Post-employment restraints unenforceable following employer’s repudiatory conduct; FWC Commissioner on a mission to set employers’ termination processes straight; Constructive dismissal from reduction in shifts; Full Bench finds that labour hire employee who was denied host site access was unfairly dismissed; Bullying application dismissed: Conduct was not repeated unreasonable behaviour; Employer agrees to $1.5 million Enforceable Undertaking
“Post-employment restraints unenforceable following employer’s repudiatory conduct”
Crowe Horwath (Aust) Pty Ltd v Anthony Loone  VSCA 181
The Victorian Supreme Court of Appeal has dismissed an application to appeal by Crowe Horwarth (Aust) Pty Ltd, preventing them from enforcing a restraint of trade clause in an employment contract that they had repudiated.
Anthony Loone (the Employee) had been the Managing Principal of the Launceston office of Crowe Horwarth (Aust) Pty Ltd (the Employer) for approximately 16 years.
In January 2015, the Employer was acquired by Findex Group Ltd. Upon acquisition, Findex sought to introduce a number of structural and operational changes, including:
- The introduction of a “one best way” approach and “family office initiative” to the company structure; and
- A new approach to the bonus program, which proposed that 20% of the annual bonus would be deferred for a three year period.
When the Employee terminated his employment on 12 July 2016 and decided to set up his own accounting business, the Employer sought to enforce the restraint clause in his employment contract.
The clause prevented the Employee, for a period of 12 months, from engaging in competition with the Employer in a business situated within five kilometres of the Employer’s location, and soliciting work from the Employer’s clients with whom the Employee had previously dealt.
The contract also provided that the clause would “survive the termination of the Employment for any reason”.
The Employee asserted the clause was unenforceable because the Employer had repudiated the contract. Specifically, the Employee alleged:
- The “family office initiative” had resulted in a substantial change and reduction in his duties, essentially stripping him of the Managing Principal Role; and
- The decision to defer part of the bonus payment was in breach of his contract; and
- The Employer had made a decision to exclude, from the bonus pool, the profitability of a business acquisition for which he was responsible, in breach of his contract, which provided the bonus amount would take into consideration his “personal performance”.
Decision at First Instance
Justice McDonald found all three of the allegations made by the Employee were acts of repudiatory conduct, which the Employee had accepted by terminating his employment.
In light of the repudiation and guided by established case law, his Honour held the restraint clause was unenforceable because:
- The Employer had not performed its part of the bargain and was not ready and able to do so;
- It would be against public policy to allow a contract to continue to operate even if a party had committed a grave breach of it;
- The Employer had not given any substantial consideration for the restraint clause; and
- No case in Australia has ever enforced a restraint covenant in such circumstances and the authority dictated that the clause should be inoperative.
The Employer then sought to appeal this decision.
Decision on Appeal
Justices Ashley, Priest and Beach unanimously agreed with Justice McDonald and confirmed the Employer was not entitled to rely on the restraint clause.
They undertook an analysis of the case law going back over 100 years and found that decisions of the High Court of Australia, and the high authority in England and Canada, have all confirmed “that a restraint clause is not enforceable against an employee whose employment ends by the employer’s wrongful conduct – whether it be wrongful dismissal or the employee’s acceptance of the employer’s repudiatory conduct”.
Their Honours made it clear that this position is not an established rule of law and courts must have regard to the factual circumstances of each case. However, it was not a coincidence that all cases considered had produced the same outcome.
What can your business learn from this decision?
This decision affirms that courts will rarely enforce a restraint clause where an employee has accepted their employer’s repudiatory conduct.
Employers should approach major workplace change with caution, including a change to the business structure or any change to monetary remuneration, including the way bonuses are awarded. An employee’s primary duties, remuneration and their entitlement to a bonus are often expressly stated within the terms of an employment contract, and unilateral changes to those terms may have significant consequences such as breach of contract.
Without careful consideration, employers may engage in conduct that amounts to repudiatory conduct. The risk is – in addition to the possibility of being sued for breach of contract – that repudiatory conduct will remove the protection provided by a restraint of trade clause (or other contractual terms) when an employee leaves the company.
Unfair Dismissal/Adverse Action
“FWC Commissioner on a mission to set employers’ termination processes straight”
Veronica Bennett v Colin Joss & Co Pty Limited t/a Joss Facility Management  FWC 3669
The Fair Work Commission (FWC) has reinstated an employee who was unfairly dismissed whilst on extended sick leave, finding that the employer’s termination process was both “highly inappropriate” and a “denial of natural justice”.
