Following a Fair Work Ombudsman (FWO) investigation of an individual’s complaint, the employer called First IR for assistance in checking their observance of their agreement and the Act.  After we assisted them with the FWO issue, First IR conducted an audit of the employer’s Enterprise Agreement (EA) obligations to make sure there weren’t any other issues.  

We discovered three problems:-

Firstly, the audit revealed a wage escalation mechanism in the EA had not been applied correctly in all cases.  This mechanism provided increases, which had to be a fixed percentage or what the FWC awarded each July, whichever was the greater.  Unfortunately, the employer only applied the fixed increase.  Over the life of the agreement, FWC awarded more than this on a couple of occasions.  As such, the employer had misapplied the mechanism.  Fortunately though, they were not in breach because their actual rates of pay were higher overall than prescribed by the EA. 

The second problem arose because unlike some agreements, which prescribe increases for the life of the agreement only, this agreement didn’t say that. Instead, it provided for increases on each anniversary of the approval of the agreement.  This meant the employer was obliged to continue paying increases in accordance with the provision after the expiry of the agreement. 

Finally, the employer assumed that once their agreement had expired, they automatically reverted to observing the terms of the Award. 

First IR’s role was to report on these deficiencies and advise on ways to ensure ongoing compliance.  Once this was completed, we conducted a series of audits across the industry, for employers with very similar agreements.  In some instances, we identified potential shortcomings due to similar problems and advised the clients to check back over their records to ensure they were not in breach of their EA and the Act.  If these audits hadn’t been conducted, then many of the employers in the industry would sooner or later have been in breach of their agreements.  They would have had the liability for back-pay and potentially faced heavy penalties if prosecuted by the FWO. 

It became evident throughout this case that many employers believe that they are immune from breaches in workplace law because they have an agreement in place. This perception is just plain wrong.  Employers should ensure that they are observing their obligations under both their agreement and law, regardless of the fact that they have an EA.  They can do this by following and rechecking what is contained in their agreement from time to time.  If you are unsure of your obligations under your agreement, especially if it has expired, we suggest that you seek assistance to avoid receiving a complaint from an employee and the FWO comes knocking on your door.

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