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Employee Relations Review October 2007

26 October 2007

Contents

Deadline of 20 October 2007 for Workplace Relations Fact Sheet

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  • Employers of employees who are in the federal system were required to provide existing employees with a copy of the Workplace Relations Fact Sheet (Fact Sheet) by 20 October 2007.
  • Failure to provide the Fact Sheet to an employee may result in a fine of $110 for each employee.
  • New employees must be given the Fact Sheet within seven days of starting work.

In our Employee Relations Express edition of July 2007, we provided some simple guidelines regarding the Fact Sheet.

Existing employees

All existing employees must have been given a copy of the Fact Sheet by 20 October 2007. If employees did not receive the Fact Sheet by this date, then the employer will be exposed to potential penalties of $110 for each employee. In the event of a breach, the government indicated in July of this year that the Workplace Ombudsman (Ombudsman) will pursue voluntary compliance before seeking sanctions. However employers should take all appropriate measures to ensure they meet their obligations.

New employees

All new employees must be given the Fact Sheet within seven days of starting work. This obligation commenced from 20 July 2007 and is ongoing.

Where can I get the Fact Sheet?

A copy of the Fact Sheet can be downloaded from the Workplace Authority website or ordered from the website. Employers may also order copies from the Workplace Infoline (1300 363 264).

Employers should be aware that the obligation to provide the Fact Sheet to all employees is in addition to existing obligations of employers to provide information statements to employees prior to entering into Australian Workplace Agreements (AWAs) or collective agreements, which remain the same.

We also note that although all employees must receive the Fact Sheet, this document does not address non-statutory arrangements such as common law contracts. Such arrangements are commonly applied to award-free and executive personnel. Accordingly, employers should consider preparing additional information which explains the Fact Sheet and its application to employees who are not regulated by awards or workplace agreements.

This article was written by Karli Evans, Solicitor, of the Melbourne Employee Relations group.

Update on the ‘Fairness Test’ and Workplace Ombudsman

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  • Around 150,000 agreements have been lodged with the Workplace Authority since the Fairness Test commenced on 7 May 2007.
  • The Workplace Authority has requested further information regarding more than 56,000 agreements. Approximately 12,800 agreements have passed the Fairness Test, whilst more than 440 have ceased to operate after failing the test.
  • The Ombudsman has set up a team of 30 inspectors to deal with agreements that have failed the Fairness Test.

In our Employee Relations Express edition of September 2007 we provided an update on the processing of workplace agreements by the Workplace Authority in relation to the Fairness Test which commenced on 7 May 2007.

The Fairness Test applies to all workplace agreements lodged on or after 7 May 2007 that remove or modify certain protected conditions. The Fairness Test will be applied where employees covered by an agreement work in industries or jobs where an award usually applies. The Fairness Test does not apply to employees who are covered by an AWA and earn $75,000 or more per year. An agreement will pass the Fairness Test where the Workplace Authority is satisfied that fair compensation has been provided by an employer seeking to modify or remove any or all protected conditions.

Statistics released by the Workplace Authority (Authority) for September 2007 show that the Workplace Authority awaits further information in relation to approximately 56,000 out of a total of 150,000 agreements lodged since 7 May 2007. More than 440 agreements ceased to operate after failing the Fairness Test and will be referred to the Ombudsman.

The Ombudsman has set up a team of 30 inspectors to deal with agreements that have failed the Fairness Test. If an agreement is found to have failed the test, it will be declared void by the Workplace Authority and referred to the Ombudsman.

Workplace Ombudsman Nick Wilson has indicated that the Ombudsman will (in most cases) adopt an approach of voluntary compliance, and give employers a chance to make up any shortfalls in an employee’s pay and make their work arrangements lawful, prior to prosecution.

Clients might also be interested in our WorkChoices Compliance Guide which has been updated to include details about the new Fairness Test.

Clients with any queries should contact one of the ER partners.

This article was written by Karli Evans, Solicitor, of the Melbourne Employee Relations group.

Application of clerical award

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  • In a recent decision of the AIRC, a commercial superintendent of a mine was found to be covered by the Queensland Clerical Employees Award—State 2002 (Clerks Award).
  • The full bench of the AIRC has made findings on the award coverage issue that should provide comfort for employers concerned about the broad application of the Clerks Award.

