Employer v Employee - Super Guarantee Charge
The recent decision of the Trustee For Virdis Family Trust t/a Rickard Heating Pty Ltd [2022] AATA 3 showcases the never-ending debate of who is an employee versus a contractor. A business was forced to pay a superannuation guarantee charge after a worker was found to be an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (Cth) (the Act).
Factual Context
A cornerstone of the Superannuation Guarantee Scheme created under the Act, is that employers, who do not make superannuation contributions for the benefit of an employee (as defined by the Act) are liable to pay a Superannuation Guarantee Charge. The charge is equal to super contributions that should have been paid.
On 5 November 2019, the employer lodged an objection to the Superannuation Guarantee Charge assessments made by the Commissioner of Taxation for each of the quarters from 1 October 2013 to 31 March 2018. The charge concerned a sub-contractor named Mr Pirie, who was engaged to do jobs for employer but had not been paid super.
The decision required a determination about whether Mr Pirie was an ‘employee’. This required a holistic analysis of Mr Pirie’s working relationship with the employer.
Section 12 of the Act defines the terms ‘employer’ and ‘employee’ in wider language than their ‘ordinary meaning’. The apparent objective is to widen the class of people who are to be treated as employees for the purpose of the Act and for the purpose of making superannuation contributions to these people.
Was Mr Pirie an employee for the purposes of the Act?
Mr Pirie began his employment with the employer on 19 September 2011 and had a letter of engagement that identified him as a sub-contractor/casual plumber. The terms of his employment were the same as those set out in the Plumbing and Fire Sprinklers Award 2010 and applicable legislation. The AAT Member pointed out that this was odd as awards generally only apply to employees.
There were a number of factors that pointed to Mr Pirie’s relationship being characterised as more of an employee than a contractor in that his letter of engagement clearly outlined obligations to his employer and how he must endeavour to promote and protect the interests of the employer.
In practice, Mr Pirie was told where he was required to work, how many hours he was required to work and if he was unable to work, he would notify the employer and another employee would do the work, he was unable to delegate jobs. The employer also paid for any materials required for a job and Mr Pirie would often wear a T Shirt containing the name of the employer and for a while his van did have signs advertising the name of the employer.
The employer submitted that Mr Pirie advertised his services as being available to others who may seek his services. While Mr Pirie acknowledged that he was free to, he rarely did as he was working full time hours for the employer.
When the AAT Member came to decide whether Mr Pirie worked under a contract that is wholly or principally for the labour of the employer, he held that Mr Pirie was an employee for purposes of the Act and therefore, the employer had to pay the superannuation charge.
This case is an important reminder about how tribunals and courts will always look to the conduct of parties rather than necessarily be constrained by the terms of a contract to characterise or determine the real working relationship.
Updated Advice: Can Employers Mandate Vaccines?
Since our last update on mandatory vaccines in the workplace, the Fair Work Ombudsman has provided some further guidance as to what circumstances it considers will give rise to a valid lawful and reasonable direction from an employer in respect of vaccinations.
The FWO considers there are four (4) broad categories of work in respect of risk of exposure:
- Tier 1 work, where employees are required as part of their duties to interact with people with an increased risk of being infected with coronavirus (for example, employees working in hotel quarantine or border control).
- Tier 2 work, where employees are required to have close contact with people who are particularly vulnerable to the health impacts of coronavirus (for example, employees working in health care or aged care).
- Tier 3 work, where there is interaction or likely interaction between employees and other people such as customers, other employees or the public in the normal course of employment (for example, stores providing essential goods and services).
- Tier 4 work, where employees have minimal face-to-face interaction as part of their normal employment duties (for example, where they are working from home).
The FWO considers that the risk of exposure that an employee faces, as well as other factors such as risk of exposing others could form a basis for a legally valid direction.
Accordingly, workers falling into Tiers 1 and 2 may have the most reasonable prospects of being validly directed to get vaccinated. The position is less clear for Tier 3 and will require a closer consideration of all the factors relating to the worker’s role. For Tier 4 workers it is less likely that a mandatory vaccine direction will be reasonable.
The Tier system is not legally binding, it is simply a general guide to assist employers and employees in determining their particular needs and position in respect of any direction. The FWO encourages all parties to seek advice for their specific situation and not rely on general advice.
Ultimately what is needed is a case-by-case assessment of the circumstances including the work performed, the requirements of the business, and the potential health risks. The factors for consideration are very broad and may not always apply across work forces. We outlined some of these factors in our previous update.
Our firm is able to assist you with advice on the above whether you are an employee or an employer. Please do not hesitate to contact us.
High Court Clarifies Casual Employee Entitlements in Landmark Decision
Yesterday, the High Court handed down its decision in the case of WorkPac v Rossato & Ors [2021] HCA 23 (WorkPac v Rossato). This decision was an appeal from last year’s decision of the FCFCA in Workpac Pty Ltd v Rossato [2020] FCAFC 84 and the precedent set in the 2018 judgment of Skene v WorkPac Pty Ltd (2018) 264 FCR 536 (Skene), where controversially, it concluded that a casual worker was able to claim statutory paid leave entitlements.
