employee

Is your business using the correct form of Fair Work Information Statement?

On 13 August 2020, the High Court of Australia handed down a decision about the method of accruing and taking paid personal/carer’s leave under the National Employment Standards.

The case was Mondolez Australia Pty Ltd v AMWU, which overturned a decision made by the Full Federal Court in August 2019 that could have resulted in significant claims for backpay and contraventions of the Fair Work Act 2009 (Cth) as its effect included that part-time employees are entitled to 10 days’ paid personal leave per year (the same as a full time employee), regardless of the number of days actually worked.

The High Court found that the entitlement to 10 days of personal/carer’s leave is calculated based on an employee’s hours worked, not days when interpreting s.96(1) of the Act such that a ‘day’ refers to a notional day, consisting of 1/10th of an employee’s ordinary hours of work in a 2 week period. Accordingly, 10 days of personal leave can be calculated as 1/26 of an employee’s ordinary hours of work in a year.

The Fair Work Ombudsman has updated the form of Fair Work Information Statement (FWIS) as a result.

Employees need to ensure they provide the correct form of FWIS to all new employees. Is your business using the correct form of Fair Work Information Statement?

FURTHER INFORMATION

For more information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au to discuss your needs.

This information is general only and is not a substitute for proper legal advice.

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Coronavirus: JobKeeper subsidy

Further to our COVID-19 blogs on employee standdowns and negotiating changes to commercial leases but in this post, the Government on 30 March 2020 announced a $130 billion JobKeeper payment system to help keep more Australians in jobs and support businesses affected by the significant economic impact caused by the Coronavirus. Those workers that are covered by the scheme will receive a fortnightly payment of $1,500 (before tax) through their employer. Employers are to pay their employees and then get reimbursed by the Government later.

The payment is intended to ensure that eligible employers remain connected to their workforce so that businesses are in a position to restart quickly when the pandemic is over.

To get the payments, employers must be eligible and the employees must be eligible.

If your business has been significantly impacted by the Coronavirus (generally able to show a 30% decline in turnover in the relevant month or quarter relative to a year earlier), the business will be able to access a wages subsidy for a maximum of 6 months to assist you to continue paying its employees.

Eligible employees are those who:

  • are currently employed by the eligible employer (including those stood down or re-hired);
  • were employed by the employer at 1 March 2020;
  • are full-time, part-time or a casual employed on a regular basis for longer than 12 months as at 01 March 2020;
  • are at least 16 years of age;
  • are an Australian citizen, the holder of a permanent visa, or a Special Category (Subclass 444) Visa Holder; and
  • are not in receipt of a JobKeeper Payment from another employer.

To register your business’s interest in the JobKeeper system, visit the Australian Taxation Office’s dedicated page.

FURTHER INFORMATION

For further information in relation to legal issues arising from Coronavirus or if you need to discuss how to best deal with employment issues, please contact us on (02) 9521 2455 or email help@mckilloplegal.com.au.

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your legal concerns or objectives.

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Coronavirus: Employees and standdowns

Many businesses are struggling at present with the turndown in sales that are a consequence of the Government’s social distancing rules to help slow down the spread of COVID-19. Those businesses are seeking to minimise costs so as to be able to survive until the Coronavirus heath crisis ends, which appears to be at least 6 months away.

The 2 biggest expenses in business are generally rent and employee/payroll. In another blog post, we discuss how lessors and lessees can negotiate mutually beneficial but generally temporary changes to their commercial leases but in this post, we discuss employee issues.

Options for employers

It is always an option for employers and employees to agree on things such as:

  • working remotely;
  • reduced hours;
  • reduced pay; or
  • taking leave (either accrued or in advance).

Where a business is unable to agree with their staff as to such matters, or if the business needs to significantly and quickly reduce costs or go into hibernation and not just change the way it goes about its business, the first point of reference in relation to the employer/employee relationship is the Employment Contract, followed by any relevant Award. If an Enterprise Bargaining Agreement or EBA applies, then that is the place to look.

Casuals and those on probation are unfortunately the first to be let go as employers seek to minimise costs. This article assumes full time or part time employment.

Often, employment contracts have provisions that allow for the standing down of employees where there is not enough work to keep them engaged.

Assuming there is such a right, then if there is work they can do (even if not their normal role), they can be redeployed but if not, the standdown option generally would be available.

Standdowns are periods where the employment relationship is still in place but there is no payment made by the employer.

