Protecting Your Business Interests – The Importance of Getting it Right

Nichola Constant, Director

Restraint of trade clauses attempt to protect the goodwill of a business by seeking to prevent former employees or owners from engaging in activities that compete with the business they have left.

Usually this involves a ‘Restraint of Trade’ provision in employment agreements, partnership agreements and sale of business agreements. These provisions seek to prevent departing employees or partners from taking clients, or competing with the business, for a period of time after they leave.

In deciding whether a restraint is reasonable, the Courts will look at whether the restraint protects a genuine interest of the restrainer and whether the time period and geographical area is no greater than required to protect that interest.

Drafting an enforceable restraint of trade clause in an employment contract first requires an understanding of the goodwill to be protected and how that goodwill was acquired. To protect the goodwill of a business, it is reasonable to place restrictions, for a period of time, on a former employee’s use of the business’ trade secrets and their access to the business’ customers with whom the former employee built up a relationship while employed by the business.

In New South Wales, the Restraints of Trade Act 1974 allows a court to ‘read down’ the terms of a restraint clause to modify it (as to the time period or geographic area) until it is reasonable.

In other states and territories, the Courts do not have this discretion. If a restraint clause is not ‘reasonable’ then a Court is likely to find the whole clause to be void and unenforceable. This is the main reason that ‘cascading’ provisions that cover a number of alternative time and geographical covenants are used. The advantage of these is that each one is intended to be severable by a Court without affecting the validity and enforceability of the restraint.

Stacks Taree v Marshall

On 1 March 2010, Justice McDougall delivered his judgment in the case of Stacks Taree v Marshall [No. 2] [2010] NSWSC 77.

Following his five-year employment as a solicitor at Stacks Taree, Mr Marshall was sued for breach of contract when he accepted a position with another law firm whose offices were located approximately 550 metres from the offices of Stacks. A term of Mr Marshall’s employment contract at Stacks prohibited him from soliciting clients of the firm and from practicing as a solicitor within a ten-kilometre radius of the Post Offices at Taree and Wingham for a period of twelve months after the termination of his employment.

While the Court held that a restraint of 12 months was reasonable to protect the legitimate interests of the employer, it read down the restraint to apply only to clients with whom the employee had contact during the final 12 months of his employment.

In reaching this conclusion, the Court had particular regard to Stacks being a third generation law firm practicing in the Taree and Wingham areas which had cultivated its reputation over a period of eighty years so that it was unlikely that Mr Marshall’s departure from the firm would have any significant impact on the presence of Stacks in the local business community of Taree. Further, in the circumstances, the restraint of trade covenant that Stacks sought to enforce went beyond the legitimate interest of protecting their goodwill.

In addition, the Court held that the restraint prohibiting the employee from engaging in “competitive activity” was not enforceable because it was a restraint against mere competition and, at common law, an employer is not entitled to protection against mere competition.

For the above reasons the application for enforcement of the restraint of trade covenant was dismissed and Stacks was ordered to pay Mr Marshall’s costs.

OAMPS Insurance Brokers Ltd v Hanna

In another recent Supreme Court of New South Wales decision, OAMPS Insurance Brokers Ltd v Hanna [2010] NSWSC 781, the Court considered the validity of cascading clauses.

Mr Hanna was an insurance broker who had been employed by OAMPS for 19 years. OAMPS sells insurance policies to clients and earns revenue by commission. Because of the nature of the business, the personal relationship between an employee and the client’s representative was seen as an important factor in client retention for OAMPS.

On 30 September 2008, while Mr Hanna was still employed by OAMPS, he signed a written employment contract, a schedule to which contained a post-employment restraint deed (the “Deed”).

The restraint period and restraint area were drafted as cascading and cumulative clauses, meaning that each of the restraint areas and time periods were intended to work together. The widest intended restraint was Australia- wide for 15 months, and the narrowest restraint was in Sydney for 12 months. There were nine combinations of restraint areas and time periods in total.

