Category: News

Family and Domestic Violence Leave becomes paid leave

Posted on by Sun Law

All employees will become entitled to paid Family and Domestic Violence Leave in 2023. The current entitlement is five days of unpaid leave.

Who is entitled to leave?

All employees covered by the National Employment Standards (NES) are entitled to this leave.  This includes part time and casual employees.

When does the leave apply?

Family and domestic violence leave is available where it is necessary for an employee to deal with the impact of family and domestic violence and it is impractical to do so outside their ordinary hours of work.

This may include matters such as making arrangements for their safety, or the safety of a close relative (including relocation), attending court hearings, accessing police services, attending counselling or attending appointments with medical, financial or legal professionals.

What is family and domestic violence?

Family and domestic violence means violent, threatening or other abusive behaviour by an employee’s close relative that seeks to coerce or control the employee and causes them harm or fear.

A close relative is an employee’s:

  • spouse or former spouse
  • de facto partneror former de facto partner
  • child
  • parent
  • grandparent
  • grandchild
  • sibling
  • an employee’s current or former spouse or de facto partner’s child, parent, grandparent, grandchild or sibling, or
  • a person related to the employee according to Aboriginal or Torres Strait Islander kinship rules.

How much leave is available and how does it accrue?

Ten days’ leave is available to all employees. This leave is not pro-rated for part time and casual employees.

The full amount of leave is available from the first day of employment. It does not accrue over the course of the year. If leave is not taken it does not carry over to the following year. On the anniversary date of employment the employee is recredited with ten days’ leave.

Existing employees should be credited with ten days’ leave on the relevant start date of the entitlement under the NES. The leave should then be recredited on the employee’s anniversary date each year, not on the start date of the NES entitlement.

Can I ask an employee for notice and evidence of the need for leave?

An employee is required to let you know as soon as possible of their need to take the leave. In many circumstances notice may not be possible. An employee may be able to give you advance notice of a court hearing, for example, but not of an emergency relocation. Common sense should be applied when considering what constitutes ‘as soon as possible’.

You can ask an employee to provide some evidence that the leave was required and that the circumstances of taking the leave fall under the NES entitlement. The evidence should be enough to convince a reasonable person the leave was necessary. Examples of evidence may be a court summons or notice, a police report, documents provided by a support service or a statutory declaration.

What are my privacy and confidentiality obligations?

Employers must take reasonably practicable steps to keep any information about an employee’s situation confidential when they receive it as part of an application for leave.  Breaches of confidentiality in these circumstances may place an employee in danger.

The nature of leave being taken by the employee and any evidence provided to support the application should remain confidential.  Evidence provided can be used to confirm the leave was necessary and for no other purpose.

The employee’s privacy must be respected and no adverse action can be taken against an employee for applying for or taking this leave.

The best way to manage sensitive information is to ensure you implement the Australian Privacy Principles even if they don’t apply to your organisation.

How does this leave fit with other paid leave?

This leave can be taken in conjunction with other forms of paid or unpaid leave. If an employee is on another form of paid leave and becomes eligible for Family and Domestic Leave they can request a change in the type of leave being utilised. The same notice and evidence requirements to show eligibility would apply to this request.

When does the entitlement commence?

All employers are currently required to provide employees with five days’ unpaid Family and Domestic Violence Leave under the NES under similar circumstances to those outlined above.

For Small Business Employers (those with 15 or fewer employees) the requirement to provide ten days’ paid leave commences on 1 August 2023.

All other employers will be required to provide the paid leave from 1 February 2023.

If you require assistance with the implementation of Family and Domestic Violence Leave please contact Belinda Sundaraj.

Director Identification Numbers – action required for all company directors

Posted on by Sun Law

Background

From November 2021, directors of Australian companies will need to verify their identity as part of a new director identification number (DIN) requirement. The DIN is a unique identifier that each director will be required to apply for once and keep forever via the Australian Business Registry Services (ABRS) website. Directors will keep their DIN regardless of whether they become a director of another company, cease to be a director, change their name or move interstate or overseas.

