From 1 January 2010, employers covered by the Fair Work Act 2009 will be required to give a Fair Work Information Statement to all new employees.

The Statement, released on 3 December by the Fair Work Ombudsman, includes information on:

• the 10 National Employment Standards, including their operation in transfers of business;
• modern awards;
• the process for making enterprise agreements;
• individual flexibility arrangements;
• freedom of association and the workplace rights safeguarded by the Act's general protection provisions;
• termination of employment;
• right of entry; and
• the functions of the Fair Work Ombudsman and Fair Work Australia.

The Statement can be downloaded from the Fair Work Ombudsman website. It will soon be available in languages other than English. The website also provides basic guidance on how employers should use the Statement.

Employers will be required to give new employees the Statement before, or as soon as practicable after, they start employment. Employers only have to give a new employee the Statement once in a 12 month period, so an employer who re-hires a casual employee several times over a year only has to provide the Statement once in that year.

Employers will be able to provide the Statement to employees by:

• giving it to the employee in person;
• mailing it to the employee's home by pre-paid post;
• emailing to the employee's work email, or other nominated email, a link to the page on the Fair Work Ombudsman’s website where the statement is located, or a direct link to the statement on the employer's website; or
• faxing it to the employee's work or home fax number.

By Jessica Paten, Solicitor

In a previous HopgoodGanim Alert, we reported that the Queensland Government had introduced legislation into State Parliament that aimed to refer the State’s industrial relations powers for the private sector to the Commonwealth. As reported, the purpose of the legislation was to enable federal industrial regulation of those private sector employers who, until now, fell outside the 2006 Work Choices reforms and the new Fair Work Act, and therefore continued to be regulated by Queensland industrial legislation.

The categories of employers to whom the legislation applies are those who operate other than through a corporate structure (sole traders and partnerships) and corporate employers who do not substantially engage in trading or financial activity.

The Fair Work (Commonwealth Powers) and Other Provisions Bill was passed by the Queensland Parliament on 11 November after lively debate that saw politicians on both sides invoking, among other things, the spirit of Gallipoli, the ghost of Banjo Paterson and references to “policy tumbleweed”.

The State Act received Royal Assent on 19 November, but until recently there was a strong possibility that the referral, due to begin on 1 January 2010, could fall down should the equivalent Commonwealth legislation flounder in a Senate preoccupied with emissions trading legislation. It certainly came close to doing so.

However, on 2 December, the Fair Work Amendment (State Referrals and Other Measures) Bill 2009 passed through the Senate without the need for a formal vote, just minutes before Federal Parliament rose for the year.

What this means for Queensland, and for all States other than Western Australia (which has refused to refer its powers), is that private sector employers that currently operate within the State industrial relations systems will become part of the federal system from 1 January 2010. For further details of this and other implications, please see our earlier Alert.

By Michelle Eastwell, Senior Associate and Jessica Paten, Solicitor

“Golden handshake” payments given to executives upon termination have been under the regulatory microscope since March this year. With federal legislation coming into operation on 24 November that regulates these payments, some executives may find that their anticipated termination payments are not so golden after all.

The Government first announced the proposed reforms on 18 March. These reforms were intended to empower shareholders to curb excessive golden handshake payments through a number of measures. These included significantly lowering the threshold at which termination benefits must be approved by shareholders, and broadening the reach of the provisions by expanding the benefits caught and the officers to which the provisions apply.

The Corporations Amendment (Improving Accountability on Termination Payments) Bill 2009 finally passed on 19 November, after being bounced between the houses of Parliament and undergoing a series of amendments from the legislation initially proposed. The Bill (now an Act) has significantly changed the laws on golden handshakes.

What does the new Act do?

The Corporations Act regulates the payment of termination benefits to directors of companies. The previous golden handshake provisions prohibited benefits being given to directors in connection with their retirement from office (or employment) above a set cap unless:

• shareholders approved the benefits; or
• they fell within one of a very limited number of exemptions. 

Under those provisions, the relevant benefit cap was up to seven times a person's annual remuneration, and only applied to directors.

As a result of the new Act, these provisions now apply to those who hold (or have held in the past three years) a “managerial or executive office”. This includes anyone whose details were included in the directors’ report, and now captures the directors of a company as well as the five most highly remunerated officers.

In addition to expanding the scope of “termination benefits”, the other key change is to the level at which the requirement for shareholder approval is triggered. Under the previous legislation, shareholder approval was only required once the value of the termination benefit exceeded seven times a director’s annual remuneration (including both fixed and at risk remuneration). Now, shareholder approval will be required as soon as the termination benefit exceeds one year’s base salary, which generally only includes fixed remuneration and statutory entitlements, and excludes the majority of at risk remuneration.

The provisions of the Act apply to retirement from an office or employment held under an agreement which is made, renewed or extended, or for which there is a variation of a condition, after the Act has commenced. The broad “variation of a condition” limb is particularly concerning, as the explanatory memorandum to the Bill indicates that any change to remuneration will amount to a “variation of a condition”.

The ramifications for breaching these provisions are significant. In addition to statutory penalties for the company of up to $99,000, and the executive of up to $19,800, any benefits received that contravene the proposed provisions are to be held in trust by the recipient and must be immediately repaid. This applies to the whole payment or benefit, not just to the amount that exceeds the one year’s base salary cap.

What should employers do?

Given that the Act has significantly changed the way in which termination benefits can be paid to directors and certain senior executives, and that considerable penalties can follow from non-compliance, it is essential that employers get on the front foot. We recommend that you consider the following:

• Conduct an audit of your standard form executive employment contracts, as well as incentive plans and policies as they relate to termination benefits. This will include payments in lieu of notice, severance pay entitlements that differ from those entitlements available to non-executive employees, automatic vesting of equity arrangements, pensions and payments for restraints of trade. If existing arrangements provide for termination payments that can or are likely to exceed the 12 month base salary cap, you may need to amend these to ensure they comply with the requirements of the Act - particularly in relation to shareholder approval for payments, where that is required.
• Look at how executive remuneration arrangements can best be structured to avoid breaching the provisions of the Act. This may involve balancing base salaries and incentive or bonus payments. Avoid leaving it to the courts to give a dollar value to your executives’ base salaries - if you outline this in your employment contracts, there can be no doubt.
• Give consideration to including claw back provisions in your contracts where termination payments beyond the cap are inadvertently paid without shareholder approval.
• Think about the timing of obtaining shareholder approval at a general meeting of the company. How can a shareholder vote best be co-ordinated with executive or director departures, without contravening the requirements of the Act regarding the timing of that meeting?
• Think twice before entering into fixed-term contracts. If you find yourself wanting to terminate the employment of an executive under a fixed-term contract, you may need to get shareholder approval or risk being taken to court by the employee for breach of contract. Related to this, be careful when entering into any out-of-court monetary settlements relating to the termination of an executive’s employment. If in doubt, seek legal advice.
• Before increasing executive remuneration, consider whether this will result in their contract being amended so as to constitute a variation of the contract. This may bring the employee within the scope of the Act, where they may not have been already.

For more information about any of the issues discussed in this newsletter, please contact HopgoodGanim’s Industrial and Employment Law team.

Andrew Tobin
a.tobin@hopgoodganim.com.au

Rebekah Fryer
r.fryer@hopgoodganim.com.au

Jessica Paten
j.paten@hopgoodganim.com.au

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