Employee Relations Review September 2007
24 September 2007Contents
- Cap for unfair dismissals increased to $101,300
- Employer found liable for psychological injury
- Dismissed employee guilty of contempt of court
- New directions in ‘genuine operational reasons’ cases
- Approving workplace agreements: What happens if employees are given false and misleading information?
- Update on the Fairness Test
- Directors’ liability for occupational health and safety in the management of a corporation
Cap for unfair dismissals increased to $101,300
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The unfair dismissal jurisdiction makes provision for certain employees to apply for unfair dismissal under the relevant provisions of the Workplace Relations Act 1996 (Cth), if their remuneration does not exceed a prescribed amount at the time of termination.
The amount is indexed annually with the commencement of each new financial year. From 1 July 2007, the limit increased from $98,200 to $101,300.
An employee may not lodge 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’
- if they are not employed under an award or workplace agreement and they earn $101,300 a year or above in remuneration.
Clients with any queries about the unfair dismissal provisions in the Workplace Relations Act should contact any of our Employee Relations partners.
This article was written by Karli Evans, Solicitor, of the Melbourne Employee Relations group.
Employer found liable for psychological injury
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In a recent decision of the Administrative Appeals Tribunal (Tribunal), an employee who was predisposed to psychological injury was able to be compensated for fibromyalgia—a chronic syndrome manifesting in generalised pain and fatigue—which was materially contributed to by the workplace harassment she suffered.
Background
Angela Brice was employed by the Australian Electoral Commission (AEC) from 1992 to 1996. During that period, Ms Brice, along with several other female employees, made a complaint of harassment against her supervisor, the Assistant Commissioner.
Ms Brice’s complaint involved her perceptions of the Assistant Commissioner’s conduct towards her. She said aspects of his behaviour and his intimidating manner, his remarks about her appearance and his standing uncomfortably close to her made her feel intimidated, anxious and upset. Ms Brice’s claim did not involve any allegations of physical contact.
Following the events giving rise to her complaint, in 1994 Ms Brice made a compensation claim against Comcare and went on stress leave. Despite efforts by the insurer to manage her return to work, in 1996 Ms Brice resigned. She has not worked since leaving the AEC.
During the period between 1996 and 2004, Ms Brice developed fibromyalgia, a condition which develops from psychological stress that causes chronic and often generalised body pain and fatigue. In 2004 she made an application to Comcare for compensation for her condition, claiming that the illness was work-related and a result of the incident of harassment in 1994. Comcare rejected her application and Ms Brice appealed that decision to the Tribunal.
The Tribunal’s decision
The Tribunal set aside Comcare’s decision and held that the harassment had materially contributed to her fibromyalgia.
In coming to its conclusion, the Tribunal noted that Ms Brice was particularly vulnerable to the stress caused by the harassment. It considered evidence that Ms Brice had been sexually abused as a child and that she had repressed memories of the abuse which resurfaced as a result of the workplace harassment. Also, not long before starting work with the Commission, Ms Brice sustained serious physical injuries in a car accident which resulted in a degree of permanent impairment.
Despite a range of factors such as:
- the fact that a ‘more robust’ person may not have been bothered by the Assistant Commissioner’s behaviour
- there was evidence that Ms Brice had a pre-existing psychological disorder or at least a pre-disposition to her particular injury before commencing her employment with the AEC
- the fibromyalgia was attributable to traumatic childhood events—but the stress of the harassment caused Ms Brice to recall repressed memories of those events
- her chronic pain already existed to some degree as a result of the injuries she sustained in the car accident, and
- Ms Brice had used illegal drugs since developing fibromyalgia which may have had a negative impact on her condition
the Tribunal found that the workplace harassment was a contributing factor to her impairment. It was also no obstacle that Ms Brice brought her claim some eight years since the end of her employment and 10 years since the harassment occurred.
