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Where to start?
A.
INTRODUCTION
You may have heard
of the terms common law contract, award, EBA, AWA, certified agreement,
collective agreement, statutory minimum standards to name a few. You
may have also heard of a state industrial relations commission and a federal
industrial relations commission as well as the Federal Court, Federal
Magistrates Court and state courts. It’s all very confusing.
When faced with an
employment law issue, it is helpful to know about the structures of
employment law in Australia and where your issue fits in.
B.
STATUTE LAW AND COMMON LAW
The starting point
is to know that there are two basic types of law which exist, statute
law and common law. Statute law is the law which parliaments create in
the form of legislation and regulations. Common law is that body of
rules created over the years by judges which are generally followed by
courts in similar situations (this is called the “doctrine of
precedent”). Generally speaking, parliament is supreme and
can pass any laws within its power. It is up to courts to apply and
interpret any ambiguities in legislation when necessary. To give you an
example, the legal claim that is made when someone is physically injured
in an accident is a common law claim of negligence. Negligence as a
separate legal concept has only been recognised since the English
decision of Donoghue
v. Stevenson in 1932. Now
whilst negligence is a common law creation, statutes now significantly
regulate the detail of such claims like how much time there is to bring
a claim, procedures to be followed and limits on certain types of
monetary damages. Employment law operates in a similar way in so far as
the basic employment relationship involves a common law contract which
has been regulated by statute.
There is a
hierarchy of legal rules and documents which may affect your situation:
Legislative minimum
rights
Awards/collective
agreements
Common law contracts
Implied employment terms
C.
LEGISLATIVE MINIMUM RIGHTS
In summary, certain
minimum rights and entitlements have been created by parliament to
protect all employees, eg annual leave. There is no common law right to
annual leave but this has been legislated by parliaments. At a federal
level, these rights and entitlements are contained within the
Australian Fair Pay and Conditions Standard which is part of the Workplace
Relations Act 1996. They are
shortly to be replaced by the Rudd Labor Government’s ten
National Employment Standards. Examples of these are the right to
annual leave, personal leave, compassionate leave and parental leave
and the federal minimum wage. These rules apply to all employees
regardless of income or position.
In addition,
federal and state workplace relations legislation provide remedies for
unfair dismissal and unlawful dismissal and there are minimum
requirements for notice of termination of employment under legislation.
D.
AWARDS/COLLECTIVE AGREEMENTS
Under this level
sits industry or business specific rules which are given legal force by
the legislation. These
rules provide more detailed protections and regulation of specific
industries and businesses. They are contained in industrial awards and
collective agreements. Awards are generally made between unions as
employee representatives and employer representative bodies and
sanctioned by the federal or state industrial relations commissions
under powers granted by legislation. For instance, the Clerical
Employees Award – State is a Queensland
award which covers all clerical employees in Queensland. It makes
specific rules in relation to things such as overtime, wage rates and
hours of work.
Collective
agreements are business specific agreements which are made between a
group of employees and their employer. A collective agreement must be
registered with a federal government agency (the Workplace Authority)
and must meet certain minimum standards. A collective agreement made
under state law must be approved by the Queensland Industrial Relations
Commission or the relevant state industrial relations commission. These
agreements have been formerly known as certified agreements or
enterprise bargaining agreements.
Until recently,
there was another category of legislatively recognised documents and
that was the AWA (Australian Workplace Agreement). This was an
individual agreement between an employee and an employer which had to
be registered with the Workplace Authority to have legal force but
could then overrule any award requirements for its period of operation.
These have been effectively scrapped by the Labor Government.
E.
COMMON LAW CONTRACTS
At its most basic
level, an employment relationship between an employer and an employee
is a civil contract where the employee agrees to do work for the
employer in exchange for monetary or other payment. In this sense, the
employment contract is no different from any other civil contract such
as a contract to build a house. This means that the employer and
employee are free to agree on whatever terms of employment they like,
subject to legislative minimum rights and award or collective agreement
requirements.
The general rule is
that courts will uphold contract terms where there is a signed contract
and the employer and employee have freely entered into the contract.
There is only a small number of cases where this general rule will not
be applied. This is important to keep in mind because there are a
number of issues not specifically regulated by legislation, such as
post employment restraints and intellectual property.
A contract does not
have to be in writing but it will make it much easier to establish and
enforce the terms of a contract where it is in writing.
F.
IMPLIED TERMS
The courts have
also held that a number of implied
terms exist in an employment contract even where they are not spelt
out. The best example is the duty of mutual trust and confidence. This
requires both the employer and employer to act in good faith during the
employment relationship.
G. IS
YOUR EMPLOYER
COVERED BY FEDERAL OR STATE WORKPLACE RELATIONS LAW?
It is also
necessary to keep in mind that there are state and federal industrial
systems. One of the features of the Work Choices legislation was to
provide that federal law covered all trading corporations. Previously,
most businesses were regulated primarily by state legislation. However,
all trading companies are now covered almost exclusively by federal
law. Some matters though, such as long service leave entitlements,
remain covered by state law.
The Workplace Relations Act 1996 (Cth) applies to what are called
“constitutional corporations”. The Commonwealth
Government has power to make laws in relation to “overseas,
trading and financial corporations” under the Commonwealth
Constitution. If your employer is a private company and its activities
are clearly of a commercial nature, it will generally be subject to
coverage by the Workplace Relations Act and be regarded as a federal
system employer.
However, if your employer is a sole trader or
partnership or family trust, you will generally be covered by state
industrial relations law. A grey area exists for those corporations
which are essentially charitable in nature but carry out some element
of trading, such as incorporated associations and companies limited by
guarantee. For those organisations, it is necessary to consider whether
the corporation is a trading corporation for the purposes of the
constitution. The courts have held that in deciding whether an
incorporated entity is a trading corporation, the question is whether
trading is a “substantial” activity of the
corporation. Trading does not have to be the primary purpose of the
corporation.
Substantial has been held to mean “not
insubstantial” in the sense of not being trivial and not
merely being a “peripheral activity”. In deciding
this issue, courts have considered the level of actual income generated
by trading activities and what percentage of the total income of the
organisation is formed by these activities. It is difficult to state
any general rule of thumb as every organisation needs to be treated on
its own merits. However, in one instance, a corporation with as little
as 4% of its income derived from trading activities has been held to be
constitutional corporations. In another case, a Western Australian
university which derived 20% of its income from activities of a trading
character was held to be a trading corporation.
Whilst these
statutory requirements and rules regulate employment, the relationship
is still fundamentally a common law contract relationship. And although
any applicable award/collective agreement or legislative minimum right
will have precedence over a common law contract, there are many aspects
of the relationship not affected by legislation. It is helpful to be aware of these various concepts
because they may affect the resolution of your particular problem.
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