These earlier Federal Court decisions led to panic from employers, who believed thousands of employees could potentially ‘double dip’, they could get their 25% casual loading as well as the statutory entitlements reserved for permanent workers.
These decisions were also the catalyst for the Federal Government to amend the Fair Work Act 2009 (Cth) (FW Act) in March of this year to include a statutory definition of a casual worker for the very first time and created a National Employment Standard entitlement for casuals to request conversion to permanent employment.
This article will look at the background of Rossato and then contrast the reasoning from the FCFCA decision and the High Court decision.
Background
Mr Rossato was employed from 2014 - 2018 by Workpac, who are a labour hire company that provides services to clients in the coal industry. During his employment Mr Rossato was employed under six employment contracts as a casual and was categorised as a casual under Workpac’s Coal Industry Enterprise Agreement (Enterprise Agreement). He was also paid as such, with the casual loading added to his pay but he did not have any statutory leave entitlements that a permanent would have.
After ending his employment, Rossato followed the Skene decision and wrote to Workpac claiming that his ongoing employment meant that he was entitled to payments. Workpac rejected his claim and promptly filed an originating application in the FCA.
Workpac sought declarations that pursuant to sections 86, 95 and 106 of the FW Act, Mr Rossato was employed on a casual basis and was therefore not entitled to paid leave. Further, they contended that section 116 of the FW Act prevented Mr Rossato from claiming payment for public holidays. Finally, WorkPac sought declarations that as a ‘Casual Field Member’, Mr Rossato was barred from claiming corresponding entitlements under the Enterprise Agreement. If the Federal Court found against them, they also sought declarations that they were retrospectively entitled to Mr Rossato’s 25% causal loading as restitution.
Federal Court Decision
The Federal Court looked at the substance of Mr Rossato’s work, rather than the form of his employment contracts, to determine whether he was a casual employee for the purposes of the FW Act and the Enterprise Agreement. This required analysis on whether there was a firm advance commitment to employment.
They found that while Rossato was employed and paid as a casual, the way his employment contracts were performed pointed against this characterisation. The factors that contributed to this were:
- His contact included a pattern of full-time hours.
- The work roster was supplied sometimes up to a year in advance, with little evidence he could elect not to work.
- His ‘Drive In – Drive Out’ and accommodation arrangement was inconsistent with intermittent employment.
The Court also rejected WorkPac’s claim for restitution for the causal loading paid to Mr Rossato, contending there was no mistake and no failure of consideration in the employment contract. (You can read the JCL insight written at the time of this decision here).
High Court Appeal
In December 2020, the High Court of Australia granted WorkPac special leave to appeal the Federal Court decision in an attempt to clarify casual employment.
WorkPac submitted that the characterisation of an employee as "casual" depends entirely on the express or implied terms of the employment contract without reference to post-contractual conduct. Workpac clearly communicated to Mr Rossato through his contracts that he was a casual, and Mr Rossato accepted each offer of employment on this basis.
The High Court upheld the test of casual employment advanced by both parties, being employment where the employee has no firm advance commitment. However, the majority rejected the Full Federal Court and the Skene decision’s approach of looking at the conduct of parties, rather than the written contract.
The majority also held that “a court can determine the character of a legal relationship between the parties only by reference to the legal rights and obligations which constitute that relationship” [57].
Therefore, using this reasoning, Mr Rossato was correctly paid as a casual employee under his employment contract and Enterprise Agreement with Workpac, and was therefore not able to access any of the paid statutory entitlements for permanent workers.
Comment
This decision, combined with the passing of the FW Act amendments, gives employers confidence and certainty when it comes to their casual employees. According to a Sydney Morning Herald article, the Federal Government had predicted that if this decision had gone the other way, it could have cost businesses $40 billion dollars in backpay. JCL welcomes this decision.
Can Employers Mandate Vaccines?
The rollout of the COVID vaccinations has raised the question of whether the vaccine will be mandatory. This is particularly important in employment where employers may demand that their employees receive the vaccine or face discipline/termination.
Regulatory Position
The Federal Attorney-General released a media statement outlining the Federal Government position on mandatory vaccines.[1] In summary the Government’s position is that vaccines should be voluntary but notes that the health agencies may mandatorily require workers in certain high-risk industries to receive the vaccine.
The statement otherwise defers to the views of the Fair Work Ombudsman (FWO) and Safe Work Australia (SWA) but makes the following general statements:
- the overwhelming majority of employers should assume they will not be able to require their employees to be vaccinated;
- it is unlikely in the majority of circumstances that employees could refuse to come to work because, for instance, a colleague had not been vaccinated.
The FWO notes there are limited circumstances where a vaccine may be mandatory. This is highly dependent upon the particular workplace and each employee’s individual circumstances. Relevant considerations include:[2]
- whether a specific law (such as a state or territory public health law) requires an employee to be vaccinated;
- whether an enterprise agreement, other registered agreement or employment contract includes a provision about requiring vaccinations;
- if no law, agreement or employment contract applies that requires vaccination, whether it would be lawful and reasonable for an employer to give their employees a direction to be vaccinated;
- whether employees have a legitimate reason for not being vaccinated.
