A Bitter Pill to Swallow? Drug and Alcohol Policies in the Workplace

Michael Starkey, Associate

Rohan Burn, Graduate Associate

With the Alcohol and Drug Foundation reporting that alcohol and drug misuse costs Australian workplaces approximately $6 billion per year in lost productivity, it is understandable that many employers will seek to implement a framework for dealing with drug and alcohol usage in the workplace. Ensuring that employees are not impaired by the effects or after-effects of drug and alcohol use is an important part of driving a high-performance culture, meeting an organisation’s responsibilities regarding the health and safety of employees, protecting an organisation’s reputation, and encouraging employee wellbeing. However, introducing a drug and alcohol policy into the workplace is often not an easy task. For any organisation, determining where to draw the line on drug and alcohol use (for example, whether the policy should be “zero-tolerance” or adopt a different approach) will depend on a number of factors, including the work health and safety context in which the organisation operates (“high-risk” or “low-risk”), and the nature of the work undertaken in the organisation. Just as importantly, when enforcing drug and alcohol policies, employers also need to consider a number of legal risks that may arise, including under anti-discrimination and unfair dismissal laws.

When it comes to drug and alcohol policies, what does a best practice approach look like?

While any employer is likely to receive some pushback when seeking to implement a drug and alcohol policy, it is possible to mitigate this by adopting an approach focused on obtaining the “buy-in” of the workforce. The rationale for the policy should be clearly communicated, and it may be appropriate to develop the terms of the policy in consultation with the workforce. Further, best practice policies tend to take a holistic approach, rather than simply a focus on punitive outcomes. A holistic approach includes an emphasis on providing support, counselling, and education, rather than seeking to “catch out” workers. In addition, it recognises the reality that many employees take prescription medications, and will encourage responsible use and disclosure. Moreover, the policy should seek to build an understanding of the impact of alcohol or drug misuse in the workplace, as well as the likely disciplinary consequences. This is important from both a cultural and legal perspective. Policies framed in this way are more likely to be accepted by a workforce, and more likely to be looked at favourably by courts and tribunals.

What is a zero-tolerance drug and alcohol policy?

In most cases, the term zero-tolerance is used to refer to a drug and alcohol policy which sets “cut-off” levels, and stipulates that testing which reveals a breach of the policy will result in disciplinary action. The levels specified in a policy will often depend on the nature of the work carried out in the organisation. For example, in high-risk industries such as manufacturing and mining, where the potential safety ramifications of a breach of the policy are significant, a zero-tolerance policy is likely to be the most appropriate response. Conversely, in industries which depend on entertaining and interacting with client (for example, because employees may reasonably be expected to consume some alcohol while entertaining clients) policies might be tailored to cover how employees are expected to behave in situations where alcohol is being consumed, while prohibiting other conduct outright, such as illegal drug use. Ultimately, employers have a right to set what they regard as reasonable standards for drug and alcohol use within and affecting their workplaces, and to enforce those standards.

While, on their face, zero-tolerance policies prohibit certain conduct, they also serve the function of educating employees on their responsibilities and the organisation’s behavioural expectations. They should detail the method of testing to be used, and outline the steps involved in any disciplinary process. Where a breach of a drug and alcohol policy is established, any disciplinary outcome needs to align with the terms of the policy and take into account all the surrounding circumstances of the employee in question. This will maximise the likelihood of an employer being in a position to defend the decision in the event that an employee pursues legal action.

What is the role of the Australian Standards?

In a number of recent Fair Work Commission (“FWC”) decisions, the FWC has indicated that reference to the relevant Australian Standards can be an appropriate way to communicate and implement a drug and alcohol policy effectively. The FWC has also commented that while compliance with the Australian Standards is not mandatory, it can enhance the integrity of a drug and alcohol policy. The Australian Standards provide guidance on the processes required for drug testing to be performed in a valid and reliable manner. In one case, an employer implemented a zero-tolerance policy in which it defined the expression “free from the presence of other drugs whilst at work” as a reference to not having a reading in excess of the relevant Australian Standard cut-off level. The effect of linking it to the Standard was that the organisation communicated clearly to employees that they were not permitted to work with any concentration of drugs to the extent that this could be detected by the processes set out in the Standard.

What method of testing should be used?

There is a separate Australian Standard for urine, saliva, and alcohol testing, and employers need to consider which method of drug testing is appropriate for the circumstances of their business. Historically, the preference of unions has been for saliva testing to be used, on the basis that a mouth-swab is more indicative of present levels of impairment, while a urine sample is more likely to detect historical drug use. However, recent decisions of the FWC have indicated that employers are able to utilise either or both methods of testing, provided adequate protections are implemented to protect the privacy of the employee being tested (for example, it may be inappropriate for a urine sample to be taken by an employee’s colleague). In one case, the FWC rejected the submission that urine testing is unnecessarily invasive because it has the potential to reveal information about an employee’s out-of-office conduct that an employer should not need to know or try to control.

How should disciplinary action for breaches of a drug and alcohol policy be managed?

Disciplinary action should be approached on a case-by-case basis. Just because a policy provides for termination of employment in particular circumstances, does not mean that termination will always be appropriate when those circumstances eventuate. Employers should take a broad approach and consider all the circumstances of the individual employee, including an employee’s record of service. For example, terminating the employment of an employee with a “clean” and long record of service for a minor breach of a drug and alcohol policy may give rise to a successful unfair dismissal claim on the basis that the dismissal was harsh or unjust if it is in a “low-risk” industry. Additionally, the circumstances of an employee’s drug or alcohol use should be considered, including whether this may be a result of an addiction. Where addiction is an issue, it may be more appropriate to approach drug and alcohol use as a “fitness for work”, rather than “misconduct” issue, although it is always advisable to seek legal advice in such circumstances, particularly around the safety aspects that may arise. In order to build a solid foundation on which to take disciplinary action in the right circumstances, employers should ensure that all employees receive adequate training on the relevant policy and understand what the organisation expects from them.

Key takeaways

  • Employers should tailor their drug and alcohol policies to their industry and workplace.
  • Develop policies that set standards of expected behaviour, are focused on safety and wellbeing, and build a culture of compliance, not policies that only seek to punish.
  • Consider referring to the relevant Australian Standard to bolster the integrity of your policy.
  • Make your policy well known and ensure employees receive adequate training.
  • Consider disciplinary action on a case-by-case basis, taking into account the circumstances of the employee involved.

PCS assists clients in policy development and review and conducts training for managers on these and other WHS issues. 

 

 

Flexibility, compliance and culture: Ideas for 2018

Sam Cahill, Associate

For many employers, the summer break offers an opportunity to recalibrate and plan for the year ahead. In this article, we look ahead to the new year, and suggest some initiatives employers might consider implementing to enhance employee satisfaction, address cultural issues and ensure compliance with workplace laws.

Flexibility

In today’s workforce, the opportunity to work flexibly is coveted by many employees. But when employers think of flexible working arrangements, they usually limit themselves to the right to make a request for flexible working arrangements under the National Employment Standards (“NES”). This right is limited to employees who meet the eligibility requirements (for example, 12 months’ continuous service, returning from parental leave, carer’s responsibilities or over 55 years of age).

In 2018, employers should consider taking a proactive approach to flexible working arrangements, rather than simply waiting for eligible employees to make a request under the NES. A more open approach to flexible working arrangements can be used to attract talented people to the organisation and enhance satisfaction and retention among existing staff.

A proactive approach necessitates a focus on identifying particular functions, positions or duties that can be performed on a flexible basis (for example, at different locations and times). A good starting point for this exercise is to review the flexible working arrangements that have been provided to employees in the past and where the functions, positions or duties that have been the basis for flexible work arrangements can be expanded or modified in light of current operating needs.

Compliance

In recent years, the Fair Work Ombudsman (“FWO”) has pursued employers in relation to a range of compliance issues, particularly the underpayment of wages and entitlements.

In September this year, the Fair Work Act 2009 (Cth) was amended to include a number of new measures aimed at protecting “vulnerable workers”.1 These measures include:

  • stronger powers for the FWO to collect evidence in investigations;
  • new penalties for providing false or misleading information to the FWO, or hindering or obstructing an FWO investigation;
  • increased penalties for “serious contraventions” of workplace laws (ie, deliberate contraventions);
  • increased penalties for breaches of record-keeping and pay slip obligations; and
  • a reverse onus of proof in underpayment claims where an employer has not met record keeping or pay slip obligations and cannot show a reasonable excuse.

