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Managing the End of Year Christmas Party – and the Aftermath

A quick Google search for career ending moves at the work Christmas Party may be an amusing exercise. However, at this time of the year it serves as a timely and educative reminder to both employers and employees that poor management, planning and behaviour can make the annual Christmas festivities, and their aftermath, a very sobering experience indeed.  In our experience these events are notorious for being a potential breeding ground for inappropriate workplace behaviour and may put employers at risk of litigious actions such as sexual harassment, bullying, discrimination and unfair dismissal claims.

An employer owes an overarching duty to take all steps reasonably practicable to prevent the risk of injury in the workplace. Any workplace Christmas or end of year event will be considered the “workplace” and the employer will be liable for any inappropriate or unlawful behaviour that occurs, if they have not taken all reasonable steps to prevent such conduct. In the context of work Christmas parties, subtler risks can often be overlooked by employers such as the service of alcohol, at an employer’s expense, and the possibility of illegal drug taking and, in some circumstances, sexual misconduct amongst staff.

Furthermore, the meaning of a “workplace” in this context has been extended, through judicial reasoning, to include not only a principal place of business, but also social gatherings at bars, restaurant or other public venues at which organised interactions amongst staff occur.

It is therefore imperative for employers to educate staff as to what constitutes acceptable behaviour, and what kinds of conduct may give rise to disciplinary action. To this end, it is important that employers implement control measures, so their staff understand what behaviours are acceptable in the context of an event organised by the company, even if it is not on work premises or during ordinary business hours.

Examples of recommended control measures include:

  1. developing and implementing policies around appropriate workplace behaviours, and refreshing these expectations with your employees regularly and in particular before the work Christmas party;
  2. consulting with staff in relation to your expectations of their behaviour at work Christmas parties;
  3. providing training to employees on their obligations under various legislation, including in respect of work health and safety; and
  4. providing access to counselling and an EAP services provider.

At the event itself, particularly where alcohol is being served, an employer can take steps to support their duty to prevent the risk of injury by:

  1. limiting the amount of alcohol supplied;
  2. preventing employees from ‘self-serving’ by appointing suitably qualified third-party officers to serve alcohol (e.g. bar service attendants with RSA’s);
  3. commencing and concluding the event earlier in the evening; and
  4. ensuring adequate security and safety measures are in place at the venue.

Careful planning, management and control of venue are vital in mitigating an employer against the risks of litigation, for example, for unfair dismissal.  In the recent decision of Drake & Bird v BHP Coal Pty Ltd [2019] FWC 7444, one employee’s termination was upheld while another was reinstated after a physical altercation at a Christmas event. The employees believed they were at a ‘pyjama night’ (an event organised by BHP mineworkers to mark new rosters) and were thus not attending a “workplace” function.  Nonetheless, there were some 60 employees of the company, including family members, attending the function, allowing the Commission to conclude that the event was sufficiently work related as to be covered by BHP’s code of business conduct and charter values.

Uncontrolled and excessive consumption of alcohol was the principal driver in causing the altercation where an uninvited supervisor decided to belatedly attend the event and was attacked by two employees, one of whom punched the supervisor.  The Commission upheld the termination of the employee who punched the supervisor but reinstated the other.  Despite the conduct of both employees running counter to BHP’s conduct policies, the event was poorly managed and controlled by BHP and they were thus exposed to unfair dismissal litigation with mixed results.

To further highlight the different outcomes that can arise based on the planning, management and control exercised by an employer (or lack thereof), it is worthwhile to compare Keenan v Leighton Boral Amey NSW Pty Ltd [2015] FWC 3156 and Vai v ALDI Stores (A Limited Partnership) [2018] FWC 4118. 

In Keenan a drunken employee was dismissed for verbally abusing his boss and sexually harassing a fellow colleague. Despite the employee being warned that the usual workplace code of conduct would apply at the Christmas party, the Commission still found that the employee’s dismissal was unfair.  In Vai, an employee was dismissed for misbehaviour at a work Christmas party at which the employer also supplied free alcohol. In this matter, the employee threw a full glass of beer towards other employees. 

While the former matter appeared more serious, the Commission found that the termination of Mr Keenan’s employment was unfair because employees were able to serve themselves alcohol and no one was given the task of supervising the function whereas Mr Vai’s termination was upheld because the work function was at a hotel where the serving of alcohol was controlled and where there were senior staff present to supervise.

Whilst work functions are a great opportunity to have fun with colleagues, our recommendation to surviving the silly season is to be honest with yourself as to whether everything reasonably practicable has been done to ensure all employees are safe and without risk of being subjected to offensive behaviour.

If any further information in relation to any aspect of this alert is required, please do not hesitate to contact us. Otherwise, we are available and ready to assist should you require any advice or legal support this silly season.

This alert is not intended to constitute, and should not be treated as, legal advice.

Ill or injured employees – what can employers do?

Can an employer terminate the employment of an ill or injured employee, who has been of work for sometime and is refusing or ignoring requests to attend independent medical examinations. Disability discrimination legislation allows an employer to terminate the employment of an employee where the employee is not able to fulfill the inherent requirements of the role as a result of the disability. However, the application of this defence is often difficult, as it means the employer needs to be sure by reference to compelling evidence (usually independent medical evidence) that this is the case.

In addition, the General Protection provisions of the Fair Work Act 2009 (Cth), prevent an employer from taking “adverse action” against an employee because of a disability. There is no similar inherent requirements defence, although if the employer can argue that the reason the employment was terminated related to the failure of the employee to perform the role (and not the disability itself) then arguably the termination would not offend the FW Act. It is notable that most employers have been reticent to take the ultimate step of dismissal because of the inherent requirement defence, because it is only due to the disability that the individual is unable to work, and as such a strong presumption is created that the dismissal is due to the disability. This is the very issue that was the subject of the decision in Western Union Business Solutions (Australia) Pty Ltd v Robinson [2019] FCAFC 181.

Background

Mr David Robinson was employed by Western Union Business Solutions (Australia) Pty Ltd (“WU”) as a ‘Client Executive’ from February 2013 until his dismissal on 8 May 2017.

Prior to his dismissal, Mr Robinson took an extended period of sick leave whereby he provided medical certificates that lacked detail with respect to his condition, other than to indicate he was suffering from “a medical condition”, “significant work related  stress and anxiety” and “a major depressive disorder associated with significant anxiety”.  The medical certificates ostensibly did not change from the commencement of his sick leave in around September 2016 to his dismissal on 8 May 2017, did not indicate a positive prognosis nor imagined a regime whereby Mr Robinson would return to work.

During Mr Robinson’s absence and on three occasions, WU directed Mr Robinson to attend an independent medical assessment who would provide a timeframe for Mr Robinson to return to work; a direction Mr Robinson ignored.

Considering Mr Robinson’s role was one that “continued to be required” by WU, Mr Robinson’s refusal to attend an independent medical assessment and the lack of specificity in the Work Cover certificates that were being provided, decided to terminate the employment. WU ultimately terminated Mr Robinson’s employment, providing him with 2 months’ pay in lieu of notice plus accrued but untaken leave entitlements. The dismissal letter stated, “in light of the Company’s serious concerns about your capacity to return to work, the company has decided to terminate your employment”.

Mr Robinson commenced proceedings in the Federal Court alleging that WU had terminated his employment because of his mental disability in contravention of section 351 of the FW Act.

Relevantly, s351 of the FW Act provides:

  1. An employer must not take adverse action against a person who is an employee, or prospective employee, of the employer because of the person’s race, colour, sex, sexual orientation, age, physical or mental disability, marital status, family or carer’s responsibilities, pregnancy, religion, political opinion, national extraction or social origin.
  2. However, subsection (1) does not apply to action that is:
    1. not unlawful under any anti-discrimination law in force in the place where the action is taken; or
    2. taken because of the inherent requirements of the particular position concerned…

At first instance, WU gave evidence that Mr Robinson was dismissed because:

  1. he unreasonably failed to co-operate with three attempts by WU to arrange for him to attend a medical appointment;
  2. he was likely working elsewhere;
  3. he was not genuinely unwell; and
  4. his absence could conceivably be indefinite considering his medical evidence was ostensibly unchanging and did not envision a return to work plan.

At first Instance

Judge Flick found that:

  • The lack of capacity of Mr Robinson to return to work was a “manifestation” of his claimed mental disability, which could not be severed from that disability;
  • Although Mr Robinson’s employment was not terminated because he suffered a mental disability, it nonetheless was terminated because of a manifestation of that mental disability and his subsequent inability to return to work; and
  • Adverse action was taken against Mr Robinson because of, or at least for a reason which included, a manifestation of his claimed mental disability and hence for reasons which included his mental disability.

Judge Flick drew comparisons with the decision of Judge Katzmann in Shizas v Commissioner of Police [2017] FCA 61 where the Assistant Commissioner of the Australian Federal Police had refused to employ Mr Shizas because he had formed the view that Mr Shizas “faced an unacceptable risk of injury in the future” due to his suffering from a physical disability.  Judge Katzmann found that it was “difficult, if not artificial” to draw a distinction between a disability and its manifestations or effects, and decided that the Commissioner of Police had contravened section 351 of the FW Act.

Appeal

The decision of Judge Flick was overturned on appeal by the Full Bench which found that:

  • The lack of capacity of Mr Robinson to return to work was not a manifestation of his mental disability, even though it may have been a consequence of it;
  • Not every consequence of a disability should be regarded as a manifestation of it;
  • A manifestation of a disability includes, for example, symptoms such as lethargy or fatigue. A consequential inability to attend work because of lethargy or fatigue is a result of the manifestation and not a manifestation of the disability itself; and

Judge Flick had incorrectly assumed that Mr Robinson’s incapacity for work was caused by an underlying mental condition and then incorrectly reasoned that the WU took action because of the mental condition rather than the incapacity.

The decision of the Full Bench draws a clear distinction between:

  • A disability (as described by its name, e.g. depression);
  • The manifestations of that disability (e.g. lethargy or fatigue); and
  • The consequences of the manifestations of a disability (e.g. inability to attend work or perform certain duties).

Lessons for Employers

The lesson for any employer considering taking adverse action against an employee, including termination of employment, who has a disability should first consider whether it is doing so:

  • Because the employee suffers from an impairment; or
  • Because the employee suffers from or experiences the manifestations of a disability (e.g. suffers from or experiences anxiety or fatigue due to depression); or
  • Because of a consequence of a manifestation of a disability, including:
    • An employee doing something (e.g. an employee truck driver improperly securing a load due to fatigue);
    • An employee potentially doing something (e.g. there exists a risk that an employee truck driver could possibly fail to secure a load due to fatigue);
    • An employee not doing something (e.g. an employee truck driver failing to secure a load in a safe manner due to lethargy); and/or
    • An employee potentially not doing, or not being able to do something (e.g. the risk that an employee truck driver will not secure a load in a safe manner due to lethargy).

Ultimately, the Full Bench determined that an employer can take lawful adverse action against an employee because of a consequence of a manifestation. Otherwise employers would have had no ability to terminate the employment of any person who is absent from work for an indefinite period if that absence was wholly or evenly partially due to a disability.

