Industrial relations and conditions of work

With M&A activity by Chinese companies in Australia totalling US$161.1 billion (A$176.57 billion) in 2009, Australia is one of China’s top targets for outbound investment.

Early involvement of legal counsel who specialize in labour and employment will not only help in the evaluation of an acquisition, but also flag issues that may otherwise surface at the post-acquisition and integration stage.

Employers and employees may negotiate the terms and conditions of employment in Australia. However, contracts of employment are often affected by industrial legislation and related instruments.

In addition, many employees work under terms regulated by collective agreements which are underpinned by the National Employment Standards. The Standards cover minimum rates of pay, maximum hours of work and some leave entitlements, and are built on and affected by pay awards for specific industries or occupations. Executive, managerial and professional employees are generally employed under individual employment contracts as opposed to collective enterprise agreements. The Standards will be applicable to these employees as well.

An employee’s conditions and terms of employment are governed by legislation which provides minimum standards for entitlements such as minimum hourly rates of pay, maximum hours of work (38 hours per week plus reasonable additional hours), annual leave, long service leave, sick leave, carers leave, bereavement leave, emergency service leave, parental leave and public holidays.

Employees in Australia generally enjoy four weeks’ paid annual leave (five weeks in the case of seven day shift workers); and are paid long service leave at the rate of three months’ leave for 15 years service or, in some locations or industries, three months for 10 years’ service.

Wages, superannuation and tax

Wage movements for the general workforce are determined through a combination of individual contracts of employment, collective bargaining and minimum wage adjustments determined by a national employment tribunal known as Fair Work Australia.

Salary movements for managerial, executive, professional and many administrative staff are primarily determined through individual contracts and market forces.

In order to avoid adverse tax liabilities, employers must pay minimum employer contributions to recognized superannuation funds for their employees. There are limited exceptions for short term casual workers.

The minimum rate of employer contributions is currently 9% of an employee’s ordinary time earnings, up to a salary cap of A$160,880 per annum (as from 1 July 2010). Many Australian businesses provide superannuation funds that have higher contributions, and therefore better benefits, for employees.

Residents of Australia are liable to tax on income derived from all sources, whether in or out of Australia, whereas non-residents are liable to tax only on income derived from Australian sources.

Employers are liable to tax on the value of certain fringe benefits provided to its employees (fringe benefit tax) and wages paid to employees (payroll tax).

Remedies available on termination

Termination of employment is regulated by legislation as well as by contract. Employers must comply with various rules when dismissing an employee whose employment is covered by an industrial instrument or is otherwise below a remuneration cap of A$113,800 (as from 1 July 2010). Employers who fail to do so may be required to reinstate or compensate employees found to have been treated unfairly or unlawfully. These remedies are in addition to any rights stemming from the employment contract.

Occupational health & safety

Legislation in each state and territory regulates occupational health and safety. There is also specific legislation dealing with the regulation of factories, shops, and the handling of hazardous substances and dangerous goods.

Safety management needs to form an integral part of business and a management processes to ensure legal compliance.

In addition, employers are obliged by legislation in each state and territory to take out insurance for their liability to pay workers compensation unless, in exceptional cases, they qualify as a self-insurer. Compensation systems in each state and territory provide benefits to employees who are injured in the course of their employment.

Discrimination

Unlawful discrimination in employment and employment-related activities is regulated by federal state and territory anti-discrimination legislation.

These laws have wide coverage prohibiting discrimination on such grounds as sex, race, religion, political belief or activity, disability, age, industrial activity, criminal record, family responsibilities, sexual orientation, gender identity, marital status, parental status or status as a carer, physical features and other grounds.

Unlawful discrimination can also occur in the context of broader business activities, particularly in the provision of goods and services to customers.

Unions

Employment legislation permits active participation by unions in the Australian industrial relations system. The level of unionization varies from industry to industry.

Employees have a legally-protected choice about whether to belong or not to belong to a union, or a particular union, or to involve a union in bargaining on their behalf. Unions have independent statutory rights of entry to relevant workplaces and other bargaining rights.

Recommended action

Companies that acquire Australian companies should take the opportunity to work out how their enterprise and employment policy will fit into the Australian industrial relations system. This is a complex matter requiring specialist knowledge and experience from legal, tax and human resources perspectives.

Acquirers can obtain critical advantages, and avoid damaging mistakes, by considering industrial relations and employment issues at the outset of an acquisition.

Michael Wadley heads Blake Dawson’s China Practice

Lee I Ching is a foreign lawyer in the Shanghai office of Blake Dawson

Blake Dawson would like to clarify that our May article, Can I get you another beer? Australia’s anti-corruption laws was written by Penelope Jessup, a foreign lawyer in our Shanghai office, and Jane Ellis, a senior associate in our Sydney office

Blake Dawson Shanghai office
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michael.wadley@blakedawson.com