0 Comments |  How to hire staff |  PRINT | 

Five things you may not know about the Fair Work Act

Tuesday, 26 June 2012 | By Oliver Milman

feature-fired-thumbDespite the Fair Work Act being fully enacted nearly three years ago, details of the landmark legislation appear to remain a mystery to many employers.


A worrying study conducted by employment law consultancy Employsure earlier this week found that a massive 90% of businesses polled don’t know their obligations under the modern pay awards regime.


A further 87% of business managers are frustrated at the amount of red tape they have to follow, while 89% say the Fair Work Act is getting in the way of running their business.


Perhaps not surprisingly, given the widespread ignorance of the Fair Work laws, one in four businesses reported being threatened with legal action by an employee.


With Labor’s review of the Fair Work Act expected this week, it’s worth taking a refresher on the important aspects of your workplace obligations as an employer.


Here are five things that you really should know about the Fair Work Act:



1. Unfair dismissal laws apply to you, even if your business is tiny


It’s true that a different set of rules – the Small Business Fair Dismissal Code – applies to firms with fewer than 15 employees, but that doesn’t mean that you can hire and fire on a whim without following the proper process.


Employees may not be dismissed in ways that are “harsh, unjust or unreasonable.” This definition will vary depending on the circumstances of each case.


If you have fewer than 15 staff, disgruntled employees will have to have worked for you for at least 12 months to lodge an unfair dismissal claim and if you’ve followed the code, the firing will be deemed fair.


However, if you dismiss someone because of their race, sex, sexual preference, age, pregnancy, disability, religion or social origin, being a small business won’t protect you. Nor, going by a recent case, if an employee tells you to “get f...ed.”


Furthermore, if you take what’s called “adverse action” – defined broadly as “altering the position of the employee to the employee’s prejudice” – against a worker for a prohibited reason, such as if he or she complains about their employment conditions, then you have to justify your reasons for doing so.


Crucially, this burden of proof has shifted from employee to employer, so be prepared to defend yourself.



2. You may have to negotiate terms and conditions


Union action is rare in small businesses, but it doesn’t mean that employees won’t be able to demand a collective deal for their terms and conditions, under the Fair Work Act. You are obliged to act in “good faith” in these circumstances.


Employment lawyer Peter Vitale says: “Unions or employees can easily establish a legal right to force employers to negotiate collectively about terms and conditions of employment.”


“While the law does not require employers to reach any collective agreement, employees may exercise rights to take protected industrial action while no agreement is in place.”


3. The fines are hefty if you get the awards system wrong


As Edward Mallett, managing director of Employsure, puts it, the modern award system is “torturous” for businesses.


“There are 122 awards covering almost all professions, with many businesses being subject to an award without knowing about it. This is alarming when a company can be fined $33,000 for this lack of awareness,” he says.


Not only can your business get hit by a sizeable fine if you overlook your obligations on, for example, penalty rates, but you could also be personally liable.


The Fair Work Ombudsman is able to prosecute individual company directors who are involved in breaches of the law, with fines of up to $6,600 levied.


The message is clear: be clear on which award applies to your staff and rigorously follow it. Don’t forget across-the-board obligations such as the national minimum wage, which recently rose to $606.40 per week or $15.96 per hour.


The risk of underpaying staff is one not worth taking.



4. You need to take the paperwork seriously


Don’t fancy a $1,650 fine for each employee you have? Then it’s a good idea to keep detailed payslips and pay records for each worker for at least seven years.


These records should be kept in what the Fair Work Ombudsman calls “a form that is readily accessible to a Fair Work Inspector”, which usually includes small business accounting software.


According to Fair Work Australia, the pay slip must contain all of the following:

  • The employer’s name
  • The employer’s ABN (if any)
  • The employee’s name
  • The date of payment
  • The pay period (beginning and end dates - e.g. 24/8/09 to 30/8/09)
  • The gross and net amount of payment
  • Any loadings, monetary allowances, bonuses, incentive-based payments, penalty rates, or other separately identifiable entitlement paid.


    5. Opportunists may prey upon your business


    As if employers don’t have enough to think about when it comes to the Fair Work Act, there’s another worry to throw into the mix – the possibility of being assailed by a fake Fair Work ombudsman.


    The (genuine) FWO said it had recently received complaints from people about companies who look like they are part of, or acting for, the authority.


    The FWO issued a statement to businesses entitled "Beware of Imitations", alerting them to the imposters.