Implications for employers
Employers need to be aware that liability for workplace injuries may arise, even in circumstances where an employee has a pre-existing disposition for the type of injury which occurs due to their personal circumstances. In some cases, this may involve claims being pursued some years after the events which are said to have caused the workplace injury. This may have particular relevance in the context of the acquisition or sale of business where it is important to identify contingent liabilities.
In the context of sexual harassment, it is useful to keep in mind that the definition of sexual harassment under Commonwealth legislation (and also in a number of the states) is an objective and a subjective test—it also takes into account the subjective circumstances of the ‘victim’. The harassing conduct will amount to harassment if it occurs in circumstances in which a reasonable person, having regard to all the circumstances, would have anticipated that the person harassed would be offended, humiliated or intimidated.
Employers should ensure that:
- where appropriate for the duties of a role, they obtain a pre-employment medical examination in order to assess an applicant’s capacity to perform the role
- they implement comprehensive workplace policies which require a standard of workplace conduct consistent with equal opportunity legislation and the organisation’s values
- all employees, including senior managers, are aware of the workplace policy and are provided with appropriate training regarding their obligations under the policy and equal opportunity legislation
- they are alert to the possibility of an employee having a pre-existing psychological disorder or a pre-disposition to particular workplace injuries, and
- they monitor workplace behaviour and complaints and take immediate action to deal with complaints in a timely way to minimise the risks of long-term psychological injury to employees.
This article was written by Chris Barton, Partner, and Danielle King, Solicitor, of the Sydney Employee Relations group.
Dismissed employee guilty of contempt of court
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In a decision of the Industrial Court of NSW (court), the Full Bench found an employee guilty of contempt of court as a result of his conduct during unfair dismissal proceedings brought against his employer, Federal Express Australia (FedEx).
Employment and dismissal
Ric Mejias was employed by FedEx as a Senior Security Specialist. His employment was summarily terminated in April 2005 due to allegations against him of serious and wilful misconduct. It was alleged that Mr Mejias had:
- gained improper access to his employer’s confidential information
- created a conflict of interest by performing work for a FedEx client outside his normal employment duties
- improperly used his employer’s computer resources.
Threats to disclose material
Mr Mejias subsequently brought an unfair dismissal claim against FedEx. In May 2005 FedEx sought formal orders preventing Mr Mejias from publishing certain documents that he had filed as part of his claim. This material was in the form of an email from Mr Mejias to a number of FedEx staff and contained a number of allegations about FedEx’s security breaches, aircraft operations and named FedEx employees in relation to personal and improper use of company IT resources. The material also contained allegations of FedEx’s breach of policy and Government regulations.
In his email, Mr Mejias asserted that, while he sincerely wish[ed] FedEx no harm’ he was ‘planning for the worst’. He said his plans included sending copies of emails, investigation reports, interview records and a range of other confidential material to third parties and setting up a web-site to facilitate the transfer of such information.
In response to FedEx’s application for orders preventing him from disclosing this confidential information, Mr Mejias agreed on the record not to disclose the material.
Further threats
In September 2005, Mr Mejias sent an email to various FedEx representatives:
- requesting the return of electronic recordings made by him in the course of his duties
- alleging that FedEx had breached legislative provisions in retaining the recordings, and
- stating that he had also emailed various people within the Attorney-General’s Department and media outlets about the issue.
Mr Mejias sent a further email in September 2005, addressed to a number of media outlets including a well-known current affairs program as well as to the FedEx chairman and other company officers, alleging breaches of safety, aviation and customs regulations, and assaults and robberies affecting FedEx employees while travelling. The email was expressed to be the first of a series and contained a threat to disclose the remaining parts of the ‘story’. Mr Mejias also said that he looked forward to an exchange which would ‘facilitate an amicable resolution to outstanding issues’.
Referral to the Industrial Registrar
In October 2005, FedEx sought orders from the court for the suppression of the material contained in the emails. In addition it sought a referral of the proceedings to the Industrial Registrar to commence proceedings for punishment for contempt.
