The face of your organisation: managing the social media presence of your employees

Chris Oliver, Director 

A quick review of both traditional and new forms of media provides a clear indication that employers of all sizes continue to struggle with the intersection between the interests of the business, and an employee’s use of social media. So why does this struggle continue? While its form is undoubtedly still expanding, the existence of social media is not new. Indeed, it has been part of the social and work landscape now for over a decade. Employers also have experience in overcoming the challenges presented by the introduction into the workplace of earlier waves of technology advancement, such as photocopiers, facsimile machines, email, the internet and mobile phones.

Perhaps, at least for some, the continued struggle arises as a consequence of the way in which resistance by employees to the imposition of limits on their social media usage is framed – that their posts are “private”, were undertaken outside of work hours, and involve the exercise of their perceived “right” to freedom of speech. By confronting these potential roadblocks, employers are better placed to manage the risks with greater confidence, and give their employees greater clarity as to what is and is not acceptable social media usage. After all, prevention is always better than the cure.

Private” posts

Despite the common reliance on this claim, an employee’s use of social media rarely remains in any sort of “private” domain. It ceases to be private and intersects with the interests of the employer in a range of situations, including:

  • where material is posted that directly ‘tags’ or references one or more co-workers;
  • using a social media account which expressly identifies their employer;
  • posting material which names or otherwise identifies the employer (including posting material in which the employee is wearing the uniform of the employer);
  • posting material which is inconsistent with the ‘values’ or objectives of the employer’s business;
  • posting material of an inappropriate nature to co-workers; and
  • posting that involves the use of devices or other facilities supplied by the employer.

Undertaken outside working hours

The rights of an employer to manage out of hours conduct was addressed by the Full Bench of the then Australian Industrial Relations Commission in Rose v Telstra1, where the Commission confirmed that employers do have the capacity to regulate the out of hours conduct of their employees where the conduct:

  • viewed objectively, is likely to cause serious damage to the relationship between the employer and the employee;
  • damages the employer’s interests; or
  • is incompatible with the employee’s duties as an employee.

Freedom of speech

It may come as a surprise to many, but there is currently no legal “right” to freedom of speech in Australia. The common response that an employee is exercising their freedom of speech in the context of social media was addressed in the unfair dismissal case of Little v Credit Corporate Group Limited2, where the Fair Work Commission stated “…the Applicant is perfectly entitled to have his personal opinions, but he is not entitled to disclose them to the ‘world at large’ where to do so would reflect poorly on the Company and/or damage its reputation and viability”.

While in a disciplinary context these three dimensions will ultimately be determined by the specific circumstances, they also provide a framework in which to proactively manage the use of social media and to make clear to employees what is expected of them.

Proactive Management

An important foundation in the proactive management of the social media activity of employees is the publishing of, training in, and promotion of, an appropriate and comprehensive Social Media Policy. While the design of the policy will often depend on a variety of issues (including the identified values and culture of the organisation, the industry in which the organisation operates and the organisation’s business objectives as they develop over time), all Social Media Policies need to cover off on a number of key elements. These include:

  • the scope and application of the policy (including situations where the employee is using the employer’s computer, internet facilities, network, or time);
  • the expectation that an employee should not assume that content is private, or will be kept private, irrespective of the privacy settings the employee has chosen;
  • clearly stating that the employee will be held responsible for anything they post on social media, including if that content is shared or reposted by others;
  • content should always be considered permanent and searchable – irrespective of the social media platform on which it is placed;
  • convey to employees that they should always assume that they can be identified and their association with the employer will be apparent to anyone who reads the content; and
  • clearly identifying the range of content and activities that is unacceptable, including specific examples wherever possible.

Managing Social Media Fallout

There are at least two key focal points to dealing with social media fallout – managing the employee as the publisher of the material, and managing the impact of the publication on others.

Managing the publisher

The manner in which an employer will deal with a current employee whose use of social media has collided with the interests of the company will generally depend on a range of factors, including the circumstances in which the post or publication occurred (such as the time of day, use of company resources or otherwise, and content), and any terms of the employee’s contract of employment. These factors also include not only the existence of an appropriate Social Media policy, but the extent to which the company can demonstrate that the employee was made aware of the policy and trained in its terms.

Assuming the employer intends to deal with the social media post as a potential disciplinary matter, it is essential that:

  • the employer keeps a cool head, and avoids making any assumptions (including with respect to the employee’s intentions or the imputed messaging behind ambiguous posts);
  • any relevant circumstances are promptly and thoroughly investigated;
  • the employer adopts a process that ensures the employee is given a reasonable opportunity to both understand the concerns, and to respond to them; and
  • all of the circumstances are taken into consideration before deciding what, if any, disciplinary action should follow.