This decision effectively means employers can now more confidently manage the employment of long term ill or injured employees, who are unlikely to be able to return to work as a result of the their illness or injury.

Protecting the business when executives leave

The importance of the Senior Executives team for any business cannot be underestimated. They are ultimately responsible for the culture, performance and success of the business. However, what happens when a senior executive leaves the business. Have you considered how this may impact the business? What are the matters that any responsible business should consider in circumstances where a senior executive leaves?

Following on from our last article in relation to how to motivate senior executives, in this week’s article, we look at the factors an employer should consider ensuring the business is protected when senior employees wish to resign, or the business chooses to remove them.

There are many issues that should be considered when a senior member of the organisation leaves. Unfortunately, many of these matters should be properly considered way before a decision is made to either terminate the relevant employee, or before the employee’s terms of resignation are accepted. In fact, I would go further and say that prudent employers should be holding regular catch-ups with the senior executive team, to ensure that if there is any apprehension someone may be considering leaving, that this is not news when it occurs, and if they are vital, that the reasons for the move are addressed and perhaps the departure avoided. In any event if this does not occur at least the following should be considered:

  • How will the departure affect the operation of the business and what must be done to manage this;
  • Why the person is leaving and whether the issues affect others in the business and especially in the Executive’s team;
  • The level of knowledge shared across the team about the matters dealt with by the Executive and how this will be managed;
  • The timing of the departure;
  • The messaging regarding the departure and its effect on both the departing employee and the rest of the business;
  • The legal requirement, which we discuss more fully below.

One of the most important protections for any business is an appropriate contract of employment. It should provide for appropriate notice periods, which is vital to ensure the business can properly plan and manage a departure, garden leave clauses, and otherwise clearly identifies the rights and obligations of both parties. In particular, in addition to the standard clauses, an employment contract for an executive should include the following:

Notice Period

Notice of termination clauses sets out the amount of notice the employee and the business must provide before the employment relationship may terminate.

It is crucial that the notice clause sets out the notice that both the employer and the employee must provide so that each party knows exactly what to expect from the other.

In circumstances where a contract does not include an express term setting out the notice period, the courts will imply a term of “reasonable notice”. Reasonable notice will be determined on a range of factors such as age, length of service, time it would likely take for the employee to obtain commensurate employment, qualifications and so on. Accordingly, it may be found that reasonable notice is substantially more than the business was prepared to provide. For senior executives who have been employed for considerable periods of time, reasonable notice could be as much as 12 months.

An appropriate notice period can also act as an effective restraint of trade, as it will prevent an employee from starting with a competitor during that period. It is for these reasons that notice periods for senior executives are often more than the standard one month. It is also important that the contract allows for the payment of notice in lieu of the employee working the notice. If this is not the case, but the employer actually wants the employee to leave immediately, without the relevant clause allowing this, there may be an argument that doing so is a breach of the contract.

Garden Leave

A garden leave clause allows the business to isolate the employee from their business while having them remain employed. During the garden leave period, the employee remains an employee of the business and as such, has the same obligations and duties to the business as any other employee, however the employee is not required to attend for work. In addition, other restrictions can be imposed including that they have no direct contact with clients, suppliers and/or access to confidential information.

Garden leave can therefore be a great way of restraining an employee. For example, if your business suspects an employee has resigned to join a competitor it is unlikely the business will want to make a payment in lieu of notice as that would simply bring their termination date forward, meaning the employee could start with the competitor even sooner. Placing the employee on garden leave, ensure they are unable to commence with the new employer or compete with the business for the notice period, but allows them nonetheless to be removed from the operation of the business.

Garden leave clauses also allow an employer to retain the knowledge of the employee for a transition period, but not necessarily have the employee attend for work. This may be invaluable in transitioning another person into the role or managing the departure.

It is important to understand that there is no general right to put an employee on garden leave and as such, a properly drafted clause should be included in the employment contract to allow the business to do so.

Restraints of Trade

Senior executives are usually the repository of the business’s knowledge and confidential information, not to mention customer connections and goodwill. When these employees leave, they create a substantial risk to the business. Well drafted post-employment contractual restraints can be an extremely useful tool to protect the business from the impact of former employees using this knowledge and connections for the benefit of others.

It is critical that a restraint of trade clause is carefully drafted to ensure that it is reasonable and enforceable. In this regard, the legal position is that post-employment restraints will be enforced if the employer seeking to enforce the restraint is able to show that the restraint is reasonable and necessary to protect the employer’s legitimate business interest.

Without appropriate restraint clauses, there is very little an ex-employer can do to prevent an employee from competing. The same observation can be made for the protection of confidential information. Unless the contract contains an appropriate clause dealing with the protection of confidentiality, the employer will need to rely on the common law which is very limited.

Termination Payments

It is not unusual in circumstances where the employment of executive employees occurs, to find that this creates significant disputation over the quantum of the termination payments, entitlement to bonuses, share options and other incentive payments. The contract of employment should make clear what payments will be made to an employee in these circumstances, and how discretionary benefits will be treated.

Lastly, in circumstances where a business may terminate an executive employee and is considering a termination payment, it is important to ensure the business does not breach its obligations under the Corporations Act 2000 (Cth). Specifically, the Corporations Act places limits on the quantum of termination benefits payable to relevant executives. For executives captured by these provisions, unless the business has obtained shareholder approval prior to the payment being made, the termination payment cannot be greater than the executive’s base remuneration in the preceding 12 months.

If you require assistance with drafting an executive employment contract, restraint provisions or require general employment law related advice, please feel free to contact our office.
This alert is not intended to constitute, and should not be treated as, legal advice.

Workforce Planning in a Slowing National Economy: A Timely Refresher on Change Management and Redundancies

With the Sydney housing boom slowing, in combination with a weakened Australia dollar and political instability as a consequence of the Turnbull government being ousted, it is no surprise that big corporates with large footprints in Australia are thinking about, and in the case of Singtel Optus (“Optus”), are in fact implementing significant restructuring and change management initiatives. As many of our readers would have seen in the news, Optus has announced plans to eliminate 400 local jobs in an effort to reduce its labour costs amid a more competitive landscape for telecommunications service providers in Australia.  However, we are seeing an increasing number of employers across many industries take anticipatory action and changing their business structure in light of the slowing national economy, and to this extent, thought now would be an opportune time to provide our clients with a refresher on the legal obligations which need to be discharged when carrying out redundancies.

In this regard, we note that change management and, in particular, downsizing has the potential to present a melting pot of legal issues for employers, and there are many practical traps for organisations to consider in planning and executing redundancies especially in an economic downturn.

The Legal Landscape

The legal definition of redundancy in Australia can be readily found in the Fair Work Act 2009 (Cth) (“the Act”). In order to give rise to a genuine redundancy the test to be satisfied is whether the employer no longer requires the job done by the employee to be done by anyone. In most circumstances, if an employee’s role is made redundant and their employment is terminated as a consequence, they will also be entitled to a severance payment, except where this is due to the “ordinary and customary turnover of labour”. This phrase was, however, recently given judicial consideration by Justice Reeves in the decision of United Voice v Berkeley Challenge Pty Limited [2018] FCA 224 (“Berkeley”) in which the Court found that in order for an employer to rely upon the exemption, they need to show that the redundancy occurred in circumstances where: …”the redundancy component of that decision is for that employer, with respect to its labour turnover, both common, or usual, and a matter of long-continued practice”.

Whilst many employers try and use redundancy as a mechanism to exit an underperforming employee, redundancy is not an excuse for terminating an employee for poor performance. However, making an employee redundant does not purely involve telling them their role is no longer required. Procedurally, an employer has a number of obligations it must fulfil before it can lawfully end the employment relationship on the basis of redundancy.

The Process to be Followed

As termination for redundancy is recognised as a normal consequence of appropriate management action to deal with restructure or financial circumstances, it is afforded certain protections from legal action as long as an appropriate process is adopted. For employees who are covered by Modern Awards or other industrial instruments, or who have access to the unfair dismissal regime, the failure to follow the appropriate process may leave the employer open to a number of claims, including unfair dismissal and possibly injunction proceedings to stop the restructure from occurring.

As such, the first stage involves careful planning, and employers ought to be aware of employee entitlements such as to notice, accrued statutory leave and other incentive payments which are derived from the National Employment Standards, industrial instruments, workplace agreements, contracts and policies. It is also pertinent to plan for contingencies in redundancy programs such as adverse media, industrial action and other forms of disputes. It is recommended that employers keep well documented records such as minutes of management meetings setting out the reasons for undertaking a restructure, downsizing or financial pressures necessitating redundancies. This will be most useful if the employee commences unfair dismissal proceedings or a general protections claim, challenging the validity of the redundancy of their role.

Depending on the specific requirements contained in any applicable modern award/ enterprise agreement or other industrial instrument, the second stage of the process requires employers to notify impacted employees (and representative organisations contemporaneously) about “major workforce change” (discussed below), including redundancy as soon as a firm decision has been made. It is vital to ensure that communication is clear and all necessary information regarding the process and timing is given to impacted staff. Even if employees are not covered by an industrial instrument it is good practice to notify and consult with affected employees.

Once notification has taken place, consultation obligations should be discharged. For employees covered by a modern award or enterprise agreement, consultation is mandatory. This includes but is not limited to talking with staff about the likely impact of the change and what mitigation strategies can be adopted to reduce adverse consequences of the redundancies to individuals. Consultation should not be a perfunctory advice about what is happening, rather it is an opportunity provided impacted employees an opportunity to influence the “decision-maker” through joint discussion. An employer needs to genuinely take into account any matters raised in consultation by staff. The benefits of proper consultation include a reduction in legal claims post termination, a valid jurisdictional objection to unfair dismissal proceedings, but most importantly it goes a long way to assist those employees who remain with the organisation to be positive and committed and to appreciate that the employer has treated its people fairly.

The recent decision of Australian Rail, Tram and Bus Industry Union v KDR Victoria Pty Ltd t/a Yarra Trams [2018] FWC 4837 (“Yarra Trams”) has highlighted the importance of following consultation requirements regardless of how insignificant an employer may consider the workplace change.

In this decision, Yarra Trams attempted to make changes to its supply chain area which is primarily responsible for procurement on behalf of the business. The changes surrounded the fact Yarra Trams had partnered with a UK-based logistics company, Unipart, to assist its supply chain. As a result of the partnership, Yarra Trams supply chain employees started reporting to a manager employed by Unipart.

Accordingly, Australian Rail, Tram and Bus Industry Union (“RTBU”) argued that the changes implemented by Yarra Trams had not complied with the consultation requirements under the applicable and relevant enterprise agreement. Yarra Trams denied that the changes were a “major change” requiring consultation under the enterprise agreement as it only affected 4 of its more than 2300 employees (being less than 1% of their workforce).

However, Commissioner Gregory found that the changes were likely to have a significant effect on Yarra Trams’ employees within the meaning of the consultation clause and as such, ordered Yarra Trams to hold off on further changes to its supply chain area in order to comply with its consultation obligations under the enterprise agreement.