Applications open from November 2021 with stiff penalties if current and new directors fail to register in time.

The ATO will be responsible for administering the ABRS, including DINs, as part of the Commonwealth’s Modernising Business Registers program.  While initially, this will be as a delegate of ASIC (the current registrar for companies, directors and company secretaries) the ATO will later assume sole responsibility for DINs.

What is a director ID number (DIN)?

A DIN is a 15-digit identifier given to a director, or someone who intends to become a director, who has verified their identity with the ABRS. Each DIN:

  • will start with 036, which is the 3-digit country code for Australia under International Standard ISO 3166; and
  • end with an 11-digit number and one ‘check’ digit for error detection.

Directors need to apply for their own DIN and they will only ever have one, which they will keep forever.

A director’s DIN will be used to trace their relationships to companies over time.  One of the goals of the ABRS and DIN regime is to overcome issues with the existing register maintained by ASIC under which a director’s identity did not need to be verified and individuals could register under multiple names and details.  This made it difficult for ASIC and others to trace an individual’s conduct as a director, particularly in respect to phoenix activity.

Who needs a DIN?

A DIN is required if an individual is:

  • a director; or
  • an alternate director who is acting in that capacity,

of:

  • a company, a registered Australian body or a registered foreign company under the Corporations Act 2001 (Corporations Act); or
  • an Aboriginal and Torres Strait Islander corporation registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act).

A person who expects to become an eligible officer within 12 months may apply for a DIN (if they do not already hold one). Once registered, that person has 12 months to be appointed as an eligible officer or their DIN will be made inactive.

How do directors apply for a DIN?

Australian directors

From November 2021, Australian and Australian resident directors can apply for a DIN through the Australian Business Registry Services website. Applicants will need:

  • a myGovID with a standard or strong identity strength.Note, a myGovID is not a myGov account;
  • their tax file number;
  • their residential address as held by the ATO; and
  • answers to two questions based on details the ATO knows about the individual (for example, bank account details, an ATO notice of assessment, superannuation account details, a dividend statement, a Centrelink payment summary or a PAYG payment summary).

A myGovID can be obtained by following the instructions available at www.mygovid.gov.au/set-up.

Overseas directors and others who cannot obtain a myGovID

In addition to the information requested on the online form set out above, directors residing outside of Australia or who cannot otherwise obtain a myGovID will need to provide certified copies of one primary identity document (for example, a foreign or Australian birth certificate or passport) and one secondary identity document (for example, a national photo identification card or foreign government identification) to support their application for a DIN.

This can be done either by phone or through completing and posting a paper based form.  For more information on the documents and certifications required for non-myGovID applicants, please see the ABRS website here.

When do directors need to apply for a DIN?

Applications for a DIN can commence from November 2021.  Both existing and new directors will need to apply in accordance with the following dates.  If you are a director of a Corporations Act incorporated company, when you must apply for your DIN depends on the date you become a director.

Date of appointment as director Date you must apply by
On or before 31 October 2021 (existing and new directors) 30 November 2022
Between 1 November 2021 and 4 April 2022 Within 28 days of appointment
From 5 April 2022 Before appointment

If an individual cannot apply by the date required, they can apply for an extension, details of which are expected to be released in November 2021.

When do directors need to use their DIN?

Directors need to provide their DIN to their current companies’ record-holders, which can be the company secretary, another director or an authorised agent of the relevant company.

If appointed as a director of any other companies in the future, directors will also need to give their DIN to the people responsible for maintaining the records of those companies.

Directors must also inform the Registrar of any changes to the information attached to their ID.

Failure to hold a DIN

Failing to hold a DIN may result in an infringement notice or possible civil and/or criminal prosecution. The maximum penalties are 60 penalty units ($13,320 at the current penalty unit rate of $222) and one year imprisonment. Certain offences may also be applied against those involved in a contravention, which could include the director’s advisers.

