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Employment Law- Case study

Natasha and her fellow employees are employed by the Smith Group Pty Ltd (‘SG’).  The employees (including Natasha) are currently covered by a modern award.  Natasha identifies as an Indigenous Australian.


In November 2021, SG approaches the employees and proposes that the employees and SG enter into an Enterprise Agreement.

SG does not provide all employees with a notice of the employee’s representational rights prior to commencing the negotiation of the proposed enterprise agreement.


SG proposes to the employees that the agreement will reflect their current terms of employment with the exception of:

(a)  The agreement will provide for a 12% salary increase made up of four increases of 3% from 1 July in each year of the agreement’s operation;

(b)  The agreement will increase the weekly number of hours from 38 hours to 41 hours per week (the modern award provides for a 38 hour week);

(c)  A reduction in the casual loading from 25% to 20%;

(d)  The agreement will provide the employees with 3 weeks’ annual leave;

(e)  The agreement will provide for 8 days’ sick leave per year which may accumulate for 3 years;

(f)  The agreement will provide for 2 days’ paid compassionate leave;

(g)  The agreement will provide for a 30 minute unpaid meal break each day;

(h)  The agreement will provide that employees will be paid monthly in arrears; and


(i)  The agreement will have a term, which will expire on 31 December 2026.

Natasha is concerned about the terms of the proposed agreement [listed above in (a)-(i)] and that if she does not support the agreement, SG may terminate her employment.

She is also concerned that she has sought the assistance of her union, the Services Union ('SU'), in the negotiations, however she has been told by SG that she cannot involve the SU in the negotiating of the proposed agreement as SG would prefer to keep things 'in-house' with its indigenous staff.Furthermore, Natasha is also concerned as to whether she will continue to enjoy the conditions in her modern award if the SG Enterprise Agreement is made and approved by the Fair Work Commission.


SG is not responding to any phone calls or correspondence from the Union.  The Union has told Natasha that SG is unable to prevent the Union’s involvement and that the Union is going to do ‘something about it’.


Q1. Advice to Natasha about her concerns:

The Smith Group Pty Ltd ('SG') employs Natasha and her fellow employees. A modern award currently covers the employees (including Natasha). SG has approached the employees and proposes that the employees and SGenter into an Enterprise Contract ('Contract'). SG has offered that the contractreflects their current employment terms with a few exceptions. Natasha is concerned about the peculiarities and revised terms of the contract and feels that if she does not support the Contract, SG may terminate her.


SG has contravened multiple provisions ofthe Fair Work Act 2009, which are outlined below, with references to the Section in which SG has been non-compliant:


a. Maximum Working hours


Did SG violate the modern award by proposing 41 hours/week of work?

Answer (a)

As per the Modern Award applicable to employees of SG, the maximum hours are thirty-eight. As per Section 62 of the Fair Wages Act, 2009, an employer cannot require the employees to be working more than 38 hours if they are unreasonable. To determine unreasonableness, factorsare mentioned in Section. 63(1) such as employee's health &safety, personal circumstances, need of the workplace, overtime payment, level of responsibility, nature of work, a notice of request or refusal, etc., are taken into consideration.


SG has violated the modern award in the given facts by proposing 41 hours/week. The employees can refuse to work for the additional hours if they establish that these hours are unreasonable. Additionally, they can use the other mentioned grounds applicable to them. Grounds that can be used are: the employer is not paying compensation for additional hours, and their level of responsibility does not warrant it. This may overpower the counter SG might raise the notice of additional hours they provided.


b. Casual Loading


Did SG violate the minimum wage order by reducing the casual loading from 25% to 20%?

Answer (b)

The minimum wage order mandates casual loading to be at 25%. Section. 293 prohibits an employer from contravening the minimum wage order.   This contraventionattracts 60 penalty units under Section 539.

Thus, SG violates the law by reducing the casual loading to 20%


c. Annual Leaves


Did SG violate Section 87 by proposing three weeks of annual leave?

Answer (c)

As perSection. 87, every employee is entitled to four weeks of paid leave.

