Your time is limited: maximum term contracts and the unfair dismissal regime

 

Roseanna Smith, Graduate Associate

Many employers choose the flexibility of maximum term contracts when engaging employees for specific tasks or short-term employment, and assume that their time-limited nature means that they cannot give rise to an unfair dismissal claim. A recent decision by the Full Bench of the Fair Work Commission brings this into question.

A maximum term contract is a contract that states the latest point at which the employment contract is to expire, but it may also provide a right for either party to terminate the employment contract prior to the nominated date with notice. This distinguishes it from a “true” fixed term contract, where neither party has the ability to terminate the employment contract prior to the nominated expiry date.

The Fair Work Act 2009 (Cth) (“FW Act”) requires that an unfair dismissal application be based on a termination of employment at the initiative of the employer. This generally does not include where the employment comes to an end merely through the effluxion of time.

Until recently, the leading authority on maximum term contracts and unfair dismissal was a decision involving an employee who had been employed on successive maximum term contracts over a period of seven years, with an on-going expectation of renewal. The Australian Industrial Relations Commission found that an unfair dismissal claim could not be brought on the basis of the non-renewal of her contract, as the termination was simply due to the effluxion of time, and therefore was not at the initiative of the employer.

In December 2017, the Full Bench of the Fair Work Commission departed from this approach. The case involved an employee who had been employed on a succession of back to back maximum term contracts, with an expectation of renewal, spanning over four years. At the expiration of the employee’s last contract, the employer did not offer him another employment contract due to his alleged poor performance.

The Full Bench determined that the correct approach was to look at the entire employment relationship, rather than simply having regard to the termination of the last of a series of employment contracts.

As a consequence of this approach, an employee may be able to bring an unfair dismissal claim if they were employed on a maximum term contract where the nature of the arrangement suggests on on-going relationship. Where the time-limited contact reflects a genuine agreement between the employer and employee that the employment relationship would not continue after a specified date, then in the absence of any vitiating factors, representations or sham agreement, there is unlikely to be a termination at the initiative of the employer.

A “true” fixed term contract continues to be protected from an unfair dismissal claim at the expiration of the fixed term. But if the time-limited contract does not in truth represent an agreement that the employment relationship will end at a particular time, the factual circumstances need to be examined to determine whether any actions of the employer were the principal contributing factor resulting in the termination of the employment, and therefore could be regarded as being at the initiative of the employer.

Key takeaways

  • Employers should be aware that simply allowing an employment contract to expire does not automatically exclude an unfair dismissal application if the nature of employment relationship creates an expectation of an on-going arrangement.
  • Employers should make clear the manner in which a maximum term contract is being used, and discuss this with the employee to avoid creating any unrealistic expectations.
  • Maximum term contracts should not be used to disguise the true intention of the parties regarding the employment relationship, as this can give rise to the risk of the arrangement being seen as a sham.

 

Not the norm: annual leave entitlements for nurses

 

Ellen Davis, Associate

When we think of annual leave we often think of four weeks as the norm, as well as an additional week for certain types of shiftwork. But in some cases, the base entitlement is higher, and it is also necessary to look carefully at which employees qualify under the shiftwork provisions.

For example, employees covered by the Nurses Award 2010 are entitled to five weeks’ annual leave, and those who are engaged in shiftwork are entitled to six weeks’ annual leave.

The Nurses Award

While the Nurses Award, like most other modern awards, adopts the National Employment Standards, it goes on to provide additional annual leave entitlements to employees covered by the Award.

Clause 31.1 of the Award provides:

a) In addition to the entitlements in the NES, an employee is entitled to an additional week of annual leave on the same terms and conditions.

b) For the purpose of the additional weeks annual leave provided by the NES, a shiftworker is defined as an employee who:

i. is regularly rostered over seven days of the week; and

ii. regularly works on weekends.

c) To avoid any doubt, this means that an employee who is not a shiftworker for the purposes of clause 31.1(b) above is entitled to five weeks of paid annual leave for each year of service with their employer, and an employee who is a shiftworker for the purposes of clause 31.1(b) above is entitled to six weeks of paid annual leave for each year of service with their employer.

Hence, an award or agreement may provide a more generous base entitlement than the NES, and define shiftwork for the purposes of that award or agreement in a particular way.

What does “regularly rostered” or “regularly works” mean?