So as to keep paying employees at such a time when a standdown is warranted, a business could for example give notice of a requirement to take any accrued annual leave and possibly accrued long service leave. Taking leave in advance is also an option but it does not assist the business as it is still incurring the wage costs and the employees are then in debt to their employer for leave taken but not yet earned.

A benefit to the business of paying out leave entitlements is that this also reduces the businesses’ leave liability in its books (and the benefit to the employee is still getting paid). Note that the payment of leave loading (if leave loading is required by any Award or agreement) is also required when leave is being taken. There is generally no such payment of loading if leave is taken in advance).

Employment contracts or Awards may provided for a period of notice for a standdown but in the absence of that, reasonable notice should suffice.

Where it is not covered in any other document, s.524 of the Fair Work Act 2009 (Cth) can apply. It provides:

(1)  An employer may … stand down an employee during a period in which the employee cannot usefully be employed because of one of the following circumstances:

 …

(c)  a stoppage of work for any cause for which the employer cannot reasonably be held responsible.

Where an employer simply faces a reduction in trade volumes or where it is merely uneconomical to continue to employ staff, it can be a grey area as to whether this is considered a “stoppage” of work for the purposes of the legislation however, where an industry has been shut down as a result of a ministerial direction or public health orders, it will generally be uncontested.

Whilst on stand down:

  • annual leave, personal leave and long service continue to accrue;
  • employees can access personal and carer’s leave (provided they comply with notice and evidence requirements); and
  • employees must be paid for public holidays where it would ordinarily fall on a day they have been stood down.

The main thing to note is that on a standdown, the employees are not being terminated or made redundant – the role is still there, just they can’t be usefully engaged. It may be that termination or redundancy is still an option but it is generally a last resort.

NOTE: Since this blogpost, the Government has announced the JobKeeper subsidy.

FURTHER INFORMATION

For further information in relation to legal issues arising from Coronavirus or if you need to discuss how to best deal with employment issues in light of the current health crisis, please contact us on (02) 9521 2455 or email help@mckilloplegal.com.au.

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your legal concerns or objectives.

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Are you hiring an Employee or a Contractor?

Are you hiring an employee or a contractor? This is an important question often overlooked by business owners.

What is the difference between an employee and a contractor?

The difference between an employee and an independent contractor is based on many different factors. No single factor determines whether someone is an employee or a contractor. Instead, the Courts will look at each case and make a decision based on the totality of the relationship between the parties when determining the status of an engagement.

There are some common factors that may contribute to determining whether a person is an ‘employee’ or an ‘independent contractor’ (or ‘contractor’ or ‘sub-contractor‘):

Employees

Employees generally:

  • do not operate independently of the business engaging them
  • are directed in how and when to perform their work
  • cannot delegate their work to someone else or pay someone else to do it
  • are paid per hour, project or a commission
  • are provided with all tools and equipment required to perform their work or gets an allowance to provide these things
  • take no commercial risks – the business is responsible for the work performed or fixing any issues with it
  • have an expectation of continuing work (except casuals)
  • are generally not employed by other businesses at the same time (at least for most full time employees)

Contractors

Contractors on the other hand:

  • do operate independently of the business engaging them
  • have freedom as to how and when to perform work, subject to the terms of the arrangement
  • may delegate or further subcontract out their work, subject to the terms of the agreement (Services Agreement or Contractor Agreement etc)
  • are paid for a result or outcome, even if this is on an hourly rate basis, a commission arrangement or per project
  • supply most of their own tools and equipment
  • are liable for the work performed and are liable to remedy or pay the costs of fixing any defects
  • are responsible for their own employees and sub-contractors
  • are usually engaged for a specific task or purpose
  • may accept or seek work from other businesses

Other differences in their rights and the obligations or the employer or principal include:

  • Independent contractors issue invoices (or tax invoices if registered for GST) whereas employees are paid regularly (weekly, fortnightly or monthly).
  • Employees are entitled to the benefit of the rights under the Fair Work Act 2009 (Cth) (FW Act) and any relevant Award or industrial agreement (including for things such as leave, overtime etc) as well as having the compulsory superannuation contribution paid to their superannuation fund.
  • Employees have tax withheld and paid on their behalf to the Australian Taxation Office where as an independent contractor will pay their own tax to the ATO (and GST if registered for GST).

What if you get it wrong?

If you pay someone as a contractor when they are really an employee, the employee may miss out on important benefits such as leave entitlements and superannuation. Although you may have paid the agreed rates or price and any applicable GST, the employee may be able to pursue the business that engaged them for those unpaid entitlements and the employer may be prosecuted. Also, if the “contractor” doesn’t pay tax, the employer may be liable for the tax that ought to have been withheld.