Caution should be exercised to ensure that time pressures and the emotional drain of managing the outward looking aspects of the situation (eg dealing with any third party or external communications), does not inappropriately impact on the manner and process for addressing the conduct of the individual employee in question.

Managing everyone else

In the face of social media fallout, the common and arguably natural reaction of many employers is to respond quickly, and aggressively. While each situation needs to be assessed on its merits, organisations should at least pause and reflect on the following:

  • why am I responding, and what do I hope to achieve by doing so?;
  • who am I responding to, and will my means and messaging reach them?;
  • in a fast-paced news cycle, by the time I get around to responding, will the rest of the world have moved on?;
  • am I comfortable with the flow on effects of my response? Am I helping close things out or am I just giving this oxygen?;
  • am I maintaining or surrendering the moral high ground in both the terms and manner of my proposed response?; and
  • can I turn this into a positive?

Key takeaways

  • It is vital that employers are clear with employees as to an organisation’s values and expectations, and that they remain engaged on an ongoing basis with the proactive management of social media usage by employees.
  • Employers should reflect on the circumstances that may lie behind many of the more objectionable uses of social media, and assess whether the conduct may be a product of disappointed expectations and an individual’s perception of having not been fairly heard.
  • The access that employees have to a wide variety of platforms, which facilitate the widespread dissemination of intemperate comments, should encourage employers to have systems in place to address employee grievances in a prompt, reasonable and constructive manner.

  1. (1998) AIRC 1592.
  2. (2013) FWC 9642.

Under the spotlight: changes to labour hire licensing regimes

Chris Oliver, Director and Daniel McNamara, Graduate Associate

2018 has been a year of change in state-based labour hire licensing regimes. New reforms have imposed greater regulation on labour hire arrangements, with new requirements imposed on labour hire operators and those availing themselves of labour hire services. This article examines why labour hire has been a focus of regulation, overviews the recent legislative reforms in a number of states, as well as the potential for reforms in other jurisdictions and in the federal sphere. It also considers what changes organisations will need to implement to satisfy the requirements of the new licensing regimes.

Why is labour hire under the spotlight?

In recent years, a number of labour hire firms have engaged in non-compliant activities, including:

  • sham contracting (where an employer wrongfully classifies an employment arrangement as a contract for services);
  • phoenixing (the process of winding up a non-compliant company, and starting up a new company so as to avoid liability for past wrongdoings);
  • failing to meet obligations under the National Employment Standards, including breaches of maximum working hours, leave and termination requirements; and
  • breaching obligations under work health and safety and workers’ compensation legislation.

The Fair Work Ombudsman has prosecuted a number of labour hire operators in the Federal Court and Federal Circuit Court. An example of serious non-compliant conduct by a labour hire operator is the case of Fair Work Ombudsman v Greenan1. A Melbourne-based labour-hire operator, Mr Greenan, failed to pay a worker close to three months’ wages for work as a mechanic, amounting to approximately $7,066. The worker was of Pakistani origin, working in Australia on a Bridging Visa C, and was subsequently terminated from his position.

The Fair Work Ombudsman issued Mr Greenan with a Compliance Notice requiring him to back-pay the labour hire worker his outstanding wages. Mr Greenan failed to comply with the Compliance Notice and also failed to comply with basic record keeping obligations under the Fair Work Act 2009 (Cth) (the “FW Act”). As a result, the Court imposed a penalty of $10,800, and referred the matter to the Commonwealth Director of Public Prosecutions in respect of additional allegations that Mr Greenan fraudulently created invoices for the worker’s wages, when in reality, these payments were put to the purchase of Mr Greenan’s new car.

Increased scrutiny of and concerns about labour hire arrangements have contributed to an environment where state governments have taken up the option of greater regulation of the industry, in order to minimise the potential for worker exploitation.

Where are the changes occurring?

The changes have occurred in Queensland and South Australia.

Queensland

Queensland is the most recent state to legislate in relation to labour hire, with the introduction of the Labour Hire Licensing Act 2017 (Qld) (the “Queensland legislation”) which came into operation on 16 April 2018.

The purpose of the Queensland legislation, which is accompanied by a set of regulations, is to establish a licensing scheme for labour hire operators.

Notably, the Queensland legislation:

  • prohibits unlicensed labour hire services from operating in Queensland, with a maximum penalty of over $130,000 or three years’ imprisonment for individuals, and penalties of over $378,000 for corporations;
  • prohibits individuals without a reasonable excuse from using the services of an unlicensed provider, subject to the same penalties as those imposed on unlicensed labour hire operators as above; and
  • requires labour hire organisations, in order to successfully obtain and maintain a license, to show that they are a financially viable business, run by a “fit and proper person” (including that the person has no past convictions for relevant criminal offences and has not been involved in phoenixing), and have a history of compliance with relevant legislation, including work health and safety, tax, superannuation and anti-discrimination laws.

