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A series of recent decisions by the Fair Work Commission have soundly reconfirmed the status of Uber drivers in Australia as independent contractors, despite the protestations of some of the drivers engaged through its “Partner App” that they are employees. These decisions reinforce the prevailing binary classification of workers in Australia – you are either an employee or an independent contractor.

With the rise of the so-called ‘gig-economy’ and the proliferation of new types of work and digital platforms, is it time we considered changing how we classify the work that people do? Recent case law in the United Kingdom demonstrates that workers in the gig-economy may not fit into the traditional contractoremployee dichotomy. Perhaps a new category is needed to balance the needs of businesses such as Uber to have flexible sources of labour, while affording a limited set of entitlements and protections to workers who are becoming increasingly dependent on these digital platforms for an income?


The term ‘gig-economy’ refers to the growing area of work involving temporary or freelance style engagements of work in areas such as transportation, food delivery, odd jobs and even professional services. Everyday consumers are able to engage these services through digital platforms such as Uber’s Partner App, Airtasker, Ola and Deliveroo, where they are connected with workers and through which payments for the services are made. Workers on digital platforms such as Uber and Deliveroo execute service agreements with the company, which allows them to use the digital platform to provide their services. The company will often require their workers to meet certain requirements. For example, Uber mandates that their driver-partners hold a full drivers licence, have car insurance and undergo background checks. Payments made by consumers using the digital platform will be transferred to the workers, with the relevant company taking a certain percentage of each transaction.

The crucial element of the gig-economy from an employment law perspective is the fact that workers are strictly engaged as independent contractors, not employees.

The Victorian Government recently conducted a study into the participants in the gig economy, titled ‘Digital Platform Work in Australia’. The survey found among other things that participants were reporting dissatisfaction with earning a fair income, their ability to set the prices for their services and their ability to gain new skills through their work. These findings reflect a growing sentiment that changes may need to be made to how these workers are classified, which is evident in the growing area of case law surrounding the gig-economy.

Challenges to the independent contractor classification 

In Australia, there is a growing body of cases that have been heard by the Fair Work Commission where workers engaged by Uber have challenged their status as independent contractors, arguing that they are instead employees and are therefore protected from unfair dismissal. In three separate cases the Fair Work Commission has firmly rejected claims brought by former Uber drivers that they were unfairly dismissed from their employment on the basis that they are in fact independent contractors and therefore not protected by the unfair dismissal provisions of the Fair Work Act.

In making these decisions, the Fair Work Commission considered various factors to determine the relationship between the drivers and Uber, using the ‘multifactorial test’ set out in the French Accent case before the previous industrial relations tribunal, Fair Work Australia. The multifactorial test looks at factors including the level of control over the person, if the person provides their own tools and equipment, if the work can be further delegated or subcontracted, if they can perform work for others and if the other party can suspend or dismiss them. In all three cases the Fair Work Commission decided that the drivers were independent contractors, pointing to factors such as the ability of drivers to log in and out of the Partner App, to control their hours of work, the ability to refuse trip requests along with other factors such as no requirements to wear uniforms, display branding and being able to work for other companies as indicative of there being a contracting relationship.

Although the Fair Work Commission found no strong arguments in favour of a finding that these drivers were employed by Uber, Deputy President Val Gostencnik’s comments in the case of Kaseris v Rasier Pacific V.O.F1 indicate that the traditional dichotomy of independent contractor/employee that has developed in Australian law may be outdated in the face of economic and societal changes which have manifested into the gig economy. In that case the applicant in part tried to rely on a decision in the United Kingdom, Uber BV v Aslam,2 which found that Uber drivers were workers and not independent contractors, but Deputy President Val Gostencnik rejected this line of reasoning. However the Deputy President did suggest in his judgment against the applicant that the traditional multi-factorial test was “no longer reflective of our current economic circumstances”, because the factors “take little or no account of revenue generation and revenue sharing as between participants, relative bargaining power, or the extent to which parties are captive of each other, in the sense of possessing realistic alternative pursuits or engaging in competition”. 

On the flipside of these cases is the decision of the Fair Work Commission in Klooger v Foodora Australia Pty Ltd.3 Foodora was another participant in the gig-economy, providing food delivery service through a network of delivery riders and drivers. The applicant delivery rider was successful in establishing that he was an employee of Foodora and in doing so was successfully able to make an unfair dismissal claim. The Fair Work Commission found after applying the multifactorial test that Foodora’s rostering system exhibited a high degree of control over the riders, with no ability for them to work outside of those hours or locations. The riders were also required to use branded attire and equipment, and the employment contract was drafted in such a way that it contained provisions which closely resembled an employment contract. The Fair Work Commission did consider the applicant’s use of a ‘substitution scheme’ whereby he was able to use third parties to perform the work through his account on the Foodora application, but did not allow Foodora to rely on this line of reasoning due to its acceptance and validation of the scheme despite it being in breach of contract and other Australian laws for other reasons.

There is currently a sham contracting case on foot in the Federal Circuit Court against another food delivery service, Deliveroo, in which the applicant rider has claimed that he is in fact a casual employee and is therefore entitled to higher rates of pay along with entitlements. Recent media reporting suggests that the applicant will rely on factors such as being required to wear a uniform, using branded equipment and the ‘batching system’ used by Deliveroo to determine priority for offering shifts to riders.

Recent developments in the United Kingdom 

In the United Kingdom instead of the independent contractor/employee dichotomy there are three categories for classifying the work that people do. People are either employees, workers or independent contractors, with different levels of entitlements and protections afforded to each category. Workers are entitled to:

  • the national minimum wage;
  • protection against unlawful deductions from wages;
  • minimum levels of paid holidays;
  • minimum lengths of rest breaks;
  • not work more than 48 hours per week or the right to opt out of this;
  • protections for whistleblowing and against unlawful discrimination; and
  • not to be treated less favourably if they work part-time.

Employees will receive all of these rights along with other entitlements such as sick leave, maternity/paternity leave and minimum notice periods. Independent contractors sit on the other side of the spectrum, not receiving any of these entitlements aside from any work health and safety protections.

