Overview of Fair Work Act oblig­a­tions for employers

In Brief

Expe­ri­ence to date has shown that busi­ness­es are strug­gling to keep up with the dynam­ic indus­tri­al and work­place rela­tions land­scape gen­er­at­ed by suc­ces­sive gov­ern­ments. The pur­pose of this arti­cle is to alert employ­ers to changes of sig­nif­i­cance and to things which need to be addressed urgent­ly by employ­ers to com­ply with the Fair Work Act (the Act).

What respon­si­bil­i­ties do employ­ers have to sup­ply accu­rate information?

Employ­ers have a sig­nif­i­cant respon­si­bil­i­ty to ensure that they sup­ply infor­ma­tion to employ­ees and equal­ly impor­tant, to avoid pro­vid­ing infor­ma­tion which is misleading.

One of the pro­vi­sions of the Nation­al Employ­ment Stan­dards (NES) is that every nation­al sys­tem employ­er pro­vide their employ­ees with a Fair Work Infor­ma­tion State­ment” (State­ment). This is a two page state­ment pro­duced by the Fair Work Ombuds­man sum­maris­ing the NES and var­i­ous employ­ee rights.

From 1 Jan­u­ary 2010, the State­ment must be pro­vid­ed to all employ­ees before or as soon as prac­ti­ca­ble after, the employ­ee starts employ­ment. On one view the oblig­a­tion extends to per­sons who were employ­ees before 1 Jan­u­ary 2010.

Mod­ern awards (in clause 5 gen­er­al­ly) con­tain require­ments for employ­ers to ensure that copies of the rel­e­vant award and the NES are avail­able to employ­ees. Gen­er­al­ly mod­ern awards require that they must be avail­able either on a notice­board con­ve­nient­ly locat­ed at or near the work­place, or through elec­tron­ic means, whichev­er makes them more acces­si­ble to staff. Fail­ure to com­ply with this award oblig­a­tion is a breach of the award and there­fore a breach of the Act.

Employ­ers that enter into a guar­an­tee of annu­al earn­ings” (see post) are required under the Act, to give for­mal notice to the employ­ee of the con­se­quences of enter­ing into the guarantee.

An employ­er that has entered into an indi­vid­ual flex­i­bil­i­ty arrange­ment” with their employ­ee (see post) must give the employ­ee a copy of any such agree­ment and ensure that the agree­ment con­tains the infor­ma­tion spec­i­fied under the award which relates to the agreement.

False or mis­lead­ing representations

Employ­ers must take care not to know­ing­ly or reck­less­ly make any false or mis­lead­ing rep­re­sen­ta­tions about what are termed as work­place rights” of oth­er per­sons. Such work­place rights include rights con­ferred under an award or enter­prise agree­ment or oth­er work­place instru­ment and rights con­ferred by the Act. These pro­vi­sions apply to rep­re­sen­ta­tions made to prospec­tive employ­ees (and sup­ple­ment Trade Prac­tices Act pro­vi­sions relat­ing to rep­re­sen­ta­tions made by employ­ers con­cern­ing pro­posed employ­ment terms and conditions).

Employ­ers also need to take care with the infor­ma­tion they pro­vide to per­sons who they are engag­ing or plan­ning to engage as con­trac­tors. The Act makes it an offence to know­ing­ly or reck­less­ly pro­pose a con­trac­tor rela­tion­ship to a per­son when the rela­tion­ship at law is that of employ­er and employee.

Employ­ers must not make any state­ment that they know to be false to per­suade an indi­vid­ual they have engaged as an employ­ee, to per­form the same or sub­stan­tial­ly the same work as a contractor.

The above pro­vi­sions high­light the desir­abil­i­ty of employ­ers review­ing and updat­ing their poli­cies and employ­ment agree­ments to ensure that only accu­rate and up to date infor­ma­tion is pro­vid­ed to staff and that appro­pri­ate pro­ce­dures are fol­lowed with respect to engag­ing staff.

