07 Feb 2019

Five years in: the upshot of the Fair Work Commission's 4-yearly review of modern awards

By Stuart Pill, Matt Condello

The impact of changes to modern awards will vary depending on whether an enterprise agreement is in place or whether employees are award-covered.

At the time the Fair Work Act 2009 (Cth) came into force, it provided that the Fair Work Commission would conduct a 4-yearly review of modern awards to ensure that they were meeting the modern awards objective. The first four-yearly review commenced in 2014. The task of reviewing all 110 modern awards has proved to be a huge endeavour, and is now in its fifth year!

Employers, employees, unions (and, we daresay, the Commission) breathed a sigh of relief when Parliament took a bipartisan approach in 2018 and amended the Fair Work Act to remove the requirement to conduct ongoing 4-yearly reviews.

Now that the review is nearing its completion, it is an appropriate time to take stock of the changes that have been made. This article summarises some important changes to the modern awards to date.

Family and domestic violence leave

All modern awards have been varied to include an entitlement to 5 days' unpaid leave to deal with situations of family and domestic violence. The entitlement extends to casual employees, and came into effect on 1 August 2018. This change is in addition to a similar entitlement being enshrined in the National Employment Standards (which applies to all employees covered by the NES, rather than just award-covered employees).

Requests for flexible work arrangements

Employees may make requests for flexible working arrangements under section 65 of the Fair Work Act. However, there is no mechanism under the Fair Work Act to enforce this entitlement. As part of the review, all modern awards have been varied to include a process that must be followed where an employee submits a request under section 65. Essentially, the process requires employers to discuss the request with the employee and genuinely try to reach agreement, including whether there are any alternative arrangements the employer might be able to offer to the employee if they reject the request. This change came into effect on 1 December 2018.

Requirement to pay entitlements on termination within 7 days

All modern awards have been varied to provide that employers must pay all wages and other amounts due under the National Employment Standards (such as leave entitlements) to employees within 7 days of the employee's employment being terminated. The change came into effect on 1 November 2018. This might be relevant where, for example, an employee is usually paid monthly and their employment ends in the first week of the month. Previously, some employers might have waited to the next pay cycle to pay outstanding wages and entitlements.

Directions to take annual leave and cashing out leave

All modern awards now include provisions dealing with the management of excess annual leave and for cashing out annual leave. The awards now provide that:

  • Excess annual leave is 8 weeks or more (40 days)
  • Employers and employers must discuss and seek to agree on taking annual leave
  • Employers can direct staff to take annual leave to reduce the balance to six weeks (30 days)
  • Employers must give not less than 8 weeks' notice and not more than 12 months' notice of the direction to take leave
  • The maximum annual leave that can be cashed out in any 12 month period is 2 weeks (and must not result in the balance going below 4 weeks).

These changes came into effect on 6 April 2018.

Minimum engagement for casual staff

All modern awards which did not already have a minimum engagement period for casuals now include a two hour minimum engagement period for casual staff on each occasion they are required to attend work. This change came into effect on 1 October 2018.

Casual conversion

All modern awards which did not already have provisions dealing with conversion of casual employees to ongoing employment now include such a provision. In summary, the clause provides that a regular casual employee may request to convert to ongoing employment where they have worked a pattern of hours on an ongoing basis for 12 months and that work could continue to be performed an ongoing basis (either full-time or part-time). This change came into effect for most awards on 1 October 2018.

What should employers do to address these changes?

The impact of these changes will vary depending on whether an enterprise agreement is in place or whether employees are award-covered.

Where an enterprise agreement is in place:

  • the enterprise agreement operates to exclude the relevant modern award;
  • the changes to the awards therefore have no immediate impact on terms and conditions of employment of the employees covered by the enterprise agreement;
  • the changes will be relevant when a new enterprise agreement is being negotiated, as the Commission must be satisfied that all employees would be better off overall under the new agreement than under the relevant award (which will now include the changes outlined above); and
  • employers should seek advice prior to commencing bargaining to ensure their bargaining strategy includes addressing these changes and to ensure the agreement will pass the better off overall test.

When employees are award-covered:

  • the changes made to the relevant award apply to all employees covered by the award from the date the changes came into effect;
  • employers should seek advice to ensure they are complying with the new requirements in the relevant modern award.

What now?

There are still a number of key matters to be determined in the award review. As of December 2018, 23 different Full Benches remained part-heard or were yet to be commenced, including a number that will not commence hearing until after 1 July 2019. These matters will include award-specific reviews, as well as finalisation of common issues, including in relation to overtime for casuals. A further update will be provided at the conclusion of these matters.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.