After being approached by a competitor, Strathearn, Hanna resigned from OAMPS and began working immediately for Strathearn. Subsequently, Mr Hanna was contacted by three OAMPS’ clients who moved their business to Strathearn.

OAMPS claimed that Mr Hanna had breached the Deed and sought an injunction to prevent Mr Hanna from providing services to a specified list of clients for a period of 15 months.

Mr Hanna claimed the Deed was void because of the uncertainty of the scope of the restraint “by virtue of its cascading nature”. Furthermore, he claimed he had not solicited any of OAMPS’ clients, and any information he had of their previous insurance and their business needs was information that was volunteered by the clients.

While noting that the case law on cascading clauses had been inconsistent, Justice Hammerschlag stated that he was bound to follow JQAT Pty Ltd v Storm [1987] 2 Qd R 162 (“JQAT”) unless he considered it to be clearly wrong. He found that the Court in JQAT held that a cascading provision in a restraint of trade clause is valid and certain if each individual restraint covenant is:

  • expressed in clear words;
  • is capable of simultaneous compliance; and
  • does not require any inquiry or finding by the Court to make it operative.

Justice Hammerschlag was satisfied that these criteria had been met, and therefore the Deed was not void due to uncertainty.

He also noted that the Deed, as a whole, indicated that the widest enforceable covenant was intended. While the court is able to sever the provision with the widest scope if it deems it unreasonable and unenforceable, Justice Hammerschlag pointed out that considerable weight should be given to the period as agreed between the parties, namely the maximum specified period.

OAMPS argued that as every policy was renewable within 12 months from Hanna’s departure, a 15 month restraint was the minimum period to ensure them a proper opportunity of not less than three months across the portfolio to protect its customer connection.

His Honour held that the restraint was reasonable due to the strong relationships that Hanna had maintained with OAMPS’ clients. At the time the deed was made, Hanna had been an employee at OAMPS for 19 years, during which time he had built and nurtured client relationships. Justice Hammerschlag found that because the length of most insurance policies is 12 months, this was the reasonable time needed to sever the relationship between Hanna and OAMPS’ clients.

The Appeal – Hanna v OAMPS Insurance Brokers Ltd [2010] NSWCA 267

On 19 October 2010, the New South Wales Court of Appeal dismissed Mr Hanna’s appeal (Hanna v OAMPS Insurance Brokers Ltd [2010] NSWCA 267) upholding Justice Hammerschlag’s decision.

Lessons for Employers

So when will post-employment restraints of trade be enforced?

The Supreme Court of NSW in Stacks Taree v Marshall and the New South Wales Court of Appeal in Hanna v OAMPS Insurance Brokers Ltd, have reinforced that post-employment restraints of trade will be enforced where the covenant is protecting the former employer’s legitimate interest, and where the covenant is reasonable in scope and properly drafted.

Further, it appears that the courts will uphold the judgment in JQAT regarding cascading provisions, and deem them to be valid insofar as the obligations are not mutually inconsistent.

OAMPS reinforces that employers whose post-termination restraints include cascading provisions must ensure that the provisions include clear language that each permutation of the restraint is separate, independent and severable from all other permutations to avoid them being void for uncertainty and unenforceable.

Both decisions are useful guides to assist employers in drafting appropriately worded restraint covenants. However, the exact wording used in post-employment restraint covenants is critical to an employer’s ability to persuade a Court to enforce them.

Your Key Actions:

    1. Genuine Interest – first, to restrain another person, an employer must have a genuine and legitimate interest that needs protecting and secondly, the restraint should be limited to protecting that interest;
    2. Time Period – the restraint should not be for a time period that is longer than necessary to protect that interest;
    3. Geographic Area – the restraint should not cover a geographical area that is larger than necessary to protect that interest;
    4. Cascading Clauses – alternative time periods and geographic areas may help to ‘hedge your bets’.

