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Dimi Baramili, Associate

In what has been a tumultuous period in federal politics ahead of the upcoming election, it is no surprise that workplace relations reform has taken centrestage, with the Coalition announcing its policy and the Government introducing a raft of reforms to the Fair Work Act 2009 (Cth) (the “FW Act”) through the Fair Work Amendment Bill 2013 (the “FW Bill”), the latter of which is aimed at addressing the concerns of specific groups.

The FW Bill was passed in the last sitting week of parliament, receiving assent on 28 June 2013, although some parts are not due to come into force until 1 January 2014.

The Government has indicated that these reforms are aimed at “strengthening the Fair Work system to provide a comprehensive safety net to protect the most vulnerable in our workforce as well as the exibility that working parents and carers need.”1 They are also the result of the independent Fair Work Act Review, with the Government noting that they “reflect recommendation 1…to include in the functions of the FWC that it should promote cooperative and productive workplace relations.”2

Specifically the reforms target:

  • flexible working and family friendly initiatives;
  • right of entry;
  • amendments to the role of the Fair Work Commission (“FWC”); and
  • the ability to take bullying claims to the FWC.

What are the Changes?

(a) Flexible Work Arrangements + other Family Friendly Initiatives (commenced 1 July 2013)

Although section 65 of the FW Act currently provides scope for individuals who are either a parent or have the responsibility of caring for a child (if they are under school age or under 18 with a disability) to request exible working arrangements in certain circumstances, this right to request exible working arrangements will now be extended to include employees with carer’s responsibilities, parents or guardians of children that are school age or younger, employees with a disability, employees 55 years or older, and employees experiencing or supporting a family or household member who is experiencing family violence.

Currently, a exible work request can be refused on ‘reasonable business grounds’. This term is not defined under the FW Act. However, the reforms now provide some guidance through a non- exhaustive list of ‘reasonable business grounds’ which include:

  • the new working arrangements being too costly;
  • there being no capacity to change the working arrangements of other employees to accommodate the request;
  • it being impractical to change the working arrangements of other employees, or recruit new employees to accommodate the request;
  • the new working arrangements would likely result in a significant loss in efficiency and productivity; and
  • the new working arrangements would likely have a significant negative impact on customer service.
Other changes concerning pregnancy and related leave which commenced 1 July 2013 include:

  • transfer to a safe job now extended to all employees not just those who have at least 12 months service;
  • increasing the period of concurrent parental leave from 3 weeks to 8 weeks; and
  • special maternity leave taken will no longer detract from the amount of unpaid parental leave available to an individual.

(b) Legislated Consideration of Penalty Rates (commencing 1 January 2014)

This has occurred through the insertion of an additional consideration within the modern awards objective via section 134(1)(da) which requires consideration of the need to provide additional remuneration for employees working overtime, shifts, or outside regular working hours (such as on weekends). This has not had an impact on current rates, rather it has been deemed a relevant consideration for the FWC at the next modern awards review.

(c) Right of Entry (commencing 1 January 2014)

These reforms are described in the Explanatory Memorandum to the FW Bill as being designed to appropriately balance the rights of organisations and employees in respect of the entry of permit holders to premises for the purposes of investigations and discussions. The reforms will allow meetings to be held in an area agreed between the parties, and if no agreement is reached, then lunch rooms may be used. The powers of FWC will also be extended so as to allow it to address disputes which concern the frequency of visits, as well as transport and accommodation arrangements, and to enforce appropriate behaviour from permit holders. Amendments will also be made concerning transport and accommodation arrangements for permit holders.

(d) Amendments to the Role of the FWC (Arbitration by Consent Commencing 1 January 2014)

Other amendments to the roles and functions of the FWC will be made, including providing the power to promote cooperative and productive workplace relations and preventing disputes, clarifying their powers during conferences and, most notably, allowing the FWC to arbitrate, by consent, general protections and unlawful termination disputes.

(e) Bullying Reforms (Commencing 1 January 2014)

As we reported in our last edition of Strateg-eyes, the FW Bill will put in place the workplace bullying reforms which emerged from the House of Representatives Standing Committee on Education and Employments’ report ‘Workplace Bullying “We Just Want It To Stop”’. This will mean that a worker within a constitutionally- covered business can apply to the FWC for a remedy in respect of workplace bullying, with the FWC required to deal with the application within 14 days of it being made. In dealing with a complaint, the FWC can generally make any type of order it deems appropriate in respect of the conduct (however it cannot order reinstatement or the payment of compensation). An order will only be made where the FWC is satisfied that the worker has been bullied and that there is a risk that the worker will continue to be bullied. The FWC can also refer the matter to the relevant WHS regulator if appropriate as this remedy will not replace or be a substitute for claims and penalties under WHS legislation.

