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Cases and Legislation February 2020

Cases and Legislation February 2020 Post-Employment Conduct “Ex-employee fined for contempt after breaching Court undertakings" Maxilift Australia Pty Ltd v Donnelly [2020] SASC 8 Executive summary A former sales manager has been fined $7,115 and found in contempt of...

Post-Employment Conduct

“Ex-employee fined for contempt after breaching Court undertakings"

Maxilift Australia Pty Ltd v Donnelly [2020] SASC 8

Executive summary

A former sales manager has been fined $7,115 and found in contempt of court for breaching undertakings he had given to the Supreme Court of South Australia (the Court) that he would not contact or accept approaches from customers and contractors of his former employer.

Background

In early 2018, Maxilift Australia Pty Ltd (the Employer), a crane sales company, commenced proceedings in the Court against a former sales manager (the Employee) who had recently left its employ to work for a competitor.

The Employer was concerned that the Employee would use its confidential information to obtain business from the Employer’s customers and contractors for the benefit of his new employer.

Even though the Employee denied misusing or having access to any such confidential information, he agreed to give undertakings to the Court to the following effect:

  • he would at no time in the future access, use or misuse the Employer’s confidential information; and
  • he had not, and would not, communicate with, or accept any approach from:
  • any customer or contractor with whom he had a business relationship with during his employment with the Employer that was not already a customer or contractor with his new employer prior to his resignation; and
  • any individual at any customer or contractor with whom he had a business relationship with during his employment with the Employer, even if they were already a customer or contractor of his new employer prior to his resignation.

The Employer thereafter commenced further proceedings against the Employee alleging that he had breached the undertakings on 25 occasions between January and June 2018, and that he ought to be found in contempt of court.

The alleged breaches included:

  • 14 interactions between February and June 2018, with a company that was a contractor to both employers which fitted cranes. Those interactions resulted in the contractor fitting a crane for one of the new employer’s customers;
  • 7 interactions between January and May 2018, with another company that fits cranes onto trucks for customers. Those interactions resulted in the new employer installing a particular crane that was not sold by the Employer;
  • 2 interactions between January and February 2018 with another company who again fit cranes onto trucks for customers; and
  • 3 interactions between January and March 2018, with a customer of the Employer in relation to a tender that had been issued for the replacement of a crane. Expressions of interest for that tender were sought only from the new employer and another company, but not the Employer. The new employer won that contract.

The Employee pleaded guilty to the breaches. However, he argued that his interactions with the contractors did not deprive the Employer of any business or result in any loss to the Employer - rather, he had given business to those contractors.

In relation to his interactions with the customer, the Sales Manager contended that was only involved in the tender process because the Employer had not been eligible to participate in the tender process. There was therefore no loss to the Employer.

Decision

The Court considered that, taken alone, each infraction was relatively minor. However, the repetitive nature of the behaviour and the frequency of the interactions rendered the Employee’s conduct to be serious contempt of court.

The Court noted that the Employee’s actions did not cause any harm to the Employer nor any direct benefit to the new employer, however “the harm caused to the administration of justice should such conduct be allowed to pass uncriticised and unpunished would be significant.”

It accepted the Employer’s submission that it would significantly undermine the Court’s processes and administration of justice if parties could not rely on undertakings being observed and adhered to.

The Court also accepted that the Employee did not likely possess sufficient facility of language and grammar to enable a clear understanding of the undertakings without clear and repeated explanation. It therefore found that his breach was reckless and that he did not knowingly breach the undertakings.

The fine imposed was reduced from $10,240.00 to $7,115.00. The Court did not consider it appropriate to impose a jail sentence on the Employee who had no prior convictions.

What can your business learn from this decision?

This decision provides comfort to employers who obtain undertakings from a former employee in relation to the use of confidential information and communication with customers and clients - particularly if those undertakings are provided to the court.

As this decision shows, the courts understand the reliance placed by employers on such undertakings, and are willing to punish breaches of those undertakings, regardless of whether or not there has been significant damage to the employer’s interests.


Player agent breached fiduciary duties by poaching young athletes

Ultra Management (Sports) Pty Ltd v Zibara [2020] FCA 31

Executive summary

A rugby league player agent and office administrator have been found to have breached their duties of good faith and fidelity and to avoid conflict of interest and duty, owed to their former employer. They have been ordered to account for all profits made as a result of those breaches.

