The Fair Work Act may be a bonanza for the lawyers but employers need to be ready for more record keeping, extra legal advice costs regarding staff redundancies or dismissals, and requests from staff who want to job share.
Lawyers say that small employers with less than 15 staff aren’t exempt in the way they may think, and are going to have to be more vigilant in the way they treat and consult with staff on any changes; many businesses will also need legal advice.
“That can be a difficult mindset for small business,” said Nick Duggal, workplace relations expert at TressCox lawyers, “but as they say, a stitch in times saves nine.”
“Hopefully, you can avoid sticky situations; sometimes, you may still end up with a claim, but if you take preventative action, your defence will be stronger.”
Duggal says many employers are already asking him for drafting advice on employment contracts for staff members not under Awards.
“This (contract) should set out the terms and conditions of their employment; I also think that contractor arrangements should be reviewed to see if they’re working with other businesses, and invoicing and have their own ABN or are working through their own company.”
Here are ten top things to consider regarding the changes:
1. Are you an eligible small business employer? If your business is incorporated, you’re in the national system. If not, you may be under State laws. This is important when it comes to unfair dismissal claims.
A small business employer is defined as employing fewer than 15 employees, however with the transitional legislation in place up until January 2011, head counts may vary because there’s a formula set out which averages ordinary hours worked by all employees for the four-week period immediately prior to an employee termination, and dividing the result by 152.
After January 1, 2011, it’s all about the head count. If you have lots of long-term casuals and part-timers, your head count may be higher (and you have to include the terminated person/s in the count as well as any staff in any other entity controlled by the owners of the business).
As a small business, you will be exempt from an unfair claim if the employee hasn’t been in continuous employment for more than 12 months. If you have 15 or more staff, the exemption period is six months employment. If you have an associated entity, then those staff will be counted in as well.
2. Good faith bargaining means you’re likely to have enterprise agreements or awards whether you want it or not, even if you’re a small employer. Are the staff already covered by an Award or an enterprise agreement? If your staff are non-award and earn above $108,300 pa, then they can’t go to Fair Work Australia for an unfair dismissal claim.
If you’re running a professional services business, then clerical staff may fall under the Clerical Award. If staff are consultants or contractors, then those arrangements may be tested under the Federal Independent Contractors Act, where a contractor complains.
“Sometimes you may have workers who are initially keen to be contractors, but then later claim to be actually in an employee relationship. This can lead to claims for employee entitlements, such as redundancy,” Duggal explained.
3. Modern awards replace the old awards, and some will have increased casual loadings and holiday penalty rates. This is a big issue for hospitality and tourism industry, and potentially for any retailer, because there’s a new Federal general retail industry award, which is quite broad.
This may represent more cost, and will impact the number of staff employed as well as the cash they get in hand. “Have a look at their coverage now, and speak to their employer association on their views,” Nick Duggal advised.
None of the new awards have been implemented yet and are still to go through the Industrial Relations Commission.
“I suspect the new revised timetable will be met, and it gives employers opportunity to work through the changes,” Duggal added.
4. The test for defending a claim for unfair dismissal on the grounds of redundancy is higher than previously, says Richard Ottley, partner at Swaab.
A genuine redundancy under the Fair Work Act means you don’t require anyone to do that job; you must consult with any union under that particular award or enterprise agreement; some awards or enterprise agreements will have specific consultation provisions which will only apply to larger employers, he says.
“You need to see what your obligations are in terms of that Award. Not only do you have to consult, you have to see if you can re-deploy the employee or place them in the enterprise of an associated entity. So really, you’re not going to get rid of anyone in a hurry because you have to go through the hoops,” he said.
“The main game is to show that you’ve thought ahead about whole process, and changing staffing arrangements in a structured manner,” Nick Duggal added. But when you don’t have dedicated HR professionals, it can be confusing.
5. The Small Business Fair Dismissal Code provides guidance about the valid circumstances of summary termination, such as fraud, crime, assault and serious OHS breaches. It’s important that an employer reports serious incidents to police.
Otherwise, the employer must give a valid reason (for the termination) based on the employee’s conduct, which under the Code should be preceded by verbal or written warnings.
However, there must be a reasonable chance to rectify the problem, and that will depend upon what is determined to be the problem. It may be that up to three months is a reasonable time to expect a change in the employee’s performance. “You may also need to show that you’ve tried to help that person through training,” says Swaab’s Ottley.
“I would definitely put anything into writing, but it’s a step back from the traditional three warnings and you’re out. Even so, I’d be inclined to give more than one warning although the interpretation of the code is just one warning.” Fair Work Australia’s adjudication on unfair dismissals hasn’t been fully tested.
6. Keep better HR records: Small business employers need to improve their HR procedures and provide copies of written warnings, notes on any meetings with the staff member in question, a statement of termination, and witness statements as evidence on the Code process. As an employer, you must ensure that any staff member is clear about a warning session; you cannot have a lawyer present at the exit interview, but you can have a witness. Make sure you do, adds Ottley.
7. Unlawful termination is different to unfair dismissal, and has been around for a while; any employee can bring a claim if they feel they’ve been discriminated against, and this usually focuses on temporary absence from work due to illness or parental leave, complaint against an employer about discrimination on the grounds of race, age, or disability.
“Under Work Choices, people were more likely to prosecute employers on discrimination grounds,” says Ottley. Now, general protection provisions of the Fair work Australia can also apply to contractors.
8. The National Employment Standards (NES) operates from January 1, 2010, and 12-months unpaid parental leave is available for eligible employees.
Outside of that, parents can seek to extend this leave for a further 12 months (but employer can refuse this second request on “reasonable business grounds”). “The Return to Work Guarantee entitles the staff member for their pre-parental position, or something similar in status or pay,” points out Ottley. Parental leave now extends to same-sex couples under the legislation.
9. The NES also governs flexible working arrangements, which says that employee with care for a child can ask for a change of working arrangements, if they’re under school age or under 18 years with a disability. The Act gives examples of changes in working arrangements, such as hours of work, patterns of work, location of work, such as working from home. Nick Duggal believes this right could present problems for many SMEs.
10. Update employment contracts and policies to ensure these comply with the new minimum standards from January 1, 2010, says Phil Clarke, Senior Associate, at Harmers Workplace Lawyers.
Key changes include unpaid compassionate leave for casuals; the removal of the existing ten-day cap on personal leave, which is used for carer’s leave; the right to request an extra 12-months unpaid parental leave; up to three week’s concurrent parental leave for couples; the right for parents to request flexible work arrangements until their child reaches school age; unpaid leave for prescribed community service activities, such as fire fighting, and jury duty; and the right to receive a base rate of pay if absent on a public holiday; the right to notice of termination in writing, and an entitlement of up to 16 weeks redundancy (although this doesn’t apply for small employers unless it’s in a contract).