Modern Awards: Things you should know before 1 January

As the Australian Industrial Relations Commission finalises its statutory function of the award modernisation process, employers should prepare for some of the changes that will come with Modern Awards.

Coverage

Employers will need to reassess whether their employees are covered by an award, and if so which one. In many cases determining the right award will be relatively straightforward, as Modern Awards have been developed to informally “replace” specifically identified pre-Fair Work Awards. Indentifying which employees will be covered could be more problematic. In some cases awards could extend coverage into lower level management position which have traditionally been excluded from award coverage.

Dispute Resolution

While Modern Awards retain some flexibility for the parties to choose an appropriate dispute resolution procedure, ultimately the authority to decide how a dispute is settled rests with Fair Work Australia, the tribunal which will replace the AIRC.

Individual Flexibility Agreements

While the Modern Awards will enable employers to reach some agreement with employees at an individual level about some key conditions, such as wages and working hours, the agreement must still pass the “better off overall” test.

The proposition does not offer the flexibility it might first seem to and is not a substitute for the forms of individual agreement available under previous legislation. It will be up to employers to ensure that the agreement leaves the employee better off overall – there is no suggestion that there will be any government body to “sign-off” on the arrangement as legitimate.

The Fair Work Act also provides that employers cannot make an offer of employment conditional on the employee agreeing to a flexibility arrangement. This leaves open the possibility that employees working side by side will have different conditions, albeit that none can be disadvantaged against the Modern Award Standard.

Employees can terminate a flexibility arrangement by giving four weeks notice.

High Income Earners – to exclude or not to exclude

For high income earners, an employer can exclude them from award coverage by giving a guarantee of minimum earnings. The threshold minimum for 2010 will be $108,300. But this figure does not include superannuation, commissions or other income which is not absolutely guaranteed.

The other catch is that giving an earnings guarantee will not prevent the employee from making an unfair dismissal claim if they would otherwise have been covered by the Modern Award.

Modern Awards – not the bottom line

Modern Awards will not necessarily represent the safety net minimum of conditions which they will start life as. Modern Awards will be subject to review every four years, and annually in relation to minimum wages.

However, there is one exception which might provide scope for unions to seek arbitrated wage outcomes which otherwise exceed the minimum pay rises set for the remainder of the community. Arguments about “work value” in individual work classifications are the stuff of pre-1970’s industrial relations and are available outside the annual minimum wage review process which Fair Work Australia must otherwise undertake.

The lessons for employers: Get ready for Modern Awards – they might look modern and simple, but the details might catch you out.

Peter Vitale is the principal of CCI Lawyers.