Australia has a complex system of employment and industrial laws. This is not least because Australia has a federal system of government, as well as laws across federal and state jurisdictions, all of which have an impact on the employment relationship.
The sources of Australian employment laws include:
- a the common law – case law applied by the courts, including interpretation of rights and obligations under employment contracts;
- b statutes – both federal and of state legislation, including most significantly the federal Fair Work Act 2009 (Cth) (the FW Act) and Fair Work Regulations 2009 (Cth) (the FW Regs), and federal and state work health and safety laws; and
- c industrial instruments – modern awards and a variety of collective workplace agreements such as enterprise agreements.
The employment contract is discussed in Section IV, infra.
The FW Act is the key Australian employment statute. It sets out the core entitlements and obligations of most employers and employees throughout Australia. Under the FW Act, most employers in Australia are obliged to provide employees with certain statutory minimum entitlements. These minimum entitlements are called the National Employment Standards (NES). The NES consists of 10 fundamental entitlements in relation to:
- a maximum weekly hours;
- b requests for flexible working arrangements;
- c parental leave and related entitlements;
- d annual leave and holiday pay;
- e personal and compassionate leave (incorporating ‘sick leave’);
- f community service leave;
- g long-service leave (an entitlement unique to Australia and New Zealand);
- h public holidays;
- i notice of termination and redundancy pay; and
- j the provision of a Fair Work Information Statement containing the NES at the commencement of any employment.
It is important to note that these are minimum entitlements. Employers are at liberty to offer more generous entitlements than these. A breach of the NES entitlements will constitute a breach of the FW Act and may give rise not only to compensation for any unpaid entitlements but also penalties. Currently, penalties per breach amount to A$54,000 for a corporation and A$10,800 for an individual.2
Despite a largely successful attempt to create uniform national work health and safety laws, and notwithstanding a general aspiration among legislators to settle on a national long service leave regime, states and territories still legislate some key areas of workplace relations, including:
- a workplace health and safety (albeit largely in uniform laws);
- b long-service leave;
- c workers’ compensation; and
- d anti-discrimination laws (in addition to federal anti-discrimination legislation).
The Australian industrial system has been reformed numerous times since the Australian Federation. However, a central and ongoing feature of industrial laws and regulations in Australia is that essential terms and conditions of employment are set out within industry-relevant industrial instruments. These have traditionally been arranged according to specific industries, such as mining, agriculture and retail, or according to significant occupations such as the administrative workforce.
After the enacting of the FW Act in 2009, industrial instruments underwent a ‘modernisation’, which reduced thousands of large and small industrial instruments to 122 ‘modern awards’ based on either industry or occupational coverage. Most of the modern awards provide entitlements that are additional to the NES entitlements and that arise out of the circumstances of the specific industries or occupations. For example, modern awards provide for minimum wages, overtime payments, hours of work and rostering arrangements, penalty rates for shift and holiday work, allowances (such as for uniforms, travel and meals) and annual leave loading payments (an additional payment during annual leave and calculated as an additional percentage on the employee’s ordinary pay rate). As with breaches of the NES, any breach of a modern award entitlement may give rise to the imposition of penalties on the employer. In addition to modern awards, specific employers and employees may enter into an enterprise agreement, which sets out the terms and conditions of employment relevant to the workforce identified in the agreement. Enterprise agreements are frequently negotiated between employers and employees (and employee representatives such as trade unions) and are certified by the Fair Work Commission. The FW Act contains prescriptions respecting the enterprise bargaining process.
The industrial law regime and its interplay with common law contracts presents a complex area of law. Many employers rightly consider it prudent to review regularly the applicability of any industrial instruments to their specific workforce.
The Fair Work Ombudsman enjoys wide powers regarding inspection of employer records and may prosecute employers for breaches of the federal workplace laws. The Fair Work Commission is a tribunal of first instance for a number of workplace relations cases, including unfair dismissal, breach of general protections, bullying claims and industrial disputes. The Fair Work Commission is also charged with ratifying industrial instruments. Otherwise, employment law cases are dealt with in either general or specialised employment law divisions within state and federal court systems.