Additional breaches include if a director:

  • fails to comply with a direction from the Registrar;
  • applies for multiple DINs (unless directed to do so by the Registrar);
  • provides a false ID;
  • misrepresents their ID; or
  • provides false or misleading information to a Commonwealth body, company, registered Australian body or Aboriginal and Torres Strait Islander corporation.

How companies can get ready

Australian companies should be aware of the incoming compliance requirements outlined above.

We recommend companies begin informing their directors of their obligations and encouraging them to start collating their personal identification documents so that applications can be submitted in a timely manner.  This is particularly important for overseas directors whose documents could take additional time, particularly in COVID-19 impacted jurisdictions.

We also suggest encouraging directors to apply for a myGovID (if they do not have one already) now in preparation for submitting their application for a DIN.

Companies and those responsible for maintaining company records should update their processes for director appointments, including asking new directors to obtain and supply their DIN as part of their appointment process, e.g. as part of an incoming director’s consent to act or conflicts declaration.

For more information

If you require more information about the ABRS, DINs and how it impacts yourself as a director or your business, please contact Sean Coleman.

Reforms to Australia’s continuous disclosure laws: introduction of “fault” element

Posted on by sbm

Introduction

In an announcement with significant implications for listed companies, their officers, shareholders and class-action litigants Treasurer Josh Frydenberg indicated his temporary changes to continuous disclosure laws will be made permanent. The changes were originally introduced in 2020 as temporary relief for businesses impacted by the COVID-19 pandemic.

These laws impose a strict obligation on listed entities to continuously disclose information which may have an effect on their market price or value.

Australia’s continuous disclosure laws are governed by Chapter 6CA of the Corporations Act 2001 (Cth) (Corporations Act) and Chapter 3 of the ASX Listing Rules.

The obligation to continuously disclose information to the market remains unchanged, the proposed changes limit potential liability in the case of a breach. The introduction of a ‘fault’ element when assessing whether there has been a breach of the obligation means that defective disclosure will not attract liability unless the discloser or its officers were aware, reckless or negligent.

These amendments will limit the financial exposure of listed companies to shareholder class action proceedings seeking redress for non-disclosure. This is particularly relevant given that Australian companies are more likely to face a major class action than those in any other country apart from the United States.

COVID-19 reforms

In May 2020 Australia’s continuous disclosure laws were changed through two temporary amendments to sections 674, 675 and 677 of the Corporations Act. These sections impose the continuous disclosure obligation and mandate how and when information must be disclosed. The changes were to be in force for a period of six months. They were extended for a further six months in September. Rather than extend the changes once more the Federal Government has made them permanent.

The Corporations (Coronavirus Economic Response) Determination (No. 2) 2020 and Corporations (Coronavirus Economic Response) Determination (No. 4) 2020 (together, the Determinations) varied the circumstances where a lack of disclosure could be considered a breach.

The Determinations fundamentally changed the continuous disclosure laws by requiring that a breach can only be found where company or its officers know, are reckless to, or are negligent as to whether or not information is price sensitive.

This temporary fault threshold was established to shield against opportunistic proceedings brought as a result of non-disclosures occurring during the unprecedent health and economic crisis of COVID-19.

Prior to the introduction of the Determinations, sections 674 and 675 operated on a narrow and objective basis with respect to information required to be disclosed. Proceedings brought against a company for breach were assessed on a strict liability basis, with no requirement for the plaintiff to prove culpability or fault of the company or its officers.

Significantly, these provisions did not contemplate how a company or its officers individually viewed, treated and considered price sensitive information.

The Determinations fundamentally changed this aspect of the continuous disclosure laws by replacing the relevant provision with one requiring that a company or its officers know, are reckless to, or are negligent as to whether or not information is price sensitive.

The purpose of the establishment of the temporary fault threshold was to shield against opportunistic proceedings brought because of non-disclosures occurring during the unprecedented health and economic crisis of COVID-19.

Planned reform

Initially introduced as temporary measures in response to COVID-19, the Determinations were to be effective for six months and are due to expire in March 2021.

If passed by Parliament, the changes made by the Determinations will become permanent through amendments to the Corporations Act.

