So you are either currently an employer or looking at employing people to work in your business. You may have a specific employment law query or might just be interested in learning a bit more about the area. You might be looking at preparing contracts for new or existing employees or have been served with an unfair dismissal or other claim by a former employee and need to know what to do.
If you have been served with a claim, you should:
- Not ignore it and hope it will go away (it generally wont!);
- Gather all documents you think might be relevant, such as employment agreements, time and wage records, personnel files;
- Look in the documents you have received for any time limits you have to respond;
- Obtain advice about your legal position at an early stage so that you can make informed decisions about how to proceed.
It may be helpful, both to people starting out in business, and to experienced business owners or managers, to recap the basic concepts of employment law. This is to be contrasted with contractor law, which is addressed in the “Contractors” part of this website.
You may have heard of the terms common law contract, award, EBA, AWA, enterprise agreement, collective agreement, statutory minimum standards, NES to name a few. It’s all very confusing and it may be helpful to know about the structures of employment law in Australia and where your issue fits in.
Statute law and common law
The starting point is to know that there are two basic types of law which exist in Australia, 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. But while 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, claims 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. In descending order, these are:
- Legislative minimum rights
- Awards/enterprise agreements
- Common law contracts
- Implied terms of employment
Virtually all private sector employers are now covered exclusively by federal statute law (in addition to common law) in the form of the Fair Work Act (although things such as workers compensation and apprenticeships are still covered by state law).
Legislative minimum rights
In summary, certain minimum rights and entitlements have been created by parliament to protect all employees, eg the right to four weeks annual leave. There is no common law right to annual leave but this has been created by state and federal legislation. At a federal level, these rights and entitlements are contained in the National Employment Standards which are part of the Fair Work Act. Examples are the right to annual leave, personal leave, compassionate leave and parental leave and the federal minimum wage.
In addition to these legislative minimum rights and entitlements, federal legislation provides remedies for unfair dismissal and breach of workplace protections and there are minimum requirements for notice of termination of employment and compulsory redundancy in the legislation.
Beneath the umbrella of minimum legislative rights and entitlements sits more detailed industry or occupation specific rules which are given legal force by the federal legislation. These rules are contained in industrial awards and enterprise agreements. Awards are made by the Fair Work Commission. As part of the changes to the workplace relations system made by the Fair Work Act the number of awards were greatly reduced but their coverage was greatly increased. For instance, the Clerks – Private Sector Award 2010 covers all clerical employees unless they are covered by a specific industry award. It contains specific rules in relation to things such as overtime, minimum wage rates and hours of work.
Enterprise agreements are business specific agreements which are made between a group of employees and their employer. An enterprise agreement must be approved by the Fair Work Commission and must meet certain minimum requirements. These agreements have been formerly known as collective agreements, certified agreements or enterprise bargaining agreements. They can only be replaced by another enterprise agreement or discharged by order of the Fair Work Commission.
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 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.
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.
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.
If you want to consider the pros and cons of engaging contractors or are encountering an issue with an existing contractor, you should go to the “Contractors” section of this website. Contractors do not have many of the rights and entitlements of employees and it is necessary to consider the nature of the relationship and the job to be performed, as well as taxation and insurance implications in determining whether to engage someone as an employee or independent contractor.