Employers must identify precisely what interest needs to be protected and in what area and for what time and then limit the restriction to that.

Be wary of any so-called ’standard’ clauses. If they do not suit the specific circumstances of your business, they are likely to be void and unenforceable. There is little point having an agreement in place if you cannot enforce it when necessary

Is your organisation “social media savvy”?

Amber Wood, Associate

It seems not a week goes by without another employee being disciplined or dismissed due to their inappropriate use of social media platforms such as Facebook, MySpace, Twitter or YouTube. However, most employers are still without any social media policy and appear to be adopting a ‘wait and see’ approach to social media in the workplace.

With Facebook boasting more than 500 million active users worldwide and Twitter recording 175 million registered users, many organisations are unsurprisingly keen to harness the endless commercial potential including advertising and marketing opportunities and direct access to customers and potential employees which social media offers.

Nevertheless, many organisations remain wary of the legal and reputational risks associated with such new technology which has changed the way that individuals and organisations communicate. Gone are the days when organisations could carefully control who speaks publicly about an organisation, what they can say and when they can say it. Today, social media platforms give everyone a voice which can be heard by millions of people at the click of a button, and while a damaging Facebook post or “tweet” may be posted to the web instantaneously, it can remain in the public domain forever.

Risks for employers

The main risks which social media poses for employers include:

  • the need to discipline or terminate the employment of employees for comments, posts or videos made by employees either in a personal or professional capacity;
  • potential vicarious liability for bullying, sexual harassment or discrimination which occurs online;
  • possible reputational risk and damage to corporate branding arising out of disparaging comments, photos, videos or blogs published by an employee, or disclosure of confidential information or trade secrets; and
  • managing or monitoring use of social media during work hours to maximise employee productivity.

Expensive lessons: recent cases of social media making the news

Whether employees should be disciplined for ‘private’ Facebook or Twitter comments made in their own time has been the subject of much debate. However, it is clear that employees are accountable for these comments, especially when the comments refer directly to the employer, or where the employer may be held vicariously liable for offensive comments. For example:

  • in May 2010, The Age columnist Catherine Deveny was stood down after making inappropriate comments or ‘tweets’ on Twitter during the Logie awards ceremony. The Age’s Editor-in-Chief Paul Ramadge stated that “the views she had expressed recently on Twitter were not in keeping with the standards … set at The Age”;
  • Olympic swimmer Stephanie Rice lost at least one sponsorship deal and may have suffered irreparable damage to her reputation following a controversial ‘tweet’ which was derogatory to homosexuals;
  • the editor of a regional newspaper was stood down by Fairfax Newspapers after posting comments on his Facebook page stating that the death of Constable Bill Crews would ‘lift circulation’;
  • a lawyer employed by a Queensland University was investigated after posting a YouTube video of himself burning and smoking pages from the Bible and Koran; and
  • Canberra Raiders NRL star Joel Monaghan was recently forced to resign from the team after lewd pictures of him taken at a team end-of-year celebration were released into the public domain on Twitter.

Recent case law

Fair Work Australia recently considered two unfair dismissal cases following the dismissal of employees for making comments on Facebook and MySpace respectively.

In Sally-Anne Fitzgerald V Dianna Smith t/A Escape Hair Design [2010] FWA 7358 (24 September 2010), a hairdresser who wrote “Xmas ‘bonus’ alongside a job warning, followed by no holiday pay!!! Whoooooo! The Hairdressing Industry rocks man!!! AWSOME!!!(sic)” on her Facebook page successfully brought unfair dismissal proceedings against her former employer. After being dismissed due to ‘public display of dissatisfaction of base of employment’, the hairdresser received $2340.48 in compensation after Commissioner Bissett found that there had not been a valid reason for her termination. Commissioner Bissett also commented that “a Facebook post, while initially undertaken outside work hours, does not stop once your work recommences…It would be foolish of employees to think they may say as they wish on their Facebook page with a total immunity from any consequence”.