The Yarra Tram decision demonstrates that even though the introduction of a workplace change may only affect a small portion of employees (and in this case did not include termination of employment), this alone will not be the determinative factor when considering whether an employer is required to follow the notice and consultation requirements which may exists under an industrial instrument.

The final stage in the redundancy process, which is required if the employer wishes to rely on any jurisdictional objection to an unfair dismissal claim and, if done appropriately can shield an employer from post-termination claims for breach of the general protection provisions, is to consider redeployment opportunities, and where appropriate, offer staff positions that may be suitable within the organisation or an associated entity. Many employers determine or otherwise pre-empt whether a role is suitable, and fail to offer the role to affected employees, because the role is a lesser paying position, requires relocation or retraining, or even constituting a demotion. This should not be a decision for the employer but rather for the employee concerned.

Payments and Entitlements on Redundancy

In circumstances where the employee’s position is terminated by reason of redundancy and no suitable alternative position is provided, an employer has a minimum obligation (subject to any enterprise-specific regime providing a more generous severance entitlement) to pay redundancy pay under the Act in accordance with the following scale:

  • Less than one year’s continuous service — Nil
  • At least one year but less than 2 years continuous service — 4 weeks’ pay
  • At least 2 years but less than 3 years continuous service — 6 weeks’ pay
  • At least 3 years but less than 4 years continuous service — 7 weeks’ pay
  • At least 4 years but less than 5 years continuous service — 8 weeks’ pay
  • At least 5 years but less than 6 years continuous service — 10 weeks’ pay
  • At least 6 years but less than 7 years continuous service — 11 weeks’ pay
  • At least 7 years but less than 8 years continuous service — 13 weeks’ pay
  • At least 8 years but less than 9 years continuous service — 14 weeks’ pay
  • At least 9 years but less than 10 years continuous service — 16 weeks’ pay
  • At least 10 years continuous service — 12 weeks’ pay.

For completeness, redundancy pay is separate and in addition to an employee’s entitlement to notice and any other statutory benefits (such as annual leave or long service leave) which an employer is required to pay upon termination.

Managing Exposure and Risk

Managing legal exposures goes hand-in-hand with any change management program, and employers need to prepare themselves for the possibility of opportunistic unfair dismissal, adverse action or discrimination claims. A few steps we recommend employers should take to reduce these risks are as follows:

  • An objective assessment of whether the proposed action is justified based on the circumstances being relied upon to effect the change;
  • Ensuring that all legal obligations have been met with regard to the notification, consultation and redeployment process (if applicable);
  • Following a robust communication strategy so that employees feel informed and included;
  • Document the process thoroughly and maintain good records of decision-making before and during the redundancy process; and
  • Ensure the appropriate severance and termination benefits are paid on termination.

If you have an employment law issue or need advice on any change management initiatives for your business, please do not hesitate to contact us for specialist advice or assistance.

This alert is not intended to constitute, and should not be treated as, legal advice.

Can you Dismiss an Employee by Phone, SMS or Email?

In a society where the use of technology including mobile telephones and computers has become so prevalent, it is no surprise that electronic devices are changing the way in which we communicate. There has been a growing trend where employees and employers now communicate almost exclusively via email or text message. As such, it is not unexpected that there are a number of employers who have terminated the employment of their staff by phone, text or email in order to avoid those hard to have conversations with their employees.

Even though terminating an employee’s employment by one of these electronic means is not unlawful, it may be considered procedurally unfair and provide an employee grounds to challenge the dismissal. In this week’s article we consider whether terminating an employee’s employment by phone, text or email will leave an employer vulnerable to an unfair dismissal claim and the Fair Work Commission’s current stance on the issue.

The Fair Work Act 2009 (Cth)

Section 285 of the Fair Work Act 2009 (Cth) (“FWA”) sets out that a dismissal will be considered unfair if:

  1. The person has been dismissed; and
  2. The dismissal was harsh, unjust or unreasonable; and
  3. The dismissal was not consistent with the Small Business Fair Dismissal Code; and
  4. The dismissal was not a case of genuine redundancy.

Section 387 of the FWA provides several factors which the Fair Work Commission (“FWC”) may consider in determining whether a dismissal was harsh, unjust or unreasonable. These factors include:

  1. Whether there was a valid reason for the dismissal;
  2. Whether the person was notified of that reason;
  3. Whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person;
  4. Any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relation to the dismissal;
  5. If the dismissal related to unsatisfactory performance by the person, whether the person had been warned about that satisfactory performance before the dismissal
  6. The degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal;
  7. The degree to which the absence of dedicated human resources or expertise in the enterprise would be likely to impact on the procedures followed in effect the dismissal; and
  8. Any other matter that the FWC considers relevant.

In our personal experience, we have been involved in a significant number of matters before the FWC where there may be a completely valid and justifiable reason for the dismissal, but the employer fails to undertake a proper termination process, resulting in the dismissal being found to be harsh, unjust or unreasonable. To that end, we note that there can be some real risk for employers when terminating an employee other than by a face-to-face meeting and we have undeniably noticed a steady increase in cases before the FWC where unfair dismissal claims have been upheld because of some procedural defect in the termination process.

Recent Case Law

Most recently, in the decision of Anita Cachia v Scobel Pty Ltd ATF the S & I Trust t/a Emerse Skin & Laser [2018] FWC 2648, Deputy President Sams of the FWC specifically considered an unfair dismissal application where the employee was terminated for serious misconduct by telephone.

In this matter, the employer dismissed Ms Cachia, a beauty therapist, for her ongoing inappropriate behaviour and poor treatment towards the company’s manager and other staff. In one instance, it was noted that she pushed the company’s manager out of a door way and slammed a sliding door in her face. It was alleged Ms Cachia also had a constant disregard for authority and there were a number of allegations made by other staff in relation to her poor treatment towards them.

In the circumstances, the employer conducted an investigation and asked staff to provide statements. The employer then met with the Ms Cachia and her mother (as a support person) to discuss the allegations and give her an opportunity to respond. Following the meeting, the employer deciding to terminate Ms Cachia’s employment for gross misconduct. As it was a small business it applied the Small Business Fair Dismissal. The termination was carried out by telephone and the employer paid all outstanding entitlements owed to Ms Cachia.

In handing down his decision, Deputy President Sams found Ms Cachia’s conduct did constitute serious misconduct and agreed that she posed a threat to the health and safety of other employees which left the employer with no other choice but to terminate her employment. The Deputy President also found that the employer complied with the Small Business Fair Dismissal Code and Ms Cachia was not denied procedural fairness.

However, His Honour did criticise the manner taken by the employer to inform Ms Cachia of her dismissal by phone. Specifically, DP Sams stated, “I do not consider that informing an employee of their dismissal by phone, text or email, to be an appropriate means of conveying a decision which has such serious ramifications for an employee”.

In this regard, Deputy President Sams considered the fact that there had already been one meeting with Ms Cachia and he could not see any reason as to why a further meeting could not have been organised to explain the company’s decision and discuss the termination. However, he did accept that the Small Business Fair Dismissal Code did not include a requirement to convey the decision to terminate an employee in person. He also made note of the fact the employer had no human resource or industrial relations expertise and had solely relied on the Fair Work Commission’s website and the terms of the Small Business Fair Dismissal Code. In concluding, Deputy President Sams referred to the fair go all round principle within the FWA and upheld the dismissal.

Lastly but notably, within Deputy President Sams’ decision he also referred to and agreed with the recent decision of Commissioner Cambridge in Knutson v Chesson Pty Ltd t/a Pay Per Click [2018] FWC 2080 at [47] where it was held that notification of dismissal should be conveyed face to face unless there is some genuine apprehension of physical violence or geographical impediment. Furthermore, Commissioner Cambridge stated, “Even in circumstances where email or electronic communications are ordinarily used, the advice of termination of employment is a matter of such significance that basic human dignity requires that dismissal be conveyed personally with arrangements for the presence of a support person and documentary confirmation”.

It is noteworthy that Commissioner Cambridge in this decision found the dismissal of an employee by email to be unnecessarily callous and the employer in this matter carried out the dismissal with significant procedural flaws. As a result, Commissioner Cambridge found that the dismissal in this specific matter to be unfair and awarded the employee $22,880 in compensation to cover 17 weeks of lost pay between her dismissal and the commencement of her new employment.

Lessons for Employers

From the decisions above, it is clearly apparent that if an employer chooses to terminate an employee by electronic communication they do run the real risk of the FWC concluding that procedural fairness was not afforded to the employee. Furthermore, it is evident that undertaking a dismissal by phone, text or email will likely reflect negatively on the employer and enhance scrutiny by the FWC on the process the employer took (or failed to take) when dismissing an employee.

Unless there is a real risk of physical violence or some geographical hindrance to holding a meeting in person, it is our recommendation that employers avoid using electronic means to discuss serious employment matters such as disciplinary issues, performance issues, termination, resignation or offers of employment. To minimise the risk of a successful unfair dismissal claim, employers must adopt the more traditional way of communicating –  a face to face meeting, confirming the decision in writing.

It is imperative to remember to ensure any process in relation to termination of employment or performance management should be procedurally fair and provides the employee with an opportunity to respond and/or raise issues or concerns. In any event, regardless of what an employee may have done, unless it is unsafe to do so, or entirely impracticable, there is no excuse for an employer to convey a decision regarding an employees’ employment via electronic means.

If any further information in relation to any aspect of this alert is required or if you need assistance in relation to a termination issue or ensuring compliance with the increased national minimum wages, please do not hesitate to contact our office.

This alert is not intended to constitute, and should not be treated as, legal advice.

GOING FROM GREY TO GREYER! WHEN CAN SOCIAL MEDIA POSTS RESULT IN A TERMINATION OF EMPLOYMENT?

The explosion of social media use over the years presents many challenges to the employment relationship. The use of social media has blurred the boundaries between work and non-work life. This has led to many employers having to deal with situations where employees have posted something in their private capacity on their own social media accounts, which has (or is likely to have) a negative impact on the employer.

In a recent article by Louise Thornthwaite,[i] published in the Journal of Industrial Relations, Ms Thornthwaite argues that historically the Fair Work Commission (“FWC”) took the view that posts on social media were public and as such were fair game for employers, in determining whether to terminate the employee’s employment. However, she now posits that it appears the FWC has moved away from this view and have increasingly recognised that employees are entitled to an expectation of privacy and not all social media activity is open to employer scrutiny and nor can it be relied upon to validate a termination.

The question of whether a dismissal is justified depends on a number of factors including both the nature of the conduct and the subsequent actions of the employer. In this article, we will examine the proposition expounded by Ms Thornthwaite and the approach the FWC takes on the issue of social media and misconduct.

There is no doubt that the explosion of social media and its use has now become part and parcel of our every day lives including our working lives. The implications for employers are significant and as such the manner in which employers’ deal with this issue is vital to ensuring that they are able to properly protect business interests without alienating a workforce for whom social media is as important as the mobile devices they use to access social media. To this extent, most employers have introduced policies dealing with the issue. How then do these policies interact with the freedom of an employee, and how far can they go to protect an employer from conduct that occurs outside the workplace in the employee’s personal time?