Newly created sections 674A and 675A of the Corporations Act will replace several aspects of section 674 and 675. These changes will reflect the framework established under the Determinations.

It is important to note that this new framework will not impact ASIC’s authority to issue infringement notices for no-fault non-disclosures.

The draft legislation also contains complimentary amendments to the misleading or deceptive conduct provisions found in section 1041 of the Corporations Act and section 12DA of the Australia Securities and Investments Commission Act 2001 (Cth).

Understanding how the changes affect your obligations

The proposed changes will have a significant impact on Australian companies and their officers.

Speculative class actions brought by shareholders over alleged non-disclosures will be harder to mount and less likely to succeed. The Parliamentary Joint Committee on Corporations and Financial Services stated that these changes should result in a decrease in the number of this type of speculative class action.

The establishment of a fault threshold should also translate to reductions in the burden and cost of regulatory compliance. This change should also impact the disproportionate rise in director and officer insurance premiums seen in recent years.

Globally, Australia’s continuous disclosure regime will now more closely align with that of the United Kingdom and the United States.

The proposed changes represent an easing of some obligations placed upon Australian companies, strict conditions both in and outside of the continuous disclosure laws remain.

The proposed laws impose a new requirement to establish there was fault in the failure to continuously disclose information before action can be taken for breach. It is important to note that a negligent failure to disclose information will lead to liability under these changes. So, while the changes impose a fault requirement where there was previously none it may be a low threshold.

Further, the new laws only establish the fault threshold for circumstances relating to price and not certainty or other foreseeable matters.

Finally, a failure to disclose, or an inaccurate disclosure, may still be subject to shareholder proceedings or enforcement actions under the misleading or deceptive conduct provisions referred to above.

The proposed changes will be made by the Treasury Laws Amendment (2021 Measures No. 1) Bill.

For further information, please contact Anand Sundaraj or William Buisman.

Reforms to Australia’s foreign investment framework

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Introduction

Australia’s foreign investment regime has undergone significant review in recent months. Since 29 March 2020, a broader range of foreign investments into Australian businesses have required approval from the Foreign Investment Review Board (FIRB) following the temporary reduction of the monetary screening threshold to $0 for the duration of the COVID-19 pandemic.

More recently, on 5 June 2020, the Treasurer, Josh Frydenberg, announced proposed reforms to Australia’s foreign investment framework which will primarily affect investment into “sensitive” sectors. These changes are currently subject to consultation and, if implemented, are expected to take effect from 1 January 2021.

Key among these reforms is the proposal to implement a national security test which will allow the Treasurer to impose conditions or block investment by a foreign person on national security grounds regardless of the value of investment. The introduction of this national security test will not affect foreign persons investing in non-sensitive sectors. It will only apply to foreign investors seeking to acquire a direct interest in a business that raises national security concerns.

COVID-19 reforms

Although a greater number of foreign investments will need to now obtain FIRB approval following the temporary reduction of the monetary screening threshold to $0, foreign investors still have some scope to continue undertaking equity transactions without FIRB approval.

Proportionate ownership (a secondary threshold which must be met before FIRB approval is required) and a change in control test continue to apply. As such, regardless of the value of the investment, if a foreign investor does not acquire a relevant proportionate interest in an Australian entity through, among other things, participation in a capital raising or placement, the investment will not require FIRB approval. Further, existing exemptions to obtaining FIRB approval, such as participation in a pro rata issue, continue to have effect. Foreign investors should obtain appropriate advice on whether these exceptions and exemptions apply to their proposed investment under Australia’s current investment regime.

Future reforms

The proposed reforms to Australia’s investment framework announced on 5 June 2020 are aimed at strengthening the regime to protect against the increasing risk of foreign investments in in businesses relating to Australia’s national security, particularly in the “sensitive” sector and the critical infrastructure sector.