II YEAR IN REVIEW
On 28 December 2015, Commissioner Heydon delivered his report concluding the Royal Commission into Trade Union Governance and Corruption. The ramifications of that enquiry continued to provide low-level background static to political and workplace relations discourse throughout much of 2016. Workplace relations were also partially responsible for the Australian federal election of 2 July 2016. In May 2016, the Prime Minister, Malcolm Turnbull, sought a double dissolution of Federal Parliament and a consequent election on the basis of the failure to pass three key pieces of legislation relating to workplace relations. The double dissolution ushered in an eight-week election campaign – the longest in over 40 years. The vote returned the coalition government led by Mr Turnbull.
Despite the centrality of workplace relations issues leading into 2016, no significant legislative or common law change took place. Between the Royal Commission and the 2016 election an employment lawyer could have been forgiven for thinking it was the perfect climate for employment and industrial law matters to be discussed, debated and even resolved. Instead, workplace relations hardly figured in the election campaign. Since the election, few significant developments have occurred.
A number of annual workplace adjustments came into effect from 1 July 2016:
- a the weekly minimum wage rose to A$672.70, or A$17.70 an hour;
- b federal modern award rates increased by 2.5 per cent;
- c the compensation cap for unfair dismissal claims rose to A$69,450; and
- d the income cap for unfair dismissal and high income threshold rose to A$138,900.
In November 2016, the federal government changed the rules governing temporary skilled workers in Australia. Commencing from 19 November 2016, Temporary Work (Skilled) visa (subclass 457) holders can only remain in Australia for a period of 60 days after their Australian employment ceases (previously it was 90 days). The change is intended to strike a balance beneficial to both ‘vulnerable’ subclass 457 visa holders and Australian workers.
Also in November, the federal government finally passed two of the bills that gave rise to the double dissolution election. First passed was the Fair Work (Registered Organisations) Bill establishing the Registered Organisations Commission (ROC). It is anticipated that the ROC will oversee the rules, annual and financial reports, conduct of officers and other related matters of registered employer or employee associations. This will include, for example, registered trade unions and industry bodies. Registered organisations enjoy certain rights and responsibilities, including representation of members at the Fair Work Commission.
The second bill re-established the Australian Building and Construction Commission (ABCC). The ABCC will effectively act as a building industry watchdog. Having regard to the Heydon Royal Commission, the ABCC will have a not-insignificant role to play respecting workplace relations in that industry by potentially addressing unlawful industrial action, picketing and any workplace discrimination or bullying.
Over 40 per cent of applications to the Fair Work Commission in 2015–2016 were in respect of unfair dismissal claims. General protections applications plateaued despite a steady rise in previous years. More significantly, almost 90 per cent of unfair dismissal applications and 53 per cent of general protections applications were finalised in 2015–2016 without the need for any decision or order by the Commission. Only 7 per cent of bullying claims were finalised by a decision of the Commission. Most unfair dismissal claims in 2015–2016 were settled for under A$20,000. This confirms that the initial conciliation process, most often conducted by telephone, remains a very effective means of dispute settlement.3
Beyond the large-scale national legal developments, in day-to-day practice, hot topics for employment lawyers and their clients were:
- a the gig economy – how individuals and teams are engaged and managed in that environment;
- b the impact of social media on the workplace;
- c the dynamic tension between the relatively libertine private world and the heavily regulated workplace;
- d measuring and managing the workforce – regulating who are employees and who are contractors;
- e managing globally mobile workforces – the tension between globalisation and local employment law regulations; and
- f the inveterate problem of evaluating risk assessments and ensuring compliance with the ever-increasing number of nuanced workplace laws and regulations relating to entitlements and broader obligations such as anti-discrimination laws and corporate governance commitments.
III SIGNIFICANT CASES
Despite, or perhaps on account of, the federal election, 2016 was an unusually quiet year in Australian employment law. Unlike the previous two years, there have been no standout cases that made any dramatic or long-lasting impact on employment law and HR practice.
IV BASICS OF ENTERING AN EMPLOYMENT RELATIONSHIP
i Employment relationship
All employees have a contract with their employer. Like most contracts, the agreed terms can be set out in writing or agreed orally between the parties. Additionally, terms can be implied into the contract by law by virtue of the employer–employee relationship, or from the facts or circumstances of a particular case.