This means that it is more important than ever for employers to take a proactive approach to ensuring compliance with workplace laws. An important first step towards ensuring compliance is to conduct a thorough review of the organisation’s employment arrangements, including:

  • the engagement of employees and other workers (including the procurement of any external labour services);
  • the coverage and application of industrial instruments (Modern Awards and Enterprise Agreements);
  • compliance with award/agreement requirements with respect to rostering, minimum rates of pay, loadings, penalties and allowances;
  • the accrual and payment of leave entitlements, including the recognition of prior service where appropriate;
  • compliance with obligations in relation to pay slips and record keeping; and
  • the impact of any changes to Modern Awards made by the Fair Work Commission as part of its Four Yearly Review of Modern Awards (for example, the introduction of new provisions regarding annual leave and casual conversion).

The purpose of such a review is to uncover any existing or potential compliance issues so they can be resolved internally and with minimum disputation and/or external scrutiny. The review may also highlight areas in which the organisation will need to develop systems and processes to ensure compliance going forward.

An employer’s compliance obligations under the various workplace laws are subject to almost constant change. This means that employers are required to continually review and adjust their systems and processes. For example, in July this year, as part of the Four Yearly Review of Modern Awards, the Fair Work Commission decided to incorporate a model “casual conversion” clause into 85 Modern Awards. The model clause provides that:

  • the employer must inform casual employees of their right to request a conversion within the first 12 months of employment;
  • casual employees who have worked a standard pattern of hours over the 12-month period will be eligible to make a request to convert to full-time or part-time employment; and
  • a request to convert can only be refused on reasonable business grounds (for example, where the conversion would require a significant adjustment to the casual employee’s hours of work or where it is known or reasonably foreseeable that the employee’s position will cease).

For some employers, the idea of casual conversion is nothing new, as it has existed in certain industries for some time. However, for others, it will be necessary to develop the appropriate systems and processes for:

  • monitoring the engagement and pattern of work of casual employees;
  • notifying relevant employees of their right to request a conversion to permanent employment; and
  • considering and making decisions in relation to requests for permanent employment.

The performance of these systems and processes will then need to be measured as part of the next review of the organisation’s employment arrangements.

Culture

In recent months, a number of allegations, mainly relating to sexual harassment and other inappropriate behaviour, have surfaced in relation to a growing list of high-profile men, including Hollywood celebrities, politicians and business leaders. In some cases, the alleged conduct was repeated over many years and was even well-known within certain organisations and industries. This has raised the question: why has it taken so long for the allegations to surface?

As discussed in the earlier article, “Power, sex and silence in the workplace”, this delay has been attributed to a number of factors, including a reluctance to report misconduct due to fear of victimisation, leading to a “culture of silence” within particular organisations. Some have argued that this culture of silence amounts to a “culture of complicity” in the action of the perpetrator. This topic will be one of the topics addressed in our series of PCS webinars next year.

Employers can take a number of steps to try and overcome a “culture of silence”. These include:

  • encouraging a culture of appropriate conduct modelled by senior staff within the organisation;
  • ensuring that anyone who reports conduct is treated with respect and their experience is not minimised;
  • ensuring the policies are drafted so that employees are specifically required to report any inappropriate conduct;
  • introducing stronger protections against victimisation for workers who report conduct; and
  • ensuring that workers receive training in relation to bullying, harassment and discrimination and what to do if they experience or witness this type of behaviour in the workplace.

  1. Fair Work Amendment (Protecting Vulnerable Workers) Act 2017.

Going, going, gone: Employment-related issues in divestment and acquisition

Michael Starkey, Associate

Divestment and acquisition are processes that are most often viewed through a regulatory lens. While it is certainly important to assess whether a divestment or acquisition will add value to your organisation, all too often, a key determinant of whether this is likely to be the case is overlooked – that is; the human “aspect”.

An organisation is in essence only as good as its people, and the truth of this is evident in the context of divestments and acquisitions. As well as covering off important employment-related basics, this article provides guidance on how organisations can adopt a strategic focus to managing people issues that arise in divestment and acquisition, with a particular emphasis on how organisations can enhance the retention of their best talent throughout this process and beyond.

Questions to ask during due diligence

While due diligence is often tedious, frustrating and time-consuming, it is essential in determining whether or not it is worthwhile for a business to enter into a transition in the first place, what might need to be negotiated in order to get the best deal, and whether the business is going to be well-positioned to complete its post-acquisition objectives. Investing time and resources into a thorough due diligence process from the outset helps a business avoid unexpected problems and the unnecessary costs that may be incurred to rectify these at the back-end of a transaction.

In considering the type of questions to ask during a due diligence process, it can be helpful to think in terms of certain categories.

Operational

Operational questions include asking what is the overall structure of the business that is being acquired, what roles exist within the business, what terms and conditions of employment are common within the organisation, and which parts of the business are doing well and which are not. It is important for a purchaser to ask these questions so that they know the landscape they are entering, and what things they may need to change in order to achieve the post-acquisition goals.

From an employment perspective, a thorough knowledge of the terms and conditions of employment that are applicable to the business is important for a number of reasons. In the first instance, it helps gauge what are likely to be the expectations of any employees who you may wish to offer future employment to as part of the acquisition. It is also important to know the source of the employees’ terms and conditions of employment, and particularly whether the employees are covered by a modern award or enterprise agreement. There are circumstances where the terms and conditions under an award or enterprise agreement will “follow” the employees upon their transfer.

Compliance

The next category we suggest are questions relevant to compliance issues. The focus of these questions is often about the “nitty gritty” of the employment relationship; for example, ascertaining the state of documentation such as employment contracts, what employment-related liabilities are accrued (for example leave balances), and the details of any current or threatened legal action against the business.

Apart from giving a clear picture of the current employment landscape within the business, these questions are directed to determining whether the business has had any compliance issues in the past, and whether there may be any record-keeping or documentation issues which could give rise to compliance issues in the future.

Ascertaining the current state of existing employment contracts is also vital in an acquisition so that the incoming organisation can determine what is the most appropriate documentation to use when the business is acquired. In most cases, best practice will be to issue new employment contracts. However, there may be circumstances in which more simple documentation that makes reference to previous employment contracts can be utilised.

Strategic

The final category, which is often overlooked in the due diligence process, relates to questions that are more strategic in nature. These are questions which are less likely to be answered by looking at data and employee records, and requires a purchaser to actively engage with relevant personnel in the business that is being acquired.

The first type of question we recommend in this category goes to the skills of relevant personnel. If a purchaser intends to continue to run the business following its acquisition (either as a separate entity or within an overarching corporate structure), it pays to have a thorough knowledge of which personnel are the “brains”, “key players” or “star performers”. By making offers of ongoing employment to these people, an organisation can help establish some continuity in a time of change, and can capitalise on their skills moving forward.

Another consideration for an incoming employer is what the culture of the organisation is like. While it is unlikely that a prospective purchaser will have access to all levels of the business in question, it may be possible to conduct a high-level cultural audit with executives and key personnel of the target business to determine whether they believe there are any major impediments to acquisition – for example, how does the organisation generally deal with change? Does the organisation go through change often, or is it more of a static organisation? While it is almost certain that there will be some obstacles to change, an organisation with knowledge of these obstacles is better positioned to address these issues in a proactive manner.

Finally, a prospective purchaser should consider what its organisation can contribute to the business, not just what they can take from the business. For example, organisations should consider whether they will be able to improve a business by providing better managerial oversight, transferring valuable skills, and sharing capabilities. If the answer to these questions is no, it may be time to reconsider the acquisition.

Talent retention

One of the most difficult issues for organisations to handle, particularly during divestment, is retaining talent up until the point when the business ceases operating in its current form. During an organisation’s “wind down” period, there will usually be a tension between employees seeking to either secure redeployment or “jump ship”, and the business’ need to remain well-managed and profitable up until completion of the sale.

Organisations need to accept that a loss of employees will be inevitable. In some cases, this may not necessarily be a bad thing. An organisation need only be concerned if it is losing employees who add value to the business, or who are a vital part of the transition team. However, there are a number of strategies an organisation can implement to help keep people happy and “the wheels spinning” during this time.

