At the start of the new financial year, employers need to review their employment framework, including the impact of increases to minimum wages and proposed changes to modern awards that might affect your business.
These changes are particularly relevant to Award covered employees, with approximately 2.3 million Australian employees, or 22.7% of all employees having their wages and other entitlements set by a modern award.
1. Increases to minimum wage on 1 July 2018
On 1 July 2018, the minimum wage in all modern awards increased by 3.5%. For any business that has employees covered by a modern award and are paying at or close to the minimum wage for the employee’s classification under the award, it is important to increase employee’s minimum wages in line with this decision by the Fair Work Commission (FWC). For employees who are not covered by a modern award or enterprise agreement, they must be paid at the least the national minimum wage, which on 1 July 2018, increased by 3.5% to $719.20 per week based on 38 hours, or $18.93 per hour. It is crucial that businesses increase an employee’s pay if they receive award wages or the national minimum wage. The Fair Work Ombudsman (FWO), who handles complaints regarding compliance with workplace laws can impose significant penalties on employers who fail to meet their minimum wage obligations.
2. Increase in the high-income threshold for 2018/2019
The high-income threshold refers to the highest salary one can earn and still be protected from unfair dismissal. Anyone who earns more than the high-income threshold (and is not covered by a modern award or enterprise agreement) is not protected from unfair dismissal, however they are still protected from other actions relating to unlawful termination.
The high-income threshold increased to $145,400 (from $142,000) on 1 July 2018.
The maximum compensation limit in unfair dismissal cases increased to $72,700 from ($72,000), representing half the amount of the high-income threshold.
3. Unpaid family violence leave to be added to awards
Earlier this year, the Fair Work Commission ruled that all Australian employees covered by modern awards will be entitled to five days of unpaid leave if they are affected by family or domestic violence. The FWC is currently drafting the “model term” outlining the exact clause to be included in modern awards. A model clause means the terms of the clause will be identical in all 122 modern awards and it is expected to be finalised in the coming weeks.
Whilst this provision will only apply to Award covered employees in the short term, the Turnbull government has indicated it will amend the Fair Work Act 2009 (Cth) to extend these same entitlements to all national system workers (approximately six million people). Meanwhile the Australian Labor Party if elected, has pledged to legislate for 10 days paid domestic and family violence leave in the national employment standards. In any event, research which considers the actual experience of several Australian employers who have already implemented paid leave policies shows that in practice, paid leave entitlements are not frequently utilised. The significance of the Award provision is the statement that main stream Australian society is committed to taking steps to reduce the incidence and impact of family violence.
4. Flexible working
As we advised in our newsletter in June 2018, the FWC has recommended that all modern awards should be varied to incorporate a model term related to facilitating flexible working arrangements. The provisional model term would enhance an employer’s obligation to consider the request, and the bolster the information they are required to provide if they refuse the request.
Additionally, the model term would allow casual employees with at least six months’ continuous service, and who have a reasonable expectation of continued work, to access flexible working arrangements provided they have parental or carers responsibilities.
The proposed new clause will mean some greater obligations on employers around consultation with Award covered employees seeking flexible arrangements, however the proposed model term retains the employer’s right of refusal on ‘reasonable business grounds’ without any right of review or appeal.
5. Casual conversion clause
Currently, a number of modern awards include a casual conversion clause, which broadly provides employees with the right to convert to permanent employment if employed on a regular and systematic basis, for a period of 6 or 12 months (depending on the award).
The FWC has developed a draft model conversion clause for insertion in modern awards which will allow casual employees to request full or part-time employment status, provided that certain criteria have been met, including being employed on a regular basis for a period of 12 months. Similar to the model term concerning a request for flexible working arrangements, the employer can refuse to convert their employment, but they must consult with the employee first and they can only refuse to convert the employee’s employment if they have reasonable grounds.
Whilst casual workers do not have access to annual or sick leave, they are entitled to a higher rate of hourly pay. As such, the impact of such a clause is not expected to be significant, as anecdotal evidence suggests that many casual employees who currently have the ability to request conversion, do not do so as they prefer to retain their casual loading.
6. Continuing focus on sham contracting
In mid-June 2018, the FWO commenced a prosecution of food delivery business Foodora Australia Pty Ltd for allegedly engaging in sham contracting activity that led to underpayments. It is being seen as a major gig economy test case. FWO is asserting that Foodora made misrepresentations to food delivery workers that they were independent contractors when they were in fact employees. Whilst the workers signed an “Independent Contractor Agreement” and each had an ABN, the FWO argues each of the workers was not genuinely conducting their own delivery business, pointing to indicia suggestive that the workers were in fact employees. The FWO alleges that amounts Foodora paid the workers was not sufficient to meet the minimum wage rates under the Fast Food Industry Award 2010.
We expect a continued focus in the new financial year by the FWO and unions on employers who inappropriately engage workers as contractors, particularly within the gig economy, where the distinction between who is an employee and an independent contract is becoming increasingly unclear. Employers need to ensure that they balance the need for flexibility in worker arrangements with their obligations to comply with workplace laws. The FWO has made it quite clear that it will use the accessorial liability provisions to prosecute individuals, such as HR managers and directors, who they consider to be complicit in drafting contracts which misrepresent an employment relationship as an independent contracting arrangement.
7. #Metoo and Sexual Harassment in the Workplace
In the past financial year, there were increasing numbers of people coming forward with complaints of workplace sexual harassment in the wake of the #metoo and #timesup movements. The momentum is expected to continue in the new financial year, with Australia set to have a national inquiry into workplace sexual harassment, headed up by the Sex Discrimination Commissioner Kate Jenkins and the Australian Human Rights Commission (AHRC). The AHRC says it will examine the scale, drivers and consequences of workplace sexual harassment and develop recommendations drawn from current best practice as part of a 12-month inquiry. The inquiry intends to draw on economic modelling to assess the financial impact on both victims, as well as to employers, with organisational impacts of sexual harassment including reduced productivity, high staff turnover, absenteeism, compensation claims and early retirement.
In year ahead, employers should expect a continued interest by stakeholders on allegations made by employees, and the manner in which employers respond to those allegations, including steps to address any cultural issues, and the adequacy of any policies and procedures they have in place to prevent and address sexual harassment.
8. Proposed Modern Slavery Bill
On 28 June 2018 the Federal Government introduced draft legislation of a Modern Slavery Bill. The legislation requires corporations with annual turnover over $100m (approximately 3,000 big companies) to report on all potential modern slavery risks and practices in their operations and supply chains. Estimates suggest about 4,300 people in Australia are the victims of modern slavery, including through human trafficking, debt bondage, forced labour and other slavery-like practices.
Earlier in June, the NSW parliament passed the “NSW Modern Slavery Bill 2018” which applies to commercial organisations who have employees in NSW, supply goods or services for profit, and have an annual turnover of over $50m. The compliance obligations include the preparation and publication of an annual modern slavery statement. Failure to comply will attract penalties of up to $1.1m. The NSW legislation provides that the reporting obligations do not apply if the organisation is subject to obligations under a law of the Commonwealth that is prescribed by the NSW government as a corresponding law.
Whilst the NSW bill, and the proposed Federal bill contain reporting requirements targeted at larger Australian corporations, the smaller enterprises that make up their supply chains will need to start paying more attention to how their work practices would stand up to scrutiny in terms of forced labour. Modern slavery legislation in Australia is expected to utilise the buying power of Australian companies to influence change, driving up employment standards throughout their networks.
If you need any assistance or have any questions about how these changes will affect your business, don’t hesitate to contact PCC Employment Lawyers.