Employee Relations Review May 2008

Award modernisation process commences

Resignation of an employee under duress found to be a termination

Termination for misuse of sick leave

Orders to stop industrial action: recent developments

Liability of directors and managers in relation to workplace agreements

Drunk police officer reinstated

Background

The Minister for Education, Employment and Workplace Relations, Ms Julia Gillard, has commenced the process for implementing Labor’s plans to modernise industrial awards. A request to modernise awards as signed by Ms Gillard was delivered to the President of the AIRC, Justice Geoffrey Giudice, on 28 March 2008 (the same day that the Transition Act commenced operation).

Under the Workplace Relations Act 1996 (Cth) (WR Act), the AIRC is required to complete an award modernisation process in accordance with the request issued by the minister. Addressing the Fair Work Australia Summit in Sydney on 29 April 2008, Ms Gillard outlined the objectives behind the Rudd Government’s policy for award modernisation.

Instead of simply amending the current awards, Ms Gillard has indicated that Labor will undertake a ‘complete overhaul’ of the system. The AIRC has been set the task of developing new awards that are modern, relevant and flexible. In doing so the AIRC is to ensure that regulatory burden on business is reduced whilst ensuring a minimum safety net of employees covered by the award.

Process

In his statement, Justice Giudice has indicated that the classification of industries (and occupations) used in the panel system (see link to list of awards on dedicated 'Award modernisation' page on AIRC website) will be the starting point for the award modernisation process, and that ‘parties should be able to follow the modernisation process’, and to ‘know which modern awards might affect their interests without too much difficulty’.

Justice Giudice also indicated the following:

• where convenient and appropriate, industries will be grouped together in one modern award (however this will not necessarily mean that there will only be one modern award for a particular group—parties will be able to make their views known). It is possible that after consultation additional industries may be added later
• within each industry, the principal federal award will usually be the starting point for drafting (which may take into account other federal awards (non-enterprise) in the same industry, state awards, and so on), and
• the award modernisation process will be conducted by a Full Bench of the AIRC (which is to be established shortly).

Priority tasks

Ms Gillard’s request sets out three priority tasks that the AIRC is to complete by 30 June 2008 as follows:

• the establishment of a list of priority industries or occupations for which modern awards are to be made by the end of 2008 (see proposed list in Attachment A to the statement). The AIRC has been directed to have regard had to those industries and occupations with higher numbers of AWAs and NAPSAs
• to publish a model award flexibility clause to be included in modern awards (see draft clauses in Attachment B to the statement), and
• to publish a complete timetable for the process (see proposed timetable in Attachment C to the statement).

Priority industries/occupations

Employers will note that the AIRC has targeted industries in which there are a high number of AWAs and NAPSAs, including aged care, clerical work, metal engineering and associated industries, retail and nursing.

Flexibility clause

Model flexibility clauses are to be a key feature of Labor’s award modernisation process. The AIRC is required to develop model flexibility clauses for insertion into each modern award. These clauses are to be designed so that they are capable of being adapted to meet the individual needs of the employer and employee, whilst maintaining the protection of the safety net.

The two draft clauses published by the AIRC have been published for comment by all parties. In his statement, Justice Giudice indicates that the first draft is proposed by the ACTU, and the second by employers.

Timetable

The AIRC’s proposed timetable indicates that the closing date for submissions is to be 6 June 2008, with a consultation process to follow with respect to the proposed ‘priority’ modernised awards. The ‘priority’ awards are to be finalised by 12 December 2008.

Consultation with unions and employer groups

The AIRC has been instructed by Ms Gillard that ‘it is to prepare exposure drafts of modern awards so that all stakeholders and interested parties have a reasonable opportunity to comment on those drafts.’

Implications for employers

• employers may take some comfort from the scope of Ms Gillard's award modernisation request, which states that the modern awards are not designed to cover ‘high-income employees’ or to ‘increase employers’ costs’. Importantly, Ms Gillard has indicated that the creation of modern awards is not intended to result in the modification of enterprise awards
• the AIRC has not been instructed to reduce the number of awards to a specified number or to create a single award to cover specific industries. It has, however, been granted broad powers to develop awards as it sees fit, based on its breadth of experience and in consultation with industry groups and unions
• employers should take every opportunity to participate in the consultation process for the modernisation of priority awards, where these awards impact on their business, and
• a Full Bench of the AIRC will sit in Melbourne on 26–27 May 2008 and in Sydney on 28 May 2008 to provide an opportunity for consultation in relation to the list of priority awards, the model flexibility clause and the timetable.

