Checks and Balances: Background checks in the workplace

James Zeng, Senior Associate

Recent news reports about the possibility of persons convicted of sex offences being employed in workplaces where minors also work, has caused some employers to review their recruitment processes and the background checks they conduct.

Some employers are unsure as to which type of background check should be conducted and the differences between working with children checks and police or criminal record checks. In particular, some employers have questioned whether they need to conduct working with children checks where they employ both adults and minors (less than 16 years of age) in the same workplace.

Working with Children Checks

The Child Protection (Working with Children) Act 2012 (NSW) defines what “child-related work” is. Child-related work includes work involving children in education, sport, transport services, entertainment and health services. The requirement to obtain a working with children check clearance applies where a “worker” (which extends to employees, contractors, volunteers) undertaking “child-related work’ has “direct contact” with children (defined as physical or face-to-face contact) or is employed in a “child-related role”. The work must be “child-related work” for an employer to register online to verify their workers’ or prospective workers’ working with children check.

Police or Criminal Record Checks

A police or criminal record check may be an alternative avenue for conducting background checks. A police or criminal record check will be mandatory where it is a legislative requirement of the position that employees or job applicants not have a criminal record. Beyond this situation, employers can seek the consent of their employees or prospective employees, but this is limited to where a person’s criminal history is relevant to the inherent requirements of the role. To act otherwise may constitute discrimination in employment on the basis of criminal record.

Our table below outlines some of the differences in New South Wales, in the process between Police/Criminal Record Checks and Working with Children Checks.

​Can I have a sample please? Best practice tips for drug testing

Jessica Anderson, Graduate Associate

recent decision of the Fair Work Commission highlights the stringency required when conducting drug testing on employees.

In this case an employee refused her employer’s direction to provide a urine sample by:

  • objecting to her immediate supervisor collecting it because it was inappropriate to have someone she knew, and worked with closely, taking the sample; and
  • stating that the collection was not in accordance with the employer’s policy.

The employee was subsequently dismissed for serious misconduct in relation to her failure to follow management’s reasonable direction to undergo a urine drug test to determine if she had any illicit drugs in her system.

The Commission determined that it was not best practice to take a urine drug sample from a person you work with and know, and certainly not from a person you directly manage. The employer also did not comply with its own collection protocols when proposing to undertake the drug testing.

Ultimately, it was held that there was no valid reason for the dismissal based on a number of factors (including the provision of a valid medical certificate and a willingness by the employee to provide a urine sample at a later date). Even if there had been a valid reason, the lack of procedural fairness afforded by the decision-makers and the uncertainty as to the reasons for dismissal would have rendered the dismissal unjust.

Lessons for employers

  • Establish a clear drug testing policy and comply with it.
  • Consider the most appropriate individuals to undertake the testing and do not allow managers to undertake testing of their direct reports.
  • Be clear on the steps required under a policy and the reasons for dismissal. An unclear drug testing policy and unclear or confused reasons for dismissal may result in a dismissal being held to be unfair.

The investigation is biased! When to consider an external investigation

Jessica Anderson, Graduate Associate

The Fair Work Commission has identified that it may be prudent for employers to engage an independent third party to conduct a workplace investigation where an employee vigorously asserts that an internal investigation into bullying allegations will lack transparency or independence.

Background

In a recent decision of the Fair Work Commission, an employee claimed she had been bullied at work by her manager, against whom she had made a number of complaints previously. The allegations were the subject of two internal investigations that found the manager had acted reasonably. However the employee insisted that the investigations produced an unfair result.

Deputy President Sams was satisfied with the employer’s internal investigations, finding that they were “sound, appropriate and responsive” and allowed the employee “every opportunity” to present her version of events, and noted that it was the employee who was acting unreasonably.

In making his determination, Deputy President Sams said that “no matter what the result of any investigation of her complaints, particularly those conducted by the employer” the employee was “not prepared to accept any outcome, unless it unequivocally vindicated her complaints”. He then went on to recommend an external investigation where it is clear that the employee will not accept the findings of an internal investigation.

Lessons for employers

  • Consider engaging an independent third party to conduct an investigation where it is apparent that an employee will not accept the findings of an internal investigation.
  • Be mindful where an employee’s focus appears to be on exacting revenge or retaliation. That is not the intent of the bullying jurisdiction.
  • A best practice investigation will be “sound, appropriate and responsive” and will provide the employee with every opportunity to present their version of events.
  • Even though an employee is asserting that they are being bullied, this does not mean that they are insulated from any disciplinary action. For example, it may be appropriate for an employee to be disciplined where there is a constant refusal to comply with the reasonable directions of their manager.

