Employee Relations Review July 2008

Cap for unfair dismissals increased to $106,400

Changes to the calculation of minimum SG contributions

Privacy laws in Australia – What should employers be doing with electronic workplace documents?

Employee with medical conditions found to be unfairly dismissed

Update on redundancy developments

The amount is indexed annually with the commencement of each new financial year. From 1 July 2008, the limit increased from $101,300 to $106,400. This new limit applies to most Australian employees, although some state systems have different standards.

An employee may not validly pursue an unfair dismissal claim with the Australian Industrial Relations Commission in circumstances including the following:

• if they are employed by an employer with 100 or fewer employees
• if they are serving a six month qualifying period of employment
• if they are dismissed for ‘genuine operational reasons’, or
• if they are not employed under an award or workplace agreement and they earn $106,400 a year or above in remuneration.

Clients with any queries about the unfair dismissal provisions in the Act should contact any of our Employee Relations partners.

Changes to the calculation of minimum SG contributions

Current SG contribution requirement

The amount of SG contributions employers are currently required to make is nine per cent of each employee’s ‘notional earnings base’.

What an employee’s ‘notional earnings base’ is depends on the circumstances. If there is no concessional earnings base available to an employer, then the default earnings base is OTE as defined in the SG Act. A concessional or grandfathered earnings base may apply if:

• ‘salary’ is set out for superannuation contribution purposes in an industrial award, or
• an arrangement was in place before 21 August 1991 under which the employer (or a predecessor employer) was making superannuation contributions for employees in accordance with an occupational superannuation arrangement, the applicable superannuation scheme or a law of the Commonwealth, state or territory.

Changes from 1 July 2008

Currently, the rules concerning concessional earnings bases are extremely complex and cause a great deal of confusion, especially if a connection back to August 1991 needs to be established. It seems that, partly for this reason and probably also because sufficient time has elapsed since the SG regime commenced, amendments were made in 2004 to remove all the concessions so as to ensure that from 1 July 2008 OTE is the only earnings base that will apply for the purposes of calculating SG contributions.

OTE is defined as the total of earnings in respect of an employee’s ordinary hours of work (other than lump sum payments made on termination of employment in respect of unused sick leave, annual leave or long service leave) and importantly includes over-award payments, shift loading and commissions. An Australian Taxation Office (ATO) SG ruling provides detail on the ATO’s views as to which types of other payments are caught by the OTE definition.

Allowances, bonuses and commissions are aspects of remuneration which are frequently excluded from concessional earnings bases, but which will generally be required to be included in OTE from 1 July 2008. Therefore, the change could be costly for employers in some sectors.

Implications for employers

• While not all employers will be affected by the changes, employers will need to ensure that the level of superannuation contributions they are currently making is equivalent to at least nine per cent of an employee’s OTE. If not, the level of superannuation contributions will need to be adjusted from 1 July 2008. Significant penalties may apply where a required adjustment is not made.
• If an employer is currently using a concessional earnings base for its employees, the employer’s SG Act obligations in respect of those employees will most likely increase from 1 July 2008.
• For accumulation-style members, this will result in higher contributions.
• If contributions need to be increased, this could mean that:
  
  • for remuneration packages expressed to be ‘inclusive’ of superannuation, an employee’s ‘take-home pay’ will be reduced, and
  • for remuneration arrangements which are exclusive of superannuation, additional costs will be incurred by the employer.
    
• For a defined benefit fund, the actuary’s benefit certificate will continue to be used to determine whether there is a ‘shortfall’ in respect of employees for SG Act purposes. Of course, reliance on the actuary’s certificate is only possible if the certificate is based on accurate information which means that the certificates will have to be re-issued on the basis of OTE if another earning base is presently being used. As with accumulation members, this could result in higher employer contributions being required.
• Trustees of defined benefit funds will also want to ensure that the change to OTE does not affect the fund’s funding position. The trustee may also need to obtain actuarial advice on this issue.
• Employers will need to ensure that their payroll systems and processes are updated to take account of the changes. In some cases, depending on how complex the remuneration structure is, employers may need to undertake a detailed analysis of the various components of remuneration payable to employees to ensure that the components which fall within OTE are captured.