This is the very question with which the FWC and other courts and tribunals have been grappling for some time. Although, earlier cases did seem to suggest that social media posts on facebook were akin to public comments and therefore there could be no expectation of privacy and as such regardless of when and where they occurred, were matters that could give rise to a valid reason for termination, it is my view that a careful reading of the facts of those cases will show that regardless of these sentiments, the reason the FWC found the posts could be relied upon was really a result of the nature of the posts and the conduct more generally. There is no doubt that more recent decisions of the tribunal have appeared to accept that not all social media posts are public and that depending on the context, including the privacy settings applied, there may in fact be a reasonable expectation of privacy by the employee, in circumstances were the post regardless of this expectation gives rise to real concerns regarding the ability of the employee to continue in employment, the FWC has found the posts may give rise to a valid reason for termination.

Notably, in circumstances where an employee’s alleged misconduct on social media occurs outside of work, the Commission has tended to apply the following principles enunciated in the 1998 decision in Rose v Telstra Corporation Limited:

It is clear that in certain circumstances an employee’s employment may be validly terminated because of out of hours conduct. But such circumstances are limited:

  • the conduct must be such that, viewed objectively, it is likely to cause serious damage to the relationship between the employer and employee; or
  • the conduct damages the employer’s interests; or
  • the conduct is incompatible with the employee’s duty as an employee.

This reasoning still appears to be apposite and applicable. By way of example, in Singh v Aerocare Flight Support Pty Ltd [2016] FWC 6186, Mr Singh was a baggage handler employed as a casual employee on a regular and systematic basis by Aerocare Flight Support, an aviation ground handling and services company. Mr Singh held an airport security identification card and was authorised to work within restricted security sensitive areas of Perth Airport. Mr Singh was dismissed by his employer after he had authored Facebook posts allegedly supporting ISIS and Islamic extremism including sharing a post from an Australian Islamic Group and included his own commentary, being the words “We all support ISIS”. Aerocare was then informed about the posts by two other workers who were friends with Mr Singh on Facebook. As a result, Aerocare undertook an investigation and met with Mr Singh to discuss with him that the Facebook posts were contrary to their social media policy and given the nature of his job, represented a security risk. Mr Singh proclaimed that the posts had been sarcastic, he was opposed to ISIS and extremism.

In its decision, the FWC accepted that the ISIS post in particular did breach the social media policy and Mr Singh had participated in relevant training in relation to the policy. However, the FWC found that the dismissal was unjust, harsh and unreasonable because Aerocare:

  • failed to thoroughly review Mr Singh’s complete Facebook newsfeed which would have led to the conclusion that he did not truly support ISIS;
  • spent only 10 minutes deliberately his response to the allegations put to him, suggesting that the decision-makers did not properly consider his responses and the dismissal was premeditated; and
  • did not consider any other alternative form of disciplinary action other than dismissal.

The FWC did not however, refuse to take account of the posts because they were made in Mr Singh’s private time, with the protections of privacy settings. By way of contrast, in Luke Colwell v Sydney International Container Terminals Pty Limited [2018] FWC 174, a more recent decision dealing with the use of social media, the FWC upheld the dismissal of an employee who sent a pornographic video to colleagues outside of work hours despite no formal complaint being lodged by the employees who received the video. The decision to dismiss the employee arose when Mr Colwell had been drinking on his day off and sent a pornographic video via Facebook Messenger to his Facebook friends which included 16 male and 3 female work colleagues. One particular female responded to him with “Are you serious? Mate don’t send me that shit”. The worker posted an apology on his Facebook page the following day.

In support of his unfair dismissal claim, Mr Colwell argued that there was no reason to dismiss him because there was an insufficient connection between the conduct and his employment. In particular, the employee relied on the fact that the video was sent outside of work hours and did not involve any work-related IT equipment. Furthermore, he argued that communications between friends was not a matter for his employer, any communication which some friends may find offensive are matters for resolution between those friends and not a matter that the employer may regulate.

Notably, over the years, Sydney International had taken steps to encourage more women to work in the stevedoring industry and as a result, introduced workplace policies addressing bullying, harassment and misconduct of a sexualised nature. Mr Colwell had received training in relation to these policies, however Sydney International did not have a social media policy in place. Despite not receiving any formal complaint from the recipients of the message, the message came to the attention of Sydney International who subsequently conducted an investigation and terminated Mr Colwell’s employment due to a finding of serious and wilful misconduct including breach of company policy.

In its decision, the FWC disagreed with Mr Colwell, stating that “if an employee engages in conduct outside of the physical workplace towards another employee that materially affects or has the potential to materially affect a person’s employment that is a matter which legitimately may attract the employer’s attention and intervention”. In this regard, the FWC found that Mr Colwell was Facebook friends with colleagues only because of their work relationship and therefore there was a relevant nexus or connection to his employment. Interestingly, the FWC also noted that it was not satisfied that the conduct constituted a breach of the policies as the policies did not include out of hours conduct or conduct via social media.

Relevantly, in relation to the fact no actual complaint was made by any of the recipients of the video, the FWC also took the opportunity to state the following:

it is the situation that employers may fall into the error of thinking that a formal complaint or allegation is required before making an enquiry into an issue of conduct such as bullying or harassment – but this is not the case and a failure to act may present risks that might otherwise have been avoided.”

Lesson for Employers

Although there certainly does appear to be more recognition by the FWC and other courts and tribunals of a reasonable expectation of privacy by employees regarding private social media posts, this does not mean that conduct by employees on social media is beyond the reach of employers. Rather, it is apparent that the FWC will apply the test as expounded in Rose v Telstra Corporation and take into account all the relevant facts, including the fact that an employee has as a reasonable expectation of privacy, in deciding that notwithstanding this expectation their activities on social media are sufficient in all the circumstances to give rise to a valid reason for termination. As is clear from the competing outcomes in the cases discussed in this article, cases involving the dismissal of employees on the basis of social media misuse are varied. It is clear, however, whether conduct on social media justifies termination remains an area of contention and will depend on the facts and circumstances of each case, including the extent to which the employer is infringing upon the privacy of its employees when taking action over unsavoury social media conduct; the manner in which the employer became aware of the conduct and the seriousness of the conduct itself. There will always need to be a sufficient nexus between the conduct and the employment relationship to justify a dismissal.

It is therefore critical employers have a robust social media policy that covers conduct that occurs outside of the workplace and outside of working hours, or that may impact upon other persons connected to the workplace. It is also important to have detailed workplace policies that deal with harassment, bullying and discrimination. Importantly, workplace policies should provide the employer flexibility in how it deals with these matters. Any policy however, will need to balance the interests of the employer in protecting the business with the real and proper expectation of its employees to privacy.

Other strategies to manage the risk of social media misuse includes providing staff appropriate training and implementing software to monitor or limit excessive or objectionable use of social media by employees during work hours.

If you have concerns about social media use in your workplace, or wish to further discuss the steps that can be taken to mitigate the risks in this area, please do not hesitate to contact us for specialist advice or assistance.

This alert is not intended to constitute, and should not be treated as, legal advice.

[i] Social Media and dismissal: Toward a reasonable expectation of privacy? Journal of Industrial relations 2108, Vol. 60(1) 119-136

Let’s Not Be Silly During The Silly Season

With the Christmas and New Year period upon us, many employers will be celebrating the end of 2017 with their employees. Whilst the 2016 comedy film “Office Christmas Party” is an extravagant portrayal of a Christmas function gone bad and which seems, in many ways an over-exaggeration of what really happens, in our experience these Christmas events are notorious for being a potential breeding ground for inappropriate workplace behavior. These parties and events may put employers at risk of litigious actions such as sexual harassment, bullying, discrimination and unfair dismissal claims.

In this regard, both state and federal anti-discrimination laws provide that employers must be able to demonstrate that they have taken all “reasonable steps” to prevent unlawful discrimination and sexual harassment from occurring in the workplace. Any workplace Christmas or end of year event will be considered the “workplace” and the employer will be liable for any inappropriate or unlawful behavior that occurs, if they have not taken all reasonable steps to prevent such conduct. It is therefore imperative for employers to educate staff around what constitutes acceptable behaviour, and what kinds of conduct may give rise to disciplinary action. To this end, it is important that employers remind their staff about workplace policies in relation to acceptable codes of conduct which continue to apply and should not be ignored in the context of an event organised by the company, even if it is not on work premises. It is worthy to note that the meaning of a “workplace” has been significantly broadened by the Courts, to include social gatherings at bars, restaurants or other public venues at which interactions amongst staff occur.

In addition, under work health and safety laws, an employer owes an overarching duty to take all steps reasonably practicable to prevent the risk of injury in the workplace. The same duty of care is owed generally under the common law. In the context of work Christmas parties, subtle risks can often be overlooked by employers such as the service of alcohol, at an employer’s expense, and the possibility of participation in illegal drug taking and in some circumstances sexual misconduct amongst staff.

In this respect, and given the ability for sexual harassment and other claims to be commenced against employers as well as individual perpetrators under accessorial liability provisions provided for in various legislative instruments, it is imperative that employers take all reasonable steps available to them to provide employees with proper information, training and supervision to prevent such issues from arising.

Examples of recommended control measures include:

  1. developing and implementing policies around appropriate workplace behaviours, and refreshing these expectations with your employees regularly;
  2. consulting with staff in relation to your expectations of their behaviour at work Christmas parties;
  3. providing training to employees on their obligations under various legislation, including in respect of work health and safety;
  4. Ensuring adequate security and safety measures are in place at the venue;
  5. Auditing any foreseeable risks, particularly when deciding on venues, start and finish times, food to drink ratios, and implement measures to prevent injuries from occurring;
  6. Monitoring the amount of alcohol served generally;
  7. Ensuring that the consumption of alcohol and service of alcohol is limited and stops at a reasonable hour;
  8. Sending a reminder to all staff prior to any event, regarding their obligations to behave appropriately, the company’s policies regarding harassment and appropriate behaviours, and the consequences if they do not; and
  9. providing access to counselling and an EAP services provider.

In the event that a complaint or inappropriate workplace matter is raised about alleged misconduct at a work Christmas event, it is of vital importance that responsive action is taken quickly by employers. Such measure that ought to be considered, depending on the sensitivity of the issue, include:

  1. providing counselling and support services to the complainant;
  2. keeping the complainant informed as to the steps being taken to respond to the matter;
  3. cooperating with Police and notifying the relevant safety regulators (if warranted);
  4. investigating the matter fully either internally or via an external investigation service;
  5. notifying the employee against whom an allegation has been made and requesting their response; and
  6. suspending the accused employee until all the facts have been gathered and a course of action has been decided upon.

In approaching these matters, practical strategies employers should otherwise bear in mind when responding to workplace complaints include:

  1. avoid delaying the response time to allegations;
  2. never assume an allegation is frivolous or vexatious without making inquiries;
  3. consider all the evidence and then determine an appropriate disciplinary response;
  4. document clearly and comprehensively each step of the response process;
  5. provide employees with counselling or an EAP services provider; and
  6. communicate effectively and appropriately when dealing with sensitive workplace matters.