In a recent decision regarding the AIRC’s jurisdiction to hear an unfair dismissal claim, Commissioner Bacon rejected the employer’s argument that the employee was award free. Commissioner Bacon found that a commercial superintendent at a Queensland coal mine was a ‘clerk’ employed under the terms of the Clerks Award, operating as a Notional Agreement Preserving a State Award (NAPSA). This was subsequently overturned on appeal by a full bench of the AIRC.

Background

The commercial superintendent lodged his unfair dismissal application out of time. In hearing the commercial superintendent’s application to extend time, the AIRC ruled on whether it was prevented from hearing the unfair dismissal application because the commercial superintendent was award free. It was agreed that the commercial superintendent’s remuneration exceeded the specified rate.

Commissioner Bacon’s decision focused on whether the commercial superintendent’s role fell within the definition of ‘clerk’ in the Clerks Award. He seized upon a few words in the definition of ‘clerk’ (namely ‘checking, or otherwise dealing with records etc’) and decided the commercial superintendent’s role comprised these tasks.

Appeal

The full bench heard two appeals against Commissioner Bacon’s decision—one by the commercial superintendent against the decision not to grant an extension of time for lodgement, the other by the employer cross-appealing the decision that the commercial superintendent was covered by the Clerks Award.

The full bench refused to grant leave to the commercial superintendent, on the basis that the AIRC’s decision on an extension of time was within its discretion. Because the commercial superintendent’s appeal failed, the full bench formally refused leave to appeal to the employer. Nevertheless, the full bench did make findings on the issue of award coverage that should provide comfort to employers concerned about the potential for broad application of the Clerks Award.

The full bench found that:

Implications for Queensland employers

The full bench’s decision signals that, going forward, professional and managerial level employees performing clerical duties will not be covered by the Clerks Award.

The broad interpretation of the award as adopted by Commissioner Bacon would have resulted in many employees having the right to bring unfair dismissal claims where previously they had no entitlement to do so. Further, these employees would have been entitled to other benefits under the Clerks Award including overtime, penalty rates, leave loading, etc, which could have resulted in significant claims for back pay by employees from their employers.

Whilst the decision is welcome news for employers, human resources staff would be prudent to ensure that position descriptions/duties for all staff are carefully considered in order to minimise exposure to coverage by the Clerks Award where possible.

This article was written by Harold Downes, Partner, and Simon Dewberry, Senior Associate, of the Brisbane Employee Relations group.

Bullying on the basis of race results in WorkCover claim

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  • In a recent New South Wales Court of Appeal decision, an employee who sustained a psychological injury as a result of his 'perception' of his fellow employees' conduct was deemed to be a compensable injury under the Workers Compensation Act 1987 (NSW)
  • The decision demonstrates that, in determining the liability of an employer for a worker’s compensation claim, a key consideration will be the consequence of workplace conduct on an employee, including the conduct of fellow employees and the working environment generally.
  • An employer may be liable for a WorkCover claim notwithstanding that an employee may have ‘misperceived’ the conduct of fellow employees, or where such conduct is not intended to harm the employee.
 
In a recent decision of the Full Court of the New South Wales Court of Appeal (court), a former employee was able to show that his perception that he was being racially harassed and vilified in the workplace caused a psychological injury which was compensable under the Workers Compensation Act 1987 (NSW) (Act).

Background

Mr Chemler was employed by the State Transit Authority of New South Wales (STA). He claimed to have experienced racial harassment, victimisation and vilification in the workplace which resulted in him suffering from anxiety, depression and hypertension. He alleged that fellow employees directed jokes toward him because of his Jewish race and because English was not his first language. He also alleged that anti-Semitic signs and graffiti were present in the workplace.

Mr Chemler was also disciplined for poor performance, including a period of demotion. He left work due to illness and notified STA that he was suffering from anxiety, depression and hypertension because of the racial harassment, victimisation and vilification experienced in the workplace.

Prior proceedings

Mr Chemler lodged a WorkCover claim on the basis that he suffered a psychological injury in the course of his employment, and that his employment was a substantial contributing factor to the injury.

