The 1 July Pandora’s box for Australian workplaces

A new financial year is always a busy time for many payroll and human resources teams. It’s a time when performance and commission reviews might be due, salaries can increase and award rate changes need not only to be interpreted, but also implemented. The deadline of “the first full pay period on or after 1 July 2019” is a phrase which instills fear into many Australian workforce managers.

In June this year the Fair Work Commission (FWC) published its Annual Wage Review. The Fair Work Act 2009 (Cth) requires the Commission to review the National Minimum Wage and Modern Award minimum wages each financial year. The outcome of these reviews impacts all Australians employed under an Award, and flows on to many others. The 2017-2018 review estimated that “the number of employees who have their pay set by an award is estimated to be 2.3 million or 22.7 per cent of all employees”.

Any Modern Award minimum wage increase also impacts loadings, penalties, allowances and overtime payments which are calculated with reference to the Modern Award minimum wages. Similarly each 1 July there is a change to the high-income threshold for unfair dismissal applications. The high-income threshold for unfair dismissal applications will rise on 1 July 2019 from $145,400 to $148,700.
Over the past 6 years, we have also seen 1 July as a key date in a phased increasing of the superannuation guarantee. However this year this rate remains steady at 9.5%.

Under the Modern Award system, the wages for each classification are the lowest possible wage rate an employee can be paid. This means an employer cannot pay anything less than the minimum wage outlined the Award which applies. Often organisations make a decision to pay above the minimum wage rate. However, over time this can too easily become an underpayments issue. Any increases to the award wage, loadings, penalties and allowances each year need to be taken into consideration to ensure the employee doesn’t inadvertently fall below the minimum wage.

There is no doubt that the Australian wage system can be complex. Navigating your way through the National Employment Standards, National Minimum Wage, Modern Awards, Enterprise Agreements and contracting arrangements can often be described as a Pandora’s box. We see reminders of where things go wrong in the media regularly, with big business and household names being warned recently by the Fair Work Ombudsman Sandra Parker announcing that they would be taking a tougher approach to enforcement. Just this week it’s been reported that Domino’s Pizza have been the subject of a class action accusing them of misleading and deceptive conduct which alleges that it caused franchise operators to underpay thousands of “award workers” under old, substandard agreements as opposed to the Fast Food Industry Award. It’s estimated that if successful, the class action could cost Domino’s Pizza more than $240 million, a very expensive Pandora’s box in this instance.

As specialist employment lawyers, we often see the cost to an organisation of underpayment issues, often the result of inattention or human error. And the cost isn’t limited to repayment of wages, but often incurs legal fees, sometimes fines and bad publicity. Not to mention the productivity, cultural and morale issues that often remain with the workforce affected. We work with many clients from a risk management perspective to prevent these issues from impacting their business.

The information in this article is for information purposes only and does not constitute legal advice. You should obtain specific advice relevant to your circumstances.

Balance for better

Workdynamic promotes gender equity in its workforce by implementing flexible working arrangements and eliminating gender pay gaps.

This International Women’s Day and every day our team maintain a gender parity mindset and support our clients to do the same. #BalanceforBetter #IWD2019

The World Bank Organisation have identified that gender equality is a critical component of economic growth and recently published Women, Business and the Law 2019: A Decade of Reform outlining how women’s employment and entrepreneurship choices are affected by legal gender discrimination. Workdynamic Director and Principal, Jane Wright, was one of the 2000 lawyers worldwide who contributed to the report.

The report collates and examines ten years of data around the economic decisions women make as they go through their working lives and is intended as an objective measure of how the regulations and laws of the World Bank Group’s 189 member countries affect women’s incentives to participate in economic activity.

There was a worldwide improvement on average towards gender equality in the last ten years, however only six countries achieve a perfect score of 100 in terms of their laws treating men and women equally among the dimensions measured.

While Australia scores 96.88 on the WBL index, we still have considerable room to improve gender equality not only in terms of legislation, but significantly our ability to meaningfully implement these laws.

Workplace policies are an important way to implement frameworks to reduce both direct and indirect discrimination and implement workplace strategies to promote gender equality. For example, the Bankwest Curtin Economic Centre and Workplace Gender Equity Agency identified in their Gender Equity Insights 2019: Breaking through the glass ceiling report that

“Flexible workplaces and paid parental leave are key to staff retention. The loss of skilled workers represents a potentially significant cost to companies, both through the loss of experience and leadership, and through the costs of recruiting and training new appointees. Flexible workplaces with paid parental leave schemes are integral to retaining female staff members during and after pregnancy.”