Many businesses that deliberately arrange in “sham contracting” (where a person ought to be an employee but they are engaged and remunerated as a contractor) are penalized by the Fair Work Ombudsman under the FW Act.

Another unexpected consequence can be that where those engaged as independent contractors are not actually independent at all (for example where they do not provide services to any other businesses) or are really employees can be the issue of payroll tax payable to Revenue NSW under Payroll Tax Act 2007 (NSW). Contractors can be deemed employees for the purpose of payroll tax if they don’t offer their services to the general public, working only for one business.

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to any employment related issue or any business/commercial law matter, contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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Employment Contracts

Are the Employment Contracts used by your business up to date?

Employees are arguably the most important asset of your business. They are also potentially one of the most risky.

Employees have contact with customers, form relationships with them, suppliers and referrers, have access to all of your other business assets such as databases, intellectual property and trade secrets.

When an employee leaves your organisation, there is potential for them to take more then their personal belongings with them when they go.

Employees are arguably the most important asset of your business. They are also potentially one of the most risky

For these reasons having a robust, yet commercial and flexible, employment agreement is essential.

What should your employment contract include?

At the very least, a contract of employment should include:

  • Position, duties and responsibilities (including whether full time, part time or casual)
  • Hours
  • Probation (for new employees or roles)
  • Remuneration and other benefits (including superannuation)
  • Leave entitlements (as well as obligations such as notice, reporting etc)
  • Confidentiality
  • Intellectual property ownership
  • Consenting to reasonable surveillance in the workplace
  • Obligation to comply with Workplace Policies including those relating to anti-discrimination and bullying, email and internet use and the like
  • Termination (including notice provisions that comply with the National Employment Standards)
  • Obligations on termination (such as returning property) and those that continue after termination (including appropriate and enforceable Restraints of Trade)
  • A copy of the Fair Work Information Statement

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to any employment related issue or any business/commercial law matter, contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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Minimum wage increase

The Fair Work Commission has, by the National Minimum Wage Order 2018, increased minimum wages by 3.5% from the first pay period starting on or after 1 July 2018.

This minimum wage increase applies to all employees paid the national minimum wage – employees will be entitled to a minimum take-home weekly pay of $719.20, or $18.93/hour.

Employers should review the pay rates of all employees to ensure that they are being paid at or above the appropriate pay rate.

A review should also be undertaken to ensure those employees on “annualized salaries” remain appropriately remunerated.

Employment contracts

If your business has not done so recently, it may be a good time to update any Employment Contracts to ensure that they cover important issues such as Restraints of Trade and consider any amendments to Workplace Policies

Further information

If you would like any more information in relation to employment law, disputes or business issues generally, please contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your legal concerns or objectives.

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The importance of workplace policies

All employers need to maintain, develop and implement appropriate workplace policies in their business.

The need for these policies is not only compliance with relevant legislation, but also to protect the businesses against claims which might arise from inappropriate conduct of employees. Creating and enforcing workplace policies is one way in which employers may be able to effectively prevent or manage such claims.

Putting in place suitable policies can be a time-consuming task and one that is potentially dangerous for those who are not familiar with the legislative and contractual requirements involved.

The purpose of workplace policies is to place both the employer and employees (or prospective employees) on notice of certain things such as prohibited conduct. They often prevent any serious problems arising but if problems do arise, the employer is usually able to prove they upheld their legal duty by showing compliance with an established written policy.

We can tailor policies to meet the requirements of your particular business.

The following is a non-exhaustive list of topics that employers may wish to cover with appropriate policies:

  • Equal employment opportunity
  • Discrimination, harassment, bullying and violence
  • Work health and safety
  • Appropriate email and internet use
  • Workplace surveillance
  • Drug and alcohol use
  • Mobile telephone use
  • Dress codes
  • Annual leave and sick leave
  • Dispute resolution
  • Counselling and disciplinary procedures
  • Privacy
  • Redundancy

The workplace policies should be drafted so that they compliment the employment contracts in place.

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to workplace policies, business law or employment related matter, contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your legal concerns or objectives.

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Selling your business?

So you have an offer to buy your business. How exciting!

Although there may be agreement on the price being paid and the amount of deposit, what else needs to be considered?

  • How is the price apportioned between goodwill and equipment?
  • Have you considered the costs associated with the sale – you may have an agreement with a business broker, but there are lawyers, accountants, financial advisers also.
  • What about tax, capital gains tax (CGT) in particular, and is GST payable?

Who does what?