SWA also note that it is unlikely that an employer can impose a mandatory vaccine condition except in particular circumstances.[3] SWA states that employers have a duty to eliminate or minimise the risk of exposure to COVID-19 in the workplace as far as reasonably practicable. What is reasonably practicable will depend on the operative needs of the business. To determine these operative needs the following should be considered:
- Is there a health agency requirement or recommendation for the industry requiring vaccine;
- The risk of exposure in the course of work (e.g., whether workers face customers, work in close proximity, etc.);
- Whether the business serves or works with high risk/vulnerable people;
- What control measures can be put in place.
Lawful Direction
As noted by the FWO, in certain circumstances an employer may legitimately give employees a direction to obtain the vaccine. The key requirements for a direction to be effective is that it must be reasonable and lawful. A direction by the employer is not necessarily limited to the scope of an employment agreement, rather it may encompass all matters connected with the job performed by an employee and any related.[4]
For a direction to be lawful it must not violate State/Territory or Commonwealth law or require the employee to violate any law. Whether a direction is reasonable will depend on the circumstances of the case such as:
- The operational requirements of the business;
- The usual operational practices of the business;
- The terms of any employment agreement;
- The nature of the employees work;
- The relevant qualifications, ability or skillset of the employee;
- The risks (if any) to the health or safety of the employee or other workers;
- The relevance of the direction to any of the above.[5]
Where a decision of an employer is based upon medical considerations, it should be shown that relevant medical evidence such as an expert report has been considered.[6] If the employee unreasonably refuses to provide evidence or attend medical examinations, this may be grounds for discipline or termination.[7]
The final consideration before issuing a direction or implementing a policy is employee consultation. Before making any direction or implementing policy, it is vital to properly consult with the employees.[8] A failure to consult may result in an employer becoming liable to various remedies including compensation. Employers should discuss potential alternative arrangements with employees before imposing any new conditions.
Case Law
There have been two decisions in relation to mandatory vaccine policies. Both cases involved workers challenging the policies implemented by their employers. Both cases were unsuccessful.
The first case, Barber v Goodstart Early Learning [2021] FWC 2156 concerned an educator at an early learning centre. Goodstart introduced an immunisation policy, requiring that all staff must receive the influenza vaccination unless they have a medical condition which makes it unsafe for them to do so. The employee claimed that she had a sensitive immune system and objected to the policy, providing a medical certificate in support of her claim. Goodstart determined that the medical certificate was not sufficient to support the objection and the employee was terminated for failing to be vaccinated and meet the inherent requirements of her role.
Deputy President Lake upheld the dismissal considering that Goodstart had given a lawful and reasonable direction to its employees. The basis for this finding was that: health bodies recommended flu vaccinations for people working with children, flu symptoms could be severe especially in children, flu vaccinations are effective at reducing the risk of infection to children and staff, alternative methods of managing risk, like social distancing, are not always available to childcare workers, and unions were supportive of Goodstart implementing the policy.
The Deputy President rejected the employee’s medical exemption argument. In assessing the medical evidence provided, the Deputy President considered that there was not evidence that the vaccine would pose significant health risk to the employee, the only evidence was vague statements relating to the employee having a sensitive gut that could be aggravated by the vaccination.
The second case, Kimber v Sapphire Coast Community Aged Care Ltd [2021] FWC 1818 concerned a receptionist in a residential aged care facility. The employer (Sapphire) introduced a compulsory flu vaccination for all employees in response to a New South Wales Public Health Order which prevented persons from entering aged care facilities without an up-to-date flu vaccination. The employee argued against receiving the vaccine claiming that she had previously had a severe reaction to the vaccine some years earlier. In support of her claim, she produced a letter from a Chinese medical practitioner stating she "would prefer not to have the flu vaccination" and had been prescribed antiviral and immune boosting herbs.
The employee was dismissed with Sapphire acting on government approved advice that the only absolute contraindication to flu vaccination was a history of post-vaccination anaphylaxis, Guillain-Barr syndrome, or use of certain cancer treatment drugs.
Commissioner McKenna upheld the dismissal again finding the employer had issued a legal and reasonable direction against the context of the NSW Health Order. The Commissioner held that the employee was not able to produce evidence that here severe symptoms were a direct result of the vaccine or that the symptoms would be repeated if she received the vaccine. The Commissioner concluded that Sapphire had acted in an "objectively prudent and reasonable way" and that by refusing to receive the vaccine, the employee could not perform the inherent requirements of her job.
Both decisions were noted to be highly specific to the individual facts. Deputy President Lake also noted that his decision should not even be taken to apply to all employees of Goodstart as “… the role each employee performs in fulfilling [the business’s] undertaking may differ.”
Against this context employers should be cautious in implementing mandatory vaccine policies or dismissing employees for failing to obtain any vaccine.
Discrimination
As noted, a direction will only be lawful to the extent that it does not violate or require a violation of a law. In this respect the primary point of concern is whether the direction would be discriminatory. Discrimination can arise both directly and indirectly.
The Fair Work Act 2009 prohibits discrimination by employers, on 13 different attributes, against employees and potential employees. These are referred to as the ‘protected groups’. Section 351 provides that, subject to exceptions:
- 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 preference, age, physical or mental disability, marital status, family or carer's responsibilities, pregnancy, religion, political opinion, national extraction or social origin.
This protection is supplemented by the various anti-discrimination legislation at the State/Territory or Commonwealth level.
