Annual Wage Increases and Direction to Take Annual Leave Disputes – the latest from the Fair Work Commission

The global economic landscape is still suffering the effects of the COVID-19 pandemic as cases continue to increase throughout the world. For the most part, Australia has been successful in limiting the numbers of active cases of the virus and is progressing towards an national economic rebuild. Notwithstanding, the economic effects of the COVID-19 pandemic are (and will continue to be) felt throughout majority of sectors and industries at a local level.

The Fair Work Commission (the Commission) has offered a helping hand to employers to relieve financial pressures caused by the COVID-19 pandemic. In a first, annual wage increases will be implemented in a three-part process, with industries most affected by the COVID-19 pandemic only required to pay the increase from February 2021. Further, recent decisions of the Commission have set out what employers will need to establish in order to reduce their obligation to pay redundancies during COVID-19.

Annual Wage Review

Each financial year, the Commission undertakes an annual review of the wages for employees in the national workplace relations system. The Commission’s Expert Panel conducts the review and issues a decision that implements changes (if any) to the minimum wage rates in modern awards, and a national minimum wage order for employees not covered by a modern award or enterprise agreement.

The majority of the Expert Panel in the Annual Wage Review 2019-20 [2020] FWCFB 3501 (Annual Wage Decision) observed that the COVID-19 pandemic ‘casts a large shadow over the current economic environment’ and affected how the Commission would deal with the Annual Wage Review for the 2019/20 financial year. The Commission considered that a balance must be struck between the effects of the COVID-19 pandemic on relative living standards and the needs of those who received lower pay.

In the Annual Wage Decision, the Commission determined that the minimum wage would be increased from the first pay period on or after 1 July 2020. However, not all industries and sectors would receive the increase from this date. Rather, the Commission adopted a staggered approach to implementing the minimum wage increases – splitting all industries and sectors into three (3) groups with varying dates when the minimum wage increase would come into effect. The groups (and their relevant industries and sectors) are summarised as follows:

• Group 1 – operative minimum wage increase date of 1 July 2020. Group 1 covers industries and sectors less affects by the COVID-19 pandemic including (but not limited to) frontline health care, social assistance workers, teachers and childcare workers and employees engaged in essential services.
• Group 2 – operative minimum wage increase date of 1 November 2020. Group 2 covers industries and sectors adversely impacted by the COVID-19 pandemic but not to the same extent as sectors covered by Group 3. Covered industries and sectors include (but are not limited to) mining, meat industry, manufacturing, clerical work and construction.
• Group 3 – operative minimum wage increase date of 1 February 2021. Group 3 covers industries and sectors most adversely affected by the COVID-19 pandemic and includes accommodation and food services, aviation, retail trade, arts and tourism.

The Commission held that organisations who had suffered less of an impact from COVID-19 would be able to manage the wage increase and therefore could pay the increase from 1 July 2020. Conversely, businesses severely affected by COVID-19 would not be required to pay the wage increase for an extended period.

Direction to take Annual Leave Disputes

The Federal Government’s JobKeeper payment scheme (JobKeeper Scheme) was implemented with the objective of providing financial relief to employers during the COVID-19 pandemic – you can find further information regarding the JobKeeper Scheme here. In summary, the JobKeeper Scheme is a temporary subsidy for eligible employers who can apply to receive fortnightly payments of $1,500.00 per eligible employee.

However, difficulty arises when eligible employees are not receptive of their employer’s access to payments, or directions made under, the JobKeeper Scheme. In particular, employees must not reasonably refuse an employer’s request for the employee to take paid annual leave pursuant to section 789GJ(1) of the of Part 6-4C of the Fair Work Act 2009 (Cth) (Act), which relevantly states:

‘(1) If:

(a) the employer of an employee qualifies for the jobkeeper scheme; and

(b) the employer is entitled to one or more jobkeeper payments for the employee; and

(c) the employer gives the employee a request to take paid annual leave; and

(d) complying with the request will not result in the employee having a balance of paid annual leave of fewer than 2 weeks;

the employee:

(e) must consider the request; and

(f) must not unreasonably refuse the request.’

(our emphasis added)

In the case of McCreedy v Village Roadshow Theme Parks Pty Ltd [2020] FWC 2480 (McCreedy), the Commission issued its first decision regarding a dispute arising from the JobKeeper Scheme and section 789GJ(1) of the Act. In McCreedy, the employer, Village Roadshow Theme Parks Pty Ltd (VRTP), was unable to operate its theme parks as a result of the impacts of the COVID-19 pandemic. A number of its employees were stood down from work which included Ms McCreedy. VRTP issued a letter to employees requested that all employees with an annual leave balance greater than 10 working days take 2.5 days per week of annual leave up until either the employee had a leave balance remaining of 10 days or 27 September 2020 is reached. Part-time employees were requested to take annual leave equivalent to half their ordinary hours.

Ms McCreedy had been employed by VTRP for 22 years and had accrued a substantial annual leave and long service leave balance. At the time of the direction, Ms McCreedy worked two days per week on a part-time basis. Ms McCreedy was directed to take one day of annual leave per week until 27 September 2020, or until her leave balance had reduced to four days.

Ms McCreedy refused to take annual leave and subsequently made an application to the Commission. Ms McCreedy submitted that the JobKeeper Scheme was not intended to assist employers in reducing leave balances and that VRTP had unfairly targeted employees with substantial leave accruals. Further, Ms McCreedy submitted that her refusal to take annual leave was not unreasonable as she had accrued the annual leave to use for several holidays she had booked – noting that these holidays had yet to be approved by VRTP.

In her decision, Commissioner Hunt held that the test was not “... whether VRTP has acted reasonably or unreasonably; it is whether Ms McCreedy has unreasonably refused the request of VRTP”. Commissioner Hunt determined that Ms McCreedy’s reliance on the fact she had already booked several holidays (albeit unapproved) was not a factor which weighed in her favour. Commissioner Hunt held that VRTP’s annual leave policy stated that leave must be approved first to discourage employees from booking annual leave that may possibly be refused. Notably, Commissioner Hunt also held that the fact Ms McCreedy was receiving almost double her fortnightly earnings from the JobKeeper Scheme was not a relevant consideration. Commissioner Hunt concluded that Ms McCreedy’s application and submission’s were “... incredibly unsympathetic, and in my view, belligerent and unwarranted attacks on VRTP.”

Take Home Messages

Employers are still required to pay an annual wage increase. However, as a first step, employers will need to determine which modern award covers their organisation and then, which group that modern award falls into in accordance with the Annual Wage Decision. Importantly, employers need to ensure that employees’ salaries and wages remain about the new rates and a review is undertaken of all employment instruments.

While the McCreedy case illustrates that employees must prove their refusal to take annual leave was not unreasonable, employers should still exercise caution when directing employees to take leave. Under the Act, an employer is not required to give a formal notice to an employee to take paid annual leave. However, for the avoidance of doubt and to comply with any consultation provisions of applicable enterprise agreements, we recommend employers provide notice to employees directed to take paid annual leave. Further, the McCreedy case serves as a timely reminder to ensure employers have robust leave taking policies in place that are accessible to employees.

For more specific information on any of the material contained in this article please contact Sathish Dasan on +61 8 8210 1253 or sdasan@normans.com.au, Ganesh Krishnan on +61 8 8217 1395 or gkrishnan@normans.com.au or Thomas Tagirara on +61 8 8217 1337 or ttagirara@normans.com.au.