Ms Bennett (the Employee) was engaged by Joss Facility Management (the Employer) to perform contractual cleaning work at three sites in Blayney, New South Wales, the majority of which she performed at Blayney Public School (the School). The Employee had been engaged by the Employer for five and a half years however, she had been performing cleaning work at the School with various other contractors for over 23 years.
In 2014, the Employee underwent surgery to remove spurs from her right ankle, which required her to take unpaid sick leave for approximately two and a half months.
Two years later in August 2016, the Employee underwent a further, more complex, surgery to remove spurs from her left foot and ankle. As a result, she took a much longer period of absence from work. During this period, there were a number of telephone conversations between the Employee and the Employer’s Return-to-Work (RTW) Coordinator about the Employee’s capacity to return to work.
On 16 January 2017 in the course of one such conversation, the Employee advised the RTW Coordinator that, whilst still certified unfit to return to work, she had a Doctor’s appointment scheduled for 10 February 2017, at which time the Employee anticipated the Doctor would provide a more helpful prognosis.
Four days before the appointment, the Employee received a telephone call from the Employer’s Injury Department Manager and internal legal counsel, advising her that her employment was being terminated, with immediate effect, on the basis that she could no longer perform the inherent requirements of her job.
The Employee filed an unfair dismissal claim alleging:
- There was no valid reason for the dismissal;
- She was not properly notified or given an opportunity to respond to the purported reason for dismissal; and
- The dismissal was particularly harsh.
The Employer argued the dismissal was valid as there was clear medical evidence that the Employee was not fit to return to her normal duties and there was no indication of when she would be able to return to work. The Employer claimed the Employee had advised them during the telephone call in January 2017 that she would not be certified fit for work at her next Doctor’s visit – an allegation the Employee denied.
Commissioner Cambridge was scathing in his decision to uphold the claim for unfair dismissal, stating that there was no medical evidence before him that supported the Employer’s conclusion that the Employee would not be able to perform the inherent requirements of her job on a permanent and/or long-term basis.
Commissioner Cambridge could not see any justifiable reason for the Employer making such a hasty decision or for failing to properly notify the Employee of their intention to terminate her employment, particularly given the fact that they were aware she had a Doctor’s appointment coming up – at which time, as it turned out, the Employee was given clearance to return to work.
In light of these factors, Commissioner Cambridge determined the dismissal to be unfair and ordered the Employee be re-instated to her former position.
What can your business learn from this decision?
Commissioner Cambridge’s reasoning in this matter is not dissimilar to his recent critique in John Finnegan v Komatsu Forklift Australia Pty Ltd  FWC 2433. In that decision, Commissioner Cambridge awarded compensation amounting to 1 weeks’ salary to an employee who was unfairly dismissed during an extended absence from work due to a mental illness.
In both decisions, Commissioner Cambridge has lambasted the employers’ processes for managing injured employees and terminating their employment – both of which were done by electronic means, such as a telephone call or an email. Commissioner Cambridge stated that both employers had failed to recognise that “employees are human beings” and quite distinct from office machinery that can be easily removed from the work environment if faulty.
Commissioner Cambridge criticised both employers’ HR specialists and their failure to ensure that the employees were provided with substantive and procedural fairness, even suggesting a “re-naming of their vocation” was needed, from Human Resources to Human Relations.
Commissioner Cambridge’s more recent decision shows that, where the process was so far deficient, the FWC will not simply make orders for compensation but will go as far as to re-instate the employee to their former role.
“Constructive dismissal from reduction in shifts”
Balgowan v City of Sydney RSL & Community Club Ltd  FWC 3798
The Fair Work Commission (FWC) held that an employee was forced to resign after her employer removed rostered shifts. The FWC ordered that the employer pay over $13,000 in compensation as a result of it being an unfair dismissal.
Ms Balgowan (the Employee) was employed on a casual basis as a Customer Service Attendant by the City of Sydney RSL & Community Club Ltd (the Employer). The Employee was employed on a regular and systematic basis, working an average of 30 hours per week performing hospitality and gaming duties.
After working a shift in the “change box”, the Employee discovered a shortfall with the float, which she could not provide an explanation for. The Employer’s HR Manager conducted an investigation and found that the discrepancy was caused by the Employee’s poor cash handling procedure, a matter about which she had previously (in December 2016) been issued with a warning.
