In our final E-update for the year, we provide a summary of some of the key industrial and employment topics for 2018 and those we expect to continue to have an impact on employers in 2019.
Casual employment was a major topic of discussion in 2018 and was the subject of a significant decision and several changes to the modern awards.
Modern awards
Penalty rates
Penalty rates continued to be a modern award issue in 2018 as the phasing-in of changes resulting from the Fair Work Commission’s (FWC’s) penalty rates decision in 2017 progressed.
Further changes also occurred in October 2018 when the FWC introduced penalty rate amendments for casual employees covered by the General Retail Industry Award 2010 (Award) (4-yearly review of modern awards – General Retail Industry Award 2010 – award specific penalty rates claims [2018] FWCFB 5897).
These changes were the result of concerns about the interplay of casual loading and penalties under the Award, with the FWC noting:
casual loadings and penalty rates are separate and distinct forms of compensation for different disabilities. Penalty rates compensate for the disability (or disutility) associated with the time at which work is performed. The casual loading is paid to compensate casual employs for the nature of their employment and the fact that they do not receive the range of entitlements provided to full-time and part-time employees, such as annual leave, personal carer’s leave, notice of termination and redundancy benefits. Importantly, the casual loading is not intended to compensate employees for the disutility of working evenings or on Saturdays [at 228].
Accordingly, the FWC introduced changes to penalty rates for casual employees working after 6.00pm on weekdays and on Saturdays.
The changes will be phased-in, with the first phase having commenced on 1 November 2018. The full transition for the casual evening penalty will be completed by March 2021 when casual employees will receive an additional 50% loading (including casual loading) for work after 6.00pm on weekdays.
The full transition for the Saturday penalty will be complete by March 2020 when casual employees will receive an additional loading of 50% (including casual loading) for all hours on Saturdays.
Casual conversion
In August 2018, the FWC handed down its decision to introduce a model clause into most modern awards dealing with the right of casual employees to request conversion of their employment to permanent employment (4-yearly review of modern awards – common issues – part time employment and casual employment [2018] FWCFB 4695).
The model clause took effect from 1 October 2018.
In short, the model clause states that a “regular casual employee” has the right to request that their employment be converted to permanent full time or part time employment. A “regular casual employee” is defined as a casual employee who, for the last 12 months, has worked a pattern of hours on an ongoing basis which, without significant adjustment, the employee could continue to perform as a part time or full time employee.
The model clause requires that requests for casual conversion be made to an employer in writing and that an employer consult with the employee who has made the request. Requests may be refused after consultation where there are reasonable grounds for the refusal.
Importantly, the model clause requires that employers make both existing and new casual employees aware of the model clause by providing them with a copy of it. Employers are expected to comply with this requirement in relation to existing casual employees by 1 January 2019.
Employers should refer to the modern awards applicable to their workplace for full details, as casual conversation clauses may vary between modern awards.
Minimum engagement
Also in its August 2018 decision, the FWC dealt with the issue of minimum engagement for casual and part time employees.
The FWC determined that it was appropriate to introduce a minimum engagement term to all modern awards.
At the time of the decision, many modern awards already contained terms dealing with minimum engagement periods for casual and part time employees. The FWC decided that it would introduce a model clause to all remaining modern awards stating that the minimum engagement for casual and part time employees will be two hours.
The model clause came into effect on 1 October 2018.
Employers should refer to their relevant modern award for details of the casual and part time minimum engagement period relevant to their business, as details may vary between modern awards.
WorkPac v Skene
In August 2018, the Full Court of the Federal Court of Australia handed down its decision in WorkPac Pty Ltd v Skene [2018] FCAFC 131.
The decision principally concerned the casual status of an employee and his claims to be entitled to payment for annual leave on termination of his employment.
In summary, the employee was a casual dump-truck operator who was employed by WorkPac to carry out duties on a number of mine sites. He worked according to a rotating roster of seven days with 12.5 hour days on, and then seven days off. His roster was set several months in advance, including on occasion, up to 12 months in advance.
The employee argued that, throughout his employment he was a permanent employee and upon termination of his employment, he should have received payment for accrued but unused annual leave.
WorkPac argued that the employee was at all times a casual employee and was paid a casual loading to compensate him for all permanent entitlements that he was not entitled to, such as annual leave.
In considering the matter, the Full Court commented that true casual employment is irregular, uncertain, unpredictable and intermittent with a discontinuity in the pattern of work, including the absence of a firm advance commitment to work. Ultimately, the Full Court held that, due to the specific circumstances of the employee’s employment, he was not a true casual employee and he was therefore entitled to annual leave.