Should your organisation wish to be on the forefront of gender equality, Workdynamic are well positioned to assist. Not only are we recognised as experts in this area, but we ‘walk the walk’ in our day to day business.

Image source: Women, Business and the Law 2019: A Decade of Reform

The information in this article is for information purposes only and does not constitute legal advice. You should obtain specific advice relevant to your circumstances.

Workdynamic congratulates Kate Peterson on her appointment as Director

Kate Peterson has been promoted to the position of Director at Workdynamic Australia. Kate’s significant contribution as Executive Counsel over the past 3 years to the firm’s specialist employment law practice has been recognised by this appointment.

“I am delighted to be commencing as a director at Workdynamic Australia, and look forward to continuing to work with clients and colleagues to strengthen our market-leading practice and our uniquely innovative and personable culture.” – Kate Peterson

Kate provides advice and representation for clients across a range of industries, and in matters requiring sophisticated strategic judgment and exceptional technical legal skills. Her outstanding knowledge and practical experience in workforce restructuring, including the successful planning of consultation, redeployment and redundancy processes in unionised sectors have benefited many Workdynamic clients. Kate’s technical capability and interpersonal skills make her a sought after investigator, particularly in complex and sensitive matters. A skilled litigator with experience in the conduct of complex Federal Circuit Court litigation and as an advocate in the Fair Work Commission and Coronial Courts, Kate is also a key part of the Workdynamic litigation team.

Kate commenced with Workdynamic Australia in January 2016. She previously practised as a Senior Associate in the Workplace Relations team at Corrs Chambers Westgarth, and prior to that as a Workplace Relations and Safety Lawyer at Clayton Utz.

Kate’s outstanding experience in this specialist practice area is also reflected in her role as an Adjunct Lecturer teaching Advanced Employment Law and Workplace Investigations to postgraduate students at the University of Sydney.

Workdynamic also takes the opportunity to congratulate Kate on the birth of her first child in January 2019. While Kate’s promotion to Director became effective during her parental leave, we look forward to welcoming her return later in 2019 when she will resume her role in our leadership team. Until then the Workdynamic team can be contacted through any of the other Directors.

Kathy Dalton joins Workdynamic as Director

Workdynamic is delighted to announce the opening of a Melbourne office with the appointment of Kathy Dalton as Director.

Before joining Workdynamic Australia, Kathy was an employment law partner of two leading international employment law practices in Melbourne, K&L Gates and DLA Piper.

With a team of 19 lawyers already working for clients spread across the continent, Kathy is a significant addition to the Workdynamic team. Kathy has forged a reputation for being a highly trusted, knowledgeable and practical senior practitioner in her field. Her depth and breadth of experience and leadership establishing our Melbourne office, will allow us to expand our service offering in Victoria in relation to all aspects of workplace investigations, employment, industrial and discrimination law.

Kathy has been providing strategic workplace relations and employment law advice to leading employers for over two decades. She is relied on regularly by boards and senior decision makers to advise on business critical and high stake workforce issues. An experienced workplace relations advisor and litigator, Kathy’s technical employment law knowledge and its practical application across a broad spectrum of private and public sector industries including retail, health, construction, transport, technology and sport, complements the existing team.
Kathy’s responsiveness and proven experience developing practical and commercial workplace relations strategies which protect and strengthen business operations is valued by many clients.

“I’m thrilled to be joining Workdynamic to have the opportunity to help lead the growth of the firm and establish the Melbourne office. The strength and depth of Workdynamic as a specialist employment law practice offers a great platform from which to cement and grow strong client relationships. I’m very much looking forward to demonstrating the benefits of the firm to many more employers down south” – Kathy Dalton

Assumed Disability Discrimination

The NSW Civil and Administrative Tribunal recently awarded $20,000 to a Department of Family and Community Services child protection case worker who was forced to take sick leave after her manager became concerned that the employee was discussing conspiracy theories with co-workers.

The case worker spoke with co-workers about her belief in a number of government cover-ups including that some people question whether the Earth is flat, that fallen angels came to earth and breed with humans to create giants and a theory about the Large Hadron Collider “shutting down” the Earth’s atmosphere.

The manager emailed the case worker to advise she had learned of the conversations and stated, “based on these conversations I have concerns about your well-being. To ensure the agency’s duty of care to yourself, other employees and clients is upheld, I am directing you on Sick Leave, effective immediately. Due to the reported conversations I will be engaging a case manager from Human Resources to liaise with yourself and your treating practitioner to determine your fitness for work.”

The case worker returned to work after seven weeks when her treating practitioner provided a report which noted her fitness to resume normal duties and stated, “…all the topics she was discussing were related to her leisure time reading and topics of interest she found in the Internet. She denied any strong beliefs attached to the topics of discussion.”