Mod­ern awards

From 1 Jan­u­ary 2010 the intro­duc­tion of the mod­ern award sys­tem has required all nation­al sys­tem employ­ers across Aus­tralia to review their work­force and to iden­ti­fy what new mod­ern award or awards may apply to their work­place. Fail­ure to cor­rect­ly iden­ti­fy and com­ply with applic­a­ble award pro­vi­sions may expose employ­ers to penal­ties under the Act (in addi­tion to being faced with claims for back payment).

There are some cat­e­gories of employ­ee who may remain award free, but in gen­er­al terms the intro­duc­tion of the mod­ern award sys­tem has result­ed in sig­nif­i­cant­ly more employ­ees being cap­tured under the mod­ern award system.

Phase in provisions

Employ­ers should appre­ci­ate that new rates payable under mod­ern awards may be phased in under tran­si­tion­al arrange­ments which appear in a sched­ule to the applic­a­ble award (although a small minor­i­ty of mod­ern awards do not have phas­ing in provisions).

Where phase in pro­vi­sions apply and employ­ers were pre­vi­ous­ly required to pay low­er wage rates than those intro­duced under an applic­a­ble mod­ern award, the mod­ern award will typ­i­cal­ly pro­vide that from 1 July 2010 through to 1 July 2014 the employ­er will be required to pay new rates on an incre­men­tal basis so that after 1 July 2014 they are required to pay the award rates in full. These pro­vi­sions may also relate to such things as load­ings and penal­ty rates.

Pro­vi­sions also exist which address the phas­ing in of, amongst oth­er things, low­er wage rates than those payable pri­or to 1 Jan­u­ary 2010. The pay­roll offices of employ­ers should care­ful­ly review these tran­si­tion­al pro­vi­sions to see what impact they may have on the cash­flow of the business.

Con­tract­ing out of the applic­a­ble award

Employ­ers should be aware of the var­i­ous meth­ods of con­tract­ing out” of the appli­ca­tion of an applic­a­ble award.

Apart from enter­ing into an enter­prise agree­ment, there are three key meth­ods of con­tract­ing out” of the appli­ca­tion of an applic­a­ble award. They are:

  • by employ­ee accept­ing a guar­an­tee of annu­al earnings;
  • pur­suant to an annu­al­i­sa­tion pro­vi­sion of an applic­a­ble award;
  • under an indi­vid­ual flex­i­bil­i­ty arrange­ment under an applic­a­ble award.
Guar­an­tee of annu­al earnings

A guar­an­tee of annu­al earn­ings is only pos­si­ble where an employ­ee is guar­an­teed annu­al earn­ings (gen­er­al­ly speak­ing salary exclud­ing com­mis­sion, bonus­es and com­pul­so­ry super­an­nu­a­tion con­tri­bu­tions) which exceeds the high income thresh­old (present­ly $108,300). If the employ­er and employ­ee agree, and a guar­an­tee of annu­al earn­ings is prop­er­ly giv­en, then an applic­a­ble award does not apply whilst the guar­an­tee remains in force.

Annu­al­i­sa­tion provision

Some but not all awards, con­tain an annu­al­i­sa­tion pro­vi­sion which enables the employ­er to annu­alise the enti­tle­ments of an employ­ee with respect to such things as: min­i­mum week­ly wages, allowances, over­time and penal­ty rates and annu­al leave load­ing, and to pay an annu­al salary in sat­is­fac­tion of these enti­tle­ments. Whilst the employ­er has to mon­i­tor the sit­u­a­tion to make sure that they are suit­ably com­pen­sat­ing the employ­ee, as long as a valid annu­al­i­sa­tion state­ment remains in force, the employ­er will not have to wor­ry about these par­tic­u­lar aspects of an applic­a­ble award.

Indi­vid­ual flex­i­bil­i­ty arrangements

A sim­i­lar but slight­ly dif­fer­ent con­cept is the award flex­i­bil­i­ty pro­vi­sions which appear in all awards which enable employ­ers and employ­ees to agree to vary­ing the appli­ca­tion of pro­vi­sions in an award under an indi­vid­ual flex­i­bil­i­ty arrange­ment. (A recent deci­sion of Fair Work Aus­tralia regard­ing Tri­mas Cor­po­ra­tion Pty Ltd — 23 Feb­ru­ary 2010″, has cast some doubt on the scope of indi­vid­ual flex­i­bil­i­ty agree­ments).

