Resources: E-updates

Employment Law E-update - November 2016

E-updates
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FWC Annual Report released

FWC Annual Report released; Reminder – Retail trading on Boxing Day; CFOs post-employment restraints unenforceable; FroYo master franchisor penalised for involvement in workplace law contraventions; High Court provides further guidance on vicarious liability; Employer ordered to pay $1,300,000 compensation in adverse action decision; Employer ordered to disclose confidential investigation report; 2017 Payroll Benchmarking Survey - Now Open.

Employment Issues

“FWC Annual Report released”

In September 2016 the Fair Work Commission (FWC) released its 2015-2016 Annual Report (the Report). The Report revealed the following:

Unfair Dismissal Applications

- Out of the 34,215 applications made to the FWC, 14,694 applications related to unfair dismissal.
- Of these 14,694 unfair dismissal applications:

  • 8,529 were settled at conciliation;
  • 2,808 were settled after conciliation;
  • The remainder were either settled prior to conciliation, withdrawn after a conference/hearing but before conciliation or by final decision/order.

- The majority of the unfair dismissal applications were settled by both monetary and non-monetary methods.
- Approximately 36 applications (0.0024%) resulted in the reinstatement of the Applicant. This is an interesting statistic considering reinstatement is the primary remedy for unfair dismissal.
- Where a monetary payment formed part of a settlement at conciliation:

  • In 30% of cases the amount was less than $4,000; and
  • In 60 per cent of cases it was less than $8,000.

- This is consistent with previous years.

General Protections Applications

- For the first time, the FWC published data on the outcomes of general protections applications involving dismissal:

  • 53% of general protections applications involving dismissal were resolved in conciliation;
  • For 25% of matters, a Certificate was issued stating that the dispute remained unresolved; and
  • For matters settled in conciliation, 63% included a monetary payment. Of these, 60% were for amounts of less than $6,000 and 82% were settled for less than $15,000.

Anti-Bullying Applications

- 32.3% of applications were withdrawn while still with the Case Management Team or the Panel Head.
- 15.7% of applications were withdrawn before any proceedings commenced.
- Factors that led to early withdrawal included:

  • Identifying jurisdictional barriers to the application;
  • The preventative focus of the potential orders; and
  • Decisions to follow alternative ways to resolve the issues arising at the workplace.

Enterprise Agreements

- 5,529 applications to approve enterprise agreements were made to the FWC. Of these:

  • 4,801 were approved;
  • 53 were not approved; and
  • 595 were withdrawn.

- The number of applications to make an enterprise agreement received was lower than in previous years.

 

“Reminder – Retail trading on Boxing Day”

In November 2015 the NSW Parliament passed laws to allow retail businesses in NSW to trade on Boxing Day. Prior to this, trading restrictions applied across NSW for the day, except for the Sydney City centre and Bondi Junction.

To trade on Boxing Day, retail businesses must meet one condition – shops must be staffed only by persons who have “freely elected to work on that day”. This means that an employee is to work without coercion, harassment, threat or intimidation by or on behalf of the occupier of the shop. If a retailer elects to open on Boxing Day and it is found that an employee has been coerced to work, fines of up to $11,000 per person may apply. In order to minimise the risk of this occurring, employers could have employees sign an acknowledgement that they have freely elected to work on Boxing Day.

Employers are also reminded that those employees who are rostered to work on Boxing Day must be paid in accordance with any applicable Modern Award or their Enterprise Agreement.

 

“CFOs post-employment restraints unenforceable”

Just Group Pty Ltd v Peck [2016] VSC 614

Executive summary

The Victorian Supreme Court dismissed an application by an employer for an injunction against its former Chief Financial Officer on the grounds that the post-employment restraints were too broad and therefore unenforceable.

Facts

Ms Nicole Peck (the Employee) commenced employment with fashion and apparel retailer, Just Group Limited (Just Group) on 6 January 2016 in the position of Chief Financial Officer.