There have been two major cases which have considered the question of how to classify participants in the gig-economy in the United Kingdom; Uber BV v Aslam and Independent Workers’ Union of Great Britain v RooFoods Ltd (t/as Deliveroo).4

The decision of the Employment Appeal Tribunal in Uber BV v Aslam confirmed that Uber drivers in the United Kingdom are in fact workers and not independent contractors. The deciding factor in this matter was that drivers for Uber were “incorporated” into the business of Uber under their arrangements and controls, which contradicted Uber’s argument the drivers were conducting their own independent businesses. The tribunal found that drivers were able to establish their own business relationship with customers, worked on the understanding that they would be indemnified by Uber for bad debts, and they were subject to various controls by Uber including setting default routes to take, limiting vehicle choices, fixing the fare so that the driver cannot negotiate a different fare with the passenger, and performance management facilitated through the driver rating system.

In contrast to this, following this decision the Central Arbitration Committee (a specialist body on trade union matters) found in Independent Workers’ Union of Great Britain v RooFoods Ltd (t/ as Deliveroo) that riders for Deliveroo did not have worker status because they had a genuine right to use a substitute to perform deliveries before and after they had accepted a particular job.

Outside of these developments, it is apparent that the United Kingdom is at least considering how these new forms of work should be dealt with in terms of classifications and entitlements. In 2017 the “Good Work: the Taylor review of modern working practices” reported on the changing employment practices in the modern UK economy, advising that employer practices needed to change in order to keep up with modern businesses. In relation to digital platform-based work, such as Uber, it recommended that clearer distinctions be drawn between workers (referred to as ‘dependent contractors’) and independent contractors, with additional protections given to dependent contractors and stronger incentives for firms to treat them fairly. The report recommended that legislation around principles of classification be made clearer, with a right of substitution no longer being a barrier to being a worker, and more emphasis placed on the principle of control (not just supervision).

Where do we go from here? 

Digital platforms and the so-called gig-economy have had a significantly positive impact in providing useful services through cheaper and more responsive methods, which are in large part due to the ability to use independent contractors. Businesses such as Uber, Ola and Deliveroo are able to focus on the core services and sharpen these offerings through the flexibility, freedom and cost savings provided by independent contractors.

However, it has become clear that as the gig-economy grows and its labour participants become increasingly reliant upon businesses such as Uber as a primary source of income, the legal framework will need to respond to ensure that there is a balance struck between the needs of workers and the businesses engaged in the market. The ‘worker’ labour classification in the United Kingdom provides a reasonable middle-ground between the two separate classifications of workers and independent contractors in the Australian context. Perhaps by using this as a starting point, we can create a third classification to meet the emerging challenges of the digital landscape and work in the gig-economy.

1. Michail Kaseris v Rasier Pacific V.O.F [2017] FWC 6610
2. Uber BV & Ors v Aslam & Ors [2018] EWCA Civ 2748 (19 December 2018)
3. Joshua Klooger v Foodora Australia Pty Ltd [2018] FWC 6836 (16 November 2018)
4. Independent Workers’ Union of Great Britain v RooFoods Ltd TUR1/985(2016)

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In times gone by, the boundaries between work and personal time were clear and distinct. Now,
advances in smartphone technology and the proliferation of innovative work-related applications
have greatly improved the connectedness, productivity and flexibility of employees, to the point
where a workplace could now be anywhere in the world with phone reception.

At the same time, these devices have also taken a central place in our home lives through the use of communication functions, cameras and entertainment. Studies have shown that depending on age and other factors, people on average check their phones 80 to 150 times a day, but how much of this is work-related and how much is personal will vary greatly from person to person.

It is becoming increasingly clear that being constantly connected in this way can come at a cost. Research has shown that workers who are “always on”, tend to have higher levels of stress and anxiety, and poorer quality of sleep leading to burnout and exhaustion. Indeed, it has been shown that the mere expectation of availability can increase strain for employees and their families, and negatively impact mental health.

What role can the law play – the right to disconnect?

So pressing are these issues in modern day society that several countries have decided that, in order to combat the problem of permanent connection, they would purport to create a new “quasi human right” – the right to disconnect. This is not a right to ignore one’s manager once they leave the office, but is more accurately described as an obligation on employers to consult with employees on their connectivity and availability outside of office hours.

The country to start this trend was France, sparked by a decision of the Cour de Cassation (the country’s highest court) holding that an employee was unfairly dismissed after being fired for not responding to work emails outside of work hours.

The changes have been immensely successful and been used as a model for similar laws subsequently implemented in Italy, Germany, Spain and the Philippines, with dozens more countries currently debating similar bills in their legislatures.

How would this affect employers?

Many businesses may be of the view that enshrining this right to disconnect in law will be detrimental to their productivity and profits. However, there is every chance that the opposite could be true. Indeed, it is likely that many employees find that being able to disconnect allows them to be more productive during work hours.

As the inability to escape work-related communications is having a tangible effect on some employees’ mental health and well-being, it is likely that a “digital detox” will be greatly received by those in need of it.

Further, when faced with a choice, it is likely that many employees would not opt out of afterhours electronic communications, particularly in industries and businesses who operate across time zones and require diligent responsiveness from their employees.

If these changes do make their way into the Australian employment landscape, organisations will need to make it a priority to strike the right balance between their employees’ private lives and the business requirements of each individual organisation.

Are these changes likely to be implemented in Australia?

Although there has not yet been much discussion on the topic in Australia, it is likely only a matter of time before it is on the horizon, especially since the International Labor Organisation has recently recommended the implementation of such a right in their 2019 report, Work for a Brighter Future – Global Commission on the Future of Work.

Enforcement issues?

While enforcement may be difficult, such laws will have served their purpose if they can change cultures and attitudes in workplaces and facilitate fruitful discussions to give employees what the ILO refers to as time sovereignty.

Differing methods of enforcement have been adopted in France, with some employers simply encouraging workers not to check emails after hours, and others going as far as setting their internal servers not to route emails to employees who are off work.

There may be concerns from businesses that legislating limits on around-the-clock communications may hurt their bottom line. However, the ILO suggests that providing employees with greater time sovereignty may result in improved health and wellbeing, which in turn may have a flow-on effect to the productivity of an organisation.