By contrast, in Tamicka Louise Dover- Ray v Real Insurance Pty Ltd [2010] FWA 8544 decided in November 2010, an employee unsuccessfully brought unfair dismissal proceedings against her former employer after she was dismissed following publication of a disparaging blog about the employer. The employee had been unhappy with the outcome of a sexual harassment investigation into a complaint she had made about a male colleague. She subsequently wrote a lengthy, scathing blog on her MySpace page, describing management as ‘witch hunters’, referring to the company’s values as ‘absolute lies’, alleging that her employer was corrupt and revealing confidential information about the investigation. The employer was made aware of the blog and contacted the employee to ‘show cause’ and remove the blog, which the employee refused to do. Fair Work Australia found that writing the blog (which was searchable on Google) and failing to take it down as reasonably requested, were valid reasons to terminate her employment.

Both cases illustrate how an employee’s private social media posts may be regulated by an employer and should serve as warnings to employers and employees alike.

Your Key Actions

  1. Consider your organisation’s current online presence and the ways in which your employees use social media both in and outside of the workplace.
  2. Assess what steps your organisation has taken to minimise potential issues arising from use of social media by customers and employees. For instance, how would your company respond if faced with a scenario similar to any of the cases above?
  3. Review any social media policies currently in place and consider how far these policies extend. Ensure that any social media policy in place reinforces other policies, particularly in relation to sexual harassment, discrimination, bullying and OH&S.
  4. Implement a thorough social media policy which compliments any broader social media or online marketing strategies in place.
  5. Ensure that the policy is explained to employees, preferably with an acknowledgement by them that they have read and understood the terms of the policy and are familiar with it.
  6. Staff should also receive training regarding the policy which should include education and awareness about social media as it is a new area which is constantly changing, and some staff may not be aware of many of the concepts.
  7. Regularly update the policy so that it remains relevant and make sure employees are aware of any changes.
  8. Take a proactive approach to social media by not only implementing policies and training, but by ensuring that inappropriate use of social media by employees does not go unaddressed.

What should a media policy include?

A good social medial policy will be well-integrated with other policies in place within the organisation and will be up to date, clear and concise. Its content will be specific to the needs of each organisation but some common areas include:

  • the ways in which social media should be used during work hours and how staff usage will be monitored (if at all);
  • guidelines about communicating with colleagues or managers online, for instance, by sending friend requests to other staff (this is especially important in relation to managers communicating with subordinate employees);
  • a reminder that all of an employee’s usual obligations as employees continue to apply while using social media (this includes the application of sexual harassment, bullying and discrimination policies);
  • guidelines around the use of confidential information, any disparaging or defamatory comments made directly or indirectly in relation to the organisation, its management, or clients; and
  • a reminder that comments made regardless of whether they are made on a company’s Twitter account for instance, or on an employee’s own private account in their own time may be subject to disciplinary action, including termination, even where those comments may appear to be unrelated to an employee’s work.

Social media, sexual harassment and bullying – what to look out for

It is vital that all staff are aware that comments, posts and messages they send to or make about other staff on Facebook may constitute sexual harassment, bullying or discrimination.

Employees must be educated about the serious ramifications of what they post on social media sites and how their actions towards a colleague on Facebook may result in disciplinary action or termination. Particular areas to watch include:

  • employees adding each other as Facebook friends (particularly where more senior staff are communicating with subordinate employees);
  • employees posting inappropriate photos, videos or commenting on other employee’s photos; and
  • employees contacting other employees repeatedly via social media to invite them out socially – if this is unwanted it could lead to bullying or harassment complaints.

Workplace Bullying & Harassment: The year ahead

Amber Wood

On 17 June 2010, WorkCover NSW launched a nine-month anti-workplace bullying campaign targeting employers in the retail, hospitality, manufacturing, health and education sectors.