The Queensland legislation excludes high-income earners (using the FW Act indexed threshold), individual executives of corporate providers, in-house employees provided temporarily (such as secondment arrangements), and certain internal labour hire arrangements.

South Australia

South Australia was the first Australian state to have a labour hire licensing scheme, through the Labour Hire Licensing Act 2017 (SA) (the “South Australian Legislation”). This scheme operates similarly to the Queensland regime, including the “fit and proper person” requirement and prohibitions on both conducting and engaging in unlicensed labour hire services. The pecuniary penalties for individuals are slightly higher in this jurisdiction, with a maximum of $140,000 for individuals, and $400,000 for corporations if found to be operating without a license. An additional feature of the South Australian legislation is that it attempts to prohibit the advertising of labour hire services without a license, with a maximum penalty of $30,000. This may have a preventive effect in seeking to protect workers prior to labour hire offences occurring.

Those exempt from the application of the South Australian legislation are group training organisations “registered in South Australia on the Group Training Organisation National Register” who supply “apprentices or trainees to do work for other persons”, and those granted an exemption by the Commissioner for Consumer Affairs. The South Australian legislation and regulations are otherwise silent as to who is exempted.

Will future changes occur?

The next state that is likely to be affected by a revamped labour hire framework is Victoria. At present, labour hire legislation is currently before the Victorian upper house after the passing of the Labour Hire Licensing Bill (Vic) by the Legislative Assembly on 8 February 2018.

If this legislation is successfully passed in its current form, it will establish a Labour Hire Licensing Authority, in addition to an Office of Labour Hire Licensing Commissioner. Although many of the provisions are similar to the Queensland and South Australian legislation (including a “fit and proper person” test, the liability of people/organisations who provide and use labour hire services, and prohibitions on advertising unlicensed labour hire), and any possible exemptions are not as yet clear, given that the proposed regulations have not been published at this stage.

Additionally, numerous commentators have anticipated that Western Australia may introduce labour hire legislation in the future.

Who is affected?

The new regimes apply to both “providers” and those who “enter into arrangements” of labour hire. Generally speaking the new regimes apply to “a person … if, in the course of carrying on a business, the person supplies to another person a worker to do work”. This applies irrespective of:

  • whether or not the worker is an employee of the provider;
  • whether or not a contract is entered into between the worker and the provider, or between the provider and the person to whom the worker is supplied;
  • whether the worker is supplied by the provider to another person directly or indirectly through one or more agents or intermediaries; and
  • whether the work done by the worker is under the control of the provider, the person to whom the worker is supplied or another person”.

The new legislation also applies to entities that “enter into arrangements” with labour hire providers. In the states which have already passed labour hire licensing legislation, engaging in such conduct can result in an identical penalty to that imposed on “providers” who breach their legislative obligation.

The new labour hire licensing schemes may affect businesses that are based outside Queensland or South Australia where the legislation has been introduced. Given the application of the new legislation to both providers and customers of labour hire, an Australian business that is not itself based in the jurisdiction but engages the services of a labour hire provider based in one of these states, may come within the scope of the new schemes.

The Prospect of Federal Regulation?

Some states have called upon the Federal Government to implement a national regulatory response to govern labour hire arrangements. Those states that have introduced legislation have noted their intention for the legislation to act as an impetus for a national scheme. The primary legislative response to date on the part of the Federal Government relating to worker exploitation, has been the introduction of the Fair Work (Protecting Vulnerable Workers) Act 2017 (Cth), which targets certain types of businesses, and increases penalties for non-compliance.

Union organisations (including the Australian Council for Trade Unions) have called for a national labour hire framework, with ACTU Secretary Sally McManus in March 2018 calling for an overhaul of the current labour hire system in Australia. However, the current government has asserted that legislating with respect to labour hire licensing regimes should remain a matter to be dealt with by the states.

Key takeaways

  • Employers who are based in Queensland, South Australia or who engage in labour hire in those states must ensure that they are complying with the new state labour hire licensing legislation.
  • If you are a labour hire provider in a state with labour hire licensing legislation, it is important that you meet the obligations under that legislation. This includes meeting various statutory requirements and obtaining a license within a specified period.
  • Entities that enter into arrangements with labour hire providers in states with labour hire licensing legislation have a responsibility to ensure that the provider is licensed. This may be best achieved by requesting proof of the provider’s license prior to engaging in a labour hire arrangement or imposing a contractual requirement that the provider warrant that it holds the appropriate licences.

  1. [2017] FCCA 2059.

Lights, camera, action: lawful industrial action and how employers can respond

Sam Cahill, Associate and Rohan Burn, Graduate Associate

For an employer, the process of negotiating or re-negotiating an enterprise agreement can give rise to a number of strategic challenges. This is especially true when an employer is required to deal with industrial action, or the threat of industrial action. In this article, we look at the steps that must be taken by employees (or their representatives) before employees can lawfully take industrial action in respect of a proposed enterprise agreement. We also highlight an employer’s legal options, in this context, for preventing or minimising any undue or unlawful disruptions to its business in response to proposed industrial action.