Transparent and well-timed communication

“What’s in it for me?” Within all levels of an organisation employees will ask the same questions regarding their pay, recognition of prior service, retention of benefits, location and job title. Therefore, a strategy around clear communication, onboarding and other transitional processes should be developed with those questions and answers in mind.

Some organisations might think they are assisting their employees by giving them as much notice of a business sale or acquisition as possible. However, on occasions, this can be to the organisation’s detriment, particularly in respect of employees for whom there is no position in the new entity or with the new employer, or for employees whose position may be uncertain. By providing employees with a long period of advanced notice of the event employers run the risk of employees “jumping ship” during the transition period.

Employers who are covered by a modern award are required to comply with the consultation provisions contained in the award. These provisions generally require that employers consult with employees who are likely to be affected by a major workplace change once a “definite decision” to introduce that change is made. When a “definite decision” is made will often be open to interpretation. However, in previous cases, courts have held that there is no requirement to commence consultation where a redundancy only remains a possibility. In a divestment context, this means that in most circumstances it will be unnecessary to begin consultation prior to the business sale being finalised, including any agreements between the outgoing and incoming employer in respect of the possible transfer of staff. It has also been held that in certain circumstances, the period between consultation beginning and a redundancy being implemented can be short. For example, the Fair Work Commission has held that (subject to particular circumstances) it may be reasonable to inform an employee of a redundancy (during consultation) and provide a termination date of the next day1.

However, this flexibility must be balanced against other considerations. For example, employers should consider how their communication process will be perceived by employees, particularly those who are remaining with the business. If there is a perception of unfairness or unreasonableness, this can have an impact on morale and, consequently, performance. In circumstances of change, it is also the case that employees are highly likely to appreciate communication that is transparent and honest. While none of us like to hear bad news, many people can appreciate that it is better to be prepared for change and its possible consequences, than to feel it has been sprung on us. Employees who leave an organisation where they perceive that communications have been handled in an open and honest manner are less likely to be bitter about their circumstances, and may be less likely to pursue some form of claim.

Skill-building opportunities

Another key to talent retention during a transition period is to promote opportunities for employees in facilitating the change. For example, during mergers and acquisitions, it is often the case that an employer will need to establish a transition team to lead the business through the period of change. Where employees are placed into roles in which they feel like they are actively contributing to the transition, rather than waiting out their days in an organisation, they are likely to be more satisfied with their work and more likely to remain with the organisation.

Incentives to stay

In cases where there are the financial resources available, organisations may wish to use monetary incentives, such as retention bonuses, for employees who “stick it out” until the end. Such bonuses need to be carefully considered, bearing in mind exactly what it is the organisation is trying to incentivise. Retention is only really valuable if the staff retained are continuing to add value to the business by performing their duties to a high standard. Therefore one option is to link retention bonuses to performance outcomes during the transition period.

Alternatively, employers may be able to offer employees additional services as a component of a redundancy package on the basis that employees remain with the business until its final day. An example of this is career transition support services, which can be of significant value to employees, particularly where they are not confident about their capacity to secure alternative employment.

In the case of award-free employees, it should also be made clear that in order to receive a redundancy payment, they will need to remain with the business up until the date on which it has been determined that their employment will come to an end as a result of a redundancy. In other words, if an employee resigns prior to this date, their employment has not terminated at the employer’s initiative, and there is no entitlement to redundancy pay.

Key takeaways

  • While it is important to get the “nitty gritty” aspects of due diligence right, due diligence should be used strategically in terms of people management to better position a business for post-acquisition success.
  • Communication about change should be open, well-timed and tailored to the circumstances.
  • Organisations should be willing to invest in their talent during times of change and should promote the opportunities available to those willing to take on the challenge.

When parting is not sweet sorrow: A critical look at the messaging around terminations of employment

Chris Oliver, Director

As our lovers exchange their goodnights in Shakespeare’s Romeo and Juliet, Juliet says to Romeo “Good night, good night! Parting is such sweet sorrow, That I shall say good night till it be morrow”. For Juliet, the sorrow of parting ways is sweetened by the wondrous anticipation that they will soon be reunited.

Perhaps self-evidently, rarely can the same be said of dismissals. In truth, the reverse is possibly more accurate with any joy being tied to the goodbye, and the sorrow being tied to any possibility of a future greeting.

Undeniably, terminations are possibly one of the more emotionally challenging aspects of the employment relationship. While you can certainly apply an Einstein relativity analysis to terminations, it is almost always a relatively unpleasant one. It is the ultimate sanction for an employer to apply, and it is a decision that can have long lasting impacts, not only for the dismissed employee but for every participant in the process and its many spectators.

What are we really saying when we dismiss someone (and also when we decided not to)?

While some employer-initiated terminations are proactively planned, in most instances they’re reactive. Consequently, how often do we genuinely consider the messages that will be created by not only the reasons for the dismissal, but all of the surrounding circumstances? Equally, how often do we consider the messages that are created by our decisions not to dismiss? For example:

  • Performance-based dismissals have a punitive element for the individual involved, but what do they say (and what do our decisions not to dismiss say) for the inevitably large group of internal and external spectators who are not involved, have limited visibility, but are certainly reaching their own conclusions about the messages;
  • Conduct-based terminations tend to also be punitive, but coupled with our decisions not to dismiss can send powerful messages as to the conduct that we will or will not accept;
  • Terminations for operational reasons tend not to be viewed punitively, but carry the potential to create a broad range of messages regarding the health of the business, the operational direction the business is taking, (in)security of employment and the importance the business places on its people and its compliance with its own processes.

As we make our decisions to terminate (or not to terminate as the case may be), it’s important to question and be aware of the messages the organisation is inevitably sending with our decision.

The standard we walk past is the standard we accept

Almost all organisations promote their values and culture across many and varied contexts – in recruitment, at organisational off-sites, during strategy sessions, team building exercises, our inductions, our policies and procedures and in our external marketing material. Those values are also regularly cited when the same organisations make their decisions to undertake investigations, disciplinary processes and dismissals.

But what is the real and practical purpose of values and culture within your operational decisions? As an organisation, can you honestly say they permeate everything your organisation does? Or is the organisation prepared to trade off culture and values against the expediency of short-term decision making?

On 12 June 2013, the Chief of Army, Lieutenant General David Morrison posted a YouTube video in response to various and apparently systemic instances of plainly unacceptable behaviour finding public light. Morrison’s powerful message included the following:

Every one of us is responsible for the culture and reputation of our army and the environment in which we work.

I will be ruthless in ridding the army of people who cannot live up to its values. And I need every one of you to support me in achieving this. The standard you walk past, is the standard you accept. That goes for all of us, but especially those, who by their rank, have a leadership role.

While Morrison’s speech may have taken its place as a seminal moment in the army’s own recent journey, his words should continue to resonate more broadly as a clear articulation of the fundamental role decision-making has in the creation and maintenance of organisational culture.

The reinstatement dilemma

What could be worse than spending time, money, emotion and sleepless nights on a termination of employment and then the employee is reinstated?

Many organisations over-discount the risk of reinstatement. They tell themselves “we will show the relationship has broken down, or we have hired someone else – so we cannot have the employee back”. In practice, it’s unlikely to be that easy. Organisations need to remember that under the Fair Work Act 2009 (Cth) reinstatement is the primary remedy and the Fair Work Commission cannot make an order for the payment of compensation unless it is satisfied that reinstatement is not appropriate.

Statistically, reinstatement is not as uncommon as most employers think. While it’s true that, on average, around 92% of unfair dismissal claims result in a settlement prior to a decision being made, that still leaves around 8% that are determined by a decision. Of those decisions where a finding of ‘unfairness’ is made, around 18% result in a remedy of reinstatement or reemployment.

While an order for reinstatement will create an obvious challenge for any organisation, every organisation should also consider the broader challenges that the resulting message will create. While the organisation is unlikely to be able to effectively or positively message the reinstatement of an employee, it is guaranteed that many questions will be asked and answered around the watercooler. For example,

  • What does the reinstatement say about our employer?
  • Did it try to enforce an inappropriate policy?
  • Did it fail to follow a fair process, and did it breach its own processes?
  • Did it “jump the gun” in its decision making?
  • Was there a “sloppy” investigation?
  • Was the termination just a ‘stitch up’?

