The Legislative Foundations of Australia’s Industrial System

In our first three publications of the Back to Basics Series, we have looked at the factors that underpin the employment relationship, examined the different types of employment relationships and discussed the central role of the employment contract.

In our fourth publication of the ongoing series, we now turn to the legislative foundations that underpin the industrial regime in Australia, being the Fair Work Act 2009 (Cth) (“Fair Work Act”) and the National Employment Standards.

The Fair Work Act

The Fair Work Act is the primary source of legislation regulating employment relations in Australian workplaces. One of the primary purposes of the Fair Work Act is to create minimum requirements, protections and obligations in order to provide a balanced framework for cooperative and productive workplace relations that promote national economic prosperity for all Australians. The Fair Work Act achieves this objective by implementing a number of mechanisms including the National Employment Standards, and the creation of Modern Awards, Enterprise Agreements, protections for unfair dismissal, provisions that protect against adverse action and sham contracting, all of which are obligations that employers must abide by and can result in significant legal remedies where a breach occurs.

A brief overview of the National Employment Standards, entitlements, protections, obligations and remedies created by the Fair Work Act are set out below.

National Employment Standards

The National Employment Standards (“NES”) are standards which are set out in Part 2-2 of the Fair Work Act. This section sets out the minimum entitlements and standards by which Australian employers must abide with respect to their employees, and includes:

• annual leave;
• personal Leave;
• compassionate leave and unpaid family and domestic violence leave;
• community service leave;
• long service leave;
• public holidays;
• maximum weekly working hours;
• the right to request flexible working arrangements;
• offers and requests to convert from casual to permanent employment;
• parental leave and related entitlements;
• minimum notice of termination; and redundancy pay; and
• the Fair Work Information Statement.

The NES entitlements set out above, apply to all national system employees (“Employees”). This includes employees that work for private sector organisations, corporations as well as non-for-profit organisations. Examples of employees not covered by the Fair Work Act or NES include:

• state public sector or local government employees in Western Australia, NSW, Queensland, South Australia or Tasmania; and
• employment by non-constitutional corporations in the private sector in Western Australia. This includes sole traders, unincorporated partnerships and trusts and incorporated associations who are charities, or not-for-profit organisations.

The NES set out minimum entitlements and thus employers are not able to create contracts or arrangements that provide less than the minimums set by the NES. This likewise applies to any modern award or enterprise agreement.

General Protections Provisions

One of the key objectives of the Fair Work Act is to ensure “fairness and representation” in Australian workplaces by putting measures in place to help protect people against unfair treatment and discrimination in the workplace.

The General Protections Provisions (“General Protections”) are protections that are provided to employees, employers, prospective employees and contractors which help carry out this aim by prohibiting specific actions in the workplace. In this article, we discuss their operation as they apply to employees. These General Protections provide protection against unfair treatment and discrimination by prohibiting the following type of conduct:

• adverse action;
• unlawful termination; and
• sham contracting.

Adverse Action

The Fair Work Act sets out protections which safeguard employees from adverse action taken against them by their employer in circumstances where the employee has exercised a protected workplace right. Adverse action is any action that prejudices their employment. Examples of adverse actions can include:

• discrimination;
• imposing a disciplinary warning;
• removing or changing a person’s duties;
• demoting a person; or
• termination of employment.

The General Protection provisions of the Fair Work Act only apply to circumstances where an employee has exercised a workplace right within the meaning of the Act. A workplace right includes:

• union participation rights;
• rights to flexible working arrangements;
• rights, benefits or responsibilities under a workplace law or workplace instrument or order made by an industrial body;
• rights arising under the Act or other workplace instrument such as an Enterprise Agreement;
• rights to initiate proceedings under the Act or participate in a process under a workplace law; or
• the right to make a complaint or inquiry in relation to employment.

Where a person has exercised a workplace right or is prevented from exercising a workplace right and adverse action then ensues, the employee will be entitled to commence proceedings against the employer for breach of the General Protection provisions of the Fair Work Act.

Sham Contracting

The General Protection provisions also prohibit employers from misrepresenting the nature of an employment relationship – also known as “sham” contracting. A sham contract is a contract that states that it is one thing (usually a contractor relationship) but in reality, it is an employment relationship.

The misclassification of an employment relationship as one of independent contractor, if done with the intended purpose to circumvent the employment obligations owed by the employer, will constitute a sham contract. The employer may then be liable for significant penalties as well as back-payment claims.

Other Protections

Unfair Dismissal

The Fair Work Act also includes provisions that protect employees against unfair dismissal. Unfair dismissal has its own provisions which are set out in Part 3-2 of the Fair Work Act. While many workers are protected from unfair dismissal, employees who are employed for less than 6 months, or earn more than the high-income threshold, currently $162,000, excluding superannuation (unless otherwise covered by a modern award or enterprise agreement), are unable to bring a claim for unfair dismissal. There are additional categories of employees who may not be eligible to claim for unfair dismissal including casual employees employed on a regular and systematic basis and employees employed on fixed term or project-base contracts.

The unfair dismissal provisions in the Fair Work Act are premised on the notion of a “fair go all round” and are designed to prevent dismissals that:

• are “harsh, unjust or unreasonable”;
• are procedurally defective;
• do not comply with the Small Business Fair Dismissal Code (in the case of an employer who employs less than 15 employees); and
• are not cases of genuine redundancy.

In cases where a person believes they were unfairly dismissed, an unfair dismissal claim must be filed within 21 calendar days of the dismissal taking effect. The Fair Work Commission will then assess whether the dismissal, including the circumstances surrounding the dismissal, was sufficiently unfair or unjust to render it an unfair dismissal. If the dismissal is found to be unfair or unjust, the person may be eligible for remedies including but not limited to reinstatement, order to restore lost pay or compensation.

Unlawful Termination

The Fair Work Act also provides protections against the unlawful termination of a person for reasons such as engaging in discriminatory conduct or temporarily being away with illness or injury. Unlawful termination will be discussed in more detail in issue six of the Back-to-Basics series.

Pay Slips and Record Keeping

The Fair Work Act places a strict obligation on employers to maintain appropriate employment records. The regulations set out the employment records that must be maintained by the employer. These records include general information about the employee, payslips, time and attendance records, leave records, start and finish times, superannuation contributions, overtime records, individual flexibility agreements, guarantees of annual earnings and information about how the employment ended (if applicable).

Such records must be kept in a certain format, and failure to maintain the relevant records for a period of 7 years after the termination of the employment is a breach of the Fair Work Act and subject to significant penalties. It is worth noting that the Fair Work Ombudsman has been quite active in auditing employers and seeking penalties for failing to keep proper records.

Remedies

Lastly, the Fair Work Act also includes a provision that allows for the Fair Work Commission, the Fair Work Ombudsman and other tribunals and courts to deal with disputes for alleged breaches of the Fair Work Act.

Key Takeaways

The key learnings to keep top of mind in respect of this article are the following:

• the Fair Work Act sets out minimum entitlements, protections, and obligations that govern Australian workplaces;
• many of these obligations are set out in the National Employment Standards;
• the General Protections provisions allow easy access for employees to commence proceedings against their employer if they feel they have suffered adverse action; and
• employers need to take care to ensure that they are operating within the requirements of the Fair Work Act and that their contracts, practices, policies and conduct do not fall short of the minimum requirements and standards proscribed by the legislation.

We regularly advise our clients on their legislative obligations and provide appropriate employment contracts and other employment documents, to ensure compliance.

If you require any assistance or information in relation to this alert, please do not hesitate to contact us.

This alert is not intended to constitute and should not be treated as legal advice.