Justice Marks granted the orders sought on the basis of his finding that it appeared Mr Mejias was guilty of contempt, in that the threat of publication of the material had placed improper pressure on FedEx to settle his unfair dismissal proceedings. The matter was referred to the Full Bench of the court.
Subsequent to this issue being heard, Mr Mejias’ unfair dismissal application was rejected by the Commission.
Decision
The Full Bench of the court found that Mr Mejias’ conduct amounted to contempt because it tended to interfere with the due administration of justice, by way of threat or detriment to his employer so as to put improper pressure on it to settle the proceedings.
The question of penalty was reserved for a later occasion (the court has the power to impose a penalty against an individual of imprisonment, a fine or both).
In order to establish criminal contempt, FedEx needed to establish that improper pressure was placed upon it which would have the tendency to deter it as a party to proceedings to obtain vindication of its rights by a court. The court found that the pressure exerted by Mr Mejias was more than the permissible degree of pressure applied by parties in attempting to settle proceedings.
Implications for employers
This decision provides an example of the types of significant commercial issues employers often face when dealing with disputes with aggrieved or former employees. When employment relationships break down, there can be a real concern that employees will seek to damage their former employer’s interests. In this case, the threatened and actual disclosures by an aggrieved employee were overt and impacted on existing proceedings and, accordingly, the employer was able to apply to the court for relief against contempt.
In other cases where there is a perceived threat of damage to an employer’s reputation and interests, an employer might seek to protect its position by securing a release from an aggrieved employee in exchange for an ex gratia payment, which contains clauses regarding non-disparagement and confidentiality terms.
When circumstances arise in which an aggrieved employee is in a position to or threatens to disclose their employer’s confidential information or to disparage their employer, the employer should consider:
- whether the employee’s conduct amounts to serious misconduct justifying summary termination of the employee or termination on notice
- whether, as a part of the arrangements upon termination of employment, it would be appropriate to seek a release from the aggrieved employee, on terms commercially acceptable to the employer, including non-disparagement and ongoing obligations in respect of confidentiality
- in circumstances where an employee threatens to breach or is in breach of their ongoing contractual obligations in respect of confidentiality, whether it would be appropriate to seek urgent injunctive relief, and
- if, the context of ongoing proceedings, an employee discloses or threatens to disclose the employer’s confidential information or otherwise to disparage the employer, whether this amounts to improper pressure to settle the proceedings such that an application for a contempt finding could be made to the court.
This article was written by Chris Barton, Partner, and Rena Marguerite, Solicitor, of the Sydney Employee Relations group.
New directions in ‘genuine operational reasons’ cases
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In recent editions of the ER Review, we considered the decisions of the Australian Industrial Relations Commission (AIRC) in Priceline and Village Cinemas. In Village Cinemas, the AIRC considered when an employer can rely on a ‘genuine operational reason’ to preclude an employee from accessing the unfair dismissal jurisdiction. The AIRC found that:
- the termination of employment of the particular employee does not have to be an unavoidable consequence of the operational reason, and
- whether the employer could have done something other than terminating the employee’s employment will generally be irrelevant.
In the Priceline case, the Full Bench found that Commissioner Eames, at first instance, had failed to properly consider whether the operational reasons relied on by the employer were genuine, or in fact a sham.
When is an operational reason ‘genuine’?
Since the decision in Priceline was handed down, there have been a number of cases where the AIRC has found that the employer’s operational reason for termination were genuine. We set out a summary of these below:
- An employee (Mr Rawolle) who argued that his employer (Don Methieson & Staff Glass) had dismissed him because he was entitled to the benefit of a union collective agreement was found to have been terminated for a genuine operational reason because this was only one of the reasons for his dismissal. The employer produced evidence that there had been a downturn in business, which was accepted by the AIRC.