Part of the problem is that everyone is watching. The challenges of reinstatement don’t just include the internal messaging and cultural challenges, but it also includes the brand damage. There can be brand damage amongst both customers and potential new employees. Even in a world of short news cycles, these matters do get traction, develop their own notoriety and can become topics of ongoing discussion for the years ahead.

Creating a settlement culture

It’s not uncommon for organisations to approach a dismissal with a mindset of “cutting a deal” on the way out, or at conciliation. While statistically the prospects of settling at some point between dismissal and hearing are good, organisations need to consider carefully the messages they are sending, and the culture they are creating, by routinely adopting this approach.

Where an organisation routinely ‘cuts a deal’ with employees on the way out, or settles all claims filed against it, it’s common for a counter-culture to develop where employees:

  • lose part of the incentive for maintaining performance;
  • delay making their own decision to move on;
  • adopt obstructionist strategies in disciplinary processes;
  • file claims in the expectation that a settlement will follow.

Regrettably, this counter-culture is often easier to create and harder to undo, than the high-performance culture, and the culture of accountability to which most organisations aspire.

Key takeaways

  • Terminations are not just about individual performance or behaviour, but are intrinsically tied to your organisation’s values and culture.
  • If you are prepared to “run it”, either terminate well or be prepared for the possibility of reinstatement and the basket of cultural consequences that follow.
  • How you dismiss and how you “clean up” play an unavoidable role in the creation and maintenance of your organisation’s culture.

Power, sex and silence in the workplace: Cultures of complicity

David Weiler, Associate

Perhaps what is most concerning about the sexual harassment and assault alleged against Harvey Weinstein by several women is that it was an open secret in Hollywood for years. It was joked about by some and ignored by many others. However, it took two independent investigations, one from the New York Times and another from the New Yorker, for those with the power to step up and take a stand against the alleged behaviour.

It is not uncommon for those who take steps to report sexual harassment to find their experiences dismissed or trivialised. For example, in a landmark sexual harassment case in Australia1, the claimant stated that she had reported to her employer instances of sexual harassment. She recounted that the response from her supervisor was allegedly to laugh and say that “he himself had been hit with the ugly stick and that he never had the pleasure of being a target of sexual harassment and fantasies, and unfortunately no one had wanted to have an affair with him.” 2

These stories not only ignite a necessary dialogue within workplaces about such behaviour, but also provide a useful case study of how sexual harassment is aided and abetted by the inactivity and silence of those in a position to speak out about such behaviour.

Power

Following the Weinstein accusations, several women made public allegations of sexual misconduct against the comedian, Louis C.K.. The celebrity responded by admitting to the claims and in a statement said:

“These stories are true. At the time, I said to myself that what I did was O.K. because I never [did anything] without asking first, which is also true. But what I learned later in life, too late, is that when you have power over another person, asking them…isn’t a question. It’s a predicament for them. The power I had over these women is that they admired me. And I wielded that power irresponsibly.”

The power that certain individuals have over those who might potentially speak out against inappropriate conduct is an important insight into how complicity is solidified within a culture. Take, for example, the situation of Quentin Tarantino whose movies, including Pulp Fiction, were distributed by Mr Weinstein. As far back as 1995 he knew of Weinstein’s conduct from his own girlfriend’s experience. As an “up-and-coming” director, the support that Mr Weinstein gave Mr Tarantino was critical to his success. Following the publicity around the allegations, Mr Tarantino reflected that he wished he “had taken responsibility for what [he] heard. If I had done the work I should have done then, I would have had to not work with him.”

Power and control are central to the employment relationship, and organisations must be enlivened to the possibility of such power being exploited. The power dynamic may contribute to an environment that prevents those affected from speaking out, as well as the willingness of peers, bystanders and other workers, who are dependent on the support of more powerful colleagues, from speaking out.

Silence

As the NY Times reports, the organisational silence echoes that of the broader industry. In 2015, an employee of Weinstein’s company, Lauren O’Connor, had written a letter to several executives in the business outlining inappropriate conduct against a colleague and notifying them that:

“There is a toxic environment for women at this company…

I am just starting out in my career, and have been and remain fearful about speaking up…But remaining silent is causing me great distress…

Harvey Weinstein is a 64 year old, world famous man and this is his company. The balance of power is me: 0, Harvey Weinstein: 10…I am a professional and have tried to be professional. I am not treated that way however. I am sexualized and diminished.”

According to the report, “some Weinstein Company board members and executives…were alarmed about the allegations….in the end though, board members were assured that there was no need to investigate. After reaching a settlement with Mr. Weinstein, Ms. O’Connor withdrew her complaint and thanked him for the career opportunity he had given her”.

These accounts offer a rare and candid glimpse into an industry where success is built, in part, on ignoring unfortunate facts and protecting one’s own interest in the face of inappropriate sexual conduct.

As a result of women coming forward to speak up against the systemic issues, change is possible. In a statement announcing the expulsion of Mr Weinstein from the body that awards the Oscars, the Board of Governors for the Academy of Motion Picture Arts and Sciences explained its decision as follows:

We do so not simply to separate ourselves from someone who does not merit the respect of his colleagues but also to send a message that the era of willful ignorance and shameful complicity in sexually predatory behaviour and workplace harassment in our industry is over. What’s at issue here is a deeply troubling problem that has no place in our society.

It is fair to be skeptical of the industry’s ability to change, but this sentiment draws attention to how institutional silence on issues such as sexual harassment plays a significant role in the perpetuation of this type of conduct and in disempowering those who experience harassment from bringing forward their allegations.

In Australia, organisations often have policies and procedures that make provision for raising allegations of this nature. But it is worthwhile considering whether the culture of an organisation creates a climate of silence and implicitly discourages the reporting of such allegations.

Liability

Another significant aspect is the liability that may arise for individuals who turn a blind eye towards inappropriate sexual conduct in the workplace. In terms of accountability within an organisation, the personal liability of individuals for breaches of the Fair Work Act 2009 (Cth) (“FW Act”) and anti-discrimination laws such as the Sex Discrimination Act 1984 (Cth) (“SD Act”) may become an issue for those considered to be “involved” in a contravention. This can include directors, compliance officers, managers and senior human resources staff.

Under the FW Act, involvement in a contravention is treated in the same way as an actual contravention. An individual is taken to be “involved” in a contravention if he or she:

(a) has aided, abetted, counselled or procured the contravention; or
(b) has induced the contravention, whether by threats or promises or otherwise; or
(c) has been in any way by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
(d) has conspired with others to effect the contravention.

To be “knowingly concerned in or party to the contravention” (s 550(2)(c)), the conduct in question may take the form of an act or omission, with the potential to capture a failure to act where some form of action would have been the appropriate response. For example, where an HR manager had knowledge of the essential matters that made up the employer’s contraventions, he was found to have been knowingly concerned in these contraventions on the basis that “as human resources manager, he should have been aware of, and at least attempted to give advice on, [the employer’s] obligations under the [Act].3

Borrowing from the criminal law concept, “willful blindness” can arise “where a person deliberately refrains from making enquiries because he prefers not to have the result, when he wilfully shuts his eyes for fear that he might learn the truth, he may for some purposes be treated as having the knowledge which he deliberately abstained from acquiring”.

Where a remedy for sexual harassment or discriminatory conduct is pursued in the discrimination context, the personal liability of an individual alleged to be involved in a breach can also arise. Under the SD Act, a person who “causes, instructs, induces, aids or permits” another person to breach the legislation is taken also to have done the unlawful act.

In this context, the reach of the SD Act has been held to extend to the role of an employment agency that knew that several young women it sent to a particular employer had made sexual harassment allegations. The agency was found to have “permitted” the unlawful conduct that took place in relation to a young woman who was harassed at that workplace, on the basis that the prior complaints relating to that workplace should have alerted it to the distinct possibility that any young female sent to that workplace was at risk.4

Take the example of a senior employee or director who is aware of instances of inappropriate conduct occurring in workplace, but who remains silent in circumstances where, because of their position of authority in that workplace, action on their part could have had an impact on the behaviour. By their own inertia on the issue, they may run the risk that they are taken to have condoned or permitted such conduct. This becomes a greater risk where there are repeat and consistent allegations, making silence a poor choice.