What is “industrial action”?

Industrial action is unlawful, unless it is “protected industrial action”. Under the Fair Work Act 2009 (Cth) (“the FW Act”), the term includes a stoppage of work (ie, a conventional “strike”) as well as a ban, limitation or restriction on the performance of work and/or the performance of work by an employee in a manner different from that in which it is customarily performed.

Industrial action does not include actions that are authorised by the employer or by the terms of the applicable enterprise agreement. For example, in the recent case of ABCC v CFMMEU (The Nine Brisbane Sites Case) (No 3)1, union officials would regularly conduct meetings at the employer’s work-site, which had the effect of delaying the start of work. Sometimes the meetings forced the cancellation of concrete pouring. The Court found that this action did not amount to “industrial action”, as the meetings were authorised by a clause in the relevant enterprise agreement.

When employees can take “employee claim action”?

This article focuses on the category of protected industrial action called “employee claim action”. This is where employees take industrial action in support of claims for a proposed enterprise agreement.

Employees may only take employee claim action in circumstances where:

  • the existing enterprise agreement (if any) has passed its nominal expiry date;
  • the parties have commenced bargaining for a new enterprise agreement; and
  • the employees (or their union) are genuinely trying to reach an agreement with the employer.

If employees attempt to take industrial action in other circumstances, the employer may apply to the Federal Court or Federal Circuit Court for an injunction to stop or remedy the effects of the industrial action.

Protected action ballots

If a union wishes to initiate industrial action, it must first apply to the Fair Work Commission (“FWC”) for a “protected action ballot order”. The application must specify the group of employees who are to be balloted and the question (or questions) to be put to those employees, including the nature of the proposed industrial action.

A recent FWC decision has confirmed that the question put to employees in a protected action ballot can be framed permissively and give scope for a range of “proposed industrial action”. However, if the subsequent written notice of the action provided to the employer is insufficiently specific, this may enable the employer to apply successfully to the FWC for an order to stop the industrial action.

Responding to an application for a protected action ballot order

If a union makes an application to the FWC for a protected action ballot order, it must provide the employer with a copy of the application documents. This gives the employer an opportunity to consider how it wishes to respond to the application.

An employer may oppose an application for a protected action ballot order in circumstances where the application does not meet the requirements under the FW Act. For example, the employer may be able to oppose an application on the basis that:

  • the employees (or union) have not been genuinely trying to reach an agreement regarding the matters in question;
  • a question that is proposed to be put to the employees does not relate to “industrial action”, as defined by the FW Act (for example, where a question relates only to the wearing of union clothing); and
  • the claims being supported by the proposed industrial action are not about “permitted matters” (eg, terms that do not relate to the relationship between the employer and its employees).

If the employer has grounds for opposing the application, it can make submissions when the application is heard before the FWC, or it can contact the union and require that the application be withdrawn or amended.

Conduct of a protected action ballot

If the FWC makes a protected action ballot order, the ballot must be conducted by a “protected action ballot agent”, as specified in the order. This will usually be the Australian Electoral Commission.

The ballot agent is required to work with the employer and employees to compile a “roll of voters”. This gives the employer an opportunity to ensure that it does not contain individuals who are not eligible to vote on the proposed industrial action. An employee will only be eligible to be included on the roll of voters if he or she will be covered by the proposed enterprise agreement and is included in the group of employees specified in the order.

After voting closes, the ballot agent must make a written declaration of the results and advise the parties (and the FWC) accordingly. If the proposed industrial action is approved (ie, if at least 50% of eligible employees cast a vote and more than 50% of those employees voted in favour of industrial action), the employees may (and may only) take the proposed industrial action during the 30-day period starting on the date of the declaration of the results of the ballot, unless this period is extended by the FWC.

Notice of industrial action

A union must provide the employer with three days’ notice in writing of any industrial action, including the nature of the action and the days on which the action will start and finish.

In the recent case of National Patient Transport Pty Ltd T/A National Patient Transport v United Voice; Australian Nursing and Midwifery Federation 2, the union gave notice to the employer stating that employees would be taking industrial action that would involve “stopping work for up to ten minutes duration on each occasion to explain the campaign-related material to patients, their families and the public”.

The FWC found it was not strictly a requirement of the FW Act for a notice to prescribe the commencement and conclusion times of the industrial action, as generally the rationale for industrial action is to cause a degree of inconvenience and expense to the employer. However, there must be enough specificity to avoid legal uncertainty and litigation over whether the action taken subsequent to the notice is protected industrial action.