- An employee (Mr Acworth) employed as a Process Improvement Engineer on a contract which provided for his reassignment to another business unit refused to accept an alternate position with his employer (Boeing Australia Limited). The AIRC found (on appeal) that although the employee’s refusal to accept the role was one reason for his termination, another reason was his refusal to accept the position which meant that there would be no role for him to perform when his current assignment concluded (the genuine operational reason for his termination). Accordingly, the genuine operational reason was part of the reason for the dismissal.
When is an ‘operational reason’ not genuine?
Conversely, the AIRC has found in other circumstances that the employer’s reason for termination is not genuine as follows:
- An employee (Ms Moxham) who argued that her employer (Baxter Business Pty Ltd) had dismissed her for personal rather than economic reasons on the basis that her boss’s friend could take her job, was found not to be terminated for a genuine operational reason. The AIRC found that whilst the employer had argued that there had been a downturn in business and produced evidence of a budget deficit for one month, it did not produce any data for the previous year or projections for the future, and accordingly the AIRC considered that it had not established the operational need to restructure.
- An employee (Mr Brown) who argued that his employer (Macedon Ranges Shire Council) had dismissed him because of a breakdown in the working relationship with his manager was found not to be terminated for a genuine operational reason. The AIRC did not accept the council’s argument that the decision to terminate Mr Brown’s employment was solely as a result of the technological or structural needs of the council, which it claimed were evidenced in several external consultant’s reports.
Implications for employers
The recent cases demonstrate that in order to be successful in a motion to dismiss an unfair dismissal application on genuine operational reasons, the employer must lead evidence which:
- convincingly establishes that the business has a structural imperative to reduce employment (ie clearly document past and future economic performance and management/board deliberations with respect to any restructure)
- shows that the economic imperative is one of the reasons for the employees’ dismissal, thereby establishing a causal nexus between the reason and the termination of employment, and
- where appropriate, shows that personal reasons were not the underlying imperative for the termination of employment (ie if the manager/HR advisor responsible for determining who is terminated has a conflict with a specific employee, ensure that an impartial employee is documented as making the decision).
The reasons for any restructure should be clearly documented so that evidence is available to satisfy the AIRC that any termination is for a genuine operational reason, or for a reason which includes a genuine operational reason.
This article was written by Katherine Wirth, Senior Associate, and Natalie Gaspar, Solicitor, of the Melbourne Employee Relations Group.
Approving workplace agreements: What happens if employees are given false and misleading information?
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Background
The case was brought by the Shop, Distributive and Allied Employees Association (SDA) seeking a declaration from the court that an employee collective agreement was not made in accordance with the WR Act, and therefore should be declared void.
The fundamental complaint of the union was as follows:
- the employer had, in attempting to encourage employees to approve the agreement, published a variety of information to employees about the deal and what it meant for them if the agreement was approved
- this information was false and misleading in a number of respects, and
- because the information was false and misleading, the employees had not been given a ‘reasonable opportunity to decide whether they wanted to approve the agreement’, as required by section 340 of the WR Act.
A court can declare an agreement void where there has been a failure to provide employees with a reasonable opportunity to decide whether to vote on the agreement, or the provision of false or misleading information in relation to the approval of an agreement in particular circumstances.
Outcome
The SDA was partly successful, but due to the running of the case and the nature of the evidence presented, it did not obtain any sufficient or relevant relief, save for a declaration that the agreement was not made in accordance with section 340 of the WR Act (which of itself means nothing).
The court did not declare the agreement void.
The majority of the employees were strongly in favour of the agreement. Nevertheless, the union still prosecuted the case in an attempt to overturn the deal.
It was found that some of the information provided to employees was false and misleading, notably in relation to pay increases and the preservation of particular benefits and conditions existing under the old arrangements.
The court found that the provision of false and misleading information had deprived the employees of their reasonable opportunity to decide as required by section 340 of the WR Act.
The court examined the nature of the statements made and whether they were misleading in some depth, having regard to what the situation would be before and after the agreement being approved.
Implications for employers
Although not expressly dealt with in this case, the court seems likely to look unfavourably on statements or information that of itself are correct however may create a misleading impression in employee’s minds.