The proposed changes include:

enabling the Treasurer to impose conditions or block any foreign investment on national security grounds regardless of the value of the investment;
requiring a foreign person to notify FIRB of any proposed investment in a “sensitive national security business” (such as a defence or national security related business, real estate proximate to defence, or national security installations business);
requiring a business or entity owned by a foreign person to notify FIRB if and when it starts to carry on the activities of a sensitive national security business;
allowing any investment that would not ordinarily require notification under the regime to be “called in” for screening on national security grounds; and
enabling the Treasurer to impose new conditions, vary existing conditions, or require the divestment of any investment which has previously been approved, when national security risks emerge.
The proposed reforms will also relax requirements for investments by Foreign Government Investors (FGI) where they will not attain management rights and cannot otherwise influence or control an investment fund’s decision making. This will be achieved through re-defining the relevant thresholds to constitute an FGI. In particular, investment funds where FGIs own 40% in aggregate, but with each FGI owning less than 20% individually, will not be considered an FGI. An investment fund which has a single FGI owning a 20% or more interest will still be deemed an FGI but may apply for an exemption.

Separately, the reforms have clarified that FIRB approval must be sought where a proposed share buy-back, exercise of redemption rights, or selective capital reductions would result in an investor’s interest in an Australian entity consequently increasing above the relevant thresholds.

To provide certainty for foreign investors prior to investing in an Australian business, the reforms will enable foreign investors to voluntarily notify FIRB of any proposed investment, regardless of whether it would otherwise be required to under the regime. The foreign investor will be able to seek prior clearance from FIRB, including by applying for an investor-specific exemption certificate, or otherwise be made aware of FIRB’s conditions to, or rejection of, the proposed investment.

Although the final details of the reforms are yet to be finalised, including in particular the definition of “national sensitive security businesses”, foreign investors should be well-advised in advance of any decision to invest in an Australian business. Both foreign investors, and Australian entities that have interests owned by foreign investors, need be aware of updates to Australia’s currently changing investment environment to ensure that they do not breach Australia’s investment laws and avoid the risk of being subject to the increased civil and criminal penalties of between $1.05 million and $525 million for individuals and between $10.5 million to $525 million for companies.

For further information, please contact Bob Ker or Jackson Lam.

ASIC’s focus areas for FY18 Financial Reports

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Prior to the end of each financial year, ASIC releases guidance to publicly listed companies (and other reporting entities) on its “focus areas” for financial reports. ASIC has recently released its guidance for FY18: FY18 financial reports – ASIC focus areas

Impact of new accounting standards

A number of new accounting standards have been released which will materially affect the preparation of FY18 financial report, including standards which vary:

  • revenue recognition;
  • valuation of financial instruments (including hedge accounting and loan loss provisioning);
  • liabilities relating to leases; and
  • general identification of assets, liabilities, income and expenses.

Directors are primarily responsible for ensuring that these new accounting standards are appropriately applied.  Given the wide-ranging and material nature of the changes to the standards, we recommend that directors and management (who have not already started to do so) immediately commence assessing the impact of these changes.

In particular, the changes to the revenue recognition could have significant impact on the timing and amount of revenue recognised under existing contracts for future deliverables.  Substantial resources, time and effort may need to be devoted to working through how these changes impact your FY18 financial reporting.

Accounting estimates

ASIC has also reminded directors and preparers of financial reports that the recoverable amounts of non-tangible assets (e.g. goodwill) as well as tangible assets (like plant and equipment) continue to be a focus. Directors and auditors should ensure that assumptions are reasonable having regard to historical cash flows, market conditions and funding costs.

Accounting policy choices

In relation to the following areas of accounting policy choices, ASIC has provided the following guidance:

  • revenue recognition – directors and auditors should review an entity’s revenue recognition policies to ensure that revenue is recognised based on the substance of transactions;
  • expense deferral – expenses should only be deferred where there is an “asset” as defined in the accounting standards, it is probable that economic benefits will arise, and intangible accounting requirements are met;
  • off-balance sheet arrangements – off-balance sheet arrangements to consider whether controlled companies should be consolidated as well as the appropriate disclosures being made; and
  • tax accounting – preparers of financial reports should ensure that the differences between tax and accounting treatments are properly understood.