The NSW Civil and Administrative Tribunal considered that:

“the Anti-Discrimination Act defines ‘disability’ to include ‘a disorder, illness or disease that affects a person’s thought processes, perception of reality, emotions or judgment or that results in disturbed behaviour’. We will call this kind of disability ‘mental illness’. Disability is further defined in s49A to include a disability ‘that a person is thought to have (whether or not the person in fact has the disability)’. We will call this an ‘assumed’ disability.“

The Tribunal determined that the case worker had been subjected to a detriment, however considered whether the direction to take sick leave met the direct discrimination statutory test of “differential treatment”. The Tribunal stated:

“According to the Department, the comparison should be made between the way [the case worker] was treated and the way a hypothetical employee who had the same conversation about conspiracy theories would have been treated. [The manager’s] evidence was that, “if any employee had made similar remarks or comments to those made by [the case worker], the response would have been the same regardless of any concerns about their mental health”. In other words, if another employee, who [the manager] did not think had a mental illness, had had the same conversations, she would have given that employee the same direction. With respect, that reasoning is not logical when the disability is an assumed mental illness. Inevitably [the manager] would have assumed that another employee who had animated conversations about conspiracy theories would also have had a mental illness.

The problem in this case is not with the Department’s submissions but with the way the differential treatment test is drafted. Where the disability is an assumed disability, and the person does not actually have that disability, the differential treatment element of direct discrimination does not reveal the true basis for the direction.”

The Tribunal further determined:

“We are satisfied that one of the true or genuine bases or the real reason for making the direction was that, based on the conspiracy theory conversations, [the manager] thought [the case worker] had a mental illness.
…
It follows that the Department has directly discriminated against [the case worker] on the ground of assumed mental illness.”

The Tribunal did not consider that it was appropriate for the Department to publish an apology for giving the case worker this direction. However, the case worker was awarded damages in the amount of $20,000.

Reminders to employers

Employers should consider the context of this decision when dealing with ill or injured employees or employees who are assumed to be ill or injured. In this instance, the direction to take sick leave without any assertion from the employee that she was unwell was determined to be unlawful.

The information in this article is for information purposes only and does not constitute legal advice. You should obtain specific advice relevant to your circumstances.

Adverse action update

Two recent decisions in the Federal Circuit Court provide guidance for employers regarding the scope of the adverse action jurisdiction.

Redundancy pay with earlier casual service

Wondering about the relevance of earlier casual service to redundancy pay?

In a decision on 30 July 2018 the FWC Full Bench has provided some welcome clarification on when an employer will need to include previous casual service for employees who later become entitled to redundancy pay.

The appeal by the employer, Unilever, concerned the question of whether or not the relevant enterprise agreement (EA) required permanent employees who had previously worked on an almost continuous pattern as casual and seasonal workers before transitioning to permanent work were due redundancy pay calculated by reference to the entire period of service.

The employer was successful in arguing that a redundancy pay entitlement under this particular EA need only be calculated by reference to service as a permanent employee. In this sense, it is an outcome that applies only in that workplace and turned on the particular aspects of the EA in question, including factors such as the heading of the relevant section of the EA (which stated it did not apply to casual or seasonal employees) and reference to ‘years’ of service (which did not align with repeated separate casual/seasonal engagements).

In interpreting the Unilever agreement, the Full Bench was asked to consider the idea that casuals might be covered by the relevant terms about redundancy in respect of service but not payment. In dealing with this, the Full Bench observed the conceptual boundary between redundancy and the nature of casual/seasonal work, which inherently entails the possibility of cessation by the employer choosing not to re-engage the employee. In short, if an employer has the choice not to re-engage this type of employee, when would a redundancy ever arise? There would be no need.

However, of broader relevance are the Full Bench’s general comments on earlier casual service and the error made at first instance when dealing with the Unilever dispute. Relevantly:

Since the 2016 FWC Full Bench decision in Donau (which analysed a similar claim under a differently worded enterprise agreement), there has been an understanding that redundancy pay under the National Employment Standards needs to include previous casual service for a permanent employee later made redundant. For example, the thinking was that an employee working ‘contiguous’ (ie, repeated and close) casual engagements for 2 years before working on a permanent basis for 8 years would be entitled to NES redundancy based on 10 years’ service (not 8).
In the present case, a different Full Bench has confirmed that Donau turned on its own facts and should not be understood as being generally applicable to considering “service” under the Fair Work Act (as it is defined in section 22) or to service in all enterprise agreements providing for redundancy. This means the thinking above should now be doubted.