Clause 7 of mod­ern awards per­mits employ­ers to make indi­vid­ual flex­i­bil­i­ty arrange­ments with their employ­ees pur­suant to which they can vary the appli­ca­tion of an award in rela­tion to:

  • arrange­ments for when work is performed;
  • over­time rates;
  • penal­ty rates;
  • allowances; and
  • leave loading.

The key fea­tures of such an arrange­ment are:

  • it must be made with­out coer­cion or duress;
  • it must be in writ­ing and signed by both employ­er and employee;
  • it must state each term of the award that is to be var­ied (lim­it­ed to those issues referred to above);
  • detail how each term is being varied;
  • it must leave the employ­ee bet­ter off over­all and must detail how it leaves the employ­ee bet­ter off overall;
  • state the date the agree­ment is to commence.

It will be nec­es­sary if employ­ers wish to take advan­tage of this arrange­ment, to care­ful­ly assess whether or not the employ­ee will be bet­ter off over­all under it. It will also be nec­es­sary to dis­cuss any pro­posed arrange­ment care­ful­ly with the employ­ee to make sure they are com­fort­able with it and under­stand that the employ­er is not seek­ing to dis­ad­van­tage them finan­cial­ly. A for­mal agree­ment should be pre­pared in order to meet the require­ments of the Act and any applic­a­ble award.

Gen­er­al Pro­tec­tion Pro­vi­sions of the Fair Work Act 

Gen­er­al pro­tec­tion pro­vi­sions cov­er, amongst oth­er things, the fol­low­ing employ­ee rights:

  • Work­place rights of the employ­ee (see below).
  • The rights of employ­ees to par­tic­i­pate in indus­tri­al activ­i­ties (known as free­dom of asso­ci­a­tion” rights).
  • Rights pro­tect­ing the employ­ee from dis­crim­i­na­tion in the workplace.
  • Rights pro­tect­ing the employ­ee from enter­ing into sham con­trac­tor arrangements.
Adverse action

A per­son must not take adverse action against anoth­er per­son because the oth­er person:

  • has a work­place right;
  • has or has not, exer­cised a work­place right; or
  • pro­pos­es or pro­pos­es not to or has at any time pro­posed or pro­posed not to, exer­cise a work­place right.

A per­son must not take adverse action against anoth­er person:

  1. to pre­vent the exer­cise of a work­place right by the oth­er person.
Work­place right

work­place right is broad­ly defined, and includes where a person:

  • is enti­tled to the ben­e­fit or has a role or respon­si­bil­i­ty under a work­place instru­ment (such as an award or enter­prise agree­ment) or an order made by an indus­tri­al body.
  • is able to ini­ti­ate or par­tic­i­pate in a process or pro­ceed­ings under a work­place law or work­place instrument.
  • is able to make a com­plaint or enquiry 
    • to a per­son or body under a work­place law to seek com­pli­ance with that work­place law or work­place instru­ment (ie the Fair Work Ombudsman)
    • if the per­son is an employ­ee, in rela­tion to their employment.

There­fore, an employ­ee who has been dis­missed can make a claim under these pro­vi­sions against an employ­er, amongst oth­er things, if that employ­ee has exer­cised their right to make a com­plaint to their employ­er in rela­tion to their employ­ment pri­or to their dis­missal (on the basis that the employ­er has tak­en adverse action against the employ­ee by dis­miss­ing the employ­ee). Also the employ­ee can make a claim if the employ­ee has been ter­mi­nat­ed fol­low­ing a com­plaint they made, for exam­ple, to the Work­place Ombuds­man, regard­ing their employ­er’s alleged fail­ure to com­ply with a work­place law.

Def­i­n­i­tion of adverse action

Adverse action in the above con­text includes:

  • dis­miss­ing an employee;
  • injur­ing an employ­ee in their employment;
  • alter­ing the posi­tion of the employ­ee to their prej­u­dice; or
  • dis­crim­i­nat­ing between the employ­ee and oth­er employ­ees of the employer.

The Act pro­hibits a per­son (an employ­er) from tak­ing or threat­en­ing to take any action against their employ­ee with intent to coerce the employ­ee to exer­cise or not exer­cise a work­place right.