When assessing the adequacy of a notice, the FWC must consider all the circumstances, and examine the wording of the notice in its industrial context. The person receiving the notice must be able to understand what action is proposed, and when it will occur so that they have an opportunity to consider their position and respond appropriately. The adequacy of the notice may depend on the nature of the employer’s operations, including their size, the number of locations, the time at which the action is to occur, and the number of employees potentially taking the industrial action.

Depending on the type of industrial action, the employer may be prohibited from paying employees while they are taking industrial action.

Options for responding to industrial action

An employer may have a number of options in responding to protected industrial action by employees.

Employer response action

The employer may take its own industrial action against the employees, called “employer response action”. This is usually in the form of a “lockout”. This is where the employer prevents the relevant part of its workforce from attending work. If taking employer response action, the employer must provide written notice to the employee union, and take all reasonable steps to notify employees of the lock out. A recent FWC Full Bench decision held that employees do not need to be paid, and are not entitled to accrue annual or long service leave during a lockout.

Stand down

The employer may exercise its right under the FW Act to stand down employees in circumstances where employees cannot “usefully be employed” due to industrial action. The employees may be stood down without pay.

Reduce pay (if partial work ban)

The FW Act provides that, if an employee is engaged in industrial action that is a “partial work ban” (ie, industrial action that falls short of a total stoppage of work), the employer will have the option of reducing the employee’s rate of pay. This must be done in accordance with the requirements set out in the Act. For all other types of industrial action, the employer will be prohibited from paying the employees during the period of industrial action.

Dispute resolution

The employer may apply to the FWC to deal with the dispute. This application can be made by one union without the agreement of any other unions involved. However, for the FWC to arbitrate the dispute (i.e. make a binding determination on the dispute), the parties must agree on the terms on which the arbitration is to take place.

Seek an order to suspend or terminate industrial action

The employer may apply to the FWC for an order to suspend or terminate the protected industrial action. The FWC can make such an order if it is satisfied that:

  • the industrial action is causing significant harm to the employer;
  • the industrial action is creating a risk to health and safety or damaging the economy; or
  • the suspension of the industrial action will assist in resolving the dispute.

Key takeaways

  • Any industrial action and any responsive action must comply with the legal technicalities of the FW Act.
  •  Employers have a range of options to consider in responding to industrial action (or threatened industrial action), and should utilise these options to minimise unnecessary disruption to their workforce and to support their commercial objectives.
  • The most appropriate action for an employer to take will depend on the employer’s overall strategy, and should take into account range of factors beyond the legal technicalities of the FW Act (such as the impact of any industrial action or responsive action on the reputation of the organisation).

1   [2018] FCA 564.
2   [2018] FWC 2068.

The Journey to High Performance

Sam Cahill, Associate

This article is based on a webinar presented by Joydeep Hor on 14 February 2018

The majority of business leaders aspire to instil a culture of high performance. However, the notion of organisational culture, and especially high-performance culture, can be difficult to define, let alone apply to the running of an organisation. In this article, we look at the key components of high-performance culture and how business leaders can assess and improve the performance culture in their organisation. This is the beginning of the journey to high performance.

High-performance culture

It is tempting to assess an organisation’s culture by reference to incidents or themes that recur within the organisation. For example, an organisation may spend a great deal of time dealing with disciplinary issues or instigating performance management. This approach is problematic, as it can lead to an undue focus on these negative aspects of people management, rather than the creation of a high-performance culture.

Instead, we advocate a more proactive and holistic approach, which involves a structured framework for assessing and improving an organisation’s performance culture. An example is the “V-S-C” framework, where performance culture is measured against three key metrics:

  • “Vision and Values”
  • “Systems and Structures” and
  • “Capability and Credibility”.

What follows is an analysis of each of these metrics of performance culture, in order to give a clearer picture of the practical steps that business leaders can take to develop and maintain a high-performance culture.

Vision and Values

A good starting point for assessing an organisation’s culture is to start with some simple questions:

  • What is the organisation’s vision or over-riding objective? What is it trying to achieve?
  • What are the values of the organisation? What are the things that management “stands for” or “stands against”?
  • How does the organisation articulate its vision and values? Are employees aware of the organisation’s vision and values? Do they share them?

For performance culture to be given the weight that it warrants, it is essential for an organisation to have a clearly-articulated commitment to high performance as part of its mission statement (or vision). It enables an organisation to articulate its aspirations in terms of a commitment to high performance, and to not limit this simply to the meeting of basic targets or revenue benchmarks.

It is essential for an organisation to spend time in articulating its vision in terms of performance. If time is spent on articulating and formalising vision and values, it makes it easier to communicate this to employees and ensure their performance is in sync. It is also important for the values of the organisation to be embraced and reinforced by individual managers, as this will enhance buy-in from employees.

