Legal and Taxation Aspects of your Small Business; I.Birt © 2007 Pearson Education Australia Legal...

Legal and Taxation Aspects of your Small Business; I.Birt © 2007 Pearson Education Australia

Legal and Taxation Aspectsof Your Small Business

3rd Edition

`08

IAN.BIRT

2

Chapter:13

Workplace Regulation

Legal and Taxation Aspectsof your Small Business

IAN BIRT


Objectives

After reading this chapter, you should be able to:– Outline and recognise the applicable industrial

relations system for your business– Explain the contractual nature of the

employment relationship– Identify and describe various statutes that

affect employment

The Industrial Relations System IR system has processes for regulating

dealings between employers and employees over industrial matters:– Pay rates– Working conditions

There is a federal IR system as well as various state systems

The Territories and Victoria (by electing to do so) operate under the federal system


Industrial Relations Law The Workplace Relations Act 1996 (Cwlth) establishes the federal IR system

and is the main Commonwealth IR legislation The Act is enforced by the Commonwealth Office of the Workplace

Ombudsman www.wo.gov.au The Australian Government Workplace Authority also provides information

and advice about complying with the legislation www.workplaceauthority.gov.au

Except in Victoria, each state also has its own industrial relations Act which establish the IR system in the state

Each Act is enforced by the relevant local IR authority - see Table 13.1 Other state legislation relating to:

• Occupational health and safety• Long service leave• Workers compensation• Anti-discrimination

is not affected by IR legislation


IR Acts and AuthoritiesTable13.1- IR ACTS AND AUTHORITIES

Federal/State

IR Act IR authority Website address

Cwlth Workplace Relations Act 1996(Cwlth)

Commonwealth Office of Workplace Services

www.wo.gov.au

NSW Industrial Relations Act 1996(NSW)

NSW Office of Industrial Relations

www.industrialrelations.nsw.gov.au

Qld Industrial Relations Act 1999 (Qld)

Qld Department of Employment and Industrial relations

www.deir.qld.gov.au

WA Industrial Relations Act 1979(WA)

Consumer and Employment Protection (WA)

www.docep.wa.gov.au

SA Fair Work ACT 1994 (SA)

SafeWork SA www.safework.sa.gov.au

Tas Industrial Relations ACT 1984(Tas)

Workplace Standards Tasmania

www.wst.tas.gov.au

Note: Victoria, the ACT and the Northern Territory operate under the Commonwealth IR System


Industrial Relations Bodies - 1The three main bodies established under the federal Workplace

Relations Act 1996 (Cwlth) are: Australian Fair Pay Commission - www.fairpay.gov.au

Periodically sets National adult minimum wage & Minimum pay rates, including casual loadings, for different classifications of workers

Australian Government Workplace Authority www.workplaceauthority.gov.au

checks and accepts lodgements of federal workplace agreements

Australian Industrial Relations Commission (AIRC) - www.airc.gov.au whose role includes:

• Making federal awards

• Determining unfair dismissal claims

• Resolving industrial disputes under federal law


Industrial Relations Bodies - 2

Role of State IR Commission: Making state awards Approving state-registered workplace

agreements Resolving industrial disputes involving

state awards or workplace agreements Determining unfair dismissal claims under

state IR legislation


Industrial Relations Bodies - 3

Appeals: Appeals against decisions of the AIRC are

made to the Federal Court State IR legislation establishes the relevant

state IR commission (except in Victoria) Appeals against decisions of state IR

commissions generally go to the relevant state industrial court


AwardsAn award is a legally enforceable order by an IR commission that sets minimum pay rates and working conditions for a particular job classification over a fixed period

A system of awards applies at both the federal and state level for specific occupations:

• Federal awards are made by the AIRC

• State awards are made by the relevant State IR Commission

Only a restricted number of allowable matters that can be included in federal awards:

• e.g. ordinary hours of work, loadings, penalty rates, monetary allowances

Relevant awards are legally binding on employers and employees If a federal award conflicts with a state award, the federal award

always prevails Awards may apply in workplaces without formal workplace

agreements in operation


Workplace AgreementsFederal and state IR legislation allows employers and employees to directly negotiate formal written workplace agreements for fixed periods, setting out the terms and conditions of employment

Different types of agreements under the legislation Some must be approved by the appropriate federal or state IR body When agreements approved, they are binding upon employers and employees Federal IR laws provide for an Australian Workplace Agreement (AWA)

