Changes to the High income Threshold and Unfair Dismissal

Effective of 1 July 2015, the high income threshold for unfair dismissal claims has increased from $133,000 to $136,700, stopping employees who earn more than this amount from being able to access the unfair dismissal jurisdiction.

This increase also meant the compensation cap for unfair dismissals has increased to $68,350. 

Although employees who earn over the threshold can be excluded from modern award coverage, the National Employment Standards still apply to them.

It is especially important for employers who are currently managing the performance of a high earning employee and thinking of dismissing them, as any employee who earns above $133,000 and under $136,700 will now be covered by unfair dismissal laws.

The high income threshold for unfair dismissals refers to the highest possible income an employee could have, unless they are covered by an award or enterprise agreement, before they are excluded from making an unfair dismissal claim against their employer.

This threshold applies under the Fair Work Act 2009 and changes every year on July 1st. The following indicates how much the threshold has increased every year:

• 2009 - $108,300
• 2010 - $113,800
• 2011 - $118,100
• 2012 - $123,300
• 2013 - $129,300
• 2014 - $133,000 
• 2015 - $136,700 (current)

If an employee claiming unfair dismissal is not covered by an award or enterprise agreement, and was earning greater than the high income threshold at the time of dismissal, then the employer may have a defence as to jurisdiction to the claim, although any defence still needs to be heard and contended in front of a representative of the Fair Work Commission.

The threshold relates to an employee’s annual earnings. It incorporates the employees’ wages, salary sacrifices, and non-monetary benefits like company cars and fringe benefits tax. It does not include allowances for living away. It is generally pretty straightforward working out an employee’s annual rate of earnings, however if an employee receives bonuses, overtime and salary sacrifices it can become more complicated.

In any unfair dismissal claim, it is important to figure out whether the employees claim is beyond the unfair dismissal jurisdiction and therefore disqualified.

The high income threshold level rises every year, enabling more and more employees to access the unfair dismissal provisions.

It is important for employers to be aware that employees that earn over the threshold may be unable to lodge an unfair dismissal claim may still have other ways to challenge their dismissal.

Before dismissing a high income employee it is always beneficial to seek professional  guidance to ensure you are safe guarded against any challenge.

Redundancy and Unfair Dismissal

Employees who have been made redundant may still be able to make an unfair dismissal claim against their former employer if the correct procedure has not been followed during the termination process.

Under the Fair Work Act 2009, an employee is unable to make a claim for unfair dismissal in the case of a ‘genuine redundancy’, however what is the difference between a ‘redundancy’ and a ‘genuine redundancy’?

Redundancy occurs when an employer no longer wants a job being done by a specific employee to be carried out by anyone, meaning that the job would no longer exist, or if the employer becomes bankrupt or insolvent.

In order for it to be considered a ‘genuine redundancy’, the employer must follow any consultation requirements in the award or registered agreement before the redundancy takes place. Failure to perform any of these steps may end up in a terminated employee claiming that the redundancy was not genuine and filing an unfair dismissal claim.

If an employer has decided to implement major changes or restructuring that is going to affect employees significantly, the employer must take these steps

1. Notify the affected employee(s) of the proposed changes
2. Discuss the proposed changes with the affected employee(s), including possible measures to reduce the adverse effect on employee(s)
3. Give proper consideration to matters raised by affected employee(s)
4. Provide the affected employee(s) in writing with relevant information about the proposed changes, including the nature of the changes proposed and the expected effect on employees.

Discussions must be held as soon as possible after a decision has been made by the employer to make the intended changes.  Employees are entitled to have trade union representatives present at all discussions and the employers must also confer with the representative.

One unfair dismissal claim involves three employees of BananaCoast credit union Ltd. Their roles were made redundant, but they learned a few months later that their employers had hired workers in very similar positions.

All though they were out of the fourteen day lodgement period, the Fair Work Commission found the employees entitled to make unfair dismissal claims as they were unaware that at the time that their redundancy wasn’t genuine.

Another case in Victoria, Nitro Gym made an employee redundant without following the correct procedures and the employee filed an unfair dismissal claim. Fair Work Act Australia found that the redundancy was not a ‘genuine redundancy ‘and awarded the employee close to $8000 in compensation.

1 July 2013 - Legal changes for Small Business

It's the new financial year and there are a raft of legal changes taking effect today for the business community to adhere to.  

In summary:

Minimum wage increase

Effective July 1, Australia's 1.5 million minimum wage workers are set to receive an additional pay raise of $15.80 per week, a 2.6 % increase over their existing wages.