The recent accusations made around the abuse of power and inappropriate sexual conduct by celebrities have brought to light how systemic sexual harassment in organisations thrives on silence and complicity. Key personnel in such organisations run the risk of being viewed as potentially involved in contraventions, where their awareness and position give them the capacity to influence such behaviour.

Key takeaways

  • Organisations need to be mindful of the power dynamics in the workplace that can foster a culture of silence and absence of complaints.
  • Diligent adherence to compliance obligations requires active, not passive, engagement.
  • “Wilful blindness” may be considered actual knowledge for the purposes of liability.

  1. Ewin v Vergara (No 3) [2013] FCA 1311
  2. Ewin v Vergara (No 3) [2013] FCA 1311 at [497].
  3. Fair Work Ombudsman v Centennial Financial Services [2011] FMCA 459 at [38]
  4. Elliott v Nanda (2001) 111 FCR 240.

How long is too long? When the job can no longer be done by an injured worker

Therese MacDermott, Consultant

A common response to a situation when a worker is injured is to assign the worker to a different role for a designated period, often referred to as “light” or “suitable” duties, while he or she is recovering from an injury. This response is generally dictated by the requirements of workers’ compensation legislation and may also be undertaken to fulfil an employer’s obligations under anti-discrimination legislation. However, employers can feel pressured to retain an injured worker in an alternative role long after it becomes clear that the worker cannot return to his or her pre-existing duties, and after the requirements of workers’ compensation laws are satisfied.

In this article, we consider what obligations an employer must satisfy under disability discrimination legislation, in order to terminate an injured worker’s employment safely on the basis that he or she is unable to perform the inherent requirements of the particular work, as they cannot return to their pre-injury duties, even with reasonable adjustments. While an injured worker may seek to be retained permanently in a re-assigned role, this is not what the legislative framework requires. What is important is the capacity to fulfil the duties for which the injured work was employed, albeit with reasonable adjustments, rather than characterising the alternative role itself as a reasonable adjustment.

Assisting a worker to return to their original role

Courts have found the requirements of the Disability Discrimination Act 1992 (Cth) (“DDA”) to make reasonable adjustments are directed towards alterations to the job or other modifications for the person, which are designed to facilitate the person being able to do the work that he or she was employed to do.

An illustration of this point is a recent case1 where a worker injured his hand at work and subsequently undertook suitable duties on a part-time basis, but was ultimately found to be unfit to perform his pre-injury duties as a “fitter”. The medical evidence in this case was to the effect that the injured worker could no longer perform the “fitter” duties and could only return to work for permanently modified duties, such as office work. The court found that the employer’s obligations arising from the DDA in this context were to make reasonable adjustments to the injured worker’s situation so that he could continue to work in the position for which he was employed, that is the “fitter” position. It was not to find him other employment in an alternative role.

One qualification to this point is that if an employer has a history of allowing injured workers to remain long term in alternative roles, the application of the strict letter of the law may raise questions about the reasonableness of this response. If the injured worker remains in the alternative role long-term, this could give rise to a situation where it is taken to be the substantive role going forward against which capacity is assessed. In such circumstances, it is generally advisable not to leave the matter unresolved indefinitely, but to make a clear decision regarding any incapacity to perform the pre-injury role. A new contract to employ the person in the alternative role can then be entered into if that is negotiated between the parties. Employers also need to be mindful of any significant differences in salary and entitlements between the two roles, and negotiate contractual terms to reflect this.

Making appropriate enquiries

If an employer is contemplating terminating an injured worker’s employment based on his or her inability to perform the inherent requirements of the job, it is incumbent on the employer to make enquiries about a worker’s capacity at that point in time. Generally, this requires a consideration of the feasibility of a return to work (including the possibility of a return to work in a reduced form in the short term), with a view to the worker returning to the pre-injury position in the foreseeable future.

The type of information relevant to these inquiries includes medical reports provided by the worker and any other reports that may have been obtained by the employer from an insurer or rehabilitation provider. Where this information is insufficient to enable the employer to make a fully informed decision, it may be appropriate, for example, to obtain the consent of the worker to release medical information from their treating doctor or specialist. An alternative approach is to request the worker to attend a medical assessment arranged and paid for by the employer. An injured worker is required to co-operate with such a request.

Consultation

A failure to give the injured worker an opportunity to consider or propose any adjustments prior to a termination of employment can impact on how an assessment of the capacity of the individual is viewed by a court or tribunal, particularly in unfair dismissal cases. The importance of consultation with an injured worker is highlighted in a recent Fair Work Commission decision,2 where it was found that a nurse had been unfairly dismissed following a non-work related injury. The Commissioner stated:

“…I am satisfied that the decision to terminate Ms Maharaj’s employment was unreasonable. Northern Health may well have been able to satisfy itself as to the correctness or otherwise of its position had it undertaken even the most basic of investigation with Ms Maharaj. It did not do so and there is nothing before the Commission that suggests that Ms Maharaj could not have returned to work, to her pre-injury duties on a graduated return to work plan.”

Timing

The appropriate time to consider a worker’s ability to perform the pre-injury role is at the time that termination is being considered. Workers’ compensation legislation in each state and territory also set timeframes for various matters, such as how long alternative duties need to be provided, and need to be factored into managing a return to work.

Another important timing factor is in relation to timeframes for a return to full capacity. If a medical report indicates that an injured worker is likely to return to full capacity to enable him or her to undertake their pre-existing duties within a nominated timeframe, then an employer will need to work with that assessment, including in some cases allowing access to different forms of leave, such as unpaid leave if necessary. This is different to a situation where the prognosis of a return to full capacity in the foreseeable future is poor. In this case, the argument that a person is not able to perform the inherent requirements of the job is strengthened.

Key takeaways

  • The duties undertaken in the pre-injury role are crucial to the assessment of incapacity.
  • Act on medical information and obtain further reports to enable informed decision-making.
  • Employing a worker permanently in an alternative role is not required, but may be an option that an employer is prepared to consider.
  • Develop a comprehensive strategy as legal challenges may arise through a number of different avenues, including compliance with workers’ compensation obligations, disability discrimination and unfair dismissal.

Just the facts: Mistakes to avoid when conducting an investigation

Kathryn Dent, Director

In our June webinar, cognisant of the fact that many HR Practitioners are increasingly involved with or conducting investigations, I highlighted the mistakes to avoid when conducting an investigation to ensure that the process and the outcomes are fair, transparent, legally compliant and defensible.

It is difficult to recommend a model investigation process because the process of an investigation will necessarily depend on the allegations, the participants and the workplace. However, avoiding the mistakes set out below should steer organisations in the right direction to ensuring that their findings and action taken in response to the findings, are solid and defensible.

My “top 10” mistakes, and how to avoid them, are reproduced here.

1.  Not following the process

Fortunately, it is rare to find an organisation that doesn’t have a grievance or complaint policy (and those that do not have one should consider drafting and implementing one as a priority).

Policies vary from organisation to organisation so it is important to be familiar with what is required once the complaint or grievance is received. Whilst a policy may not be contractual in nature (the best policies aren’t), they are there to provide consistency of approach and security to employees and to that extent compliance with them is highly advisable.

Generally, policies have a multi-step approach, starting with internal resolution before the matter is escalated. The best policies avoid mandating that each step must be followed (sometimes this is not appropriate given the identity of the parties involved), reserve discretion and afford flexibility to cater for different circumstances. Importantly, the policies should not commit the organisation to commencing and concluding an investigation within a set timeframe. Instead, a general commitment to expediency should suffice, as a means of reassuring the parties.

If you need to deviate from the process set out in the policy, make sure you have sound reasons for doing so and that you consult with those involved in the investigation about this to obtain their consent. This minimises the risk of technical objections and challenges on this point at a later date.