The very next day, a high profile CEO resigned from his position following an allegation of sexual harassment. In an unprecedented move by a Board of an ASX 200 company, the CEO’s termination payment was severely curtailed, and immediate action taken to stamp out any other instances of sexual harassment within the organization. This made front page news of major metropolitan newspapers.

On July 2010. The St Vincent de Paul Society’s NSW State Council was placed under temporary administration by the National Council amid allegations of bullying and harassment by staff.

Workplace bullying and sexual harassment are now front and centre issues in boardrooms across the country.

Workplace bullying is often defined as “repeated, unreasonable behaviour directed towards an employee or employees that creates a risk to health and safety”. However, bullying can be isolated one-off event.

Over the past two years WorkCover has investigated 1,165 complaints relating to bullying and WorkCover’s statistics show there have been around 2,400 workers compensation claims relating to bullying costing a total of more than $60 million.

WorkCover’s renewed focus on workplace bullying and harassment reflects the huge emotional and monetary toll that workplace bullying can have on employees alike.

The daily costs for employers of workplace bullying include: decreased productivity; low employee morale; increased absenteeism; and increased staff turnover. Reducing these costs should, on its own, be enough incentive to prioritise prevention of bullying.

Employers seeking simultaneously to improve productivity and to avoid the scrutiny of WorkCover, can draw lessons from the outcomes of recent high profile bullying and harassment cases.

Perhaps ominously for employers, the three decided cases summarised below are from three different areas of law: workers’ compensation; occupational health & safety; and unfair dismissal. While the statement of claim in the fourth case has been publicly available, the other case is yet to playout in a court.

Workers Compensation (workplace negligence)

The recent workers’ compensation case of Bailey v Peakhurst Bowling & Recreation Club Ltd [2009] NSWDC 284 (3 November 2009), also sends a clear message to employers about the seriousness of workplace bullying.

Justice Levy of the NSW District Court found that due to severe and sustained workplace harassment and bullying buy her supervisor at the Peakhurst Bowling & Recreation Club, Ms Bailey, a bar worker, would never be able to work again. Justice Levy awarded Ms Bailey damages of $507,500 plus costs. The bullying occurred over a period of two years and included the following conduct:

  • repeated indications by Ms Bailey’s supervisor that her employment was precarious or in jeopardy;
  • use of “extremely vulgar language” in Ms Bailey’s presence;
  • placing undue pressure on Ms Bailey by causing her to repeatedly break liquor licensing laws;
  • demanding that Ms Bailey resign from her union;
  • changing Ms Bailey’s shifts from day to night including on Christmas Eve; and
  • wrongfully implying that Ms Bailey was responsible for an alleged shortage in the cash float at her cash register.

Occupational Health & Safety

One of the most widely publicised recent bullying cases is the prosecution by WorkSafe Victoria of the employer which operated Café Vamp in Melbourne after and ex-employee committed suicide following “relentless bullying” at the hands of her fellow café staff.

The employer was fined $110,000 for breaching its obligations under the Victorian Occupational Health & Safety Act (Victoria) (“Victorian OHS Act”) to provide and maintain systems of work that are safe and without risks to health.

The company’s director was fined $30,000 in his capacity as director for failing to provide information, instruction, training or supervision to prevent risk.

Perhaps most significantly is that three fellow employees including one manager were fined $45,000, $30,000 and $10,000 respectively for breaches of the Victorian OHS Act which imposes a duty upon employees to take reasonable care for their actions to prevent risks to the health and safety of other persons. In Victoria and New South Wales, the prosecution of employees for safety breaches has, until now, been very rare.

Again, while the employees engaged in the bullying conduct, the employer allowed a culture of bullying to flourish at the café and did not take any steps to investigate or prevent the bullying. The individual liability of the employees and the high penalties awarded appear to show an intention to send a clear message to employers that workplace bullying and harassment is an issue which must be taken extremely seriously.