This article was written by Natalie Gullifer, Partner, and Kristina Vermey, Senior Associate, Melbourne.

Introduction

Given the wide range of laws governing the access and disclosure of electronic data created by employees in the workplace, employers are understandably confused about what they can and cannot do with regard to these communications.

This article looks at what employers are able to do in monitoring use of electronic communications and suggests good practices to establish in the workplace in relation to document management, archiving and the monitoring of electronic communications.

What employers can do

The Telecommunications (Interception and Access) Act 1979 (Cth) prohibits the interception of ‘a communication passing over a telecommunication system’. Whilst it is unlawful for an employer to ‘eavesdrop’ on employees’ telephone conversations or intercept incoming or outgoing emails, it is lawful to access stored data that is not ‘passing over’ a telecommunication system.

In Victoria (and in similar legislation in most other states), provisions in the Surveillance Devices Act 1999 (VIC) prohibit a person from knowingly communicating or publishing a record or report of a private activity resulting from the use of a listening device, an optical surveillance device or a tracking device. However, these have no bearing on access to information from electronic data stored on an employer’s IT systems.

The New South Wales Workplace Surveillance Act 2005 (NSW) does provide the further requirement that where computer surveillance is used, it must be carried out in accordance with a policy of which employees are aware in advance.

The Privacy Act 1988 (Cth) (Privacy Act) requires compliance with National Privacy Principles. These restrict the ways in which data may be used—in particular in relation to ‘personal information’ from which a person’s identity is apparent.

However, employers are exempt from adhering to the National Privacy Principles where they are dealing with ‘employee records’ and data that is directly related to a current or former employment relationship. This exemption is likely to cover most electronic communications within the workplace, and will include information relating to the termination of the employee’s employment and their performance or conduct.

Whilst there is likely to be no legal obligation to adhere to the National Privacy Principles in relation to much of this employee information, it is advisable to follow the principles to maintain the company’s reputation as a good employer and to demonstrate that the employer acted fairly in potential unfair dismissal claims by employees who breach policies relating to the company’s information and communication systems.

Likely changes to the legal regime

The Telecommunications (Interception and Access) Amendment Bill 2008 (Cth) is currently before Parliament. While the proposed amendments have little impact on employers, Attorney-General Robert McClelland has expressed an intention to provide greater powers for employers to collect information in order to protect their communications networks.

The use of electronic communications in litigation and its impact on employers’ management of electronic data

Under the rules of civil procedure governing litigation in all Australian jurisdictions, parties may be required to make discovery of all documents which are or have been in their possession relating to any question raised by the pleadings. ‘Documents’ is broadly defined and includes emails, videos and audio tapes.

In its recent Practice Note on electronic discovery in litigation, the Federal Court recommended that electronic documents should have document numbers, include relevant dates, have a known author and addressee and include relevant attachments. Employers should keep these recommendations in mind when collecting data that may be discoverable in court proceedings.

Document retention is another area in which employers are often unsure of their obligations. There are circumstances in which statute prescribes that documents be retained. These include the need to retain employee records for seven years, and to retain documents where they may be relevant to litigation that has commenced or is anticipated.

In light of these requirements, employers should consider implementing a clear policy in relation to document retention. This might include routine cleaning up of the database every seven years and the nomination of a senior employee to monitor the application of the policy to ensure that information is not destroyed in an ad hoc manner. Employers should also be ensure that possibly relevant documents are not destroyed where litigation is anticipated or on foot.

What employers should do

Only the Workplace Surveillance Act 2005 (NSW) requires an employer to inform its employees of their policy regarding computer surveillance. Employers are also required to give employees notice detailing the kind of surveillance to be carried out, how it will be carried out, when it will start, whether it will be continuous or intermittent and whether it will be ongoing or for a limited period.

Even where the employer is outside of New South Wales, the Office of the Privacy Commissioner’s ‘Guidelines on Workplace E-mail, Web Browsing and Privacy’ recommends that employers develop a policy in consultation with staff. Such a policy should be clear as to what the employer considers to be appropriate use of the system, what information is collected and how it may be disclosed, and employees’ rights of access.