Members of the Full Bench will also sit in Brisbane, Adelaide and Canberra on 29 May 2008, and in Hobart, Perth and Darwin (by videolink) on 30 May 2008 to provide further opportunities for consultation.

Freehills is happy to assist any clients who may wish to make a submission to the award modernisation process.

This article was written by Karli Evans and Georgia Rutecki, Solicitors, Melbourne.

Resignation of an employee under duress found to be a termination

Background

Mr Ashley Bell was a long-serving train driver of the employer, Pacific National. He had been reviewing the shifts for the day when he noticed that a colleague due to return from a lengthy period of annual leave, was due to work one shift that day, before taking another three days of annual leave. Mr Bell decided (without authority) to contact his colleague and inform him there was no need to come in. He then fraudulently signed his colleague’s timesheet for that shift.

On discovering the incident, the employer conducted an investigation. In an interview with the employer, Mr Bell admitted to forging his colleague’s signature on the timesheet and conceded that it was not appropriate to do so. The employer’s representative informed Mr Bell that the matter was a serious one and adjourned the meeting, stating that he needed to consult its policies over the weekend before making a determination on the issue. It was a point of contention whether in that meeting or in subsequent conversations the employee was warned that termination may be a result of the investigation, or that the employee’s employment would be terminated.

Later that day, the employee resigned by letter, citing the reason for his resignation as ‘due to circumstances beyond [his] control’ before the investigation could be concluded. The employer subsequently sent a letter to Mr Bell, stating that if he had remained with Pacific National, he would have been terminated on the basis of his conduct.

The employee brought an unfair dismissal application. The issue before the AIRC was whether the employee was eligible to make the claim, given he had resigned from his employment. The employee argued he had no choice but to resign—that is, he was constructively dismissed.

Decision

The AIRC favoured the employee’s version of the events.

The AIRC found that in the meeting with the employee and subsequent conversations (including with the employee’s union representative), pressure had been placed by the employer on the employee to resign and a constructive dismissal had occurred. In particular, this was because:

• statements by the employer going to the seriousness of the issue (both to the employee and his union representative) and the possible outcomes conveyed not a possibility of termination, but a threat of termination
• extending the investigation’s outcome until after the weekend (to consider what the AIRC saw as an ‘irrelevant’ policy) was ‘simply a device to put further pressure on the driver’, and
• the employee’s letter of resignation was not unequivocal and indicated the involuntary nature of the resignation.

The AIRC’s finding on this threshold issue means that it will refer the substantive fairness issues to be considered by the AIRC in a separate hearing.

Implications for employers

Conducting investigations into allegations of employee misconduct involve a delicate balance of a number of considerations, including treating employees fairly, determining whether on the balance of probabilities the alleged conduct occurred and ensuring compliance with any applicable policies and procedures. An employer which fails to deliver on any of these aspects may be exposed to potential unfair dismissal claims.

This decision highlights a number of important considerations for employers when conducting an investigation into misconduct:

• employers should ensure that there are no unreasonable delays in the investigation process. In this case, the manager’s evidence clearly indicated that the policy he stated that he ‘needed to consider over the weekend’ was irrelevant to the dismissal of employees, and that the delay placed further pressure on the employee. This significantly undermined the credibility of the employer’s case
• employers should not ‘pre-empt’ the outcome of an investigation, and should take every step available to ensure that any decision with respect to termination of an employee is not made ‘in advance’ of an investigation being completed. The evidence in this case indicated that the relevant manager had already stated that he considered the employee’s action ‘to be fraud’, and
• for the same reason, employers should carefully consider any correspondence sent to an employee after a purported ‘resignation’. In this case, following receipt of the employee’s resignation, the employer sent a letter to Mr Bell stating that if he had remained with Pacific National, he would have been terminated on the basis of his conduct.

We will provide an update on this case if it proceeds to an arbitration before the AIRC.

This article was written by Lisa Croxford, Senior Associate, and Karli Evans, Solicitor, Melbourne.