STA asserted that the whole or predominant cause of Mr Chemler’s injury was that it had disciplined him (which was reasonable given his performance), and that accordingly the injury was not compensable under the Act.

Following proceedings before the Workers Compensation Tribunal (tribunal) and the Court of Appeal, it was ultimately held by Acting Deputy President Handley that:

This decision was upheld by the court.

Appeal

The court confirmed the tribunal’s decision that Mr Chemler’s perception of the racial harassment and vilification conduct in the workplace caused his injury, which was compensable under the Act. His employment was the ’substantial contributing factor‘ to the injury.

Whether the conduct of his fellow employees did or did not amount to harassment, victimisation or vilification was irrelevant. It was enough that the existence of the jokes and signs had been proved, this conduct occurred in the workplace and was a substantial contributing factor to Mr Chemler’s injury.

In relation to the tribunal’s comments about Mr Chemler’s ’perception‘ of the conduct of his fellow employees in the workplace, the following points help to explain the decision:

Implications for employers

We recommend that employers ensure that:

This article was written by Chris Barton, Partner, and Annelies Herrmann, Solicitor, of the Sydney Employee Relations group.

Potential new laws granting the ACCC power to claim compensation for secondary boycotts on behalf of employers

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  • Under a proposed Bill, the Australian Competition and Consumer Commission (ACCC) will have the power to bring representative actions in relation to breaches of section 45D and section 45E of the Trade Practices Act 1974 (Cth) (TPA), which have until now been expressly excluded from the ACCC’s powers in relation to representative actions.
  • The ALP has indicated it will support the government’s proposal to amend section 87 of the TPA to grant the ACCC power to pursue compensation on behalf of persons (typically employers), who suffer loss as a result of secondary boycott activities.

A marked shift has occurred in ALP policy, with bipartisan support for proposed laws granting the ACCC power to bring representative actions under section 87 of the TPA in relation to secondary boycotts.

The Trade Practices Amendment (Small Business Protection) Bill 2007 (Cth) was moving through the parliamentary process, but was not completed by the time the federal election was called and the Parliament dissolved.  Whether the legislation proceeds through the new Parliament after the election is yet to be seen.

The ACCC already has power to prosecute unlawful secondary boycotts under sections 45D and 45E of the Act, seeking the imposition of penalties and injunctions. As a result of the proposed amendments, the regulator could additionally bring representative actions on behalf of persons suffering damage from unlawful secondary boycotts to obtain compensation on their behalf (for post-commencement conduct only).

According to the explanatory memorandum, the rationale for the changes is to provide small business with access to ACCC resources to obtain relief for loss suffered due to unlawful secondary boycotts. The Trade Practices Amendment (Small Business Protection) Bill 2007 (Cth) represents the fifth time the Howard Government has sought to introduce these amendments.

Nature of the amendments

Secondary boycotts and arrangements inhibiting supply are illegal under sections 45D and 45E of the TPA. Breaches frequently arise in the course of industrial disputes involving multiple parties.

Section 45D prohibits two persons from acting in concert to hinder or prevent a third person from supplying or acquiring goods or services from the target of the boycott, where the purpose or likely effect of the conduct is to cause substantial loss or damage to the business of the target. The provision does not apply where the conduct is engaged in by employees of the target company.

Section 45E prohibits a person from making an agreement with a trade union for the purpose of preventing or hindering the supply or acquisition of goods or services between that person and the target of the boycott. Either the person or the target must be a corporation for s 45E to apply.

Section 87 of the TPA previously provided powers to the ACCC to bring representative actions on behalf of employers in relation to contraventions of Part IV (restrictive trade practices), except in relation to contraventions of sections 45D and 45E.

Implications of the changes

This article was written by Matthew Follett, Senior Associate, and Preeti Kamat, Articled Clerk, of the Melbourne Employee Relations group.