– A signed individual contract of employment made between an employer and an employee

Other types of federal workplace agreements available include:– Employee collective agreements

– Union collective agreements

Federal workplace agreements are lodged with the AWA within a prescribed period State-based workplace agreements are known by various names, depending on the state,

including:– Enterprise agreements

– Certified agreements

– Industrial agreements Such agreements apply to a specific workplace or industry, not an occupational group


Record Requirements IR legislation and relevant regulations require

employers to keep detailed records of:• Work time• Leave taken• Remuneration for employees

The maintenance of a combined time and wages book satisfies these requirements

Records required under IR legislation must generally be retained for seven years


Which IR System Applies?

Recent changes to the Workplace Relations Act 1996 (Cwlth) are aimed to encourage direct negotiation between employers and employees in a national IR system

As a result, federal IR laws now apply to:– Employees in the territories– Commonwealth government bodies/agencies and their

employees– Employers with employees involved in specified

interstate or international trade and commerce– Most employers and employees in Victoria


Transitional Arrangements A transitional agreement for up to three years applies to

company employers with employees covered by a state award or state workplace agreements

Company employers already operating with employees covered by a federal award remain in the federal IR system

Unincorporated employers - e.g. sole traders and partnerships - with employees covered by a state award or agreement stay in the state IR system

Unincorporated employers with employees already under a federal award will be covered by state IR laws after a five-year transitional period


The Employment Relationship The employment relationship is contractual. Under a contract of

employment, employees can be full-time, part-time or casual The terms or contents of the employment contract are the promises agreed

upon by the employer and the employee Any employment contract will usually contain the terms of employment


FIGURE13.1 - TERMS TYPICALLY INCLUDED IN AN EMPLOYMENT CONTRACT

Employmentcontract

Express terms

Implied terms

written

verbal

Statutory entitlements

Award provision

Common law duties

Express Terms There will be express terms in every employment contract:

– These are promises that the employer and the employee both agree to at the start of employment

Express terms can be written or verbal and include:– Job tasks and duties– Pay rates (ordinary and overtime)– Hours of work– Times of work– Allowances and fringe benefits– Bonuses– Leave entitlements – e.g. holidays, long service, sickness– Pay method and frequency– Meal and break times– Public holidays– Training– Review periods


Implied TermsEmployers and employees owe common law duties to each other

An employer’s duties at common law include duties to:– Maintain a safe workplace and safe work systems for employees

– Pay wages to employees

– Be legally responsible for employees’ actions in the course of their employment

An employee’s duties at common law include duties to:– Work competently

– Maintain confidentiality

– Obey any reasonable and lawful work directions that are within the scope of employment


Breach of Terms

Under common law, employers or employees can sue each other if terms of the employment contract are breached

The person suing may be able to seek: – An order to end the contract

– An order for damages

– An injunction requiring someone to do or not do something

Employers that do not comply with statutory entitlements and award minimums for employees:– Can be sued by employees for unpaid sums

– Can also be prosecuted by relevant authorities, resulting in heavy fines


Employee or Independent Contractor?

Businesses can engage self-employed service providers to work as independent contractors - Called ‘outsourcing’

A work arrangement will be either:– Contract of service:

• Contract of employment between an employer and an employee that establishes an employer/employee relationship

– Contract for services:

• Contract made between a client payer and an independent contractor for labour services

Differences between employee and independent contractor in any work arrangement:– Industrial awards apply only to employees

– Employers generally required to arrange workers compensation insurance for employees only

– Employees have statutory entitlements for annual holidays, long service leave, sick leave and workers compensation

– Employers are liable to pay payroll tax, compulsory workers compensation insurance premiums, fringe benefits tax and pay as you go (PAYG) tax withholdings for employees

– Employers are legally responsible for the actions of employees during employment


Factors to ConsiderIn determining whether a worker is an employee or an independent contractor, all the following factors should be considered - no one factor is conclusive:

Degree of control: Who tells the worker how to do their work? Written agreement: What does any written agreement say? Remuneration method: What is the frequency and means of remuneration of

the worker? Tax treatment: What tax is withheld from payments to the worker? Working hours: Who chooses the working hours of the worker? Tools of trade: Who supplies the tools or equipment for work? Choosing replacements: Can the worker choose a replacement to do the work? Other employment: Does the worker work for anyone else? Operating structure: What operating structure or business name does the

worker work under?


Termination of Employment At common law, the contract of employment can be terminated by either the

employer or the employee Either party must give reasonable notice to the other A reasonable notice period is generally based on the pay period If the employee is paid monthly, for example, then one month’s notice

should be given Employers requiring a terminated employee to leave immediately must

make payment in lieu of (instead of) notice: • This payment is the amount the employee would have earned during the notice period

• If payment in lieu of notice is not offered by the employer, the employee must work for the notice period, otherwise their right to payment is lost

The notice period is subject to any minimum period prescribed in the relevant award, applicable workplace agreement or existing fixed-term contract that applies

The Workplace Relations Act 1996 (Cwlth) and relevant state IR Acts set a minimum period of notice required based on the employee’s period of service for workers covered under the legislation


Termination Without Notice

Under common law, termination without notice is permitted where the other party has committed a fundamental breach of the employment contract

Termination without notice - or payment in lieu of notice - is justified by an employee where to do the work would jeopardise the employee’s life or health

An employer can instantly dismiss an employee without notice for continuing ‘serious misconduct’

Serious misconduct includes:– Gross disobedience– Deliberate refusal to obey a reasonable and lawful direction– Incompetent work performance– Dishonesty– Intoxication– Offensive language or behaviour

The federal Workplace Relations Act and state IR legislation also allow for instant dismissal of an employee for serious misconduct


Unfair Dismissal - 1The Workplace Relations Act 1996 (Cwlth) prohibits unfair dismissal of

employees

The fairness of any dismissal will depend on the particular situation

An unfair dismissal occurs where the termination was:– Harsh

– Unjust

– Unreasonable in the circumstances– Was made on discriminatory grounds

Factors to consider in determining whether there is an unfair dismissal:– Were valid reasons given for the dismissal?

– Was an opportunity given to the employee to explain himself or herself?

– Were sufficient warnings given for unsatisfactory performance?• At least three written warnings are generally considered acceptable

– Was the termination on the basis of unlawful discrimination such as race, colour, age or gender?


Unfair Dismissal - 2Several things employers can do to minimise

unfair dismissal claims:– Employers can require new employees to work for a

probation or trial period before offering them permanent employment

– The employment of unsatisfactory employees can be terminated at any time during reasonable probation periods

– Regular two-way job performance evaluations of employees should also be conducted

– Employers should keep written records of evaluations, memos, warning letters, termination notices and any other employee correspondence


Unfair Dismissal - 3Federal unfair dismissal legislation covers employees under federal awards and workplace agreements, employees who are employed by either corporations or the Commonwealth government and employees employed in the territories or Victoria

Following employees are excluded from the protection of unfair dismissal law:– Seasonal workers– Employees on fixed-period contracts– Casual employees employed for less than 12 months– Employees on probation (trial) periods for up to six months– Employees paid executive salaries (above a defined threshold)

The Act also exempts small business company employers with 100 or less employees from unfair dismissal laws

All employees are protected from termination of employment on unlawful discrimination grounds A person claiming unfair dismissal must apply to the AIRC within 21 days of being dismissed A person found to be unfairly dismissed can seek job reinstatement or compensation for lost

wages - up to a limit There are similar ‘unfair dismissal’ prohibitions in the state IR legislation for most states Employees not covered by the federal legislation are generally protected under the relevant state

legislation


Legislation Affecting Employment - 1 Leave entitlements:

– Employees covered by federal workplace agreements are entitled to:• Annual leave• Personal / carer’s leave• Parental leave

– Legislation in some states and territories give all employees entitlements for:• Paid annual leave • Long Service Leave - After continuous service for a specified period - usually 10 or 15 years

– Full-time employees are entitled to four weeks paid annual leave

Workers compensation insurance:– Compulsory– Similar workers compensation legislation applies in each state and territory– Legislation establishes a statutory workers compensation scheme– Scheme is administered by the local occupational health and safety authority - see Table

13.2 – Employers must arrange compulsory workers compensation insurance cover for employees

and limited kinds of contractors and voluntary workers– Workers compensation insurance provides cover for workers injured or made ill during

employment– Heavy fines apply for non-compliant employers– The legislation also requires employers to provide rehabilitation for injured workers to enable

them to return to the workforce


Legislation Affecting Employment - 2 Employers are required to keep the following records:

– Workers compensation insurance documents – e.g. example, policies, proposals, claims

– Wages records detailing employees’ work times and remuneration– An accident register book that records workplace injuries or illnesses

Workplace deaths and serious workplace injuries or illnesses:– Must be promptly reported to employers’ local occupational health and safety

authority (see Table 13.2)– Report forms can be obtained from the occupational health and safety authority

Workers compensation records:– Generally required to be kept for at least seven years

Safety, Rehabilitation and Compensation Act 1988 (Cwlth):– Establishes a federal statutory workers compensation scheme for Commonwealth

government employees.

– Scheme is administered by Comcare - www.comcare.gov.au

– Other states have their own EEO legislation


Legislation Affecting Employment - 3

Workplace health and safety

Each state and territory has workplace health and safety legislation which administered by the local occupational health and safety authority

Workplace health and safety legislation requires employers to maintain healthy and safe workplaces as well as adopt safe work systems

Local safety authorities provide information about health and safety requirements for various industries

There are heavy fines for employers who breach health and safety legislation


Occupational Health and Safety Authorities

Table 13.2 - OCCUPATIONAL HEALTH AND SAFETY AUTHORITIES

Federal/state/territory Local authority Website address

Commonwealth

New South Wales

Victoria

Queensland

Western Australia

South Australia

Tasmania

Australian Capital Territory

Northern Territory

Comcare

WorkCover New South Wales

Victorian WorkCover Authority

WorkCover Queensland

WorkCover Western Australia

WorkCover Corporation of South Australia

Workplace Standards Tasmania

ACT WorkCover

NT WorkSafe

www.comcare.gov.au

www.workcover.nsw.gov.au

www.workcover.vic.gov.au

www.workcover.qld.gov.au

www.workcover.wa.gov.au

www.workcover.com

www.wst.tas.gov.au

www.workcover.act.gov.au

www.workcover.nt.gov.au


Superannuation Contributions

The Superannuation Guarantee Charge Act 1992 (Cwlth) requires:– Most employers to make minimum superannuation contributions for

eligible employees to an approved superannuation fund

Contributions are at prescribed percentage rates:– The rate is 9% of ordinary gross earnings paid to employees

Superannuation contributions are in addition to the remuneration paid

Businesses that fail to pay these minimum contributions:– Must pay a higher penalty charge (the Superannuation Guarantee

Charge) to the ATO


Income Tax Withholdings Under federal income tax legislation:

– Employers are required to withhold income tax at prescribed rates from employees’ wages

– Any tax withheld must be regularly remitted to the ATO

Businesses paying contractors:– Who do not quote an Australian business number (ABN) must

also withhold income tax from payments– Any tax withholdings from contractors’ payments must be

regularly remitted to the ATO

Income tax withholdings from payments to others is made under the PAYG withholding system


Workplace Discrimination - 1Discrimination means treating people differently based on unlawful groundsAnti-discrimination legislation is based on the principle of equal employment opportunity (EEO)

In the workplace, discrimination can occur in:– Job applications

– Promotions

– Dismissals

There are specific federal Acts prohibiting discrimination in the workplace on the grounds of :

– Race

– Disability

– Gender

Complaints under this legislation are made to:– The Human Rights & Equal Opportunity Commission - www.hreoc.gov.au

Commission determinations are enforced in the Federal Court Federal Court orders made can include:

– Injunctions

– Damages

– Job reinstatements


Workplace Discrimination - 2 In New South Wales, the Anti-Discrimination Act 1977 (NSW) prohibits discrimination

on grounds such as:– Race, – Colour– Marital status– Gender – Pregnancy – Political belief – Ethnic / religious background– Disability, – Age– Sexual preference

Complaints under the Act are lodged with the NSW Anti-Discrimination Board Referrals go to the NSW Administrative Decisions Tribunal Orders that can be made include damages and injunctions Under the Anti-Discrimination Act 1991 (Qld):

– Complaints are lodged with the Queensland Anti-Discrimination Commission – Referrals go to the Queensland Anti-Discrimination Tribunal

Tasmania, the ACT and the Northern Territory also have anti-discrimination legislation


Legal and Taxation Aspects of your Small Business; I.Birt © 2007 Pearson Education Australia Legal...

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