However, organisations must also recognise that, at best, vision and values are only the beginning. Once an organisation’s vision and values have been articulated, they need to be actioned by management and continuously reinforced. The “lived experience” of the vision means that employees are more likely to adhere to it, and also facilitates the achievement of high performance. Finally, an organisation’s vision and values are not set in stone. Constant reflection on an organisation’s vision and values is an important part of a high-performance culture.

Systems and Structures

An organisation’s systems and structures are the building blocks of its approach to human resources and people management. The articulation of the organisation’s vision and values must be carried through in its systems and structures. When assessing an organisation against this metric, it is important to ask:

  • How does the organisation recruit and induct new employees?
  • Does the organisation have written employment contracts, position descriptions and internal policies? What do these documents say about working for the organisation?
  • What is the organisation’s reporting structure? What are the opportunities for career progression?
  • How does the organisation provide employees with feedback on their performance? Does it have a system of performance appraisal?

By way of example, staff inductions provide an opportunity to explain the rights and responsibilities of employees and the organisation, promote an understanding of the organisation and its history, inform employees about points of contact within the organisation and communicate policies and procedures.

One aspect of staff inductions that some organisations may overlook is scheduling a conversation between a valued and successful employee and a new employee or employees. This discussion is an authentic and powerful tool designed to promote not only individual success, but also instil a sense of drive to achieve the organisation’s desired outcome.

Similarly, an organisation’s employment contracts, position descriptions and internal policies provide an opportunity for an organisation to infuse its systems and structures with its vision and values. Employment contracts and position descriptions can be used to set clear expectations regarding performance, while policies can be used to articulate what it means to work for the organisation and what is required of employees. The framing of the vision and values in such documentation ensures that they have been formally recorded and that staff understand what it is the business aspires to achieve.

Credibility and Capability

The best systems and structures will only be as good as the leaders who are responsible for implementing them. This means that, in order to have a high-performance culture, an organisation must have managers and supervisors with the capacity to lead and inspire high performance.

When assessing an organisation against this metric, it is important to ask:

  • Do managers and supervisors espouse and uphold the values of the organisation? Do they talk the talk? Do they walk the talk?
  • Do managers and supervisors conduct themselves in a manner that resonates with the organisation’s high-performance mantra?
  • Do leaders have the necessary “credibility” to execute the organisation’s vision and values?
  • Does the organisation take steps to monitor its leaders to ensure that this is the case?

A good leader will have traits and values that reflect the broader vision and values of the organisation. Moreover, a good leader will be able to build rapport with employees and encourage them to adopt those same traits and values. This enables and promotes a strong alignment between the objectives and values of the organisation and the personal aspirations of employees.

To build rapport and inspire employees, leaders must have credibility. One way of testing against this metric is to gain an understanding of how the organisation’s leaders are perceived by employees, either through dedicated group discussion sessions or using survey tools. If employees see that leaders are walking the talk, this can enhance the performance culture within the organisation.

Culture audits

An effective starting point in the journey to high performance is to conduct a culture audit. This enables an organisation to gain an understanding of its performance culture as its stands. It can help an organisation understand the strengths and weaknesses of its performance culture and the areas in which there is scope for improvement. Using the simple V-S-C framework, an organisation can use the findings of an audit to embark on a journey towards a culture of high performance. At the same time, this approach can highlight where problems exist, and therefore prevent costly and time-consuming people management issues that can impact on the effective and productive functioning of the organisation.

PCS regularly conducts culture audits and works with organisations nationally and globally to implement a high-performance culture in their organisations. Please contact info@peopleculture.com.au or any of the PCS Directors for further information.

 

Not a word: confidentiality provisions in employment contracts, settlement agreements and non-disclosure agreements

Therese MacDermott, Consultant

Roseanna Smith, Graduate Associate

Recent publicity around sexual harassment and other forms of misconduct in the workplace has brought into the spotlight the extent to which confidentiality provisions in employment contracts, settlement agreements and standalone non-disclosure agreements are used to keep such conduct out of the public domain. While a litigated dispute will mean the issues are aired in a public forum, few matters are in fact litigated, and settlement on confidential terms is a widespread practice.

Competing factors come into play surrounding the extent to which such matters become public knowledge. On the one hand, parties to a dispute are at liberty to settle a dispute on terms that they can agree on, including a provision that makes the fact that the conduct occurred confidential and not something to be disclosed by any party to the agreement. On the other hand, serious forms of wrongdoing and/or systemic practices at a workplace may be of genuine concern to the broader community, and hence a valid subject of public interest.

This article considers recent developments in this area, including the proceedings seeking to enforce the obligations under a deed of release signed by a former employee of the Seven Network, and the recent campaign that banks should waive their rights to enforce non-disclosure agreements against former employees who may wish to give evidence to the Royal Commission into Misconduct in the Banking, Superannuation and Finance Services Industry (the “Banking Royal Commission”).