You need good advice. You are great at what you do, but you cant do everything. You need a great team of advisers – this is their thing.

Your lawyer will be required to prepare the legal documents that give effect to the sale (such as Business Sale Contract, Share Sale Agreement, Deed of Restraint, Deed of Consent to Assignment of Lease, Employment Contracts, Deed of Novation, Consultancy Agreements etc… yes, there may be others).

Your accountant can advise on the price apportionment and taxation implications, whether GST is payable or not, and how to make the most of any CGT concessions, exemptions and rollover relief such as those relating to small business and retirement.

Your financial adviser can give you advice on what to do with your cash to make the most of it now or in retirement.

What are you actually selling?

It would seem obvious, but have you considered what you are actually selling? Are you selling your business or, in the case of a company or unit trust, the entity that owns it?

There is a big difference, particularly given that entitlements to income and liability for expenses incurred prior to completion of the sale will remain with the vendor under a business sale whereas in the case of a share sale, the whole lot will be under the control of the purchaser from completion.

This will also affect how much due diligence a purchaser may undertake – as any prudent purchaser would have concerns about potential claims, tax debts etc

The usual things

Assuming a sale of business, not a share sale, some of the other things to consider is what is included in the sale?

  • Business name
  • Plant and equipment used by the business
  • Stock
  • Customer lists
  • Agreements with suppliers, referrers… to the extent they can be transferred
  • Phone/fax numbers, logos, domain names, email addresses social media etc
  • Intellectual property – do you have any trademarks?
  • Licenses/permits to operate the business
  • Are staff being terminated or transferring to the purchaser? What are employee entitlements are due?
  • Are the business premises leased? Is the agreement subject a an assignment of the existing lease or the granting of a new lease?
  • Personal Property Securities Register issues – for example, is the telephone system under a hire purchase agreement? Is the photocopier leased?
  • Do you need the consent of anyone to the sale proceeding? Eg, a franchisor, a mortgagor, someone you have given a first option to purchase to for example?
  • Are there to be restraints of trade/non-competition provisions that affect you? What about for key staff?

Although an exciting time, there are many issues that need to be considered when you are selling your business. The abovementioned items are certainly not an exhaustive list of things to consider and every business is different, but hopefully it gets you thinking about what you may need to consider when selling your business.

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to buying/selling businesses, intellectual property or any commercial law matter, contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au.

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your legal concerns or objectives.

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Minimizing risk in your business

Running a business is risky and small businesses can be especially so. Minimizing risk in your business is crucial.

Often, SME owners put their own personal assets on the line, whether to borrow funds from a lender to start up or buy stock or equipment or by signing a guarantee in relation to suppliers and others for the debts of the business.

There are several methods of protecting personal assets from creditors, but it is a process that many don’t follow. Some are quite simple and easy to put in place. They include…

Placing assets in a spouses’ name or in a family trust

In most circumstances, creditors will not be able to make a claim upon assets owned by your spouse or held by a discretionary trust, provided that you are not the trustee. If your spouse is the trustee, then he or she is the person who will usually decide how to divide up the income or capital of a trust (or not to).

Of course, stamp duty and capital gains tax issues must also be considered before acquiring or transferring assets as well as the potential operation of claw back provisions. The loss of the principal place of residence CGT exemption or the land tax issues may be a factor weighing against doing this.

In the end, it is weighing up risk vs benefits and making an informed decision regarding any asset protection measures.

Encumbering assets if you cannot transfer them

An asset that is mortgaged to its value is not attractive to a creditor. The mortgagee in such a case is the only entity that will benefit from the subsequent sale of the asset.

A guarantee form a person without assets is effectively valueless. Often businesses don’t check to see what a guarantor actually owns.

If you seek a guarantee from a director of another business, you could make some inquiries about their credit/financial position before creating an account,

Correctly structuring your business

Sometimes it is not feasible to establish an asset-holding entity and a trading entity (as many small business start-ups are strapped for cash) but it can be a great way to protect the business assets from day to day trading risks. Even getting the type of business structure right from the beginning (sole trader, partnership, company, trust or combination etc) can have a massive impact on your business.

It is possible to establish a company with a single director  and/or single shareholder. The company dealing with third parties, supplies, customers and the like is the entity that may be liable to them, not the shareholders.

The shareholders are only liable to the company for the unpaid amounts (if any) on any issued share capital. This liability is usually a nominal amount such as a dollar. Shareholders have no liability to third parties unless they agree to it, such as by giving a guarantee.