Some exemptions apply to anti-discrimination law, namely ‘reasonableness’, ‘genuine occupational qualification’ and ‘inherent requirement’. These exceptions do not apply to all anti-discrimination legislation and do not apply in all circumstances.
Summary and Practical Considerations
In summary, at this time there is not any specific law at the State or Federal level that makes vaccination mandatory. Employers may be able to give their employees a direction to be vaccinated, however this will be highly dependent upon a number of factors weighed against each other. These factors will include:
- The operative needs of the business;
- What infection control measures can and can’t be put in place;
- Vulnerability of workers and/or visitors/customers;
- Practicality of alternative arrangements;
- Specific medial needs of employees;
- Overall safety of the workplace and workers;
- Compliance with relevant laws.
In the case of requiring a vaccine, it will need to be demonstrated that a mandatory vaccine policy/direction is reasonable to protecting the interests of all stakeholders. It will therefore be necessary to show that the vaccine is a necessary control for the purpose of complying with WHS obligations and protecting members of the workplace.
For employees disputing receipt of the vaccine, you must at least be able to produce medical evidence demonstrating that the vaccine will have an appreciable negative impact on your own health. It is not sufficient that the vaccine may cause discomfort or non-detrimental health complications.
[1] https://www.attorneygeneral.gov.au/media/media-releases/guidance-released-vaccine-rollout-australian-workplaces-19-february-2021
[2] https://coronavirus.fairwork.gov.au/coronavirus-and-australian-workplace-laws/health-and-safety-in-the-workplace-during-coronavirus/covid-19-vaccinations-and-the-workplace
[3] https://www.safeworkaustralia.gov.au/covid-19-information-workplaces/industry-information/general-industry-information/vaccination
[4] Woolworths Ltd v Brown (2005) 145 IR 285 at 293–297; Horan v North Coast Tavern Pty Ltd t/as North Shore Tavern [2011] FWA 3035 at [43]
[5] Jeremy Lee v Superior Wood Pty Ltd [2019] FWCFB 2946.
[6] CSL Ltd (t/as CSL Behring) v Papaioannou [2018] FWCFB 1005; Lion Dairy & Drinks Milk Ltd v Norman [2016] FWCFB 4218 at [34].
[7] Hudson v RMIT University [2020] FWC 4289; Burns v Sacred Heart Mission Inc [2014] FWC 3188.
[8] Michelle Sposito v Maori Chief Hotel [2021] FWC 700.
Deliveroo driver ruled to be an employee by the Fair Work Commission
Yesterday, the Fair Work Commission handed down a decision in the matter of Diego Franco v Deliveroo Australia Pty Ltd [2021] FWC 2818, that could have significant ramifications across the Australian gig economy landscape.
Currently, online food delivery giants like Deliveroo and UberEats rely on their drivers being independent contractors, so they can have flexible work arrangements and work for multiple delivery platforms. This therefore means they lack the general protections that employees are entitled to under the Fair Work Act such as unfair dismissal.
Mr Franco launched an unfair dismissal challenge after being dismissed with seven days’ notice for late deliveries. The first determination for the Fair Work Commission was whether he was an employee and therefore prima facie entitled to unfair dismissal protections. Secondly, if he was an employee, they had to determine whether his dismissal was harsh, unjust or unreasonable under section 385 of the Fair Work Act.
Mr Franco submitted that the main factor contributing to him being an employee was that he was not running his own business, rather he was working for Deliveroo and obtaining renumeration from them directly rather than pursuing his own personal profit.
Other factors included the remuneration being non-negotiable, wearing Deliveroo clothing, and that Deliveroo exercised control over Mr Franco through the supplier agreement he signed.
While Deliveroo asserted it had no control over when or where Mr Franco worked which would point to an independent contractor relationship, this was not quite the reality when the working arrangements were examined closer.
Deliveroo utilised a SSB system that required riders to book sessions in advance and preference was given to riders with good performance metrics. This meant that Mr Franco was directed by the SSB system to work particular times, make himself readily available and not to cancel booked engagements. So while superficially it appeared there was an absence of control, Commissioner Cambridge noted that this was camouflaged into a significant capacity for control.
Mr Franco's submission that his termination was harsh, unjust or unreasonable was based on the fact that failing to deliver in a reasonable time was not a valid reason as Mr Franco had never been notified about expected delivery times for drivers.
Deliveroo submitted that Mr Franco was an independent contractor due to him not being required to perform services for the Deliveroo business personally, his ability to accept and refuse work, work whenever he wanted, being able to work for multiple entities at the same time, him signing a supplier contract, supplying his own delivery equipment and being paid on invoices.
However, Commissioner Cambridge said that with “consideration of all the relevant indicia, has, like the colours from the artist’s palette, emerged to form a complete picture… the relationship between Mr Franco and Deliveroo is that of employee and employer”.
Commissioner Cambridge emphasised the fact that Mr Franco was not carrying on a trade or business of his own, but rather working as part of Deliveroo and also took into account how much control Deliveroo exerted over Mr Franco with the SSB system.
When considering how Mr Franco could and did work for other competitors, Commissioner Cambridge contended that this must be assessed in the context of a modern, changing workplace impacted by a digital world and therefore will not always be a determining factor of an independent contractor relationship.
