October Newsletter: Modern Award Review

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October Newsletter: Modern Award Review

The Fair Work Commission continues Modern Award review with finalised TOIL and annual leave clauses


As part of the Fair Work Commission’s Modern Award review, two recent decisions issued by the Fair Work Commission have settled the wording for new clauses relating to Time Off In Lieu (“TOIL”) and annual leave.

Annual Leave Terms

In the first decision, the Fair Work Commission finalised the clauses relating to annual leave that are proposed to be inserted into the Modern Awards.  In June, an initial decision was released containing provisional annual leave clauses.  Further submissions on the wording of the clasues and whether the clause relating to excessive leave should be inserted in all Awards were invited by the Fair Work Commission.

In September, the Fair Work Commission issued a second decision finalising the wording of the clauses relating to excessive leave, cashing out of annual leave and granting leave in advance.  The Fair Work Commission noted that Ai Group had initially sought inclusion of a clause relating to purchased leave.  However, as this was not pressed, the Fair Work Commission determined that no further action would be taken on developing a purchased leave clause.

As a result of the two decisions, the new annual leave clauses provide for the following:

  1. For Modern Awards that currently require an employee to be paid their annual leave prior to taking it, an amendment to provide that where an employee is paid by EFT, they may be paid in accordance with their usual pay cycle whilst on annual leave (rather than having to be paid in advance, as is currently the case in 51 Modern Awards).
  1. By mutual agreement in writing, leave can be taken in advance. Leave taken but not yet accrued can be deducted from moneys due on termination if the employee’s employment is terminated prior to accruing the leave taken in advance.
  1. Where an employee has excessive annual leave (over eight weeks), subject to prior consultation, an employer can direct an employee to take some of that leave. The excessive annual leave clause sets out requirements for taking the leave, including that the employee must retain at least six weeks of the leave, the leave must be for at least a week and must be taken between eight weeks and 12 months after the direction is issued.

An employee who has had excessive leave accrual for more than six months and has not been directed to take leave can, where agreement has not been reached during consultation, issue a written notice requesting that leave be taken.  Such leave is subject to similar limitations as employer-directed annual leave.  The maximum amount of leave that can be taken under this entitlement is four weeks in any 12 month period.  Interestingly an employer must grant leave in accordance with a valid notice.

  1. An employee can cash out up to two weeks’ of annual leave in any 12 month period. The clause sets out procedural requirements including that there must be a separate written agreement for each cashing out which must contain specified information.  The employee must receive at least what they would have received had they taken the leave at the time it was cashed out and must retain at least four weeks’ annual leave.

The Fair Work Commission also made determinations relating to some other minor amendments to prevent inconsistencies in particular Awards.  The Fair Work Commission will hold a further hearing on 23 November 2015 to hear submissions on the insertion of the new annual leave clauses in specific Modern Awards.

TOIL Clause

The Fair Work Commission also issued a decision on the wording of the new TOIL clause proposed to be inserted into some Modern Awards.  In July 2015 the Fair Work Commission issued a decision providing the proposed wording of the new TOIL clause and sought further submissions on the proposed wording.  After considering submissions provided by various parties, the Fair Work Commission settled the wording of the new TOIL clause.

The new TOIL clause allows an employer and employee to agree to an employee taking TOIL instead of receiving payment for overtime hours worked.  The Fair Work Commission took the view that the insertion of a TOIL clause was consistent with the Modern Awards’ objective and general objects of the Fair Work Act 2009 (Cth) (“FW Act”).  The new TOIL clause contains the following characteristics:

  1. A separate written agreement will need to be entered into between the employer and employee every time TOIL is taken, complying with the requirements set out above and being retained as an employee record. The Fair Work Commission proposes to insert a template into the Modern Awards where the new TOIL clause will be inserted, although it will be an example only and not necessarily required to be used.
  1. TOIL will be paid at the ordinary rate (i.e. an hour for an hour) rather than at overtime rates.
  1. TOIL must be taken within six months of the overtime being worked. The Fair Work Commission removed a provision requiring an employer and employee to agree when the TOIL would be taken within four weeks of the overtime being worked.
  1. At any time an employee can request that overtime be paid instead of TOIL taken and payment must be made in the pay period following the request.
  1. It is made clear that where an employee could make an application for TOIL under section 65 of the FW Act (i.e. because of personal circumstances applying to them), such application can only be refused on the basis of reasonable business grounds (as applies in section 65).
  1. An employer must not exert undue influence or pressure relating to agreements about TOIL.

Interested parties have until Monday 9 November 2015 to file submissions and evidence with the Fair Work Commission on whether the TOIL clause should not be included in a Modern Award.  A list of the Modern Awards proposed to be affected with the draft determinations can be found at https://www.fwc.gov.au/documents/sites/awardsmodernfouryr/common/Award-flex-Schedule-draft-determinations.pdf.

The content of this article is intended to provide a general guide to the subject matter.  Specialist advice should be sought about your specific circumstances.

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