The matter was remitted to the Federal Circuit Court of Australia for determination of the employee’s actual entitlement.
This decision has been widely reported and has caused some concern for employers that casual employees are now entitled to annual leave in addition to being paid casual loading. Of course, this is not the case for true casual employees and the full impact of this decision, particularly its interaction with casual loading, is not yet known.
However, prudent employers will regularly review their casual employment arrangements to ensure that casual employees are true casuals and not permanent employees in disguise.
Exploitation of workers continued to be an important topic throughout 2018 and was the driver for some significant legislative changes, including new regulations for labour hire providers and self-reporting obligations under new modern slavery laws.
Labour hire industry
In response to concerns that some employers have exploited employees through labour hire arrangements, a number of state and territory governments have introduced, or have proposed introducing, labour hire licensing laws to regulate the labour hire industry.
There are currently three states (Queensland, Victoria and South Australia) that have implemented labour hire licensing laws and licensing schemes. Under these schemes, labour hire providers are required to be registered and licensed. They must demonstrate to the relevant licensing body that they are fit and proper to provide labour hire services and must comply with all relevant legislation. Under labour hire licensing laws, it is unlawful to operate an unlicensed labour hire business or do business with a labour hire provider that is unlicensed.
The labour licensing scheme in South Australia is currently under review and the South Australian Government has recently introduced a bill intended to repeal the state’s labour hire licensing laws.
Labour hire licensing laws passed the Victorian Parliament this year and administrative arrangements are currently being implemented. Licensing requirements are slated to begin in 2019.
The ACT Government has also announced its intentions to introduce labour hire licensing laws in the near future.
Modern slavery
In 2018, anti-modern slavery legislation was introduced in NSW and federally.
The Modern Slavery Act 2018 (NSW) was passed by NSW Parliament in June 2018 but is yet to come into effect.
In November 2018, the Modern Slavery Bill 2018 passed through Federal parliament. It is expected that the new Modern Slavery Act 2018 (Cth) (MS Act) will come into effect in January 2019.
The modern slavery legislation will compel certain large businesses to make annual modern slavery statements about their actions to address modern slavery in their operations and supply chains. Business who will be subject to the new laws should prepare for the reporting requirements to commence in 2019.
At the beginning of the year, we reported on the decision of the Full Bench of the FWC in Khayam v Navitas English Pty Ltd t/as Navitas English [2017] FWCFB 5162 (Navitas) and the implications that decision would have on how employers use maximum-term contracts.
In summary, Navitas did away with the long-held position that, where employment ends as the result of the expiry of a maximum term contract, an employee is not dismissed for the purposes of accessing the unfair dismissal jurisdiction of the Fair Work Act 2009 (Cth) (FW Act). The Full Bench was of the view that this position was based on the misunderstanding that ‘dismissal’ referred to termination of the employment contract. In fact, according to the Full Bench, ‘dismissal’ refers to the termination of the employment relationship. On this basis, where an employee is employed on a series of maximum term contracts and the employer then fails to offer them a further contract upon the expiry of the term, as was the case in Navitas, this amounts to termination at the initiative of the employer. In Navitas, the employee had therefore been dismissed and was entitled to make a claim for unfair dismissal.
This decision has seen employers adopt a more cautious approach to the use of multiple or rolling maximum-term contracts as there is now an increased risk of exposure to claims for unfair dismissal. If employers have not already done so, we strongly recommend a review of maximum term contract arrangements to ensure that there is clarity about the employment relationship and the termination date.
The gig economy has remained the subject of much debate in workplace relations this year and the topic will undoubtedly gain even more traction in 2019.
The FWC issued two decisions this year that dealt with the question of whether workers in the gig economy (e.g. workers engaged by Uber, Deliveroo and Foodora) are employees or independent contractors. The outcome of those decisions has been to confirm that this is a complex area of law that requires consideration of a wide range of factors.
In the first decision – Pallage v Rasier Pacific Pty Ltd [2018] FWC 2579 – the FWC found that an Uber driver was not an employee but an independent contractor. It followed the same multifactorial test that the FWC used in a similar case in November 2017, and found that there were a number of factors that weighed in favour of finding that the Uber driver was an independent contractor. These included that: • the driver could choose when to log on and off the app to accept or refuse rides;
• the driver brought his own equipment including his vehicle and a mobile phone with a broadband connection;
• the driver was required not to display anything in his vehicle that would identify him as an Uber driver or to wear any prescribed uniform;
• riders were required to pay GST; and
• payment was made by reference to completed tasks.