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On 24 May 2019 an important decision was handed down in the United Kingdom confirming that employers are entitled to provide birth mothers with better paid parental leave (“PPL”) than husbands or partners. This is unsurprising in Australia, where a similar case was determined in 2013, but worth noting as many employers in Australia prefer a gender-neutral approach.

The UK decision about “paying women more” 

The case of Ali v Capital Customer Management Ltd; Hextall v Chief Constable of Leicestershire Policei was a joint appeal of two male employees against the parental leave policies of their employers.

The statutory backdrop is that women in the UK have a right to 39 weeks of paid “maternity leave”, six weeks’ at 90% of their full rate of pay and the remainder at a lower “statutory rate” of pay. Women can bring their maternity leave to an end after two weeks and opt to take the remainder of their leave with their husband or partner under a “shared parental leave” regime for up to 52 weeks (less the two-week compulsory period) at the statutory rate of pay. At the relevant time the statutory rate was around £139 per week, or about $247 per week in Australian dollar terms.

Employers are, of course, free to supplement the statutory scheme by having their own, more generous, policies, which is what had occurred in this case. The employers were paying women who had given birth at their full rate of pay for up to 14 or 18 weeks, respectively. However, husbands and partners taking shared parental leave received only the lower statutory rate.

The circumstances of the employees 

Mr Ali’s daughter was born on 5 February 2016, after which he immediately took two weeks of leave. During that period his wife was diagnosed with post-natal depression and advised by her doctor to return to work. Mr Ali sought to take shared parental leave to care for his daughter to enable this to occur and wished to be paid at the same rate of pay as a female employee would have been paid on maternity leave.

Mr Hextall was a police constable whose wife ran her own business. His wife gave birth to their second child on 6 September 2015 and Mr Hextall took 14 weeks’ shared parental leave. He brought a claim alleging that his employer’s policy of remunerating shared parental leave at the statutory level only caused particular disadvantage to men and was unlawful discrimination.

Findings by the UK Court of Appeal 

The issues in the Ali and Hextall cases included:

  • whether the men should receive equal treatment and pay from their employers for performing the same role as a birth mother; and
  • whether the predominant purpose of maternity leave is not childcare but other matters exclusive to the birth mother resulting from pregnancy and childbirth and not shared by her husband and partner.

The Court of Appeal found that there was no direct discrimination by the employers, because women taking maternity leave are in materially different circumstances than men and are entitled to special treatment afforded to women in connection with pregnancy or childbirth. Nor was there indirect discrimination against the male employees, with the Court finding that there was nothing unusual about the employers’ maternity or parental leave schemes particularly when Parliament had made an exception for provisions giving special treatment to a woman in connection with pregnancy or childbirth.

The Australian position 

The approach taken in the UK case is also available in Australia.

The Sex Discrimination Act 1984 (Cth) (the “SDA”) has an exemption for special measures intended to achieve equality. Section 7D of the SDA provides that a person may take special measures for the purpose of achieving substantive equality between various types of people, including:

  • men and women;
  • women who are pregnant and people who are not pregnant; and
  • women who are breastfeeding and people who are not breastfeeding.

An employer does not discriminate against another person by taking special measures authorised by section 7D of the SDA. An employer will be regarded as having taken a special measure to achieve equality even if the measure is taken for a range of purposes and is not the dominant purpose.

States including New South Wales, Victoria and Queensland have a similar type of exemption.ii A case in point is Tung v State of Queensland.iii

Tung v Queensland Health 

This decision of the Queensland Civil and Administrative Tribunal (“QCAT”) was about whether it was discriminatory for an employer to refuse to provide a male employee with the same level of PPL as a female employee in the same position.

Mr Tung was a male nurse employed by Queensland Health. Mr Tung’s wife ran her own business as a hairdresser and was unable, for practical reasons, to take much time away from her business. The couple decided that Mr Tung would be the primary caregiver for their child for a period after its birth. Mr Tung applied for 14 weeks’ paid maternity leave that was available to female employees of Queensland Health and was refused. Mr Tung alleged that this amounted to both direct and indirect discrimination under the Anti-Discrimination Act 1991 (Qld) (“ADAQ”).

On the face of the departmental policies which provided for such leave, it was available only to female employees who were pregnant. QCAT found that there was no direct sex discrimination, because a female employee who was not pregnant would have been treated the same way as Mr Tung.

When considering whether there was indirect discrimination, QCAT asked whether providing a benefit to working mothers as part of what might colloquially be described as “affirmative action” or “positive discrimination” is unreasonable when similar benefits are not available to other, arguably, equally-worthy employees who also have family responsibilities. Expert evidence was given that there are benefits to both parents and the child itself if fathers are allowed time to have an active parenting role.

However, QCAT decided that the focus must be upon whether the term of the policy limiting the benefit to mothers was reasonable, not whether it would have been reasonable to provide a similar benefit to other employees. The policy was reasonable because it:

  • took account of the impact of pregnancy on the mother, and was designed to allow full recovery of the mother from both the pregnancy and childbirth;
  • was designed to enhance child and maternal health, development and bonding (although it was recognised that this might equally be said in support of the provision of such leave to fathers); and
  • facilitated greater workforce participation by women and promoted gender equality and the retention of skilled women in the workforce.

QCAT considered that, even if it was wrong in concluding that there was no discrimination against Mr Tung, the policy was exempt from these considerations under the “welfare measures” and “equal opportunity measures” in the ADAQ.

The takeaways

  • As in the UK, Australian employers are allowed to provide better PPL policies for women who give birth than other types of employees.
  • Many employers prefer to have a gender-neutral PPL policy that provides benefits to the “primary care-giver”. This ensures equal treatment for all employees regardless of whether they become parents through giving birth, their partner giving birth or surrogacy.
  • However, the scope exists for employers to implement lawfully special measures to assist female employees who are birth mothers back into the workforce.

i [2019] EWCA Civ 900.
ii Section 35 of the Anti-Discrimination Act 1977 (NSW), section 12 of the Equal Opportunity Act 2010 (Vic) and section 105 of the Anti-Discrimination Act 1991 (Qld).
iii [2013] QCAT 251.