Can you sack an employee for sleeping in?

Beverley Thomas, Associate

Yes, you can, provided that you can demonstrate that dismissal was not harsh, unjust or unreasonable. The same may apply to other bad habits of employees that undermine an employer’s professional standards or policies.

Recently the Fair Work Commission (“Commission”) commended auctioneer house, Pickles Auctions (“Pickles”) on their approach toward the dismissal of a car detailer with a bad habit of tardiness. He had previously received numerous verbal and written warnings for poor attendance. The detailer, who had been employed by Pickles for close to seven years, filed an unfair dismissal claim following the termination of his employment because he had slept in and failed to notify that he would be late. His dismissal occurred after he attended work more than an hour past his scheduled start time. When questioned by Pickles in a disciplinary meeting as to why he was late, his response was simply that he thought “the time was earlier than it was”.

Pickles was successful in defending the unfair dismissal claim. This was mainly because it was able to satisfy the Commission that it had given the Applicant an opportunity to explain his late attendance and he failed to do so, in circumstances where he had “a demonstrated inability to improve his attendance conduct…”.The Commission also noted that Pickles’ approach to the procedural aspects of the dismissal “should properly be recognised as commendable”.

Here’s our top takeaways from the example set by Pickles if you are considering the ongoing employment of an employee with a bad habit.

  1. Keep a paper trail: Formally raising dissatisfaction with an employee’s conduct in writing can assist an employer to establish a valid reason for dismissal. In this case, Pickles was able to do just this as it relied on the six written and numerous verbal warnings given to the employee in respect of his ongoing failure to attend for work at the scheduled time..
  2. Ring the alarm: Employers mustn’t be shy to raise their concerns about unsatisfactory performance. Not only does it put an employee on notice that their conduct may be putting their employment in jeopardy but it allows them an opportunity to improve and meet the employer’s expectations. Pickles had evidence of raising concerns with the Applicant since 2011 and as recently as in the last 6 months of the employee’s service which minimised his ability to argue that he was not given the opportunity to improve his behaviour.
  3. Let the employee have their say: A dismissal is less likely to be deemed unfair if the employer can show that they gave the employee a chance to provide an explanation or defence for their unsatisfactory conduct. It is important that this step is not regarded as a “checkbox” to be “ticked off”. Proper consideration must be given to what an employee has to say. Pickles met with the Applicant to do exactly this but instead of immediately terminating his employment it adjourned the meeting to consider the employee’s excuse, his work history and the previous warnings given, before reconvening to terminate his employment.
  4. Offer a support person: Employees do not have a general entitlement to have a support person present at a disciplinary meeting but the unreasonable refusal of a support person may weigh against an employer in the event an employee requests one. For this reason it is recommended that employers offer an employee the opportunity to bring a support person along to a meeting where dismissal is a possible outcome.
  5. Know your expertise: The Commission is at liberty to scrutinise an employer’s management resources and whether the lack of HR expertise has impacted on the procedures followed in effecting a dismissal. The Commission was impressed by Pickles’ dedicated in house employment relations specialist in this matter and held them accountable for the proper and just dismissal of the Applicant. Seeking the external counsel of an employment law specialist like PCS can also assist an employer to meet this criteria.

When employees walk out

David Weiler, Associate

Recently it was reported that up to 500 journalists and other editorial staff walked off the job in response to an announcement by Fairfax Media that it intended on making cuts to the equivalent of 120 full-time staff. This dramatic display of industrial defiance is an example of where a breaking point has arisen between employees and management. 

The actions taken by the Fairfax employees constituted unprotected industrial action under the Fair Work Act 2009 (Cth) (“FW Act”) as it was not undertaken as the result of a protected action ballot (nor could it have been as the relevant enterprise agreement had not yet expired). This type of behaviour can be extremely detrimental to businesses and employers should be aware of their rights in preventing such action, especially those in the public spotlight. 

If an employer is of the opinion that unprotected industrial action is threatened, impending or probable it has the ability to apply to the Fair Work Commission to make an order to stop the industrial action (or proposed action). Therefore it is crucial that if an employer thinks action may be taken, it acts as swiftly as possible. A breach of an order to stop bargaining can carry a maximum penalty of $10,800 for individuals and $54,000 for bodies corporate. 

