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How to work out which modern awards apply in your business

January 25, 2018

Part 1 of our Modern Award Series – How to work out which modern awards apply in your business

By Alex Millman and Emma Treherne, NRA Legal

With 122 modern awards covering most industries, it can sometimes be a mind-boggling exercise to work out which one applies to your business. The problem is, you can’t simply choose the modern award or modern awards that will apply in your business, they will choose you and remember, there could end up being more than one!

As a business owner, this is possibly the single most important aspect to get right. Get it wrong, and you and your business could face claims for underpayments of wages and other entitlements, as well as substantial fines for breaching the terms of the (correct) modern award as well as the significant reputational damage that now comes with this territory.

You should always be careful before deciding that your business or an employee is ‘award free’.  With 122 modern awards to consider, it is more likely than not, there is a modern award that covers the employee in question.

If you are reckless in telling your employees they are award-free when they are in fact covered by a modern award, you and your business could be liable for an additional penalty for recklessly misrepresenting your employees’ workplace rights.

How do I tell if a Modern Award applies to my business?

Each modern award includes two critical provisions which tell you whether it applies to you.

Clause 4 of each modern award is a coverage clause which sets out the businesses to which the award applies.

For example, clause 4.1 of the General Retail Industry Award 2010 (GRIA) states:

This industry award covers employers throughout Australia in the general retail industry and their employees in the classifications listed in clause 16—Classifications to the exclusion of any other modern award. The award does not cover employers covered by the following awards:

  • the Fast Food Industry Award 2010;
  • the Meat Industry Award 2010;
  • the Hair and Beauty Industry Award 2010; or
  • the Pharmacy Industry Award 2010.

The question you, as a business owner, need to answer is “Am I in the general retail industry?”, to determine if this modern award covers your business,

Clause 3 of each modern award sets out what specific words and phrases in the modern award mean. In the case of the GRIA, the expression general retail industry is extensively defined, so make sure you carefully review these definitions.

So, if a business falls within the meaning of general retail industry, and is not excluded from the modern award by any other provision of clause 4, then that business will be regulated by the GRIA. The employees of that business will, therefore, need to be classified, and paid, according to the generalised classification structure in that modern award.

What if two very similar modern awards may apply?

Sometimes the difference in coverage between modern awards is very hard to see; however, with enough examination you can usually find out which one has coverage.

The food industry is a common example, as different modern awards may apply depending on:

  • how you can serve food;
  • where you serve food; and
  • what other businesses your business is attached to.

For example; a business which serves food in stand-alone premises could be a restaurant or a fast food shop – which will depend mostly on how the food can be served. Put that same business in a ‘club’ licensed under State legislation and it may fall under the category of ‘registered club’.

These small degrees of separation matter a lot. Always seek professional assistance to properly determine modern award coverage for your business – getting it wrong can be an expensive exercise. 

Given this is a real issue for many of our fast food members and is complex and confusing, we will discuss this in Part 2 of our Modern Award Series in next week’s newsletter What if there is no industry modern award that applies?

If there is no industry-specific modern award that appears to cover your business, beware of the three ‘catch-all’ modern awards that could apply – the Professional Employees Award 2010, the Miscellaneous Award 2010 and the Manufacturing Industries and Occupations Award 2010.

The Professional Employees Award 2010 covers all employers whose employees fall within the classification structure of that modern award. Broadly speaking, this applies to engineers, scientists and information technology professionals.

The Manufacturing Industries and Occupations Award 2010 covers employers of employees in the manufacturing and associated industries and occupations and employees in the following occupations (as defined in this modern award), which include, and are limited to, maintenance employees in the engineering streams in the modern award, technical workers, draughtspersons, production planners, trainee engineers, trainee scientists and engine drivers, as defined in this modern award.

The Miscellaneous Award 2010 covers all employers in Australia who are not covered by any other modern award and whose employees fall within the very broad classification structure of that modern award.  This modern award could well apply to many of our member businesses in retail and fast food.

Are there any exceptions?

Yes. The Miscellaneous Award 2010 does not apply to employees who, because of the nature and seniority of their role, have not traditionally been covered by awards.

You can only rely on this exclusion if:

  • the role has not traditionally been covered by awards; and
  • this is because of the nature or seniority of the role.

Great care must be taken when considering the first part of this test, as recent cases from the Fair Work Commission have shown that this needs to be viewed on a national scale. If the role has historically been covered by an award anywhere in Australia, the Miscellaneous Award 2010 may apply. We recommend you seek proper advice before determining that an employee is award-free.

What if we get it wrong?

Paying employees correctly under the wrong modern award is possibly even worse than paying them incorrectly under the right modern award.

Each modern award has different rates of pay, different classification structures, different penalties, loadings and allowances; and different procedural rules. If you get the modern award wrong,  the breaches could be significant and as we have discussed, can significantly expose your business to prosecution and penalties.

Moreover, if you ‘recklessly’ inform employees that they are covered by the wrong modern award, this can attract an additional penalty for misrepresenting employees’ workplace rights.

Each of these matters carries a financial penalty of up to $12,600 for individuals and up to $63,000 for a corporation, per contravention. A pattern of contraventions may amount to a ‘serious’ contravention, which can attract penalties of up to $126,000 for an individual and $630,000 for a corporation.

We are certainly seeing a trend where significant penalties are being imposed on businesses, there is no excuse or defence to getting it wrong.

Other effects of Modern Award coverage

Remember also that employees covered by a modern award, including a ‘catch all’ award like the Miscellaneous Award, are entitled to bring an unfair dismissal claim in the event of termination, even if they earn above the high income threshold (presently, as at 25 January 2018, $142,000 per annum). 

Know which Modern Award applies but don’t know what’s in it?

At NRA Legal, we offer training so you can upskill and properly understand the terms of the modern awards that apply in your business.

To find out more about how the specialist industrial relations advocates and trainers at NRA and our lawyers at NRA Legal can assist, please call 1800 RETAIL (738 245).

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