There are authorities spanning through the different industrial tribunals and commissions which provide that an employee “regularly works Sundays and public holidays if they have worked at least 34 Sundays and 6 public holidays in a year”.1 While this decision was in the context of award and agreement free employment and the Full Bench has not yet had the opportunity to confirm that the above principle applies universally to all modern awards, it is expected that the Fair Work Commission would be guided by, and have little reason to depart from, the above principle in determining any dispute about the interpretation of “regularly works” or “regularly rostered”.

In the context of the Nurses Award, it would appear from the use of the words “regularly works weekends” that Saturday shifts would be included in the quota of 34 Sundays.

 

Key takeaways

  • Employers should check the specific wording of the award or agreement regarding annual leave entitlements.
  • In the case of additional leave entitlements for shiftwork, working a minimum of 34 shifts on Sundays per year tends to be the prevailing standard, but this can be varied by an award or agreement.
  • Employers who wish to minimise their additional annual leave costs could consider how they organise their rosters.

Is it all “strictly confidential”?

 

Cassandra Bujaroska, Graduate Associate

Scenario

It is Friday afternoon and one of your most senior employees, the manager of the sales team, comes to your office to officially give notice of their resignation. All appears to go smoothly, until, a few months later, you lose two of your firm’s major clients. Upon investigation, you discover that the senior executive accessed and stored confidential information on a USB before he resigned.

You need a game plan, but you are unsure how to go about it. What steps should you take? What are you legally entitled to do in these types of situations? What obligations do employees owe regarding confidential information post-employment?

What is confidential?

Any information that is not in the public domain, such as customers’ names and software programs, and trade secrets would fall under the definition of confidential information. Additionally, the case law in this area points to a number of factors that are relevant in determining whether or not information is considered to be confidential. Recently, the factors that a court will consider were summarised, and include the following1:

  • The extent to which the information is known outside the business;
  • The skill and effort required to collect the information;
  • The extent to which the business treats the information as confidential;
  • The value of the information to competitors;
  • Whether the information can be easily duplicated by others;
  • Whether the employee was informed that the information was confidential; and
  • Whether the usage and practice in the industry supports the confidentiality.

How does the law protect confidential information?

Employees owe a number of obligations to their employer regarding confidential information obtained in the course of their employment. For example:

  • an employee will have an implied contractual obligation to maintain confidentiality, an obligation which remains post-employment;
  • an employee may be subject to equitable obligations, including fiduciary duties to maintain confidentiality, and to act only in the interests of the employer;
  • if employed by a corporation, an employee will have an obligation under the Corporations Act 2001 (Cth) to not ‘improperly use the information to gain an advantage for themselves or someone else, or to cause detriment to the corporation’.2

The best way for an employer to protect its confidential information is to ensure that the employee has a written contract of employment that includes specific obligations with respect to confidential information.

For example, the contract should:

  • define confidential information;
  • impose express obligations (both during and post-employment) not to misuse confidential information; and
  • impose obligations to prevent misuse of confidential information by other parties, and to report any such misuse to the employer.

What to do if an employee breaches confidentiality

If an employee breaches his or her obligations with regards to confidential information, the employer may pursue a number of legal remedies, including:

  • an injunction to prevent any further breaches of confidentiality;
  • damages for breach of contract; or
  • an account of profits.

However, an employer will need to act quickly to ensure that these remedies remain available.

Key takeaways

  • Make express provision for confidentiality in employment contracts and in relevant workplace policy and procedure;
  • Expressly define what constitutes confidential information;
  • Regularly update what is confidential information as the business develops and where roles change;
  • Undertake training on confidential information, and make clear the consequences of improper use of such information; and
  • Act quickly with respect to any suspicion that any past or current employees have breached their obligations to keep information confidential.

Please contact People + Culture Strategies on (02) 8094 3100 if you would like assistance with reviewing or preparing confidential information policies, procedures or training.


Reed Business Information v Seymour [2010] NSWSC 790.

The Fair Work Commission gives Uber a Christmas gift: Drivers are not employees

 

Rohan Burn, Associate

In December 2017, the Fair Work Commission (“FWC”) dismissed an Uber driver’s unfair dismissal application on the basis that the applicant was not an employee and therefore not able to pursue this statutory remedy. This decision contrasts with a recent UK employment tribunal decision in which Uber drivers were found not to be self-employed, and were consequently found to be entitled to basic workplace rights.