Update on 100 employees or fewer exemption for unfair dismissal claims

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  • Where an employee brings an unfair dismissal action under the Workplace Relations Act 1996 (Cth), an employer can apply to the AIRC (commission) to have the action dismissed on the basis that it employs 100 or fewer employees.
  • The onus lies on the employer to show on the balance of probabilities that they employ fewer than 100 employees. This may require the production of material in support of the company’s position, (ie payroll records, witness statements, company information from ASIC, PAYG tax summaries etc).
  • The relevant time for determining the number of employees is either the time when the employer gave the employee the notice of termination, or the time when the employer terminated the employee's employment.
  • Where employers regularly engage contractors, they should maintain evidence showing that the relationship is one of principal and contractor in order to minimise the risk of unfair dismissal claims.
  • Although not yet settled, it appears that employees of foreign related companies may be included in calculating the number of employees in certain circumstances.

Where an employee brings an unfair dismissal action under section 643(1)(a) of the Workplace Relations Act 1996 (Cth) alleging that the termination was harsh, unjust or unreasonable, an employer can apply to the commission under section 643(10) to have the action dismissed on the basis that it employs 100 or fewer employees.

In calculating the ‘headcount’, the following are relevant:

In this article we look at recent cases in which employers have sought to rely on the exemption by way of jurisdictional objection to unfair dismissal claims. We also consider the implications of the exemption for Australian-based employees who may be employed by an international group.

What do recent cases show that employers must prove in order to have the action dismissed?

What if the employing entity is part of a larger organisation (within Australia), will all employees be counted?

What if the employing entity has a foreign holding or subsidiary company, or is part of an international group?

What if an employer sources workers from a labour hire company?

Employers would be well placed to conduct a careful assessment/audit of their national and international operations prior to terminating an employee, in order to clarify whether they will be able to rely on the 100 employees or fewer exemption if faced with an unfair dismissal claim.

This article was written by Karli Evans, Solicitor and Andrew Pollock, Paralegal, of the Melbourne Employee Relations group.

Restraints of trade – recent developments

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  • Courts appear to be more willing to enforce restraint clauses in order to enable employers to protect confidential information and customer relationships from exploitation by former employees.
  • However, pro forma clauses which are not carefully tailored to the employee’s specific circumstances may not be enforceable if the clause goes further than is reasonably necessary to protect the employer’s business interests.

Restraints of trade

Whilst the common law imposes an obligation on employees to keep certain types of information confidential once the employment relationship ceases (eg ‘trade secrets’ such as formulas or customer lists), information which forms part of an employee’s skill base or experience (eg general ‘know how’) will not be protected after employment ceases unless there is an express restraint in the contract of employment. Similarly, an employee’s activities after termination of employment (eg soliciting customers or other employees) cannot be limited by an employer without an express clause.

For this reason, employers often use restraint clauses in contracts of employment to provide additional protection for their business. This is particularly the case where an employee’s work is regarded as significant or particularly confidential, or if the employee is in a position to cause ’trade harm’ to the company of he or she were to work for a competitor or set up a business in competition with the employer.

Many employers often fail to appreciate that under common law, such restraints are unenforceable by a court unless they are reasonable in scope, area and duration, and they go no further than to protect the legitimate commercial interests of the employer (such as goodwill or customer relationships). This is consistent with the principle endorsed by the courts that restraints of trade restrict freedom of competition in the marketplace.

Accordingly, employers who use a ‘pro forma’ or standard restraint clause which is not tailored to the specific circumstances of an employee (eg the type of information that they may have access to or the geographical area which they may compete in) often find that the court will not enforce the clause, which may have significant implications for the business. In all Australian states and territories (except for New South Wales), the courts can only ‘read down’ a restraint clause to find it reasonable if the unreasonable aspects of the restraint can be deleted from the clause without affecting the overall meaning and application of the clause.

It is therefore critical that restraint clauses are carefully drafted to ensure they afford appropriate protection to the business interests of employers.

In light of the current skill shortage, it appears that many employers have become more willing to bring court actions to seek enforcement of contractual restraints.

Recent cases indicate that employers have had some success in doing so when the restraints are expressly set out in a contract and are reasonable in scope and duration. The cases below illustrate the increased willingness on the part of superior courts to enforce such clauses, and provide examples of some of the more common pitfalls of employers when drafting restraints.

