Modern awards cast regulation net wide

Much has been written already on this website about the changes to industrial relations regulation in Australia: let’s face it there’s plenty to write about. As we approach 1 January 2010, the start date for phase two of the Fair Work Act changes, the focus on the impacts of “Modern Awards” gets sharper.

A lot of employers will find they have employees who could hardly be described as vulnerable, but who will, at the stroke of a pen, be covered by an award “safety net”. Even though employers may think they are covered well above minimum conditions, there are other traps waiting.

The genesis of what could be a confusing – we might generously say, exploratory – period in Australian industrial relations is Deputy Prime Minister, Julia Gillard’s Award Modernisation Request. This document is essentially a direction, given in March 2008 under the Rudd Government’s first phase legislation, by the Minister to the Australian Industrial Relations Commission (as it will continue to be for a short period of time).

The task is to collapse about 2,500 Federal awards into something closer to 120 and make the whole lot easier to understand and apply, without disadvantaging employees or adding to employer costs; a Sysiphean task if ever there was one. And the AIRC has been beavering away furiously on the project ever since.

This is where the tricky bit starts. In the original Award Modernisation Request it states that the process is not intended to “extend award coverage to those classes of employees, such as managerial employees, who, because of the nature or seniority of their role, have traditionally been award free.” By issuing a varied Request in June 2008, the Minister directed the AIRC to “create a modern award to cover employees who are not covered by another modern award and who perform work of a similar nature to that which has been historically regulated by awards”. This is known as the “Miscellaneous Award”. Of course, it comes with all the usual penalty and overtime rates and other additional costs.

In its statement which accompanied the publication of an exposure draft of the Miscellaneous Award the Full Bench of the AIRC said this:

“It is unclear which employees will be covered by this award. It may be that it will have application in some areas of the workforce which have not been covered by awards before.”

It’s clear that the AIRC has made its best efforts, with a difficult brief, to limit the scope of the award by specifically excluding employees in industries which already have an award – in other words, they have tried to cut off “back door” award coverage for those employees not already covered by their industry award.

The biggest problem is that what is left are such generic classifications that the Miscellaneous Award could cover just about anyone who is not covered by another award. For example, within the four level classification structure, the highest classification covers employees who have “at least a three or four year tertiary degree or equivalent and is carrying out duties requiring such qualifications”.

The scope is huge and will undoubtedly extend “safety net” award coverage into areas never before contemplated, let alone intended. Of course, many employees falling within the miscellaneous award will be well remunerated and probably have no need to rely on the minimum wage levels contained in the Award.

And that is kind of the point; the Government has created an award for people it can’t identify (otherwise they would be explicitly covered by another award); for people who probably don’t need award protection; regulating employers who won’t have a clue whether their employees are award employee or not and, critically, therefore won’t know if they are complying with the law or not.

The further twist in the tail is that anyone covered by this award will have access to the statutory unfair dismissal regime.

The Miscellaneous Award is, in a sense, the most obvious example of the potential for unintended consequences of the award modernisation process. There will be employers in many different industries who will confront similar issues.

If there are employers who consider that they are award free and doubt the potential for this to impact their business, have a think about how many people you employ who have a trade or a tertiary degree.

Peter Vitale is the principal of CCI Lawyers.