Doesn’t add up: no accrual of leave entitlements during a lockout

 

Roseanna Smith, Graduate Associate

The Fair Work Commission (“FWC”) has held that a lockout constituted an “excluded period” of service under the Fair Work Act 2009 (Cth) (“FW Act”), and consequently that the employees affected by such action did not accrue annual leave or long service leave during this period.

What is an “excluded period”?

The FW Act provides that a period of service is a period during which the employee is employed by the employer, but does not include an “excluded period”.

An excluded period is defined to include any period of unauthorised absence or any period of unpaid leave or unpaid authorised absence (other than certain specified categories).

When calculating leave entitlements, an excluded period will not be included in a period of service, although it does not break the employee’s continuous service.

In April 2017, after a year of enterprise agreement negotiations, an employer locked out its employees in response to notified industrial action that was to take the form of work bans and four-hour stoppages. A dispute then arose as to whether the lockout constituted an “excluded period”.

Annual Leave

The FWC decided that a lockout was an unpaid authorised absence, as it was an absence “that is endowed with authority or approval” by the employer. The FWC determined that it did not matter whether the employees who were absent “agreed or wished to be absent”; what is relevant is that the absence was authorised by the employer.

The FWC was of the view that because the FW Act expressly deals with the situation where employees are stood down as being included in a period of service, it considered that the legislature had turned its mind to the issue. Hence, if a lockout period was meant to be included for the purpose of calculating leave entitlements the legislature would have expressly included that within the FW Act provisions.

Long Service Leave

Both the relevant Modern Award provisions and the relevant state long service leave legislation (Long Service Leave Act 1992 (Vic) (“LSL Act”)), referred respectively to an “unbroken contract of employment” and “continuous employment”. The Modern Award and the LSL Act provided for exclusions when calculating long service leave, including “service interruptions”, such as industrial disputes. The Commission agreed with the employer that the ordinary meaning of industrial dispute included disputes arising from enterprise agreements and lockouts. Consequently, during the period of the lockout the accrual of long service leave was effectively paused.

The decision is significant because it highlights that the consequences of industrial action can extend to employee entitlements. It remains to be seen whether the decision will discourage industrial action by employees.

 

Key takeaways

  • The taking of industrial action, including by an employer in response to actions by employees, can have consequences for leave entitlements.
  • Certain actions may give rise to an “excluded period” and will not count towards the length of the employee’s service, but do not break the employee’s continuous service.
  • In the case of long service leave, industrial action may have an effect on the entitlement depending on the terms of the exclusions in the relevant state legislation and industrial instrument.

 

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.

“Like for Like” – A consideration of casual conversion

Erin Lynch, Director

The Fair Work Commission (the “FWC”) recently addressed the right to convert to permanent employment when an industrial instrument (in this case an enterprise agreement) provides such a right. Of particular interest was the FWC’s consideration of the right to convert on a “like for like” basis.1

The relevant term of the enterprise agreement provided that:

“… where a casual Transport Worker has been directly employed by Toll or engaged through a labour hire company to perform work for Toll on a regular and systematic basis for more than 6 months, the Transport Worker may elect to become a permanent Transport Worker, on a like for like basis, within the specific business unit at which the Transport Worker is engaged, in accordance with the Award.”

The employee claimed that he had a right to convert from casual employment to permanent employment on a “like for like” basis. Previously he worked Monday to Friday, normally commencing at 4.00am, and generally did an eight-hour shift. He wanted an equivalent position on a permanent basis.

The offer initially proposed by the employer was “made up of 4 hour, 5 hour and 6 hours shifts” and was communicated as amounting to “30 hours a week”. The employer asserted that this complied with the casual conversion clause of the enterprise agreement and the award.

The FWC ultimately concluded that the offer did not reflect the right conferred by the enterprise agreement to convert casual employment to permanent employment on a “like for like basis”.

It reached this conclusion on the basis that the phrase “like for like”:

  1. is to be interpreted “with a practical bent of mind” and in the manner which it was “likely to have been understood in the context of the relevant industry”2 ;
  2. requires a comparison between the nature and extent of the work previously performed by a casual employee with that of a permanent employee performing much the same work; and
  3. has to be applied to the facts and circumstances of each individual employee and the workplace in which the work is performed.

While it was held that mathematical precision is not required, the FWC accepted that it is a tool which assists in reaching an informed decision when comparing competing positions.

In this case, the nature and extent of the ordinary hours worked by the employee was a little less than eight ordinary hours per shift and about 34 hours per week. If you were to include ordinary hours together with overtime, the employee worked just over eight hours per shift and slightly more than 38 hours per week.

