The Fair Work Commission (Commission) has handed down a decision to vary the Professional Employees Award 2020 (Award) to include specific penalty and overtime rates and to clarify that Award’s coverage.
Overtime
As part of the 4-yearly review of modern awards, a Full Bench observed that there were deficiencies in the Award concerning hours of work and overtime. The Commission therefore acted on its own motion to further review these matters.
In summary, the Commission found that:
- full-time professional employees covered by the Award frequently work well in excess of 38 hours per week, either on a regular basis or during peak work periods;
- those employees are typically paid an annual salary that is intended to remunerate all aspects of the employment relationship. Those employees do not usually receive additional overtime payments and are rarely granted time off in lieu (TOIL);
- the annual salaries paid to most professional employees are significantly in excess of the Award minimums. However, there are some professional employees who are Award-reliant and who earn less than the amount they would earn if they were entitled to be paid the minimum hourly rates for all hours worked.
While the Commission accepted that it may not be “industrially appropriate” for an award applying to highly-paid professional salaried employees to provide for a prescriptive regime of overtime, weekend penalty rates and shift allowances, and that to some extent, this class of worker may need to work flexibly as required to meet the demands of their employment – the minimum annual wages in the Award could not be regarded as high enough to compensate any employee, even a professional employee, for all incidents of their employment and that they were never intended to do so.
In fact, the Commission observed that the lower-level salaries in the Award could render a full-time employee in the category of “low paid” if they worked significant additional hours.
Adopting a “minimalist approach” the Commission held that the Award ought to be varied to relevantly include provisions to the following effect:
- Unless the exemption rate applies (see below), the employee must be paid the appropriate hourly rate for all hours worked in excess of 38 hours per week, in addition to the minimum annual wages set out in clause 14 of the Award – this includes work on or in connection with call-backs and work performed on electronic devices or otherwise remotely.
- The model TOIL term.
- A penalty rate of 125% for all hours worked (whether ordinary or overtime hours) before 6.00am or after 10.00pm on any day Monday to Saturday.
- A penalty rate of 150% for all hours worked (whether ordinary or overtime hours) worked on a Sunday or public holiday.
- For casual employees, these penalty rates will be in addition to their casual loading.
- Employers must keep a record of all hours worked by an employee in excess of 38 hours per week, or worked before 6.00am or after 10.00pm on any day Monday to Saturday, or worked at any time on a Sunday or public holiday.
- Exemption rate: these requirements will not apply in respect of employees covered by the Award who have a contractual entitlement to an annual salary that is 25% or more in excess of the minimum annual wage for the appropriate classification in clause 14.
Coverage
In a recent unfair dismissal decision, the Full Bench observed that the Award classifications are expressed in highly generic terms and do not describe with any specificity the job functions required to be performed at each level[1] making it difficult to ascertain coverage (when applying the accepted “principal purpose” approach). The Full Bench noted there had been “excessive litigation” as to whether unfair dismissal applicants were covered by the Award and foreshadowed that the coverage provisions of the Award ought to be reviewed so that the scope of its coverage was expressed with greater certainty and so that questions about whether the Award covers particular employees could be determined more readily and with greater consistency.
The Commission accepted these observations and found that the classifications in Schedule A appeared to be drafted on the basis of an assumption that, once a person was engaged to perform duties of the requisite nature, they would fall within one of the classifications. In other words, the classifications had the function of determining in what grade an employee covered by the Award would fall rather than whether the employee was covered by the Award in the first place.
The Commission therefore held that Schedule A required some modification to “more clearly elucidate the circumstances in which an employee will be covered by any of the classifications without either expanding or contracting the coverage of the Award” and that accordingly Schedule A should be varied to include a new opening provision to the effect that “an employee performing professional engineering duties, professional scientific duties, professional information technology duties or quality auditing must be classified in one of the classifications provided that the employee is not employed in a wholly or principally managerial position.”
Next steps
While the determination is not yet finalised, we recommend that employers covered by the Award review their pay arrangements and ascertain the extent to which the salaries paid exceed the minimum annual wage. Where those arrangements do not exceed 25% above the minimum rates, employers will need to implement a time keeping system and ensure their payroll system is configured to pay these additional amounts (or alternatively, increase wages to the exemption rate).
We also recommend that employers review their contractual arrangements and update the remuneration terms – as these will likely be outdated upon the commencement of these new provisions.
Although the Award’s classifications have only been clarified (not changed), we recommend employers review their existing structures to ensure that all employees performing professional engineering and scientific duties (except managers) are classified according to the Award’s grades.
[1] See Zheng v Poten & Partners (Australia) Pty Ltd [2021] FWCFB 3478
In the meantime, if you are an employer with any questions about award coverage or interpretation, or have existing employment contracts that need reviewing (or require the creation of new employment contracts), please reach out to one of our team on (03) 9448 9600.
The above is general information, which is current at the time of publication, and should not be taken as legal advice.
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