The relevant legislation in Australia does not stipulate that an employment contract must be in writing. However, a relevant industrial instrument, such as an award or enterprise agreement, may require the parties to enter into a written contract. It is recommended that a written contract be entered into to ensure that the terms and conditions of the employment are clear and known to both parties.
An employee can be hired on a permanent or casual basis, or for a specified (fixed) time or task. A fixed-term employment contract will specify the date upon which the employment will automatically come to an end. While a true fixed-term contract does not allow for termination of the employment before the end of the specified term (except in cases of serious misconduct), a maximum-term contract allows a party to bring the employment to an end before the expiry of the term upon the giving of notice to the other party.
An employer and employee can agree to any lawful terms and conditions of employment, so long as the employee’s entitlements are no less beneficial than the minimum terms and conditions conferred by relevant legislation and industrial instruments.
An employment contract will usually include clauses specifying the nature of the employment, the commencement date, the employee’s position and supervisor, duties and responsibilities, remuneration, leave entitlements, procedures for termination and a requirement that the employee will follow relevant workplace policies and procedures; in other words, core entitlements and practical provisions that govern the employment relationship. Many contracts will also contain provisions in respect of confidentiality, intellectual property obligations and post-employment restrictive covenants.
Generally, an employer cannot vary an employment contract without the employee’s consent and, depending on the terms of the contract, the variation may be required to be in writing. Regardless, it would be prudent to do so. A variation may also require some form of consideration.
ii Probationary periods
It is common for employers to require employees to complete a probationary period, during which both parties can determine whether the employee is suitable for the role.
Legislation does not specifically provide for a probationary period, nor does it specify how long a probationary period should be. The length of a probationary period will best be determined by the nature and seniority of the role. It should be reasonable. Notwithstanding these general statements, it is increasingly common for employers to require a six-month probationary period. During the probationary period, the parties generally provide each other with one week’s notice of the termination of the employment (or payment in lieu at the employer’s election).
It is unusual for a probationary period to be longer than six months. This is despite employees of small employers (those that have fewer than 15 employees) being precluded from bringing an unfair dismissal claim until they have served a 12-month qualifying period.
iii Establishing a presence
To carry on business in Australia, a foreign company must register with the Australian Securities and Investments Commission (ASIC). Upon such registration, the foreign company (or its subsidiary as the case may be) will be required to lodge relevant financial reports and other administrative documents in accordance with ASIC rules.
Outside formal registration as a foreign company, in certain circumstances it may be the case that by engaging a contractor in Australia a foreign company has created a permanent establishment. This will give rise to local tax liabilities. Corporations should carefully consider the employment law ramifications of how any Australian presence is managed.
A foreign registered business in Australia will be obliged to comply with Australian state and federal employment laws respecting its employees. Naturally, this will include remitting payroll tax to the Australian Taxation Office (ATO) and withholding tax from salaries in accordance with ATO regulations as any locally registered business would be required to do.
V RESTRICTIVE COVENANTS
As a general proposition at common law, restraints of trade, including in respect of post-employment restraints, are at first instance void and unenforceable as a matter of public policy. Australian courts are nevertheless prepared to enforce restrictive covenants in employment contracts if the restraints are reasonably necessary to protect a legitimate business interest of the employer. This requires two separate questions to be answered:
- a What are the legitimate business interests sought to be protected by the employer?
- b Does the restraint go no further than is reasonably necessary to protect those legitimate business interests?
There are usually three interests capable of protection in respect of employment restraints: the employer’s confidential information, customer connections and staff connections. Accordingly, it is common for employment contracts to include a range of restrictive covenants that aim to protect these business interests, including:
- a a non-disclosure clause that prohibits an employee from disclosing the confidential information of the employer;
- b a non-solicitation of customers and suppliers clause that aims to protect against the poaching of the employer’s customers and suppliers;
- c a non-solicitation of staff clause that prohibits an employee from poaching staff of the employer, thereby affecting its workforce; and
- d a non-compete restraint, which can protect all three interests by prohibiting an employee from working in a competing business for a period of time after the employment has come to an end.