It was then found that there was no valid reason for Mr Franco’s dismissal relating to his capacity or conduct and the substantive reasons were not sound. He was therefore reinstated and will be awarded back pay for lost wages.
Shifting Attitudes
In previous gig work decisions, the Fair Work Commission has typically gone against the workers, finding that their working relationship is more indicative of a contractor relationship. An example from last year was Amita Gupta v Portier Pacific Pty Ltd; Uber Australia Pty Ltd t/a Uber Eats [2020] FWCFB 1698, where the full bench found that Gupta was an independent contractor by focusing on the flexibility of work arrangements and the ability to work for multiple corporations.
However, this is not always the case. A Foodora rider was awarded $15 000 in 2018 for unfair dismissal. In this decision, Commissioner Cambridge focused on the applicant being “integrated into the respondent’s business and not an independent operation”. You can read our article about this case from 2018 here.
This decision also comes after a recent UK Supreme Court decision of Uber BV v Aslam [2021] UKSC 5, where Uber’s appeal was dismissed and Aslam, an Uber driver, was determined to be a worker and entitled to the minimum standards under UK labour law.
The Courts did not determine whether Aslam was an employee however. As the UK labour law framework is quite distinct from the Australian framework the decisions cannot be directly followed, but as Commissioner Cambridge acknowledged in his reasoning, decisions like Aslam confirm the extent to which services on digital platforms are challenging traditional employment concepts.
In a statement to the media, Deliveroo said it planned to appeal the decision.
Federal Court rules 'casual' worker entitled to paid leave
The Federal Court of Australia recently handed down a significant decision in the matter of WorkPac Pty Ltd v Rossato [2020] FCAFC 84, redefining Australia’s employment law landscape.
Mr Rossato was employed by WorkPac between July 2014 and April 2018. During this time, he supplied labour to companies within the Glencore Group under six consecutive contracts, all of which specified that he was a casual employee.
As such, WorkPac contended that pursuant to sections 86, 95 and 106 of the Fair Work Act 2009 (Cth), Mr Rossato was employed on a casual basis and was therefore not entitled to paid annual leave, compassionate leave or personal/careers leave. Further, it contended that section 116 precluded Mr Rossato from claiming payment for public holidays. Finally, WorkPac sought declarations that as a ‘Casual Field Member’, Mr Rossato was barred from claiming corresponding entitlements under the applicable enterprise agreement.
In the event that the Court found against WorkPac’s submissions, it sought declarations that it was entitled to restitution of the casual loading included in Mr Rossato’s hourly rate.
WorkPac noted that casual employment arises in the absence of a “firm advance commitment as to the duration of the employee’s employment or the days/ hours the employee will work.” Despite this, it asserted that as the terms of Mr Rossato’s contract specified that he was a casual employee, there was no need to have regard to how the contract was performed in practice.
The Court rejected this argument, contending that the presence or absence of the “firm advance commitment” should be assessed with regard to the employment contract as a whole. In doing so, it noted that whilst the description of the party’s relationship is relevant, it is not conclusive, and regard should also be had to whether WorkPac:
- provided for the employment to be regular or intermittent;
- permitted Mr Rossato to elect whether to offer employment on a particular day; and
- permitted Mr Rossato to elect whether to work and the duration of the employment.
The Court concluded that in spite of the language used in his employment contract, Mr Rossato was not a casual worker under the Fair Work Act or the Enterprise Agreement. Rather, the parties had agreed on employment of indefinite duration, which was stable, regular and predictable. As such, Mr Rossato was entitled to paid annual leave, paid personal/carer’s leave, paid compassionate leave and payment for public holidays.
The Court also rejected WorkPac’s claim for restitution for the causal loading paid to Mr Rossato, contending there was no relevant mistake and no failure of consideration.
Ultimately, this case highlights the need for employer’s to carefully consider the nature of work being undertaken by staff in order to prevent the risk of ‘double dipping’. It follows the 2018 decision of WorkPac v Skene [2018] FCAFC 131 which similarly held that employees who receive casual loadings may nevertheless be entitled to annual and personal leave.
COVID-19: FWC approves reduction in redundancy pay
The Fair Work Commission (FWC) has approved the first application for a reduction in redundancy pay during the COVID-19 pandemic.
Employers may apply to the FWC to vary redundancy pay under section 120 of the Fair Work Act 2009. The section allows an application to be made where the employer either (a) obtains other employment for the redundant employer, or (b) cannot pay the redundancy pay the employee is entitled to. The FWC has discretion to reduce the amount of redundancy pay (including to a nil amount) if it is considered necessary.
In Mason Architectural Joinery Pty Ltd [2020] FWC 1897, the small business Mason Architectural Joinery Pty Ltd (Mason Joinery) had taken many steps to reduce its overheads in the wake of a downturn of business. These steps included reduction of spending, sale of the company car and redundancy of two employees.
The employee was entitled to 3 weeks’ notice of termination and 7 weeks’ redundancy pay under the Joinery and Building Trades Award 2010. Mason Joinery was able to pay the employee his accrued annual leave and accrued roster days off entitlements as well as the notice amount. Mason Joiner was however unable to pay the full redundancy pay. Mason Joinery sought an order decreasing the redundancy amount.
