WorkChoices arrived in 2005 amidst expectation in the business community that the new laws would provide greater flexibility to negotiate terms of employment with employees. Fast-forward to 2007 and a significant number of Australian employers are still struggling to comply with their legal obligations, exposing themselves to costly delays, possible fines and back payments.

Many employers run into trouble when their workplace agreements fail to meet the standards of the WorkChoices Authority, set out by the Fairness Test.

Want to know how to cut through the Australian Workplace Agreements (AWAs) red tape? Read on and follow the easy tips, helpful checklists and examples to make sure you get the most out of your employment arrangements.

AWAs in the Spotlight

National retailer Spotlight faced intense media scrutiny and public censure after 460 of its workplace agreements failed the government’s new Fairness Test. Spotlight’s agreements legally removed penalty rates, but only gave employees an extra 2 cents per hour in return. Spotlight’s experience has demonstrated that many employers still don’t understand the requirements of the Fairness Test. Failing the Fairness Test could expose your business to significant back payments, as all employees must be paid compensation for any period the employer fails to comply…not to mention the untold costs of all that bad publicity!

Introducing AWAs and the Fairness Test

AWAs, are individual contracts negotiated between employers and employees. They represent a significant shift away from union bargaining and other types of collective bargaining, and cut back many of the award conditions won by the unions over the years in sectors such as retail and hospitality.

When AWAs were initially introduced, many employers rapidly moved to remove terms such as penalty rates from contracts. In response to public concern about this trend, the government introduced the Fairness Test.

Pass the Fairness Test with flying colours…

The Fairness Test applies to employees who would otherwise be entitled to the benefit of protected award conditions and are paid less than $75,000 per year. The Fairness Test ensures that all workplace agreements meet two key criteria: that minimum conditions are protected and that nothing prohibited is in the agreement.

Understanding Minimum and Protected Award Conditions

Minimum standards and protected award conditions provide a safety net for employees. They guarantee workers minimum wages and conditions. Any conditions included in an AWA that are less favourable than the Australian Fair Pay and Conditions Standard will immediately be treated as void.

What are the four guaranteed minimum conditions that must be present in any AWA?

Checklist:

Beware a bargain when workplace bargaining with employees

Protected Award Conditions (also known as ‘protected allowable award matters’) are automatically implied into ALL workplace agreements unless explicitly excluded or modified. These conditions include rest breaks, incentive-based payments and bonuses, annual leave loadings, public holidays, some financial allowances, overtime and shift work loadings, penalty rates and outworker conditions.

When bargaining with an employee over protected award conditions, you need to be aware that if an employee agrees to give up or trade any parts of their protected award conditions, such as shift loadings or weekend penalty rates, you must provide compensation that is considered fair by the WorkPlace Authority. Unfortunately for employers, there is no simple definition for what is considered fair. A suggested guideline is to estimate what the financial value of the protected award condition being traded is, in comparison with the financial value of the new term..You don’t necessarily have to pay the exact difference if the new term is of equal value to the employee – for example allowing them to leave work early to pick up their children from school.

Since the legislation provides no definition of ‘fairness’, there is an element of uncertainty in the application of the Fairness Test by the WorkPlace Authority. It is therefore crucial to provide all the information requested by the WorkPlace Authority when submitting an AWA. The authority has reported that more than 56,601 of the agreements submitted since May 2007 cannot be approved until the employers provide more information.

There is no way to appeal the decision once an AWA is deemed to fail the Fairness Test, even if the WorkPlace Authority has misinterpreted a clause in your agreement. Therefore, it is essential that your agreement is carefully drafted to make it clear that the employee IS being fairly compensated in exchange for giving up any protected award conditions.

If you have followed the checklists and examples above, you are already well on the way to successfully drafting an AWA that meets the WorkPlace Authority standards.

Keep an eye out for your next fortnightly e-mail update to learn how to avoid a $33,000 penalty…

The second stage of the Fairness Test checks to ensure that no prohibited content has been included in AWAs submitted by employers. In our next newsletter, we will tell you how to avoid a $33,000 penalty for lodging an agreement that contains prohibited content. We will also follow the Spotlight story to see how Australian businesses are responding to WorkChoices, and explore the other agreement making options that might be available to you and your employees.

Yours Sincerely,

Laura MacIntyre
Editor
The Workplace Bulletin

Tags: AWAs