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“Open plan” and “hot desking” have been the buzzwords of workspace design for years, but regular opinion polls suggest that they are indeed the preferred office environments for Millennials and members of Generation Z. But if, in the words of Carole King, nobody [literally] stays in one place anymore, what does this mean for workforce management strategies?

For several years, offices have been transforming their spaces into open-plan environments. Other companies have even done away with fixed offices altogether, requiring employees to move between shared desks and quiet spaces as required by the immediate task at hand – if there is even a need to be in the office to begin with.

The push for open-plan offices has been partly tempered, borne out of the desire for increased collaboration between colleagues. However, in recent years, debate has ensued about how much open place offices contribute to collaboration and, ultimately, productivity. The open-plan office has subsequently seen some pushback. Research in 2017 by Regus, a company that specialises in providing serviced offices, suggested that 76% of workers in Australia considered enclosed workstations as optimal for concentration (and not the open plan). A similar proportion of respondents in the same study indicated a preference for enclosed workstations for productivity, and the protection of workers’ privacy.

In 2019, the debate on open-plan offices has been tempered, suggesting that they are not inherently bad, but just being “used wrong”. However, the general debate on the optimal office design appears to have transformed into discussions about how fluid office environments (namely “hot desking”) can cater towards the demand for flexibility, particularly for Millennials and Generation Z, who increasingly comprise the majority of workers and demand the flexibility to work both inside and outside of the office. Deloitte has conducted its Millennial Survey since 2012, and its latest 2019 report flags the increasing demand not to just work from home, but for work conditions that mimic the so-called “gig economy”. Matters of work conditions extend beyond mere office design, but considerations of balancing managerial control with ever-increasing flexibility.

Whether in an open-plan office, or in a company that practices hot desking, the physical transformation of the physical work environment has a bearing on how managers can influence or exert any necessary control over their workforces in an age where flexibility is all the rage. As managerial control is increasingly exerted through electronic or virtual means, it may seem less overt, reduced, and maybe even unnecessary. However, managerial obligations and responsibilities for employees have not necessarily changed nor been reduced in the same way that fixed office spaces and face-to-face contact have been reduced.

Legal advice and strategic guidance about your obligations and strategies is therefore necessary, even when the focus might be on the choice of new furniture, or the latest technology to gather colleagues electronically at the same time in the same virtual setting. For example, People + Culture Strategies is available to advise on both flexible work arrangements, and even assist with assessing home-office environments when employees request to work from home. As decisions about open-plan offices and hot desking may ultimately result in a grant of increased flexibility, People + Culture Strategies encourages employers to take a step back and consider its strategies for managing a more fluid and dispersed workforce.

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The notion of the culture of an organisation can be hard to define, and it is often considered an intangible concept. Broadly speaking, the culture of an organisation is its character. It is the sum of its values, vision and attitudes, as well as its people; what they say and what they do.

We all know that an organisation’s values statement is meaningless without the right behaviours and actions to support and implement those values. The difficulty for many organisations is knowing whether the behaviours and actions within the organisation are having an adverse impact; that is, whether the organisation’s culture is enabling certain types of conduct, including misconduct.

Public scrutiny of banking and financial Institutions

Recent events such as the Royal Commission into Misconduct in the Banking, Superannuation and Financial Service industry (the “Commission”) have contributed to a focus on corporate culture. The processes utilised by the Royal Commission have led to a detailed examination (in public hearings) of the organisational practices of a number of institutions, as well as the behaviours of individuals within those organisations. Senior executives of organisations have been called to give evidence before the Commission, and subject to detailed questioning and robust cross examination about the manner in which they conduct their business. These hearings are a very public form of holding organisation’s accountable for their practices and the behaviour of their staff. The Commission’s processes have also involved detailed research by its staff and requests for public submissions. These processes provide other avenues by which organisational practices have come under review and have been subject to sustained criticism.

This type of scrutiny has caused a number of organisations to review their governance frameworks and their internal culture. Many organisations have had to undertake detailed reviews internally in order to prepare submissions and to present evidence before the Commission. A not infrequent organisational response to such scandals has been that “any misconduct was caused by a few bad apples and that the issue did not raise broader or systemic concerns1. This type of response tends to ignore the root cause of the conduct, which often resides in a failure to audit and improve the culture promoted within an organisation and the systems and structures that work alongside that culture.

In the case of the financial institutions that have been the subject of the Commission’s enquiries, issues such as remuneration arrangements have been identified as playing a significant role in contributing to (mis)conduct. The Commission has criticised certain practices that have led to poor advice being given to customers to secure commissions. Such outcomes are unsurprising where the culture of the organisation has been to prioritise sales over customers interests. Sales volume was rewarded, whereas doing “the right thing” by the customer was not. In addition, problems of misconduct can be exacerbated where there is a culture of pay secrecy clauses, and where discretionary incentives and bonus payments are common but not disclosed. As a consequence of the public scrutiny of such practices, reforms of pay secrecy provisions are now being considered.

Cricket under the spotlight

An example of the auditing of a specific organisation’s culture that has played out in the public arena is the recent review of Cricket Australia.2 Cricket Australia engaged an independent organisation, the Ethics Centre, to audit its culture. Again, this was as a response to a scandal, rather than a proactive effort to audit or improve culture.

The type of audit process undertaken had as its starting point the identification of the principal attributes (purpose, values, principles) that define and underpin Cricket Australia’s “target culture”. Surveys and interviews were then conducted amongst key personnel (Board members, management, staff, former and current players and other key stakeholders). The process included the review of additional documentation, such as the organisation’s Code of Conduct, the Directors’ Code of Ethics, and the anti-harassment code. On the basis of the data collected, the Ethics Centre prepared a report that detailed why gaps may exist in respect of the “actual culture” and the “aspirational culture”, and how these gaps could be bridged.

In essence, the report showed a disconnection between the Board of Cricket Australia (and its senior executives) and those who play the game. The Ethics Centre report suggests that the unsatisfactory behaviour that engulfed the organisation in a scandal was a predictable consequence of the way the Board of Cricket Australia and its executive team had established a “winning without counting the costs” culture.