Commissioner McKinnon was satisfied that Mason Joinery was under significant financial strain. The Commissioner noted that the business had not received income for two months and had lost some pre-booked jobs resulting in the viability of the business being highly dependant on the how long the pandemic situation would last.
The Commissioner noted that the employee was able to secure a new job only 8 days after his termination. The new job also paid $2 an hour more than the previous position with Mason Joinery. The notice of termination that the employee received was equivalent to 15 days’ pay and covered that 8 days of non-employment.
The employee had also taken a holiday that was pre-booked during his employment with Mason Joinery from 15 March 2020 to 21 March 2020 (a month after he started his new job). Upon his return the employee was required to self-isolate for 14 days. The Commissioner held that as the employee had been paid out his accrued annual leave the employee suffered no loss in this regard as the amount was sufficient to cover both the holiday and period of self-isolation.
Accordingly, the Commissioner held that it was appropriate to reduce the amount of redundancy pay for the employee to 1 week’s pay.
Fair Work decision signals warning for COVID-19 redundancies
In a previous update we noted that while Covid-19 has created a unique situation, standard employment law procedures still apply and must be followed. A recent case in the Fair Work Commission (FWC) demonstrates the risks resulting from a failure to follow the appropriate procedures.
In Australian Municipal, Administrative, Clerical and Services Union v Auscript Australasia Pty Ltd [2020] FWC 1821, the FWC assessed an application bought by the Union alleging that Auscript failed to consult in respect of employee redundancy and closure of sites.
In January 2020, Auscript decided to close offices in Hobart and Adelaide as well as downsizing one of its Sydney offices. This was done without consultation with the Australian Municipal, Administrative, Clerical and Services Union (ASU). The ASU and Auscript agreed to develop a joint Consultation and Communication Protocol (the Protocol) to avoid further potential failure in Auscript complying with their obligations under the Auscript Australasia Enterprise Agreement 2010.
Auscript sought to make further redundancies in response to the impact of Covid-19 on its transcription work. Auscript alleged that restrictions in Courts and Tribunals as well as its own forecasts necessitated the sudden decision to maintain the viability of its business. Auscript claimed that it fulfilled its obligations under the Protocol. The ASU disagreed and sought the urgent assistance of the FWC.
At a conference the FWC issued a statement which among other things noted that the parties agreed to “abstain from any compulsory redundancy until at least the parties finalise a strategy … to preserve as many jobs as possible and communicate the identified options clearly to staff so they can make informed decisions”. No agreement was able to be reached after the conference and Auscript would not commit to engage in further consultation. Auscript sought to press ahead with closing the Melbourne office and implement redundancies in Queensland. The matter was then progressed to a hearing.
Upon perusing the evidence, Commissioner Yilmaz determined that Auscript had not given genuine consideration to options other than redundancy. The Commissioner was not satisfied the participation in the conference by Auscript was not genuine, describing its actions as a “mere formality”. The Commissioner criticised Auscript’s communication to employees, labelling it an “empty offer” and not “genuine consultation.” Further, Commissioner Yilmaz concluded it was clear the company had already made a decision unable to be influenced by employees or their representatives.
While it was accepted by all parties that it was a necessity that major decisions had to be made, the Commissioner noted that “an obligation to treat staff with dignity” remained. Accordingly, the Commissioner made an order in favour of the ASU.
Does an employee owe a fiduciary duty for credit limit increases?
Employees owe certain fiduciary duties to their employers. Generally, this means an employee cannot do either of the following things:
- Make or pursue a personal gain in circumstances in which there is a real and substantial possibility of a conflict of interest arising between the personal interests of the employee and the interests of the employer (the no conflict duty); and
- Make or pursue a personal gain based by using his or her position as an employee or by using information or opportunities received in the course of his or her employment (the duty of trust).
As these duties are quite broad in scope a variety of circumstances could constitute a breach of either duty. A recent case in the Queensland Court of Appeal examined whether an employee owed a fiduciary duty to his employer in regard to providing a credit limit increase to a customer.
In Metal Manufactures Limited v Johnston & Anor [2020] QCA 42, a company was permitted to purchase goods on credit up to an amount of $20,000 which was later extended to $50,000. However, the company was unable to keep within this agreed credit limit and, with the assistance of an employee of its supplier, was ultimately able to purchase goods up to an amount of $325,797.50.
The supplier sought to recover this owing account; however, the company was wound up in insolvency prior to trial leaving no possibility of recovery. A case was instead bought against the company’s director and the employee of the supplier.
The supplier alleged a breach of fiduciary duty on the part of their employee for allowing the company to purchase goods beyond their credit limit in contravention of section 182(2) of the Corporations Act 2001 (Cth). The case against the director was that he had knowingly, or ought to have know, assisted the employee in breaching his duty. The case was accordingly dependant on successfully proving a breach of duty by the employee.
There is a long line of authority establishing that employees owe a fiduciary duty to their employers. This is also expressly indicated in section 182(2) of the Corporations Act. Not all employees will owe a fiduciary duty however and accordingly it must be established that a particular employee owes by looking at all circumstances of the case.