Unfair Dismissal

Failure to investigate allegations of bullying was a key issue in the recent unfair dismissal case of Adam James Harley v Aristocrat Technologies Australia Pty Ltd [2010] FWA 62. In this case, Mr Harley successfully argued that he was constructively dismissed from his sales role having received a “show case” letter from the company and being required to attend a meeting with management to respond to allegations of alleged poor performance.

Fair Work Australia (“FWA”) found that Mr Harley had been subjected to a course of harassment by his manager which culminated in the company’s attempt to terminate his employment. Despite Mr Harley making complaints about his manager’s constant criticisms, the company did not take the complaints seriously, and did not investigate the complaints.

FWA found that the Applicant had been unfairly dismissed and awarded the maximum of six months’ compensation to Mr Harley. FWA was particularly critical of the company’s Human Resources department for failing to investigate the matter, despite being a large multi-national company with ample resources including a dedicated human resources team.

Trial by media

The recent allegations of sexual harassment made by a female staff member from a high profile company marketing department against its CEO resulted in a shock resignation from the CEO, who had been widely regarded as one of Australia’s most talented executives.

When announcing his resignation, the CEO released a statement acknowledging that he had ‘acted inappropriately’ towards the staff member at two company functions and as a result had ‘inexcusably let down the female staff member’.

The company lost the CEO who helped quadruple the company’s market value during his seven years reign. The company’s share price plummeted in the immediate wake of the resignation announcement. Arguably, the brand, which had been carefully crafted for over a century, suffered the most damage. A company with a predominantly female customer base. 70 per cent female staff, and many female shareholders, could not have relished the extensive publicity surrounding the resignation.

Some commentators have praised the Board of the company for acting promptly and for paying out a relatively small termination payment to the CEO, allegedly stripping him of significant share entitlements. Other commentators have praised the CEO for publicly acknowledge his inappropriate behaviour and resigning.

The company’s quick, public, and seemingly decisive steps should be of particular interest to employers. According to statements issued on behalf of the company, it is conducting and independent inquiry into sexual harassment within the company and has created an anonymous hotline for employees to report instances of harassment. These measures appear to be positive steps, designed to avoid a large damages award to the complainant. However, allegations if proven, that sexual harassment at the company was commonplace, or that there were previous complaints which were not properly investigated or resolved may prove problematic for the company. Employers “must do” list.

The above cases show that an employer must negotiate through a maze of obligations it has to its employees. With the economic, social and legal costs and risks so high, what should employers do to ensure they maximise productivity and do not get caught in WorkCover’s nine month campaign or face similar situations to those detail above?

  • Develop policies which specify what types of workplace behaviour will not be tolerated and the consequences of breaching these policies.
  • Policies and the corresponding processes should allow confidential internal complaints and thorough and transparent investigation processes so that any complaints can be dealt with promptly, discretely and thoroughly.
  • Policies must be reviewed and updated regularly and adapted to suit the needs of the employer and its employees.
  • The policies must be enforced consistently and fairly. Best practice is to ensure good workplace behaviour is part of the employer’s culture.
  • Employers should ensure that policies are supported by training so that employees understands the subtleties and consequences of poor workplace behaviour.
  • Employees must know they can make a complaint about a fellow employee regardless of seniority or status within the organisation.
  • Management and human resources staff must be properly trained to investigate and handle complaints appropriately.
  • Employers should keep detailed records of any complaints, investigation of complaints and the outcome of complaints including contemporaneous meeting notes and copies of all correspondence.
  • All complaints should be investigated promptly and taken seriously.
  • Finally, complaints, alleged perpetrators and any witnesses should be treated with respect at all times. All parties should be afforded procedural fairness.
People + Culture Strategies will partner with you to determine how we can assist your organisation to develop the right solutions and strategies in all workplace issues, including the development and implementations of policies, workplace issues, including the development and implementation of policies, workplace training, conducting investigations into allegations of bullying or harassment, performance management, and assisting with WorkCover investigations.

