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Busted - Myths of Employment Law

Busted – Myths of Employment Law

Published on April 6, 2016 by Nicole Dunn and Veronica Lee

We understand employers are busy overseeing the many elements that go into running their business. Managing employees and understanding employer responsibilities is a large part of running a successful operation. Unfortunately, it’s not uncommon that we encounter an employer at the wrong end of a claim because they’ve bought into an “employment law myth” so we’ve busted a few employment myths for you.

Myth 1: The award doesn’t apply if I pay over award rates

In most cases, the provisions of an award will apply to an employee whose role falls within an award even where an employee is paid over the minimum wage rates set by an award.

Employers often mistakenly assume that if they pay over award hourly or weekly rates they do not have to meet other award provisions such as hours of work, holidays, termination, overtime and penalties etc… This assumption is wrong, the award provisions apply even where over award rates are paid.

In the decision of Fair Work Ombudsman v Henna Group Pty Ltd [2012] the Federal Magistrates Court found an employer failed to pay a number of employee entitlements including overtime and penalty rates for weekends, public holidays and accrued leave on termination. The employer company had underpaid its employees a total of $16,036.75. The employer indicated that he was paying above award wages, however, this was not taken into consideration by the Court and the employer was found to have contravened award provisions, the Workplace Relations Act 1988 and the Fair Work Act 2009. The employer company, the sole director and the person responsible for paying the wages were all prosecuted and penalties of $160,000 for the employer company and $30,000 each for the individuals were imposed in addition to the payments owed to the employees having to be paid.

Myth 2: I can always just extend the probationary period of a new employee if I’m unsure about their performance

An employer can only extend a probationary period if the employment contract provides for that extension, or the employee agrees to the extension at the time it is proposed by his/her employer. However, if the probationary period goes beyond the expiration of the minimum employment period, being 12 months for an employer with less than 15 employees and 6 months for a company with 15 or more employees, the extension of the probation period will not prevent an employee who complains of being unfairly dismissed from bring a claim.

Section 383 of the Fair Work Act 2009 sets out the minimum period of employment (as noted above) which is required to have been completed to enable an employee to bring an unfair dismissal claim in circumstances where that employee asserts that the termination of their employment was harsh, unjust or unreasonable.

The minimum period of employment set out in section 383 of the Fair Work Act 2009 will apply irrespective of the probation period agreed to in the contract of employment for the purposes of an unfair dismissal claim.

Conversely, if an employee who has successfully completed a probationary period as set out in their employment contract of for example, three months, but is terminated before he/she has been employed by the employer for six months, he/she will not be able to pursue an unfair dismissal claim as the minimum period of employment required by the Fair Work Act 2009 has not been completed.

Myth 3: Annual leave can always be cashed out

Annual leave cannot be cashed out unless it is done in accordance with section 93 or 94 of the Fair Work Act 2009.

Section 93 of the Fair Work Act 2009 provides that a modern award or enterprise agreement may make provision for cashing out of annual leave provided a balance of 4 weeks annual leave remains. It is important to read the relevant modern award or enterprise agreement and check what requirements are stipulated in that instrument. However, keep in mind that most modern awards do not contain any provision permitting cashing out of annual leave.

Section 94 of the Fair Work Act 2009 provides that an employer and an employee whose employment does not fall under an award or an enterprise agreement, may agree to cash out that employee’s accrued annual leave so long as:

  1. a balance of 4 weeks annual leave remains after any part that is cashed out;
  2. the agreement between the employee and employer is recorded in writing; and
  3. the cashed out annual leave must be paid as if the employee was taking annual leave, accordingly, if leave loading is payable when annual leave is taken then it must be paid out when annual leave is cashed out.

Each time annual leave is cashed out a new and separate agreement must be entered into.

Myth 4: I mostly employ permanent casuals

The term “permanent casual” is problematic.

True casual employment is ad hoc, uncertain and irregular.  Employees who work regular, systematic hours and have an expectation of ongoing employment may be deemed permanent employees. The impact of this is that employees who are deemed to be permanent employees may have rights for statutory entitlements (such as to annual leave) despite being paid a casual loading.

Then who is a casual employee?

It is important to keep in mind the decision of Telum Civil (Qld) Pty Ltd v Construction Forestry Mining and Energy Union [2013] FWCFB 2434.  In this matter the Full Bench of the Fair Work Commission held that the meaning of “casual employee” should be drawn from the relevant enterprise agreement or modern award and not from the common law approach. The Full Bench held that where an employee is covered by a modern award or an enterprise agreement that contains a definition of “casual employee”, then that definition will apply, and not the more general common law definition.  This approach was said to be consistent with the objectives of the Fair Work Act to ensure that modern awards and enterprise agreements work with the National Employment Standards to provide a fair and relevant safety net of terms and conditions.

This is in contrast to the decision under the Workplace Relations Act 1988 ofWilliams v MacMahon Mining Services Pty Ltd (2010) 201 IR 365.  In this case a miner who had been working a fixed pattern of 12 hour shifts on a fly in fly out basis was found to be entitled to annual leave even though he had signed a contract clearly designating him as a casual.  The contract provided for termination on one hours’ notice. The court found that there was nothing irregular or intermittent about Mr Williams engagement and therefore looked past the contractual description.

Additionally, if a person is casual under the enterprise agreement or award, they may still be able to bring an unfair dismissal claim if they assert the termination of their employment was harsh, unjust or unreasonable as the Fair Work Act 2009 specifically protects casuals who work regular and systematic basis for 12 months.

It is important to be clear with your employees about the nature of their engagement from the outset. But remember, if you begin to treat your casuals as if they are ongoing permanent employees, then they may be deemed to be entitled to the benefits of permanent employment.

Myths busted!

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