In this case the Court did not find that a fiduciary duty was established. Whilst the employee was a store manager, he was not a senior employee in the overall context of the business, did not have discretionary power to allow a customer credit beyond what was already agreed. On this basis the employee was not deemed to be in a position of special trust or confidence.
Even if a fiduciary duty had been established, the claim still may not have succeeded. While the Court was willing to accept that the employee had deliberately allowed unauthorised supply beyond the credit limit which was “consciously wrongful” and took deliberate steps to conceal the conduct, the Court was not willing to label the conduct dishonest in the sense of impropriety.
The basis for this finding was an absence of evidence demonstrating the employee received some personal benefit, either from his employer in terms of commission, salary increase or promotion; or from the company or director in the form of a bribe.[iv]
Whilst a fiduciary duty could not be established on these particular facts, it may still be possible for an employee of a similar position or standing to be considered a fiduciary of their employer. Additionally, further causes of action may be pleaded against an employee; simply not being in a fiduciary relationship will not be sufficient to avoid liability.
Employment Law and Covid-19
Due to the rapidly evolving situation involving the novel Covid-19 disease (Coronavirus) many workplaces and individuals are implementing and taking precautions to minimise the risk of infection. One such precaution is a period of self-isolation when an individual has come into contact with an infected person. Isolation may also be necessary when a partner or family member has been exposed.
It is important to understand the implications this may have for an individual in terms of employment, particularly employee entitlements, employer obligations and protections for both parties. This is important as the Fair Work Commission and Courts are still operating meaning an application can be bought against an employer at this time.
This article will answer some common questions that may be causing uncertainty during this time.
Relevant materials
The primary source for all specific rights and obligations in an employment relationship is the employment agreement. This may take the form of an individual agreement, enterprise agreement or award. Prior to taking any action you should check your relevant award and agreement.
Aside from the employment agreement, the minimum standards are provided for in the Fair Work Act 2009 (Qld) (FWA) and the Industrial Relations Act 2016 (Qld) (IRA).
Leave Entitlements
There are several kinds of leave available to employees but this article will only focus on sick leave and annual leave.
In terms of sick leave, which is also known as carers leave, there is a statutory entitlement for full-time workers under both the FWA and IRA for 10 days sick leave per year, accrued progressively throughout the year. Part-time workers are entitled to a pro-rata of 10 days in accordance with their hours of work.
Similarly, there is a statutory entitlement under both Acts for four weeks of annual leave for full-time and part-time workers. An additional week of leave may be available if you fulfil the criteria to be considered a shift worker.
When is leave taken?
Sick leave can be taken because the employee is not fit for work because of personal illness or injury; or to provide care or support to a member of the employee’s immediate family or household who requires it because of personal illness or injury or unexpected emergency. Leave may bet taken for a whole or part of a day.
The procedure for taking sick leave will be dependant upon the terms of your relevant employment instrument, however section 41 of the FWA requires at least that the employee promptly notifies the employer of the illness and period of time they are away as well as giving evidence of the illness.
Similarly, the procedure to take annual leave will be governed by the relevant employment instrument. Pursuant to section 88 of the FWA, paid annual leave may be taken for a period agreed between an employee and his or her employer.
Accordingly taking any form of leave must follow the procedures established in either an employment instrument or in accordance with the relevant Acts.
Will isolation count against leave?
This will depend on what arrangement is made between yourself and your employer. While an employer may direct you to see a doctor or stay home you cannot be forced to use any accrued leave. However, if you do not elect to take a form of paid leave, your employer has no legal obligation to pay your wages. You must therefore carefully consider your personal circumstances before electing to take unpaid leave.
If possible, look to make alternative arrangements with your employer such as working remotely or a compromise in terms of the amount and type of leave taken. You may have a formal right under your employment agreement to request a flexible or alternative working arrangement. In addition, full or part-time employees with 12 months of continuous service may also have a right to request a flexible or alternative working arrangement under the FWA.
Requests for flexible work arrangements must be seriously considered by the employer and can only be refused on reasonable business grounds. Workplace regulators have encouraged employees and employers to work together to find solutions to meet the needs of workplaces and staff.
Can I be directed to take leave?
Employers cannot direct employees to take sick leave. An employer may direct an employee to leave the work place or attend a doctor if they suspect they are suffering from an illness.
In regard to annual leave, under the FWA an employer can direct an employee to take annual leave, but only when the request is reasonable. In assessing whether a direction is reasonable, the following factors are relevant:
- The needs of the employee and the business;
- Any arrangements in place;
- Custom and practice of the business;
- Timing of the direction or requirement to take leave; and
- The length of the period of notice to take leave given.
Directions to take leave during shut down periods have been held to be reasonable. On this basis it appears that a direction issued at this time may be reasonable.
Can an employee be dismissed while on leave?
An employee may be dismissed while on leave provided that the reasons for termination are not based on or related to the employee taking leave.
In regard to personal/carers leave, section 352 of the FWA provides the protection for employees temporarily absent because of illness or injury. There are however two exceptions: where the employee’s absence extends beyond three (3) months; or where the total absences over a 12-month period equate to more than three (3) months and the employee is not on paid person/carer’s leave.