Employers should be particularly careful to ensure that any statements made to employees during bargaining about the effect of an agreement do not or are not capable of creating a misleading impression. In some cases, that alone may move the court to declare void any agreement which has been approved.
This article was written by Matthew Follett, Senior Associate, and Jessica Toop, Solicitor, of the Melbourne Employee Relations group.
Update on the Fairness Test
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Employers are adopting a number of approaches in relation to providing information to the WA regarding the fairness test assessment. Prior to determining which approach to take, we recommend that employers (at a minimum) assess whether their agreement will pass the fairness test prior to lodgement.
Employers should keep in mind that the WA has a significant volume of work to undertake in applying the fairness test. If an employer can present information to the WA in a form that allows the WA to apply its own processes, then it is more likely to be acceptable to the WA.
The following is a brief outline of some of possible options for employers in lodging agreements:
Lodge the agreement, and provide additional information on request
- This option is most likely to be the option adopted by employers who lodged agreements in May and June (the period between the introduction of the fairness test and the publication of Additional Information Forms on the WA website).
- Going forward, however, there is a risk that the Workplace Authority may change its approach and decide to simply apply the fairness test without further consultation with the employer.
- The form should be used as a guide to the information the WA requires. If the formatting does not allow an employer to present the information in an appropriate way, then additional information should be attached to the form.
Lodge submissions regarding the fairness test, together with the agreement
- This option provides for the employer to lodge the agreement together with submissions as to why the agreement passes the fairness test.
- This approach allows the employer to both present information in a form that it considers appropriate and direct the WA’s attention to what the employer considers to be the relevant award for the purposes of comparison. It also ensures that the WA does not decide to apply the fairness test without hearing the employer’s views.
- An employer should assess whether an agreement will pass the fairness test before making the agreement. The submissions to the WA can effectively mirror the process of assessment used by the employer (provided that process was reasonable).
Meet with the Workplace Authority and agree on the information to be provided
- This option contemplates that the employer meet with the WA in order to seek agreement on the form of the information to be provided and is a variation of the option above.
- The aim of this option is to agree with the WA on the format of the information required by the WA before the information is lodged. However, this approach should be considered in the context of the number of employers seeking to lodge agreements and the practicalities of large numbers of these employees looking to set up meetings with the WA.
Employers should ultimately determine the approach that best suits the agreement in question. However employers should bear in mind that if they can present information to the WA in a form that lets the WA apply its process (tick boxes), then it is more likely to be acceptable to the WA and should expedite the processing of the agreement to the extent possible.
This article was written by Karli Evans, Solicitor and Andrew Pollock, Paralegal, of the Melbourne Employee Relations group.
Directors’ liability for occupational health and safety in the management of a corporation
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Background
The New South Wales Act imposes particularly onerous obligations on employers to ensure the health and safety of all employees at work. Furthermore, if a corporation contravenes the Act, section 26(1) deems each director or person concerned in the management of the corporation to contravene the Act subject to two statutory defences, namely: (a) that he/ she was not in a position to influence the conduct of the corporation in relation to the contravention or (b) he/ she, being in such a position, used all due diligence to prevent the contravention.
Previously, many attempts by directors or other persons to defend a contravention of the Act have been unsuccessful, as the two applicable defences have been interpreted extremely narrowly by the court.
Decisions
The WorkCover Authority of New South Wales (WorkCover) initiated proceedings against Dasco Construction Pty Limited in the first case (Dasco) and ABC Tissue Products Pty Ltd (ABC Products) in the second case, under section 8 of the Act following incidents in 2004. The General Manager of Dasco and four directors of ABC Products were also charged under section 26(1) of the Act.
In Dasco, a brick boundary wall of a building development site collapsed onto an adjacent building causing significant damage. Dasco’s General Manager had prepared an OHS plan but had delegated its implementation to a project manager employed by a contractor.