The New Paid Parental Leave Scheme: Your questions answered

Tim Wilson

Some of PCS’ clients have been asking us for advice on implementation of the Government’s paid parental leave scheme. We answered your key legal and strategic questions below.

What is it?

On 21 June 2010, the Paid Parental Leave Bill 2010 (Cth) (“Bill”) was passed by both houses of parliament. The Bill establishes Australia’s first national paid parental leave scheme.

When does it start?

Employers will not be required to comply with the provisions of the Bill until 1 July 2011 but can choose to “opt in” from 1 January 2011.

How does it work?

Broadly, the key elements of the scheme are as follows:

  • it will be wholly funded by the Commonwealth Government;
  • the Family Assistance Office will inform employers which employees have applied and are eligible for the payments;
  • employees will be eligible if:
    • they are working mothers or initial primary carers of a child born or adopted on or after 1 January 2011 (including certain part/time, seasonal, casual and contracted employees);
    • they satisfy the “work test”
      • performing 330 hours of qualifying work within the qualifying period;
      • their income is equal to or less than the indexed income limit (currently $150,000); and
      • they satisfy the “Australian residency test”;
  • employers are not required to make payments until they have received the relevant payment from the government; and
  • employers will then be responsible for administering the making of payments (up to 17 weeks’ base rate of pay at the National Minimum wage- currently $569.90) to eligible employees.

Additional guidance and conditions of eligibility may be included in the Paid Parental Leave (“PPLR”). At the time of writing the PPLR have not been released.

What if a paid parental leave scheme is already in place?

A number of employers currently exceeded their legal obligations and already provide employees with some form of paid parental leave. How then would these two schemes interact?

The Bill (as amended) clarifies that an employer’s obligations to make payments under the Bill is in addition to any other legal obligation that an employer may have to make parental leave payments to an employee.

Where a paid parental scheme is already in place, employers should consider what the source of that scheme is. If the scheme forms part of an industrial instrument or a contact of employment, careful consideration needs to be given before any payment is reduced or offset against the government contribution as this creates at least some potential for claims to be brought (including potential claims of discrimination or breach of the Fair Work Act’s general protection provisions).

Likewise, where a policy confers disproportionate benefits in terms of paid maternity, paternity and adoption leave, consideration of any potential discrimination may be necessary.

What are the consequences of non-compliance?

If concerns are raised as to compliance, the matter can be referred to the Fair Work Ombudsman for investigation. The Ombudsman can impose various civil penalty orders, including requiring repayment to the Commonwealth and penalties of up to $6,600 for each breach.

What are the top tips?

Employers may wish to consider:

  • when industrial instruments, contracts of employment and any parental leave policies were last updated and reviewed;
  • whether paid parental leave policies provide disproportionately for maternity, paternity and adoption leave;
  • what administrative measures need to be put in place to ensure that government contributions are passed on the employees; and
  • how any change in approach may be communicated to employees so as not to impact individual or collective morale.

IR and the Upcoming Election

Ed Austin-Woods

In the eyes of the electorate, industrial relations policy remains a key point of difference between the ALP and the Coalition’s recent promise that it would preserve the ALP’s current legislative framework or at least a first term if elected. The Coalition has recognized that its workplace relations policy is a politically sensitive subject and is seeking to neutralize it as an election issue by taking this position. However, employers need to be aware of the possibilities for change that may occur to ensure that their industrial strategy is thorough and properly considered. This is especially pertinent when planning whether an industrial instrument should be entered into or re-negotiated, or whether it should be delayed so as to await a more favourable legislative framework.