Key disclosures

Reminders were also made in relation to full and appropriate disclosures where estimations are subject to uncertainty or if the application of accounting policies is subject to significant judgment.

If you require more information about these recommendations or how it affects your business, please contact Anand Sundaraj, Bob Ker or Johnson Pang.

Federal Court decision on casuals and paid leave

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The recent decision of the Federal Court finding that an employee was not a genuine casual employee and was entitled to paid leave has caused some concern among employers with casual staff.

Where an employee is a true casual employee this ruling has no effect. The findings in this case are quite specific to the fact scenario of the case and do not have the effect of providing all casual employees with paid leave in additional to the casual loading. In most cases, the loading will continue to cover leave entitlements for true casuals. The case analyses the employee’s employment contract and relationship at length and applies the provisions of the Fair Work Act 2009 (‘FW Act’) and previous case law relating to the definition of ‘casual’ employment. The contract of employment was heavily focussed on by the Court.

Under the FW Act an employee can only be a casual where they do not have regular and systematic employment. They work irregular hours and are entitled to refuse a shift. Once a shift ends they do not have an expectation of another shift (keeping in mind they may work to a short term roster arranged in advance, for example, weekly). Casual employees are paid a loading on the usual hourly rate paid to permanent employees for the type of work they do. This loading is typically 25% and is designed to compensate casuals for the lack of paid leave and certainty of employment.

In this case, the employee concerned was employed in various mines by a labour hire firm on a series of contracts over a period of five years. The employee moved between several mines over the course of the contracts but was engaged for months or years on each engagement in a specified mine. The mine operator also directly employed permanent staff who worked side by side with the labour hire company staff in the same or similar roles. The mining operator’s permanent staff were paid more per hour than the labour hire casual staff and also had an entitlement to paid leave.

Facts to note:

The contract between the parties contained several provisions that were in conflict with concept of casual employment including:

  • A stand down provision, which would not be necessary for a true casual employee who would simply have their shift cancelled.
  • A requirement that the employee complete all rostered shifts, a true casual can elect to accept or reject a shift offered to them.
  • A prohibition on the employee working for another employer during the term of the contract, a true casual would be free to take other work.
  • The employee’s shifts were determined up to 12 months’ in advance, so there was regular and systematic employment.
  • Failure to complete more than two consecutive shifts without reasonable notice and excuse would be considered abandonment of employment or open the employee to disciplinary action under the contract. A true casual is free to accept or reject shifts without penalty.
  • The casual rate of pay, including the loading, was significantly lower than the rate being paid to permanent staff employed directly by the mine in equivalent positions. In effect, there was no casual loading and staff working side by side in similar jobs were treated very differently. Those classified as casual were patently worse off than permanent employees.

The employer relied heavily on the contract specifying that the employee was a casual and the payment of a loading as evidence that the employee was a casual. The Court held that merely calling an employee a casual and paying them a nominal loading was not enough to make it so. The provisions of the contract and the parties’ behaviour in the employment relationship are in direct conflict with the case law and legislative definition of casual employment.  Calling an employee a casual will not make it so if the reality of the employment relationship is one of permanent employment.

Application to existing casual employees

Where an employer has existing casual staff an audit should be performed to determine if each employee is a true casual. If the employee is paid an adequate loading compared to permanent staff and is not working on a regular and systematic basis they are most likely a genuine casual and not affected by this decision.

If the employee is working regularly they may still be a casual if they do not have an ongoing expectation of employment and are working varied or ad hoc shifts to fulfill a need as it arises.

If the employee is working regular shifts and has an ongoing expectation that they will continue to work those same shifts for the foreseeable future they may not be a genuine casual and may be entitled to be treated as a permanent employee. This would include accrual of paid leave. So where an employee works, for example, every Tuesday and Thursday and expects to work those days each week they should be made permanent part time.

Once an audit of patterns of work has been completed employees should be classified according to the regularity of their work pattern. If the analysis shows the employee works according to a short term roster, is free to reject a shift and has varied hours or no expectation of ongoing employment they are a casual employee and can remain classified as such. The employee would be paid the normal hourly rate for the type of work performed plus the appropriate casual loading.