However, although the Commission must (so far as practicable) determine such an application within two days after the application is made, this is not always enough time. In the case of the Fairfax employees, they were only given notice of the proposed redundancies on a Thursday morning and the first wave of 24-hour strikes began on Friday. This demonstrates the potential for disruption from unprotected industrial that employees can cause, often with little recourse. Importantly, employers are prevented under the FW Act from taking adverse action against an employee that takes part in industrial action, regardless of whether it is protected or not.

If employees do take unprotected industrial action, employers are obligated under the FW Act to not pay them for this period of time (and at least four hours of pay if the action lasts less than four hours). 

The Fairfax dispute is a high profile example of how important it is for employers to manage industrial relations even when an enterprise agreement is on foot. We work with clients on how to effectively engage early, often and genuinely with both employees directly and their union representatives.  

Employer Funded Paid Parental Leave – Top 5 Things to Consider

Beverley Thomas, Associate

Despite lingering uncertainty about the future of the Government’s Paid Parental Leave Scheme, many organisations continue to develop and implement their own unique Parental Leave Policies to entice to job applicants, encourage diversity and improve the work-life balance of their employees.

Globally, we have seen companies, particularly in the tech space, making waves with their policies. For example, online e-commerce company, Etsy, offers a half year’s paid leave to its employees and Netflix provides its employees with “unlimited” paid leave during the first year after the birth or adoption of a child. Regardless of where your organisation draws its inspiration from, there are a few things to keep in mind when designing your Paid Parental Leave Policy. Here are our top tips:

  1. Remember that paid leave equals service: Some employee entitlements are determined by years of “service”. While periods of unpaid leave do not count towards service, paid periods of leave usually do. This means that employees will accrue annual and personal leave during periods of employer funded paid parental leave, so it is worth factoring in this cost when designing a policy.
  2. Foster a culture of acceptance: There’s no use in implementing generous family friendly policies if the culture of the workplace is such that an employee would be frowned upon if they accessed the policy’s benefits. Acceptance is something that should filter from the top down in order to have the most influential impact. Recently, Facebook founder Mark Zuckerberg, took two months off to spend time with his wife and new daughter after her birth. This sent a powerful message to employees of this social media network that equally grants new mums and dads four months of paid parental leave.
  3. Benefits are best kept discretionary: Business environments, governments and legislation can all change and affect your organisation’s ability to provide benefits in excess of its obligations. For this reason, it is generally recommended that a Paid Parental Leave Policy is contained in its own policy document as opposed being drafted into contract of employment or enterprise agreement. Provided it is made clear that it is not an entitlement and subject to change, this will assist you organisation to alter its policy from time to time with less exposure to a legal claim.
  4. Keep diversity at the forefront: Surrogacy, adoption, fostering and same-sex relationships are just some of the features of today’s diverse society. Avoid directly or indirectly discriminating against particular groups by taking a gender neutral approach to policy drafting and extending benefits to less commonly considered scenarios.
  5. Think outside the square: Providing employees with paid leave is only one way that employers can take a family friendly stance. Consider other options that might be more suitable for your organisation, such as providing employees with a bonus upon their return to work after taking parental leave. Other options include continuing to make superannuation contributions to an employee during periods of unpaid parental leave or facilitating flexible work arrangements upon a parent’s return to the workplace.

Getting independent contracts right: a case law follow up

In our most recent edition of Strateg-Eyes, we considered the use of “triangular contracting arrangements” as a means of mitigating the risk of a worker being deemed an employee when the intention was that they be engaged as an independent contractor. A timely decision of the Fair Work Commission (in Mr Norman Turner v Australian Postal Corporation [2016] FWC 801) has demonstrated the effectiveness of these arrangements when properly deployed in practice.

The decision

Mr Turner performed work for Australia Post and argued that he was unfairly dismissed following the termination of his engagement. Australia Post objected on the basis that Mr Turner was an independent contractor, not an employee.

Mr Turner argued that the relationship was one of employment based on certain of its characteristics, including that Australia Post:

  • controlled his mail delivery area;
  • dictated the appearance of the vehicle he was to use;
  • required him to wear an Australia Post uniform; and
  • required him to comply with certain of its policies and procedures.

Australia Post argued that no employment relationship existed because the Mail Contractor Agreement (the “Agreement”) it had entered into was between it and Coomba Park Couriers, Mr Turner’s company. That is, the Agreement was a triangular contracting arrangement.

The FWC accepted Australia Post’s argument, holding that because:

  • there was no contract between Australia Post and Mr Turner; and
  • the Agreement was not a “sham” (in that there was no evidence to suggest that it was not intended it would have “substantive legal effect”),
  • there was “no basis [on which] to undertake a ‘multi–factorial assessment’ to determine whether the character of any contract between Mr Turner and Australia Post (if it existed) was a contract of employment or alternatively a contract of some other character”.