Lessons for employers

While redundancy benefits in enterprise agreements are commonly established by reference to continuous service (ie permanent service only), this is not always the case. You should not automatically assume casual service is excluded and look carefully at the particular language of the EA.
For employees covered by the NES, it is no longer clear that earlier casual service has to be included when calculating the redundancy pay for a now-permanent employee.

This article was written by Kate Peterson, Executive Counsel at Workdynamic Australia. The information in this article is for information purposes only and does not constitute legal advice. You should obtain specific advice relevant to your circumstances.

Round up of bullying cases

The new bullying laws have been in place for just over 6 months, and with that in mind, this article summarises the key decisions that have been handed down so far. The cases show that so far, the Commission has been reluctant to characterise behaviour as bullying, and has interpreted the concept of ‘reasonable management action’ in a relatively broad manner.

Whilst the figures for the 4th quarter of 2014 are not yet available, as of 31 March 2014, 151 applications for anti-bullying orders had been made to the Commission, of which only 8 were finalised as a result of a decision of the Commission.

First substantive anti-bullying orders made

The first substantive anti-bullying orders were made on 24 March 2014 (Applicant v Respondent, PR548852). Whilst the decision provided no information regarding the circumstances which lead to the orders, the decision indicated that the Commission is willing to make broad-reaching orders in order to prevent bullying from occurring. In that case, the alleged bully was ordered to:

complete any exercise at the employer’s premises before 8.00a.m;
have no contact with the applicant alone;
make no comment about the applicant’s clothes or appearance;
not send any emails or texts to the applicant except in emergency circumstances; and
not raise any work issues without notifying the Chief Operating Officer of the respondent, or his subordinate, beforehand.

The applicant was also ordered not to arrive at work before 8:15am.

Conduct prior to 1 January 2014 can be considered bullying

In Ms Kathleen McInnes [2014] FWCFB 1440, the employer respondent raised a jurisdictional objection on the basis that the applicant was complaining of conduct that occurred prior to the commencement of the new bullying laws on 1 January 2014. In particular, the applicant was complaining about conduct that occurred from 2007 until 2013, and no conduct after that time.

A Full Bench of the Commission rejected the jurisdictional obligation, and held that allowing consideration of pre-1 January 2014 conduct would not give the laws retrospective operation. This is because the anti-bullying provisions do not attach any liability to past events and are instead about preventing prospective conduct. In other words, the provisions are not directed at punishing past bullying behaviour or compensating the victims of such behaviour, and it is therefore permissible to consider conduct that pre-dates the laws.

Guidance on the concepts of ‘reasonable management action’ and ‘reasonable behaviour’

In Ms SB [2014] FWC 2104, the Commission handed down its first substantive bullying decision and provided useful guidance as to the meaning of ‘reasonable management action’ and the concept of ‘reasonable behaviour’ in connection with the new jurisdiction.

Background

The applicant claimed that she had been bullied by two subordinate employees – Ms CC (a current employee) and Ms NP (a former employee). The applicant complained that these employees had filed false complaints of bullying against her, spread malicious rumours about her and engaged in other harassing and humiliating conduct.

Ms NP initially made a bullying complaint against the applicant, which the employer investigated and found to be unsubstantiated. Ms NP subsequently left her employment. After the applicant had lodged her application with the Commission, Ms CC made a bullying complaint against the applicant. The employer engaged an external investigator to investigate the complaints by Ms CC and the applicant, which found that the complaints against the applicant were justified in part, whereas the complaints by the applicant were not substantiated.

Whilst the employer was not named as a respondent to the proceedings, the applicant also raised concerns about the conduct of her immediate manager and HR staff. She argued that it was unreasonable for the employer to accept and investigate the complaints against her, and that once Ms NP’s complaint had been found to be unsubstantiated and that the employer failed to take adequate action to prevent further complaints from being made again. The employer was also accused of failing to support the applicant when she was the target of malicious rumours, and had failed to notify employees as to the outcome of the complaints which resulted in rumours and gossip.

Unreasonable behaviour

The Commission made the following observations in relation to concept of unreasonable behaviour:

The requirement that conduct be repeated can refer to a range of behaviours over time. There is no specific number of incidents required, provided that there is more than one occurrence, and it is not necessary that the same specific behaviour is repeated.
‘Unreasonable behaviour’ is behaviour that a reasonable person, having regard to the circumstances, may consider to be unreasonable. In other words, the assessment of the behaviour is an objective test having regard to all of the relevant circumstances applying at the time.
There must be a causal link between the behaviour and the risk to health and safety. The behaviour does not have to be the only cause of the risk, and it is sufficient if it was a substantial cause of the risk viewed in a common sense and practical way.
A risk to health and safety means the possibility of danger to health and safety, and is not confined to actual danger to health and safety. Risk means the exposure to the chance of injury or loss – and it must be real and not simply conceptual.

