Many workplace disputes centre around pay rates, classifications and penalties under modern awards. But many employers skip the most important starting point when dealing with modern awards and engaging employees hired in their business: Award Coverage.
When was the last time you read clause 4 of the award?
Clause 4 is the coverage clause. It tells you who the award applies to, and if you are not starting there, you may already be applying the wrong award before you even get to wages, overtime or allowances.
This sounds obvious, yet award coverage mistakes remain one of the most common compliance issues we see.
Too often, employers identify an award based on assumptions like:
- “We’re in hospitality, so it must be the Hospitality Award”
- “They work in an office, so the Clerks Award applies”
- “We’ve always used this award”
Modern awards are not applied based on habit, convenience or what the business’ payroll software defaults to. Coverage depends on the actual wording of the award and the nature of the employer’s business and the employee’s duties, and this is exactly why clause 4 of the award really matters.
The Award coverage clause will usually define:
- the industries covered;
- the types of employers captured;
- the classifications of employees included; and
- any exclusions that push employees into another award entirely.
If the wrong award is being used, the consequences can escalate quickly and can include:
- underpayment claims;
- payroll remediation exercises;
- Fair Work Ombudsman scrutiny;
- civil penalties; and
- employees arguing they were never correctly classified in the first place.
It’s also important for employers to know that applying an award “in good faith” or simply making a mistake is not necessarily an acceptable defence. The Fair Work Commission and Courts will look at the legal coverage position, not whether the employer made an understandable assumption or honest mistake. This becomes especially important for businesses operating across multiple functions or industries. A single business can have employees covered by different awards depending on the work being performed, yet many businesses still attempt a ‘one award fits all’ approach.
The safest approach for employers includes:
- Start with the employee’s actual duties,
- Read clause 4 carefully,
- Review classification structures,
- Check interaction with other potentially applicable awards,
- Reassess periodically as roles evolve.
Remember – the biggest award risk is often not identifying the correct award in the first place. If you need help with identifying the correct award, reach out to our team.
Get in touch to discuss your options with our team.
Disclosure statement: This information is general in nature and does not take into account any individual’s or business’ specific circumstances. You should obtain independent legal advice before making any decisions based on this information. Liability limited by a scheme approved under Professional Standards Legislation.