Can Executive and Managers be covered under the SCHADS Award – 3 key considerations for Employers

Whilst NB Employment Law principally acts for employers, we have on occasion accepted matters from employees for charitable reasons. In this regard, we have recently prosecuted an application for unfair dismissal on behalf of an employee[1] (the Application) which may provide useful guidance for employers working under the Social, Community, Home Care and Disability Services Industry Award 2010 (the SCHADS Award) to consider. Specifically, it provides important guidance on the coverage of the SCHADS Award in respect of senior personnel, such as managers.

Background of the SCHADS Award

The SCHADS Award covers employers and their employees within the following sectors:

• crisis assistance
• supported housing
• social and community services
• home care
• family day care scheme sectors.

Unlike many other modern awards, the SCHADS Award contemplates award coverage for senior managerial employees employed within the social and community services sector. Usually, such employees perform duties and functions which place them outside of the coverage of modern awards.

When preparing for the Application, we were reminded of the previous decision in Cubillo v North Australian Aboriginal Family Violence Legal Service [2011] FWA 6818. In that decision, Fair Work Australia (as it then was) considered whether an employee engaged as a Chief Executive Officer fell within the coverage of the SCHADS Award. This was an important jurisdictional point. If the employee did not fall within the coverage of the SCHADS Award, she would have been ineligible to apply for unfair dismissal because her earnings exceeded the high-income threshold.

After considering the employee’s duties and the history of the SCHADS Award, Fair Work Australia made the observation that “The history surrounding the making of the Modern Award indicates that it was intended to cover managerial positions in the social and community services sector of the type occupied by the Applicant”[2]. The observations suggest that even if an employee performs a high-level role (such as that of CEO) within the social and community services sector, they may still be covered by the SCHADS Award.

What Happened in the Application?

After considering the responsibilities of the employee, the Fair Work Commission concluded her duties were compatible with a Level 8 social and community services employee. It rejected the employer’s contentions the employee was award-free, noting the description of the role to be “extremely compatible” with a Level 8 employee. This was notwithstanding the Fair Work Commission’s acceptance of the employee having “significant independence of action, only constrained by organisational policy” which was indicative of a very senior role.

Other features of the employee’s role assisted her in demonstrating award coverage. It was noted she provided multi-functional advice to stakeholders within the organisation, including its Board. She was also subject to broad direction when exercising managerial responsibility. The role also required the implementation of organisational objectives, and the development of plans and programs. These tasks required post-graduate experience, and detailed knowledge of policies, programs, guidelines, procedures and practices of the organisation and external stakeholders.

As a result of the employee’s coverage under the SCHADS Award, its consultation provisions applied to the employer when it was considering the introduction of changes having significant effects on the employee (such as a potential redundancy). As the employer did not strictly engage with its consultation obligations, it became the “primary reason” for the Fair Work Commission’s finding the employee’s dismissal was unfair.

 
Broader Issues as a Result of the Findings

Whilst the employee’s award coverage meant she was entitled to be consulted under the SCHADS Award, there are broader ramifications associated with the finding. As an example, an employee would become entitled to various financial entitlements under the SCHADS Award, including overtime rates and loadings depending on their hours of work. If the employee’s remuneration terms did not take this into consideration, the employer might be inadvertently exposed to issues of underpayment of wages. This might be difficult to calculate, particularly if the employer assumed the employee was salaried and kept no records of their hours of work. This would then lead on to issues of whether employee record keeping had been met.

Consistent with section 382 of the Fair Work Act 2009 (Cth) and the previous decision in Cubillo, a finding that an employee falls within the coverage of the SCHADS Award would also entitle them to access the unfair dismissal jurisdiction of the Fair Work Commission. This would create an additional consideration for an employer, when determining whether to dismiss such an employee. This was not a live issue in the Application because the employee’s earnings fell short of the high income threshold, but might be an issue in the case of other employees.

3 Tips for human resources, employers (and businesses)

1. Reviewing existing arrangements with managers

The findings of the Application are a good reminder that managerial employees working in the social and community sector might be covered by the SCHADS Award. It is prudent to assume that a position title or remuneration is not determinative of award coverage. Titles such as ‘Chief Executive Officer’ and ‘Deputy Director’ were held by employees subsequently found to be covered under the SCHADS Award.

What will be determinative is, instead, the duties and responsibilities of employees, assessed against the various classification levels under the SCHADS Award. We therefore recommend employers (and businesses) review the roles being performed by their managerial employees, to determine whether they fall within award coverage.

2. Recording the arrangements within position descriptions

To mitigate the possibility of disputes regarding award coverage, it is prudent to have a detailed position description for managerial roles setting out key responsibilities and duties. This will make it easier to assess the position against the requirements of each classification level under an award (if applicable). If an employee is promoted or their duties change as a result of organisational requirements, it is worth revisiting the position description to ensure it is consistent with the required duties and responsibilities. We therefore recommend keeping position descriptions updated, to ensure clarity and to assist in determining award coverage, if required.

3. Being mindful of award free contractual terms

From time to time, we review employment contracts containing terms where the employee and employer have mutually agreed the position is ‘award free’. It is not uncommon to see such clauses within the employment contracts of managerial employees, or employees who are highly paid. Nonetheless, such clauses generally have little legal effect since employees and employers cannot agree (even by consent) to contract out of award coverage. The determination of whether an employee is covered by an award is a statutory consideration, and usually starts with applying section 48 of the Fair Work Act 2009 (Cth).

We therefore recommend employers (and businesses) review roles within their organisation which were previously understood to be award-free to determine whether there is a possibility the roles might, in fact, be award covered. This will assist in mitigating risks of underpayment liability, amongst other issues relating to non-compliance with the terms of an award.

If you are an employer (or business) in the social and community services sector, it may be worth having a discussion with us to ensure your working arrangements with managers do not result in unnecessary risk exposure.

We can also assist in reviewing the working arrangements with managerial employees in general. At NB Employment Law (formerly NB Lawyers), we offer an obligation free consultation – please call +61 (07) 3876 5111 to arrange an obligation free consultation to discuss your inquiries and we will do our best to provide a helpful, practical solution.

[1] Jankovic v Logan Child Friendly Community Limited [2022] FWC 1108.
[2] [2011] FWA 6818 at paragraph 43.

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