There is not a similar protection for those on annual leave. However, a dismissal effected while an employee is on annual leave may give rise to certain general protections such as the protection against unfair dismissal. Employers should be careful in complying with their termination obligations in this regard.
Can an employer make directions to an employee?
Yes, an employer is entitled to make a number of directions in regard to an employee’s work provided the direction is reasonable and do not place an employee at imminent risk.
Directions that can be made include:
- A direction to work from home;
- A direction to continue working;
- A direction to leave the workplace and attend a medical facility;
- A direction to take annual leave;
- A direction to cease work.
Typically, when a direction is made, the employer will bear a continuing obligation to pay wages and entitlements. In circumstances where business is stopped, this may not be financially viable. Employers should accordingly consider their circumstances.
Can employees refuse to attend work?
This is a complicated question and there is no simple yes or no answer.
Whether refusing to attend the workplace is a legitimate exercise of a workplace right or undertaking of industrial action is highly dependent on all the circumstances surrounding the refusal. There is no clear answer that will apply to all types of employees. Best practice in this situation is for the employee to communicate their concerns with their employer and attempt to make alternate arrangements such as working from home.
Can workers be stood down without pay?
Usually when an employee is stood down, they are still considered ‘employed’ and accordingly are paid salary and receive entitlements, however in certain circumstances, a worker can be stood down without pay.
If an employment agreement does not include stand down provisions, the circumstances in which a stand down is permitted are outlined in section 524 of the FWA. This section provides that an employee may be stood down during a period where they cannot usefully be employed during one of three situations. Most relevant to the current situation is “a stoppage of work for any cause for which the employer cannot reasonably be held responsible.”
Whether a particular employee can be usefully employed is a question of fact to be determined having regard to the circumstances that face the employer. Previously the provision has been held to apply to incidents such as inclement weather which may indicate that a pandemic would be viewed as a stoppage of work that cannot be reasonably deemed as employer caused.
Alternatively, under section 525, an employee and employer may agree for the employee to take leave (paid or unpaid) instead of being stood down during this period.
Aside from the stand down powers of employers, the State and Federal Governments also have the power to make an enforceable government order, determination or direction to prevent an employee from attending a workplace. When such an order is made, an employer is not required to pay the employee. This has occurred in Queensland following the ordered shutdown/limitation of many ‘non-essential’ businesses such as restaurants, gyms and pubs.
Can an employer change an employee’s roster or hours of work?
Yes, a variation in hours or roster may occur. Employers must consult with the employee and their relevant employment agreement before making a variation. This includes a consideration of the employee’s views on the change and cannot be affected unilaterally.
The parties may also choose to enter into an ‘individual flexibility agreement’ (IFA) which allows the variation of employment agreement terms relating to hours or rosters. An IFA does have some formalities that must be satisfied before the agreement becomes effective.
Alternatively, employees may wish to agree to a variation in the span of their hours which may assist them avoiding peak times. Again, this will require a consultation of the employee and their existing employment agreement.
Dismissal/Redundancy
An unfortunate side effect of the situation is a down turn in business and by extension a loss of jobs. While employers are able to terminate employers, they must follow proper protocols and comply with their obligations under the relevant employment agreements and the FWA.
Termination
Employees must be paid their accrued entitlements. A party may lawfully terminate the employment in one of two ways: through giving notice in accordance with the terms of the employment agreement, or in response to conduct in breach of the employment agreement.
Section 117 FWA provides that an employer must not terminate the employment of an employee without first giving the employee a minimum period of notice in writing. The minimum period starts at one week and may be up to five weeks depending upon the employee's length of service and age. The statutory minimum can be satisfied by payment in lieu of giving notice.
Redundancy
Redundancy is slightly different to a standard termination. Redundancy occurs when an employer no longer requires the job to be done by the employee or anyone else. If an employee is made redundant, the employer must pay redundancy pay in accordance with the statutory entitlement in section 119 FWA. Redundancy may also be voluntary or involuntary. In terms of involuntary redundancy, it must be demonstrated that the redundancy is “genuine”, otherwise any termination may attract protections under the FWA.
There are three elements to the meaning of genuine redundancy:
- The employer must no longer require the employee’s job to be performed by anyone because of changes in operational requirements;
- The employer must comply with any consultation obligations it has under a modern award or enterprise agreement; and
- Redeployment within the employer’s business or an associated entity must not be reasonable in the circumstances.
Demonstrating satisfaction of these elements requires a factual examination of the circumstances leading up to the decision to make the employee redundant. In a recent case note, we examined redundancy in the context of a downturn in business.
Termination Protections
A range of protections exist for employees. These include unfair dismissal and the general protections which prevent dismissal on a discriminatory basis (which may include sickness or injury) or for exercising workplace rights.
For example, an employee cannot be dismissed because simply because they fall ill or are unable to attend their workplace due to family or caring obligations.
Protections at work
Aside from protection against dismissal, the general protections provisions of the FWA also apply to work generally and protect workers against: adverse action (an employer or industrial association taking action, threatening to, or organising action against an employee), coercion, misrepresentation, and undue influence or pressure.
These acts may arise in a huge variety of circumstances including termination, the payment or non-payment of entitlements or salary, discussion about workplace conditions, entitlements or rights, the making or variation of agreements, and the effects of workplace decisions.