Termination for misuse of sick leave

Background

The employee, a fanatical AFL supporter, obtained tickets to the final match of the 2007 season in Perth. The day was particularly significant for the employee as it was the final game for both the Essendon Coach, Kevin Sheedy, and its Captain, James Hird. The employee unsuccessfully attempted to arrange for other employees to cover his weekend shifts. He then obtained a medical certificate covering the weekend and told his employer (Crown Casino) that he would use sick leave in order to attend the match. The employee’s manager warned him against misusing sick leave for that purpose.

Upon returning to work and producing the certificate, the employee was suspended pending a review. During the review the employee argued that he was emotionally unfit to work on the weekend in question due to the impact of Sheedy’s and Hird’s retirements.

Following the review, the employee was terminated. The employee then brought a claim alleging that his position was terminated for the prohibited reason of temporary absence due to illness or injury. In response, the employer argued, however, that the employee was terminated on the basis of his misconduct in misusing sick leave in order to attend the match.

Decision

The court noted that despite the fact that production of a medical certificate is required for a temporary absence under the regulations, it must still relate to an illness or injury to trigger the operation of the protections under the Workplace Relations Act 1996 (Cth). The court found that neither a court nor an employer is necessarily bound to treat a medical certificate as binding on them. It was further found, however, that ‘a medical certificate from a qualified medical practitioner within the practitioner's area of expertise is prima facie to be accepted’, and it would only be in the most exceptional circumstances that an employer or court would not accept its validity. This was such a case.

The court considered a number of factors in assessing the validity of the certificate. These included the employee’s excellent state of physical health, the fact that he was not suffering any depressive illness at the time and that he had not asserted that he was suffering a medical condition. The court further considered the fact that the employee’s doctor did not inquire about any symptoms he was suffering, and noted that the doctor had a history of issuing inappropriate medical certificates.

It was found that the circumstances were sufficiently exceptional to hold the certificate invalid and that the employee was not in fact ill on the day of his absence from work. It was accordingly held that the employer was entitled to terminate the employee’s employment for misconduct in the circumstances.

Implications for employers

Despite Crown’s success in this instance, the case gives an extremely narrow scope for employers to challenge the validity of a medical certificate. The court repeatedly emphasised the unusual nature of the case, particularly the fact that the employee openly informed his employer of his intention to take sick leave in order to attend the match.

The case suggests that employers are likely to succeed in challenging a medical certificate only where there is strong evidence against any sound medical basis for its issue justifying the court’s application of a commonsense approach. Employers should carefully consider their reasons for challenging a certificate and any supporting evidence before terminating an employee.

This article was written by Nick Ogilvie, Senior Associate, and Andrew Pollock, Paralegal, Melbourne.

Orders to stop industrial action: recent developments

Background

In April 2006 two trucking companies sought orders from the AIRC under section 496 of the WR Act to stop a strike that was taking place. The order was granted by the AIRC and was binding on the TWU NSW, its officers, and employees of the two companies who were either members of the union or eligible to be members of the union. This order was in the ‘template’ form that is customarily used by employers, and was later upheld on appeal by a Full Bench of the AIRC.

The TWU NSW (which was not transitionally registered under the WR Act) applied to the High Court for the order to be quashed. The application was remitted to the Federal Court. The application was made on the grounds that the AIRC had exceeded its power in several respects, including:

• the TWU NSW was not a registered organisation under the WR Act and therefore could not be subject to orders under the WR Act
• the order was too broad in its scope, and
• that in binding employees who were not members of the union, the order denied those employees ‘procedural fairness’ and the employees had been given no opportunity to put their point of view to the AIRC.

The decision

Application of the WR Act to the TWU NSW

With respect to the submission that the TWU NSW was not covered by the WR Act, the court found that the AIRC has power to make orders binding on organisations that are not registered under the Act. The court found that section 496 provides that orders can be made against ‘another person’ (which includes an organisation) who is engaging in unprotected industrial action.

The court’s comments regarding the scope of the section 496 order

The court criticised the order for being too vague and open ended, so as to make compliance difficult. The order extended to ‘officers, employees, agents and delegates’ of the union, which was alleged to cover even those individuals who had nothing to do with the workplaces in question. The court also criticised a provision which required the union to take all steps ‘necessary, reasonable and available’ to ensure employees comply with the order as being too vague and open-ended (that is, there was no detail as to how and by what time the union should notify employees).