To determine whether the restraint goes no further than is reasonably necessary, the courts will look at the agreement between the parties and the circumstances at the time the contract was entered into. It will take into account the relative bargaining position of the parties and other factors, such as:
- a the character of the employer’s business;
- b the employee’s position in terms of his or her duties and level of seniority;
- c the employee’s level of remuneration;
- d whether or not the employee will receive some form of payment during the restraint period; and
- e the currency of the employee’s knowledge of any confidential information.
New South Wales is the only Australian jurisdiction that has passed legislation in relation to restrictive covenants. The Restraint of Trade Act 1976 (NSW) (the RoT Act) goes beyond the prima facie common law position and provides that a restraint is valid to the extent it is not against public policy. In applying the RoT Act, the court will likely adopt the following three-stage process:
- a The court will determine whether any alleged breach infringes the terms of the contractual restraint clause.
- b The court will determine whether the restraint, so far as it applies to that breach, is against public policy. A restraint is not against public policy if it is reasonable between the parties and is not injurious to the public. The usual reasonability test (outlined above) is applied.
- c If the restraint is not against public policy, then it may be deemed valid. This will necessarily be subject to any order made under subsection 4(3) of the RoT Act, which allows the court to ‘read down’ or ‘amputate’ a restraint that is unreasonable, so as to make it reasonable.
The courts will not perfect an imperfect agreement, and such ‘reading down’ will be applied very carefully, having regard to the facts and circumstances of the case and the actual wording of the restraint clause within the contract. For example, although the court has the power to narrow a restraint, it cannot rewrite it. More often than not, it is the length of the restraint period that will be altered by the court.
In jurisdictions where the RoT Act does not operate, employers have sought to avoid the common law’s all-or-nothing approach by structuring restraints in a way that allows the court to sever the restraints that it considers unreasonable, allowing it to enforce those restraints that remain. These are sometimes called cascading, laddered or step provisions.
i Working time
The FW Act specifies that full-time employees must not be required to work any more than 38 ordinary hours each week unless the additional hours are ‘reasonable’. The FW Act provides that the following matters are among those to be considered when determining if additional hours are ‘reasonable’:
- a risk to the employee’s health and safety;
- b the employee’s personal circumstances, including family responsibilities;
- c the needs of the workplace; and
- d the employee’s level of remuneration.
Part-time employees are employees who work fewer than 38 ordinary hours each week.
Legislation does not limit the amount of time that an employee may work at night. However, a relevant award or enterprise agreement may contain terms and conditions about work performed at night, including the maximum number of continuous hours an employee can work without a break. An industrial instrument may also prescribe the payment of penalties and allowances to employees who perform shift work, including night shifts.
An employee who works in excess of his or her ordinary hours of work may be entitled to overtime pay in accordance with a relevant award or enterprise agreement. The industrial instrument will usually stipulate the wage or penalty that must be provided to employees when working overtime. In industries where employees generally work in excess of 38 hours per week, and subject to the terms of any relevant industrial instrument, it is not uncommon for the employment contract to express that the employee’s remuneration package has been calculated with those overtime hours in mind. If this is not specified in the contract, then the employee will be entitled to additional remuneration in respect of his or her overtime work. The interrelation between the employment contract and the terms of any relevant industrial instrument is dynamic and complex. Employers do not infrequently err in seeking to ‘package’ remuneration to include both salary and all allowances in circumstances where an industrial instrument does not allow such packaging (or ‘annualisation’) of remuneration outside an individual flexibility arrangement.
VII FOREIGN WORKERS
Only Australian citizens and permanent residents, New Zealand citizens and foreign nationals with an appropriate visa can lawfully work in Australia. In addition, Australia’s migration laws place a positive obligation on an employer to ensure that its employees can legally work in Australia. This requires the employer to perform checks to safeguard against employing a foreign national who does not have an appropriate work visa. If an employer engages a worker who does not have the required visa status and work entitlements, it may face significant financial penalties and adverse publicity.