How non-disclosure terms operates in an employment context

Confidentiality clauses

Most employment contracts contain confidentiality provisions that limit the extent to which employees can disclose confidential information during, and after the conclusion of, the employment relationship. In addition to contract law principles, equitable obligations of confidentiality are also applicable. The type of information which is generally defined as being “confidential information” in an employment contract includes intellectual property, business plans, trade secrets, client lists, research and commercially sensitive information. These types of clauses, however, are not general regarded as preventing employees from disclosing sexual harassment and misconduct in the workplace given that they are aimed at governing very specific types of information that are confidential to the employer, and not principally directly to the manner in which a workplace may operate.

Settlement Agreements

Settlement agreements commonly make provision for tailored confidentiality clauses, as well as non-disclosure terms. This will often be a standard practice where an end to an employment relationship is negotiated between the parties. This could include circumstances where the relationship comes to an end on the basis of established misconduct or other inappropriate behaviour.

In terms of confidentiality, settlement agreements can impose specific obligations regarding the confidentiality of information, processes or contacts the employee or executive in question had access to during their employment. Such clauses are likely to be more particularised than a standard clause in an employment contract. In addition, the terms of a settlement agreement may protect the confidentiality of:

  1. the negotiations leading up to a settlement,
  2. the terms of the agreement; and
  3. any conduct that led to the entering into of the settlement agreement.

A well-drafted agreement will not only include a non-disclosure clause, but also contain a release which ensures that the parties cannot pursue any further claims arising out of the subject matter of the settlement agreement.

Non-disclosure agreements

It is less common in the Australian employment context to have a standalone non-disclosure agreement (“NDA”). However, such an agreement may be entered into where the parties agree to keep confidential certain matters either of a sensitive commercial nature or where wrongdoing may have occurred, but no other matters requiring settlement terms are involved. Such an agreement might also be used regarding commercially sensitive information where contractors or consultants are engaged.

Obligations to disclose wrongdoing

In the case of sexual harassment that amounts to, for example, sexual assault, an employer may be subject to a positive obligation to report such conduct if the employer has “knowledge or belief” of the commission of a “serious indictable offence”, defined as an offence which is punishable by a sentence of imprisonment of five years or more. Offences of that nature could include sexual assault.

In New South Wales, section 316(1) of the Crimes Act 1900 (“Crimes Act”) provides that it is a criminal offence for an individual or a corporate entity to fail, without reasonable excuse, to report a “serious indictable offence”. Relevant to establishing the requisite state of knowledge or belief, is an awareness that the offence has, or may have, been committed, or the holding or withholding of information which might be of material assistance in securing the apprehension or conviction of the offender. The application of the Crimes Act’s obligation to legal practitioners has always been a contentious area, given client confidentiality.

Whistleblowers

Misconduct in the workplace may also come to light by way of a whistle-blower disclosing events or past misconduct. The Corporations Act 2001 (Cth) (the “Corporations Act”) provides some protection for whistle-blowers, as it makes it a criminal offence to victimise a whistleblower or terminate their employment based on the disclosure of certain information. The Corporations Act provides protection from any civil or criminal liability for making the disclosure and no contractual remedy or other right may be exercised against a person on the basis of the disclosure.

However, the protection offered by the Corporations Act is narrow, as it only protects current officers, employees, contractors and employees of contractors. Its protections do not extend to individuals who may have had their employment recently terminated. Further, the relevant disclosure can only be made to the Australian Securities & Investments Commission or the company’s auditor, director, secretary or senior manager or a person authorised to receive whistleblower disclosures. Finally, the legislative provisions only apply when the whistleblower has reasonable grounds to suspect that the company, or an officer or employee of the company, has or may have contravened the Corporations Act.

Intervention by the courts

The role of the courts in overseeing agreements that have been reached in respect of non-disclosure, was considered in the case of Seven Network (Operations) Ltd v Harrison.1

Ms Harrison was employed by the Seven Network as an executive assistant. During her employment she formed a consensual relationship with the Chief Executive Officer of the Seven Network. The relationship ended in 2014, and around a similar time as an investigation into Ms Harrison’s expenses on the company credit card. On 1 August 2014, Ms Harrison entered into a deed with the Seven Network (the “First Deed”). The First Deed effected a role transfer of Ms Harrison within the company and an undertaking to repay $14,000.00 worth of expenses back to the company. Ms Harrison was ultimately terminated from her employment in late 2014 by way of a deed of release between Ms Harrison and the Seven Network (the “>strong>Second Deed”). The Second Deed imposed strict obligations on Ms Harrison that included, among other things, non-disclosure of information regarding the relationship with the Chief Executive Officer and that Ms Harrison discharge Seven Network from any claims that she could have against them.

In March 2015, the Seven Network suspended payments to Ms Harrison under the Second Deed on the basis that Ms Harrison had refused to comply with her obligation under the deed to return certain company property when requested to do so by the Seven Network.