In ABC Products, a factory worker suffered injuries to his arm whilst cleaning a roller machine. In this case the company was family-run, where specific responsibilities had been assigned to each of the directors, namely sales and marketing, purchasing and health and safety. The directors’ roles were mutually exclusive.
In Dasco, the director prosecuted was found guilty, but the court exercised its discretion to discharge him without conviction. In ABC Products, four directors were prosecuted. Two pleaded guilty whilst the two others elected to defend the prosecution and ultimately were successful in establishing a section 26 defence.
Directors were not in a position of influence
The two ABC Products directors who successfully defended the charges were held not to be in a position to influence the conduct of the company under section 26.
In what can be suggested is a contrast to previous cases, Justice Staff said that the section 26 defence ‘expressly recognises that not every director will be held to have contravened the same provisions as the corporation’. His Honour said that the court needs to distinguish those directors who are in a position of influence or who are ‘complicit in the contravention’, from those who are not.
In Dasco, the General Manager was found to have established a comprehensive OHS plan for the project site and to have taken steps to appoint persons (engaged by contractors) who would be directly responsible for supervising the work to be done on behalf of Dasco. He had made the contractors fully aware of the comprehensive OHS plan and attended the building site frequently to discuss OHS matters with the project manager (an individual employed by one of the contractors). Although the court found the Managing Director guilty, it exercised its power under section 10(1)(b) of the Crimes (Sentencing Procedure) Act 1999 (NSW) not to record a conviction.
In ABC Products, there was found to be a clear distinction between the directors’ responsibilities because each director was assigned a specific area of responsibility and thereby limited to the powers and duties given to them. Therefore, neither the purchasing director nor the sales and marketing director had any involvement in the management of the company and could not be assumed to have had, merely by virtue of their title as director. Importantly, these directors received no information regarding OHS policies and they could not readily discuss safety issues with the OHS director. Essentially, these two directors were found to have had no ‘real control’ over the corporation’s conduct which triggered the section 26(1) defence and the charges against them were dismissed.
Delegation of OHS responsibilities is no excuse
Due to the particularly onerous obligation in the Act, Justice Staunton in Dasco said that a corporation’s ‘obligation to ensure safety cannot be transferred or delegated, consciously or otherwise, to some other person or entity’ regardless of their competency and skill. The court was cautious not to allow corporations to simply ‘turn its back on matters of occupational health and safety’. In Dasco, the General Manager had delegated OHS responsibilities to the contractors, however he satisfied the court that he took appropriate steps on the site because:
- he devised a comprehensive OHS plan for the project site
- the contractor accepted full responsibility on site for all safety matters and had complete on-site control
- he liaised with the contractor on a daily basis
- he was available to be contacted at any time in relation to problems relating to OHS matters, so when he was not contacted, he was entitled to assume that there were no problems, and
- the contractor was made fully aware of Dasco’s OHS plan.
Implications for employers
In ABC Products, Justice Staff determined that a traditional approach of assuming the influential position of directors merely by their title of director renders the section 26 defence ‘meaningless’.
These two recent decisions may indicate a shift towards a more factual interpretation of the legislation, which will include an examination of the individual circumstances of each director seeking to rely on a defence in section 26, including reference to Articles of Association and delegation of OHS matters. However, there are several limitations to this new approach:
- Decisions such as these are likely to be limited to the specific facts and circumstances surrounding a case, particularly the structure and organisation of the corporation with respect to OHS
- Although some directors successfully invoked a section 26 defence, others were convicted. In Dasco for example, whilst Dacso’s General Manager was discharged subject to an 18 month good behaviour bond, a director of the subcontractor responsible for construction of the wall was convicted and was ordered to pay an $8,000 fine, and
- Although Workcover has not appealed the decision in Dasco, it has decided to appeal the decision in ABC Products.
This article was written by Miles Bastick, Partner, Shivchand Jhinku, Senior Associate and Leilah Farahat, Graduate, of the Sydney Employee Relations group.
For more information please contact one of our Employee Relations partners.
