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Common traps for employers

Please note: This article is intended to be brief information only and should not be relied or acted upon as legal advice. You should always seek legal advice tailored to your own individual circumstances.

National vs State system employers

This article addresses issues concerning the employment of employees in Western Australia by “national system employers” under the Fair Work Act 2009 (Cth) (Act).

Please be aware that some employees in Western Australia (ordinarily those employed by sole traders, partnerships and non-trading corporations) are employed by “state system employers”, being employers covered by the state industrial relations system under the Industrial Relations Act 1979 (WA).

If you are not sure whether an entity is a national or state system employer, you should seek legal advice.

But I pay above award?

Many employers believe that they pay “above award” rates and as such they do not need to comply with modern awards even in the absence of a guarantee of annual earnings. However, often employers have not fully read applicable awards or undertaken proper audits or reconciliations to ensure that they actually do meet their minimum obligations under awards in respect of an employee’s actual hours of work. In this regard, it is relevant to note that awards often change, including with award pay rates usually being revised each year.

It is essential for any employer to be aware of, and continually audit compliance with, all the provisions of any applicable modern award.

In recent times, large publicly-listed companies have ran into problems with significant unrecorded liabilities in respect of failures to pay minimum rates provided by awards (or enterprise agreements) over long periods of time. In response to continued underpayment issues, many modern awards have been amended to include express provisions dealing with “annualised salaries”. These new clauses typically set out what award provisions can be set off by an annual salary and provide for various stringent record keeping and reconciliation obligations to be followed where annual salaries are used for award-covered employees (with the intention of ensuring that employees are not worse off through the use of annual salary).

Leaving aside whether financial obligations in respect of minimum pay rates and allowances are met, modern awards also impose various non-monetary obligations on employers. It is important that an employer complies with any applicable non-monetary obligations, as a failure do so will likely result in a contravention of a civil remedy provision under the Act.

But the candidate is too old?

Anti-discrimination laws (both at the state and federal level) generally prevent an employer discriminating against an employee or prospective employee simply on the grounds of their age.

But I can just tell them they’re fired?

Section 117 of the Act generally requires employers:

  • to not terminate an employee’s employment unless notice has been given in writing (which cannot be backdated); and
  • to not terminate an employee’s employment unless the employee is given the minimum period of notice prescribed by section 117(3) or payment in lieu.

Exceptions apply to section 117, including in respect of an employee whose employment is terminated because of serious misconduct and employees who are (true) casual employees.

An industrial instrument or an employee’s contract of employment may also have provisions which restrict the termination of employment in certain circumstances.

If the employee is protected from unfair dismissal and has served the minimum period of service, then there is a risk the employee may bring an unfair dismissal claim in the Fair Work Commission. While the Commission considers all the relevant circumstances, in order to successfully defend such a claim, the employer usually needs to show that:

  • it had a valid, lawful reason for dismissal which is sound and well founded; and
  • it afforded due process and procedural fairness to an employee prior to dismissal.

Regardless of whether the employee is protected from unfair dismissal, there is also the risk that an employee may bring a general protections or discrimination claim alleging they were unlawfully dismissed.

You should seek legal advice prior to effecting a dismissal to minimise the risk of any claim being brought – prevention is better than cure.

What on earth is the Fair Work Information Statement?

An employer must give each employee the Fair Work Information Statement before, or as soon as practicable after, the employee starts employment (except to the extent that the employer has provided a copy of the Statement to the employee in the previous 12 months).

This obligation is a provision of the National Employment Standards and a failure to comply will result in the contravention of a civil remedy provision under the Act. Accordingly, it is best to provide a copy of the Statement to an employee at the same time as providing them with their contract of employment.

My employee resigned – do I need to pay them notice?

Ordinarily, where an employee genuinely resigns of their own accord, then they are usually required to afford their employer a period of notice (which is usually the greater of that set out by an award, enterprise agreement or an express or implied term of their employment contract).

Often employers mistakenly determine they need to pay out the remainder of any notice period if an employee resigns and finishes employment before the notice period otherwise would have elapsed.