Given the shift towards a greater reliance on electronic data in litigation, employers should implement a practice of collecting related information such as document numbers, dates, authors, addressees, and attachments with regard to each document produced and stored.

Finally, organisations should have a clear document retention policy that is appropriately managed to ensure that documents are not destroyed in an ad hoc manner.

We can assist clients with any aspect of compliance with privacy legislation, including the development of policies in relation to the management of electronic documents and monitoring/surveillance of employees’ computer usage.

This article was written by Kate Jenkins, Partner and Yee Ching Rainbow Cheung, Articled Clerk, Melbourne.

Background

The employee, a headbuilder, suffered a shoulder injury during 2005 and was placed on restricted duties. These restricted duties were gradually expanded in accordance with Certificates of Capacity issued by the employee’s doctor. Difficulties developed during the restriction period between the employee and his supervisor, culminating in the employee making a complaint to management. Management refused to investigate the complaint, believing it to be a part of a conspiracy on the part of the employee and others against the supervisor. As a result of this refusal, the employee took sick leave—following consultation with various practitioners, the employee made a Work Cover claim for stress and anxiety.

Shortly after returning to work, the employee was terminated for misconduct. The employer had obtained video surveillance footage of the employee’s activity during late January 2007 whilst on stress-related sick leave, during which the employee was still under restricted duties on account of his previous shoulder injury. The employer concluded that, contrary to his representations to his doctors and the employer, he was not suffering from a shoulder injury such as to preclude him from performing his normal duties. The employer also argued that the employee had a positive duty to indicate to the employer that he might perform restricted activities on an intermittent basis without risk of aggravation of his injury, and that his failure to do so constituted misconduct. The employee applied to the AIRC for relief under section 643 of the Workplace Relations Act 1996 (Cth) (WR Act) on the basis that the termination was harsh, unjust and unreasonable.

Decision

The AIRC found the following:

• There was no evidence that the employee misrepresented his condition to his doctors or the employer. The employee was receiving treatment for the shoulder injury up to mid-February 2007—the AIRC accepted that the return-to-work restrictions in the Certificates of Capacity were consistent with a conservative approach to the employee’s treatment. The AIRC further accepted that this treatment would have reduced the employee’s symptoms by the time the video footage was obtained.
• Although the employee had been providing Certificates of Capacity in respect of his shoulder during his period of sick leave, he was not absent from work on the basis of the shoulder injury but rather due to stress and anxiety.
• As the employee did not misrepresent his condition, there was no valid reason for the termination of his employment. While the employee had a physical capacity to undertake normal duties during his period of sick leave, it was his psychological issues that prevented him from working during that period. The employee consequently was under no duty to disclose his improved physical capacity to his employer.
• The employer failed to give the employee an adequate opportunity to respond to the reason for termination. The fact that he was not given the opportunity to provide his own doctor’s assessment or subjected to a physical examination by the employer’s doctor suggested that the employer did not have the necessary information upon which to form a fair and reasonable view. The AIRC also gave weight to the employer’s absence of compassion in dealing with the employee, and its failure to adequately address the compliant against the employee’s supervisor.

Implications for employers

• This case highlights the reluctance of the AIRC to critically examine the merit of medical advice in the context of misrepresentation of a workplace injury. Video footage appearing to show the employee acting inconsistently with his Certificate of Capacity was not sufficient to show that he had misrepresented his condition to his doctor and was held to be consistent with a positive response to medical treatment.
• This can be contrasted with the position in Anderson v Crown Melbourne Ltd examined in our May Employee Relations Review—in that case, the AIRC was willing to examine the merit of the medical certificate. The AIRC in Anderson, however, was influenced by the fact that the employee had foreshadowed using sick leave for recreational purposes and the doctor’s history of issuing suspect medical certificates.
• Employers should give particular consideration to the AIRC’s observation that the employee was under no positive duty to disclose his apparently improved physical capacity. As long as the employee held a current Certificate of Capacity and had not misrepresented his condition, the employee was entitled to follow the return to work plan devised by his doctor.
• Without strong evidence of misrepresentation, employers should consider alternative grounds for dismissal in these situations. Dismissal due to the employee’s inability to fulfil the inherent requirements of the role may be an easier option.
• Employers should also consider the influence of the employer’s lack of compassion and failure to investigate his complaint upon the AIRC’s findings. Employers should ensure that adequate dispute resolution processes are both implemented and followed.