Reasonable management action

The Commission also stated the following in relation to the concept of ‘reasonable management action’:

‘Reasonable management action’ should be given a wide meaning and covers everyday actions to effectively direct and control the way in which work is carried out.
To determine whether management action is reasonable, it is necessary to undertake an objective assessment of the action in the context of the circumstances and knowledge of those involved at the time. Some of these considerations may include:
the circumstances that led to and created the need for the management action to be taken;
the circumstances while the management action was being taken; and
the consequences that flowed from the management action.
It may also be relevant to consider the specific ‘attributes and circumstances’ of the situation including the emotional state and psychological health of the worker.
The question of whether the management action was carried out in a ‘reasonable manner’ is an objective test. It will depend on factual matters including the action, the facts and circumstances giving rise to the requirement for action and the way in which the action impacts upon the worker and the circumstances in which the action was implemented.

The Commission at [51] stated:

The test is whether the management action was reasonable, not whether it could have been undertaken in a manner that was ‘more reasonable’ or ‘more acceptable’. In general terms this is likely to mean that:

management actions do not need to be perfect or ideal to be considered reasonable;

a course of action may still be ‘reasonable action’ even if particular steps are not;

to be considered reasonable, the action must also be lawful and not be ‘irrational, absurd or ridiculous’;

any ‘unreasonableness’ must arise from the actual management action in question, rather than the applicant’s perception of it; and

consideration may be given as to whether the management action involved a significant departure from established policies or procedures, and if so, whether the departure was reasonable in the circumstances.

Findings
The Commission held that whilst some of the behaviour alleged was bordering on unreasonable, it did not fall within the scope of bullying behaviour as defined in the Act. In particular, the Commission found that:

The employer did not act unreasonably by receiving and investigating the complaints, and this was in fact the only reasonable and prudent response.
Whilst the making of deliberately false or misleading allegations could be found to be unreasonable, there was no evidence that this was the case here.
Whilst the employer could have been more proactive in ensuring support was provided to the applicant after the allegations by Ms NP were not found to be substantiated, its failure to insist that she attend mentoring and management training were not unreasonable given that at the time, the applicant had stated that she did not see the value of this support.
It was not unreasonable for the employer to engage an external person to investigate the applicant’s complaints against CC.

Performance appraisals, bonus payments and bullying

In Mr Tao Sun [2014] FWC 3839, Mr Sun argued that he had been bullied as a consequence of the following conduct:

Following a performance review where he received a rating of ‘Meets Requirements’, Mr Sun alleged that Mr A (his Manager once removed) had subsequently changed his performance appraisals which resulted in Mr Sun receiving a lower annual bonus than he had expected (First Complaint).
Mr A subsequently told Mr Sun that he could allocate employees to undertake tasks irrespective of whether they are within the employees’ skills or position description, and required Mr Sun to perform a task which he considered to be beyond his skills and capabilities (Second Complaint).

Mr Sun’s evidence in support of the First Complaint was the fact that his bonus was lower than he had expected. He also relied on an email from Mr A to his direct manager which was critical of Mr Sun’s performance. Mr Sun had located this email after accessing Mr A’s electronic diary (without permission).

The Commission found that there was no evidence to support the First Complaint. In particular, the bonus in question was discretionary and was a matter for the employer’s judgment. The Commission expressed caution at the idea of considering a discretionary bonus to be a form of workplace bullying.

Further, the email was not sent at the time that Mr Sun received his bonus, and was accessed without Mr A’s permission. The fact that an employee believes that they have been bullied at work does not mean that their normal duties and responsibility no longer apply or that they have immunity from observing policies and procedures.

In relation to the Second Complaint, the Commission disagreed that the task in question fell outside of Mr Sun’s skill level or position description, and held that Mr A’s actions were reasonable and carried out in a reasonable manner. The Commission stated that it was ‘not sustainable for employees to say that a task is beyond their skill level and if the Employer does not agree, allege that it is workplace bullying’.

No repeated incidents of unreasonable behaviour

In The Applicant v General Manager and Company C [2014] FWC 3940, the Applicant alleged bullying conduct by the General Manager of the company.
The Applicant pointed a range of behaviours which she argued were unreasonable, including aggressive tone and behaviour, questioning of her decisions, undermining her by going directly to members of her team, belittling behaviour, micro-management and so on.

The Commission found that there was only once instance of unreasonable behaviour by the General Manager, being his failure to properly respond to a request for a support person at future meetings. Because there was no repeated incidents of unreasonable behaviour, the Commission did not make an orders in respect of bullying.

