowances and payments in respect of overtime will be included as ‘earnings’ where these are guaranteed and can be determined in advance. Nevertheless, there remains some uncertainty regarding the calculation of earnings, and we can expect early case law to shed some more light on these issues.

From 1 January 2010, an employer and a high income employee can agree to exclude the operation of a modern award by making a guarantee of annual earnings.

Unfair dismissal compensation cap

The limit of compensation that may be awarded by Fair Work Australia in lieu of reinstatement for an unfair dismissal application is the lesser of six months’ compensation and:

  • $54,150 for applications made under the Fair Work Act, and
  • $55,700 for applications made under the Workplace Relations Act 1996 (Cth) (Workplace Relations Act) (that is, for applications made after 1 July 2009 in respect of terminations effected before this date).

Notice of employee representational rights

The Fair Work Act imposes an obligation on an employer to take reasonable steps to provide employees with a prescribed ‘notice of employee representational rights’ as soon as practicable after bargaining commences. Employees who are currently bargaining must provide this notice to employees no later than 14 July 2009 (even though negotiations commenced before the Fair Work Act came into effect).

The notice must be in the prescribed form in the regulations. Some parts of the notice require further information to be completed by the employer (such as the name of the proposed agreements and its intended coverage). At the time of publication of this newsletter, the notice is not electronically available.1

The regulations set out a number of non-exhaustive ways that the notice can be provided to employees. These include:

  • giving the notice to the employee personally
  • sending the notice by pre-paid post to the employee’s residential address, or to a postal address nominated by the employee
  • emailing the notice (or an electronic link to the notice) to the employee’s work email address, or to another email address nominated by the employee
  • faxing the notice to the employee’s fax number at work or home, or to another fax number ominated by the employee, or
  • displaying the notice in a ‘conspicuous location at the workplace that is known by and readily accessible to the employee’.

The Explanatory Statement to the regulations notes that in some circumstances, ‘reasonable steps’ may necessitate an employer providing the notice to employees using more than one method. Therefore, although the regulations contemplate the giving of notice by posting it on a noticeboard, this may not in itself satisfy the requirements of the Fair Work Act.

Partial work bans

The strike-pay provisions in the Fair Work Act prohibit an employer from paying an employee for the period in which the employees engaged in protected industrial action, apart from partial work bans (that is, where the employee attends work, but does not perform their entire role or duties as required). Payment can only be withheld in respect of protected partial work bans if the employer gives notice of the reduction in payments. The proportion of the reduction is calculated as follows:

  • Step 1: Identify the work that the employee is failing or refusing to perform.
  • Step 2: Estimate the usual time that the employee would spend performing the work during a day.
  • Step 3: Work out the time estimated in Step 2 as a percentage of an employee’s usual hours of work for a day.

Obviously, it is difficult to calculate with any precision the amount that should be withheld in respect of protected partial work bans.

Model terms

In order to be approved by Fair Work Australia, enterprise agreements must include a flexibility term and a consultation term. If an enterprise agreement does not include these terms, the model flexibility and/or consultation clause is taken to be a term of the agreement.

Flexibility term

The flexibility term must specify the terms of the enterprise agreement that can be varied by agreement with an individual employee. The individual flexibility arrangements must result in the employee being better off overall than the employee would have been if no individual flexibility arrangement were agreed to. The explanatory memorandum to the Act gives the example of ‘Josh’, whose 37 ½ ordinary hours of work each week are required to be worked between the span of 8am and 6pm each day. Josh’s employer would normally require people employed in Josh’s role to work between 9.00am to 5.30pm. However Josh coaches an under-12s footy team, and would prefer to start work at 7.30am on those days. Josh and his employer can agree for him to not be paid a penalty on those days, as Josh is genuinely happy to agree to this arrangement because it enables him to balance his work and personal commitments.

The model flexibility term in the regulations is limited to providing for individual arrangements to be made in respect of:

  • when work is performed
  • overtime rates
  • penalty rates
  • allowances, and
  • leave loading.

Although the matters in the model flexibility clause are broad, they are exhaustive. Therefore, clients that intend to provide for individual arrangements in respect of other matters should attempt to negotiate these when bargaining.

Consultation term

The consultation term must provide for consultation between an employer and employees about major workplace changes that are likely to have a significant effect on employees. The term must allow for representation of those employees for the purpose of that consultation.

Clients who do not want to be bound by the terms of the model consultation term must negotiate a term in their enterprise agreement which provides for consultation about major workplace changes (which can be defined in the agreement), and which allows for employee representation.

The model consultation term requires the employer to notify and consult with employees who will be significantly affected by an employer’s decision to introduce a major change to production, program, organisation, structure, or technology in relation to its enterprise. The employer is required to recognise a representative appointed by the employees for the purpose of discussion.

The regulations designate the following things as ‘likely to have a significant effect on employees’:

  • the termination of the employment of employees
  • major change to the composition, operation or size of the employer’s workforce or to the skills required of employees
  • the elimination or diminution of job opportunities (including opportunities for promotion or tenure)
  • the alteration of hours of work
  • the need to retrain employees
  • the need to relocate employees to another workplace, or
  • the restructuring of jobs.

The model clause also requires the employer to provide the following things in writing to relevant employees:

  • all relevant information about the change including the nature of the change proposed
  • information about the expected effects of the change on the employees, and
  • any other matters likely to affect the employees.  

Although an employer is not required to disclose confidential or commercially sensitive information, the model term imposes rather onerous obligations on an employer to provide information in writing to all affected employees in a number of broad-ranging circumstances.