The court indicated that the order exceeded the powers of the AIRC under the WR Act on the basis that each employee was ordered to ‘not engage in, or threaten to engage in’ industrial action. The court commented that whilst the AIRC found that industrial action was occurring and that it could validly order that it stop, it exceeded its power in ordering that employees not ‘threaten’ to engage in industrial action when there was no finding that any new action was ‘threatened, impending or probable.’

The fact that the order required each employee to be immediately available for work and to perform work as required by the employer in accordance with the relevant workplace agreement, was also criticised. The court found that this ‘may well be’ beyond the scope of the power as it went beyond what was required of the order, namely that industrial action merely stop.

The court was critical of the notice provided to employees of the section 496 application, and indicated that this raised issues of procedural fairness. The court indicated that the order of the AIRC extended to employees who were not members of the union, and no notice of the section 496 application was given to any of the employees individually—the only notice given was to the union.

Previously, the AIRC had granted orders binding on employees on the grounds that the relevant union is sufficiently representative of their interests. However, this case was distinguished on the grounds that the order extended to non-members of the union, and it could not be assumed that the TWU NSW had any responsibility or obligation to represent interests of non-members.

The court ruled that the exercise of the AIRC’s power under section 496 requires advance notice of the fact that an order is being sought, and the opportunity to make submissions to the AIRC. Depending on the circumstances, this could mean that an employer is responsible for ensuring that all affected employees are individually served with notice of the section 496 application and the resultant order.

Recent unrelated appeal – HSUA

In a subsequent unrelated appeal against an order by the Health Services Union of Australia (HSUA), the Full Bench of the AIRC upheld a section 496 order made in a similar format, notwithstanding the Federal Court decision. The AIRC found that the order made was within the scope of the AIRC’s power and was not ‘vague and general’. In upholding the terms of the order, the Full Bench made the following comments:

• the AIRC does not have to specify the particular industrial action at which the order is directed, as the ‘terms of section 496(9) provide ample foundation for an order in general terms...the contention that [an] order is beyond power because it does not sufficiently identify the industrial action at which the order is directed cannot be accepted’
• the order that the HSUA ‘take all reasonably practicable steps necessary and available to it’ including ‘to advise delegates at a facility operated by the employer’ to stop any industrial action, writing to delegates and posting a notice to employees on a notice board, requiring that its delegates comply with the order and requiring that the a particular branch immediately direct that industrial action cease was not so ‘vague and general’ as to be beyond the power conferred on the AIRC by section 496(1), and
• the order was not invalid due to a failure to provide employees with advance notice that an order was sought against them or because the order did not adequately provide for the employees to be given notice of the order once made. The AIRC indicated that ‘it is a question of fact in any particular case whether the union adequately represents the interests of the employees in the relevant aspects’. The AIRC found in this case that there were a number of indications that the HSUA adequately represented the employees, including that the HSUA had ‘a ready and effective means of communication with its members’ and ‘there was ample evidence…that the HSUA was acting on behalf of its members’.

Implications for employers

The comments of both the Federal Court and the Full Bench of the AIRC regarding section 496 orders highlight the importance for employers to ensure that such orders are appropriately drafted and the details of any industrial action (including whether it is happened, threatened, impending, probable or being organised) is clearly articulated and substantiated. In future, employers who apply to the AIRC for orders must be particularly careful to ensure that:

• proposed orders are expressly ‘tailored’ to the particular circumstance and extend only to what is necessary to deal with the particular nature of the industrial action at hand. The use of ‘template’ orders should be avoided. Orders should be drafted so as to specify as to whom they apply, and should impose clearly defined and realistic obligations as to how those persons are (in practical terms) required to comply with the order
• employers should attempt to ensure, as far as practicable, that the orders only cover individuals who are likely to be involved in any industrial action (for example, specify that the orders only cover employees who are members of the particular union, who are working in a particular area of the business, and so on)
• employers may also stipulate in a proposed order that the union take certain steps to advise its members with respect to any order made, including that the union publish a notice giving details of the order on its websites, advise its delegates of the order and provide the delegates with a copy of the order. The AIRC found in the HSUA case that these were appropriate measures to ‘bring the terms of the order to the attention of the HSUA members concerned’
• consideration should be given to appropriate service of any application and proposed orders on employees. The Federal Court made some strong comments about procedural fairness for employees, including that employees who may be subject to an order should be given an opportunity to make submissions with respect to any application filed before it is heard by the AIRC, and
• similarly, consideration should be given to appropriate service of any application and proposed orders on a union. It will not be enough to assume that serving the application on the union alone will be sufficient to constitute service on the relevant employees. The AIRC indicated in the HSUA case that it will be a ‘question of fact’ in each particular case as to whether a union ‘adequately represents the interests of employees’. Employers should take steps to ensure that it has sufficient evidence to establish that a union is acting on behalf of its members.