The best defence against exposure to a bullying claim is for employers to implement a clear anti-bullying policy and resolution procedure and to ensure that managers and staff receive training in relation to their obligations. It is also important to investigate complaints in a prompt and impartial manner, having regard to the requirements of procedural fairness.

This article was written by Lauren Barel, Director and Principal of Workdynamic Australia. The information in this article is for information purposes only and does not constitute legal advice. You should obtain specific advice relevant to your circumstances.

Redundancy update 2017

Is it a “genuine” redundancy or not?

Background

In the case of Muhammad Buttar v PFD Food Services Pty Ltd T/A PFD Food Services [2017] FWC 4918, the Fair Work Commission (FWC) found that an employee’s dismissal was not a “genuine” redundancy despite undertaking a legitimate restructure of its business.

Mr Buttar was an employee of PFD Food Services (PFD) with more than two years’ service and was employed as a Supervisor within the Adelaide Fishroom. His employment was governed by the relevant modern award, the Seafood Processing Award 2010 (Award).

The Adelaide Fishroom had been experiencing a serious downturn in business and as a result, PFD decided to restructure and sought to reduce labour costs by making Mr Buttar’s position redundant.

Absent any consultation or discussion with Mr Buttar, PFD sought to make Mr Buttar’s position redundant on the same day they notified him that it would take effect, despite its obligation under the Award to consult with employees affected by major workplace change.

Mr Buttar brought an application for unfair dismissal against PFD. The decision before the FWC was to determine whether the redundancy was a “genuine” redundancy as defined under the Fair Work Act, and if not, whether the dismissal was “harsh, unjust or unreasonable”.

FWC Decision

Deputy President (DP) Anderson of the FWC found that PFD unfairly dismissed Mr Buttar and was ordered to reinstate him into his former role as supervisor (or an equivalent position) despite the presence of the following facts:

PFD had a genuine business reason to restructure, due to the downturn in performance and profitability suffered by the Adelaide Fishroom.
A meeting was held between Mr Buttar and Mr DeCasto, PFD’s State manager, however it was held that this did not discharge PFD’s consultation obligations as it did not constitute meaningful consultation.

PFD’s failure to consult with Mr Buttar in accordance with its statutory obligation under the Award meant that the redundancy could not be a genuine redundancy within the meaning of the FW Act. It was held that Mr Buttar had been unfairly dismissed because PFD failed to give “reasonable consideration” to redeployment when notifying Mr Buttar of his redundancy on the day it took effect. DP Anderson found that Mr Buttar’s dismissal could not be considered to be a genuine redundancy as it would have been reasonable in all the circumstances for Mr Buttar to be redeployed by PFD, either within its business or an associated entity.

Considerations by FWC

When determining whether reinstatement of Mr Buttar would be appropriate, DP Anderson considered the following matters:

PFD would incur ongoing labour costs it otherwise sought to eliminate; and
PFD’s claim that the relationship between Mr Buttar and the State manager was severely damaged and had broken down.

Despite the presence of these factors by PFD, DP Anderson determined that the relationship between Mr Buttar and Mr DeCasto was capable of being both managed and salvaged, and therefore reinstatement was appropriate.

DP Anderson determined “that difficulty does not outweigh the factors which weigh in favour of a finding that reinstatement is not inappropriate” and identified relevant factors in favour of reinstatement including:

Mr Buttar’s strong employment record; and
the fact that Mr Buttar had developed friendly relations with colleagues with who he worked with on a daily basis.

FWC determined that an order for reinstatement to another position, consistent with Mr Buttar’s skills and capability, on terms and conditions no less favourable than those immediately before his dismissal, was appropriate.

Lessons learned

As this case demonstrates, failure by PFD to adequately undertake consultation and provide consideration of any possible redeployment opportunities led to the decision of the FWC to reinstate Mr Buttar into his former position, despite the fact that PFD asserted that the relationship with Mr Buttar had broken down due to a loss of trust and confidence.

The PFD decision is useful in assisting employers to understand the level of engagement that the FWC requires from employers in order to demonstrate compliance with obligations under relevant industrial instruments.

In order to assist employers in understanding how to undertake in meaningful consultation with employees affected by major workplace change (which includes redundancy), employers of award-covered employees should ensure they do the following before terminating an employee’s employment due to redundancy:

meet with affected employee/s to discuss the nature of the change and the effect on the employee/s;
ensure the employee/s are afforded an opportunity to provide any suggestions and/or issues about the effect the proposed change may have on them during the consultation meeting and any subsequent meetings;
discuss any redeployment opportunities and consider the employee’s skill set, qualifications and experience to determine whether there may be suitable alternate roles available within the business or any of its associated entities;
issue written correspondence to affected employees to provide an overview of the discussions had;
ensure any matters raised by employees in relation to the change are acknowledged, considered and addressed.

