Questions & Answers - Contracts, policies and procedures

Question:

Our organisation is a private VET college for international students. We issue our staff with Common Law Employment Contracts. How will the new FW Act influ-ence what needs to be contained in our contracts and also any work practices? Also, I have only started with my new employer in the last month and there are not really any existing HR policies, procedures or processes. I am developing everything from scratch. Do you have any checklists I can use when developing the HR policies & procedures?

Answer:

You need to be aware of the new modern awards that will apply to employment in your organisation on and from 1 January 2010. You will find the current drafts of those awards here: http://www.airc.gov.au/awardmod/fullbench/industries/awardmoddocument.cfm?award=education&document=Exposure.

There are options to modify the impact of these awards on your employees, including making award flexibility agreements (which allow you to depart from award provisions dealing with loadings, allowances, overtime and hours of work provided that employees are left no worse off), giving earnings guarantees for staff earning more than $108,300 (which means the award will not apply) and, of course, making enterprise agreements.

You will also need to be aware of the new minimum employment conditions contained in the National Employment Standards (NES), which also commence on 1 January 2010. NES may create new entitlements for your staff, particularly those that are award-free, in areas such as redundancy pay, requests for flexible working arrangements and requests to extend parental leave. There will also be an obligation on you to issue all new employees joining after 1 January 2010 with a Fair Work Statement.

You will need to review all your employment contracts and policies to ensure that they do not undercut the provisions that will be contained in the NES and modern awards. You will also need to review the obligations in the awards regarding consultation about redundancy, as your compliance with this clause will affect your capacity to defend unfair dismissal claims arising out of redundancy.

Question:

Please could you tell me about the type of employment contracts now suitable? Are AWAs and Greenfield agreements now redundant? Are common law contracts the best way to go or are there award contracts?

Answer:

You cannot make AWAs anymore, although for the remainder of this year you can make Individual Transitional Employment Agreements, which are like AWAs. Greenfield agreements can only be made with unions. You can only make collective agreements under legislation. It does not sound like you need to make any statutory agreements, rather simply use individual employment contracts. Next year you can make flexibility agreements under modern awards to modify the impact of the award (e.g. cash out annual leave loading).These stand alongside employment contracts.

Question:

Given that the qualifying period under the FWA is now 6 months, should we change employment contracts to have a probationary period of 6 months or continue to have 3 and know that we have room to move as the employee can not lodge an unfair dismissal until after 6 months?

Answer:

A 6 month probationary period may deter potential recruits. On the other hand, if contracts provide for a lesser notice period to terminate during the probationary period and you are likely to be terminating employees on grounds of unsuitability between 3 and 6 months, you might want to extend to 6 months.

Question:

I have a question regarding employment contracts. With the implementation of the NES and Modern Awards should we re-issue all new employment contracts or can we do an "all employees memo"?

Answer:

Once the NES and Modern Awards come into operation on 1 January 2010, you will be bound by their provisions, whether or not you refer to them in your contracts of employment. However, for administrative and HR reasons it may be useful to update your contracts of employment to make sure they are consistent with the new changes and to deal with terms and conditions of employment in one document, although, you cannot compel employees to sign new contracts of employment.

We recommend that you check the NES and Modern Awards against your existing contracts of employment to see if there are any discrepancies. If there are no discrepancies, you may wish to notify existing employees about the NES and Modern Awards in a memo (or not at all). If there are discrepancies, it would be sensible to update your contracts of employment.

Question:

We have common law employment agreements in place that exceed all of the minimums set out in the National Employment Standards. Do these continue to remain sufficient? Is there any need to register these?

Answer:

No, it sounds like you will comply with the new requirements. You might need to check what modern awards will apply on and from 1 January 2010 and make sure you meet the minimum conditions provided in those.

Question:

I note the NES under Fair Work applies to all employees, including high income executives and professionals. Can employers still demand a longer notice of termination period from resigning senior execs as we currently do (sometimes up to 3 months)?

Answer:

Provided that the executives are not covered by Modern Awards or other industrial instruments which say otherwise (although, that would be unlikely), you can require a longer period of notice in their contracts of employment.

Question:

What changes (inclusions/exclusions) need to be made to common law employment contracts?