Relevantly, whilst inappropriate workplace conduct should be dealt with and punished accordingly, employers need to ask themselves whether the punishment fits the crime. It is therefore not only relevant to act in circumstances where a complaint of inappropriate behaviour is received, but to ensure the ensuing response is proportionate, fair and reasonable.

Whilst new examples emerge each year, in 2016, the case of Damien McDaid v Future Engineering and Communication Pty Ltd [2016] FWC 343 was by far the leading decision in this area. In this case, the employee was a project coordinator at an engineering firm, Future Engineering and Communication Pty Ltd (“FEC”). During his employment, his colleagues had previously noted that he sometimes behaved in a domineering or aggressive manner at work. In December 2014, FEC had arranged a day of go-karting followed by a Christmas party at the office (which had a swimming pool) for its employees. At the party, there was an unlimited amount of alcohol for employees to consume.

During the party, Mr McDaid became intoxicated and started behaving aggressively towards another colleague, Mr Sinna, who was a senior engineer at FEC. Those at the party saw Mr McDaid push Mr Sinna in the chest a few times in an aggressive manner before ultimately pushing him fully clothed into the swimming pool. Following the incident, Mr McDaid’s general manager asked him to leave. When Mr McDaid refused, their conversation escalated into a fight with both suffering injuries.

Following Mr McDaid’s return to work, FEC investigated his behaviour and conduct at the party. Two months later, FEC called Mr McDaid to a meeting which he attended with a support person. He was given notice in writing of his dismissal with reasons and given an opportunity to respond. McDaid maintained that he had no recollection of what had occurred at the party, and subsequently accused FEC of unfairly dismissing him. In this particular case, the Fair Work Commission concluded that:

  • Mr McDaid had aggressively and repeatedly “harangued” a colleague before pushing him into a pool;
  • Mr McDaid refused to leave the office premises when told to do so by his manager; and
  • Mr McDaid initiated a fight with his manager by pushing him and injuring him.

Against this background and the investigation process undertaken by FEC prior to the dismissal, the Commission was satisfied that FEC had a valid reason for the dismissal and followed a proper process. The dismissal was therefore justified.

Whilst work functions are a great opportunity to have fun with colleagues, our recommendation to surviving the silly season is to be honest with yourself as to whether everything reasonably practicable has been done to ensure all employees are safe and without risk of being subjected to offensive behaviour.

If any further information in relation to any aspect of this alert is required, please do not hesitate to contact us. Otherwise, we are available and ready to assist should you require any advice or legal support this silly season.

We wish all our client’s well over the festive season and a prosperous New Year.

This alert is not intended to constitute, and should not be treated as, legal advice.

Enterprise Agreements: How Do They Operate And How Can They Be Terminated?

For larger organisations, or employers who engage a multifaceted workforce, an enterprise agreement (“EA”) can be a very sensible and practical instrument to simplify the terms and conditions of employment for its workforce. It is not uncommon for employers to have a number of modern awards applying to their employees and thus creating complexity and administrative difficulties. In addition, as modern awards are not focused on individual businesses but apply across industry, many of the terms are often difficult and costly to implement and on the whole can be a challenge for a business to ensure compliance.

The Fair Work Act 2009 (Cth) (“FW Act”) provides a mechanism whereby employers can negotiate directly with their employees to create an agreement specifically suited to their workforce and which sets out the terms and conditions governing the employment relationship between the employer, its employees or a group of its employees. These agreements are known as Enterprise Agreements. The real advantage of enterprise agreements are as follows:

  • They allow the employer and employees to directly negotiate the terms and conditions of employment applicable to that business;
  • They allow the employer to adopt a flexible approach to matters which are otherwise prescriptive in a modern award;
  • Enterprise agreements replace in their entirety any modern award that would otherwise apply; and
  • During the nominal expiry period, no party to the agreement including any union organisation representing employees can take industrial action.

But first, what is an EA? The FW Act broadly defines an EA as an instrument between one or more national system employers and their employees and in some circumstances, a trade union or employee association, as specified in the agreement. These agreements are negotiated through collective bargaining, and there is a requirement for this to occur in good faith.

There are three types of EAs that can be made:

  1. Single-enterprise agreements: means an agreement made between a single employer (or two or more single interest employers) and employees employed at the time the agreement is made, who will be covered by the EA. Single interest employers are those with a common enterprise or are related entities, such as a joint venture or franchise network; and
  2. Multi-enterprise agreements: means an agreement between two or more employers (that are not single interest employers) and their employees employed at the time the EA is made, and who will be covered by the agreement; and
  3. Greenfield agreements: means an agreement that is made in relation to a new business enterprise before any employees are employed.

For all three EA categories available, the FW Act requires the agreement to deal with certain “permitted matters” which includes, but are not limited to, the following:

  1. Terms and conditions about the employment relationship;
  2. Terms about the relationship between the employer and any employer organisation representing the interests of employees (such as a trade union);
  3. How the agreement will operate, and for what period of time; and
  4. Such other matters as the parties may agree that are permissible and do not offend the requirements of the FW Act because they are, for example, objectionable, discriminatory or inconsistent with the industrial action provisions.

In addition to containing lawful matters, the FW Act mandates that an EA must also contain the following terms:

  1. A nominal expiry date which cannot exceed the period of 4 years from the date the EA is approved by the Fair Work Commission;
  2. A dispute resolution clause which authorises the Fair Work Commission or another independent body to settle disputes about matters which relate to any aspect of the agreement;
  3. A flexibility clause that allows the making of flexible working arrangements to meet the operational needs of the employer and the individual needs of an employee; and
  4. A consultation term which requires the employer to undertake consultation with employees in relation to major workplace change that is likely to have a significant impact on an employee (or group of employees).

Relevantly, once the parties have agreed upon the content of the EA, and the EA has been approved by employees by a successful vote in accordance with the specific requirements of the FW Act, the employer will need to apply to the Fair Work Commission to approve the agreement. In order to gain the approval of the Fair Work Commission, the agreement must be genuinely made (or agreed) between the employer and the employees covered by the EA; the agreement must pass the “better of overall test” which means, as against any applicable modern award, the employees are considered better off under the EA; the agreement must not contain any prohibited terms; the employees who voted on the agreement must have been fairly chosen; the agreement must contain the compulsory clauses mentioned above; and the agreement must have a nominal expiry date. Assuming the employer can demonstrate to the Fair Work Commission compliance with these requirements, the EA will be approved.

Significantly, whilst much effort and time goes into the bargaining and approval process for an EA, employers often do not consider the lasting application of an EA and what happens after its nominal expiry date. It is in these circumstances that many employers often encounter difficulties and, in some cases, inadvertently breach modern award requirements or other workplace laws. All EA’s continue to operate after the expiry of the nominal expiry date. For example, an EA that is made prior to the commencement of the FW Act on 1 January 2010, will continue to operate notwithstanding that its nominal expiry date may have been in 2008. As such, if an employer continues to apply rates of pay from 2008 in respect to its employees, there is a real risk and likelihood that the rates of pay will be less than the national minimum wages set by the terms of an applicable modern award. In these circumstances, the employer will have an exposure to a backpayment liability to various employees across the enterprise and, in the event of a workplace audit by the Fair Work Ombudsman, the employer could face prosecution and penalties for breaching minimum pay rates.

Accordingly, a fundamental step in the lifecycle of an EA is for the employer to determine how it is going to deal with the EA once it has reached its nominal expiry date. Given the inherent risks associated with the continued application of the agreement, employers must be careful to avoid situations where employees are being disadvantaged as compared with the minimum modern award requirements or the terms of the agreement become unattractive for the employer due to emerging economic conditions.

To this end, most EA’s will specify that the parties to the agreement must engage in discussions to renegotiate the EA within a certain timeframe either before or after the nominal expiry date with a view to replacing the agreement. However, if this does not occur or agreement is not reached, the EA can only essentially be terminated in one of two ways – by the parties’ agreement, or by application to the Fair Work Commission. Termination by agreement can only occur where the parties genuinely agree. In practice, this is unlikely to happen naturally where one party wishes to retain certain rights they do not wish to surrender, or give up certain benefits they find attractive. In any event, where agreement is reached, employees will need to vote to set aside the EA and apply to the Fair Work Commission to have the agreement terminated within 14 days from the date of the successful vote.

Alternatively, an EA may be terminated, after its nominal expiry date, in accordance with the FW Act, if the Fair Work Commission is satisfied:

  1. It is not contrary to public policy to do so; and
  2. It is appropriate to terminate the agreement.

An application to the Fair Work Commission to terminate the agreement, other than by agreement, must also be accompanied by certain employer declarations. In a decision of the Full Bench of the Fair Work Commission in Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU) v Griffin Coal Mining Company Pty Ltd [2016] FWCFB 4620, it was found to be appropriate to terminate the Griffin Coal Mining Company (“Griffin Coal”) EA on the basis of the company’s financial position, including trading losses of almost $300 million since 2011. In considering Griffin Coal’s application for termination, the Fair Work Commission applied the public interest and the appropriateness tests. In this regard, due to the economic environment and the need for business flexibility, the Full Bench concluded that it was in the community interest to terminate the agreement and it was appropriate to do so in the circumstances. In reaching this conclusion, the Full Bench of the Fair Work Commission upheld the initial decision of the primary Judge, finding that all relevant factors had been considered in a fair and equitable manner.

Of significant interest is the recent decision by the Fair Work Commission terminating the enterprise agreement at Murdoch University. In August this year, the Fair Work Commission decided to terminate the Murdoch University existing enterprise agreement, despite vehement opposition by the NTEU which had been embroiled in bargaining negotiations with the university for over a year. The university and NTEU were negotiating over terms in the existing agreement which the University did not want to be contained in any new agreement, but given they were in the existing agreement meant they continued to apply and thus gave the NTEU the upper hand in bargaining. Commissioner Williams decided that as such, it was in the public interest to terminate the existing agreement to effectively level the bargaining playing field. This is a significant decision as the Commission in effect entered into the bargaining playground and to some extent took a side. This is something a number of employers will now be looking closely at, as it means the use of the termination power in circumstances of bargaining a new agreement becomes relevant and may be a useful bargaining weapon.

Whilst in profitable times an EA may be an attractive way for employers to incentivise employees and take themselves outside the modern award regime, it is important that employers have regard to the ongoing operation of an EA and the fact they will have to live with its terms until the agreement is either replaced or terminated. As such careful consideration must be given to the terms of the agreement and their longevity.

If you are considering making an EA, or have an historical agreement creating havoc in your organisation, or wish to discuss any aspect of this article, please do not hesitate to contact us.

This alert is not intended to constitute, and should not be treated as, legal advice.