2.  When failing to plan is planning to fail

Once you have decided to investigate, which can sometimes be a challenging step in itself (think about the “off the record” or “confidential chats” employees want to have, usually for fear of retribution), the next phase is planning it. Failing to plan an investigation can affect the outcome and defensibility of findings. For example, it could lead to witnesses and evidence being overlooked, policies not being complied with, insufficient support, an exacerbation of health issues caused by the behaviour the subject of the investigation, an aggravation or repetition of behaviour and further damage to working relationships. Planning will help to mitigate these risks. Planning involves:

  • Identifying witnesses, additional to the complainant and respondent
    • This may or may not be capable of being done early depending on how comprehensive the initial complaint or grievance is.
    • Only interview those who are likely to have knowledge of the matters or who have been identified as potential witnesses by the complainant or the respondent.
  • Working out the order of interviews
    • Generally, interview the complainant first and then the respondent, with any witnesses last. Remember that any new material from witnesses that could affect the findings may necessitate a further interview to put that material to the person (at least of the respondent).
    • Whether respondent or witnesses follow the complainant may depend on:
      • The extent of confidentiality that is required to preserve the integrity of evidence including the respondent’s answers; and
      • How likely it is that the respondent will admit to the allegations and obviate the need for interviewing the witnesses.
  • Working out the mechanics of the interviews
    • Where will they be held? Away from the workplace to protect confidentiality?
    • How will they be recorded? Audio recording requires consent of the party being interviewed. If you are transcribing by hand or recording digitally on an electronic device, best practice dictates that the written statement should be signed.
    • When will they be conducted?
    • How long is each interview likely to take?
  • Status quo
  • Whether or not the parties should remain in the workplace is an important consideration to minimise further damage to workplace relationships or potential health-related issues.
  • There is also the question of whether to suspend the alleged wrongdoer, to avoid a continuation of the behaviour in question and/or victimisation. Suspension on full pay is often sanctioned for cases of serious misconduct and is made easier if there is a clause in the employment contract permitting such an action.
  • Selecting the investigator is also part of the process and leads into a discussion of the next mistake.

3.  Not choosing the right investigator

Remember there are a variety of types of investigators whose job it is to hear the alleged facts and complaint, obtain responses, marshall evidence, assess it on the balance of probabilities and make findings.

The selection of an investigator will depend on the issues at stake (for example, are they potentially press-worthy and reputationdamaging if made public? Could they result in litigation? Would a lawyer be a better choice in order to potentially attract legal professional privilege and preserve confidentiality?)

The selection will also depend on resources (Can the organisation spare an internal resource being devoted to hours of interviews? Does the internal investigator have sufficient experience? Could the internal investigator be accused of bias if they have had dealings with the participants in the investigation?).

4.  Investigator as decision maker

While the investigator’s primary responsibility is to determine the truth of the allegations as far as he or she can, the investigator should also be conscious to avoid acting in a way which may lead to challenges to his or her findings.

On this basis, it would be a mistake to have an investigator as decision-maker on anything other than very minor matters. If the findings could lead to a termination of employment, then separating the investigation function from the decision-making function is prudent. An “independent” decision maker can review the report and accept or reject the findings and then determine the most appropriate course of action without the added pressure of having to defend the process and course they adopted, which may happen if they were the investigator.

5.  Relying on “untested” information

Information should be tested as far as possible. If untested information is going to be relied on, the investigator should be able to justify why that reliance was reasonable in the circumstances.

For example, it would be a mistake to accept as fact information presented by the complainant or witness if there was a means to test it (for example if a document existed which would verify the information presented or event or if a third party witnessed it).

6.  Not knowing the role of a support person

Within the unfair dismissal regime industrial tribunals may find a termination to be harsh, unjust or unreasonable if the unfair dismissal applicant was unreasonably refused the opportunity of having a support person present during any discussions relating to dismissal.

The case law which has developed in this area has clarified that a support person’s role is not that of an advocate or representative, but is limited to assisting the relevant employee.

On this basis an investigator has the right to caution or silence a vocal or obstructive support person or, in extreme cases, suspend or terminate the interview.

7.  No logical order

The order of interviews will help ensure the investigation runs smoothly and expeditiously, the latter being important to preservation of confidentiality, protection of participants, potential restoration of the relationship or timely disciplinary action at worst.

Whilst it is not fatal to have to reinterview witnesses, having an order to the process will minimise this potential. A logical order means that all allegations or accounts can be put to a person in the one interview, and this is usually best achieved if the order of interviewees starts with those who know the most. This can also flush out additional interviewees or other evidence.

8.  Blurring the investigation and the disciplinary response

If you have followed the recommendation to separate the roles of investigator and decisionmaker, then this potential blurring is less likely to occur.

The disciplinary process should be separate and distinct from the investigation. The disciplinary process is about identifying what action is appropriate based on the findings and other relevant material (such as an employee’s personal circumstances and other extenuating factors). At its most simple, the disciplinary process starts when the investigation findings are accepted and should be embarked on in a manner that is procedurally fair. Procedural fairness can be dictated by applicable contractual obligations, policies or procedures. It also arises from the general proposition that any proposed disciplinary action should be put to the employee, a response obtained and consideration given to that response (relevant to defending an unfair dismissal).

It is appropriate to warn the employee prior to the meeting of the potential for dismissal, indicate that all circumstances will be taken into account, and allow a support person to be present.

9.  Not dealing with the findings and implementing recommendations (if there are any)

There are several reasons why it is a mistake to not deal with findings and/or not to implement recommendations.

Inaction may:

  • be seen as excusing unacceptable workplace behaviour, thereby prejudicing the ability to discipline other employees for similar behaviour in the future;
  • adversely impact staff morale and productivity, and at worst may lead to staff turnover or inability to attract new staff;
  • undermine the integrity of the complaint or grievance procedure and as a consequence, employees’ confidence in invoking it;
  • have health and safety implications if a person continues to engage in bullying or harassing behaviour;
  • restrict an employer’s ability to mount a defence, ie making it difficult to demonstrate it took all reasonable steps to prevent any unlawful conduct.

10.  Not learning from mistakes

The final takeaway is to review the investigation once it is completed. Were there lessons to be learned? What were they? For example:

  • Was the relevant process easy to follow?
  • Were employees able to access and rely on the policy, or were there impediments? Can those impediments be eradicated and how?
  • Were there any additional matters raised during the investigation that require attention by way of unaddressed behaviours, non-compliance with policies, flaws in processes, gaps in policies, other breaches?
  • Was confidentiality and non-victimisation maintained or should any potential breaches be separately investigated and disciplined?
  • Has a systemic issue been identified that requires broader investigation or rectification?

My house, my rules: The “pros and cons” of workplace policies

Sam Cahill, Associate

It is common for employers in Australia to have a suite of workplace policies. Indeed, in recent years, it has become an unquestioned assumption that employers should have written policies concerning a range of workplace issues, including bullying and social media. In this article, we look at the advantages and disadvantages associated with workplace policies, and how an employer can maximise the effectiveness of its policy arrangements.

Benefits of Workplace Policies

Managing legal risks

An employer has various legal obligations with respect to work health and safety and the prevention of certain types of behaviour in the workplace, including discrimination, harassment and workplace bullying. An employer, and its senior officers, may face severe penalties for failing to comply with work health and safety duties. Similarly, an employer can be held vicariously liable for a failure to take appropriate steps to prevent, or respond to, unacceptable behaviour at work. Importantly, an employer can use workplace policies to:

  • provide staff with information concerning work health and safety;
  • explain the types of behaviour that are prohibited at work;
  • outline the disciplinary consequences for engaging in prohibited behaviour; and
  • establish processes for reporting behavioural or safety issues to management.

These policies can assist in managing the employer’s legal risks. By way of example, an employer may be able to rely on its policies to assist in demonstrating that:

  • it complied with its work health and safety obligations;
  • it took reasonable steps to prevent sexual harassment in the workplace, and is therefore not vicariously liable for such behaviour; and/or
  • it had grounds to dismiss an employee who had engaged in unacceptable behaviour in breach of a policy.

However, the mere existence of policies covering these issues will not be sufficient. An employer will need to demonstrate that the relevant policy had been actively promulgated and enforced. This was highlighted in a recent case involving racial vilification in the workplace, in which the Federal Circuit Court made the following assessment of the employer’s policies:

“The official position taken by [the employer] is wholly exemplary. The code of conduct and other documents exhibited to the Court show that, on its face, [the employer] is wholly opposed to any form of racial or other unlawful harassment in employment. The difficulty, however, is that it is one thing to have these policies, no doubt sincerely embraced by the management of [the employer], but it is another to enforce them.”1

The employer in that case had failed to respond adequately to complaints of racist behaviour in the workplace, and thereby failed to enforce its policies regarding racial vilification. As a result, the Court found that the employer was vicariously liable for the unlawful conduct of its employees.

