Reflecting on the effect of these changes and trends in relation to some workplace matters, we comment below on the current requirements and some of the key takeaways for employers. We have selected and focused on a few emerging compliance issues that we have observed during the past 3-6 months including, but not limited to:
- Record-keeping obligations;
- Annual leave accrual on workers’ compensation claims;
- The definition of ‘day’ for the purposes of accruing personal paid leave;
- Superannuation payments for shift workers;
- Increased powers of the Fair Work Ombudsman; and
- Ongoing compliance with minimum wage rate and penalty increases under Modern Awards.
Current requirements
1. Employers’ record-keeping obligations
- Sections 535 and 536 of the FW Act prescribe employers’ obligations to keep employee records for a period of 7 years. These records include but are not limited to: remuneration, hours of work, leave, and superannuation contributions.
- Copies of these records must be made available at the request of an employee or former employee and may need to be produced upon the request of a Fair Work Inspector who has the power to (i) impose an infringement notice on the spot; and (ii) recommend the matter be taken to Court for a formal hearing.
- Employers who fail to keep the requisite records may face penalties imposed by a Court, serious contraventions of which could attract a penalty of $126,000 for individuals and $630,000 for companies.
- Significantly, section 557C of the FW Act (by reason of the FWA Act) places the onus on an employer to demonstrate that it did not contravene provisions to keep or provide employee records (including payslips) without a reasonable excuse.
- Employers must meet all record keeping obligations and satisfy the form and content of particular records (as specified in the FW Act) to avoid potential breaches of the civil remedy provisions in the FW Act.
2. Annual leave accrual on workers’ compensation claims
- Section 130 of the FW Act provides that an employee is not prevented from taking or accruing leave during a compensation period, if the taking or accrual of leave is permitted by a compensation law.
- This view is supported by the meaning of ‘service’ under the FW Act, which only excludes a period of unauthorised absence or unpaid leave. Generally, a compensation period is an authorised period of absence and as such, in accordance with the National Employment Standards, will accrue progressively during a year of service according to the employees’ ordinary hours of work.
- The Full Federal Court in Anglican Care v NSW Nurses and Midwives’ Association (2015) 231 FCR 316 adopted a broad approach to section 130 and held that in the absence of an express prohibition to accrue annual leave during a compensation period, an employee will be entitled to accrue annual leave.
- We note that the Fair Work Ombudsman (FWO) has the power to investigate any matters relating to unpaid annual leave entitlements which could potentially result in (i) the imposition of financial penalties; and (ii) reputational damage to the employer.
- The time limit for making an entitlement claim is six years from the date that the contravention occurred.
- We recommend that employers keep a close eye on any approved workers’ compensation claims to ensure that annual leave entitlements are paid correctly during an employee’s absence to avoid any unnecessary exposure to a potential entitlement claim and seek legal advice on potential liability.
To read the full case, click here.
3. The definition of ‘day’ for the purposes of accrual of annual leave
- In the case of Mondelez v AMWU [2019] FCAFC 138, the question for determination was the meaning of ‘day’ as it related to a shift worker who worked 12-hours per day when absent from work on personal / carer’s leave.
- The AMWU argued that the definition of ‘day’ pursuant to s.96 of the FW Act adopts an ordinary meaning, that is, a calendar day within a 24-hour period. Therefore, when shiftworkers need a sick day, they should be eligible to be absent from work without loss of pay for 10 calendar days per year, even if those days comprise 12-hour shifts.
- Conversely, the employer, Mondelez, argued that a day refers to a ‘notional day’, that is, the average daily ordinary hours on the assumption that the employee works a five-day working week up to a maximum of 76 hours per year.
- Notwithstanding Justice O’Collaghan’s dissenting view in favour of Mondalez, the majority of the Full Court held that a ‘day’ refers to a ‘working day’, that is, the portion of a 24-hour period that is allocated for the purposes of work. Furthermore, the employee who worked three 12-hour shifts each week accrued 120 hours of leave each year and not 76 hours.
- Employers should ensure that employees are accruing personal leave according to their pattern of hours worked pursuant to a relevant contract, enterprise agreement or modern award. It is also apparent that employees could accrue personal leave that are in fact more generous than the traditional position of 76 hours annually.
We will keep our clients advised should Mondelez decide to appeal the Full Court’s decision.
To read the full case, click here.