In contrast, the second FWC decision in November 2018 found that a Foodora food delivery rider was in fact an employee and not an independent contractor, and therefore entitled to make a claim for unfair dismissal – in which he was subsequently successful.
In Klooger v Foodora Australia Pty Ltd [2018] FWC 6836, the FWC considered that there were numerous factors that weighed in favour of the rider being an employee. These included that:
• the start and finish times of shifts and the geographical locations of those shifts were fixed by Foodora in a manner similar to that of casual employees being offered available shifts;
• Foodora had considerable capacity to control the manner in which the rider performed work as it controlled shifts and monitored performance by a ‘batching system’ which affected the rider’s ranking; and
• there was an expectation that the rider would dress in Foodora-branded attire and utilise equipment that displayed the Foodora brand.
The FWC noted with interest that, in opposition with those factors weighing in favour of an employment relationship, the rider had engaged in a substitution scheme in which he permitted other people to use his account to provide the services. Foodora relied on this scheme (and the fact that they had endorsed it) as evidence that the rider had sub-contracted his services as permitted under the agreement he had with Foodora. Ultimately, this position was rejected noting that the persons to whom the rider had allowed access were persons who had previously been suspended from working with Foodora (due to visa issues). According to the FWC, Foodora’s endorsement of what would be unlawful behaviour should therefore not be a proper or acceptable basis for determining the employment relationship.
Having found that the rider was an employee, the FWC then went on to find that he was unfairly dismissed because he had made complaints about the terms and conditions under which Foodora drivers were engaged. Given Foodora had entered into voluntary administration during these proceedings and he could not be re-instated, the employee was awarded 26 weeks’ compensation (the maximum available compensation).
The FWC also took the opportunity to comment on the public importance and interest of this particular matter. It expressed the opinion that there may well be some need in the future to review the legislation’s current understanding of the employment relationship to take into account the changing nature of work and how it is being impacted by technology. It recommended that the increased use of independent contractor relationships should be subject to stringent scrutiny to ensure that it does not result in breaches of workplace relations legislation.
The FWC’s comments in this regard are telling of the increased scrutiny that businesses within the gig economy will face in the coming years.
This year, we have noticed an increased focus by employers on the implementation and enforcement of restraints of trade for departing employees, which prompted our October webinar on drafting and enforcing restraints of trade.
Employment restraints will often seek to restrain a departing employee for a specific amount of time from soliciting work from the employer’s clients and customers, poaching other employees and/or from working for a competitor. Such restraints are particularly important when there is a concern that the employee has confidential information or relationships that, if not restrained, could cause detriment to the employer’s business.
This area of law is unique because it operates on the fundamental premise that restraints of trade are anti-competitive and prima facie unenforceable. An employer must therefore prove that a restraint is reasonably necessary to protect its legitimate business interests if it seeks to enforce one on a departing employee.
One of the key problems in enforcing restraints is often that the relevant clauses in a departing employee’s employment contract are not as tailored as they need to be in order to be enforced. For example, it is unlikely that a court will accept that it is reasonably necessary to restrain an employee from working for a competitor for five years anywhere in the world if that employee was a part-time administration officer.
This is a problem that can easily be avoided by strategic planning and drafting of the restraint clauses at the very beginning of the employment relationship. Restraints should be drafted with the specific position and duties of an employee in mind and with consideration as to what would be reasonably necessary to protect the employer’s legitimate business interests.
As restraints of trade are dealt with at a state and territory level, care must be taken to ensure that restraints are drafted in a way that it is able to be enforced within the relevant state or territory jurisdiction in which the employee is employed.
For example, the common law (which applies to restraints in all states and territories except New South Wales) prevents a court from adding words or modifying a restraint in any way to make it reasonable. Accordingly, if a court finds the restraint unreasonable at common law – it is entirely void.
For this reason, many restraints will often include ‘cascading’ clauses which enable a restraint to be read down if required.
However, the drafting of the restraint is not the final consideration for the courts. A range of other factors may also be considered in determining whether a restraint is enforceable or not. Two cases that have arisen this year highlight the need for there to be a real risk to the employer’s business interests before a restraint will be enforced.