Company directors may have some liability but only in limited circumstances can the corporate veil be lifted. Courts may be prepared to lift the veil in limited circumstances, such as in the case of insolvent trading, fraud or misrepresentation, inappropriate transactions or where public policy requires it.

Charging assets (and properly recording the charge)

Before lending money to your business, a charge should be created in the correct form and that form recorded as against assets such as real property (by way of mortgage recorded at Land and Property Information or another State’s land titles registry) or against non-real estate assets (by way of a Specific or General Security Deed and making a registration on the Personal Property Securities Register (PPSR)) to secure repayment of that money in preference to other creditors should the business fail.

Having proper terms of trade

Most businesses, if they have them at all, have terribly inadequate terms and conditions of trade. Often they are just copied and pasted from other documents and not tailored, leaving businesses thinking they are adequately protected when they really are not covered at all.

T&Cs should be built to protect your particular business and should be a work in progress, tweaked to solve or prevent problems that have arisen in your business from occurring again,

Avoiding personal guarantees altogether

A guarantee is a contract by which a guarantor promises that another person or entity will comply with his, her or its obligations to a third party and if they don’t, the guarantor will. The most common example involves bank loans where a guarantor such as a parent promises to repay the loan of their child if the child defaults.

Becoming a guarantor can be extremely risky, particularly when large liabilities are involved. Under most guarantees, the guarantor becomes immediately and primarily liable to repay the debt (and the lender does not have to wait for attempt to recover from the borrower before calling on the guarantee).

As a practical matter, many businesses cannot obtain finance unless a personal guarantee is provided. If this is the case however, whenever the loan is actually repaid or if the business can prove it is financial stable and secure, the guarantee should be discharged so that the guarantor cannot continue to rely on it at a later date concerning subsequent transactions.

Managing staff

One of the biggest risks to your business is that of staff leaving, and worse still, taking valuable information and assets with them.

Having appropriately drafted Employment Contracts with restraints of trade in them is a must.

Superannuation contributions

In many circumstances, superannuation entitlements can be protected from bankruptcy trustees. There may be no protection for example where the payments are made for the primary purpose of defeating creditors.

Making contributions to super is getting harder and harder with the Federal Government’s recent changes to the superannuation laws however, this can be an effective long term tool for wealth creation and asset protection. This will also usually involve the assistance of your financial planner.

Business succession planning

If you are in business with another person, what happens to your business if you or your business partner gets seriously injured or dies?

Do you have an appropriate and valid Will, Enduring Power of Attorney and Appointment of Enduring Guardians in place?

Usually having these estate planning documents is not enough. Presumably your business partner would give all of his or her assets to their spouse on their death through their Will. What if you don’t want to me in business with your business partner’s partner?

You should have in place business succession documents to deal with this such as a Buy/Sell Deed with appropriate insurances, a Shareholders Agreement (for companies), Unitholders Agreement (for unit trusts) or a Partnership Agreement (for businesses operating through a partnership structure).

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to starting a new business, commercial law, business disputes or estate planning/business succession issues generally, contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au.

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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What is a restraint of trade?

Post engagement restrictions

Often, employment contracts and contractor agreements contain restrictive covenants or ‘restraints of trade’ to protect businesses when an employee or service provider / contractor leaves.

So, what is a restraint of trade? A restraint of trade is effectively a restriction on the employee or contractor as to where they may work and who they may work for during, and for an agreed period after the termination of, their engagement. Restraints often restrict an employee’s ability to work for competing businesses and within a certain geographical area for a specified period of time.

How far can they go?

A valid restraint should only restrict activities reasonably necessary to protect the legitimate interests of the business that has the benefit of it. Those legitimate interests may include clients, referral relationships, trade secrets, confidential information and the like.

A restraint clause that is too wide, and therefore too restrictive, is generally unenforceable. A restraint should be tailored to accurately reflect the nature of the business activities being protected and only go so far as to protect them, when looked at reasonably. Where restraints seek to protect more than is reasonably necessary to protect the business, they can be struck down. There are public policy considerations in not preventing competition. Restraints are read strictly against the business that seeks to impose it.

Where there are no restraints in the employment or services agreement, there is no restraint and the business will only be able to rely upon their common law rights, which are often inadequate.

How are they enforced?

To enforce a restraint, the court requires that the party seeking to enforce it show that the restraint is reasonable – this will depend on the nature of the business, the restraint period, the restraint area and the nature of the work undertaken by the person or entity affected by it.

Often, enforcement takes the form of an injunction, seeking damages or an accounting for profits.

Further information

If you would like any more information in relation to employment law, disputes or business issues generally, please contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your business and employment law needs.