These reforms have been criticised by many employer groups as swinging the balance further in favour of employees under the FW Act, in particular the amendments to the right of entry provisions, the extension of those employees eligible to request flexible working arrangements and the workplace bullying reforms. Although the Coalition has released its Industrial Relations policy with a comparison of this policy against that of the current government it does not appear to make many changes to this policy. The impact of these reforms remains to be seen, and in particular, whether we will see a significant increase in the amount of claims utilising the FWC bullying jurisdiction. 


  1. Hon Bill Shorten MP Press Release dated 28 June 2013.
  2. Hon Bill Shorten MP Fair Work Amendment Bill 2013 – Summing-up speech, House of Representatives dated 6 June 2013.

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Kathryn Dent, Director

On a fine winter’s morning in June 2013 set against the iconic Sydney Harbour backdrop, some of PCS’ valued clients and supporters attended our latest Breakfast Briefing, interested to learn more about the personal risks inherent in managing people.

PCS Directors Kathryn Dent and Nichola Constant shared the stage and exchanged their experiences and extrapolated workplace scenarios where there was, or could be, exposure to personal as well as organisational liability. The practical examples given and experiences recalled highlighted to the attendees the need for vigilance in managing people not only to protect their organisations from legal action, but also themselves, and how they might effectively achieve this.

Section 550 of the Fair Work Act 2009 (Cth)

An exploration of this section was a recurring theme throughout the morning given that it imposes liability on individuals where they are “involved in” breaches of the Fair Work Act 2009 (Cth) (the “FW Act”). Both Directors explained throughout the morning that the phrase “involved in” was broad and covered the acts of aiding, abetting, counselling, procuring, inducing, directly or indirectly (being) knowingly concerned in or party to, or conspiring. As a consequence, members of the audience were encouraged, in order to avoid a charge under section 550, to take such action as required (given the circumstances of the issue) to demonstrate no involvement in any breach or better still, to show attempts at compliance with the FW Act.

Independent Contractors

This was logically the rst area reviewed during the Briefing given that prior to the commencement of any working relationship employers (and their internal advisors such as HR Managers) have to decide whether to engage or employ a worker, that is, decide whether the worker is being contracted as an independent contractor or an employee. Kathryn highlighted that sections 357-359 of the FW Act were an incentive to ensure correct characterisation as these sections make it an offence to engage in “sham contracting”. Also, because of the operation of section 550, individuals who are part of that decision-making process may be personally liable, as was demonstrated in several cases discussed including Fair Work Building Inspectorate v Supernova Contractors Pty Ltd & Anor; Australian Building & Construction Commissioner v Inner Strength Steel Fixing Pty Ltd [2012]).1

Similar provisions imposing personal liability could arise in this area if it was determined that the scheme was for tax avoidance purposes.

In addition to the defence of “not being involved” in the offence, speci cally with sham contracting, an individual who could demonstrate other relevant defences, including that they did not know or were not reckless to the character of the contract, might escape liability, such as occurred in Fenwick v World of Maths.2 Establishing this defence would require the individual to understand the indicia of employees and independent contractors and to characterise and enter into the relationship on this basis.

Recruitment and Selection

Concurrent with the characterisation process is the recruitment and selection process of the individual who will be physically performing the work. That of itself leads to another area of exposure to personal liability, with Nichola traversing the laws that govern what employers, and individuals acting on their behalf (as employees or agents such as recruiters) should and should not say to these workers, including representations which could be the subject of misleading and deceptive conduct allegations under the Competition and Consumer Act 2010 (Cth).

Pay Records and Benefits

If an organisation, following the above process, decided to employ an employee, as opposed to an independent contractor, then the employer is obliged to issue payslips, keep employment records and comply with a minimum set of terms and conditions derived from a modern award, an enterprise agreement, or the National Employment Standards all of which are governed by the FW Act (the “FW Act minima”), and other legislation, including long service leave obligations under State and Territory legislation. Kathryn indicated that a breach of any of the FW Act minima could trigger a civil penalty and by virtue of section 550, liability would extend to any involvement by an individual in these breaches. Common examples given of these breaches were underpayment of award rates of pay and penalty rates and failure to issue payslips and maintain employee records as was demonstrated in Fair Work Ombudsman v Nicole Patrice Dawe.3

While privacy obligations were discussed, given the exemption for “employee records”, the extent to which an individual within an organisation dealing with workplace matters could be held liable for a breach of the Privacy Act 1988 (Cth) was not clear.

