Confusion still reins over Fair Work Act

The Fair Work Act, introduced last year, and bedded down in stages ever since, has touched IR on just about every level. As such, many organisations are still struggling to come to grips with the changes introduced by the new legislation.

"From our perspective we'd like to think people are ready, but we know in reality there are areas where people are still confused," says Tim Capelin, managing partner at Australian Business Lawyers (ABL).

Top of the 'grey areas' is changes to Awards. Far from commitments stating that there would be no new categories of workers coming under Award coverage, this is not the case. "I think the categories of employers that are likely to have the most problems are those where Award coverage has substantially expanded. Finance industry Awards are perhaps the best example, where you've got Award coverage including HR managers, and a full range of mid-level managers. This was fine for banks and large insurance companies, but for other finance sector participants - such as small financial planners - it is something new," Capelin says.

What this means for employers is it will take some time to adjust, and Capelin suggests in some instances it will be more a change of form rather than substance. "In some Awards, the Clerical Award in NSW, for example, employers were used to having an exemption rate, so if you paid 15% above the top rate you were exempted from a large number of the penalty provisions in the Award. That has been taken out of the private sector Clerical Award. However, an annualised salary provision has been put in. So you can achieve largely the same effect, but you've got to re-do your documentation in order to comply. You have these hidden problems that could become an underpayment claim down the track," he says.

The way that enterprise agreements are negotiated and changed, including union access to workplace, and the right to bargain, has also been modified. "We've gone from a system that was largely one where the philosophy behind the legislation was 'work it out at your workplace, and if you're going to have a fight, have a fight and we largely won't intervene'. To an approach of, 'we'll help you manage the process and if problems occur or if you're concerned about how the parties are negotiating there are avenues for Fair Work Australia to intervene'. Fair Work Australia are largely reasonably practical so they're not taking a highly technical view of the legislation, which makes some participants happy and others less happy depending on which side of the argument you're on," says Capelin.

As most employers are aware, when 1 January 2010 rolled around, so too did the National Employment Standards (NES) - 10 minimum standards, including a right to request flexible work arrangements. "A lot of the NES is not new, but there are some tweaking of old standards," says Capelin. "For instance, parental leave including more radical changes to right to request an extra 12 months unpaid parental leave."

ABL has found the most interest coming from employers with employees expressing interest in the right to request by parents who have children under school age or have a child with a disability under 18.

"Because it's a very narrow subset of their workforce, many businesses are aware that they are required to provide flexibility to these workers, but are also aware that doing so only to that group will create further HR problems," Capelin says.

Although it may not be necessary to draft these changes into employment contracts and policy documents, Capelin warns that employers need to at least ensure they are compliant. "You certainly have to review all your contracts and all your policy documents to make sure they're compliant. Plus in certain sectors it will be very hard to not have to amend their documentation," he warns.

Redundancy requirements under the Fair Work Act have also changed. Prior to 1 January 2010, employers of non-Award employees did not have a requirement to give redundancy entitlements to their employees. The transition to the new arrangement is complicated but generally if the employee did not have an entitlement to redundancy before 1 Jan their service - for the purpose of the new entitlement - started from 1 Jan 2010. "Employers could be confused - they could see the scale and think, 'I've got a 10 year employee, I've got to give them the 10 year payout rate', as opposed to whatever the rate is for service under one year," says Capelin.

This uncertainty is likely to continue as the parameters of the legislation are mapped out in test cases before Fair Work Australia. Capelin notes that Workchoices, regardless of the philosophy behind it, was badly drafted legislation, and the constant amendments only made matters worse. The new legislation is better drafted and the process for creating it was more thorough, but because it has a lot of "ambiguous provisions", it means it must be interpreted over time. "There's two ways of drafting legislation - you can be very prescriptive or be very general - and they've changed it to the latter. But that means you must have that interpreted over time, so there will be uncertainty over a period," he says.

The advice of workplace lawyers is essential, but as a starting point, there are cost effective online tools such as HR Advance - supported by ABL - which provide databases of compliant documents that can be self-created and customised.

HR Summit 2010
Tim Capelin will be discussing the Fair Work Act at HR Summit 2010, Sydney 28-29 April. For more information visit www.hrsummit.com.au