An offer of a position made up of “4 hour, 5 hour and 6 hour shifts” fell short, as in the casual role, the employee regularly worked Mondays to Fridays for periods in excess of six hours per shift. To meet the requirements of the enterprise agreement to convert employment on a “like for like” basis, the employee was entitled to a permanent full-time position.

In addition, the FWC added that the right to convert was not limited by what the employer may have be prepared to offer and it was “not merely a right to convert to a permanent position; it [was] also a right to convert to a permanent position on a “like for like basis”.”

This decision demonstrates that the FWC will adopt a fairly strict approach to interpreting casual conversion provisions in enterprise agreements (and potentially awards). Employers should be mindful when negotiating enterprise agreements, to avoid terms which may result in business outcomes that may not be sustainable.

We do note that in this case the employer did not argue that a permanent full-time position was not available for the employee and this could be relevant in other conversion situations.


1 Tomvald v Toll Transport Pty Ltd [2017] FCA 1208

2 Kucks v CSR (1996) 66 CR 182 at 184

First FWO prosecution for race-based underpayments

Therese MacDermott, Consultant

It is fairly well known to HR and legal practitioners that the extent of race based employment discrimination is not accurately reflected in the number of complaints lodged by individual workers. This makes the role of the regulator, in pursuing breaches of the Fair Work Act 2009 (Cth) (the “FW Act”) that are linked to race, a significant aspect of enforcement and compliance.

The Fair Work Ombudsman (“FWO”), since its inception, has assiduously prosecuted egregious underpayments and other conduct amounting to substantial non-compliance with core employment obligations.

In a recent case, following an audit of its work arrangements, an employer was found to have breached the FW Act in a number of respects, including by failing to pay the minimum award rates and other allowances for overtime, weekend work and public holidays and in relation to its record keeping obligations.1

The respondents admitted the underpayment and record keeping contraventions in relation to a number of its employees. However, the case proceeded on the outstanding issue of whether, in addition to the established breaches, the respondents had taken adverse action against particular employees because of their nationality or descent. Ultimately, the Court found that the employer contravened the prohibitions on discriminatory treatment in the FW Act. It held that the failure to pay particular workers correctly and other treatment was adverse action based on race.

In establishing the causal link between the treatment and the prohibited ground (in this case, race), many adverse action cases have turned on the state of mind or motivation of the decision-maker in order to ascertain the real reason for the decision-maker’s conduct. Many employers have been able to discharge the onus of establishing that a prohibited ground was not a substantial and operative factor for the treatment by establishing that the prohibited ground had nothing to do with the reasons the decision was made.

However, in this case, the Court did not accept that the second respondent (the decision-maker) was confused about the award obligations and concluded that the Malaysian national extraction and Chinese race of the employees in question was the substantial and operative reason. The Judge found that the employer failed to provide any convincing or credible explanations for the treatment consistent with the absence of race as a substantial and operative reason for the action.

This case is significant as it is the FWO’s first racial discrimination litigation. It is also a reminder to employers to ensure that decision-making within their organisations is not impacted by any prohibited grounds so as to bring into question compliance with the FW Act. Decision-makers must be able to provide credible explanations for the treatment of workers that is disassociated from any discriminatory treatment or other proscribed bases.


Fair Work Ombudsman v Yenida Pty Ltd & Anor [2017] FCCA 2299

Fair Work Act amendments enhance penalty provisions & impose new franchising obligations

Michael Starkey, Associate

Last week, the Federal Parliament passed amendments to the Fair Work Act 2009 (Cth) (the “Act”) which aim to protect “vulnerable workers” from exploitation by employers. The amendments follow a period of intense media scrutiny in relation to such workers, particularly migrant workers employed by franchise companies.

Serious contraventions

The amendments impose penalties of up to $630,000 for a corporation and $126,000 for an individual in respect of a new category of “serious contraventions” of the Act. A contravention of a civil penalty provision of the Act (for example, underpayment of wages) will be considered a “serious contravention” if:

  • the person knowingly contravened the provision; and
  • the person’s conduct constituting the contravention was part of a systemic pattern of conduct relating to one or more other persons.

These new penalty provisions also capture persons who are knowingly involved in a serious contravention.

Employers should bear in mind that the category of “serious contraventions” applies to all employers, not just franchisors.

Franchising obligations

The amendments create a new offence to capture franchisors and parent companies in the event that they fail to take reasonable steps to prevent contraventions within the franchise group. This means that franchisors will be directly exposed to liability for contraventions such as underpayments, even if they do not employ the workers in question themselves.