The effect of this increase will see the National Minimum Wage increase from 1 July 2013 to $622.20 per week, or $16.37 per hour. The new rates will need to be paid from the first full pay period on or following July 1, 2013.

Increase in High Income Threshold/Unfair Dismissal

The high income threshold increases from 1 July 2013,

• the high income threshold increases to $129,300
• the compensation limit under unfair dismissal increases to $64,650.

The high income threshold is indexed annually on 1 July.

The high income threshold affects how modern awards apply to employees. It also affects employees’ ability to access unfair dismissal. Higher income employees are generally not allowed to apply for unfair dismissal since the terms of employment can be different above this threshold. As well as affecting unfair dismissal rights, the threshold impacts the maximum amount payable for an unfair dismissal case. This amount is capped at either half of the high income threshold or six months of the dismissed employee's wage.

Superannuation

From July 1, employers will contribute 9.25% to superannuation for each of their eligible employees, an increase of 0.25% from the current rate of 9%.
Also from July 1, businesses will be required to pay elderly people aged 70 and above superannuation entitlements, as the existing upper age limit for employee super guarantee eligibility will be removed.

If you were making super payments at the minimum 9% rate, you need to adjust payments to the new rate from 1 July 2013.

Superannuation is paid on top of the minimum entitlements in the award or agreement that applies.

Loss carry-back measures

Small businesses are now able to carry back their losses to offset past profits and receive a tax refund. Businesses can carry back up to $1 million in deductions against profits made in the previous year to receive a refund of up to $300,000 each year from tax previously paid – representing the company tax rate of 30 cents in the dollar.

The importance of having a Social Media policy in your workplace

No matter if your business employs 2 people, or 200 people, or 2000 people, in this electronic age your business needs a social media policy in place. Even if you may already have policies in place that cover employee internet and email use, it is becoming more and more important that you set rules and guidelines for the way your employees use social media – both in the workplace and at home or away from work.

A recent Fair Work Australia decision resulted in an employee who had been dismissed for serious misconduct, being re-instated and compensated for loss of wages, despite having made a series of derogatory comments on Facebook about his managers, due to the determination that the employer did not have a policy on the use of social media by employees. The outcome of this case may have been different if the employer had adopted a clear social media policy, specifically prohibiting the publication of such comments within social media forums and stating what the consequences were for breach or non-compliance. It is evident from this case that employers should note FWA's finding that induction training and employee handbooks are no longer sufficient in workplaces.

In addition, if a social media policy within an Enterprise Agreement is found to be unfair or too restrictive to the employee, the agreement may not be allowed to be registered with FWA, and any related dismissals may be subject to appeal or be proven unenforceable.

The challenge for employers is therefore in striking a balance between the legitimate right of an employer to protect its business interests and reputation, and the employee's personal liberty. Employers should have a workplace social media policy that imposes fair limits and protects the interests of the employer and employee alike.

Following are several elements that should be covered when drafting and implementing a workplace social media policy:

1.       Your definition of social media.
You need to be very clear and make employees aware of exactly what your business defines as “social media”. To cover yourself, ensure you make it clear that the policy is not just limited to the sites and types of media that you list i.e. Facebook or Twitter, but also covers other sites such as blogs and other multi-media.

2.       A description of what is acceptable and what is not.
Your policy should specify to employees what behaviours are acceptable and what behaviours are not [give examples where possible]. You should remind employees that they should not say or do anything on social media that:

• could be viewed as derogatory towards, or disparaging of, colleagues, customers or clients;
• gives away or discusses your business’ confidential information;
• has the potential to bring your business into disrepute;
• undermines their effectiveness or productivity at work (eg. through excessive use).

Additionally, you should make it clear that bullying and harassment online will be treated the same as if it occurred offline and in person.

3.       A reminder of the dangers of social media.
In your policy you should provide a reminder of what employees risk when they post something on social media, due to the nature of the internet, e.g. the post can be seen by many people, it is difficult to erase and leaves a trail even when removed.

4.       The consequences of breaching the policy.
Your policy must remind employees of that the consequences of breaching the terms of the policy may involve disciplinary action or termination of employment. It is also recommended that the policy makes it clear to your employees that the same policy applies if they bully or harass an employee either inside or outside of work on a social media site.

Finally, you also need to ensure your policy is available to all your employees, and you should train and remind your employees about the policy on a regular basis to ensure it is effective and enforceable.

