A vast number of laws and regulations govern employment relationships in Australia. Despite the best intentions, your business may be in breach of few of them. Each contravention of Australia’s key employment legislation, the Fair Work Act 2009, exposes your business to penalties of up to $54,000 and up to $10,800 for individuals.
Below are six problems that we come across most often. How does your business stack up?
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1. Using unpaid ‘interns’ to do productive work
Unpaid ‘internships’ are an increasingly attractive option for Australian students and jobseekers to get a ‘foot in the door’ of certain businesses and industries and to gain experience. They are attractive to some businesses as well, particularly startups.
Beware though, if an ‘intern’ is not participating in a recognised school program or tertiary degree requirement and is performing productive work for your business, you may unwittingly create an employment relationship. If this is the case, unless your business is paying and otherwise treating the intern like an employee, you are at risk of breaching the National Employment Standards in the Fair Work Act in addition to minimum award conditions. If you are not sure about the status of an intern in your business, seek advice.
2. Failure to consult with employees about a proposed workplace change
Around 60% of Australian workers have their minimum employment conditions underpinned by a modern award. Each award contains a term requiring employers to consult with employees where there has been a “definite decision” to introduce major changes that are likely to impact employees.
You may be aware of the need to consult award-covered employees regarding redundancies. However, it is also the case that employers of award-based employees are required to consult regarding changes relating to job structure, work availability, hours of work, promotions, training and relocations.
Consultation is not just a box to be ticked after a decision has been made. Rather, courts and the Fair Work Commission have said that consultation is about providing the individual with a real opportunity to influence the decision maker and should be taken seriously. Failure to consult, or consult adequately, may be a breach of the relevant award. In turn, a proven breach of an award condition will be a contravention of the Fair Work Act.
3. Failure to provide for allowances owing under an award
In addition to minimum wages, penalties and overtime, many awards entitle employees to allowances. For example, the Clerks (Private Sector) Award 2010 requires employers to provide employees with a meal or pay them $14.65 if they are required to work more than one-and-a-half hours of overtime without 24 hours notice.
Many employers pay over (sometimes well over) the minimum award rate of pay and seek to rely on the higher payment to cover for wages, allowances, penalties and overtime. However, the Fair Work Commission and courts have confirmed that unless a written employment agreement specifies an over-award payment is intended to cover those specific minimum entitlements, award entitlements will be actually payable on top of the higher rate of pay the employee is already receiving.
4. Failure to pay leave loading on termination payments
Most employers understand they are required to pay employees their accrued unused annual leave upon termination. However, as recently confirmed by the full court of the Federal Court of Australia, accrued annual leave balances at termination must be paid at a rate that includes any applicable leave loading – typically an extra 17.5 per cent on top of the employee’s hourly rate of pay. Failure to pay leave loading on termination will be an underpayment under and breach of the relevant award or enterprise agreement, and a contravention of the Fair Work Act.
5. Not keeping adequate employee records
The Fair Work Act requires employers to maintain employee records for seven years from the date the record is made. The records must be kept even after employment ceases. The kinds of records employers are required to keep are those concerning pay, overtime, averaging arrangements, leave, superannuation contributions, individual flexibility arrangements, guarantee of annual earnings, termination of employment and transfer of business matters. The records need to be accurate and legible. They must also be provided to an employee upon request.
6. Not providing each employee a Fair Work Information Statement upon commencement of employment.
The Fair Work Act requires employers to ensure all employees receive a copy of the ‘Fair Work Information Statement’ before, or as soon as practicable after, the employee commences employment. This commonly breached requirement is easily fixed. Visit the Fair Work Ombudsman’s website, download the Fair Work Information Statement and make it part of your standard operating procedure to include it with each employee’s written employment agreement or in their induction pack.
So, how do your business’s employment practices stack up against these six common issues? Undertaking a review now may save you and your business much effort and expense in the future.
Evan Willis is a solicitor in the workplace relations and safety practice group at Holding Redlich in Melbourne.