On 10 April 2017 the Employee attended a meeting with the HR Manager. The HR Manager provided evidence that the Employee was advised that she was required to undergo training before she returned to cashbox shifts and in the meantime would be removed from her rostered cashbox shifts. It was the Employer’s evidence that the Employee said that she would “just go” and stated that she would resign. The Employee’s verbal resignation was accepted by the HR Manager. The HR Manager conducted a short exit interview and asked the Employee to return her uniforms. The HR Manager then sent an email to the Employee, which confirmed her resignation and advised that she would be paid in lieu of her notice period.
The Employee’s evidence regarding the 10 April 2017 meeting differed significantly. The Employee maintained that she did not provide a verbal resignation, nor was she offered retraining. In subsequent email correspondence to the HR Manager, the Employee stated that she did not resign at the meeting and that by not providing her regular shifts the Employer had effectively terminated her employment. The Employee subsequently provided an involuntary resignation letter in which she maintained that she was given no other option but to resign.
The Employer raised a jurisdictional objection to the Employee’s unfair dismissal application on the basis that the employee resigned and was not dismissed. In respect of the meeting, the Employer submitted that it did not engage in any conduct or action which intended to bring about the end of the employment relationship or which would have led the Employee to conclude that there was no option but to resign. The Employee continued to be rostered and in the circumstances there was no alternative to removing the Employee’s cashbox shifts.
The Employee maintained that she did not resign and while she intended to leave work at the end of July 2017 to prepare for the birth of her child, she had no intention to leave prior to this.
The FWC noted that in constructive dismissal matters it was required to establish “that the actions of the employer rather than the employee caused the employment to come to an end ...” and to examine whether the conduct of the employer was sufficiently serious to be a breach of the contract, which represented a repudiation of the contract.
The FWC held that the Employer’s actions to remove the Employee from rostered “change box” shifts for a period of up to three months would have resulted in a 75% reduction in the Employee’s remuneration. The FWC held that this was a significant change to the Employee’s employment, which she was entitled to reject and consider the actions as a repudiation of the employment.
The FWC held that it was the actions of the Employer that bought the employment relationship to an end and accordingly, the Employee was constructively dismissed.
Further, the FWC determined that the Employee was also unfairly dismissed and ordered the Employer to provide the Employee with compensation equivalent to 16 weeks remuneration.
What can your business learn from this decision?
An employee must be ‘dismissed’ before an unfair dismissal application can be lodged with the FWC.
Under the Fair Work Act 2009 (Cth), an employee will be dismissed where their employment is terminated by the employer or if the employee was forced to resign because of the employer’s conduct.
Conduct that significantly changes the terms and conditions of an employment contract could amount to repudiation by the employer and consequently a constructive dismissal from the employment.
Resignation is not a dismissal by an employer and is a jurisdictional objection which can be raised by employers to an unfair dismissal application.
However, to be found not to amount to a dismissal, a resignation must be given freely, without coercion or as the result of actions taken by the employer.
“Full Bench finds that labour hire employee who was denied host site access was unfairly dismissed”
Tasmania Ports Corporation Pty Ltd t/a Tasports v Gee  FWCFB 1714
A labour hire employee was unfairly dismissed despite being denied access to his host employer’s site.
Tasmania Ports Corporation Pty Ltd t/a Tasports (Tasports) is a state-owned company that owns and operates ports and also supplies labour to privately-owned ports. In the present case, Tasports supplied the labour of Mr Gee (the Employee) to a host employer engaged in the export of iron pellets from a port in Tasmania.
In 2015, the host employer accused the Employee of committing several policy, procedure and directive breaches. The host employer conducted a workplace investigation, concluded that the breaches occurred and revoked the Employee’s access to the port where he had been working.
On the basis that the Employee was denied access to the host employer’s site, Tasports terminated the Employee’s employment. Tasports’ reason for dismissal was that without access to the site, the employee could not perform the inherent requirements of his role.
The Employee claimed that he was unaware of the allegations against him, was unaware of the investigation and was subsequently dismissed – all without being afforded the opportunity to respond.
The Employee then lodged an unfair dismissal claim with the Fair Work Commission (FWC).
First Instance Decision
In the first instance, the matter was heard by Deputy President Wells who held that the Employee was unfairly dismissed because Tasports did not have a valid reason for the dismissal.