The Employee’s employment contract with Just Group included terms regarding confidential information and post-employment restraints. The post-employment restraints included cascading provisions and sought to restrict the Employee for up to 24 months after termination of employment, within a geographical area, from directly or indirectly engaging in, assisting or advising or carrying on, any activity which was:

  1. The same or similar to, any part of the specialty brand and fashion business of Just Group in which she was involved or in which she received confidential information; or
  2. For or on behalf of a list of brands or entities listed in an annexure to the contract. This annexure included Cotton On.

On 2 May 2016 and within her six month probation period, the Employee provided one months’ notice of her resignation and later advised Just Group that she was leaving to join the Cotton On Group (Cotton On) in the position of General Manager, Finance and Treasury.

Prior to the Employee commencing employment with Cotton On, Just Group commenced proceedings in the Supreme Court of Victoria for an injunction to enforce the Employee’s post-employment restraints. Just Group argued that it had a legitimate commercial interest to protect its confidential information, particularly as Cotton On was a major competitor.

The primary issue to be determined was whether the Employee’s post-employment restraints in her employment contract were enforceable.

Decision

Just Group argued that the very wide restraint in the Employee’s contract focused on the circumstances of the Employee’s alleged breach, that is, her prospective employment with Cotton On, the competition between it and Cotton On and the damage that could be inflicted on its business should the Employee commence employment with Cotton On.

Judge McDonald noted however that the contract was subject to Victorian law and as such, common law principles applied.

Unlike in NSW, there is no statutory regime in Victoria permitting the Court to determine the extent to which a restraint clause was valid. Accordingly, the Court was required to assess whether the restraints were reasonable “not by reference to what the parties have actually done or intend to do, but what the restraint entitles or requires the parties to do” (Gummow J in Adamson v New South Wales Rugby League Ltd [1991] FCA 425).

With respect to restraint (1), the Court determined:

  • That the clause restricted the activities to be undertaken by the Employee rather than the business activities of the new employer. As drafted, the restraint did not make sense and was unenforceable; and
  • That by applying common law principles, the restraint was too broad – it operated to restrain the Employee from taking up any role (not just a role where the Just Group’s confidential information may be relevant). As such, it went beyond what was reasonable to protect Just Group’s confidential information and was therefore unenforceable.

With respect to restraint (2), the Court determined:

  • That it had a very broad reach and operated with respect to any of the 50 brands or entities listed in the annexure. Further, Just Group failed to prove the restraint was reasonable or provide evidence of the commercial activities of all the entities listed in the annexure; and
  • That by applying common law principles, the restraint would have prevented the Employee from being employed by any of the entities listed in a role where the confidential information acquired by the Employee was not relevant.

Interestingly, Judge McDonald noted that if restraint (2) had only referred to Cotton On, based on the evidence of the level of competition between Just Group and Cotton On, the Court may have concluded that the restraints were enforceable.

Judge McDonald added that a further issue in relation to the contract, which indicated that the restraints were unenforceable, was the fact that the restraints were for a minimum of 12 months and up to 24 months, and this was incongruous with the one months’ notice of termination of employment or payment in lieu thereof to be given to the Employee during the probationary period.

Just Group’s application for injunctive and declaratory relief was dismissed.

Comment – what can your business learn from this decision?

It is not uncommon, particularly for senior positions, for employment contracts to include a post-employment restraint, to limit:

  1. the geographical area where the former employee may work; and/or
  2. the time frame in which the former employee can take up employment of a similar nature or in an industry; and/or
  3. the non-disclosure to others of confidential information acquired during the employment.

For a post-employment clause to be enforceable by a court at common law it must be reasonable (in terms of both geography and time).

“Reasonableness” may take into account a number of factors including, as in this decision, the full operation of the clause and the time limits in comparison to the length of employment.

Accordingly, post-employment restraints must be carefully drafted to ensure that they will be reasonable and enforceable in all Australian jurisdictions.

If you require assistance with drafting post-employment restraints, please contact us on (02) 9256 7500.