Enterprise Bargaining

Not only does the breach of an enterprise agreement potentially implicate individuals but so may the process of entering into one. Nichola highlighted the various obligations required during the process of making an enterprise agreement and where individuals may be liable.

Culture

The discussion then turned to a very topical issue, that of “workplace culture” and more speci cally in the context of individual liability, behaviours that negatively impact on it, for example, harassment, discrimination and bullying. Kathryn reminded the audience that the laws prohibiting discrimination apply not only during recruitment and selection but throughout the relationship and on termination.

Discrimination

Kathryn discussed the provisions within the Anti Discrimination Act 1977 (NSW) (the “AD Act”) that make it unlawful for a person to cause, instruct, induce, aid or permit another person to do an act that is unlawful by reason of a provision of the AD Act.

Additionally the AD Act and the Sex Discrimination Act 1984 (Cth), both directly impose personal liability by making it unlawful for individuals (for example an employee, a contract worker or a “workplace participant”) to engage in sexual harassment and two cases were discussed where individuals were held liable.4

The acts of inciting, assisting or promoting were highlighted as giving rise to individual liability under the Racial Discrimination Act 1975 (Cth) and the Disability Discrimination Act 1992 (Cth) as was any discriminatory conduct under section 550 through a breach of section 351 (which is in the general protections provisions of the FW Act).

Bullying

At the time of the Briefing, the Fair Work Amendment Act 2013 (the “FW Amendment Act”), had not yet been passed by Parliament but was discussed and given it is now law, the reality (as foreshadowed) is that after 1 January 2014, if an anti-bullying order is made by the Fair Work Commission a breach of it may implicate individuals if they have the requisite degree of “involvement” to attract section 550.

Bullying can also result in prosecutions under work health and safety laws. These laws themselves impose obligations on organisations and all individuals from Board level to “worker” so there is plenty of scope for an individual to be prosecuted, at some level, where the work health and safety risk emanates from bullying behaviour. This occurred in Inspector Gregory Maddaford v Graham Gerard Coleman & Anor.5

Work Health and Safety

Nichola then proceeded to highlight more generally individuals’ liabilities for work health and safety. Individuals under the Work Health and Safety Act 2011 (NSW) ranges from “officers” who must exercise “due diligence” to “workers” who must exercise “reasonable care”. The concept of personal liability in this area is not new.

Termination

In addition to discrimination and adverse action considerations, individuals’ liabilities in a termination situation could also arise in relation to the giving of notice under the National Employment Standards (or the applicable industrial instrument) and also in the payments that must be made in relation to accrued annual leave, and if applicable, redundancy. Any involvement in relation to these entitlements could trigger section 550 but Kathryn described how an individual’s lack of involvement (for which evidence must be adduced) would exonerate them as occurred in Guirguis v Ten Twelve Pty Ltd & Anor.6

Restraints of Trade

While not specifically an area in which individuals were likely to be prosecuted, Nichola discussed this “last stage” of the work relationship to bring the Briefing full circle as the enforcement of any contractual restraints in relation to activity and relationships post-termination depend on the reasonableness of the restraint which was determined at the beginning of the relationship. It was a timely reminder to individuals that such clauses being held to be unenforceable by virtue of being uncertain or unreasonable whilst not rendering them liable for prosecution could leave them open to criticism if they did not seek advice and/or properly consider and draft such a clause.

Conclusion

The journey through the work relationship demonstrated that at each significant step an individual’s actions, be it in characterising a worker, hiring them, being responsible for their terms and conditions including environment and payment or terminating their employment, could result in that individual being prosecuted for various breaches, usually where the organisation was also liable. As a result of drawing these matters to our guests’ attention, PCS trusts that its clients and supporters are now armed having been forewarned.


  1. [2012] FMCA 935; [2012] FCA 499.
  2. [2012] FMCA 131.
  3. [2013] FMCA 191.
  4. Lee v Smith & Ors (No.2) (2007) EOC 93-465; Kraus v Menzie [2012] FCA FC 144.
  5. (2005) EOC 93-366.
  6. [2012] FMCA 307.
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Roy Yu, Associate

Employers will be required to account for workplace changes which took effect on 1 July 2013.

Superannuation

From 1 July 2013, the superannuation guarantee levy will be 9.25%, which is an increase of 0.25% from the previous year.