The outcome of the audit is an implementation plan designed to achieve better alignment between Cricket Australia’s actual and aspirational culture. The report includes recommendations for structural changes to the team, changes to performance reviews and selection functions, and improvements to basic skills and team culture.

Building, auditing and improving a culture

What do these reviews teach us about the things that stand out in relation to a good corporate culture?

  • Communicate – what is acceptable (and unacceptable) conduct and behaviours throughout the organisation;
  • Challenge – the communication of an organisation’s conduct, values and expected behaviours only gets you so far. This needs to be actioned by management and continually reviewed, enforced and validated. Employees should also be encouraged to raise potential practices or behaviours of concern; and
  • (a lack of) Complacency – the active management of culture necessitates robust and ongoing processes that reinforce the desired culture, are responsive to changing needs and encourage improvements.

A fish rots from the head

An organisation’s culture starts at the top. For an organisation to be effective in reinforcing good corporate culture, it is critical that senior management leads by example. A failure in culture happens when there is poor communication, including when leaders are remiss in reinforcing the expected behaviours and where the organisation’s systems and practices do not lead to the sanctioning of poor behaviours. The culture of an organisation can also be compromised when an individual and an organisation’s values do not align, and this misalignment is not actively managed.

Where an organisation makes clear what behaviours are required, and the consequence of non-compliance, there is a greater chance that behaviour across the organisation will be more consistent, and any non-complaint behaviour will be called out by other employees.

Knowing where the problems lie

One of the key takeaways from the events outlined above is that regular and detailed examination of organisational practices and behaviour is a core aspect of good governance. It is far better to know what lies within your organisation and address these internally, than to wait until poor practices come to light in very public forums. Where problems are identified either internally or publicly, implementing organisational change and establishing accountability mechanisms are crucial to restoring confidence in the organisation’s brand.

1. Interim Report of the Financial Services Royal Commission, available at
2. Australia Cricket, A Matter of Balance. The Ethics Centre Organisation Review Report Oct 2018, available at


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Processes that audit or review organisational systems and practices can provide an organisation with prudent information about compliance, risk and culture. However, organisations may be hesitant or lack the motivation to proactively undertake such processes. Often, they are a response to a particular event or circumstance or are instituted by the need to gather certain information. In this article, we explore three situations which may trigger an audit process, what the audit process may look like, and how an organisation may seek to change as a result of the outcomes of such a process.

What might trigger an audit?

Conduct and/or organisational culture concerns

It is important for an organisation to have an awareness of its cultural health and to be responsive to any situations that jeopardise this. Organisations that ignore their workplace culture may be more exposed to greater risks of poor employee satisfaction, non-compliance with workplace policies, and claims of workplace discrimination, bullying or harassment. If these risks materialise then an organisation may respond by conducting a culture audit and/or an investigation into any alleged misconduct. Depending on the circumstances, an organisation may need to conduct an audit or review process in response to a particular complaint, general concerns expressed by the workforce as a whole, or to satisfy a regulatory agency such as a work health and safety authority. In the case of allegations of inappropriate workplace behaviour, organisations may be subject to additional pressure due to the speed at which information is exchanged in the social media environment, which can expose an organisation to significant reputational risks that may have ramifications in terms of an organisation’s bottom line. Thoroughly investigating and managing an employee’s complaint and the wider cultural issues of a workplace can also be a powerful symbol to both internal and external stakeholders that the organisation takes such matters seriously.

Financial and/or compliance issues

External financial or compliance audits may be instigated by bodies such as the Australian Taxation Office (“ATO”) or the Fair Work Ombudsman (“FWO”). To avoid being “caught out”, organisations may proactively instigate an internal review in preparation, for example, for a FWO or ATO announced compliance campaign targeting their particular industry. A related scenario is where an individual employee notifies their employer of their intention to contact an agency such as the FWO to make a complaint, for example about wages or related entitlements. Subject to operational requirements and an organisation’s perception of risk, an internal review into that specific employee’s payments or the wider payment practices of the organisation may be appropriate, as it can shed light on whether there are any systemic problems of this nature within the organisation.

Due diligence

Audits are not only conducted in response to existing liabilities but may also be performed to assess the future liabilities of an organisation. In particular, when an organisation is considering the acquisition of a new business, an audit is a vital step in assessing the value of that target business. This type of audit forms part of the “due diligence” process that an organisation performs. It can inform the terms on which an acquisition is negotiated and can help to avoid unexpected problems and additional costs associated with the potential liabilities of the target business.

What form do these audits take?

Conduct and/or organisational culture concerns

There is no “one-size fits all” method for responding to allegations of misconduct or poor cultural health within an organisation. The first step for an organisation is often to conduct an investigation to determine whether there is any factual basis for the complaint or concerns and to identify the best way for the organisation to respond. In investigating a particular complaint of misconduct, an organisation needs to be mindful of whether the problem is more widespread and whether a broader cultural audit is required. An organisation’s response will usually be predicated on a close consideration of the legislative obligations, relevant workplace policies and any relevant industrial instruments. In terms of the wider cultural implications, an organisation may need to have regard to how it communicates its behavioural expectations, its approach to training, and what its employee engagement surveys and analysis of employee leave patterns might say about the organisation’s culture.

Financial and/or compliance issues

A basic financial audit of employee entitlements involves the reviewing of wages, pay slips, leave entitlements, incentive schemes, rosters, contracts, and indicators of actual hours worked. An employer should take into account the type of work the employee is performing and the terms of any applicable industrial instrument, including those that provide for minimum rates of pay, overtimes, loadings and other allowances.

Due diligence

Subject to time pressures, budgets, and any agreed parameters for the process, a due diligence audit can involve considering the target business’ governance structures, as well as any applicable industrial instruments and employment contracts to ascertain any risks that may be associated with, for example, confidential information and intellectual property clauses, or the incorrect characterisation of an employment relationship. It is important to know the source of the employees’ terms and conditions of employment, and whether the employees are covered by a modern award or enterprise agreement, particularly because there are circumstances where the terms and conditions under an award or enterprise agreement will follow the employees when there is a transfer of business. The due diligence process may also reveal the extent to which employee benefits, such as accrued leave entitlements and other liabilities may affect the sale price of a business.