Termination of Employment: Key Learnings for Employers

The termination of the employment relationship is one of the most challenging and frequently litigated areas in employment law. Unsurprisingly, the first half of 2017 has been no exception. There have been numerous cases go before our judicial system which have raised nuanced, and in some respects untested questions of law to be determined. In this legal briefing, we provide a recap on three exceptionally informative and instructive cases for employers, each dealing in their own way with a unique and distinct issue in relation to termination of employment.

The Enforceability of Post-Employment Obligations

Crowe Horwath (Aust) Pty Ltd v Loone [2017] VSCA 181

In a recent Victorian Supreme Court of Appeal decision, it was found that restraint of trade covenants in an employment contract were unenforceable due to the employer’s repudiatory conduct, which the employee accepted in bringing the employment to an end, before setting up a business in competition with his former employer.

In the decision, the Court rejected financial services provider Crowe Horwath Australia Pty Ltd’s (“Crowe Horwath”) appeal, upholding the trial judge’s ruling that the employer breached its employment contract with a senior accountant when it made changes to a bonus payment scheme, and significantly changed his role within the firm. In this particular case, the employee concerned, Mr Loone was employment by Crowe Horwath pursuant to a written employment contract as Managing Principal of Crowe Horwath’s Launceston accounting office. Crowe Horwath was acquired by the Findex Group, who then commenced restructuring the business. As part of this restructure, Crowe Horwath significantly changed Mr Loone’s duties, such that he argued he was no longer the Managing Principal.

Relevantly, Mr Loone had contributed significantly to the successful acquisition of another accounting firm in 2014 and 2015. In addition, Mr Loone believed the associated profits from the acquisition should have been considered as part of calculating his yearly bonus. However, on 1 July 2017, Mr Loone was informed that those profits would be excluded from the calculation of the bonus pool for the Launceston office. In light of these circumstances, and substantial changes to his position, Mr Loone considered that the actions of Crowe Horwath failed to consider his efforts in procuring the sale, and breached the bonus clause in his contract, which required CHA to take into account his personal efforts in determining the bonus payable to him. He considered the breaches as fundamental and constituting a repudiation by Crowe Horwath of his contract of employment and terminated his employment on the basis of repudiatory breach on the part of his employer.

This decision is significant because, among other things, the employment contract contained a restraint of trade clause that prevented Mr Loone from soliciting Crowe Horwath’s clients, and from conducting any business similar to or in competition with Crowe Horwath within a 5km radius of its premises for a period of 12 months following termination. In seeking to enforce the restraint clauses, Crowe Horwath filed proceedings. However, the Court held that despite the fact, for the most part, that the restraint of trade clause was enforceable, and Mr Loone’s employment contract provided his employer absolute discretion to determine the bonus, the contract required Crowe Horwath to consider Mr Loone’s personal performance and the failure to include the acquisition in Mr Loone’s bonus calculation, meant it had failed to consider his performance in beach of a fundamental obligation under the contract. In this regard, the Court said that although the authorities provided different jurisdictional explanations, there was a “consistent trend” showing that when an employer repudiates a contract of employment and it is accepted by the employee, the employer can no longer enforce a restraint of trade clause.

As such, the Court of Appeal agreed with the decision of the trial judge to deny discretionary relief to Crowe Horwath, finding that post-employment restraints are rarely, if ever, enforceable where employment has ended as a result of an employee accepting the employer’s repudiation of the employment contract. As a result of the decision, the Court determined that the restraint of trade clause did not survive the termination of Mr Loone’s employment and were of no ongoing application to him.

This decision provides a significant lesson to employers who wish to protect customer and supplier connections, goodwill and prevent competition by an employee after the employment terminates. It demonstrates that employers will be unable to rely on contractual restraint of trade covenants in circumstances where the employer has conducted itself in a manner that repudiates the contract of employment, and the employee accepts the repudiation in bringing the employment to an end. As such, in order to best protect the business’s proprietary interests, it is essential that employers:

  • Understand the requirements imposed by the contract of employment prior to making any changes to an employee’s circumstances; and
  • do not engage in any conduct giving rise to a repudiation of the employment contract.

Avoiding “Hollow Consultation” in a Redundancy Context

Belinda Lee v Mission Australia [2017] FWC 3557

In certain circumstances, employers are required to consult with employees before terminating their employment for reasons of redundancy. The obligation to consult arises where employees are covered by a modern award or other industrial instrument requiring consultation in relation to workplace change. Employers are obliged to engage with affected employees to ascertain the impact of the proposed changes on them and undertake genuine efforts to redeployment affected employees. This obligation to consult is often overlooked or given very little weight by employers. However, recent decisions regarding the failure to consult have made it clear that the failure to consult notwithstanding any other factors may render the decision to terminate unfair. Relevantly, in a recent Fair Work Commission decision, Commissioner Johns cautioned employers against hollow attempts at consultation and said that, “it cannot be conducted for mere show.”

In this particular case, which subsequently resolved through private settlement, Commissioner Johns granted an urgent interim injunction to Ms Lee, to prevent the Applicant’s employer, Mission Australia, from retrenching her. Mission Australia had written to the Applicant informing her that she was going to be made redundant following the withdrawal of government funding, which meant her role was no longer viable for the organisation. The employee concerned, who was on maternity leave at the time, wrote to her employer questioning the decision, given the reasons provided and efforts by the business to redeploy her within the organisation seemed “unclear”. In this regard, the Australian Services Union (“ASU”) on behalf of the employee, requested that the termination and redeployment period be deferred given the employee was on maternity leave and would be disadvantaged in securing alternative employment while on leave. When Mission Australia refused to address the employee’s concerns, the ASU sought urgent relief to restrain the employer from effecting the termination. Commissioner Johns granted the injunction and said Mission Australia needed to first address some fundamental process issues, including whether it had engaged in meaningful consultation, had done it all could to mitigate any adverse impacts of the redundancy and had made reasonable redeployment efforts. To this end, Commissioner Johns observed:

“If the consultation does not provide [the program manager] with an opportunity to influence the decision it is of no value and the requirement to consult and the consultation is hollow.”

In this particular case, Commissioner Johns highlighted the importance of making interim orders. He said that in the circumstances failing the injunction, the employee’s proposed dismissal could only be undone after significant litigation and there would be “some complexity attached to unscrambling the egg.”

After Commissioner Johns’ decision was handed down, the matter settled privately.

In a separate decision handed down last week, the Fair Work Commission has confirmed its approach to this issue. In David Conlon v Sandlewood Aboriginal Projects Limited [2017] FWC 3186 (2 August 2017), the FWC held that despite the fact that there was absolutely no position that could be offered to an employee made redundant, and effectively accepted that consultation would not have changed the outcome, the failure to properly consult rendered the termination unfair.

These decisions serve as an important reminder to employers that consultation about workplace change must occur prior to any termination for reasons of redundancy. In addition, the consultation must be genuine, meaningful and provide the employee with an opportunity to influence the outcome before any final decision is made.

What Does Serious Misconduct Actually Mean?

Steven Biffin v XL Express Pty Ltd T/A XL Express [2017] FWC 3702

The right to terminate an employee’s employment immediately on the basis that the employee has engaged in serious misconduct, is often an attractive option for employers dealing with a difficult employee. However, what exactly is meant by “serious misconduct”? At common law, the Courts have held that serious misconduct must necessarily have traits of “wrongfulness, impropriety or unlawfulness motivated by premeditated or intentional design or obstinate indifference to the consequences of one’s actions”: See for example O’Connor v Palmer and Others (No.1) (1959) 1 FLR 397. Similarly, the Fair Work Act 2009 (Cth) (“FWA”) provides that employees cannot be terminated in circumstances that are harsh, unjust and unreasonable. A dismissal may not be considered harsh unjust and unreasonable if an employee has engaged in misconduct sufficiently serious to justify instant dismissal. The FWA simply notes that serious misconduct should be given its “ordinary meaning”. Some further guidance as to the meaning of serious misconduct can be found in rule 1.07 of the Fair Work Regulations 2009 (Cth) which provides that serious misconduct includes the following:

  • wilful or deliberate behaviour by an employee that is inconsistent with the continuation of the contract of employment;
  • conduct that causes serious or imminent risk to the health and safety of a person or the reputation, viability or profitability of the employer’s business;
  • the employee, in the course of employment, engaging in theft, fraud or assault;
  • the employee being intoxicated at work; or
  • the employee refusing to carry out a lawful and reasonable instruction that is consistent with the employee’s contract of employment.

Ultimately, however, whether a course of conduct will be regarded as serious misconduct will ultimately turn on the nature of the particular conduct in question and not its consequences.

In a recent decision of the Fair Work Commission, Deputy President Asbury expressed “surprise” at the HR practices of a major courier company, XL Express. The company dismissed a depot manager who was partially responsible for a breach of a worldwide embargo on the new JK Rowling book and who was the subject of unfounded bullying allegations, was found to constitute unfair dismissal resulting in a significant compensatory award to the employee.

In this particular case, XL Express dismissed its long-serving depot manager for alleged serious misconduct in November 2016, during a meeting at which its HR manager told him that by delivering a consignment of embargoed JK Rowling books a day early, resulted in financial damage to the Company and damaged its reputation. In addition, at the meeting the HR manager made bullying allegations against the employee of which he was previously unaware. The HR manager informed the employee that Workplace Health and Safety Queensland had conducted an investigation and concluded that he was a bully. These statements were inaccurate and found by the FWC to be false.

In concluding that the dismissal was unfair, Deputy President Asbury ordering XL Express to pay the employee $48,400 in lost wages and $6,560 in related superannuation contributions, and described the termination as “surprising” given the HR resources at the company’s disposal.

Interestingly, while the Commission accepted that the depot manager engaged in misconduct because he was responsible for the embargoed delivery, Deputy President Asbury said he was not solely at fault and that alone this did not provide a valid reason for dismissal after a 24-year unblemished work tenure. As such, Deputy President Asbury described the termination meeting a “fait accompli” given that the employee had no opportunity whatsoever to defend himself.

This case is an important reminder to employers that dismissal for serious misconduct can have significant consequences for employees (and employers when used inappropriately), and therefore ought to be relied upon with caution and only where there is sufficient evidence and a proper basis to warrant summary dismissal.

If you wish to discuss any aspect of this article or require specialist advice or assistance in relation to your employment relations framework, please do not hesitate to contact us.

This alert is not intended to constitute, and should not be treated as, legal advice.

I DIDN’T MEAN TO RESIGN SO CAN I HAVE MY JOB BACK?

What happens when an employee resigns from their employment and they then advise you they wish to rescind their resignation and continue with their employment. Now, if the employee is an asset to your company you may be feeling quite relieved. However, on the other hand, if the employee really hasn’t been a suitable fit for the organisation or is a poor performer then you may be reluctant to accept their continued employment. In this update we consider whether notice provided in this manner is valid and whether an employer has any obligation to accept an employee’s change of mind after providing their resignation.

REQUIREMENTS FOR A VALID NOTICE OF RESIGNATION

The basic rule is that a resignation is a unilateral action. In order for an employee to properly terminate the employment contract they must do so willingly, not under duress and by providing the appropriate notice of termination.