Restraints upheld

In Brink’s Australia Pty Ltd v Kane, an employer (Brink’s) sought an injunction to restrain a former employee from diverting business opportunities to his new employer, MDS. The employee had secretly obtained sensitive information (including customer information and price lists) from Brink’s for the benefit of his new employer, MDS. A restraint clause stated that Mr Kane could not solicit customers for a period of three months, or divulge confidential information.

The court upheld the restraint clause and granted the injunction, despite Mr Kane’s arguments that three months was an unreasonable period and that the customer information was general information and not confidential in nature.

Similarly, in IceTV v Duncan Ross & Ors, the court granted an injunction to an employer requiring two former executives to comply with confidentiality and non-solicitation clauses that applied for a period of 12 months after the period of employment. The executives had started their own company in competition to IceTV, and provided consulting services to one of its clients, Mobilesoft.

The court found that the restraints were reasonable and granted the injunctions sought, despite arguments for the executives that the restraints were of unreasonable length and that the customer had approached them (rather than the executives soliciting the customer’s business).

Restraints found to be unenforceable

In Sear v Invocare Australia Pty Ltd, the court found a restraint in the form of a ‘step’ or ‘cascade’ clause was unenforceable as it was wider than necessary to protect the legitimate interests of a funeral business. A former employee sought a declaration that the restraint was unenforceable in order to enable her to establish a business in the same industry. The restraint was a ‘step’ or cascade clause which prohibited involvement with such a business for periods ranging from five years to one year, in areas ranging from Perth to a certain kilometre radius of any of the premises of the business.

The court found that as the employee had worked at all but one of the business premises, even on the narrowest geographical construction of the ‘step’ clause, it was too broad. As the court could not ‘read down’ the clause to exclude the branch at which the employee had not worked, the entire restraint was unenforceable.

In Del Casale & Ors v Artedomus (Aust) Pty Limited, two employees appealed a decision of a superior court which restrained them from using confidential information in carrying on a competing business in the stone and ceramic products industry. The information related to the source of a particular type of stone, which was exclusively imported from Italy and distributed in Australia by their former employer, Artedomus. The employees had sourced the rare stone from an alternative supplier in Italy for distribution in the same market.

On appeal, the court stated that in the absence of an express restraint in the employment contract, the information about the type and source of the stone could not be protected post-termination, unless it was deemed by the court to amount to a ‘trade secret’.

The court acknowledged that whilst Artedomus went to considerable lengths to protect the information both within and outside the business, it was difficult to separate the knowledge of the stone from the employee’s general knowledge, or ‘know-how’. As a result, without an express restraint clause, the information could continue to be used by the employees. The injunction was therefore overturned.

Implications for employers

The cases demonstrate that the following key points:

This article was written by John Cooper, Partner, Karli Evans, Solicitor and Preeti Kamat, Articled Clerk, of the Melbourne Employee Relations group.

Employee entitled to annual leave entitlements based on full package of $300,000

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  • A decision in the District Court of New South Wales (Civil Jurisdiction) (court) has recently ordered an employer to pay out a former employee’s annual leave entitlements based on his full salary package (which included substantial commissions) of approximately $300,000 a year rather than his base pay of $50,000 a year.
  • According to the court, the employee’s annual leave entitlements should have been calculated in accordance with the Annual Holidays Act 1944 (NSW) and not the Australian Fair Pay and Conditions Standard (standard). Unlike the standard, the New South Wales holiday legislation provides for bonuses and other incentives to be included in the calculation of such entitlements.
  • The court held that the entitlements under the New South Wales holidays legislation continued to apply as a NAPSA.
  • The court also held that provisions of the New South Wales holiday legislation were incorporated by reference to the employee’s contract of employment.

Background

Brad Mason was a former employee of Citigroup Pty Limited (Citigroup). Mr Mason commenced his employment with Citigroup on 19 November 2001 but left on 28 July 2007.

Within the 12 months prior to the termination of his employment, Mr Mason received commissions totalling $282,088.39. His base salary was $50,000 per year.

Mr Mason’s contract of employment provided that he was entitled to annual leave ‘in accordance with legislation’. The contract did not expressly specify the applicable legislation. At the time of this contract, the relevant legislation governing annual holidays was the Annual Holidays Act 1944 (NSW) (NSW Act). The NSW Act provides that calculation of annual leave payments should be based on the worker’s ‘ordinary pay’, which includes bonuses and incentives.