What might an organisation change as a result?

Conduct and/or organisational culture concerns

The starting point in achieving acceptable workplace behaviour and fostering the desired workplace culture is ensuring that all levels of an organisation are aligned and also aware of their legal obligations and they monitor and enforce compliance. If an investigation into misconduct substantiates findings of inappropriate or even unlawful behaviours it may be appropriate for an employer to take disciplinary action. Where conduct is revealed, a failure to act can cause problems when the organisation is confronted with similar behaviours in the future that it seeks to address. If cultural problems have been identified, then it is important for an organisation to enhance the capability of its managers to become effective leaders. A healthy workplace culture can reduce an employer’s financial costs, increase employee health, well-being and productivity, increase attraction and retention of employees, and reduce an employer’s risk profile in terms of its exposure to bullying, discrimination and harassment type claims.

Financial and/or compliance issues

The first response to an audit, for example, on employee entitlements may be to rectify any underpayments and to inform any affected parties. In situations where there has been an overpayment to employees, we recommend seeking advice because of prescriptive provisions in the Fair Work Act 2009 (Cth) that prohibit an employer from simply deducting such an overpayment from subsequent wages. In circumstances where underpayments or overpayments have not occurred, the audit may nevertheless reveal potential risks of future non-compliance that necessitate changes to an organisation’s systems and structures, as well as its human resources processes. Organisations may also take the opportunity to address any inconsistencies between employees’ entitlements by overhauling its remuneration structure.

Due diligence

If risks are identified through the due diligence process then, depending on the seriousness of these risks, the potential buyer may seek to renegotiate the price of the transaction, or seek specific warranties or indemnities in relation to those risks. If these risks cannot be resolved, then the potential buyer may seek to withdraw from the transaction altogether. The audit may also identify a target organisation’s need to rectify its practices before a sale and its reliance on key employees that the potential buyer may seek to retain through more generous terms of employment in order to capitalise on their skills and to maintain consistency during the change period.

The takeaways

In all cases, any audit should not be regarded as presenting a complete and objective picture of an organisation. As mentioned, the scope of the audit can be limited and any reliance on the audit should be similarly qualified. Audits themselves are not completely free from risk and the audit process should be monitored to ensure it is free from bias and those being audited are afforded a fair process. Notwithstanding this, audits provide useful insights into an organisation and communicate positive messages to stakeholders about a company’s diligence and concerns around compliance and culture. The process of responding to these “triggers” with an audit is valuable in itself, again in terms of the messages that conducting an audit conveys. Rather than ignoring these trigger events and their wider implications, responding with an audit is an action that is likely to be of substantial benefit to organisations and is strongly recommended.


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Hearing PCS Founder and Managing Principal, Joydeep Hor, speak at the HR Summit about the PCS approach to people issues and “what good looks like” resonated with Sue McGregor, People Culture & WH&S Manager at Kalyx Australia Pty Ltd (“Kalyx”). She felt this refreshing perspective was one that her company could benefit from exploring.

Kalyx provides an unparalleled level of independent, quality research to Australian agriculture and horticulture. With regional locations and a national focus, it provides quality and innovative research that is timely, accurate and second to none in Australia.

In respect of its people, Kalyx has 16 offices, 100 permanent staff and between 50 and 60 casual staff members at harvest time. The majority of the office locations are regionally based, and a high percentage of the workforce comes from a rural area and/or have studied agriculture or science.

Kalyx had reached a stage where it needed to develop a strategic plan. The Board was grappling with competing in the “corporate world” at both a national and international level, but also wanted to retain its authenticity and its “small company” feel.

Listening to Joydeep speak made Sue realise that, with the right attitude and approach, Kalyx could achieve that balance. The concept of “what good looks like” may have been simple in concept but made sense and was an easy message to deliver. Getting buy-in on “what good looks like” was necessary for Kalyx to maintain market share and achieve success in the industry.

The Plan

After meeting with Sue, a project plan was developed. This involved:

  • reviewing current systems and structures (including vision statements, organisational charts, position descriptions, relevant policies and template contracts) and also conducting high-level interviews with Sue and the General Manager;
  • based on the review, developing a “gap analysis” and also making necessary recommendations to bring the source documentation in line with best practice; and
  • conducting a half-day session with the Board around making Kalyx a high-performing organisation.

The Message

Deciding on the level of staff involvement in the process was considered at the outset. Sue was initially the one driving the process, however, “buy-in” was also sought from the Board and the senior management team.

In Sue’s opinion, the message was simple and the level of interest in the process was heightened because she believed in the message and the Board also backed the process. Sue says this made it much easier to get the management team to engage in the process.

The Actions

The current position descriptions and performance review documents were updated to reflect easily understandable and measurable key performance indicators.

This included creating a matrix for each position description that addressed things such as technical competency, relationships and adherence to values. For each of these areas, examples were created so that staff could easily recognise how they could satisfy these requirements and to help them understand “what good looks like”. For example, “conducts high quality trials that produce meaningful and significant data”, “has the technical expertise to accurately diagnose problems in the field”, “is flexible, adaptable and open to change”, “breathes integrity – doesn’t compromise values for anyone” and “trusts the team – help others and be helped when required”.

This led to developing clear progression and succession pathways, as well as improved onboarding processes and increased engagement with staff via informal and formal feedback and reviews.

Contracts of employment were reviewed and “paired back” to a more approachable document. To provide Kalyx with the ability to expand upon the contract, a bank of optional clauses was created to be inserted into the contract as required. For example, if Kalyx required an employee to have a particular qualification the “Accreditation and Qualification” clause could be inserted, or if Kalyx wished to have an employee subject to a particular post-termination restraint a “Restrictions After Termination of Employment” clause could be inserted.

Onboarding and exit checklists were also reviewed and amended to ensure they aligned with the updated employment contracts.
An induction timeline document was created, which spanned from the recruitment phase to the first six months of employment. This allowed Kalyx to develop the appropriate timelines, training and internal HR documents. It also provided for a uniform approach to recruitment and induction for new employees.