Clarifying expectations and ensuring consistency

Policies can be used to provide employees with clarification regarding the employer’s expectations. By way of example, an employer may have policies regarding appropriate workplace attire and attendance at work. Used in this way, workplace policies can be an effective method of delivering instructions to an employer’s entire workforce. They can also provide a basis for disciplinary action against employees who fail to comply with these instructions.

Policies can also be used to provide guidance to managers, and thereby ensure consistency of decision-making across the organisation. By way of example, a policy may provide guidance on:

  • how and when an employee can be required to provide medical evidence in respect of a period of personal leave;
  • how and when an employee may be issued with a formal warning for misconduct or unsatisfactory performance; and
  • when the employer will provide support to an employee undertaking further study.

Policies of this kind may be especially helpful in organisations where managers are required to make decisions regarding employment issues without assistance from human resources practitioners.

Detriments of Workplace Policies

Limiting employer’s discretion

An employer will often have a significant amount of discretion when issuing instructions to employees and managing issues in the workplace (provided the employer complies with the relevant laws). For example, an employer may adopt one of a number of approaches when responding to complaints made by an employee, or raising concerns regarding an employee’s performance. However, an employer may have a policy that restricts this discretion by prescribing certain requirements, such as a requirement to:

  • provide an employee with a certain amount of notice of a disciplinary meeting;
  • provide an employee with written information regarding an allegation or investigation;
  • complete a workplace investigation within a prescribed period of time; or • provide an employee with a certain number of warnings before terminating his or her employment.

Given the importance of maintaining an employer’s flexibility when dealing with employment issues, we generally recommend that employers refrain from introducing policies of this kind or that policies which do cover these issues retain a level of flexibility within which discretion can be exercised and the consequences for an employer of noncompliance are less onerous.

Legal risk associated with failure to comply

An employer may face legal action from employees if it fails to comply with its own policies. The main avenue of legal redress is for an employee to allege that the policy in question was incorporated into his or her contract of employment, meaning that a breach of the policy amounts to a breach of contract for which (unlimited) damages may be awarded.

Australian courts have recently considered this issue in the following scenarios:

  • An employee’s contract of employment contained a promise to “abide by all Company Policies and Practices currently in place, any alterations made to them, and any new ones introduced”.2 The employer in question had a policy setting out generous redundancy entitlements, but refused to follow this policy in respect of the employee.
  • An employee’s letter of engagement provided that the employer’s policies “are to be observed at all times.” 3 The employer in question had a “Workplace Harassment and Discrimination Policy”, which stated that the company would “handle complaints promptly, with confidentiality, impartiality and with sensitivity to the complainant’s needs”. The company failed to do so in respect of a complaint made by the employee.
  • An employee was required to sign a policy document titled “Working with Us”, which provided that the company would “take every practicable step to provide and maintain a safe and healthy work environment for all people”. 4 The employee argued that the employer breached this policy by allowing him to be bullied at work.

In each of these scenarios, the court found that the promises contained in the employer’s policy were incorporated into the employee’s contract of employment, and were therefore enforceable against the employer under contract law.

Conversely, in a recent High Court decision, the Commonwealth Bank avoided being held liable for failing to follow its redundancy policy as the documentation made it clear that processes outlined in the policy, such as those dealing with redeployment, did not give rise to a contractual entitlement.5

Key takeaways

  • Regularly evaluate whether your organisation’s current policies are necessary and appropriate. In doing so, it is important to distinguish between policies that are designed to protect the organisation (eg, anti-discrimination, work health and safety, sexual harassment, confidential information) and other policies that relate to operational matters (eg, performance management, dress code, study leave). It may be that policies falling into the second category are unnecessary or inappropriate.
  • Ensure that your organisation’s employment contracts expressly state that its policies do not form part of the employee’s contract of employment (and that this wording is also reflected in the policies) and do not use language that conveys a promise to employees or imposes an obligation on the organisation.
  • Ensure that all staff in your organisation, and especially managers, understand and follow your organisation’s policies. This can be done by encouraging staff engagement and providing regular updates and training. Your organisation should strive to create a compelling narrative as to why its policies exist and why they must be followed.

Think Before You Act: Enforcing Restraints Strategically

 
Michael Starkey, Associate

It is a common misapprehension, particularly among employees, that post-employment restraints are rarely enforceable. In fact, provided they go no further than is reasonable and necessary to protect an employer’s “legitimate business interests”, courts are willing to uphold such restraints, which can prevent former employees from taking up work with a competitor, or soliciting or accepting work from the employer’s clients. However, post-employment restraints remain tricky for reasons broadly associated with two “stages”.

  1. Documentation and drafting: post-employment restraints must be properly documented and drafted so that they only impose obligations which are reasonable and necessary; and
  2. Circumstances of enforcement: when an employee’s employment comes to an end, a business needs to make a decision about whether or not it is worthwhile to seek to enforce the restraint.

This article looks at a number of considerations employers may wish to take into account when making decisions associated with these “stages”, in order to ensure that their use of post-employment restraints is practical, strategic and helps to protect their business interests.

Up-to-date Documentation

The surest way of protecting an employer’s legitimate business interests is including a properly drafted post-employment restraint in an up-to-date contract of employment that is applicable to an employee’s current position. While all employees have ongoing obligations in respect of an employer’s confidential information, attempting to enforce restraint obligations which are not documented, or which are only documented in an employment contract that is no longer relevant to the employee’s role, is a difficult task.

Employers who are concerned about an employee’s post-employment activities that may not be captured by a documented post-employment restraint should, nonetheless, seek legal advice in respect of their position. In some cases, it may be possible for an employer to obtain injunctive relief to prevent a former employee from wrongfully diverting or exploiting a business opportunity that arose as a consequence of the employee’s employment.1

Finally, employers should also ensure that any post-employment restraints contained in an employee’s contract are incorporated (or otherwise, not displaced) by any documentation entered into regarding an employee’s separation from the business (such as a deed of release).

Be Specific

One of the best ways of ensuring that a post-employment restraint is drafted so as to be enforceable is to be as specific as possible with respect to the activities the employee is restrained from undertaking. This is particularly so in the case of broad non-compete clauses which seek to prevent an employee from working with a competitor of the employer. As well as being reasonable in terms of geographical scope and duration, these clauses should take into account the nature of the employer’s business and the employee’s position within it.

In an illustrative case from 2016, an employer was unable to enforce a non-compete clause against its CFO because the way in which the clause was drafted would have prevented her from working for a competitor in any capacity (examples raised during proceedings included “check out operator” or “shelf stacker”). The court refused to enforce the clause because, if it did so, the CFO would be prevented from working in positions in which she could pose no “threat” to her former employer’s legitimate business interests if the clause was enforced.2

This is particularly important for employers outside of New South Wales. While courts in New South Wales are permitted by legislation to “read down” a restraint which would otherwise be too broad so as to make it enforceable, courts outside New South Wales do not have this ability.

Upholding Your End of the Bargain

An employer that wishes to enforce a post-employment restraint should be careful to “uphold its end of the bargain” during an employee’s employment. In one recent case,3 a leading accountancy firm was unable to prevent a senior accountant setting up in competition because it was found to have “repudiated” his employment contract. This “repudiation” came about because of certain changes the employer made to the employee’s role and bonus structure. These changes were said by the court to be so fundamental that they indicated that the employer no longer intended to be bound by the employment contract. In these circumstances, the employer was unable to rely on the post-employment restraints contained in it.

In any event, parties should always aim to ensure that they adhere to the terms of a contract. However, employers may take some reassurance from the fact that they may be able to enforce post-employment restraints, even if they have breached an employee’s contract, if their breach is not so fundamental as to constitute a repudiation of the contract. For example, in a 2015 case,4 another leading accountancy firm was able to enforce a post-employment restraint against a key executive whose business it had purchased despite not paying certain instalments of the purchase price for the business on time. This was (in part) because the late payment, while a breach of the contract, was not found to amount to a repudiation.

Considering the Reason for Termination

When considering whether, or to what extent, to enforce a post-employment restraint, employers should give consideration to the reason and circumstances in which an employee’s employment has come to an end. This may be relevant to both the potential risk a former employee poses to an employer’s business, and whether a court would be likely to hold that it is reasonable to restrain the employee from certain activities. For example, a court will be more likely to enforce a broad non-compete clause in circumstances in which an employee has suddenly resigned and is found to have taken copies of the employer’s confidential information upon doing so, than in circumstances in which an employee has been made involuntarily redundant.

