Workplace agreements and contracts

Introduction

Many employees in Australia work for corporations. The Commonwealth Constitution (section 51 [xx]) grants power to the Commonwealth parliament to make laws with respect to corporations. The Workplace Relations Act 1996 (Cth) covers employees of corporations. It makes sense, therefore, to focus on federal legislation. Although State industrial legislation exists (except in Victoria), federal legislation is far more relevant. For these purposes, all references will be to the Workplace Relations Act 1996 (Cth) ('the Act') unless otherwise specified.

In contrast to an Award or a Certified Agreement, an Australian Workplace Agreement (AWA) is not based upon the practice of collective bargaining. Collective bargaining is where all workers in a business or an entire industry (for example, every single coal miner) agree to present a united front to negotiate for their pay. If every single coal miner decided to go on strike, the employer would not be able to sell any coal, so this is a very powerful weapon.

In an AWA, an individual can always be replaced by another individual. This means that individual workers negotiating for an AWA must be very careful not to make outrageous demands. If the individual, however, has very rare skills or experience or intelligence, then the bargaining power of that individual will be increased. It follows that the bargaining power of a nuclear scientist is far superior to that of a supermarket shelf packer.

Australian Workplace Agreements

An AWA is, in theory, the result of an employer and an employee negotiating until both sides accept certain terms to govern the employment relationship. Some potential employees are not confident enough to debate such important issues. A worker in a car factory, for example, might be very skilled, but might not speak perfect English. It is only fair, therefore, that every individual is allowed to appoint an agent to be the representative of that individual (s 334 of the Act). See image 1 and animation 1

When an AWA has been concluded, the employer is required to lodge the AWA with the Employment Advocate (EA) within 14 days. The EA is a Commonwealth government body (s 342(1)).

During the course of the AWA, it may be varied by agreement between employer and employee. Agreement is not required when the purpose of the variation is to remove terms of the AWA that contravene the minimum requirements of the legislation (s 363).

Concluding an AWA has been an employment option that requires a balance. The two competing issues are the increased flexibility of individual agreement and the possibility that employers might attempt to lower wages by threatening to sack workers who do not agree to an AWA. The 'no disadvantage test' was developed because of this threat. It required that an individual who agreed to an AWA must not suffer any disadvantage compared to workers on collective agreements. This removed the possibility of employers using the weak bargaining power of employees to persuade them to accept an AWA with less remuneration. This test was abolished by legislation (see s 344(5)).

Changes to federal legislation were proclaimed in March 2006. There are now five conditions that are required to be incorporated in every AWA. Any more conditions than those five require the agreement of the employer and the employee, for example, the employer and employee might agree that a condition of an AWA is that the employee can work from home one day per week. The five compulsory conditions are:

1. minimum rates of pay (including loadings for casual workers)
   
   
2. standard hours of work
   
   
3. parental leave (including adopted children)
   
   
4. annual leave (holiday leave); and
   
   
5. personal leave (sick leave).

An AWA is able to operate for a maximum of five years. One other requirement of an AWA is that there must be a process for dispute resolution. This is designed to encourage mediation or arbitration as alternatives to litigation as these are less costly than going to court.

Overall, there are advantages and disadvantages of using an AWA. The advantages include greater flexibility for both employer and employee. The needs of an individual can be considered instead of the group as a whole. On the other hand, the AWA system, without 'the test', allows employers to offer individual workers less pay than any collective agreement. Where there are many potential workers in an industry, this means that, to secure a job, some workers will accept less pay than the collective agreement. This will reduce the market value of all the workers in that field, and other employers will benefit from lower labour costs. See image 2

People who support this system say that lower labour costs for employers will ultimately mean that goods and services will cost less money. It is said that unless labour costs can be reduced, employers will offer jobs to people in other countries, besides in Australia, which in turn will lead to increased unemployment.

The other point of view is that employers will use the AWA system to increase their profits. It is said that people will have to work more hours for less pay in order to keep their job. This is seen by some as exploiting workers and it is certainly a possibility for workers who have very few skills to offer, making this a controversial subject.

Contracts at common law

Statutes are passed by a parliament. Another source of law is the common law, which is older than any statute. Because the Commonwealth of Australia consists of States that used to be British colonies, most of the English common law applies throughout Australia. One of the most important parts of the common law is the law of contract.

Consider how upset people become when promises are broken. One of the first tasks of the common law was to decide which promises were binding. It was decided that a promise, to be binding, had to be given exchange for another promise. It follows that when two people exchange promises, they are often concluding a contract. When a customer in a supermarket brings food to the checkout, for example, the customer is promising to pay for the food and the supermarket is promising to allow the customer to take the food.

With respect to employment, when one person promises to work in the factory of a corporation, and the corporation promises to pay that person, it is a common law contract of employment. From the above examples, it can be seen that not only do promises have to be exchanged, but there must be something given up by both parties. The worker gives up his or her time. The corporation gives up some money to pay the worker. This is called consideration. It follows that there are four elements to a common law contract:

1. the offer
   
   
2. the acceptance
   
   
3. the consideration; and
   
   
4. the intention to enter a contract.

Generally speaking, people under 18 are deemed not to be able to enter a contract as they are said to lack capacity. As employment is such an important issue for most people, the common law has developed two extra terms that operate whenever it is clear that the contract at hand is one of employment.

Employee duties

A term implied in law compels the employee to obey the reasonable and lawful directions of the employer. The direction from the employer, however, ought to be within the scope of the contract. It follows that when an employer orders a receptionist to check the electrical wiring, the receptionist is entitled to refuse. In the same way, if the principal of a school ordered an English teacher to clean the school grounds, the teacher would be entitled to refuse.

A term implied in law requires that an employee should perform all reasonable and lawful tasks with due skill and care. This only applies where the employee claims to have, or does actually have, certain skills. If a teacher, who claimed to be a mathematics teacher, could not explain how to use long division, the teacher would be in breach of contract.

A further obligation upon the employee concerns the use of secret information. An employee is prohibited from misusing secret information. Secret information might be the recipe for a soft drink, or the blueprints for a new machine.

Employer duties

A term implied in law is that the employer will allow the employee the opportunity to earn wages. This term forbids the employer from standing down an employee (sending home without pay) if there is a shortage of work.

An employer has a duty to indemnify (ensure that no loss is suffered by) an employee. This only occurs when the employee has incurred expense that is reasonably related to the employment relationship. The exception to this is where the employer expressly authorises any expenditure.