Finally, the employee handbook was reviewed to ensure that the entire “people process” was consistent.

The Learnings

Sue describes the main learnings as:

  1. Getting the recruitment right.
  2. Spending time on onboarding correctly and spelling out “what good looks like”.
  3. Being clear on the ‘non-negotiables’ to success in the organisation.
  4. Checking in regularly and providing feedback (both positive and constructive).
  5. Providing clear and transparent progression pathways.

The Surprise

The biggest surprise for Sue was confirmation that you need to keep things simple. On reflection, getting tied up with “corporate lingo” does not assist the process, and a simple message is what resonates with the staff.

The Changes

Since undertaking the review Kalyx has:

  1. Introduced value and cultural fit questions into interviews.
  2. Developed a week-long onboarding phase (at one branch) to instil consistent compliance requirements in staff and discuss “what good looks like” for Kalyx and for the staff.
  3. Developed clear progression pathways.
  4. Introduced quarterly informal check-ins rather than formal (stuffy) performance review process.

Twelve months on

Kalyx has seen a number of benefits as a result of engaging in the process.

Management and staff no longer tolerate non-compliance or the “rotten apple” syndrome. Staff are now comfortable to call out, and capable of calling out, poor behaviour by others in the workplace. This means that rather than a “top-down” approach to poor behaviour, behaviour is managed at the ground level.

Sue also believes that these new processes have meant that staff engagement and retention is higher. Of particular note is the increased engagement or willingness of staff to have open discussions with management about the positive and negative aspects of the workplace.

Sue says she would recommend this process to organisations because of the simplicity of the message. The workplace gets so busy and there are so many competing priorities. For Sue it was very refreshing to return to the basics and just “get it right”.


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When an organisation braces for “audit time”, the negatives can be perceived to outweigh the positives. This is often the case where organisations engage in mandatory audit processes to confirm compliance with specific statutory obligations. However, “audit time” does not need to be viewed by organisations with apprehension. When executed properly and for a valid purpose, audits can be of great benefit to an organisation in terms of productivity, efficiency and employee satisfaction. Auditing processes, including those that are externally driven and those that are employer-initiated, can be used proactively to mitigate the risks of other issues emerging and reactively, to identify and manage existing problems.

This article considers the proactive use of audits which an organisation may wish to engage in and highlights the benefits of an approach to auditing that stretches an organisation beyond a minimal compliance model.

What does an audit entail?

When you mention “audit”, it is commonly thought of as a process that independently examines documentation, records or processes of an organisation with the aim of ascertaining whether an organisation is compliant in terms of its legal or ethical obligations. Not so common, is using an audit style process to test how an organisation is placed in terms of what it aspires to achieve, including culture and values and what is regarded as best practice in the industry. Audits can generally be defined as either:

  1. employer-initiated audits that are instituted as an objective means of ascertaining current practices or standards with a view to creating a “high-performance” culture; and
  2. external audits, which are generally reactive and performed by staff from statutory agencies and are focused on an organisation’s legal compliance.

Proactive audits

Unlike external auditing processes, employer-initiated audits are typically a proactive step taken by organisations and are considered as going “above and beyond” an organisation’s legal requirements. They are not mandated from an organisational/employer liability perspective. While external auditing fosters compliance and enables an organisation to “survive”, employer-initiated audits allow an organisation to “high-performing/” and thrive, by focusing on areas of the business that can be improved or enhanced. These include:

  • culture audits – introspectively focusing on the practices and behaviours within an organisation, whether these practices and behaviours align with an organisation’s objectives, and any areas of potential improvement;
  • effectiveness audits – considering whether an organisation is optimising its resources and human capital in line with its goals; and
  • people strategy audits – assessing an organisation’s leadership and direction, its alignment with the organisation’s structural framework, and identifying areas for improvement or change which may exist throughout the employee lifecycle.

If an organisation wishes to reap the benefits of an employer-initiated audit fully, auditing should be seen as one element of an overall strategy to creating a “high-performance” culture, including working together to reduce risks to the health of the organisation and build long term organisational resilience. An employer-initiated audit process can critique the governance and practices of an organisation but requires the support of management and appropriate internal governance mechanisms to enable the outcomes of the audit to be fully realised. In essence, this requires all aspects of the organisation’s operations to align with what the audit process seeks to achieve.

Apart from providing an independent and transparent analysis of an organisation’s functions, strengths and weaknesses, employer-initiated audits can also establish key trends and themes. This can have the flow-on effect of creating a better understanding of risks and processes, highlighting organisational issues requiring action, and establishing mechanisms to rectify risks and organisational gaps.1

Staff engagement in employer-initiated audits

To ensure that an audit fulfils its purpose, organisations should be mindful that the audit process engages with, and involves, staff.

Having staff input into the audit process is a necessary step in ensuring that concerns of staff are recognised, affirming an employer’s commitment to organisational justice and fairness. This can assist in creating a culture where staff feel empowered to be involved in processes which benefit the long-term productivity and wellbeing of the organisation, knowing that their voices have been heard.

In addition, distributing the results of the audit process can have the effect of keeping an organisation accountable to remedy any issues outlined in the audit. Communicating audit results provides a level of transparency that can foster staff engagement and increase “buy in” to any organisational initiatives that result from the audit process.

Reactive audits

A later article in this edition “Pulling the trigger: audits as a responsive mechanism” discusses audits as a reactive tool. Typically, these take the form of external audits.

External audits often fall into the category of being “mandatory”, meaning that organisations have little or no legal choice but to comply with the audit. The possibility of an external audit is a very real prospect for many organisations. Generally speaking, the intention of external auditing is to operate as a general deterrence.2 This is based on the idea that the threat of an audit or investigation, accompanied by the risk of subsequent legal action, should outweigh the benefits of the non-compliant behaviour. As a consequence, decision-makers in an organisation may fear the repercussions of engaging in non-compliant behaviours and hence be more likely to comply with legislative standards.