This is because a court may conclude that it is “excessive” to prevent an employee from earning a living in their chosen field when the employee’s employment has come to an end at the employer’s initiative and through no fault of the employee. However, the reason an employee’s employment has come to an end is less likely to be a factor in whether an employer is able to enforce more “particularised” restraint provisions, for example, relating to the non-solicitation of clients, or an employer’s confidential information. This is because such provisions are likely to do no more than is necessary to protect an employer’s existing interests, without affecting an employee’s ability to earn a living.5

Finally, employers should bear in mind that the enforcement of post-employment restraints is not an “all or nothing” process. Often, employers and former employees are able to negotiate an agreed position without the need to resort to legal proceedings. Employers should consider the most appropriate strategy for enforcing restraints on a case-by-case basis, in consultation with their legal advisers.

Key takeaways

  1. While post-employment restraints should be used diligently and strategically, Courts have displayed a consistent willingness to enforce post-employment restraints which are well-documented and properly drafted, taking into account the nature of an employee’s role.
  2. Employers are far more likely to be able to rely on contractual post-employment restraints if they “uphold their end of the bargain” during an employee’s employment.
  3. When considering whether to invest in enforcing a post-employment restraint, employers should have regard to the circumstances of the termination of the employment in question. This may assist in an evaluation of what “threat” a former employee might pose, as well as the employer’s prospects of success.

Hook, line and sinker: Accessorial liability under the Fair Work regime

Bree Woodhouse, Senior Associate

Regulatory agencies such as the Fair Work Ombudsman (“FWO”) are increasingly interested in seeking to hold third parties accountable for their involvement in contraventions of the Fair Work Act 2009 (Cth) (the “FW Act”). Over the past few years’ prosecutions by the FWO have held various individuals accountable for their involvement in breaches of the FW Act. When reviewing non-compliance, the FWO has looked past the corporate veil to those who orchestrated the breaches, such as Directors.

This article looks at other categories of individuals who may be at risk of being found to be accessories to breaches by an employer, including external and internal advisers.

In the 2015/2016 financial year the FWO sought orders against accessories in 92% of the cases filed in court. This is an increase  from the prior year of only 72%.1 It is now emerging that the FWO is willing to scrutinise both internal and external advisers as to their involvement in breaches of the FW Act, and to hold them accountable for their part in the breaches.

In an October 2016 media release, Natalie James, of the FWO, stated that “We are prepared to use the accessorial liability provisions of the Fair Work Act, where it is in the public interest to hold anyone to account for their involvement in exploiting workers.”2

The degree of involvement

Under the FW Act, involvement in a contravention is treated in the same way as an actual contravention. The most common form of involvement relied on in enforcement proceedings is being “… knowingly concerned in or party to the contravention”. Turning a blind eye to conduct constituting a contravention can amount to “wilful blindness”, and thereby satisfy the knowledge aspect. Borrowing from the criminal law concept, “wilful blindness” can arise “where a person deliberately refrains from making enquiries because he prefers not to have the result, when he wilfully shuts his eyes for fear that he might learn the truth, he may for some purposes be treated as having the knowledge which he deliberately abstained from acquiring”.3

External advisers

External advisers such as accountants, business consultants and the “head office” of franchised companies are being closely watched by the FWO as to the degree of involvement that these third parties have in any non-compliance. If these external advisers have been ‘knowingly concerned in or party to the contravention’ or alternatively have engaged in ‘wilful blindness’ regarding their client’s obligations, the FWO may take action against these third-party businesses.

In a recent case the Federal Circuit Court of Australia found that an accountancy firm was liable as an accessory in its client’s underpayment of staff. In Fair Work Ombudsman v Blue Impression Pty Ltd the Court found that the Victorian accountancy firm Ezy Accounting 123 Pty Ltd (“Ezy”) had “deliberately shut its eyes” to breaches by its client when it provided bookkeeping services to its client Blue Impression.

The alleged underpayment by the employer (Blue Impression), which ran a Japanese fast- food outlet in Melbourne, related to the failure to pay the correct minimum hourly rate and related loadings and allowances in breach of the Fast Food Industry Award 2010. Ezy claimed that it was no more than a service provider and was dependent on the information provided to it by its client. It claimed it had no knowledge of the specific circumstances of any of the employees, their duties, their hours of work, the applicable penalty rates and loadings or the relevant modern award. The bookkeeper at Ezy tasked with providing the payroll and bookkeeping services to Blue Impression gave evidence that her role was limited to purely “data entry” and that she “did not think twice” about the information regarding hourly rates provided to her. When providing evidence to the court the bookkeeper stated: “It was not my business to know whether or not the rates complied with any award. That was a matter for the employer

The Court found that EZY “had at their fingertips all the necessary information that confirmed the failure to meet the Award obligations by the first respondent and nonetheless persisted with the maintenance of its (payroll) system with the inevitable result that the Award breaches occurred.”

Ezy faces penalties of up to $51,000 per breach for seven breaches of the FW Act, with the hearing regarding this penalty to be heard at a later date.

A further example of external third party liability is the case of Fair Work Ombudsman v Yogurberry World Square Pty Ltd. This is the first case in which a master franchisor has been found liable for the contraventions of its franchisees. When reviewing the matter the Court found widespread underpayments and imposed fines of $146,000 on the companies in the Yogurberry group, including the master franchisor and CL Group, the Yogurberry payroll company. The court found that the companies within the group had “knowledge of, and participated in, establishing rates of pay, making payment of wages, determining hours of work and dealing with employment related matters”, and therefore had the requisite knowledge of the contraventions.

Internal advisers

The category of internal advisers extends to those individuals who have knowledge of, and make decisions regarding, the working conditions of employees. By virtue of their positions, managers and others senior personnel have the authority to influence compliance regarding working conditions.

In Fair Work Ombudsman v Crystal Carwash Café Pty Ltd both the director and a manager of the company were found to be involved in the contraventions on the basis that they were responsible for setting the terms and conditions of employment, including wages and working hours, and were involved in breaching the obligation to pay minimum wages for the shifts employees worked. In addition to the back pay due to the employees, the company was fined $70,000 and the director and manager were each fined $10,000 for their role in the breaches.

In the cleaning services industry, in Fair Work Ombudsman v Jooine (Investment) Pty Ltd the Court considered how the company’s director (who was also the company’s internal workplace adviser) was knowingly involved in breaching the FW Act through the use of sham contracting. The matter involved the underpayment of a foreign worker who was engaged by the company in a sham contracting arrangement. Both the company and its director/internal workplace adviser were found liable for the contravention. The Court commented that the director/adviser who had prepared the contracting documents did so “with a deliberate intention to circumvent the legislative framework that has been put in place to protect vulnerable individuals from exploitation.” The Court further foreshadowed the need to deter advisers (internal and external) from assisting businesses evade their obligations under the FW Act: “The deterrent should also extend to the advisors who have facilitated the orchestration of these scams, to prevent their further proliferation of such advice and facilitation.”

A Human Resources Manager was found to have contravened the FW Act in Fair Work Ombudsman v Centennial Financial Services Pty Ltd & Ors. This was based on the HR Manager’s involvement in setting up sham contractor arrangements. The HR Manager was initially involved in employing the employees and preparing their contracts of employment.

At a later point in time the HR Manager terminated the contracts of employment and prepared “Consultant Agreements” to replace the contracts. The HR Manager did this on the instructions of the employer. The “Consultant Agreements” were to perform the same duties in the same positions, with the only substantive difference being that the individuals would be paid commission only rather than wages. The Court found that the knowledge of the terms of the employment agreement and the terms of the consultant agreement was sufficient for the HR Manager to be “knowingly concerned in” the contravention, and cautioned HR professionals with regards to following directions from “higher up” as not being a defence to breaches of the FW Act. In this context, the Court observed that “as Human Resources Manager, he should have been aware of, and at least attempted to give advice on, Centennial’s obligations under the WRA”.

Key takeaways

  1. Both internal and external advisers need to be mindful of the accuracy of information provided to them.
  2. Inquiries should be made to confirm compliance with minimum statutory obligations.
  3. Where the information gives rise to doubts, a strategy of deliberately refraining from inquiring presents significant risks.