The Deputy President found that there was no valid reason for the dismissal because:
- a host employer’s actions in preventing a labour hire employee from accessing its site is not automatic grounds from dismissal;
- the investigation conducted by the host employer was flawed and therefore it did not have a sound, defensible or well-founded reason for refusing site access;
- Tasports’ reliance on the reasons of the host employer for refusing the Employee access to the site was not sufficient to justify dismissal and it should have done more than be satisfied that the host employer had good reason for its actions; and
- Tasports had a duty to protect the interests of the Employee and failed to make proper investigations of its own or consider redeployment or retraining options before dismissing him.
DP Wells held that the dismissal was harsh and unjust because the Employee was never provided with the opportunity to respond to the allegations against him and because he had an unblemished employment record. Further, the Employee’s personal circumstances would make it difficult for him to secure other employment.
Full Bench Decision
Tasports appealed the decision of DP Wells to the Full Bench of the FWC.
The Full Bench rejected the majority of Tasports’ grounds of appeal but considered its arguments in relation to whether the actions of a host employer in restricting the site access of a labour hire employee is capable of rendering the employee unable to perform the inherent requirements of their job.
The Full Bench considered two main authorities on this point, Kool v Adecco Industrial Pty Ltd T/A Adecco  FWC 925 (Adecco) and Pettifer v MODEC Management Services Pty Ltd  FWCFB 5243 (Pettifer), which were applied in DP Wells’ decision.
The Full Bench compared the facts in those decisions to those in this case.
Both Adecco and Pettifer dealt with circumstances involving a labour hire employee being denied access or removed from a host employer’s site.
The Full Bench concentrated on the main principles in Pettifer, where a host employer had a contractual right to remove labour hire employees from its site. In that case, the employer conducted its own enquiries into why the employee was removed from the host site and disagreed with the host employer on its reasons.
In Pettifer, the employee retained his employment whilst his labour hire employer explored other employment options for him. Eventually, it was concluded that no other work was available – a conclusion to which the employee was invited to respond. Failing any alternatives being identified, the employee was dismissed for reasons based on his capacity for other work. In that case, the employee applied to the FWC claiming that he was unfairly dismissed, but a Full Bench found that he was not.
In this case, the Full Bench held that DP Wells had correctly applied the principles from Pettifer and Adecco in concluding that there was no valid reason for the Employee’s dismissal.
The Full Bench found that there was no evidence of a contractual right for the host employer to remove the Employee from its site and that even if there was, Tasports had failed to:
- make its own enquiries into the allegations made by the host employer;
- allow the Employee to respond to the allegations; and
- properly explore redeployment options before dismissal.
Permission to appeal was granted but the appeal itself was dismissed.
What can your business learn from this decision?
When a labour hire employee is refused access to their host employer’s site, it does not give a labour hire employer an automatic right to terminate the employee’s employment.
Labour hire employers should always make their own enquiries when one of their employees is denied access to a host employer’s premises.
Ultimately, as an employer, a labour hire provider still has an obligation to ensure it provides procedural and substantive fairness to employees in disciplinary proceedings, especially related to the potential termination of their employment. Terminating someone’s employment based on a third party decision to prevent access to a certain location falls short of compliance with basic substantive and procedural fairness obligations.
“Bullying application dismissed: Conduct was not repeated unreasonable behaviour”
Krnjic  FWC 3688
The Fair Work Commission (FWC) has confirmed that for behaviour to constitute bullying there must be repeated unreasonable behaviour towards an employee.
From 2009, Mr Krnjic (the Employee) was employed as a part-time Team Member in the Electrical Department at one of Bunnings Group Ltd/TA Bunnings Warehouse Victorian Stores.
In April 2016, Ms Morihovitis (Team Leader) commenced at the store as the new Team Leader.
In July 2016, the Employee lodged an Application for Stop Bullying Orders (the Application) with the Fair Work Commission (FWC) in which he alleged that the Team Leader bullied him:
- During a shift in May 2016 – the Team Leader asked what happened to the Employee’s face. The Employee, who suffers from facial drop on the left hand side, claimed that this question was disrespectful and hurtful, that he was being discriminated against and that the Team Leader’s questioning went beyond routine enquiries;
- On 8 June 2016 – the Team Leader repeatedly called him to locate his whereabouts in the store whilst he went to collect a lifting aid. The Employee claimed that he was incessantly questioned and handed the phone to another employee because he found it pointless to continue the conversation; and
- On 9 June 2016 – the Employee was assisting another employee with the lifting aid to scan some items when the Team Leader burst into the aisle to abruptly ask what he was doing there, rather than being in the Electrical Department. The Team Leader then asked the Employee to report to her before taking breaks. The Employee claimed that he was being singled out and was treated differently from other employees.