 

“FroYo master franchisor penalised for involvement in workplace law contraventions”

Executive summary

In the first decision of its kind, a master franchisor has been penalised for its involvement in a franchisee’s contraventions of the Fair Work Act 2009 (Cth) (FW Act).

Facts

Yogurberry World Square Pty Ltd (Yogurberry World Square) operated a take-away frozen yoghurt and drinks franchise in World Square, Sydney.

Yogurberry World Square was a member of a group of companies, including a payroll company and the master franchisor company for the Yogurberry brand, YBF Australia Pty Ltd (YBF Australia). Each member of the group of companies was involved in the operation of a business trading under the Yogurberry brand.

In 2013, the Fair Work Ombudsman (FWO) investigated the Yogurberry World Square store, which was at that time operated by YBF Australia. It found that YBF Australia had committed a number of contraventions of the FW Act and issued it with a letter of caution and several infringement notices.

Sometime later, Yogurberry World Square (a related company of YBF Australia) took over operation of the Yogurberry World Square store.

In 2014 and 2015, the FWO made efforts to recover records from the Yogurberry companies relating to payment of wages and rosters. The new operator of the Yogurberry World Square store blamed the change in management for its inability to produce records.

The FWO then launched an investigation into the group of companies, including YBF Australia (the master franchisor).

As a result of the investigation, Yogurberry World Square admitted to a range of contraventions of the FW Act including underpaying wages, failing to pay penalties, failing to pay special clothing allowance, failing to keep proper records and failing to issue employees with payslips.

YBF Australia admitted to its involvement in the contraventions, as did the associated payroll company and an individual who was a director or an officer in each of the Yogurberry companies (the Respondents).

Decision of the Federal Court

As the contraventions were admitted by the Respondents, the Court was left to decide on the quantum of penalties to be ordered.

The Court had regard to the maximum penalties available, the Respondents’ cooperation with the FWO and the objective seriousness of each contravention.

The Court found that since 2013, the Respondents had been on notice of their obligations to comply with workplace laws and had deliberately not kept proper records, thus frustrating the FWOs investigation into their workplace practices.

Furthermore, no evidence as to the financial position of the Respondents was provided to the Court in the proceedings. This led the Court to infer that the Respondents were intentionally trying to disguise their respective financial positions in order to prevent an evaluation of how each had profited from contraventions of the FW Act.

The Court held that these factors, as well as the vulnerable nature of the employees concerned, increased the need for specific deterrence in this case. The Court said that penalties imposed on employers and those involved in contraventions should not form part of “the cost of doing business”.

Ultimately, the Court made orders that each Respondent pay a penalty:

  • YBF Australia – $25,000
  • Yogurberry World Square – $75,000
  • CL Group Pty Ltd – $35,000
  • Soon Ok Oh – $11,000

The Court also ordered that:

  • YBF Australia and CL Group Pty Ltd conduct an audit to ensure that all employees or persons engaged to perform work under the Yogurberry brand in Australia are paid correctly, issued with payslips and proper records are kept;
  • Ms Oh and the master franchisor, YBF Australia engage a professional to train them and any other director or company secretary in respect to the FW Act, the Fair Work Regulations and the Fast Food Industry Award 2010; and
  • The Respondents pay the FWOs costs.

Comment – what can your business learn from this decision?

This is the first decision in which the FWO has secured penalties against a master franchisor for its involvement in contraventions of the FW Act.

Although the contraventions were admitted, this decision demonstrates that the FWO and the courts are interested in reducing the distance between franchisors and franchisees when it comes to contraventions of the FW Act, particularly in relation to employee entitlements.

 

“High Court provides further guidance on vicarious liability”

Prince Alfred College Incorporated v ADC [2016] HCA 37 (5 October 2016)

Executive summary

  • The High Court of Australia (HCA) has provided further guidance to assess an employer’s vicarious liability.
  • The “relevant approach test” was developed to give employers guidance as to how and when the courts will hold them vicariously liable if their employees commit crimes of sexual assault at work.