Background

Mr Zibara and Mr Angeli were employed by Ultra Management (Sports) Pty Ltd (UMS), a sports management company, as a sports management agent and office administrator respectively.

The National Rugby League (NRL) has a player agent accreditation scheme (NRL Accreditation Scheme) which is governed by scheme rules. Those rules require agents to become accredited and to protect the welfare and interests of players who participate or may participate in the sport. The scheme also creates and publishes approved forms for use by agents, including standard contracts between players and agents.

As sports management agents, both Mr Zibara and the Director of UMS, Mr Ayoub, were subject to the NRL Accreditation Scheme and its rules.  

In June 2017, significant changes were made to the standard contract between players and agents. Those changes included the insertion of a sub-clause in the termination provisions which allowed a player to terminate a contract if the nominated agent ever left the employ of the agency.

It was made clear at the time that this new form of contract was required for all new contracts from July 2017, and all contracts prior to that date did not need to be updated. Both UMS agents confirmed this in a telephone call with the Head of the NRL Accreditation Scheme.

Prior to the rollout of the new standard contract, UMS had existing contracts with 18 players, and each of those contracts had between 18 months and 4 years left to run before the expiry of the term. Each contract had remuneration arrangements which entitled UMS to a percentage of the player’s income.

Between October 2017 and November 2017, 16 of those players signed new contracts with UMS which used the new standard contract, and included the termination clause that permitted players to leave in the event Mr Zibara, as the nominated agent, ceased employment. UMS contended that these contracts were entered into without the knowledge or authorisation of Mr Ayoub, while Mr Zibara contended that Mr Ayoub was at all times aware of what he was doing.

On 15 December 2017, Mr Zibara and Mr Angeli resigned from their employment with UMS. At the time of Mr Zibara’s resignation, UMS understood that he was to take up an opportunity in the supplements business.

Subsequent to the signing of the new contracts, nine players elected to terminate the contract with UMS and four of those signed new contracts with Genesis Talent Management Pty Ltd, a sports management company set up by Mr Zibara and Mr Angeli in February 2018.

UMS commenced proceedings in the Federal Circuit Court of Australia (the Court) alleging that Mr Zibara and Mr Angeli had breached their duties of good faith and fidelity and duty to avoid conflict of interest and duty owed to UMS. UMS sought an account of any profits made by the respondents for the breaches of their fiduciary obligations owed to UMS.

The evidence put before the Court included numerous text and email communications from August 2017 to January 2018 from Mr Zibara or Mr Angeli and the players or the players’ parents, suggesting that the players were required to enter into the new contracts to replace their existing ones. In addition to this, the Court heard that when UMS raised concerns about Mr Zibara’s conduct to the Head of the NRL Accreditation Committee in March 2018, Mr Zibara’s response was: “what was I meant to do leave with nothing”.

Decision

The Court was satisfied that Mr Zibara had caused new contracts to be entered into with 16 players despite there being significant time left to run on their existing contracts. The Court was also satisfied that this was done without the authorisation of UMS and with full knowledge that:

  • the new contract would allow a player to terminate the contract if he ever left the employ of UMS;
  • the existing contracts did not need to be replaced with the new ones; and
  • UMS had made a decision to allow the existing contracts to run their course and new contracts could be negotiated upon the expiry of the term.


The Court inferred from the evidence that from about July 2017, Mr Zibara began contemplating leaving UMS because of the opportunity that had arisen following the changes to the standard form contract that would enable players to join him if he ever left. According to the Court, it was at this point in time that Mr Zibara chose to prefer his own personal interest which came into conflict with his duty of loyalty to UMS.

The Court was also satisfied that Mr Angeli also breached his duties of absolute and disinterested loyalty to UMS by assisting Mr Zibara in breaching his fiduciary breaches, with full knowledge of what he was doing.

The Court ordered that Mr Zibara and Mr Angeli were to account to UMS for all profits derived from the breaches, not only for the period of the contracts between the players and Genesis, but also for any profits derived from any renewal of a contract.  

What can your business learn from this decision?

The duties of good faith and fidelity and to avoid conflict of interest and duty are owed by employees to their employers during the course of their employment – particularly by employees who hold prominent positions within the business. These duties are imposed by courts of equity to ensure that employees do not misuse the position that they hold for the business for their own personal gain.

This decision provides further support to employers following the High Court’s 2018 decision in Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43 (Foresters), that serious breaches of these equitable duties will be appropriately punished including potentially accounting for any and all profits derived from the breach with no time limitation.    