This article was written by Tony Wood, Partner, and Andrew Pollock, Paralegal, Melbourne.

Background

The plaintiff, Mr Stokes, sued Southcorp for payment in lieu of notice and redundancy benefits after his job was restructured following the merger of Fosters and Southcorp.

In October 2005, his employment was transferred from Southcorp to Fosters and his job description altered. The terms of his altered position were not as generous as those which previously applied. He continued to work in the new role until March 2006, when he was advised that he would be transferred from an East Burwood site to Fosters’ Abbotsford site.

Mr Stokes claimed that this change constituted a redundancy on the basis that his new position was substantially different and his new conditions were to be less favourable. From 3 April 2006, he effectively abandoned his employment. He did not attend work for a week and his laptop and keys to his vehicle were found at the East Burwood site.

The decision

The decision considered the following three issues:

Location

Mr Stokes argued that his location at Burwood East was an express term of his contract, and that the attempt to transfer him to Abbotsford constituted a breach of the contract.

The court found that the work location was an express term of the contract but one that Southcorp reserved the right to vary on notice as it saw fit. However, Stokes was given only two weeks notice of his impending transfer, in contrast to the one month required under the contract. As such, Southcorp was found to have breached the contract and was required to pay the outstanding notice.

Incorporation of company policy – Riverwood distinguished

Mr Stokes also claimed that he was entitled to a severance payment in the event of being made redundant under Southcorp’s Redundancy Policy. He argued on the basis of Riverwood that this policy was effectively incorporated into his contract of employment.

Two important factors distinguished this case from Riverwood.

First, unlike Riverwood, the policies in question did not confer significant additional benefits on the employee but were more of a description of ‘how things are to be done at the workplace’.

Secondly, the court applied the reasoning of the majority in Nikolich v Goldman Sachs, which commented that the question of whether policies are contractual does not turn on the words in the contract but the objective intention of the parties. Whereas in Nikolich the employee was required to closely review particular policy documents at the same time as he signed his contract of employment, Mr Stokes was not familiar with the redundancy policy in question, and could not confirm that he had ever seen it prior to commencing proceedings.

Was it actually a redundancy?

Although Mr Stokes had no contractual entitlement to a redundancy payment, the court also considered the issue of whether Stokes was, in fact, made redundant.

Mr Stokes argued that the job he was doing was no longer being done after the closure of the East Burwood site, but this argument was rejected by the court. At all relevant times the merged Fosters/Southcorp structure still needed an employee to perform the role Mr Stokes had been performing. An alternative position had been offered to Stokes at the Abbotsford site and Fosters did not intend to terminate his employment. The court concluded that the change to his position ‘at best might amount to a repudiation of the contract, but it is not a question of redundancy’.

Furthermore, the terms of the Southcorp policy relied on by Stokes were also fatal to his claim, as the policy stated that ‘Redundancy occurs when Southcorp determines that a particular position is no longer required.’

However, in not providing adequate notice of his transfer, Southcorp had breached the contract. It was ordered to pay Stokes $3,444 in lieu of notice, plus interest.

Implications for employers

• Claims that company policies are incorporated into an employee’s contract of employment will be unlikely to succeed based on the wording of the policies alone. The policy must be considered in the context of the broader intentions of the parties. However, employers should still be careful to ensure that if they do not want a policy to have contractual force then this is made clear through both the employee’s contract and the actions of the employer at all stages of the employment relationship.
• The case also confirms that a redundancy situation will generally not arise following a re-structure of an employee’s position as long as the employer still requires that employee’s role to be performed. Employers should still be mindful that every case will turn on its own facts. In particular, an employer’s redundancy policy may trigger an entitlement to a redundancy benefit if redundancy is defined broadly enough to cover a re-structure of the kind in question.

This article was written by Paul Burns, Partner, and Ben Davies, Solicitor, Melbourne.

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