Background

In 1962 the Plaintiff was repeatedly sexually abused by a school teacher and housemaster employed by the Prince Alfred College Boarding School (the College) in Adelaide.

In 1997 the Plaintiff was diagnosed with post-traumatic stress disorder and contacted the College. It was agreed that the College would pay the Plaintiff’s medical and legal fees and his son’s school fees ($10,000 a year for three years). The Plaintiff also later sued the teacher. The matter resolved by way of settlement in the sum of $15,000.

In 2004 the Plaintiff was advised by his psychologist that he would no longer be able to work full time.

In 2008 the Plaintiff commenced action against the College, suing it on a number of grounds, including that it should be held liable for the actions of the teacher under the doctrine of vicarious liability.

Decision

The HCA dismissed the case on the basis that the Application was out of time and it was unfair to grant an extension of time (as a lot of the records and notes had been destroyed or lost over time and several key witnesses had died).

Further, the HCA stated that it was not fair to allow Plaintiff to sue after he had already reached settlement in 2008.

The HCA identified a need for guidance on an assessing an employer’s vicarious liability where an employee commits a criminal offence.

The HCA developed the “relevant approach test”, which considers the “special role that the employer has assigned to the employee and the position in which the employee is thereby placed vis-à-vis the victim”.

The HCA explained that to determine whether the performance of a role may give rise to the “occasion” for the wrongful act, particular characteristics need to be taken into account. These characteristics included authority, power, trust, control and the ability to achieve intimacy with the victim. These are not the only characteristics, others may be relevant and will depend on the facts of each case.

In circumstances where an employee attempts to achieve intimacy with the victim and the employee takes advantage of his/her position, the HCA stated that this may be enough to determine that the “wrongful act” is in the course or scope of employment.

If it is found that the employee’s “wrongful act” was in the course of employment, the employer would be held vicariously liable for the employee’s actions.

What can your business learn from this decision?

Employers now have clear guidance from the HCA as to when criminal sexual conduct will likely to be inside or outside the scope of employment.

This decision is likely to be used in cases where employees are given “power” over others at work. Typically, this will occur in medical field (doctors, nurses, etc.), carers (child care, aged care, invalid care) and teachers.

This decision could also have wider application to those employees who hold positions of seniority that have features of authority, power, trust and control or where there are vulnerable workers such as juniors, trainees and apprentices.

Employers are reminded to regularly review their policies and procedures setting out acceptable standards of behaviour in the workplace. In addition to this, employers should provide regular refresher training to employees, particularly those in senior positions and in positions of “power”, making it clear that the employer does not and will not tolerate behaviour outside the employer’s stated standards of behaviour.

 

Unfair Dismissal / Adverse Action

“Employer ordered to pay $1,300,000 compensation in adverse action decision”

Construction, Forestry, Mining and Energy Union v Hail Creek Coal Pty Ltd [2016] FCA 199

Executive summary

The Federal Court of Australia (FCA) has ordered Hail Creek Coal Pty Ltd (Hail Creek), a Rio Tinto subsidiary, to pay $1,300,000 in compensation (plus interest) as a result of adverse action it took against an injured worker.

Background

In mid-2009 the employee, a drill rig operator for Hail Creek sustained injury to his back.

As a drill rig operator the employee had competencies to work on a wide range of equipment (dozers, cable tractors, graders and dump trucks). In October 2010, following surgery to his spine, the employee returned to work performing light duties. He continued to work as a drill rig operator between October 2010 and November 2013.

In or about November 2013 the following two significant events occurred:

  1. The employee commenced an action in the District Court of Queensland (DCQ) claiming Work Injury Damages and was awarded compensation of $637,000. The future economic loss component of the compensation award was calculated on the assumption that the employee would continue to work at Hail Creek in the role of drill rig operator – “as he had obtained a new skill as a result of being retrained”.
  2. The employee underwent a pre-arranged 5-yearly medical assessment under the Coal Mining Safety and Health Act 1999 (Qld) (the Act). A form as prescribed by the Coal Mining Safety and Health Regulation 2001 (Qld) (the Regulation) was completed and stated that the employee was unfit to perform his current position as “operator”.