Citigroup paid out Mr Mason’s annual leave entitlements based on his base salary (not including commissions) in accordance with the Australian Fair Pay and Conditions Standard (Standard) in the Workplace Relations Act 1996 (Cth) as introduced by WorkChoices (WR Act), and not the NSW Act.

WorkChoices commenced on 27 March 2006.

The claims

Mr Mason claimed that:

Decision

The court accepted Mr Mason’s claim that his annual leave entitlements were governed by the NSW Act as a NAPSA and were accordingly ‘preserved entitlements’. The standard did not apply to the employee because the annual leave under the NSW Act entitlements were ‘more generous’ than those set out in the standard.

As part of its reasoning in relation to the decision, the court considered the application of a number of relevant provisions of the WR Act. In particular, the court made the following observations:

The court also held that the relevant provisions in relation to annual leave entitlements in the NSW Act were incorporated by reference into Mr Mason’s contract of employment. The court came to this conclusion on the basis that, at the time the contract was made, the only legislation that could have been within the contemplation of the parties was the NSW Act.

Implications for NSW employers

Based on this decision, although an employee may have accrued annual leave after the commencement of WorkChoices (27 March 2006), depending on the terms of the employee’s contract of employment, the employer may nevertheless be liable to pay out the employee’s annual leave entitlements based on state holiday legislation if the entitlements under such legislation are ‘more generous’ than those set out in the standard.

The inclusion of bonuses and incentives (eg commissions) in calculating an employee’s annual leave entitlements may result in a significant additional cost to the employer.

Accordingly, employers should consider carefully reviewing the relevant clauses of their contracts of employment for the purposes of identifying any potential liability in this regard.

This article was written by Miles Bastick, Partner and Justin Fung, Solicitor of the Sydney Employee Relations group.

Submissions invited on review of APCS and junior/training wages

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  • The Australian Fair Pay Commission (commission) is taking submissions from relevant stakeholders on its review of Australian Pay and Classification Scales (APCS) and junior and training wages.
  • Submissions regarding the commission’s APCS review must be received by the commission by Friday 14 December 2007.
  • Submissions regarding the commission’s review of junior and training wages must be received by the commission by Friday 29 February 2008.

The commission is taking submissions from relevant stakeholders on its review of APCS and junior and training wages. A public consultation process will commence once the commission has received submissions.

Clients are encouraged to take this opportunity to forward submissions to the commission on the appropriate role of APCSs as a safety net and the utility of creating an APCS for junior and training wages.

Review of APCS

Submissions regarding the commission’s APCS review must be received by the commission by Friday 14 December 2007.

The Workplace Relations Act requires the commission to remove references to state or territory boundaries from APCSs by March 2009. This is in accordance with the Government’s push towards national uniformity in the labour market. According to the commission chair Ian Harper, the commission must first understand the role of APCSs before it can remove state and territory variations. The commission is therefore inviting submissions on its wage-setting function and the safety net role of APCSs.

The APCS Issues Paper provides background on the commission’s APCS review. Further information on the APCS review process and guidance on making submissions is available through the commission website.

Review of junior and training wages

Submissions regarding the commission’s review of junior and training wages must be received by the commission by Friday 29 February 2008.

Approximately 530,000 workers are employed on junior rates and another 170,000 on training wages. According to the Award Review Taskforce’s review of pre-WorkChoices awards, around 44 per cent do not contain junior rates of pay. Those awards which do contain junior rates of pay vary significantly at different ages, making the commission’s job of removing state and territory boundaries from APCSs even more challenging.

Accordingly, one of the key questions for the commission is whether an APCS should be created for junior and training wages. The commission is also seeking submissions on whether junior wages should apply to all employees aged under 21.

The junior and training wages Issues Paper provides background on the commission’s junior and training wages review. Further information on the junior and training wages review process and guidance on making submissions is available through the commission website.

This article was written by Natalie Gaspar, Solicitor, of the Melbourne Employee Relations team.

For more information please contact one of our Employee Relations partners.



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