As such, Mr Turner was precluded from bringing an unfair dismissal claim.

Lessons for employers

  • Independent contracting arrangements should be recorded in tripartite contracting arrangements where possible.
  • Such arrangements should contain express acknowledgments that the relationship they record is not one of employment.
  • Even where a number of features of a relationship are indicative of employment, if these features can be explained as genuine requirements of a commercial contract, the worker may not be deemed to be an employee.

Beyond restraints: other methods of protecting business interests

Michael Starkey, Associate

When it comes to protecting legitimate business interests following a termination of employment, many employers will be familiar with contractual restraints of trade. Such provisions seek to prevent an employee from, for example, soliciting his or her former employer’s clients, or taking up employment with a competing business. Well drafted restraints can be invaluable in these regards – however, restraints are also notoriously difficult to enforce, and whether or not a restraint will be effective is often not known until it is too late.

In light of this, we thought we’d share some lessons from a recent decision of the New South Wales Supreme Court (BGC Partners (Australia) Pty Limited v Hickey [2016] NSWSC 90 (“Hickey”) which demonstrates that when it comes to protecting your business’ interests, restraints aren’t the only option.

Fixed-term contracts

It is a common misapprehension that a “fixed-term contract” is one that has a specified end date, but may be terminated by either party prior to that date. Such contracts are in fact “maximum-term contracts”. Fixed-term contracts are contracts that are unable to be terminated prior to their specified end date.

A business which is able to assess its needs in advance might consider employing executive employees on fixed-term contracts so it can be certain of the period that they will remain with the organisation (and, therefore, be kept out of the market).

Employers should be wary, however, of certain risks inherent in fixed-term contracts, including that a term of “reasonable notice” may be read into the contract in the event of a dispute, and of the organisation being “shackled” to an employee who might not perform as hoped.

Creative termination clauses

One way in which a fixed-term contract might be modified so as to mitigate some of these risks is through the inclusion of creative termination clauses.

In Hickey, the employee’s argument that he should be entitled to resign on the provision of reasonable notice was rejected because the express terms of the contract specified that he could only resign in very limited circumstances – that is, by giving notice within the final two weeks of the term, in which case the employment would end three months after the term expired.

Termination clauses such as this can help protect an employer’s business interests by:

  • preventing unilateral resignation in surprising circumstances; and
  • drawing out the length of any notice period, thereby giving the organisation time to secure its interests prior to the employee leaving it.

The outcome in Hickey was that the employee was prevented from working with his former employer’s competitor for nine months (being the three month “notice period” plus a six month restraint which was successfully enforced).

While restraints will remain the primary method by which most business’ protect their interests post-termination, by making themselves aware of other available options, employers can reinforce the protection of restraints as appropriate in the circumstances.

Deduct-do or Deduct-don’t: The Rules Around Employee Deductions

Elizabeth Kenny, Associate

When an employee owes an employer money, many employers assume that they are able to make deductions from an employee’s wage or salary to recover the money which is owed to them. However, the Fair Work Act 2009 (Cth) (the “FW Act”) is particularly prescriptive about the circumstances in which an employer can make lawful deductions from an employee’s wage and salary and further safeguards employees from unlawful deductions by exposing employers to civil penalties in circumstances where an unlawful deduction is made.

The Law

Under the FW Act, an employer cannot deduct amounts from the employees pay unless:

  • the employer has obtained consent from the employee in writing AND where it is principally for the employee’s benefit (eg. salary sacrifice arrangement); or
  • it is permitted by law, a court order, by the Fair Work Commission (“FWC”), or under the relevant industrial agreement or modern award.

An employer cannot deduct money if the employer gains a benefit, either directly or indirectly, and it is unreasonable in the circumstances.

Deductions by Consent

Employers must be mindful that getting express consent from the employee must be in relation to the specific deduction to be made including specifying the amount of the deduction. Therefore, a generalised consent to deductions without any specifications as to what kind of deduction and the amount of the deduction may not be considered to be valid or lawful.

Deductions Permitted by Law

While it may seem that the law is prescriptive about when a deduction is lawful or unlawful, it is often the most confusing for employers to determine whether a deduction is lawful when the employer has not received express consent from the employee.

For example, if an employee resigns without notice, is an employer able to deduct any amounts that the employee owes including notice of termination?