Some caution needs be applied to taking this as a green light for gig-economy work arrangements as being beyond the scope of employment laws, as the applicant had no legal representation and it is a single member decision.

The FWC found the overseas decision to be of “no assistance” to the applicant because of the significantly more expansive definition of a “worker” in the United Kingdom. In the Australian context, there is no statutory definition of employment and a worker’s status is determined by reference to common law principles. This requires a multi-factorial analysis of the formal terms and actual work practices adopted between the parties. Deputy President Gostencnik did suggest the emphasis on a work-wages bargain and the current indicia that distinguish an employee from an independent contractor may be “outmoded” for participants in the digital economy.

The contractual relationship

Those unfamiliar with the specifics of Uber’s service agreements may be surprised that the respondent maintained Uber was in no way affiliated with providing transport services in Australia. Uber is self-defined as a technology company that provides a software application which enables a driver to accept a request from an Uber app user (a “Rider”). This acceptance creates a direct legal relationship between the driver and Rider that is independent of Uber and its affiliates.

The FWC agreed that Uber does not pay the driver for a service but rather charges the driver a service fee that is calculated as a percentage of the fees paid by the Rider. This was not “seriously challenged” by the applicant and this contributed to the absence of any work-wages bargain, as there was no obligation on the driver to perform a service and for Uber to pay for that service.

Indicia of worker status

At common law, a key indicium of an employment relationship is the amount of control over a worker. A major problem for the applicant in arguing that he was an employee of Uber was the “complete control” he had in the provision of his service to Riders. Part of Uber’s appeal to drivers is said to lie in their ability to determine when they work, for how long, and in what locations. Uber drivers also operate and maintain their personal vehicles, must wear their own clothes, and style how they interact with Riders.

The FWC found these factors outweighed the need for drivers to accept and meet Uber service standards aimed at protecting the Uber brand, ensuring customer satisfaction, and maintaining safety requirements. These standards are assessed based on the ratings that Riders give their drivers and Uber maintains the right to deactivate a driver’s account if, as in this case, those ratings are consistently poor.

Possible ramifications for your business

  • There is an increasing tension with the applicability of the traditional common law tests to modern labour markets.
  • The understanding of the parties and the description in the contract is not determinative of how the relationship will be characterised.
  • Developments in common law or legislative intervention may have ramifications that affect your organisation’s rights and obligations if employment relationships are seen to be inadvertently created.
  • Multiple factors must be taken into consideration to determine a worker’s employment status and PCS can assist employers to ensure their arrangements with “independent contractors” are genuine.

Off the Record: significant penalties imposed on company and director for underpayment and failure to keep records

Cassandra Bujaroska, Graduate Associate

Background

The Federal Circuit Court of Australia has recently handed down a decision involving allegations of underpayment and inadequate record keeping in relation to a second-year apprentice employed by a plumbing company.

During the Fair Work Ombudsman’s (“FWO”) investigation of this matter the company admitted to the breaches and remedied the underpayment by providing the employee with $26,882.73 in back pay. However, the FWO still launched proceedings against the employer and a director of the company as joint respondents with respect to these breaches, seeking the imposition of civil penalties.

Employee records

The court was not required to determine whether the employee had been underpaid, as this was admitted by the employer. The judge did, however, make the following comments regarding the use of employee records in underpayment claims:

“Given the statutory requirements upon employers with respect to record-keeping…a Court would accept even the most slight and generalised evidence of an employee as to the hours of employment in circumstances where an employer does not produce appropriate records.”

The judge made reference to recent amendments to the Fair Work Act 2009 (Cth) regarding evidence in underpayment claims. Earlier this year, the FW Act was amended to provide that, in circumstances where an employer fails to keep appropriate employee records, and the employee brings an underpayment claim, the employer bears the onus of disproving any allegations made by the employee about the work performed by the employee or the payments made by the employer.

Key lessons for employers

  1. Underpayments and poor record keeping can result in significant penalties being imposed under the FW Act, both on the employing entity and any individuals who are involved in the contraventions;
  2. The FWO may still prosecute employers even though the employer admits and rectifies an underpayment; and
  3. An employer bears the onus of disproving any allegations of underpayment made by an employee.

If you require any assistance or advice regarding record-keeping requirements under the FW Act, please feel free to contact People + Culture Strategies on (02) 8094 3100.