One final observation: although the AIRC decision sought to distinguish certain key facts to justify its departure from the more stringent obligations imposed by the Federal Court decision, there is clearly some tension involved in reconciling the two outcomes. There is some real scope for continuing uncertainty regarding this issue into the future.

This article was written by Nick Ogilvie, Senior Associate, Karli Evans, Solicitor, and Ben Davies, Solicitor, Melbourne.

Liability of directors and managers in relation to workplace agreements

Background

In February 2007, after two successful interviews with Chili’s restaurant in Wollongong, Alice McCarthy was offered employment as a food server, and was subsequently asked to attend an orientation day with around 20 other employees. During the orientation, Ms McCarthy was handed an AWA which she signed after having read it for around five to ten minutes. No information statement was provided to her, nor was she informed that she could take the AWA away with her for at least seven days to read the document before signing it. The AWA was countersigned by Mr Suleman, the general manager of the restaurant, and was lodged on 19 February 2007. Ms McCarthy started her first shift on 9 March 2007.

In March 2007, Ms McCarthy was asked by Mr Suleman to sign a second AWA. Again, she was not told that she had seven days to read the AWA before signing it. Ms McCarthy was concerned that if she did not sign the AWA at that point, her employment would not continue.

The Australian Workplace Ombudsman (AWO) brought proceedings in the Federal Magistrates Court in Sydney against the company, RSG, its sole director and shareholder, Mr Noor and Mr Suleman for breaches of the WR Act. The AWO’s primary claims were failure to provide ready access to an AWA for at least seven days (section 337(1)), failure to provide an information statement to employees before signing an AWA (section 337(2)) and duress applied to an employee in connection with an AWA (section 400(5) of the WR Act).

The AWO argued that Mr Noor, as the company’s sole director and shareholder, was a person involved in the above contraventions, on the basis of section 728 of the WR Act (a person who is involved in a contravention of a civil remedy provision is treated as having contravened that provision).

Decision

The court found that Mr Noor had breached section 337 of the WR Act in relation to both AWAs by his omissions, and was ordered to pay a $10,000 fine. The court found that the director’s complacent and ‘cavalier attitude’ towards his responsibilities ‘of a corporation employing a large number of young people’ could not be condoned. The court held that the director did not inform himself of the requirements of the WR Act, nor did he ‘ensure that his staff complied’. The court noted that the fact that Mr Noor did 'nothing' did not mitigate his actions, but rather ‘magnified them’. The court took a very strong exception to Mr Noor’s conduct and noted that he had not ‘shown any contrition’, nor had he assisted the authorities, and the court noted that ‘in fact, quite to the contrary, he made it very difficult indeed to be served with this process’.

The court was satisfied that Mr Suleman’s actions gave Ms McCarthy the impression that if she did not sign the second AWA, she would lose her position. The court further accepted that Mr Suleman breached section 400(5) of the WRA, in that he applied illegitimate pressure to Ms McCarthy. Although this was a very serious matter, in the absence of the company as party to the proceedings, (the company was in administration) a nominal penalty of $250 against Mr Suleman was considered appropriate because:

• he was a low-level employee 
• he was ignorant of the requirements of the WR Act (which generated no sympathy for Mr Noor)
• the duress was inadvertent, and 
• he had already suffered significant personal loss by the failure of the company.