4. Superannuation payments for shift workers
- The minimum super guarantee contributions are payable on ordinary time earnings (OTE). Section 6(1) of the Superannuation Guarantee (Administration) Act 1992 includes ‘shift-loading’ as OTE for the purposes of superannuation contributions.
- Shift loadings paid for a day time worker who works within their ordinary span of hours including early mornings or late nights, weekends or public holidays are likely to be included in OTE. This is distinguished from overtime hours which would typically fall outside of an employee’s ordinary hours of work.
- We recommend that employers clearly understand what the ordinary span of hours are for each employee as specified by the applicable industrial agreement or modern award to ensure superannuation contributions are made on all OTE.
5. Fair Work Ombudsman – Increased powers and penalties
- The Fair Work Ombudsman and Registered Organisations Commission Entity Annual Report 2018-19 revealed that the FWO’s compliance activities have resulted in successful recovery of over $40 million for nearly 18,000 workers with penalties of $4.4 million imposed by Courts as a result of litigation. Furthermore, Inspectors issued $479,900 in on-the-spot fines for pay slip and record-keeping breaches.
- Priority industries and issues identified by the FWO in its 2019-20 Compliance and Enforcement Priorities include: hospitality, horticulture, supply chain risks, franchisors and sham contracting.
To read the FWO Annual Report, click here.
6. Ongoing compliance with minimum wage rate and penalty increases under applicable Modern Awards
- Modern awards outline a number of minimum requirements, including loadings and penalties that may apply, subject to the time and date of the week employees are rostered to work.
- Relevantly, if you currently have an employee’s employment governed by an applicable modern award, it is important to ensure that minimum pay rates, including penalty rates, loadings and shift allowances are correctly applied as these rates may increase from time to time as determined by the FWC.
- For example, a casual employee under the General Retail Industry Award 2010, who has previously been entitled to a 30% penalty loading for ordinary hours worked after 6.pm between 1 November 2018 to 30 September 2019, is now entitled to a 35% loading from 1 October 2019 to 29 February 2020, which again increases to 40% from 1 March 2020.
- We recommend employers remain vigilant and avoid any risk of non-compliance by applying the most recent version of the applicable modern award (as some are amended regularly) and paying employees their full entitlements, having regard to each employee’s weekly ordinary hours of work.
- Some recent examples of the FWO’s powers to enforce compliance with modern awards include:
- Investigating Woolworths’ self-disclosure for underpaying 5,700 salaried employees a total of $300 million;
- Penalising dental operators, a total of $73,000 for underpaying a visa holder $66,945 for work as a laboratory technician;
- Managing Luxottica Retail Australia Pty Ltd, t/a Sunglass Hut, who agreed to back pay $2.3 million to 620 employees, for failure to comply with overtime rates in the relevant award;
- Securing $57,000 in penalties against a major service station chain for underpayments;
- Recovering $81,638.82 in unpaid wages for 167 current and previous Subway employees for failure to pay entitlements such as casual loadings, overtime rates and failure to issue proper payslips or keeping adequate employee records; and
- Securing $40,260 against operators of a scenic and commercial helicopter flights business for underpaying pilots, failing to provide accurate payslips and annual leave records.
7. Ensuring Enterprise Agreement covered employees are paid not less than the corresponding Modern Award base rate
- Section 206 of the FW Act provides that if the minimum hourly rate contained in an applicable enterprise agreement is less than the equivalent modern award, then the enterprise agreement has the effect as if the rate in the agreement is equal to an applicable modern award rate.
- If an employer has a group of employees that are covered by an enterprise agreement, who are also covered by a modern award in operation, then it is important to ensure that in circumstances where the minimum rate contained in the modern award is increased, and exceeds the rate contained in the current Agreement, that he agreement covered employees are entitled to the increased rate to reflect the applicable modern award.
Key Takeaways
In summary, we recommend that employers:
- Maintain, and keep adequate employee records for a period of 7 years;
- Ensure annual leave accrues for employees who are on workers’ compensation;
- Ensure accrual of annual leave is correct pursuant to the relevant contract, enterprise agreement or modern award for shift workers;
- Continue to make superannuation contributions for shift workers having regard to an employee’s ordinary span of hours; and
- Ensure all minimum rates, loadings and penalties are correctly applied and paid to employees pursuant to an applicable enterprise agreement or modern award.
Please contact our employment & workplace relations team on (08) 9321 0522 if you need to discuss any of the above or other compliance matters further.
We are also available to complete a ‘compliance-check’ for your business to minimise any potential risk of contractual or statutory non-compliance.
