Workplace Relations Changes: Fair Work, Industry Awards, Termination Payments and Reasonable Hours

Contents

• Are you ready for the Fair Work Act?
• Changes to the modern clerks and banking, finance and insurance industry awards
• Termination payments tightened up by recent changes to the Corporations Act 2001 By Nadine Zets of Gadens Lawyers, Sydney
• So what are reasonable additional hours?
• Caltex wins the right to implement random drug and alcohol testing

Are you ready for the Fair Work Act?

With the remaining provisions of the Fair Work Act 2009 (Cth) (FW Act) and modern awards to commence on 1 January 2010, now is the time for employers to consider whether they are ready for the FW Act.

Our previous updates (available from our website here) have outlined the key areas of the FW Act with which employers need to be familiar. However, there are a number of practical steps employers should be taking now in preparation for 1 January 2010. These include:

• identifying which modern awards will apply to employees from 1 January 2010, identifying each employee's classification under the relevant modern award, and considering the transitional provisions in each of the modern awards (see our modern award update here)
• considering how the national employment standards (see our national employment standards update here ) interact with each applicable modern award and any other industrial instruments (such as AWAs, ITEAs and collective agreements)
• reviewing and updating pro-forma contracts of employment to ensure they comply with applicable modern awards, the national employment standards and the FW Act generally
• reviewing and updating policies and procedures (and associated forms) as required to comply with applicable moderns awards, the national employment standards and the FW Act generally
• considering implementing new policies and procedures (and associated forms) to deal with new matters under the FW Act and the national employment standards, such as flexible working arrangements and community service leave
• ensuring that payroll systems have been updated to comply with applicable modern awards, the national employment standards and the FW Act
• reviewing employee records to ensure they comply with the new record keeping requirements which deal with matters such as hours of work and payments to employees
• obtaining a copy of the Fair Work Information Statement prepared by the Fair Work Ombudsman to distribute to new employees (available here)
• considering what communication strategy, if any, is needed to notify employees of, and implement, any changes in your workplace.

Please contact a member of the gadens lawyers' workplace relations group if you would like assistance with any of these steps.

By Stephanie Nicol of Gadens Lawyers, Sydney

Changes to the modern clerks and banking, finance and insurance industry awards

On 16 November 2009, the Australian Industrial Relations Commission varied the Clerks – Private Sector Award 2010 (Clerks Award) and the Banking, Finance and Insurance Award 2010 (Banking Award) to include a clause allowing an employer to pay an employee an annualised salary. In conjunction with this decision, the Australian Industrial Relations Commission deleted from the Clerks Award and the Banking Award the 'exemption' clauses which excluded the operation of certain clauses of the Clerks Award and Banking Award for employees earning more than a specified amount of remuneration.

By Michael Cooper of Gadens Lawyers, Sydney

Termination payments tightened up by recent changes to the Corporations Act 2001

The Corporations Amendment (Improving Accountability on Termination Payments) Act 2009 (Cth) (Amending Act) came into force on 23 November 2009 and tightens up the provisions in the Corporations Act 2001 (Cth) (Corporations Act) dealing with termination payments made to directors and other senior executives.

Generally, these termination benefits provisions specify that an entity must not, without shareholder approval, give a benefit to a person who holds a "managerial or executive office" (or did so during the last three years) in connection with the person's retirement from that office or position of employment if the benefit exceeds a certain amount.

The Amending Act aims to promote responsible remuneration practices and discourage excessive termination benefits being paid to executives by empowering shareholders to disallow such benefits over a specified amount (particularly where they are a reward for poor performance).

Key changes

The key changes introduced by the Amending Act are:

• the threshold at which termination payments to executives must be approved by shareholders has been lowered (termination benefits exceeding one year's average base salary are subject to shareholder approval as opposed to previously where termination benefits could reach up to seven times a recipient's total annual remuneration before shareholder approval was required)
• the range of personnel whose termination benefits can be subject to shareholder approval for "disclosing entities" within the meaning of the Corporations Act has expanded to include not only directors (and de facto or shadow directors) but also senior executives and key management personnel and the five most highly remunerated officers (if different) of the entity (that is, the officers named in the remuneration report). The current range of personnel caught for non-disclosing entities remains largely unaffected, that is, the provisions apply to directors, de facto and shadow directors
• the types of benefits which will form part of a "termination benefit" and therefore require shareholder approval has been clarified
• unauthorised termination benefits must be repaid immediately (there was no express repayment obligation previously)
• that the retiree shareholder (i.e. the executive who will be the recipient of the payment) cannot participate in a vote on their termination benefit (except if acting as a proxy)
• the penalties for unauthorised termination benefits has increased.

When do the new arrangements apply?

The new arrangements will not apply retrospectively to existing contracts. However, they will apply to contracts that are entered into, renewed, varied or extended after 23 November 2009. Although minor variations to contracts are unlikely to be caught, employers should be aware that changing a material term, including any term relating to remuneration such as salary increases, would be considered a variation sufficient to attract the application of the Amending Act.

By Nadine Zets of Gadens Lawyers, Sydney

So what are reasonable additional hours?

A recent decision of the Federal Magistrates Court of Australia has given guidance on what are reasonable additional hours for an employee to work. It is a requirement under the Workplace Relations Act 1996 (Cth) (WR Act), continued under the Fair Work Act 2009 (Cth) (FW Act), that an employee cannot be required to work more than an average of 38 hours per week plus reasonable additional hours. This decision is the first time that a court or tribunal has had an opportunity to consider these provisions of the WR Act, which have been largely replicated in the FW Act.