Implications for employers

• this decision highlights the responsibility of company directors and senior executives to keep abreast of and ensure that staff comply with the WR Act, which regulates negotiations between employers and employees in the making and lodging of workplace agreements (including the introduction of ITEAs by the Workplace Relations Amendment Act 2008 (Cth)). The principles will apply equally to other forms of workplace agreement, including employee collective agreements. These responsibilities are particularly important where companies employ large numbers of young staff 
• it is possible that the proposed ‘Forward with Fairness’ reforms (to be implemented from 1 January 2010) may in fact increase the obligations imposed on employers (and individual directors) in relation to making workplace agreements, and
• employers should be aware that although the court in this situation held that the company acted ‘high-handedly and with little regard to the requirements of the Act’, it escaped substantial penalty in this case only because it went into voluntary administration at the commencement of the proceedings.

This article was written by Anthony Longland, Partner, and Leilah Farahat, Solicitor, Sydney.

Drunk police officer reinstated

Background

Mr Collins was a police officer stationed at Burwood in New South Wales. In October 2005, the commissioner of police issued a notice to Mr Collins under section 181D of the Police Act 1990 (NSW) (Police Act), which challenged his suitability to continue as an officer in the New South Wales Police Force. Under the Police Act, the commissioner has the power to dismiss an officer if the commissioner has no confidence in the officer, after having regard to the officer’s competence, integrity, performance or conduct.

The challenge to Mr Collins’ suitability followed an incident on 19 December 2004, in which Mr Collins was charged with various offences, including dangerous driving occasioning grievous bodily harm (under the influence). Mr Collins had been involved in a vehicle accident in which the car he was driving overturned and the four occupants inside received minor injuries. Mr Collins had a blood alcohol reading of 0.153 per cent.

Mr Collins subsequently pleaded guilty to dangerous driving occasioning grievous bodily harm (under the influence), and the New South Wales District Court issued a suspended sentenced of 18 months imprisonment, and disqualified Mr Collins from driving for 12 months.

In response to the commissioner’s challenge to his suitability, Mr Collins pointed to a number of mitigating factors, including:

• his previous two-and-a-half year record of perfect behaviour
• his admission with respect to binge drinking and his attempts to seek medical assistance
• he indicated that he was a family man who had found another job while he was suspended from the police force
• he was aware of the effect his behaviour has had on his young family and felt deeply remorseful, and
• he had attended counselling, and adopted skills to avoid binge drinking in the future.

After considering the response, the commissioner ordered Mr Collins be removed from his position as a police officer. Mr Collins sought review of this decision in the NSW IRC on the ground that his removal was ‘harsh, unjust or unreasonable’ under section 181E of the Police Act.

Employee reinstated

The NSW IRC found the commissioner had the power to remove police officers based on ‘conduct’ alone (in this case, Mr. Collins’ drink-driving incident) or by taking into account other factors relating to the officer’s competence, integrity and performance.

The commissioner in the present case purported to focus on Mr Collins’ conduct, but then decided to also take into account other factors relating to his competence, integrity and performance. However, the commissioner did not take into account the various mitigating circumstances put forward by Mr Collins, because he considered that those matters had already been taken into account by the district court when it sentenced Mr Collins.

The NSW IRC held that once the commissioner decided to examine some aspects of Mr Collins’ integrity, all aspects placed before the commissioner regarding Mr Collins’ integrity, performance and competency were also relevant.

Taking into account Mr Collins’ prior unblemished work record, his contrition, rehabilitation, success in his new role, as well as the economic hardships Mr Collins and his family faced as a result of his job loss, the NSW IRC held that his dismissal was harsh (although not necessarily unreasonable or disproportionate to the offence committed). The commission ordered that the applicant be reinstated as a police officer.

In making this assessment, the NSW IRC did consider the public interest in protecting the integrity of the police force, but concluded that the integrity of the force would not be undermined because Mr Collins was rehabilitated, mature and his offence involved what the district court described as ‘a momentary reckless error of judgment’.

Implications for employers

Whilst this case specifically relates to the police force, it is an important reminder for all employers to consider all relevant mitigating circumstances prior to terminating an employee for misconduct, in order to minimise the risk of a claim that an employee’s dismissal is harsh, unjust or unreasonable.

The decision also demonstrates the willingness of the NSW IRC to reinstate a police officer, despite the fact that the officer’s behaviour was in direct conflict with the interests of the New South Wales police force. Whether a similar decision on the same facts would be made by the AIRC is less certain.

 This article was written by Dean Farrant, Senior Associate, and Rebecca Mason, Articled Clerk, Melbourne.

More information

For information regarding possible implications for your business, contact a member of the Employee Relations team.