This overview is to be used only as a guide to matters that should be addressed during the course of fulfilling statutory obligations to consult with employees affected by major workplace change. It is recommended that specialist advice be sought to ensure strict compliance with these statutory obligations.

This article was written by Amanda Dorahy, Associate at Workdynamic Australia. The information in this article is for information purposes only and does not constitute legal advice. You should obtain specific advice relevant to your circumstances.

Termination of an Enterprise Agreement: A Landmark Ruling

A recent Fair Work Commission (FWC) decision in the tertiary education sector offers guidance to employers facing difficult and protracted enterprise agreement negotiations in any industry.

Historically, there has been an unwritten expectation that where bargaining has reached a stalemate, the existing enterprise agreement would invariably remain the ‘status quo’ until a deal was done.

A series of FWC decisions now shows that employers are having increasing success in significantly impacting this status quo by approaching the FWC to terminate the expired agreement. Perhaps inspired by this trend, an employee application to achieve a similar result and terminate a long-expired Coles enterprise agreement is currently pending before the FWC.

The Murdoch University decision is the most recent in a series of significant examples, and is the focus of this update. In this regard, we note there is discussion of an appeal by the union acting for the University’s employees (the NTEU).

Mechanism for terminating expired enterprise agreements

Enterprise agreements have a nominal term, however after expiry the agreement continues to operate until terminated or replaced.

There is a pathway for an employer, employee or union covered by an expired enterprise agreement to apply to the FWC to terminate the agreement. Under section 225 of the Fair Work Act 2009 (Cth), the Fair Work Commission must terminate an expired enterprise agreement if satisfied:

• it is not contrary to the public interest to do so; and
• it is appropriate to terminate the agreement, having regard to the views of those covered by it (the employer, employees and any union) and the likely effect termination would have on them.

If an expired enterprise agreement is terminated, the employees’ terms and conditions may fall back to the underlying modern award. This has the potential to have a dramatic impact on the workforce and, from a strategic perspective, can be a compelling opportunity for change. This could be a significant ‘game changer’ for either employees or the employer. Relevantly, in the Coles application that is currently pending, it is an employee asserting that a return to the modern award would be in the public interest (whereas in the cases below it has been the employer saying there is a case to remove restrictive conditions contained in the relevant enterprise agreement).

The return to award conditions is however subject to any undertaking the employer may make to the FWC to offer a middle ground, thereby providing the FWC with more confidence that termination would not be contrary to the public interest. In each significant case in this area considered below, the employer has volunteered an undertaking that cushions the impact of the desired termination.

Background to the Murdoch University decision

There are a range of dated examples where agreements have been terminated where they are genuine relics from a previous workforce context. The most obvious cases arose where no employees remained covered by the agreement. There are still regular uncontroversial cases of this nature being heard by the FWC. However, the more interesting area is where an application to terminate is sought as a solution to problematic bargaining.

Aurizon decision
In 2015, the FWC terminated 12 expired enterprise agreements on application by Aurizon (formerly, Queensland Rail) (see [2015] FWCFB 540, upheld in [2015] FCAFC 126). The employer in that case was driving the case for change to the enterprise agreements, which it considered contained unworkable employee protections and rigidity that constrained its operations. The parties started bargaining in April 2013 (about 8 months prior to the expiry date) but had made little progress in the year to May 2014, when the employer made the application to terminate the agreements.

Key to this outcome was the Full Bench’s view that termination could still properly occur while the parties were bargaining. There would be a change to the bargaining status quo in negotiations, but this was not inconsistent with the goals of the FW Act. Earlier decisions had declined to intervene while bargaining was occurring, whereas the Full Bench in this case pointed to the “full arsenal of tools under the [FW Act]” which were available to the employees and unions in order to “assert legitimate industrial pressure” on the employer.

AGL Loy Yang decision
In 2017, the Full Bench of the FWC again affirmed termination of an enterprise agreement impacting on current bargaining (see [2017] FWCFB 1019). The facts involved the employees working at Loy Yang coal mine and nearby power station (which supplied 30% of Victoria’s electricity). The parties had been in negotiations for about 15 months. During that time, the employer had sought assistance from the FWC under s 240 of the FW Act (leading to 14 conferences involving the FWC), the union had sought good faith bargaining orders from the FWC and there had been two union applications for authorised protected action ballots.