Based on the opinion provided in the assessment, a decision was made by the mine manager to stand the employee down.

In early 2014 the employee challenged the assessment in the Queensland Supreme Court and obtained a ruling in his favour – that the assessment was not a valid one for the purposes of the Regulation.

In about March 2014 Hail Creek ceased paying wages to the employee, claiming that he had exhausted his sick leave and annual leave entitlements. The employee’s status was changed to being on leave without pay.

Hail Creek arranged for the employee to undergo a further assessment. The form displayed a tick next to the box that stated the employee “is fit to undertake proposed/current position (drill rig operations), subject to the following restrictions”. The restrictions were listed to be heavy or continuous jarring and vibration, working above shoulder height and operating heavy haul trucks or dozers.

An employee of Hail Creek telephoned the Doctor who assessed the employee and requested another form. The amended form contained the same information, except that the box that was now ticked stated “Is not fit to undertake proposed/current position, because of the following restrictions”. Based on the amended assessment, Hail Creek confirmed its decision to stand the employee down and cease payment of wages.

The employee challenged the amended assessment and was again successful, with the Court ruling that it was inconsistent with the Regulation.

Hail Creek appealed this decision to the Queensland Court of Appeal. The employee was again successful. Hail Creek’s Appeal was dismissed.

In December 2014, the Construction, Forestry, Mining and Energy Union (CFMEU), on behalf of the employee, commenced proceedings against Hail Creek in the FCA, seeking declarations that Hail Creek contravened the General Protections (Part 3-1) and Enterprise Agreement provision (section 50) of the Fair Work Act 2009 (Cth) (FW Act).

Decision

Justice Reeves did not accept Hail Creek’s manager’s claim that he stood the employee down for the sole reason that he had any genuine concern about Hail Creek’s obligations under the Regulation, particularly Regulation 46 and that the DCQ decision had “no bearing” or “did not have anything to do with” his decision.

In this regard, Justice Reeves considered the evidence of the mine manager about costs for Hail Creek and an email in which he commented on the large DCQ payout that although paid by the Insurer, could be an indirect cost for Hail Creek in future insurance premium calculations. Justice Reeves described the decision as a “pretext for a hasty decision made by [the mine manager] ...”

Further, Justice Reeves noted the mine manager’s lack of knowledge of the Act or Regulation and how they operated, describing his level of understanding as “rudimentary at best”.

Justice Reeves ruled that Hail Creek engaged in adverse action when it stood down the employee for a prohibited reason after he exercised a workplace right (launching legal action in the District Court of Queensland).

Justice Reeves also found that Hail Creek contravened the FW Act by failing to pay the employee, in breach of the Hail Creek Agreement 2011.

Hail Creek argued that the employee was not entitled to wages because from 18 November 2013 he was unfit to perform the role he was employed to perform, namely, that of a multi-task operator and that he could not perform that role as he did not have a valid assessment under the Regulation.

The CFMEU submitted that at all times the employee had been willing and able to perform the role he was employed to perform (an operator operating a drill rig) and was therefore entitled to be paid wages under the Hail Creek Agreement 2011 (the Agreement). It added that the employee had not been required to perform any other work under the Agreement.

Justice Reeve determined that as there was no evidence to support the allegation that the employee was to perform the work of a multi-skilled operator and that Hail Creek directed him to not attend for work, Hail Creek took adverse action against the employee and contravened the FW Act and the Agreement.

Comment – what can your business learn from this decision?