Key Takeaways

Audits are inevitable in the lifecycle of an organisation. This article has outlined some key considerations in conducting audits, and the type of audits that an organisation may experience. It has identified that the benefits of auditing have the potential to far outweigh any administrative burden that the auditing process may impose. Fears and concerns around external audits should not be transposed to the employer-initiated auditing context, as the latter can bring significant benefit to the long-term functioning of an organisation. As we have outlined, employee engagement is a crucial step for employer-initiated audits. Organisations of all sizes should embrace the prospect of positive change that audits can deliver.

If your organisation wants to take a proactive approach to assessment, PCS recommends you consider a culture and effectiveness audit. This will involve an assessment of your organisation’s vision and values, systems and structures, capabilities and credibilities, to identify gaps in your organisation and build a robust people strategy.

  1. PriceWaterhouseCoopers, Maximising the value of Internal Audit: who dares wins p 8.
  2. John Howe and Tess Hardy, ‘Business Responses to Fair Work Ombudsman Compliance Activities’, (Centre for Employment and Labour Relations Law, Melbourne Law School, January 2017) p 3.
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The focus of much of the debate on the merits of a dismissal is usually the substantive and procedural fairness of the termination. Often, our litmus test is whether there was a valid reason to terminate, and whether the termination was carried out in a procedurally fair manner. However, the legislative regime governing unfair dismissals has three dimensions – not only whether the termination was unjust or unreasonable, but also whether it was harsh.

In this article we explore the terrain of “harshness”, and we distinguish this criterion from the other dimensions of dismissal to give you a clearer picture of what factors are pertinent to a finding that a termination is unfair in the circumstances. A consideration of these factors can then be incorporated into your organisation’s processes for managing situations requiring a disciplinary response, in a manner that minimises the risk of a successful unfair dismissal claim.

What constitutes harshness?

The range of mitigating circumstances that may be relevant to the question of harshness is much broader than one might expect, and includes not only the circumstances of an employee’s employment (for example, their work history and disciplinary or performance record), but also their personal circumstances (such as their age, mental health or likelihood of successfully finding alternative employment based on their skill set). Harshness is also relevant in that it extends to situations where termination of employment is a disproportionate response to the conduct in question. The Fair Work Commission (“FWC”) is vested with a wide discretion in its consideration of harshness, as the legislation specifies a wide range of criteria that can be considered, including “any other matters that the FWC considers relevant”.1

While factors such as an employee’s personal circumstances are not matters that employers have any direct control over, they are matters about which an employer can make enquiries prior to imposing any disciplinary sanctions. It is prudent for an employer to ask an employee in broad terms to provide any information the employee believes may be relevant to the employer’s deliberations regarding the most appropriate form of disciplinary action to take (for example, as part of a “show cause” process). This allows an employee to draw to the employer’s attention any factors of a personal nature before the disciplinary process is finalised, and ensures that the employer is fully appraised of relevant matters, before opting for termination as the appropriate disciplinary response.

On the other hand, there are matters relevant to the question of harshness that are clearly within the employer’s control. One of the regular points that emerges in disputed terminations is the question of whether there was a culture that tolerated certain conduct, or where there has been inconsistency in enforcing compliance with standards of behaviour.

Case study: Swearing at work

The cases that deal with swearing at work offer a good illustration of the types of mitigating circumstances that should factor into an employer’s deliberations before a decision is made to terminate employment for conduct related reasons. The cases show that the presence of mitigating factors does not always make termination inappropriate. Rather, it is a question of showing that due consideration has been given to such factors. In some situations, the mitigating circumstances will not be sufficient to weigh against termination as the appropriate disciplinary outcome.

The FWC has observed that:

…one can readily hypothesise a case where the breach of a swearing policy would not be seen by any reasonable person as justifying dismissal. In a workplace where swearing occurs without warnings or disciplinary response, selecting a single instance of swearing by a stressed employee with long and unblemished service as a basis for dismissal would be seen by any reasonable person as harsh and unfair”.2

In this context, the failure of the employer to respond to prior occurrences of similar behaviour, the one-off nature of the incident, the long and unblemished record of the employee, and the employee’s “stressed” condition all constituted mitigating factors which, when given appropriate weight, should have led the employer to a disciplinary outcome other than termination. In a similar case, while the use of profanities and threats of violence by a mine worker constituted a valid reason for dismissal, the employer was found to have not given the mitigating circumstances sufficient consideration, which resulted in the termination being harsh in the circumstances.3 Those circumstances included the fact that the incident was a “one-off”, that the worker had an eleven-year record of service with no known prior disciplinary action, and was suffering personal health difficulties. In addition, the Full Bench of the FWC observed that language of this type had been allowed to be used without criticism by the employer for many years.

In another case, the FWC ordered the reinstatement of an employee who had seven years of unblemished service, and whose skills and age (50) meant he had limited prospects of finding alternative work.4 The incident leading to termination arose when certain employees took protected industrial action. The applicant left a message on the mobile phone of another employee, who he believed not to have participated in the protected industrial action, and said “Hi mate, just wondering if you are working. If you are, you’re a f…ing scab”. A complaint was made, the employer investigated the matter, and then summarily dismissed the employee for misconduct. The FWC found that while the employee’s conduct was a valid reason for termination, the dismissal was a disproportionate response to the conduct, which was out of character for the employee, appeared to be inconsistent with disciplinary action taken in other similar matters, and did not have due regard to the employee’s previous good service and work performance.

Key takeaways

  • An employer retains a discretion to decide on the most appropriate disciplinary sanction, but this needs to be viewed not only through the lens of a valid reason and a fair process, but also whether the sanction will be judged to be harsh, taking into account all the relevant circumstances.
  • Where termination is being considered, the process necessitates a thorough consideration of the circumstances of an employee’s employment history, any previous misconduct and the employee’s personal circumstances.
  • It is also necessary to consider past disciplinary responses of the organisation to similar incidents. This does not mean that it is never possible to change the culture where conduct has been tolerated in the past, but it does mean that an employer needs to communicate its attitude to such conduct, before it seeks to “make an example” of a particular individual. Clear policy documentation and tailored training are therefore required.
  • Proactively making enquiries and seeking input from an employee will avoid mitigating factors only coming to light when the parties are before the FWC, and will hopefully prevent what might otherwise be a fair and reasonable termination from being tarnished.

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