Undue influence

An employ­er must not exert undue influ­ence on an employ­ee in rela­tion to a deci­sion by the employ­ee to, amongst oth­er things:

  • agree to or ter­mi­nate an indi­vid­ual flex­i­bil­i­ty agreement;
  • accept a guar­an­tee of annu­al earn­ings (but note con­tra­ven­tion will not occur if a prospec­tive employ­er makes an offer of employ­ment con­di­tion­al on a prospec­tive employ­ee accept­ing a guar­an­tee of annu­al earnings).
  • agree or not to agree to a deduc­tion from amounts payable to the employ­ee in rela­tion to work
  • make or not make an arrange­ment under the NES.

Addi­tion­al­ly (as not­ed above) a per­son must not know­ing­ly or reck­less­ly make any false or mis­lead­ing rep­re­sen­ta­tion about:

  • the work­place rights of anoth­er per­son; or
  • the exer­cise or the effect of the exer­cise of a work­place right by anoth­er person.

Employ­ees who engage in law­ful indus­tri­al activ­i­ty are pro­tect­ed from dis­crim­i­na­tion. Pro­tec­tion from dis­crim­i­na­tion also is con­ferred in rela­tion to sim­i­lar grounds to those referred to in the unlaw­ful ter­mi­na­tion pro­vi­sions. Dis­crim­i­na­tion on the grounds of tem­po­rary absence from work is also prohibited.

Sham con­trac­tor arrangements

Employ­ers should be care­ful to ensure that they take care to under­stand whether or not they are able to offer a per­son a con­trac­tor arrange­ment as opposed to an employ­ee con­tract. Penal­ties exist for employ­ers who offer sham con­trac­tor arrangements.

Onus of proof

Where a breach of these pro­vi­sions is alleged, the onus is on employ­ers to prove that they did not act for a par­tic­u­lar rea­son or with the par­tic­u­lar intent (that con­sti­tutes the contravention).

Appli­ca­tions under the Gen­er­al Pro­tec­tion Pro­vi­sions are made to Fair Work Aus­tralia (FWA). If the appli­ca­tion con­cerns a dis­missal then the appli­ca­tion must be made with­in 60 days from dismissal.

The Unfair Dis­missal Régime

Gen­er­al­ly speak­ing employ­ees of small busi­ness employ­ers can access the unfair dis­missal régime after they have been with their employ­er for 12 months or more (small busi­ness employ­ers are present­ly employ­ers with less than 15 full-time equiv­a­lent employ­ees at the time of dismissal).

Gen­er­al­ly speak­ing employ­ees of larg­er busi­ness­es will be able to access the unfair dis­missal régime after six months of employment.

Claims must be brought with­in 14 days of ter­mi­na­tion although FWA may extend time in some circumstances.

Exclu­sion from unfair dis­missal claims

The fol­low­ing types of employ­ee will be exclud­ed from bring­ing a claim for unfair dismissal:

  • Where the dis­missal was a case of gen­uine redundancy
  • Where the employ­ee is not cov­ered by an award or enter­prise agree­ment and their annu­al rate of earn­ings exceeds the high income thresh­old (present­ly $108,300.00).
  • The employ­ee was under a con­tract of employ­ment for a spec­i­fied peri­od of time, for a spec­i­fied task or for the dura­tion of a spec­i­fied season.
  • The employ­ee was under a train­ing arrange­ment for a spec­i­fied period.
  • Cer­tain casu­al employees.
Def­i­n­i­tion of unfair dismissal

A per­son has been unfair­ly dis­missed if dis­missal was:

  • harsh, unjust or unrea­son­able; and
  • not a case of gen­uine redun­dan­cy; and
  • not con­sis­tent with the Small Busi­ness Fair Dis­missal Code (in cir­cum­stances where that Code applies).

The Small Busi­ness Fair Dis­missal Code is a code which if fol­lowed by small busi­ness employ­ers, pro­vides a defence to an action for unfair dismissal.

The Code may be accessed on the web­site of Fair Work Aus­tralia. The Code does not apply to oth­er busi­ness­es (being employ­ers with 15 or more full time equiv­a­lent staff).