The Employer objected to the Application and submitted that there was no repeated unreasonable behaviour, no risk to the Employee’s health and safety and that the conduct was reasonable management action carried out in a reasonable manner.
In response to the Employee’s claims about bullying, the Team Leader provided evidence that:
- In a conversation with the Employee she asked about his appearance and whether he suffered an injury at work but had asked the question from a safety perspective;
- She contacted the Employee to ask him where he was when another supervisor reported that the Employee was “doing nothing”. The Employee had answered her in an angry voice that she was not a “policewoman” and to “stop asking so many questions”; and
- She was unable to locate the Employee in the store and after finding him emphasised with the Employee that he needed to stay in the Electrical Department and that she needed to know where team members were.
The Employer submitted that the Employee failed to provide appropriate responses to reasonable and legitimate questions by the Team Leader, failed to follow reasonable directions and that the Employee acted unreasonably and in an insubordinate manner.
The Employer relied upon the FWC decision in Mac v Bank of Queensland Limited & Ors FWC 774 (Mac) which provided that the belief of bullying must be reasonable, which was not the case in this matter. The Employer submitted that the Employee’s allegations were discrete interactions, which involved routine queries and questions from a supervisor to a team member and could not constitute repeated and unreasonable behaviour.
The FWC applied the decision in Mac and made the following comments:
- “repeatedly behaves unreasonably” is a definition provision, which must be considered in the context of the purpose of the anti-bullying jurisdiction;
- case law provides guidance about reasonableness and unreasonableness; and
- for conduct to be reasonable, it does not have to be the best or the preferable course of action.
The FWC noted that the matter concerned two strong personalities and that there was some tension between the Employee and the Team Leader. The FWC considered that at most, the Team Leader’s question about the Employee’s appearance was insensitive and inappropriate. However, the FWC held that it was unable to conclude that the Team Leader repeatedly behaved unreasonably toward the Employee such that he had been bullied at work.
In the FWC’s view, a team leader who had responsibility for a group of team members was entitled to know where team members are and what they are doing and also that team members will engage in communication about these issues. The FWC was also not satisfied that the behaviour was repeated and took the view that the events did not demonstrate a pattern of repeated unreasonable behaviour.
Accordingly, the Application was dismissed.
What can your business learn from this decision?
This decision confirms that while employees may have a genuine belief that they have been bullied at work, the FWC will consider all the circumstances and determine whether the individual or group of workers repeatedly behaved unreasonably.
The FWC also provided further guidance on what may and may not be considered bullying conduct and reasonable management behaviour.
The FW Act defines that a worker is “bullied at work” where an individual or group of individuals repeatedly behaves unreasonably towards the worker and that the behaviour creates a risk to health and safety.
Work Health and Safety
"Employer agrees to $1.5 million Enforceable Undertaking”
SafeWork NSW and wood products manufacturing employer Borg Manufacturing Pty Ltd (Borg) entered into an Enforceable Undertaking (EU), which required Borg to commit to more than $1.5 million in safety programs.
Borg was charged with contraventions of sections 19(1) and 32 of the Work Health and Safety Act 2011 (NSW) (WHS Act) after an employee suffered a hand injury as a result of operating a mechanical guillotine which was not properly guarded.
In lieu of prosecution, SafeWork NSW agreed to accept an EU from Borg. Under the EU, Borg is required to undertake compliance activities including:
- completion of a machine safety audit program to ensure plant and equipment are guarded across all Borg sites in NSW;
- development of a work health and safety education program; and
- sponsorship of an online induction program for small businesses to be used by members of the Furnishing Association of Australia.
With the cost of these compliances activities expected to be $1,505,000.00, the EU is the highest value ever accepted by SafeWork NSW.
Lessons for employers
Employers are required to assess risks in the workplace and implement control measures to eliminate or minimise the risk. SafeWork NSW’s “Managing the Risks of Plant in the Workplace Code of Practice” sets out particular hazards, risks and control measures for the management of health and safety risks of plant in the workplace.
A health and safety regulator has the discretion to accept an EU by an organisation in certain circumstances.
As can be seen by the Borg EU, an EU will generally require the organisation to improve health and safety within the organisation’s workplace but also commit to health and safety initiatives for the industry or community.
Holding Back the Years – Restraints & Employment Contracts
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Find out how to navigate the legal minefield of post-employment restraints – there are still a few spots left^ for our FREE webinar on 26 September 2017 at 10 am.
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