A number of different visas permit a foreign national to work in Australia, but employer-sponsored visas are very common. To become a standard business sponsor, the employer must apply to Australia’s Department of Immigration and Border Protection. As a standard business sponsor, the employer agrees to certain obligations, including expending a percentage of its annual payroll on the provision of providing training to Australian citizens or permanent residents, ensuring sponsored persons only work in their nominated position and, if requested by the visa holder, paying travel costs to enable a sponsored person to leave Australia.
While there is no limit on the number of visa holders an employer may have, when an employer applies to be a standard business sponsor it must specify the number of people that it intends to sponsor. If this number is reached, a further application to the Department is needed to increase the number of workers the employer would like to sponsor.
To prevent foreign nationals from filling positions that could be performed by local labour, a sponsor must provide the Department with information about its attempts to recruit Australian workers and how it has determined that there is no suitably qualified and experienced local labour to fill the relevant position.
Each visa confers different work rights, which include the duration of the visa and number of hours that an employee may work. For example, the popular Temporary Work (Skilled) visa (subclass 457) allows employees to work with their sponsor employer for up to four years.
Foreign workers have the same rights and obligations in the workplace as all other employees. In addition, standard business sponsors must ensure that subclass 457 visa holders are provided with terms and conditions of employment that are no less favourable than those provided to an Australian citizen or permanent resident performing equivalent work. An employee sponsored on a subclass 457 visa must also be paid no less than the temporary skilled migration income threshold, which is currently A$53,900 per year. This is the case even if the market rate for the position is less than the temporary skilled migration income threshold.
VIII GLOBAL POLICIES
Workplace policies are not required by law. However, having workplace policies and implementing them appropriately can assist with regulating an employee’s behaviour at work. For example, since the Richardson v. Oracle case in 2013–2014, it may be considered necessary for employers to have specific sexual harassment policies that are kept current and that, arguably, cite relevant legislation.4 In circumstances where it is lawful and reasonable for an employee to comply with an employer’s direction to adhere to a workplace policy, the employer can take disciplinary action where adherence does not occur.
Workplace policies do not usually form part of the employment contract. This allows the employer to change the policies from time to time without having to obtain the employee’s consent. If workplace policies form part of the employment contract, the employer can become vulnerable to claims for breach of contract in circumstances where it has not acted in strict compliance with the policy document.
It is not necessary for an employee to sign a company policy, however, an employer must be able to show that the employee was aware of the existence of a company policy if the employer seeks to discipline the employee for non-compliance. It is, therefore, good practice for an employer to require its employees to sign an acknowledgement that they have read and understood the employer’s workplace policies and that they have attended any relevant workplace training on the policies themselves.
Any workplace policies should be readily available to employees at all times. Making policies available in a staff room or placing them on the company’s intranet site usually achieves this requirement.
The FW Regs require that employee records must be in English. As a matter of practicality, employment contracts ought to be in English as well.
In circumstances where contracts are provided in dual languages, or where two contracts are provided in different languages, it would be prudent for employers to nominate one of those documents as the employment contract and the other as a translated guide to the contract. Having regard to the FW Regs and the standard practice of written Australian employment contracts to be in English, it would be sensible for the contract to be in English and the guide to be in the second nominated language.
X EMPLOYEE REPRESENTATION
Employees may elect other employees as workplace representatives. Industrial associations such as trade unions may also register as registered organisations to represent the interests of employees. Australian employees enjoy freedom of association and a right to both join a trade union and to take part in industrial action. Those rights are protected under the FW Act. An employer who takes adverse action against an employee because of that employee’s membership in the industrial association will be in breach of the general protection provisions of the FW Act.
XI DATA PROTECTION
i Requirements for registration
There is no data protection agency in Australia and consequently no obligation on Australian employers to register with any such body. The collection, use and disclosure of personal information is, however, regulated by the Privacy Act 1988 (Cth) and in particular the Australian Privacy Principles (APPs) contained within that legislation.
The Australian Information Commissioner is charged with overseeing the operation of the Privacy Act and taking any complaints in relation to alleged privacy breaches.