If you have a current workplace social media policy in place, we recommend that it is timely to consider reviewing your current policies and procedures to ensure they are drafted so to protect the interests of the employer and employee alike. Professionally drafted social media policies are critical to your business.

Changes to Fair Work Act

On Wednesday 28 November 2012, Federal Parliament passed the Fair Work Amendment Act 2012 (Cth) (Amendment Act) which implements a number of recommendations of the Fair Work Act Review Panel.

The changes to the Fair Work Act 2009 implemented by the Amendment Act are mostly administrative and technical in nature, and to that extent will not make a major difference to employers’ workplace arrangements.

However, there are some significant changes to the FW Act provisions dealing with unfair dismissal and general protections claims, certain aspects of agreement-making, and ballots for protected industrial action that employers need to be aware of. Changes have also been made to the structure and operation of Fair Work Australia (FWA), and the tribunal has been given new functions in relation to default superannuation funds in modern awards.

The Government’s intention in changing the unfair dismissal provisions of the FW Act is “to ensure the right of an employee to bring an unfair dismissal claim is better balanced against the right [of] an employer to ensure they are required to respond to applications that are genuine, and to ensure that [FWA] has the power to deal with unreasonable conduct in relation to a claim”. Whilst on the face of them, these changes appear beneficial to employers, the strong likelihood is that they will, in practice, provide little relief to employers from the challenges of the unfair dismissal regime.

The key changes that will be implemented are summarized as follows:

Contracts and Enterprise Agreements

1.  Individual union officials will not be able to act as bargaining representatives for employees not covered by the official’s union.
2.  Employees will not be able to opt out of an enterprise agreement.
3.  Employers will be prohibited from making enterprise agreements with only one employee.

Unfair Dismissal

4.  Aligning the timeframes for making unfair dismissal claims and general protections dismissal claims at 21 days.  The time limit for lodging an unfair dismissal claim has been extended from 14 to 21 days from the date that the dismissal takes effect. The time limit for lodging a general protections claim based on dismissal has also been changed from 60 days to 21 days. This should be welcomed by employers, as employees will now need to decide whether to lodge an unfair dismissal or a general protections claim (rather than one, followed by the other; or the pursuit of a general protections claim that should properly have been brought as an unfair dismissal claim).

5.  Under certain circumstances Fair work Australia will be capable of dismissing unfair dismissal applications at their discretion. This will apply where the parties have concluded a settlement agreement, when an applicant fails to attend a proceeding relating to the application or where the application fails to comply with Fair Work Australia directions or orders relating to the application.

6.  Fair Work Australia will be able to demand a party pay costs if through an unreasonable act or omission they have caused the other party to incur a cost. This recommendation reflects concerns that unscrupulous lawyers or agents are encouraging dismissed employees to pursue unfair dismissal claims without merit on a no-win, no-fee basis. They can also demand a party pay a cost order if they fail to agree to a settlement that is deemed reasonable.

Change of Name

7.  It was proposed that the name of Fair Work Australia would be changed to a new title containing the word ‘Commission’ and no longer containing the words ‘Fair Work’ due to the considerable confusion caused by having a number of agencies with similar names (e.g. FWA, the Fair Work Ombudsman (FWO), and more recently Fair Work Building and Construction (FWBC).

The Amendment Act has made several important changes to the structure and operation of FWA, and has re-named  the tribunal as the Fair Work Commission (FWC). The Government opted for FWC, indicating that the word “Commission” more accurately reflects the tribunal’s functions.

Superannuation

8. The establishment of an ‘Expert Panel’ to deal with minimum wage decisions and default superannuation funds for employees who do not nominate their own superannuation fund and are covered by a modern award.

The commencement date of the changes introduced by the Amendment Act is currently unclear.

As an employer, you should obtain advice about how these changes affect your contracts, Enterprise Agreements and HR policies and procedures.

Be aware what the pending changes to unfair dismissal could mean for you as an employer:

• check the date of unfair dismissals applications and general protection claims relating to a termination of employment complies with the new time limits; 
• seek advice on whether the applicant's initial documentation lodged with the Fair Work Commission provides sufficient information about the alleged circumstances of their dismissal;
• seek advice on whether there are grounds to apply for a cost order; and
• seek advice on whether there is scope to apply to the Fair Work Commission for an unfair dismissal application to be dismissed.

To minimize your risk as an employer, you should consider contacting Annette at End2End Business Solutions on (02) 8977 4002 for advice on employee dismissals for your business.