You may have heard of the terms “common law contract”, “modern award”, “EBA”, “collective agreement”, “enterprise agreement”, “National Employment Standards” to name a few. You may have also heard of Fair Work Commission, the Fair Work Ombudsman and industrial relations commissions as well as the Federal Court, Federal Circuit 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; 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 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. Whilst negligence is a common law creation, statutes now significantly regulate the detail of such claims, eg the time limit 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
Modern awards/enterprise agreements
Common law contracts
Implied employment terms
C. Legislative minimum rights
Certain minimum rights and entitlements have been created by parliament to protect all employees, eg the right to annual leave. There is no common law right to annual leave. For private sector employees, these rights and entitlements are contained in the National Employment Standards which are part of the Fair Work Act 2009. Examples of NES are the right to annual leave, personal leave, compassionate leave and parental leave. These standards apply to all employees regardless of income or position.
The Fair Work Act creates other rights which may be relevant including the right to belong or not to belong to a union, to take lawful industrial action and protection from discrimination.
In addition, federal and state legislation provide remedies for unfair dismissal and dismissal in breach of workplace rights and there are minimum requirements for notice of termination of employment under legislation.
D. Modern awards/enterprise agreements
Below legislative minimum rights sit industry or occupation specific rules which are given legal force by legislation. These rules provide more detailed protections and regulation of specific industries and occupations. They are contained in modern industrial awards and enterprise agreements. An example of a modern award is the Clerks – Private Sector Award which contains specific rules about clerical occupations such as overtime, wage rates and hours of work.
Enterprise agreements (sometimes called “EBAs”, “collective agreements” or “certified agreements”) are generally business specific agreements which are made between a group of employees and their employer. An enterprise agreement must be approved by Fair Work Commission and must meet certain minimum standards.
It is not possible to contract out of modern award or enterprise agreement provisions, unless specifically allowed by the modern award or enterprise agreement.
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 perform 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 modern award or enterprise 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 are 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 issues.
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. Examples are the requirement to give reasonable notice of the termination of the employment relationship where the contract is silent and also the implied duty of mutual trust and confidence. The implied duty of trust and confidence requires both the employer and employer to act in good faith during the employment relationship, but not in the manner of termination of the employment relationship.
G. Is your employer covered by federal or state workplace relations law?
From 1 January 2010, all private sector employers and employees (with the exception of some employers in Western Australia) are covered by federal employment law – primarily the Fair Work Act. Some matters though, such as the detail of long service leave entitlements, remain covered by state law. Workplace health and safety law and workers compensation law remain largely detailed by state laws (excepting Commonwealth public servants).
Only state public sector and local government employees remain covered by state systems of industrial relations. If you fall into this category, you should seek specialist advice about your situation because much of the detailed information outlined on this website will not apply to you.
However, whilst these statutory requirements and rules regulate employment, the relationship is still fundamentally a common law contract relationship. And although any applicable modern award/enterprise 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.