Are we looking at a Fairer Paid Parental Leave Bill?

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The exceedingly generous and hotly debated Paid Parental Leave Scheme that the Government took to the 2013 Election has now been consigned to history. In its place, the new Fairer Paid Parental Leave Bill 2015 is now before a Senate Community Affairs Legislation Committee inquiry.

So, if passed, what would the new Bill mean to employees, and to employers?

It would, from 1 July 2016, ensure that parents who are entitled to receive employer-provided parental leave payments in excess of the total amount of parental leave pay under the Government-funded Paid Parental Leave (PPL) scheme will not receive any parental leave pay under the PPL scheme. Parents who receive employer-provided payments of less than the total amount of parental leave pay under the PPL scheme will receive a top-up to the level under the PPL Scheme.

The Bill would also remove the requirement for employers to provide Government-funded PPL payments to their eligible long-term employees. Employees would be paid directly by the Department of Human Services unless an employer opts in to provide the PPL payments to its employees and the relevant employee agrees to the employer making the payment.

Ai Group’s submission to the inquiry, lodged at the end of July, recognises the current Budgetary constraints but expresses concern about the potential adverse effects on workforce participation of reducing or removing Government PPL payments to many parents.

We also express a number of specific concerns about the provisions of the Bill as currently drafted and express the view that, if passed in its current form, it will be important that the impact of the Bill is closely monitored and changes made to address any adverse effects.

Under the Bill, the entitlement of an employee to Government PPL payments revolves around whether or not the employer is “legally obliged to pay” the employee an amount because the employee is on parental leave.

Ai Group’s submission expresses the following views about this issue:

  • In many circumstances, it will be very difficult to determine whether or not the employer is “legally obliged to pay” the employee the parental leave payments under the employer PPL scheme.
  • Where an employer’s PPL scheme constitutes a company policy (as is often the case), in considering whether the policy is a legal entitlement of the employee it will be necessary to consider:
    • The terms of the policy;
    • Any exclusions or disclaimers in the policy and the policy manual;
    • Whether the policy is referred to in the employee’s written contract of employment (if such a written contract exists);
    • How the policy is referred to in the employee’s written contract of employment;
    • If not an express term of the employee’s employment contract, whether the policy is an implied term of the employee’s contract of employment.
  • The issue of whether or not a company policy forms part of an employee’s contract of employment in a particular case can be extremely complex. This issue has been the subject of many court cases. For example:
    • In Goldman Sachs JB Were Services Pty Limited v Nikolich [2007] FCAFC 120, Mr Nikolich successfully argued in the Full Federal Court that certain terms of a company policy entitled “Working With Us” formed part of his employment contract and that, in not following the policy, the employer had breached the employment contract.
    • In Yousif v Commonwealth Bank of Australia (2010) 193 IR 212, Ms Yousif did not succeed in proceedings before the Federal Court that a policy entitled “Appointment to Roles” was binding as a term of her employment contract. She failed because of a disclaimer in the Human Resources Manual which stated that policies do not form part of employment contracts.
    • In Barker v Commonwealth Bank of Australia [2012] FCA 942, Mr Barker initially succeeded with his arguments before the Federal Court that a breach by CBA of its redeployment policy could constitute a breach of an implied term of mutual trust and confidence in the employment contract. The Federal Court decisions were ultimately overturned by the High Court (Commonwealth Bank of Australia v Barker [2014] HCA 32).
  • Employees and employers (large and small) cannot be expected to understand the current status of complex and highly contested principles of employment and contract law when determining whether the employer is “legally obliged to pay” the payments under its employer-specific PPL scheme.
  • The uncertainty would be unfair to employers and employees because penalties of up to 60 penalty units ($51,000) apply for breaches of the PPL Act.

The Senate Committee is required to report to Parliament by 15 September 2015. Ai Group will continue to keep members informed as debate around the legislation continues.

Does your business have a PPL scheme as part of company policy? And have you considered the implications of the Fairer Paid Parental Leave Bill? Share your thoughts, experiences or questions below.

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Stephen Smith
Ai Group's Head of National Workplace Relations Policy, Stephen Smith is responsible for workplace relations policy development and advocacy. He regularly represents industry’s views to governments and opposition parties, and in numerous inquiries and major cases. He is Special Counsel for, and Chairman of the Board of, Ai Group Workplace Lawyers, a national law firm operated by Ai Group.

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