Independent Contractors

"Court finds Tupperware demonstrator an independent contractor not an employee"

Gravener v MIJA Pty Ltd & Ors [2020] FCCA 46

Executive summary

An independent contractor who demonstrated Tupperware products in Queensland has had her claims of unlawful adverse action rejected following the Court’s finding that she was a true independent contractor and not an employee as alleged.  

Background

Within Australia, Tupperware operates largely through a network of franchises that engage independent contractors to hold events and demonstrate products. The demonstrators enter into independent contractor agreements with franchisees at the commencement of their engagement and are expected to grow their own business by deciding how, when and where they will demonstrate products for the purposes of making sales.

In this case, a demonstrator engaged by a franchisee claimed that she was in fact an employee and was subjected to unlawful adverse action by the franchisee including when it terminated its agreement with her.

The demonstrator attempted to argue that there were a range of factors in her engagement that were indicative of an employment relationship, including that:

  • she was promoted to the position of manager;
  • the franchisee exercised control over her in the performance of her work by:
  • telling her when and where to work when it operated kiosks in shopping centres; and
  • requiring her to work long and demanding hours;
  • the franchisee presented the demonstrator to the world as an emanation of its business by requiring her to wear a polo shirt; and
  • the demonstrator was required to assist in the management of other demonstrators.

Federal Circuit Court of Australia Decision

The Federal Circuit Court of Australia (the Court) summarised the relevant authorities on determining the employment/contractor status of an individual, highlighting that the question is determined according to the multiple indicia test.

The test requires the Court to consider a range of factors that are relevant to the determination of the relationship between the parties. Such factors include the degree of control exercised by the hirer, the nature of the work performed, the contractual arrangements between the parties and the way in which the individual is presented to the world in relation to the hirer’s business. The Court noted that these factors should not be treated a checklist and, in each case, different factors will be relevant and will carry varying weight.

In assessing the evidence before it in this particular case, the Court commented,

It is important to note that the mere assertion by the [demonstrator] that certain things did or did not occur is not of itself proof that those things did or did not occur… I formed the view that the [demonstrator] displayed, at times, a belligerent attitude to relevant questions and was in the main argumentative with Counsel cross-examining her. Her belief that she was an employee marred her ability to make reasonable concessions based upon the evidence presented to her. [at 45 – 47]

In relation to the demonstrator’s specific assertions, that Court found that:

  • Under the terms of the “Tupperware Demonstrator terms and conditions agreement” between the parties, the demonstrator explicitly acknowledged that:
  • the relationship was that of independent hirer to contractor;
  • the demonstrator was not an employee; and
  • she would set her own hours and was responsible for running her own business.
  • Payments made to the demonstrator deducted GST but not income tax or superannuation, indicating the arrangement was commercial rather than that of employment.
  • The franchisee did operate shopping centre kiosks, though attendance at the kiosks was neither mandatory nor expected. In particular, the demonstrator was not required to work at those kiosks and, in fact did not because she submitted her availability too late.
  • The demonstrator did, on occasion, work long hours. However, she was not required to do so by the franchisee. Rather, she worked long hours to earn income and bonuses for her own business.
  • The demonstrator did wear a polo shirt with the franchisee’s business name on it. However, the demonstrator was not required to wear this shirt. It was made available to her for purchase and she chose to purchase it and wear it. Further, other items used by the demonstrator in her business had her name on them and so it was not reasonable to infer that polo shirt had the effect of presenting her to the world at large as and emanation of the franchisee’s business.
  • The demonstrator was asked to assist with the management of others. However, she was not obliged to do so by the franchisee and there was no evidence before the Court that had the demonstrator refuse to provide additional training, her agreement would have been terminated.

In short, the Court found that, despite the demonstrator’s assertions and belief that she was an employee, it was simply not borne out on the evidence before it.

Ultimately, the Court held that result of the multiple indicia test was that the demonstrator was an independent contractor and not an employee.

The Court, therefore, rejected four of the five claims of adverse action from the demonstrator on the basis that she was not an employee. The Court rejected the demonstrator’s final claim of adverse action on the basis that it similarly could not be made out on the evidence before the Court.

What can your business learn from this decision?

Businesses engaging independent contractors should ensure that their arrangements are clear to all parties concerned from the outset and throughout the period of the engagement. Hirers in particular should ensure that they maintain a true arm’s length from their contractors and permit those contractors to conduct their own business according to their own methods.