In circumstances where an employee has resigned on the spot and has not given the correct notice of termination, an employer may be able to deduct the equivalent period of notice from monies due on termination of employment, so long as this is specified in the applicable modern award or industrial agreement. It is common in modern awards to include a provision which states that:

“If an employee fails to give the required notice the employer may withhold from any monies due to the employee on termination under this award or the NES, an amount not exceeding the amount the employee would have been paid under this award in respect of the period of notice required by this clause less any period of notice actually given by the employee.”

Another example is when an employer has overpaid an employee. Can the employer deduct the amount overpaid from the employee’s next pay?

Generally speaking, the employer cannot take money from the employee’s pay to correct the mistake or overpayment. Similarly to the above, an employer will only be able to deduct an overpayment amount if it is allowed under an industrial agreement, modern award, legislation or court order. Therefore, it would be far more beneficial for employers to discuss and agree to a repayment arrangement with the employee in a scenario where an employee has been overpaid.

Lessons for Employers

Employers must be cautious when determining whether a deduction from an employee’s wage can be made, particularly as civil penalties can be imposed if a deduction is found to be unlawful. As best practice, employers should seek to obtain the employee’s express consent for any deduction, or ensure that they are permitted under an industrial instrument or modern award to make such deduction.

If you are unsure if a deduction is lawful or unlawful, please speak to the PCS Team on (02) 8094 3100.

Key Lookouts for Foreign Investors

Beverley Thomas, Associate

Despite the relatively high cost of labour, it’s easy to see why Australia is an attractive market for foreign investors. Australia boasts an AAA rated economy, low risk business environment and a location that lends itself to fantastic exporting opportunities across Asia. 

Recently, the Fair Work Ombudsman (Ombudsman) investigated a Singaporean investor, Reddot Brewhouse (Reddot) who underpaid its staff in an Australian venture. 

Reddot established an Australian brewery for the purposes of exporting its boutique brews to the broader Asian market. Unfortunately for Reddot a bump in the road to success was met when the Ombudsman discovered that a welder employed by Reddot had been underpaid by $20,260 over the span of three months. What’s more, the underpaid employee emigrated from the Philippines for the role and was oblivious to the fact that he was engaged under a class of visa that was significantly different to what the employer originally promised. Instead of receiving a subclass 457 visa, the employee was granted a subclass 400 visa, which only permits a short stay for work that is not ongoing. 

In a bid to encourage compliance with the Fair Work Act 2009 (FW Act), Reddot has been compelled to comply with enforceable undertakings which include obligations to:

  • back pay unpaid penalties and unlawful deductions from the employee’s wages;
  • implement systems and processes to ensure future compliance with workplace laws; and
  • engage an external accounting professional to audit Reddot’s workplace practices.

So, what should foreign investors take away from the Ombudsman’s investigation into Reddot?

  1. Foreign investors would do well to familiarise themselves with Australian workplace laws prior to entering the market. Even if an investor does not set up an Australian entity, it will be subject to the FW Act as foreign corporations are still classified as “national system employers”. In this instance, Reddot was lucky to have only been subject to enforceable undertakings as typically such breaches would result in steep penalties being imposed against the employer.
  2. Importing labour into Australia will not absolve a foreign entity from its obligations under Australian workplace laws. Reddot’s owners stated in the course of investigation that Australia’s labour market was “too expensive”, leading them to import labour from overseas. However, visa holders are entitled to the protection of the National Employment Standards and visa sponsors such as Reddot are required by the Department of Immigration and Border Protection (Department) to pay an employee sponsored for a subclass 457 visa at least the safety net salary of $53,900p.a. to protect them against exploitation. This is known as the Temporary Skilled Migration Income Threshold (TSMIT). The TSMIT does not apply to other subclasses of temporary skilled visas such as the subclass 400 short stay visa. It is relevant to note, though, that employers are still required to demonstrate that employees will be paid in accordance with Australian market rates whilst working in Australia for periods that are 3 months or longer, in order to meet application criterion. Failure to do so will result in a visa application refusal.

Further, failure adhere to the prescribed salary levels after a visa has been granted will be considered a breach of the sponsorship obligations for Standard Business Sponsors. Additionally, underpayment of subclass 400 visa holders may also constitute a breach of the Migration Act 1958 (Cth) as well as the FW Act if such payments do not meet minimum standards as prescribed by a modern award, or minimum wage requirements at the least. Breaching sponsorship obligations, or investigations by the FWO could compromise an employer’s prospects of sponsorship and/or employment of foreign nationals.

Considering investing in Australian markets? Look no further than PCS to help you understand your obligations as an employer and assist you with your skilled migration needs.