Fair Work Creates Possible un-Flexibility
You are here:Award and Enterprise Agreement flexibility provisions are to be inserted into all awards and enterprise agreements to increase individual flexibility - but they may have unexpected impacts on the overaward area for the unwary.
With the demise of AWAs under Work Choices (they were actually introduced long before Work Choices), Labor is introducing award and agreement flexibility provisions as part of the Fair Work Act . Modern awards with the flexibility provisions won't be in operation until 1 January 2010, but we believe enterprise agreements will have the model flexibility clause imputed into them.
Where an employee and employer agree to an individual flexibility arrangement under a flexibility term in a modern award or agreement:
- the modern award or agreement has effect in relation to the employee and the employer as if it were varied by the flexibility arrangement; and
- the arrangement is taken, for the purposes of this Act, to be a term of the modern award or agreement.
The employer and employee must genuinely agree to any individual flexibility arrangement, the arrangement must be in writing and signed, and the employer must ensure that the arrangement would result in the employee being ‘better off overall’ than the award or agreement.
Where an individual flexibility arrangement does not meet a requirement set out in the Act, the arrangement still has effect as if it were an individual flexibility arrangement, but can be terminated by the employee giving 28 days notice. The employer may also be liable to a civil remedy penalty for contravention of an enterprise flexibility term.
Possibile Un-Flexibility
Because the award or enterprise agreement flexibility provisions set out a strict regime to be followed, failure to 'tick all the boxes' may mean the flexibility agreement does not meet all the requirements of the Act, potentially making it a breach of the award or agreement.
Many employers and employees operate in a wage area where there is sufficient space between the award or agreement rates and the actual take home pay per period not to underpay the employee. However, it is a requirement that any overaward (or over-agreement) payments be "specifically referable" to the award (or agreement) entitlement in order to be able to offset it against the award/agreement entitlement. We have for many years recommended insertion of a "specifically referable" clause into employment contracts in order that this may occur.
ERS Comment: We expect some enthusiastic magistrate or judge somewhere will want to find that any 'overaward' arrangement should have complied with the award or agreement flexibility provision and at worst case, is inoperable if it fails to do so. We think employers should consider the magnitude of the risk if this was to occur.
We strongly recommend 'specifically referable' -type arrangements have an additional provision inserted to expressly state they are not an individual award or agreement flexibility arrangement, if they don't purport to be one.
ER Strategies will update the Online HR Resources Service to include this change shortly.
UPDATE 27 November 2009 - the recent decision on the modernised Clerical Award to insert a detailed annualised salary clause has increased the uncertainty. Although a number of States (NSW included) up until now had an exemptions clause, we feel the strict process laid down in the Clerical Award for annualised salaries to be effective could increase the risk of informal overaward agreements (i.e. not strictly complying with the Individual Flexibility Arrangements clause or the Clerical Annual Salaries clause) being declared ineffective.
Whilst common sense by rights should prevail, we tend to find that common sense isn't always that common in the employment law area, so we remain a bit concerned about this! We can guarantee there will be more communications on this topic.
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