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Historically, a Federal Award was an order made by the Australian Industrial Relations Commission (AIRC) in settlement of an interstate industrial dispute. The order would contain terms and conditions of employment that would govern the employment relationship. Sometimes the "dispute" was really only a technical one to give the AIRC power to act. In 1996 the concept of an industrial dispute for award-making purposes was re-defined and limited to 20 topics called "allowable award matters". As a result, awards could only create enforceable rights and obligations so far as the underlying industrial dispute dealt with an allowable award matter or things incidental to such matters, and then only by prescribing minimum terms and conditions.

The Workplace Relations Amendment (Work Choices) Act 2005 (Cth) ("Work Choices") amendments further limited the content of awards.

Awards have historically been binding only on named respondents (parties). A list of respondents was usually found in the award itself. An employer may also have been bound if it was a successor of a named party, or if the employer belonged to a recognised employer organisation that was named as a party to the award. The award also named the union or unions which were party/parties to it. It was the union that negotiated the award on behalf of employees who were eligible to be its members.

Generally, individual employees did not appear before the AIRC on the hearing or determination of a "dispute".

Common Rule Awards operate within Tasmania. That is, the AIRC can make a Federal Award that applied to all employers within an industry in Tasmania, without the need for the employer to have been party to a dispute. In practice the AIRC extended existing Federal Awards, with some variations to apply to a whole industry.

Work Choices sought to make awards a marginal part of industrial regulations in Australia by introducing a range of ways in which the award terms and conditions could be avoided, one mechanism being not using the award as a comparison for a "fair" agreement.

FW Act / modern awards

Under the FW Act, awards have a more central role in the industrial relations system than under Work Choices. Awards provide part of the safety net of terms and conditions, along with the NES (see: "National Employment Standards"). Awards are also used as a reference instrument to decide whether an agreement passes the "No Disadvantage Test" (pre-1 July 2009) and the "Better Off Overall Test" (BOOT) (post-1 July 2009).

From 1 January 2010 new modern awards and the NES took the place of the old awards. The old awards no longer apply to any employees or operate for any other reason under the Act, save as a historical reference or where expressly, or by deeming, they are to be incorporated into modern awards, the NES or enterprise agreements. Modern awards have reduced the overall number of awards by combining the coverage of a number of awards into one award.

Modern awards do not apply to workers on higher incomes. The FW Act defines a high income earner as an employee who has a written guaranteed income, accepted by the employee of greater than the amount set by regulations. From 1 July 2011 the amount set by the regulations is $123,300 for full-time workers. Note that workers are not excluded solely because of the level of income, they must also have a written and accepted guarantee of a specified income to be excluded from award coverage (see: ss47(2) & 329-333, FW Act).

Modern awards can contain 10 minimum standards in addition to the NES, (s139). These minimum standards are:

  • minimum wages, including skill-based classification;
  • type of employment;
  • arrangement of work, including hours, rosters and breaks;
  • overtime rates of pay;
  • penalty rates, including for shift, weekend and public holiday;
  • annualised wage and salary arrangements;
  • allowances, including for expenses incurred, additional skills, responsibilities or disabilities;
  • leave, leave loading and arrangements for leave;
  • superannuation; and
  • procedures for consultation, representation and dispute settlement.

Modern awards must also include a flexibility term. Such a term helps an employer and employee to reach an arrangement to vary the effect of an award to meet the genuine requirements of the parties. An employee must be better off overall on the flexibility arrangement than under the terms of the relevant award. The flexibility arrangement must be in writing and signed by each party.

Modern awards may also include terms relating to outworkers, industry specific redundancy schemes (for example the construction industry redundancy fund) and incidental and machinery terms, (see: ss140-142 of the FW Act). Modern awards may also provide additional detail of the NES required for the specific industry.

As part of the award modernisation task, the AIRC created a default award, which will apply to all non-managerial employees who are not covered by a modern award.

It is not always easy to find out whether a Federal Award applies. The best source of information for union members is their union, which will be familiar with awards within its industry.

A breach of an award can lead to prosecution by authorities as well as to civil action.

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