The period of notice given to terminate an employment contract must be as prescribed by the contract of employment, relevant Modern Award or industrial agreement or agreed or, if there is no prescription or agreement, it must be reasonable. The assessment of how much notice is reasonable is dependent on the facts and circumstances of each case. These may include factors such as the employee’s length of service, the employee’s age, qualification, seniority and industry custom and practice.

A notice of termination will be held to be invalid if it is not given in accordance with the requirement of the relevant industrial instrument or contract, or because it specifies too short a period, and it will therefore not operate to end the contract of employment. However, the unilateral act of the employee, which clearly indicates that the employee no longer wishes to be bound by the contract will then amount to a repudiation of the contract.

In the absence of a term in a written agreement or industrial instrument to the contrary, there is no general requirement that notice of termination be in writing. Importantly, an employee’s resignation must be communicated to an employer in such a way that a reasonable employer would have little doubt in regards to the employee’s intention not to be bound by the contract of employment and the continuation of the employment relationship. Until the resignation is properly communicated to the employer, it is not effective to terminate the employment and is capable of withdrawal. For instance, if an employee provides written notice of termination to the secretary to be conveyed to the boss, and prior to the boss receiving the notice, the employee withdraws it, it will not have any effect.

EFFECT OF NOTICE

A valid notice of termination will operate according to its terms and will bring the contract of employment to an end when the notice period expires. In certain circumstances, an employer may bring the contract to an end immediately by paying the employee in lieu of notice. Notably, termination of the contract does not mean that the contract ceases to have all legal effect. For example, in relation to restraint clauses and confidentiality obligations.

WITHDRAWAL OF NOTICE

Providing proper notice of resignation is a unilateral act, requiring no acceptance by the other party for it to have effect. If an employee has provided a notice of resignation in clear and unambiguous terms then the notice cannot be withdrawn unless the employer consents to the withdrawal. When deciding whether to allow the rescission of a notice of resignation, employers should consider the circumstances leading up to the resignation including the reason why the employee resigned.

In order to prevent claims for unfair dismissal or constructive termination, employers should ensure that resignations are not motivated by a “heat of the moment” decision as a result of an altercation or work related stress. Where a resignation occurs in the heat of the moment or out of frustration or without proper consideration, the employer must be satisfied that the resignation is a truly voluntary one. This would include the classic scenario of an employee walking out of the business yelling “I am not coming back!”. In these circumstances, if there is a real possibility the resignation was motivated by emotional upset and the employee within a reasonable period of time, thereafter indicates he wishes to withdraw the resignation, should be given an opportunity to do so, The decision of Birrell v Australian National Airlines Commission held that the ability to withdraw a resignation in these circumstances was tightly confined, stating that the notice must be given in the heat of the moment, and withdrawn as soon as the person realises she or he has acted in anger. However, if such a notice is not withdrawn as soon as emotions have subsided, but allowed to stand, the invalidating circumstance would be removed and the notice ratified.

RELEVANT RECENT DECISIONS

In the decision of Taylor v AGAS National [2016] FWC 3435, the Applicant commenced unfair dismissal proceedings against his employer, AGAS National. The Applicant was a truck driver and was approached by his Operations Manager to discuss a vehicle accident that had occurred while undertaking his delivery duties the prior day. Mr Taylor became abusive and argumentative regarding the issues raised in the discussion and as such, told the Operations Manager to “shove your job I won’t be back” and walked out. The employer made numerous calls to Mr Taylor after he had left with no response. The following morning, Mr Taylor sent a text message to his Manager stating that he would not be attending work. The employer again attempted to contact Mr Taylor and sent him a text message stating “Mate will you be in on Monday” to which no answer was received. On the following Monday morning Mr Taylor presented for his shift at the usual time, however, was advised that his resignation had been accepted and his services were no longer required.

The Fair Work Commission (“FWC”) found that if the employer had been the initiating party to the termination, there would have been no need whatsoever for the repeated attempts to contact the driver to see what he was intending. Furthermore, the FWC also considered the fact Mr Taylor had sent a text on the Friday morning advising he would not be coming to work. The FWC found the driver was the architect of his own demise and had been given a chance to smooth things over, but flatly refused to communicate. The FWC held Mr Taylor’s conduct as a whole manifested an intention to no longer be bound by his contract of employment and no longer render dutiful service to his employer. As such, the FWC held there was no dismissal at the initiative of the employer and the application was dismissed.

In contrast, in the decision of CV v Darlea Pty Ltd T/A Sawtell Coaches [2015] FWC 1267 it was found unreasonable for an employer to act on the resignation of a bus mechanic who felt his complaints about workplace bullying and unsafe vehicles were being ignored. In this matter the Applicant had submitted a letter of resignation, providing two weeks’ notice. The letter also doubled as a formal complaint where the employee cited unacceptable working conditions (bullying, harassment and intimidation) and dangerous behaviours (deliberate sabotage and damage to the buses). The resignation was accepted in writing by the employer. However, the same day the employee thought better of his decision to resign and requested to withdraw his resignation. The employer asked the employee to make the request in writing. The employee did not do so. Around the same time, the employer was subject to a surprise inspection of the roadworthiness of its buses by Roads & Maritime Services (“RMS”). As a result, a large portion of the fleet received defect notices, which caused a crisis for the company. Relevantly, the employee continued to work, including past the expiration of the original notice period. The employer suspected the employee as being responsible for the audit by RMS, and as a result presented the Applicant with a letter of termination, advising him that he had failed to rescind his earlier resignation in writing and that his employment had come to an end. He was directed to leave the premises immediately.

The FWC held that the Applicant had been left with no option but to resign due to intolerable workplace bullying which was ignored by the employer. VP Lawler noted that a resignation, once accepted, cannot be unilaterally withdrawn but found in this case that in fact the employer had accepted the withdrawal of the resignation by continuing the employment past the notice period. He stated that it should had been obvious to the employer that the Applicant’s resignation was a product of frustration and the Applicant acted quickly in seeking to withdraw the resignation. It was found to be unreasonable for the employer to request the withdrawal be in writing, and the conduct of the employer in allowing the Applicant to continue working past the date his resignation was due to take effect was conduct indicating the acceptance of the Applicant’s withdrawal of his resignation. VP Lawler concluded that the termination was a result of the employer suspecting the Applicant for “dobbing in” the employer to RMS and the dismissal had been harsh, unjust or unreasonable. The employer was ordered to pay the Applicant $20,000 in compensation.

WHAT EMPLOYERS CAN DO TO AVOID RISKS FROM EMPLOYEE RESIGNATIONS

In light of the above authorities, it is prudent for employers to be cautious in regards to resignations given in the heat of the moment or due to an employee’s perceived failure by management to deal with legitimate complaints. To avoid risks associated with a finding that the resignation of an employee should have been permitted to be withdrawn or that the resignation was in fact forced, employers should:

  • Avoid suggesting to an employee that she/he must resign ‘or else’.
  • Consider whether it is appropriate to make enquiries about whether an employee really meant to resign in circumstances where the resignation is given during or directly after an altercation or other work related episode, and may be in the “heat of the moment” or while under extreme pressure.
  • Ask an employee who has resigned verbally, to confirm the resignation in writing.
  • If the resignation has been provided in writing and is not impacted by the emotional distress of the employee, accept the resignation in writing;
  • If an employee’s resignation is due to a perceived failure of management to deal with a legitimate complaint, try attempting to open further discussions and address the employee’s concerns.
  • Keep adequate records of all interactions with employees that involve or indicate verbal resignations as well as any notes of discussions relating to unsatisfactory work performance or unacceptable conduct/behaviour.
  • When possible, conduct an exit interview.

If you wish to discuss any aspect of this article or require specialist advice or assistance in relation to an employment law issue, please do not hesitate to contact us.

This alert is not intended to constitute, and should not be treated as, legal advice.

All It Takes Is One Good Deed

Often disputes between departing employees and their employer result in a settlement or agreement. Some employers also wish to provide additional benefits to departing employees as a show of goodwill or to ensure the employee leaves in an amicable manner. Should these agreements, or additional benefits be subject to the employee agreeing not to commence any legal proceedings against the employer? Most employers would surely respond that this would be desirable. It is not uncommon for employers to require their employees in such circumstances to enter into a form of release.

There is widespread uncertainty as to the form any such release agreement should take and the default is to use a deed of release. We receive many queries from employers about whether it is appropriate to use a deed of release and what can be included in the deed. Understanding the importance of how a deed of release can assist and protect your business can be highly beneficial.

Why use a Deed rather than a contract?

This is a rather vexed issue. There are two significant reasons why Deeds are preferable to contracts (mere agreements) and they are as follows:

  • There is no requirement for consideration, this means that a party entering into the Deed does not need to have something of value in return in order to make it enforceable; and
  • The limitation period for suing on a deed in circumstances of breach is 12 years in most States (and 15 years in South Australia and Victoria), rather than 6 years for breach of a contract.

More specifically, deeds are a form of contract demonstrating that the parties intend their promises contained in the deed to be binding. It is usual for deeds to be used in circumstances where a person is giving up their legal rights. However, it is not absolutely necessary that a deed rather than an agreement is used.

Deeds are specialised and powerful legal instruments that can have significant consequences if not used appropriately. In order to be effective, a deed must be “signed, sealed and delivered”. In other words, there are specific requirements regarding the execution of deeds. These may differ from State to State, and care needs to be taken to ensure that the execution of the deed conforms to the relevant legislative requirements. In addition, once a deed is provided to the other party after it has been executed it will be taken as “delivered” and it will be enforceable. Care therefore needs to be taken to ensure that the deed is not provided to the employee until it is finalised and the employer is ready to be bound by its terms.

Another important difference between a deed and an agreement is that a deed is binding on a party when it has been signed, sealed and delivered to the other parties, even if the other parties have not yet executed the deed document: Vincent v Premo Enterprises (Voucher Sales) Ltd [1969] 2 QB 609 at 619. Given the more solemn nature of a deed, as compared to an agreement, in order for it to be effective, a deed must be witnessed by at least one person.

What is a deed of release?

A deed of release is a written instrument which either:

(a)     passes an interest, right or property, or creates a binding obligation on some person or party; or

(b)     affirms or confirms something which passes that interest, right or property.

A deed of release is commonly used where an employer and employee seek to settle a dispute mutually between them or prevent a dispute from arising. An employer who makes a payment to an employee whose employment has been terminated, which is in excess of the employee’s legal entitlement, should always ensure that any such payment is offered conditional upon the employee entering into a deed of release.

What should a Deed of Release include?

General terms

The terms and conditions in a deed of release should be carefully and clearly written. The deed should characterise the purpose of the deed, the parties involved, tax implications and, if there are proceedings on foot, how those proceedings will be disposed of.

Recitals

The recitals in a deed show the circumstances on which a release is based and the agreement reached between the parties. Legal authorities have held that recitals may assist in interpreting the operative provision if there is an ambiguity and therefore the effect of a recital can be of great significance.