If an employee is working regular and systematic hours and expects to work those hours week in and week out for the foreseeable future consideration should be given to making that employee permanent. The employee would be paid the normal hourly rate and would accrue leave. They would no longer receive a casual loading.

The employees’ contracts should also be reviewed to ensure that the contract does not include provisions incompatible with casual employment, as mentioned above.

Treasury temporary amendment of continuous disclosure provisions

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Following proposals from ACID and others, the Commonwealth Treasurer Josh Frydenberg has announced temporary amendments to the continuous disclosure obligations for ASX listed companies under the Corporations Act 2001 (Cth) (Corporations Act) in response to the uncertainty faced by listed companies due to the ongoing COVID-19 pandemic and economic fallout.

The amendments change the standard for when ASX listed companies must announce information to the market and consequently when they, and their directors, could be liable for failing to announce information.  The new standards require information to be announced to the market if “the entity knows or is reckless or negligent with respect to whether the information would, if it were generally available, have a material effect on the price or value of … securities of the entity”.  This is a change from the usual objective standard of “a reasonable person would … expect information to have a material effect on the price or value of … securities”.  The amendments are effective from 26 April 2020, and set to run initially for six months.

The changes are being made in response to concerns that ASX companies may face increased class action litigation or regulatory action for failing to announce information regarding the performance of their business during and following the current COVID-19 pandemic and the related economic fallout.  While we expect that this may provide ASX listed companies and their directors some breathing room by introducing higher thresholds around actual knowledge in connection with the “know” and “reckless” standards (which are linked to the Commonwealth’s Criminal Code).  However companies and directors should remain alert to their disclosure obligations as “negligence” under Australian general law typically contains elements of an objective reasonable person which means the changes may not be as broad reaching as their initially appear.

ASX listed entities also should take note that their obligations on when and what to disclose under ASX Listing Rule 3.1 (which uses a similar “reasonable person” test to the unamended Corporations Act) remains unchanged, but should take comfort from ASX’s recent guidance around announcement expectations in respect to COVID-19.

What do I need to know about the JobKeeper package?

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  • The JobKeeper scheme has now been made law with passage of legislation providing for the program and amending the Fair Work Act 2009 (FW Act)to make its provisions compatible with the scheme. We have summaried the key points that have been the most asked about by our clients.
  • A new section has been temporarily inserted into the FW Act to allow for employees and employers to take steps to protect jobs in ways that would previously have been a breach of the Act. This section currently only remains in effect until 28 September 2020. This may be extended in the future.
  • Some of the detail about issues such as eligibility will be set out in Rules to the Coronavirus Economic Response Package (Payments and Benefits) Act 2020. These Rules are not yet available. The information provided is based on the legislation as it currently stands and its supplementary materials. We will keep you updated as Rules are implemented.

JOBKEEPER PAYMENT

Quantum of payment

  1. The payment is a flat $1500 a fortnight for each eligible employee, regardless of the employee’s usual or actual wage. If the employee was making less than $1500 they are still entitled to the full amount. This is based on the average wage in the most affected sectors such as retail, tourism and hospitality.

Reimbursement and staff communication

The payment is in the form of reimbursement. It will only be payable where an employee has been paid a minimum of $1500 per fortnight by the employer. This may mean an employee is paid more than their usual wage. Where an employer makes an application in relation to an employee the employee must be informed of the application. Reimbursement will begin in May 2020 and be backpaid to 30 March 2020.

ELIGIBILITY

Eligibility for employers

Eligibility is based on a drop in turnover over a specified period. There is no requirement to provide evidence linking the drop explicitly to the effects of COVID-19. Turnover is linked to your method of GST reporting. Quarterly reporting businesses will use a quarterly comparison and businesses who report monthly use a monthly comparison. Businesses reporting quarterly may have an issue showing the required drop initially, however, you can provide an estimate for the purpose of the application.

The ATO has indicated there will be some tolerance around estimates for applications. You can make a good faith application if you reasonably expect to meet the threshold on estimated turnover.