This means that:

(a) if an employer had originally agreed to paying an employee’s salary or wages inclusive of superannuation (in other words, a fixed sum), then the superannuation component of the employee’s total package would increase by 0.25%. The total amount paid by the employer however, would remain the same; and

(b) if an employer had originally agreed to paying an employee’s salary or wages exclusive of superannuation (in other words, ‘plus’ superannuation), then the employer would need to make an increased payment for superannuation. In this instance, the total amount paid by the employer would increase by 0.25% of the non-superannuation component.

The increase is in annual increments and follows the scale set out below. This schedule may change depending on the outcome of this year’s election.

Additionally, from 1 July 2013, fund providers will be permitted to set up a new type of account called “MySuper” which will have low fees and simple features and will replace current default accounts chosen by employers. From 1 January 2014, employers will be required to make contributions into a fund that offers a MySuper account where an employee has not completed a Standard Choice form.

Another superannuation change which commenced on 1 July 2013 is that employers must now make superannuation guarantee payments for employees over 70 years of age.

Wages

A 2.6% increase to all modern award rates applies from 1 July 2013. As a result of this decision of the Minimum Wage Panel of the Fair Work Commission, the national minimum wage for the 2013/14 Financial year is $16.37 per hour, or $622.20 per week for a 38 hour week. This represents an increase of $15.80 to the minimum weekly wage.

Separately, the default casual loading for employees not under any award or agreement increased from 23% to 24%. Employees covered under award arrangements continue on the standard 25% loading.

Employers must ensure that these increases are duly passed onto all employees.

Unfair Dismissal Remuneration Cap

From 1 July 2013, employees who earn in excess of $129,300 p.a. are prevented from bringing unfair dismissal applications unless they are covered by an enterprise agreement or modern award. The maximum compensation for unfair dismissal claims is half the amount of the high income threshold, being $64,650 (up from $61,650 in 2012).

Taxation of Genuine Redundancy Payments and Employee Termination Payments

In the 2012/2013 Financial year, a genuine redundancy payment was tax- free up to a $8,806 base amount plus a $4,404 service amount multiplied by the number of years of service. For the 2013/14 Financial Year, these amounts become $9,246 and $4,624 respectively.

For Employment Termination Payments (‘ETPs’) more generally, if a person has reached “preservation age” in the income year their employment is terminated, the maximum tax rate is 16.5% (including Medicare levy) up to a cap. If a person has not reached “preservation age”, the maximum tax rate is 31.5% (including Medicare levy) up to a cap amount.

The concessional tax treatment is limited to the smaller of the “ETP cap” ($180,000 for 2013/14, indexed annually) and the “whole of income” cap ($180,000 and not indexed). The cap is reduced by other taxable payments an employee receives in the income year, such as salary. ETP amounts paid in excess of these caps are taxed at the top marginal rate (plus Medicare levy) of 46.5%.

Fair Work Amendment Bill 2013

This legislation was passed on 28 June 2013 and implements some further recommendations of the Fair Work Act Review Panel’s report from 2012. Some key amendments include:

Anti-Bullying

Workers who are bullied at work will, as of 1 January 2014, be able to apply to the Fair Work Commission (“FWC”) for an order to stop the bullying. Notably, the FWC is required to start dealing with such an application within 14 days of the application being made. The FWC will be entrusted with powers to make a wide range of orders to prevent the bullying from continuing – but this does not include orders for compensation or reinstatement.

Flexibility for Working Families

There have been a number of changes introduced to the Fair Work Act concerning employees with family and caring responsibilities. These changes regarding special maternity leave, parental leave and right to flexible work commenced on 1 July 2013. Employers will need to ensure that special maternity leave taken will not reduce an employee’s entitlements to unpaid parental leave. The right to request flexible working arrangements has also been extended to a number of other employee categories including employees who are parents or carers, aged over 55 years, or have a disability. Effective as of 1 January 2014, employers will need to consult with their employees about the impact of changes to regular rosters or hours of work.

When employees have family and caring responsibilities, employers are also required to consult with them about the impact of changes to their regular roster or hours of work.

Union Right of Entry

As of 1 January 2014, unions will be able to meet with employees in the lunch rooms of their employers to conduct interviews or hold discussions in accordance with conditions of their entry permit. If there are disputes concerning this, the FWC now has the capacity to deal with this (and regulate the frequency of visits for such discussions).

Where the parties cannot reach agreement on transport and accommodation arrangements for permit holders in remote areas, the FWC may also now facilitate resolution of these disputes.