Where an employee does not provide the required notice, they may be liable for any breach of their contract or an applicable industrial instrument. An employer can usually waive the benefit of any entitlement to notice from the employee.

However, it is important to note that some awards require notice to paid out by an employer in limited circumstances (such as where an employee has resigned in the period between receiving notice of termination of employment and the termination taking effect due to redundancy).

You should seek legal advice if you are unsure of your obligations.

I can fire them because they’re making complaints?

It is ordinarily unlawful to dismiss an employee because they’ve made a genuine complaint or inquiry in respect of their employment.

In the event that an employee has made complaints or inquiries and are subsequently dismissed, there is a risk that an employee may bring a general protections claim, alleging that that the have been subjected to unlawful adverse action (i.e. dismissed) for exercising a workplace right to make a complaint or inquiry in respect of their employment.

General protections claims usually involve a reverse onus of proof and can involve claims for significant amounts of compensation and pecuniary penalties. Furthermore, persons involved in a contravention may also be personally liable as an accessories and liable to personally pay penalties and compensation.

You should seek legal advice prior to taking any adverse action which affects such an employee’s employment where they have made complaints or inquiries about their employment.

Our employee stole from us or owes us money so we’ll just withhold their pay or not pay out their entitlements?

Employers are generally required to pay amounts payable to an employee in relation to the performance of work in full (i.e. without deductions, save for those permitted under section 324 of the Act). Section 323(1) of the Act, which imposes this requirement, is a civil remedy provision.

One of the reasons for this requirement is to address the imbalance of power between an employer and an employee who may need their salary in a timely manner to meet mortgage repayments or to maintain their family and livelihood. Withholding salary could otherwise be unfairly used to exert pressure on an employee or a recently dismissed former employee.

In a recent case in the District Court of Western Australia, an employer was found to unlawfully withheld the payment of employee entitlements upon the termination of employment of an employee who had engaged in fraudulent conduct and owed money to the employer as a result.

Record keeping – I do my best but we’re a small business?

The Act requires employers to keep various records prescribed by regulation. The regulations prescribe various records which are required to be kept, in addition to records which may be required to be kept under taxation, superannuation and long service leave legislation.

It is particularly important to comply with record-keeping obligations under the Act, as a failure to do so may see a reverse onus of proof apply in the event that an employee brings an underpayment claim.

I don’t need to give an employee a reason for termination?

Failing to give a reason for termination, even during the probation period, may weaken an employer’s defence to any termination-related claim that may be brought by the former employee. This is particularly so where an employee brings a general protections claim alleging dismissal for an unlawful reason, which may carry a reverse onus of proof on the employer to show that the reason for dismissal was not that alleged by the employee.

But they’re a contractor?

There may be a risk that a particular worker is an employee rather than a contractor. Certain sham contracting prohibitions exist. The incorrect classification of an employee as a contractor may result in liability under the Act, taxation legislation (including in respect of PAYG withholding, pay roll tax etc), superannuation legislation and workers’ compensation legislation.

It is always important to ensure that any worker is correctly treated in accordance with the true character of their work relationship at law.

You should seek legal advice if you are unsure whether a worker is truly a contractor or an employee.

They’re truly a contractor so I don’t need to pay them super do I?

Even if a worker is truly a contractor running their own business (i.e. not an employee), be aware there may be a need to pay superannuation in relation to the worker (depending on whether they fall within the expanded definition of “employee” under superannuation legislation). You should seek legal advice if you are unsure.

But I don’t need to use a contract of employment?

Most, if not all, employees are engaged by contractual means. Even if you don’t use a written contract of employment, employees can be found to be employed pursuant to an agreement which is either oral, in writing or partly oral and partly in writing. For example, an agreement can be concluded by conversations and emails.

We recommend that all employers and employees have a written contract of employment in place prior to the commencement of employment. It better that the terms are clear and expressly agreed in writing rather than having to be inferred or implied by a court down the track were a dispute to arise.

If you require advice or assistance, please do not hesitate to contact us.