Release from all claims in relation to employment

The parties should consider whether release clauses are to be unilateral or mutual, and how the scope of the release is to be defined. As a release involves the giving up of or abandonment of a right or claim, the deed should express clearly what the releasor is giving up. The High Court of Australia has emphasised that Courts should be slow to hold that certain rights or actions should be surrendered unless the parties had clearly intended for them to be surrendered (see: Grant v John Grant and Sons Pty Ltd (1954) 91 CLR 112 and RW Miller & Co P/L v Australian Oil Refining P/L [1967] HCA 50).

Undertakings

It is important to consider how the deed of release will be structured and whether the employee is required to comply with an obligation before they acquire any benefits from the deed of release. For example, an employee may be required to return all company property and discontinue proceedings prior to receiving the benefits under the deed of release.

Restraints of trade

Post-employment restraints are often included in deeds of release to protect the company’s confidential information, as well as customers, employees and suppliers from solicitation. It is important that restraints of trade clauses are drafted carefully and precisely to ensure they will be enforceable.

Company property

The requirement to return company property is useful in ensuring that the employee is compelled to return all company property before receiving the benefits provided under the Deed. Clauses regarding company property can require former employees to return to the employer any copies of confidential documentation or property that they have in their possession.

Confidentiality

It is common for confidentiality provisions to be used in deeds of release to prevent both the employer and employee from disclosing what was agreed in the Deed to anyone, except their financial advisor, lawyer or where permitted by law.

Non-disparagement

Non-disparagement clauses restrict what former employees can say about their former employer, specifically restricting them from saying anything that would damage the reputation or goodwill of the employer in its industry and the community generally. For employers, the obligation of non-disparagement should be drafted in a way that only obliges the corporate party “to use its best endeavours” to ensure non-disparagement by its directors, officers and employees and ensure they will not be responsible for any unauthorised statements.

Terms regarding communication to other employees

It is not uncommon to have a provision in the deed of release setting out how the termination of the employee will be communicated to their colleagues. Generally, this can be achieved by the parties mutually agreeing on a form of communication, and how it will be transmitted, and included this in a Schedule to the deed.

Execution

It is important that the relevant parties are signatories to the deed of release and the at no time should an employee be coerced or pressured into signing the deed of release. Employees should be given the opportunity to consider the deed, ask any questions and obtain independent legal advice about the contents of the deed if they wish. In order to be effective, a deed must be witnessed by at least one party who is not a party to the deed.

What should I do if an employee breaches the terms of the Deed of Release?

The contractual doctrine of privity applies to deeds at common law. Generally, only a party to the deed may enforce the deed. In NSW a cause of action on a deed has a limitation period of 12 years (s16 Limitation Act 1969 (NSW)).

An employee may breach a deed of release in a number of ways and the available remedies to an employer will depend on the type of breach. For example:

  • If a former employee breaches their restraint clauses in the deed of release, an employer can seek injunctive relief preventing the employee from continuing to breach their restraints or the employer can possibly receive compensation in the form of damages for losses resulting from the breach. The ability to enforce a restraint clause and seek any type of relief will be dependent on the wording of the clause.
  • If a former employee breaches confidentiality clauses or uses confidential information, the employer may be able to obtain court orders preventing further misuse of confidential information or obtain compensation for losses as a result of the breach.
  • If a former employee attempts to commence legal proceedings against the employer which is barred by the terms of the deed, the employer can plead the deed as a bar to the commencement of any such proceedings.

Relevant Decisions in this area

In Lockett v Sugar Research Australia [2015] FWC 7686 Mr Lockett made an application for an unfair dismissal claim asserting his redundancy was a sham. Mr Lockett’s employer contended that the Fair Work Commission was jurisdictionally barred from entertaining Mr Lockett’s application for reasons that the two parties had jointly entered a deed of release. Mr Lockett asserted that he did not understand the deed, and entered the deed under duress or in a confused state of mind. Senior Deputy President Richards rejected the Applicant’s assertion and held that he believed Mr Lockett entered the deed in a relatively composed state of mind. The Deputy President upheld and applied previous decisions where a deed of release, knowingly and properly executed, served as a bar to an application for a remedy in relation to an alleged unfair dismissal and dismissed the proceedings.

Further, in Nalbandian v Commonwealth of Australia (Australian Bureau of Statistics) (No 2) [2016] FCCA 1606 the applicant, a former employee of ABS, was ordered to pay costs for instituting proceedings vexatiously when he brought a claim under the Fair Work Act 2009 (Cth) when a binding deed of release was in place. The ordinary rule in this jurisdiction is that each party should pay its own costs. The applicant was also ordered to pay back the moneys paid to him under the deed for breaching the deed by commencing proceedings. It is common for a deed of release to have a provision that allows the employer to claw back monies paid under the deed if the employee commits a breach.

Even though employers may view drafting a deed costly and time consuming, the benefit of certainty surrounding the termination, and the elimination of possible future claims is invaluable. If you require advice or assistance in drafting and entering into a deed of release with an employee, please do not hesitate to contact our office for specialist advice.

This alert is not intended to constitute, and should not be treated as, legal advice.

Notice of Termination – How Much is Too Much?

What happens when you want to terminate the employment of an employee, or as an employee you wish to resign but your contract of employment is silent on how much notice is required. This may seem like a silly question, and many employers still believe that the notice required on termination relates directly to the frequency of payment. In other words, if an employee gets paid fortnightly they are entitled to give 2 weeks’ notice. This is not the case, notice is usually a matter agreed between the parties on commencement of employment and contained in the written contract of employment, but what happens when there has been no prior agreement and nothing in the contract of employment dealing with this issue. How much notice must be given and what are the consequences for failing to provide sufficient notice?

Although, the Fair Work Act 2009 (Cth) (“the Act”) sets out minimum notice required in these circumstances, it will not displace the contractual requirement of notice. At common law, where an employment contract does not provide for a period of notice of termination, the law will imply a term that the contract may be brought to an end by “reasonable notice” by either party. This term is implied as a matter of law, to ensure the contractual relationship is not incapable of being brought to an end. Terms that are implied by law do not rely on imputed intentions of the parties, or on business efficacy, but are legal constructs designed to ensure the proper operation of the contract between the parties.

Reasonable notice will be implied where, the employment contract is silent as to the period of notice required for termination. However, this may also occur, where an employee was originally employed to perform a particular role under a particular employment contract, and their position, duties and title evolved significantly over time such that the position they hold at termination is significantly different from the one to which they were originally employed, and for which the original written contract of employment was created. In this circumstance, there is no written contract for the employment which is being terminated and thus no term of notice. For example, this situation would apply where an employer hires a paperboy, who after 30 years’ worth of service has accumulated so much industry knowledge and know-how that at the end of his tenure held the office of Editor in Chief. In those circumstances, assuming the employer failed to issue the employee with a new employment contract, and the old contract did not specify that it would continue to apply regardless of changes to the employee’s role, the employee would be able to argue that the change is so profound that the old contract of employment no longer applies, but rather that there is a new contract that is terminable on the provision of “reasonable notice”.

The assessment of how much notice is reasonable is, however, dependent on the facts and circumstances of each case. There are a number of imperative factors that a Court will consider in making the assessment (“Common Law Test”). Without being exhaustive, these factors include:

  1. the employee’s length of service;
  2. the employee’s age;
  3. the employee’s qualification and experience;
  4. current market and job mobility factors;
  5. the period the employee might reasonably have continued in the employment but for the termination;
  6. industry custom and practice;
  7. the employee’s seniority and importance;
  8. the character and nature of the employment relationship;
  9. the availability of comparable employment for the employee; and
  10. whether the employee was induced by the employer to give up secure employment in order to take up the position.

In applying the Common Law Test, Courts have awarded notice from anywhere between 4 weeks and 18 months. One of the primary difficulties with the concept of reasonable notice is the uncertainty involved, as to actually determine what is reasonable requires the commencement of litigation without any assurance of the quantum of notice that may ultimately be awarded.

The primary rationale behind requiring a party to give notice of termination has been expressed as necessarily allowing the party receiving the notice to make other arrangements (that is, to seek alternative employment, or for an employer to seek another employee) and to enable the parties to bring to an end the contractual relationship in an orderly manner so that they have a reasonable opportunity to wind up matters which arise out of the existing employment relationship (see Birrell v Australian National Airlines Commission [1984] 9 IR 101).

Importantly, the introduction of the Fair Work Act 2009 (Cth) (“Act”) prescribed statutory minimum periods of notice of termination to be given to an employee under the National Employment Standards. The cases which have considered whether this minimum period is sufficient to dislodge a claim of reasonable notice confirm that an employee is not prevented from receiving a longer period of reasonable notice in circumstances where the minimum period in the Act would be wholly inadequate upon consideration of the Common Law Test (see Guthrie v News Limited [2010] VSC 196 (“Guthrie”)).

This particular issue was resolved by the oft-cited decision of Guthrie, a case in which News Limited (“News”) engaged Mr Guthrie as Editor in Chief of the Herald Sun in February 2007 for a fixed term of 3 years. From about March 2007, the employment relationship between Mr Guthrie and the then Managing Director of News broke down, and Guthrie was terminated under his employment contract with a payout of $844,523.

Relevantly, the employment contracted purported that the payout sum was inclusive of notice and any redundancy or severance pay due to Mr Guthrie. In this matter however, Guthrie claimed that his employment contract entitled him to reasonable notice (or a payment in lieu) and sought 12 months’ salary and 4 weeks’ severance from News.

As Guthrie was employed pursuant to a fixed term contract, that also provided for a payment of an amount of notice of termination, Justice Kaye observed that the issues to be determined in this particular case was:

  1. whether an employee under a fixed term contract is entitled to damages for a wrongful breach including as a result of not completing the full term provided by the fixed term contract, and the loss of opportunity to renew the contract for a further period; and
  2. whether an employee under a fixed term contract is entitled to claim damages for failure to pay reasonable notice.

Justice Kaye ultimately held that Guthrie was not engaged under a true fixed term contract, as the drafting on the early termination clause operated to make the contract terminable on reasonable notice. In considering the Common Law Test, the Court initially assessed Mr Guthrie’s entitlement to reasonable notice to be 12 months’ remuneration in gross terms. This amount, however, was reduced because Guthrie was not employment indefinitely and knew in advance when he entered into the fixed term contract that his secured period of employment had an end date. Accordingly, Justice Kaye reduced the period of reasonable notice to 8 months.

This area of law demonstrates the costly implications that may flow from simply failing to include a termination provision in an employment contract and the importance of employers ensuring that their agreements with staff contain express notice provisions dealing with termination. As a precaution, employers ought to consider the inclusion of addition clauses in the employment contract which contemplate the employment relationship changing over time without affecting the application of the contract. In this regard, as a matter of practice:

  • employers should regularly review, update and refresh their existing employment contracts; and
  • in the absence of appropriate provisions regarding changes to the employment relationship and how the contract will continue to apply, employers should ensure that any variations of the contract are documented in writing by way of a letter or memorandum signed by the parties.

If you wish to further discuss the steps that can be taken to mitigate the risks in this area or have an employment matter for which you require assistance, please do not hesitate to contact us for specialist advice.

This alert is not intended to constitute, and should not be treated as, legal advice.

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