The comparison is over a comparable period, eg, March 2019 compared to March 2020. There is no detail about what constitutes a comparable period currently. It should be a period which can be shown as reasonably appropriate for comparison.

You must show a drop in turnover of 30% in the period for eligibility (15% for not-for-profits).

Companies in receivership or voluntary administration are eligible to apply.

Eligibility for employees

Employees must also meet certain eligibility requirements.

Nationality: this scheme is only open to Australian citizens, permanent residents and certain New Zealand visa holders (sub class 444 visa and some other circumstances such as continued residence of ten years or more). Employees on employer sponsored visas (e.g, 457,482 and TSS visas) are not eligible.

Employment date: employees must have been employed on 1 March 2020. Anyone hired after that date will not be eligible. An employee whose employment was terminated after 1 March and has been rehired is also eligible

Employment status: full time and part time employees are eligible. Casual employees are only eligible if they have been employed on a regular and systematic basis for at least 12 months. Please note that the requirements for casual eligibility are based on other sections of the FW Act and this concept of a ‘permanent’ casual confers other rights on the employee under the act such as eligibility to make an unfair dismissal claim.

Contractors/self-employed/sole trader: provided they fulfil the turnover eligibility requirements those who are self-employed are also entitled to this payment on the same basis as an employee.

Salary requirements/means testing: there is no means testing or maximum salary cap on this payment. There is also no minimum salary requirement. This is a flat payment of $1500 per fortnight for each eligible employee.

Employees on sick leave

An employee on sick leave should be paid from their accrued sick leave and this payment does not apply to the period of sick leave.

Employees on Paid Parental Leave

Employees on paid parental leave are not eligible for this program and should be continued to be paid as normal.

Workers’ Compensation Payments

Employees receiving workers’ compensation payments are not eligible for this program unless they are completing some paid work, for example, completing a return to work program on reduced hours/modified duties.

Continuous Service

For the purposes of accruing leave changes made in this period do not break continuity of service. Leave continues to be accrued.

Rehiring of redundant employees

An employee who has been made redundant can be rehired and become eligible for this program. The employee must have been employed at 1 March 2020. If the employee was paid a severance package this does not have to be repaid. However, the termination may break the employee’s continuity of service. Leave accruals will begin from a zero base and start accruing from the date of rehiring.

FW ACT CHANGES

In addition to providing financial support there has been a temporary relaxing of some aspects of the FW Act in order to facilitate stand down and reduction in salary and hours for employees. This section is only applicable where the employer has qualified for the JobKeeper program. If the employer has not qualified for the program the provisions of this section cannot be utilised.

Changes to an employee’s conditions of employment should be done following a consultation period and by written agreement. Where agreement cannot be reached a direction may be given by the employer in certain circumstances. Either party may notify a dispute to the Fair Work Commission where agreement cannot be reached or where a party may be acting unreasonably. The consultation period should allow the employee three days to consider the employer’s proposed changes to terms and conditions of employment. The consultation process should be recorded in writing and an employee request to include a representative should be accommodated. The employee may agree to the proposed changes without waiting for the consultation period to end.

Strategies available to the employer include:

  • reduction in salary and/or hours, provided that salary does not fall below any statutory minimum;
  • a direction to take annual leave, including leave at half pay for double time. An employee cannot be directed to take annual leave if it would reduce their accrued leave balance to below two weeks of leave;
  • stand down;
  • a change in duties. Any change in duties must be safe and within the scope of the employee’s skills and qualifications and within the scope of the employer’s usual course of business. An employee must be paid the higher of their usual rate of pay and the rate of pay applicable to the changed duties; and
  • a change in the location where the employee works, including a direction to work from home. Any change should be reasonable taking the employee’s circumstances into account. This may include their status as a carer.

INTERACTION WITH OTHER LAWS

All other sections of the FW Act and other legislative obligations, such as the unfair dismissal and discrimination regimes and occupational health and safety laws, remain in force and unaffected by these changes unless there is an explicit change.

Further information is also available on the Treasury website.