Other changes

Other changes introduced by the amendments include:

  • new powers for the Fair Work Ombudsman to require the production of evidence in relation to investigations; and
  • new prohibitions preventing employers from implementing cashback arrangements that require employees to spend their money in connection with their employment or prospective employment, where the requirement is unreasonable and the payment is directly or indirectly of benefit to the employer or prospective employer.

Given the nature of these amendments, we encourage all our clients to undertake workplace audits in relation to payment of wages, award compliance, and leave entitlements to identify any systemic issues (within their own organisations and any franchising group) and rectify them.

Please contact your PCS Team Member for further information and assistance.

“Don’t forget the public” – breadth of non-worker WHS duty

Ben Urry, Associate Director

When reviewing health and safety practices, businesses need to adopt a long-term view of the potential impact on non-workers. A business should not assume that their obligation to protect customers, visitors or members of the public is limited only to the particular point in time when the work was actually being undertaken.

Risks to health and safety may not manifest for days, weeks or even months after the work is performed, and if the work has the requisite causal connection to the creation of the risk, then a business may be exposed to criminally liability.

In a recent decision handed down by the Industrial Relations Court of South Australia, it was held that work, health and safety (“WHS”) provisions in the Work Health and Safety Act 2012 (SA) in relation to a “non-worker” (including the public at large) were not limited to risks in the workplace at the time the work was being undertaken.

In September 2014 a young girl was killed at the Royal Adelaide Show when she was thrown from an amusement ride. The ride had been certified as safe to use (by Safe is Safe Pty Ltd) 12 days prior to the accident.

Safe is Safe and its officer, Mr Hamish Munro (the “Defendants”), were subsequently charged under the Work Health and Safety Act 2012 (SA). The Defendants argued that the obligation to ensure, so far as is reasonably practicable, that the health and safety of other persons is not put at risk only existed while the work was being carried out (ie the period in which the inspection and issuing of the certificate occurred) and did not extend to the consequences or product of the work.

In rejecting these arguments, the Court held that it was the creation of the risk that constituted the offence, with the “risk” in this context simply meaning the possibility of the health and safety of the nominated class of persons being compromised.

The case is a timely reminder to businesses that the mere passage of time since the work was undertaken does not lessen the possibility of liability for any risks created.

How to minimise legal risks associated with labour contracting

Sam Cahill, Associate

Labour contracting can give rise to specific legal risks for a business that uses such an arrangement where non-compliance with employment obligations occurs. The Fair Work Ombudsman (“FWO”) has published a new guide that suggests certain steps businesses can take to minimize the legal risks associated with labour contracting.

What is labour contracting?

Labour contracting can be done in two different ways. The first way, which is commonly known as “labour hire”, is where a business (the “host”) engages a labour hire agency to provide workers – who are employed and paid by the labour hire agency – to perform work under the direction and control of the host business. The second type, which is often referred to as “outsourcing”, is where a business (the “principal”) engages a contractor to perform a certain task or function instead of having this task or function performed by its own employees. Under this arrangement, the work may be performed by the contractor’s employees or sub-contracted to another contractor business.

Legal Risks

The labour provider (often referred to as the contractor) – being the employer of the relevant workers – owes various legal obligations to its employees under the Fair Work Act 2009 (Cth) (“FW Act”) and any relevant Modern Award or Enterprise Agreement.

The host business is not immune from liability if a breach occurs. The FW Act provides that any party – including an individual or another business – who is “involved” in a breach of the FW Act is also taken to have committed the breach. This concept is known as “accessorial liability”. In the context of labour contracting, accessorial liability means that a host or principal business can be held liable for the failure of the labour provider to comply with its legal obligations.

Steps recommended by the FWO

In recent years, the FWO has sought to crack down on compliance issues arising with respect to labour contracting and other similar arrangements, and has relied on the accessorial liability provisions under the FW Act to establish liability on the part of a number of businesses.
Now, in a bid to improve understanding of these issues within the business community, the FWO has published its own guidance material on labour contracting. In short, the FWO suggests that a host or principal should take the following steps to minimise the legal risks associated with labour contracting and accessorial liability:

  • understand the pay and conditions that apply to the workers;
  • understand the workplace practices of a potential contractor (for example asking for information as part of the tender process);
  • ensure that the contract price negotiated is adequate to cover the wages and other entitlements for the relevant workers (keeping in mind that the contractor will also have overhead costs and will generally need to make a profit);
  • seek an undertaking from the contractor that it will comply with the FW Act (this can be done as part of the written agreement); and
  • require the contractor to notify or seek approval prior to engaging any sub-contractors.

Please contact us if you require any assistance regarding your labour contracting arrangements, including the implementation of the above recommendations.