This decision is a good example of a business that maintained an appropriate arm’s length from its contractor, despite the contractor’s belief to the contrary.

Industrial Action

"Employees ordered to stop systematic personal leave industrial action"

Orora Packaging Australia Pty Ltd T/A Orora Bag Solutions v El-Chami and Others [2020] FWC 224

Executive summary

Employees who took part in a deliberate pattern of personal leave absences were found to have engaged in covert industrial action. The Fair Work Commission (FWC) made orders stopping the employees from organising industrial action by way of taking systematic personal leave.  

Background

The employer operates a manufacturing business. Two lines of the business run 24 hours per day, 5 days per week and are overseen by key operators. If a key operator is absent from work, the line cannot operate.  

The employer made an application to the FWC against 31 employees for an order to stop unprotected industrial action. The employer claimed that, since October 2019, the employees had been engaging in a coordinated campaign of accessing sick leave which was directed at immobilising the two operating lines. As a result of employees taking sick leave, the lines had to be shut down, affecting the employer’s operations.

The employer’s evidence demonstrated that for the period from October to December 2019, the employer suffered a significant number of lost production hours due to personal leave, compared to the same period in 2018 which did not record any loss of production due to personal leave. The employer also argued that the personal leave was coordinated as multiple employees were absent on the same lines for single days only.

The employer argued that it had never experienced the level of absenteeism that had been occurring and it had never lost productivity on an entire shift due to personal leave.

Decision

Commissioner Bissett considered the evidence submitted by the employer. She was satisfied that there was planned and coordinated action by employees who worked on the two operating lines involving the taking of sick leave, and that this was a campaign against the employer.

Commissioner Bissett found that the coordinated sick leave absences amounted to industrial action which was not protected industrial action. She also found that the industrial action was an organised activity and it was probable that it would continue.

Accordingly, Commissioner Bissett held that, in accordance with section 418 of the Fair Work Act 2009 (Cth) (FW Act), an order that the action stop, not occur or not be organised must be made. An order was made directing the employees not to organise, engage in or threaten industrial action involving coordinated personal absences for a period of two months.

What can your business learn from this decision?

The FW Act sets out what is and what is not protected industrial action. The FWC has power to make orders to stop industrial action which is happening that is not protected industrial action. Significantly, an order can also be made by the FWC upon application to prevent unprotected industrial action from proceeding where it is threatened or being organised by employees.

Modern Award Reviews

NEWS ALERT – Miscellaneous Award 2010 review

A Full Bench of the Fair Work Commission (FWC) has released its provisional view that the coverage clause of the Miscellaneous Award 2010 should be varied (4 yearly review of modern awards – Miscellaneous Award 2010 [2020] FWCFB 754).

The Miscellaneous Award has caused confusion amongst employers and employees as to its coverage for some time and this confusion came to a head in 2018 in the decision of United Voice v Gold Coast Kennels Discretionary Trust t/as AAA Pet Resort [2018] FWCFB 128. In that decision, the Full Bench held that a kennel and pet boarding business was covered by the Miscellaneous Award despite a virtually industry-wide belief in Queensland that it was award-free and advice from the Fair Work Ombudsman confirming the same.

Following that decision, the President of the FWC issued a statement that the coverage of the Miscellaneous Award would be reviewed by a Full Bench.

In conducting that review, the Full Bench considered the relevant provisions of the Fair Work Act 2009 (Cth), submissions from employer groups and unions, and the history of the Miscellaneous Award including the Ministerial Direction to make the Miscellaneous Award that was issued back in 2008.

The Full Bench concluded that some changes to the coverage clause of the Miscellaneous Award were required to ensure it aligns with the provisions of the FW Act and to limit confusion in future.

In short, the Full Bench confirmed its provisional view that the current subclause 4.3 should be removed and the current clause 4.2 should be amended to read as follows:

4.2 The award does not cover managerial employees and professional employees such as accountants and finance, marketing, legal, human resources, public relations and information technology specialists.

The Full Bench has invited interested parties to make further submissions on the matter before a final determination is made. Employers who wish to make a submission should do so with the FWC.

 

Should you require any further information or assistance, please contact our Director Shane Koelmeyer on (02) 9256 7500 or via email on sydney@workplacelaw.com.au.

Information provided in this update is not legal advice and should not be relied upon as such. Workplace Law does not accept liability for any loss or damage arising from reliance on the content of this update, or from links on this website to any external website. Where applicable, liability is limited by a scheme approved under Professional Standards Legislation.

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