Historically, and previous to this latest announcement, the ALP and Coalition had significantly different policies which demonstrated the contrasting ideologies between the parties. The ALP believes in collective bargaining with strong union power and involvement, and that this affords employees the best representation and strongest position in workplace negotiations. On the other hand, the main objective of the Coalition’s industrial relations policy is to foster a more direct relationship between employers and employees at the workplace level without union interference. The Coalition’s core values include individual freedom and free enterprise, and it positions itself as the champion of small business.

When the ALP was elected to Government in 2007, one of its central platforms was that it would abolish the WorkChoices legislation implemented under the Howard Government. It promised to bring in a new system that would guarantee both employers and employees a “fair go all round”, a concept which was mirrored in the names of the Fair Work Act 2009 (Cth) (“FW Act”) and Fair Work Australia (“FWA”).

The FW Act heralded a number of significant workplace reforms. Access to unfair dismissal laws has been extended to allow workers relief where they are employed by a company with less than 100 employees. The National Employment Standards have been introduced which comprise 10 minimum employment standards (replacing the Australian Fair Pay and Conditions Standard). The prohibition on discrimination has been broadened though the introduction of the general protections provisions.

Importantly, the FW Act has also provided unions with stronger right of entry powers and an increased ability to negotiate enterprise agreements on behalf of employees they industrially cover. Under the Good Faith Bargaining (“GFB”) Principles, employers are now legally obliged to negotiate with unions in good faith. This includes the requirements to recognize and bargain with the other party’s bargaining representatives, attend and participate in meetings, disclose relevant information, respond and give genuine consideration to proposals in a timely manner, and refrain from capricious and unfair conduct that undermines freedom of association and collective bargaining. However, the FW Act also specifies that the obligations do not require concessions to be made or agreement reached on proposed terms.

Where an employer refuses to bargain, a union or employees can ask FWA to determine if there is ‘majority employee support’ for negotiating an enterprise agreement. If FWA determines there is majority employee support, the employer will be required to bargain collectively.

The GFB Principles have forced employers to re-think their negotiating strategy. Considerable though must be given to how replies are drafted, and future bargaining positions to be adopted. All possible outcomes, and their necessary response, must be properly prepared and planned.

The Coalition has stated that if elected it will not amend the current legislative framework for at least three years. It maintains that, in doing so, it is respecting the opinion of the Australian public who voted against WorkChoices at the last election, and listening to small business who do not want any more changes. On June 26 2010, the Coalition released a policy document called “Our Action Contract” which provides that they will nor revisit WorkChoices or reintroduce Australian Workplace Agreements (“AWAs”).

Although the Coalition has made these promises, we can expect it to return gradually to a position where it will wind back unfair dismissal laws for small business, address penalty rates, diminish union right of entry, and re-introduce non-union contracts. Furthermore, it is expected that a Coalition Government will eventually remove the GFB Principles. Consequently, employers would no longer be legally obliged to negotiate with their employees and/or representatives, and the involvement if unions would be considerably weakened. This would then also necessarily strengthen the position of employers in negotiating the terms of any proposed agreement.

Employers will need to remain informed on workplace policy development so they are able to make proper and educated industrial decisions. Industrial relations is certain to play a central role in the upcoming election. In 2007 it was reported that the ACTU spent $30 million in advertising against the Howard Government and WorkChoices. The Coalition’s election pitch is that it will not amend the FW Act for at least three years if elected. However, the Government will argue that the Coalition cannot be trusted and that wholesale changes will occur. The ALP will continue with the rhetoric that a Coalition Government will reintroduce WorkChoices and bring back AWAs.

Pre-election HR Actions

Be familiar with the current industrial legislative framework and the changes brought about by the FW Act.

Consider and understand how this framework affects your workplace obligations in relation to current contracts, agreements, policies and future industrial negotiations.

Understand the importance and relevance of the GFB requirements, and the correct procedures that must be followed when bargaining is deemed to have commenced.

Keep up-to-date and informed on changing policy developments, and consider their consequences and implications.

Have a sound IR strategy in place that reduces risk exposure through consideration of both and possible future movements.