Fair Work Aus­tralia may order:

  • rein­state­ment of the employ­ee to their job (or a job of an asso­ci­at­ed enti­ty) togeth­er with an order for remu­ner­a­tion lost dur­ing the peri­od out of work;
  • com­pen­sa­tion up to 26 weeks’ pay (with a cur­rent cap of $54,150.00).
Unlaw­ful termination

Apart from unfair dis­missal, an employ­ee may access a sep­a­rate rem­e­dy for unlaw­ful ter­mi­na­tion” if their employ­ment is ter­mi­nat­ed, amongst oth­er things, for one or more of the fol­low­ing reasons:

  • Tem­po­rary absence from work due to ill­ness or injury;
  • Fil­ing of a com­plaint or par­tic­i­pa­tion in pro­ceed­ings against an employ­er involv­ing alleged vio­la­tion of laws;
  • Race, colour, sex, sex­u­al pref­er­ence, age, phys­i­cal or men­tal dis­abil­i­ty, fam­i­ly or car­ers respon­si­bil­i­ties, preg­nan­cy, reli­gion, polit­i­cal opinion;
  • Absence from work dur­ing mater­ni­ty leave or oth­er parental leave.

Claims for unlaw­ful ter­mi­na­tion must be brought with­in 60 days. If the mat­ter is not resolved it can be referred to the Fed­er­al Mag­is­trates Court where reme­dies include rein­state­ment and compensation.

Small busi­ness employ­ers wish­ing to ter­mi­nate an employ­ee should exam­ine the Code and ensure that as a min­i­mum they com­ply with it. It should be not­ed that the Code itself has a check­list which the employ­er should com­plete at the time of mak­ing any deci­sion to ter­mi­nate the employ­ment of one of its staff.

Larg­er employers

For larg­er employ­ers, it is high­ly desir­able to have estab­lished a ded­i­cat­ed and com­pre­hen­sive per­for­mance man­age­ment and dis­ci­pli­nary process, which may be includ­ed in an employ­ee hand­book or in a dis­crete pol­i­cy. In defend­ing any claim for unfair dis­missal, an employ­er may, in addi­tion to prov­ing that ter­mi­na­tion was jus­ti­fied, also need to be able to estab­lish that its process­es were fair and that it fol­lowed them in ter­mi­nat­ing the employ­ee’s employment.

A recent deci­sion of Fair Work Aus­tralia has sug­gest­ed that employ­ers may need to take into account, amongst oth­er things, pri­or ser­vice record and the indi­vid­ual per­son­al and finan­cial cir­cum­stances of an employ­ee pri­or to mak­ing a deci­sion in rela­tion to ter­mi­na­tion. These fac­tors were recent­ly held to be rel­e­vant to a find­ing that a dis­missal was harsh.


To con­clude, employ­ers need to review their oblig­a­tions under the Act, and in particular:

  • ascer­tain which mod­ern award or awards apply to their workplace;
  • ensure that they are meet­ing any new award require­ments for their staff;
  • con­sid­er tak­ing advan­tage of any phas­ing in” pro­vi­sions which may apply to the mod­ern awards cov­er­ing their workforce;
  • con­sid­er whether or not they wish to con­tract out of the pro­vi­sions of any mod­ern awards which may apply to their workplace;
  • if they do wish to con­tract out, ensure that they have appro­pri­ate tem­plates in place;
  • con­sid­er whether an enter­prise agree­ment may suit their workplace;
  • ensure that they have process­es in place for pro­vid­ing every new employ­ee with a Fair Work Infor­ma­tion Statement; ·
  • famil­iarise them­selves with the NES;
  • review their employ­ment con­tracts, poli­cies and pro­ce­dures in light of the NES to take into account new pro­vi­sions relat­ing to, amongst oth­er things, parental leave (includ­ing extend­ed parental leave), flex­i­ble work­ing arrange­ments upon return from parental leave, com­mu­ni­ty ser­vice leave and new safe­ty net pro­vi­sions relat­ing to sev­er­ance payments;
  • review dis­ci­pli­nary process­es and pro­ce­dures in light of the new unfair dis­missal provisions.

For fur­ther infor­ma­tion please contact: