Why is a written employment agreement/contract necessary for employees covered by a modern award?
As a HR consultant, I’m asked this question often. There is good reason.
Let’s take a look at some of the ‘risks’ of not having a written employment agreement (contract) and what the Federal Court held recently in the case, Australasian Meat Industry Employees Union v Dick Stone Pty Ltd [2022] FCA 512.
Risks
When terms and conditions of employment are not in writing, employers expose themselves and their business to:
- the employee misunderstanding important details of their employment that may differ to minimum requirements provided for in modern awards;
- the employer and employee may dispute what was agreed because they are relying on memory; and
- a Court will not enforce the employer’s agreement with the employee because they may not be able to prove the existence of the contract or, the terms and conditions of employment, as illustrated in the case below.
Australasian Meat Industry Employees Union v Dick Stone Pty Ltd [2022] FCA 512 (the case)
This case was recently heard in the Federal Court of Australia. The Australasian Meat and Industry Employees Union commenced proceedings on the employee’s behalf.
Allegation – the employer failed to pay overtime
One allegation made reference to the employer’s failure to pay the employee overtime for hours worked in excess of 38 hours per week and outside the span of hours, provided for in the Award.
The Award
The employee was covered by the Meat Industry Award 2010 (the Award). The span of hours provision in this Award, for ordinary hours, are between 4.00 am and 9.00 pm on weekdays and between 4.00 am and 6.00 pm on Saturdays.
The employment agreement (contract)
There was a written contract in place between the employer and the employee. The contract stated that the employee was:
‘engaged as a Knife/Hand Labourer and was expected to work 50 ‘ordinary work hours’ per week between 2.00 am and 11.00 am on weekdays, and between 2.00 am and 7.00 am on Saturdays, plus reasonable additional hours as requested’.
However, the contract did not state the employee’s ordinary hourly rate of pay, entitlement to overtime nor the name of the modern Award.
The employer’s defence
The employer told the Court:
‘…the employee’s overtime entitlements were offset by the payment of a ‘blended rate’ that was above the Award minimum pay rates. The ‘blended rate’ was applied to the employee’s 50-hour week and satisfied the employer’s obligations under the Award.’
What the Court said
The Court disagreed stating:
‘the employer was not entitled to offset the employee’s overtime entitlements in circumstances where there was no such provision in the contract and also where it had not been communicated to the employee.’
The Court held that the employer had breached the Award by failing to pay the employee overtime rates between 2.00 am and 4.00 am on weekdays and Saturdays.
What we learned
This decision highlights that an agreement to pay an employee an above Award rate (a ‘blended rate’ in this case), must be provided for in a written contract to off-set payment of minimum Award entitlements.
In essence, any specific terms and conditions of employment that are agreed between the employer and the employee that fall outside minimum Award requirements, must be confirmed in a written employment contract to mitigate risk.
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