The above decision highlights an important aspect of the High Court decision of Board of Bendigo Regional Institute of Technical and Further Education v Barclay (2012) 64 AILR 101-722. In that case, the employer’s reasons for the alleged adverse action were accepted because the decision-maker in the witness box gave credible and believable reasons for the decision (that did not include reasons amounting to adverse action). Accordingly, it is clear that these cases turn on the credibility of key witnesses. In this case, the key witness presented poorly in the witness box and was unable to persuade the Court that his reasons for action did not include a prohibited reason.

Hail Creek has lodged an Appeal of Justice Reeve’s decision. We will keep you updated in relation to the Appeal.

 

Bullying / Discrimination / Harassment

“Employer ordered to disclose confidential investigation report”

Mr Gordon Cooper and Ms Rosemary Cooper [2016] FWC 7627

Executive summary

An employer has been compelled by the Fair Work Commission (FWC) to disclose a confidential investigation report, despite the report being marked “private and confidential.”

Facts

Two employees made workplace bullying complaints to their employer, in response to which the employer engaged a third party to conduct an investigation. The third party investigator provided an investigation report to the employer that was marked “private and confidential.”

The employer took action in relation to the bullying complaints based on the contents of the report.

The two employees subsequently filed Applications for Orders to Stop Bullying (the Applications) in the FWC. In connection with the Applications, the Applicants also applied for orders compelling their employer to disclose to them the investigation report, correspondence relating to the investigation report and Board Minutes associated with the investigation report.

The Applicants sought the production of the report and the associated documents on the basis that they were highly relevant to the applications for orders to stop bullying and it was in the interests of justice that they and the FWC be able to see the contents of the report.

The employer was opposed to disclosing the report because it was confidential in nature. In particular, the employer was concerned that through disclosure of the report the identities of investigation witnesses and their evidence would be known to the Applicants and may be made public through the FWC proceedings. The employer was of the view that this exposure would undermine the employer’s guarantees to witnesses that their evidence would remain confidential and as a result, other employees may lose faith in the employer’s complaints and investigations process in the future.

Decision of the FWC

The FWC found that though there were competing interests, the matters covered by the report and the associated documents were capable of being relevant to the stop-bullying applications and should therefore be made available to the Applicants and the FWC.

Commissioner Simpson said that despite the fact that the Applicants would learn the identities of the witnesses, “the interests of justice weigh in favour of the disclosure of the report being ordered”.

To overcome the employers concerns regarding confidentiality, the FWC made supplementary orders that the report and the associated documents not be used for any purpose other than the Applications and were not to be viewed by any persons other than the Applicants and the Applicants’ legal representatives.

Comment – what can your business learn from this decision

Where an employer engages a third party to conduct an investigation, the investigation report produced as a result of the investigation may be subject to a notice to produce even when that report is marked private and confidential.

However, if an investigation is conducted by a legal representative engaged by the employer, the report will attract legal professional privilege that should have a better chance of withstanding any notice to produce.

 

2017 Payroll Benchmarking Survey - Now Open

Every year Australian Payroll Association (APA) completes valuable research in their annual payroll benchmarking survey. The survey looks at the cost of payroll in Australia as well as salary costs across locations, employer size and industries.

APA invites you to participate in this unique survey.

All survey participants will receive a copy of the 2017 Payroll Benchmarking Survey findings in early February 2017.

This complimentary report is only available to survey participants who complete the online survey by the closing date.

The survey takes approximately ten minutes to complete and the APA welcome your participation.

You will find the survey link at https://www.research.net/r/2017-payroll-benchmarking-survey (available until 23 December 2016).

If you have any questions or concerns, please don't hesitate to contact the team at Australian Payroll Association.

 

Sydney FC & Workplace Law

Congratulations to the Sydney FC W-league team on another fine victory. This time the Sky Blues defeated Adelaide United (2-0) in front of a great home crowd over the weekend.

 

Need A Laugh

Q: What do you get when you cross an elephant and a fish?
A: Swimming trunks!

Q: What starts with an E and ends with E, but only contains one letter?
A: An envelope.

 

Should you require any further information or assistance, please contact our Managing Director Athena 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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