SG violates the law,which mandates four weeks of paid leave for full-time employees.


d. Sick Leaves


Did SG violate Section 96 by providing only eight days' sick leaves, which are allowed to be accumulated for three years?

Answer (d)

As per Section. 96, which is in tune with National Employment Standard, the sick leaves should be ten days and should be allowed to be accumulated year after year without any limit.

SG violates this Section by limiting it to eight days and allowing its accumulation for three years only.


However, SG has been compliant with a few of the terms, which are outlined below:

a. The contract will provide for a 12% salary increase made up of four increases of 3% from 1 July in each year of the contract's operation

The law does not explicitly address salary increments. Still, based on secondary research, a salary increase of 3% is reasonable, given that the minimum wage was increased by 2.5% as of 1 July 2021. Since SG is providing a slightly higher increase, these terms can be considered reasonable.

b. The contract will provide for twodays' paid compassionate leave

As per Section 104, an employee is entitled to two days of compassionate leave.Thus,SG is compliant with the above term stated in the contract.

c. The contract will provide for a 30-minute unpaid meal break each day

As per the modernaward, a 30-minute unpaid meal break is reasonable. Thus,SG is compliant with the above term stated in the contract.

d. The contract will provide that employees will be paid monthly in arrears

As per Section 323, An employer must pay an employee amount payable to the employee about work performance. Since SG has proposed to pay arrears monthly, this term is reasonable.

Natasha had sought the assistance of the Services Union ('Union') for negotiations; however, SG is not responding to the correspondences from the Union and has to thwart its involvement. Furthermore, Natasha is also concerned about whether she will continue to enjoy the conditions in her modern award if the SGContract is made and approved by the Fair Work Commission ('FWC'). In regards to this, below are some of the points SG violates as per the Fair Work Act, 2009:


1. Notice of Employee Representational Rights

Did SG violate s. 173 by not providing notice to employees about their right to representation?

Answer (1)

As perSection. 173, an employer must notify each employee about the right to represent themselves for the enterprise contract.

SG has failed to provide notice to its employees about their rights. The requirement forinformation is of utmost importance. It should be provided at the beginning of a negotiation. The failure of thisloses not only the trust of its employees but also theFair Work Commissiondoes not approve the enterprise contract making the employer start the whole process again (Peabody v CFMEU (2014) FWCFB 2042).


As per the above-stated rules, SG was obligated to give its employees notice of their right to representation, which it failed to do so. Because of the ruling in the above case, SG will never be approved for its Contractby Commission. Natasha should not worry about the contractbeing agreed upon.


2. Approval by FWC

Does SG’s enterprise contract pass the requirement for being approved by FWC?

Answer (2)

Requirements to approve enterprise contract are enumerated under Section. 186&187. The relevant provisions are:

  1. It is genuinely agreed between the employer and employees
  2. Does not contravene Section. 55 (i.e., it should not contradict the NES)
  3. Passes the better off overall test (BOOT). (Section. 193)
  4. It is done in good faith bargaining.


SG's contractcontravenes Section. 55 as it violates NES (Point (e)). It also will not pass the BOOT. To pass the BOOT, each award-covered employee should be better off if the contractcovered the employee than if the relevant modern award covered the employee. The test requires(Hart v Coles Supermarket (2016) FWCFB 2887) the identification of terms that are more beneficial for an employee, terms which are less beneficial for an employee, and an overall assessment of whether an employee would be better off under the contract. As established in the above issues, the contract contravenes significant provisions in the law and is framed in a disadvantageous manner to the employees. Hence, under no circumstance will it pass the BOOT.


If the contractdoes not pass the BOOT, the Commission can still pass the Contractunder Section 189 (Public interest) and Section 190 (with undertaking). Allowing the contractto come into force if it does not contravene Public Interest is very rare. This contract does not fall under that rare circumstance because there exist no exemptional or extraordinary circumstances requiring such terms (Nulty v Blue Star Group (2011) FWAFB 975).


However, the employer can give an undertaking and approve the contract. As witnessed previously (Re Mcdonalds (2010) FWAFB 4602), the quashed contractwas approved in appeal because the employer-provided an undertaking.