Under the APPs the personal and sensitive information of an individual is protected from unauthorised collection or disclosure. An exception to this general rule is in relation to current and past employee records collected and used by an employer in the course of the employment relationship. The corollary of this is that employers do not automatically have to grant access to employee records upon request by an employee. It should be noted that this exception will not apply to independent contractors engaged by an employer.
ii Cross-border data transfers
The obligations regarding collection and use of personal information under the Privacy Act and the APPs will apply to information transferred outside Australia. In those circumstances, an employer would need to ensure that the recipient of employee information has taken reasonable steps to avoid breaching the privacy laws. Such reasonable steps will depend on the nature of the information transferred, but generally this will include having sufficient procedures in place to avoid a breach of the Privacy Act. Exceptions to these obligations will be where the employer reasonably believes that the overseas recipient of personal information is subject to similar privacy laws as those that exist in Australia and has taken steps to ensure protection of the personal information in accordance with those laws. A further exemption will be where there is consent to the transfer of the personal information.
iii Sensitive data
Sensitive information includes information in relation to, for example, an individual’s health, racial origins, political affiliations or trade union memberships. This information is more rigorously protected under the Privacy Act than general personal information. However, the employee exemption applies equally to sensitive information provided that it is collected and used in relation to the necessary operation of the employment relationship.
iv Background checks
Background checks are not unlawful under Australian employment laws. Such checks are regularly undertaken to confirm qualifications and by way of employment reference checks. Employers are also not precluded from undertaking or engaging a third party to undertake criminal record and driver’s licence checks, any working with children certification checks or ASIC searches to determine company affiliations and directorships. Before undertaking any such searches it would be prudent to seek the candidate’s or the prospective employee’s consent. Employers should also be mindful of the use for which the checks are made. Imprudent background checking may give rise to breaches of anti-discrimination laws or the rules relating to spent criminal convictions.
XII DISCONTINUING EMPLOYMENT
Employees in Australia cannot be dismissed ‘at will’. Employment contracts may be terminated by either party on the giving of notice in accordance with the terms of the employment contract, or in accordance with the minimum notice periods set out in the FW Act. Contracts very often provide that the employer may terminate an employment contract by way of a payment in lieu of notice. In those circumstances, the employment will come to an end immediately.
An employer may purport to terminate the contract of an employee immediately and without payment in lieu of notice in cases of serious or wilful misconduct.
Employees who are subject to the FW Act unfair dismissal regime may bring a claim on the basis that their dismissal was ‘harsh, unjust or unreasonable’. Whether a dismissal is ‘harsh, unjust or unreasonable’ will depend on the reason for the dismissal and the process undertaken to dismiss the employee. Accordingly, even if the employer has a valid right to terminate the employment (contractually or otherwise), it must afford the employee procedural fairness.
An employer is not required to notify any government authority of the dismissal of fewer than 15 employees. Where more than 15 terminations are being made (including by way of redundancy) the employer must notify Centrelink, a government welfare benefits agency. Otherwise there is no direct role for any government or statutory authority in the termination process.
When an employee’s contract is terminated, the parties may enter into either a deed of release or a settlement agreement. A deed of release is common in settlement of any actual, anticipated or potential litigation. Litigation may be concluded prior to judgment by way of a settlement agreement (or deed), which will likely include agreement as to appropriate court orders ending the proceedings.
Under the FW Act, an employee’s position is terminated by way of ‘genuine redundancy’ when the employer no longer requires the employee’s job to be performed by anyone. This is generally because of the employer’s operational requirements. For the redundancy to be genuine, the employer will also need to comply with consultation requirements set out in any relevant industrial instrument. In the case of a genuine redundancy, an employee will not benefit from the FW Act’s unfair dismissal remedy.
In the absence of these conditions, or where the employee might have been employed in another appropriate position within the employer or a related entity, then the redundancy may not be deemed a genuine redundancy.
In addition to notice, an employer must provide an employee with redundancy pay. Under the FW Act, this ranges from four to 16 weeks’ pay depending on the employee’s length of service. A relevant industrial instrument or employment contract (expressly or impliedly) may provide for additional redundancy pay. Redundancy pay is not generally payable in the following circumstances, among others:
- a if the employee has been employed for fewer than 12 months;
- b if the employer is a small business employer (fewer than 15 employees);
- c if the employee is employed on a fixed-term or specific-task employment contract;
- d if the employment was terminated for serious misconduct; or
- e if the employee is a casual employee or an apprentice.
