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Award free or award captive? Compliance with modern awards is not a choice

Employment Law

It’s not uncommon for some businesses and employers to think they are not covered by the modern award system, particularly if they have engaged employees pursuant to a contract of employment or a letter of offer setting out an employee’s basic terms, conditions and rate of pay.

For some businesses that may be right if the employees are “award free” or if the employer is not a national system employer. In other circumstances, a business may negotiate an enterprise agreement with its award covered employees, thereby replacing the modern award. If the enterprise agreement complies with the Fair Work Act 2009 and is registered at the Fair Work Commission (FWC), then it becomes the legal industrial instrument governing the basic terms and conditions of the employees covered, to the exclusion of the modern award – and underpins any additional terms of employment set out in a contract of employment, such as above award rates of pay.

Most workplaces in Australia are now covered by the Fair Work system – and as far as the Fair Work Ombudsman and the Fair Work Commission are concerned, most employers and employees in the national Fair Work system are covered by one of the 121 modern awards. Very senior employees in specific professions or occupations which traditionally have not been award covered might fall outside of an award, however even where the work undertaken by employees is difficult to classify, the modern award system may still capture particular employees via the Miscellaneous Award 2010.  A full bench decision of the Fair Work Commission in United Voice v Gold Coast Kennels Discretionary Trust t/a AAA Pet Resort [2018] FWCFB 128 serves as a prescient warning for employers that at the very least, junior employees and roles are likely to be covered by an award even if traditionally the role was award free prior to the introduction of the modern award system and the Fair Work Act.

It’s important to be aware of the relevant awards and their applicability to an industry, your business and your employees. The Fair Work Commission conducts yearly annual wage reviews and issues national minimum wage decisions resulting in increases to the minimum wage for employees – by updating the pay rates in the various modern awards, and by increasing the national minimum wage for award free employees.

On 1 February 2021, a 1.75% increase to minimum wages takes effect in various group 3 awards, including retail, hospitality, fast food, fitness, hair and beauty, and live performance – following a decision of the Fair Work Commission in June 2020.

This is good news for employees as it guarantees a basic minimum wage with yearly increases, taking into consideration increases in the costs of living (CPI).  It can however, be a bit of headache for businesses when trying to work out an employee’s rate of pay and other terms and conditions the employer must comply with.

If you are a business thinking of engaging a new employee, updating your employment contracts, or considering negotiating an enterprise agreement with your workforce, it may be worth speaking to the employment team at Atkinson Vinden Lawyers to get some initial advice on award coverage and related issues.

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