To make this issue favourable to employees, the bargaining representative will need to highlight the disadvantages in terms of monetary and health.


3. Discrimination based on race

Did SG violate s. 351 by discriminating against Natasha based on her race?

Answer (3)

Natasha represents herself as an Indigenous Australian. Under Section 342, an adverse action is when the employer treats an employee differently from other employees. If such adverse action is due to race, it is discrimination under Section. 351 and is prohibited.


Adverse action can be in the form of refusal to hire, discriminating or injuring them or even altering their position detrimentally. Smith (2011) suggests that these provisions have seen a shift with Fair Works Act where the protection is granted at every level rather than just dismissal. In the first case of racial discrimination (Fair Work Ombudsman v Yenida (2017) FCCA 2299), the Court has laid out that in the context of the Fair Works Act, discrimination means treating a person in a "less favorable manner" and is something which is done deliberately.


SG preferred to keep the matters "in-house" with the indigenous race and denied them their right to be represented by the Union. This is discrimination under Section. 351 as it's treating Natashaless favourably. SG could face 60 penalty units under this violation.


4. Undue Pressure

Is SG mounting undue pressure on Natasha?

Answer (4)

As per Section 344, an employer should not mount undue pressure on the employee to agree on acontract.

Here, SG is in a position of authority and Natasha feels obliged to agree to the terms of the contract or fears termination. This is the fit case of undue influence/pressure. Undue pressure can be interpreted from body language, conduct and tone (Wintle v RUC Cementation Mining (2014) FCCA 694). The conduct of SG by not allowing representation and ignoring the calls of SU can be interpreted as wrongful conduct and falls under undue pressure.


Natasha has a strong case against SG as SG has violated multiple provisions and NES. Andrew Stewart (2021, p.121) says that no provision in FWAexplicitly provides that "standard" prevails over any employment contract and that the contractin no way can exclude the standards laid down. The closest Section in law to this is Section 326 (employment contract 'has no effect' to the extent it permits certain unreasonable deductions to be made from wages). However, this has been the principle that the courts follow throughout and will prevail here.


Post-2006 (Tess, John & Sean 2013), the pattern has been towards civil remedy litigation by Fair Work Ombudsman. It is a tangibleway to enforce rights and order compliance as it tarnishes the public image. Alternatively, there are more enforcement tools available to the Fair Work Ombudsman in the Fair Works Act than litigation to further Natasha's cause more rapidly. (Hardy 2020).


Q2. Advise the Union in relation to what they might do regarding this situation and the conduct of SG.

Union's right to entry to date remains restricted in many senses. SG, by ignoring the calls of SU is contravening the good faith bargaining. It can resolve it by sending a strong message by entering the premises and investigating all the contraventions SG is doing before taking the following steps. As observed by Harde & Howe (2009), even though unions represent employees, they are not the joint regulator of employment standards. This role can be characterized as representation and negotiation rather than monitoring and oversight.


1. Right to entry

Can SU enter the premises of SG?

Answer (1)

Bargaining representatives have a right to enter the premises on any alleged infringement of law (Section. 481)

As established already, there are multiple violations of the Fair Works Act taking place. Hence SU has the right to enter the premises of SG for inspection. They can apply for a permit from Fair Work Commission under Section. 512. Under Section. 482(1)(c) SU can access documents and make a copy of the documents relevant to the infringement. This will send a solid message to SG about the seriousness of the situation.


2. Good faith bargaining

Is SG bargaining the contract in good faith?

Answer (2)

Section. 228 defines good faith bargaining as attending, participating in a meeting, responding to proposals, refraining from capricious conduct, recognizing bargaining representatives, etc. If this does not take place, the remedy is provided under Section. 229 where good faith bargaining can be enforced upon on an application to Fair Work Commission.


SU can approach Commission under Section. 229 for a bargaining order and get itself involved. Here, by not recognizing employees' bargaining representatives and engaging in capricious behaviour, SG is not bargaining in good faith.

SU can easily exercise its right to representemployees' interests by following the above steps

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