Employer groups appeal Fair Work Australia decision to reject agreement which allows annual leave to be cashed out

Peak employer group the Australian Industry Group will appeal the rejection of three workplace agreements by Fair Work Australia, claiming the industrial umpire is trying to prevent agreements where employees are allowed to cash out their annual leave entitlements.

Cashing out of annual leave is allowed under the Fair Work Act, provided an employee retains at least four weeks of annual leave and the agreement covering the employee has a clause which allows cashing out.

However, late last month FWA Commissioner John Ryan rejected three workplace agreements on the grounds that they included a clause allowing cashing out of annual leave.

He argued that while the clauses in the agreement were satisfied the Fair Work Act, Ryan argued FWA is required to simply approve such agreements and was required to ensure that employees were not left disadvantaged.

In the case of an agreement with insulation maker Armacell Australia (used as a sort of template for all three decisions), Ryan found that a clause allowing employees to cash out annual leave would leave them worse off overall.

“The agreement appears to promote a culture of cashing out rather than taking paid leave,” Ryan says.

“The absence of limits, other than the minimum statutory limits, on the making of requests to cash out leave and the granting of the requests leads me to draw the conclusion that the agreement is not about providing real and tangible benefits to employees which enhance their leave entitlements but is about reducing leave accruals through cashing out leave entitlements to the extent permitted by the Act.”

AIG chief executive Heather Ridout is not impressed.

“The three appeals… will be an important test of the Fair Work Act. It is vital that the three decisions are overturned to ensure that Australian employers and employees remain free to decide what lawful workplace arrangements suit their needs,” she said in a statement.

AIG is also unimpressed with the way Ryan applied the better off overall test to the agreements, and his insistence that the on an undertaking from two of the companies that FWA be given compulsory arbitration powers if a dispute arises. AIG argues this is in direct conflict to a decision in March in a case involving Woolworths, where the company and employer groups successful argued such arbitration clauses are not mandatory.

In other IR news, the Gillard has backdown on a promise to support a union test case on equal pay for women in low paid sectors including childcare, retail, hospitality and cleaning. The Government is concerned the wage push could force salaries to rise across the economy.

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