In Austal Ships v Clay [2018] WASC 178, the Supreme Court of Western Australia granted an interlocutory injunction in favour of an employer which prevented a former assistant projects manager from joining a competitor while the Court determined whether the restraint was reasonable or not. In ordering the injunction, the Court noted that the new employer was a direct competitor to whom the previous employer had just lost a tender, and that the employee had current knowledge of his previous employer’s confidential operations as well as confidential information about current tenders. There was, therefore, a real risk that the employee could reveal confidential information and cause damage to the employer’s interests.
In contrast, the Supreme Court of New South Wales in SAI Global Property Division Pty Ltd v Jones [2018] NSWSC 438, refused to grant an interlocutory injunction against a former head of segment and strategic sales because there was no evidence that the employee had taken any confidential information upon his departure, and the Court was satisfied that the employee was not joining a competitor directly – rather a subsidiary that did not justify the enforcement of the restraint.
We predict that next year and moving forward, there will (and should be) be an increased spotlight on not only the post-employment activities of employees but also a review of the strategies used by employers to minimise the risk of confidential information being misused by employees. With both employers and employees having an increased dependency on digital information and electronic storage systems such as cloud storage, there has never been a more apt time to review your restraint clauses and confidential information policies and procedures.
Employers should be aware that, where there is a concern about an employee breaching a restraint or otherwise breaching their duties to their employer, it is imperative that swift action be taken to minimise any damage.
Procedural requirements
In 2018, the trend of the close scrutiny of enterprise agreements (EAs) by the FWC, including the strict interpretation of procedural requirements continued and resulted in EAs being rejected for procedural deficiencies.
Under the FW Act, the Notice of Employee Representational Rights (NERR) must strictly comply with the content and form requirements set out in the Fair Work Regulations 2009 (Cth). Any departure from the form may invalidate the NERR and result in an EA not being genuinely agreed to by employees.
This was the issue that faced Aldi in Aldi Foods Pty Limited as General Partner of ALDI Stores (A Limited Partnership) v Shop, distributive and Allied Employees Association & National Union of Workers and Another [2018] FWCFB 2485.
In this case, the Full Bench of the FWC dismissed an appeal by Aldi against decisions to reject applications for the approval of two EAs. The NERR issued by Aldi referred employees to their “leader” instead of “employer” in the event they had any questions.
Despite earnest submissions from Aldi that the substitution of “employer” with “leader” was a trivial departure that did not render the NERR invalid, the Full Bench held that the amendments were not trivial and upheld the decisions to reject the applications for approval. Aldi has since sought a judicial review of the Full Bench decision. The Federal Court of Australia heard the matter in November this year, with judgment being reserved.
The procedural requirements in the EA process are not limited to issues with the NERR. In Construction, Forestry, Maritime, Mining and Energy Union and Ors v CBI Constructors Pty Ltd [2018] FWCFB 2732, the Full Bench of the FWC upheld an appeal by the unions against the decision of a single Commissioner to approve an EA. The unions submitted that the employer did not comply with the requirements to advise employees of the time and place of the vote and the voting method by the start of the access period.
The employer had notified employees on the morning of 22 June 2017 that a vote by way of secret ballot would take place on 29 June 2017 after the toolbox talk. Subsection 180(4) of the FW Act provides that the access period is the seven-day period ending before the start of the voting process. The unions submitted that this required there to be a clear seven days between the notification time and the commencement of the vote and the time between 22 June 2017 and 29 June was not seven clear days.
The Full Bench concluded that the access period consisted of seven clear calendar days and that it ended at the end of the calendar day immediately preceding the day on which the voting process for a proposed agreement commences. The Commissioner’s decision was dismissed and the application for approval of the EA was dismissed.
As a result of this decision, the FWC changed its single enterprise agreement date calculator to allow for eight days between the notification time and date of the vote.
BREAKING NEWS:
Finally (after much delay), the Federal Government has passed legislation which allows the FWC to approve an EA if it is satisfied that an EA is genuinely agreed to notwithstanding that there are minor procedural or technical errors in the procedural requirements or the NERR, and provided that employees are not likely to have been disadvantaged by the errors.
Better off overall test
This year, a Full Bench of the FWC also handed down its decision outlining how EAs containing loaded rates should be assessed against the better off overall test (BOOT) (Loaded Rates Agreements [2018] FWCFB 3610). Loaded rates of pay are where employers choose to pay a higher rate of pay at all times to compensate employees for penalty rates and other monetary entitlements employees would normally receive, such as penalties for work in the evening or on weekends.
As well as setting out eleven principles for the application of the BOOT to EAs with loaded rates, the Full Bench also set out how the FWC should approach the application of the BOOT to all new EAs moving forward.