XIII TRANSFER OF BUSINESS
There is no concept of a ‘transfer of employment’ in Australia. The FW Act places certain obligations on employers when a transfer of business occurs. This is the proper context in which to consider the legal condition of employees affected by an acquisition or merger of businesses. This can be a complex area of employment law. The treatment of employees in a transfer of business scenario will depend on both the commercial context of the transfer and whether or not the transfer of business is by way of an assets or share purchase.
In summary, a ‘transfer of business’ occurs when:
- a an employee transfers from one employer (the old employer) to another employer (the new employer);
- b the work performed by the employee for the new employer is the same, or substantially the same, as the work the employee performed for the old employer; and
- c one of the following connections exists between the old employer and the new employer:
• there is a transfer of assets from the old employer to the new employer in accordance with an arrangement between them; in other words, the old employer sells all or a part of its business to the new employer;
• the old employer and new employer commence or cease an outsourcing arrangement; or
• the old employer and new employer are associated entities.
There is no automatic transfer of employees from an old employer to a new employer when a transfer of business occurs. In practical terms, the employment with the old employer is terminated and the employee enters into a new employment contract with the new employer.
The default position in circumstances of a ‘transfer of business’ is that any period of service with the old employer counts as service with the new employer. The new employer must recognise an employee’s accrued entitlements in respect of sick and carer’s leave, requests for flexible working arrangements and parental leave.
Despite the default position, the new employer can elect whether it wishes to recognise the following entitlements of a transferring employee:
- a The employee’s service for the purposes of redundancy entitlements. If the new employer does not recognise an employee’s services with the old employer for redundancy entitlements, the old employer may need to make a severance payment to the employee upon termination.
- b The employee’s accrued annual leave entitlements. If the old and new employers are not associated entities, the new employer can elect not to recognise accumulated annual leave. If this occurs, the old employer must pay out the accrued annual leave on termination.
- c The employee’s service for the purposes of unfair dismissal. If the employers are not associated entities, the new employer can elect not to recognise the employee’s service for the purposes of the qualifying period for making an unfair dismissal claim. The new employer must notify the employee of this election in writing before the new employment begins.
Any approved enterprise agreement, workplace determination and named employer award that applies to a transferring employee will transfer from the old employer to the new employer. The transferring instrument will also apply to any new employees that commence work with the new employer following the transfer of business if the new employee will do the same work as a transferring employee and, at the time the new employee is employed, no other enterprise agreement or modern award would cover him or her. Applications can be made to the Fair Work Commission to alter this position.
The FW Regs require the old employer to transfer all employee records to the new employer upon the transfer of business.
During 2016 there was much agitation from community and political groups for the NES to be amended to include an employee entitlement to paid domestic violence leave. The matter was tabled at a federal and state governments meeting – the Council of Australian Governments meeting – in December 2016. No determination was made at that meeting, but subsequently the Queensland government undertook to give all government employees 10 days of paid domestic violence leave. Despite the federal government not moving on the issue, a number of leading Australian corporations have undertaken to give employees various forms of the entitlement, including leave in the case of employees being affected by domestic violence. We anticipate that this will continue to be an area of change.
The federal government has promised to introduce legislation in early 2017 to give the Fair Work Ombudsman extended powers. The Fair Work Ombudsman has also announced that it will continue to prosecute not just employers and directors for workplace breaches but also employees in HR functions and management.
We anticipate that those areas of day-to-day concern highlighted in Section II, supra, will continue to occupy the minds of corporate management, HR functions and employment law practitioners in 2017.
1 Dayan Goodsir-Cullen is a partner, Erin Kidd is a senior associate and Kate Hollings is a lawyer at McCabes.
2 Penalties are expressed in the FW Act in terms of penalty units, which are prescribed by the Crimes Act 1914 (Cth). Penalties were last fixed in 2015. The next indexation of penalties will be in 2018.
3 All figures taken from the Fair Work Commission, 2015–2016 Annual Report, September 2016.
4 Richardson v. Oracle Corporation Australia Pty Limited  FCA 102. The subsequent appeal (Richardson v. Oracle Corporation Australia Pty Limited  FCAFC 82) did not address this specific issue.