Interestingly, the employer in that case had agreed to a term in the enterprise agreement stating that if the employer sought to terminate the agreement, it would maintain identified core terms and conditions until a replacement agreement was made. This came into play in the FWC’s consideration of the termination application, and AGL was required to abide by the commitment. At first instance, the employer offered an undertaking to maintain conditions for 3 months following termination of the agreement. This was an issue in focus in the appeal and at that stage Loy Yang instead offered an undertaking for up to three years, which was material to the Full Bench’s decision.

Outcome in the Murdoch University decision

On 29 August 2017, the Fair Work Commission decided to terminate the Murdoch University enterprise agreement, which covers about 3,500 employees. The key aspects of this decision include:

1. The employer and the union had commenced bargaining in about April 2016, with the first substantive bargaining meeting taking place on 18 May 2016. The application for termination was made after approximately 27 meetings had occurred, along with industrial action, social media campaigns and applications to the FWC and courts. The FWC was satisfied the parties were unlikely to reach an agreement in the foreseeable future.

2. There was extensive evidence about the downward trend in Murdoch University’s financial position and operations. A theme of the University’s evidence was that terminating the enterprise agreement would remove constraints and enable the University to be more agile in a challenging market. The University identified specific provisions of the agreement that it considered problematic and put forward evidence as to why these presented a problem. For example, the University considered the misconduct and unsatisfactory performance provisions to be priority areas for change, principally because of the very involved, prescriptive and multi-stage process for determining an outcome under these provisions.

3. The FWC decision clearly states this kind of application is an option during bargaining, stating: “There is no predisposition toward regarding it as contrary to the public interest to terminate an agreement when bargaining is taking place. The termination of an agreement might better support good faith bargaining for an agreement that delivers productivity benefits at the enterprise level” ([311]). The FWC recognised this outcome would change the context of bargaining and favour the employer. Commissioner Williams considered the status quo was not neutral, but rather favoured the NTEU and their resistance to change. By granting the termination application, “The starting point then would be that the provisions of the expired Agreement are not operative and will not be in a new agreement unless both parties agree to this. The focus for negotiations will likely then be on why provisions from the terminated Agreement should be retained and why different provisions should be included in a new agreement” ([454]).

4. The University offered an undertaking to maintain some terms and conditions for a period of up to 6 months in order to avoid an immediate reduction in take home pay, along with an undertaking responding to the NTEU’s arguments about compromising academic freedom.

Hallmarks of a strong case for termination – the current state of play

For an employer facing difficult and slow bargaining in a changing industry, the Murdoch University outcome is another sign that termination of an existing enterprise agreement may be an achievable ‘game changer’ to impact the negotiations. Based on this outcome and the key decisions that have gone before, there are a few hallmarks where there will be a stronger case for termination:

1. A successful termination application can be made notwithstanding that bargaining is ongoing, however successful applications have come after lengthy negotiations, including, in most examples, unsuccessful recourse to the FWC for assistance with the bargaining. In essence, the termination application is typically positioned as a means to resolve a stalemate. A termination application will not be an employer’s first port of call when faced with difficult bargaining. It is also likely to be a significant investment of time and resources. The Murdoch University case involved a 10-day hearing with extensive evidence, including expert reports from economists and other analysts.

2. A changing industrial context or one where the employer can point to a public interest associated with improved efficiency and operations across the workforce. For example, in Aurizon there were peculiarities arising from instructions from the Queensland Government to Aurizon in the context of privatisation and the Full Bench was also cognisant of the dynamics of the rail freight sector and pace of change.

3. Expert and detailed evidence that demonstrates the market position of the employer and, ideally, the impact of the enterprise agreement. Detailed evidence about the practical impact of key clauses in the enterprise agreements, which can satisfy the FWC that these are significant restrictions on the employer’s operations and a cause of inefficiency is likely to be compelling.

4. Carefully designed undertakings from the employer can give comfort about the practical impact of any termination on employees. In each of three examples above, this was a material comfort to the FWC which encouraged termination. Where a termination would have an abrupt impact on take home pay (for example, by dropping employee remuneration down to award rates), the FWC’s assessment of the likely effect on employees will become a material obstacle for an employer application.

Lessons for employers

This outcome continues the trend demonstrating that termination of an enterprise agreement is becoming a realistic option for employers faced with difficult bargaining and a market environment where terms in an enterprise agreement are a material obstacle to the business. While this kind of application remains a significant legal case to run, and requires compelling evidence, the status quo reflected in an expired enterprise agreement should no longer be regarded as set in stone.

This article was written by Kate Peterson, Special Counsel at Workdynamic Australia. The information in this article is for information purposes only and does not constitute legal advice. You should obtain specific advice relevant to your circumstances.