In short, the Full Bench noted that the BOOT required:
• Each and every award covered employee and prospective employee to be better off under the agreement than under the relevant modern award. If any employee is not better off overall, the EA does not pass the BOOT.
• An overall assessment to be made, requiring the identification of terms which are more beneficial for an employee, terms which are less beneficial, and an overall mathematical assessment of whether an employee would be better off under the agreement.
Part of this overall assessment requires consideration of the terms of the proposed EA and what it provides and may permit. To do this, FWC may be required to examine existing and potential rostering arrangements, as well as the effect of terms which may not currently apply, but may apply in practice in the future.
The practical effect of the FWC’s position with respect to the BOOT is that EAs are now closely assessed against modern award terms. Where EA terms may differ from award terms, employers are required to provide evidence, by modelling or submissions, that current or prospective employees are financially better off overall.
This careful assessment of EAs resulted in significant delays in the approval process, with the FWC taking longer to deal with EAs during 2018. The assessment also raises generally the utility of the EAs where there is little benefit to employers because EA terms are compared closely to the modern award and require each and every employee to be better off, rather than a substantial part of the workforce.
Industrial manslaughter
In October 2017, Queensland amended its work health and safety (WHS) legislation to introduce new offences of “industrial manslaughter” in response to a number of workplace fatalities.
Under the amendments, a person conducting a business or undertaking (PCBU) or a senior officer will commit the offence of industrial manslaughter where a worker dies and the PCBU’s or senior officer’s negligent conduct caused the death of the worker.
The issue became a hot election topic this year with the Victorian Government proposing to also introduce the offence of industrial manslaughter. With the Labor Government having recently won the Victorian state election, it is expected that such amendments will be introduced next year.
The matter also came up during elections in South Australia and Tasmania.
In the Northern Territory, a review of the work health and safety regulator, NT WorkSafe, is currently underway. The terms of reference for this review include whether industrial manslaughter offences should be introduced.
We expect this to be an ongoing topic in 2019, following the completion of the review of the model WHS laws.
Fair Work Ombudsman’s focus on accessorial liability
The Fair Work Ombudsman (FWO) has affirmed its position that it is prepared to pursue individuals who are knowingly involved in contraventions of the FW Act – recently confirming that three-quarters of the matters that it has taken to court recently involve claims of accessorial liability.
Talking to Tracy Angwin of the Australian Payroll Association (APA), Lynda McAlary-Smith, the Executive Director for Compliance and Enforcement at the FWO, pointed to one matter in particular from this year which saw the Full Court of the Federal Court of Australia confirm penalties imposed on an accounting firm for being involved in an employer’s contraventions of the FW Act (EZY Accounting 123 Pty Ltd v Fair Work Ombudsman [0218] FCAFC 134).
In dismissing the accounting firm’s appeal, the Full Court confirmed that:
where an alleged accessory is aware of a system producing certain outcomes, and those outcomes constitute contraventions of the [Fair Work] Act, it is unnecessary to show that the alleged accessory knew the details of each particular instance of those outcomes in order to show the requisite knowledge.’ (Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034)
Ms McAlary-Smith noted that contraventions of the FW Act often revealed a clear weakness in the internal corporate governance of the business and a confusion as to who was accountable for ensuring compliance. She confirmed that the FWO’s tolerance for non-compliance is very low particularly for large-scale organisations who have the resources to inform themselves of their obligations.
This is a clear indication that individuals, including payroll staff and accountants, will continue to face increased scrutiny by the FWO in its enquiries aimed ensuring that employees are being paid correctly and businesses are complying with the FW Act and any applicable industrial instruments.
With a looming Federal election, 2019 is set to be an interesting year for workplace relations.
APA’s Payroll Benchmarking Study
Each year, the APA conducts an annual Payroll Benchmarking Study, with information collected from over 3,000 employers. The Study is now open for 2019 with employers encouraged to participate by completing the survey. The results of the Study will be finalised and released in February 2019.
Q:Why did no one bid for Donner and Blitzen on eBay?
A: Because they were too deer.
Q: What kind of motorbike does Santa ride?
A: A Holly Davidson!
Should you require any further information or assistance, please contact our Director Shane Koelmeyer on (02) 9256 7500 or via email on sydney@workplacelaw.com.au.
Information provided in this update is not legal advice and should not be relied upon as such. Workplace Law does not accept liability for any loss or damage arising from reliance on the content of this update, or from links on this website to any external website. Where applicable, liability is limited by a scheme approved under Professional Standards Legislation.