Ms Harrison alleged that the suspension of payments amounted to a repudiation of the deed. By way of accepting the repudiation, in May 2015 Ms Harrison lodged a complaint with the Australian Human Rights Commission (“AHRC”) alleging sexual harassment, discrimination and victimisation.

Between November and December 2016, Ms Harrison shared information publicly about her relationship with the Chief Executive Officer and aired various grievances she had in relation to her former employer. In December 2016, a media release that detailed confidential information contained in the Second Deed and the facts that led to the creation of the two deeds was released. In response, the Seven Network applied to the Supreme Court for an interlocutory injunction to restrain conduct it alleged was in breach of the deeds.

The Court found that the Seven Network’s suspension of payments was a response to Ms Harrison’s refusal to return company property and as such did not amount to a breach of the Second Deed. Further the Court noted that even if this was a breach, the obligation of non-disclosure was not conditional on the Seven Network’s performance of their obligations.

In response, Ms Harrison argued that her case was a matter of public interest, arguing that the enforcement of the non-disclosure obligation would stifle freedom of speech and the open reporting of matters of public interest. She also claimed that the dispute was in the public interest as it involved the interests of the Seven Network and its shareholders, both in a financial sense and because the dispute could shed light on the way in which the Network conducted its corporate governance.

While it was accepted by the Court that the case involved an element of public notoriety and by virtue of that, was in the public interest, the Supreme Court held that the Seven Network’s legitimate interests under the agreement outweighed any public interest in the matter. The Court made clear that where private parties enter into agreements freely, courts will be reluctant to interfere. Hence the court granted the Seven Network an interlocutory injunction preventing any disclosures that came within the terms of the agreement, stating that “if parties, for valuable consideration, with their eyes open, contract that a particular thing shall not be done… the thing shall not be done”2. The Court emphasised that it requires “compelling discretionary reasons” to refuse to grant injunctive relief where a breach of a negative covenant has occurred 3.

Is there too much cover-up?

The recent commencement of the Royal Commission has re-ignited discussion around the use of non- disclosure terms in agreements to prevent parties revealing misconduct or other wrongdoing.

The Royal Commission has been set up to, among other things, inquire into misconduct and questionable behaviour within the finance sector. One difficulty the Royal Commission faces is that many victims or witnesses to misconduct are subject to non-disclosure terms. As a consequence, unless the Royal Commission exercises its power to secure information or the corresponding party to the agreements waive their rights, these individuals face the prospect of proceedings alleging a contractual breach should they choose to disclose information to the Royal Commission.

Prior to the start of the Royal Commission, the Australian Council of Trade Unions (“ACTU”) launched a campaign seeking to secure agreement that banks and other financial institutions would waive their rights with respect to disclosure of information relevant to the Royal Commission. The “Big Four” Australian banks have confirmed that customers and former employees who had signed an agreement as part of a settlement are free to give evidence to the Royal Commission, without the threat of legal action.

Limitations, however, have been placed on the waiver. In particular, the Commonwealth Bank has signaled that the waiver is limited to disclosures to the Royal Commission, and has warned that disclosures outside of this forum may still potentially give rise to a breach.

Outside the Big 4, the position of other financial institutions, including regional banks and life insurance companies, is not as clear. In response to this, the Commissioner, the Honourable Kenneth Madison Hayne AC QC, reminded financial institutions of the Commission’s power to secure information:

“First, the commission would be very likely indeed to exercise its compulsory powers to secure the information in question…. Second, the very fact that an institution sought to inhibit or prevent the disclosure of the information would excite the closest attention, not only to the lawfulness of that conduct but also what were the institution’s motives for seeking to prevent the commission from having that information.”4

Take away

While recent developments show that courts may be reluctant to interfere with private agreements that have been made for consideration, caution needs to be exercised. There is still the risk that the information may eventually come to light at some point in time, and the enforcement of strict non-disclosure obligations where wrongdoing is systemic can have considerable reputational consequences.

Factors to consider in framing non-disclosure terms include:

  1. What are the legitimate interests of the parties that should be protected?;
  2. Would a non-disclosure term simply conceal a culture that will do long term damage to the organisation?; and
  3. Does the agreement contemplate limited circumstances where disclosure may be permissible to further the public interest?

PCS strongly recommends that you seek advice when preparing documents containing confidentiality obligations.


1 [2017] NSWSC 129.
2 Otis Elevator Co Pty Ltd v Nolan [2007] at 30 referencing Doherty v Allman (1878) 3 App Cas 709, 720.
3 Otis Elevator Co Pty Ltd v Nolan [2007] at 17.
4 Sue Lannin, ‘What we did (or didn’t) find out about the banking royal commission’, ABC News (online), 12 January 2018

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.