Fair Work says employer can trade higher pay for less annual leave

Industrial relations lawyers say yesterday’s Fair Work Australia decision to allow an employer to pay his workers a higher hourly rate in exchange for less annual leave does not provide clear guidance on the issue.

The full bench of Fair Work Australia yesterday approved an agreement struck by a New South Wales paint contractor that substituted overtime, carers’ leave and long service entitlements for a higher hourly pay rate.

But industrial relations lawyer Peter Vitale told SmartCompany the judgement shouldn’t be viewed as a definitive decision.

“It’s pretty clear that there are a number of decisions that run counter to this. It also needs to be borne in mind that even though it was a full bench, it was a majority not a unanimous decision of the full bench.”

The 2-1 decision approved the wage agreements of Hull-Moody Finishes, a painting contractor in Sydney that employs seven workers.

Irving Warren, the executive director of the Building Industry Specialist Contractors Organisation of New South Wales, represented Hull-Moody Finishes and was the only person to appear before the bench.

In a dissenting judgement, commissioner Ian Cambridge said the removal of personal leave has “significant health and safety ramifications” which needed to be taken into account.

He also said the lack of paid annual leave would operate as a disincentive for workers to take it.

In support of his judgement, Cambridge quoted eight previous judgements which he said had come to a similar conclusion.

Vitale says the decision suggests such arrangements are “arguably permissible” in enterprise agreements, but employers should be cautious about applying them to their workers.

“I think it’s important to understand that the arrangements would need to be arranged through an enterprise agreement and not just through an employment contract,” he said.

“Nevertheless I think the decision leaves open real questions about whether or not these arrangements are in fact inconsistent with the national employment standards.”

Vitale said the decision pointed to inherent tensions within the Fair Work Act, which does aim to give employers some measure of flexibility in their employment relations.

“It may be that this discloses that the act isn’t entirely clear with respect to how far employers can go,” he said.

This led to disagreements in how the act was applied.

“There is no real agreement among the members of the commission about what the appropriate course is. Another full bench may well come to a different conclusion.”

“It may take decisions of the Federal Court or a full federal court before we begin to get any real clarity around this.”