Mr MacPherson was employed as an electrical fitter by Coal & Allied Mining Services Pty Limited at its Mount Thorley/Warkworth Operations. Mr MacPherson was originally working on a roster which required him to work an average of 40 hours per week on a rotating day/afternoon shift, Monday to Friday. This rotating roster operated over a three week cycle, during which Mr MacPherson was required to work five afternoon shifts.

In November 2008, Coal & Allied implemented a new roster system where employees were required to work an average of 44 hours per week. This roster operated over a two week cycle, and included four day shifts, but no work after 6:30 pm. The change to the roster system was due, in part, to Coal & Allied acquiring new equipment to be maintained. In conjunction with the new roster, employees were afforded a work pattern allowance of $11,856 for working the four additional hours each week.

Mr MacPherson is a married man with four children. Two of his children are of university age, and the others were aged 15 and 13 around the time Mr MacPherson's roster was changed. Prior to the roster change, Mr MacPherson had arranged his family activities so that on the days he was not working an afternoon shift, he could take his children to activities after school. This included coaching a soccer team during the winter months, and taking his children to cricket and swimming training during the summer months.

In the first week of the operation of the new shifts, Mr MacPherson approached his supervisor and advised that he could not work past 2:30 pm as he had personal family commitments. Mr MacPherson was disciplined for refusing to work the roster, and subsequently commenced proceedings claiming, amongst other matters, that Coal & Allied had breached the WR Act's provisions regarding hours of work.

The court held that the adoption of the new roster, and the increase in hours of work, provided a significant benefit to Coal & Allied, noted that the roster would interfere with some of Mr MacPherson's family commitments, and accepted that those family commitments were important. The court ultimately considered however that the benefits to Coal & Allied outweighed the detriment to Mr MacPherson (which was compensated for by the additional payment), and held that the six extra hours of work per week over and above 38 hours were reasonable in the circumstances.

Implications for employers

This decision gives some guidance as to what are reasonable additional hours. While what are considered reasonable additional hours is likely to vary from case to case, the factors identified by the court will assist employers to determine whether the hours they are requiring employees to work over and above 38 hours per week are reasonable.

By Michael Cooper of Gadens Lawyers, Sydney

Caltex wins the right to implement random drug and alcohol testing

Caltex and the Australian Workers Union (AWU) had been negotiating for a new enterprise agreement to cover employees employed at Caltex's Kurnell refinery. While most of the matters to be dealt with under the enterprise agreement had been finalised, Caltex and the AWU had not resolved the issue of drug and alcohol testing at the refinery, and specifically whether Caltex could undertake random drug and alcohol testing.

Both Caltex and the AWU elected to have Fair Work Australia (FWA) determine the matter under the Fair Work Act 2009 (Cth) (FW Act).

Caltex and the union's positions

Caltex proposed to introduce random testing for drugs and alcohol at the Kurnell refinery, in line with a policy Caltex was implementing across its business. The random testing for drugs and alcohol was to be restricted to those working in safety critical sites, members of the Caltex Leadership Team, and their direct reports. Caltex had proposed to introduce random testing for drugs and alcohol as a result of its obligations under the Occupational Health and Safety Act 2000 (NSW) (OHS Act) to ensure the health, safety and welfare of its employees and at common law to provide safe systems of work. This was especially true given that the Kurnell refinery was classified as a "Major Hazard Facility" under the regulations to the OHS Act.

The union however proposed that testing only occur on a for cause basis, based upon reasonable suspicion of drug or alcohol abuse. This was primarily due to a claim that there was a lack of evidence that random testing was required, substantiated by a lack of incidents as a result of employees use of drugs or alcohol at the Kurnell refinery since 2005 and a minimal number of incidents prior to 2005.

The decision

FWA held Caltex should implement its proposed drug and alcohol policy at the Kurnell refinery by 1 February 2010. In making its decision, FWA considered a number of factors including:

• the arduous and absolute duties imposed on Caltex under the OHS Act
• the lack of incidents at the Kurnell refinery
• the dangerous nature of the materials which were contained at the Kurnell refinery
• the potentially catastrophic results of an incident due to drug or alcohol abuse at the Kurnell refinery
• FWA's view that the drug and alcohol policy would be a disincentive for drug and alcohol abuse within the workplace
• that the purpose of the policy was to assist relevant persons to be rehabilitated, not penalised
• the fact that random alcohol and drug testing was already prevalent in other hazardous industries in the Australia, such as the aviation industry.

FWA emphasised however, that this decision did not mean that random testing for drugs and alcohol was an automatic entitlement for employers. Instead, FWA was concerned that the policy be correctly administered.

In finding that Caltex should implement its drug and alcohol policy at the Kurnell refinery, FWA imposed some restrictions on the operation of the drug and alcohol policy. These included:

• when an employee returns a positive test result, the medical review officer must inform the employee and liaise with them in relation to the test result and the options for treatment. The medical review officer will then report the result to Caltex
• an employee who has breached the drug and alcohol policy will receive formal counselling. Further breaches would result in a formal warning, a final warning and in the end, dismissal
• that employees be provided with sick leave in accordance with the ILO Code of Practice
• that disputes in relation to the policy be resolved pursuant to the enterprise agreement
• that the revised policy not be varied unilaterally by Caltex until the expiry of the enterprise agreement.

Implications for employers

This decision does not mean that an employer can simply implement random drug and alcohol testing policies within their respective organisations. It does however emphasise the importance of the purpose of a drug and alcohol policy in a workplace, and gives guidance on the factors which should be considered by employers when implementing a drug and alcohol policy.