Answer:

Strictly speaking, you are not required to amend your common law contracts of employment. However, we recommend that you review them to ensure that they contain terms that are consistent with the Fair Work Act. In particular, you should check that your common law contracts of employment do not contain terms that are less beneficial than those provided for in the Fair Work Act or, on and from 1 January 2010, less beneficial than those contained in any relevant Modern Awards and the National Employment Standards. In particular, we suggest that you review the provisions in your contracts dealing with leave, hours of work and termination of employment and redundancy. Rather than repeating the content of the new leave provisions, you could always refer to "the relevant legislations as in force from time to time".

Question:

Wanted to check whether the Fair Work Act makes any provisions around employment probationary periods. We currently employ the majority of staff on a 6 month probation period and are unsure whether this needs to change. During the 6 month probation, either party can terminate the employment contract with just one week's notice. Can you please advise if this will still be OK or if we need to make changes?

Answer:

It will still be OK for you to employ staff on a six month probationary period, during which either party can terminate the employment contract on one week's notice. This is for the following reasons:

1. Your current practice complies with the minimum notice periods prescribed by the National Employment Standards (NES), which state that the minimum notice period required for an employee who has completed not more than one year of service is one week.
2. It will still be the case that any employee dismissed within the six month probationary period cannot bring an unfair dismissal claim, even though the exemption relating to employees on probation no longer applies under the Fair Work Act 2009.

As set out in section 382 of the FW Act, a person is protected from unfair dismissal only if they have completed the 'minimum employment period'. The 'minimum employment period' is defined in section 383 of the FW Act to be a period of 1 year if the employer is a small business employer (i.e. the business employs fewer than 15 employees at the time), or a period of 6 months in any other case. Consequently, employees who are subject to probationary periods of longer than 6/12 months may still have bring unfair dismissal claims, notwithstanding the longer period of probation in their contracts.

As your current practice does not derogate from either of the above provisions, you will not need to make any changes.

Question:

Currently we have common law contracts for all staff, including our professional engineers and scientists. Would I be correct in assuming that the new modern award for Professional Employees would apply to them? But is this only up to the first level supervisors? Do we need to reissue contracts to all existing staff mentioning the modern awards and NES? Am I correct in stating that second level managers and higher level managers would not be subject to the Professional Employees modern award?

Answer:

Assuming that you do not have enterprise agreements in place, the Award will apply to your professional engineers and scientists. You are correct in your view that the award is meant only to apply up to the first tier of supervisory staff. More senior staff will not be subject to the Award as framed presently.

You are not required at law to issue new contracts of employment. However, you should carefully review your existing contracts of employment and pro forma contracts for new staff to ensure that they are consistent with the provisions of the Fair Work Act. If they are not and they are less beneficial, the Fair Work Act will apply in any event. However, in our experience, it makes things easier from an administrative and HR perspective to have employment contracts that either reflect the current state of the law or are more general in their application (eg. "You will be entitled to annual leave in accordance with the relevant legislation as may be in force from time to time").

Question:

Can you explain what, if any, effect the new legislation has on the commonly used 3 month probationary period?

Answer:

The new Fair Work Act does not really have any impact on a 3 month probationary period. Under the Act, employees need to serve what is now referred to as a 6 month "minimum employment period" before they can bring an unfair dismissal claim. Having said this, a lot of employers still refer to 3 month probationary periods in their contracts of employment.

Question:

Can you advise us of how managers and professional staff (trainers and assessors) are to be treated if we cannot have an employment agreement with them any longer?

Answer:

You can enter into written employment agreements with these employees. In fact, even if you did not have a written contract of employment, the employees would be covered by a "common law" contract of employment. Under the Fair Work Act you can no longer enter into registered industrial agreements with individuals. However, you should have contracts or letters of employment recording the terms and conditions of employment with all of your employees.

Question:

With the implementation of NES in Jan 2010, what changes or modifications do we need to do in the employment contracts? Will it be ok to inform the employees about their entitlements and review our company policies?

Answer:

Strictly speaking, you do not need to change your employment contracts because the NES will override them to the extent of any inconsistency. It would be sufficient to advise employees about their new entitlements and review your company policies to ensure they are consistent with the NES. However, many employers prefer to amend their standards contracts of employment to reflect new provisions in order to avoid uncertainty.