“I’ll be back”: Reinstatement of sacked workers

Michael Starkey, Associate

It may be Arnie’s favourite catchphrase, but “I’ll be back” are the words no employer wants to hear when effecting a termination of employment.

This article considers the role of reinstatement in the Australian workplace relations system and highlights that an employer’s fear that a reinstatement order will be made is not how most matters are resolved. It uses recent case examples to explore what factors are taken into account by the Fair Work Commission (the “FWC”) in ordering reinstatement, and canvasses strategies that an employer might adopt when confronted with a reinstatement order to deal with its consequences at an organisational level.

Primary Remedy or an Uncommon Remedy?

Reinstatement is the “primary remedy” under the unfair dismissal jurisdiction of the Fair Work Act 2009 (Cth) (the “FW Act”). This means that if the FWC finds that an employee has been unfairly dismissed, it must order reinstatement of that employee unless it is satisfied that reinstatement is inappropriate in the circumstances.1

In the previous edition of Strateg-Eyes, we flagged that the Productivity Commission has recommended that reinstatement be removed as the primary remedy of the unfair dismissal jurisdiction (while stopping short of calling for the remedy to be abandoned completely). In support of its view, the Productivity Commission noted that:

  • reinstatement is often impractical given that “the trust that is central to a harmonious and productive employment relationship is irremediably destroyed at the end of most unfair dismissal cases”;
  • parties often elect compensation during mediation in any event; and
  • reinstatement is an uncommon remedy in practice.2

Although no changes have yet been made to implement the Productivity Commission’s recommendations, employers who may be concerned about reinstatement can take some comfort in the last of the Productivity Commission’s observations. In its 2014-15 Annual Report, the FWC noted that of 188 dismissals found to be unfair at arbitration, reinstatement (in addition to compensation in some cases) was ordered in only 27 cases (or just over 14 per cent).3

Avoiding reinstatement: what the FWC will consider

The FW Act does not specify what factors the FWC must take into account when considering whether reinstatement is appropriate in the circumstances of a particular dismissal. While the appropriateness of reinstatement will therefore be determined on a case by case basis, a number of recent cases highlight some of the factors that may be considered.

Is loss of trust and confidence enough?

Often, employers will argue against reinstatement on the basis that the circumstances leading to the termination have resulted in the employer losing the necessary trust and confidence in the employee to maintain his or her employment.

While it is recognised that a degree of trust and confidence is required in an employment relationship, in one recent case, it was held that a loss of trust and confidence will not always be the sole (or even a necessary) criteria in determining whether or not to order reinstatement because “in most cases the employment relationship is capable of withstanding some friction and doubts”.4

A loss of trust and confidence will only be enough to prevent reinstatement if its effect is to make the employment relationship unproductive and unviable.5

Maintaining a culture of compliance

Employers have had more success in demonstrating that reinstatement is inappropriate by establishing that it would undermine the policies and disciplinary procedures relied on to terminate an employee’s employment.

In one recent case, the FWC found that the “application of the relevant policy and the maintenance of appropriate discipline” within the organisation were important, and that the applicant had “not shown any real appreciation of [how] her conduct” (which included acting aggressively toward suspected shop lifters) may have breached those policies. In these circumstances the FWC concluded that reinstatement was not the appropriate remedy.6

Post-termination conduct

With the proliferation of social media, the post- termination conduct of employees is becoming increasingly visible to a broad audience. In one recent case, while the employee’s dismissal was determined to be fair (due to his dishonesty during a workplace investigation), it was held that reinstatement would not have been possible even if the opposite conclusion had been reached because of derogatory Facebook posts he shared about his former employer.

The New South Wales Industrial Relations Commission held that it would be unreasonable to reinstate an employee who had “publicly characterised his employer as ‘bastard’ and ‘criminal with stars’”, particularly given the posts were not “put up in the heat of distress about a dismissal and taken down again, but posts put up publicly two months after the termination and left there”.7

Dealing with the reality of reinstatement

While the statistics demonstrate that reinstatement is not necessarily a common remedy for unfair dismissal, a case from March this year demonstrates a number of factors which may lead the FWC to exercise its power to order it.

The case involved a Centrelink officer who posted comments on social media describing his clients as “spastics” and “whingeing junkies”, criticising the government and allegedly bringing the Department of Community Services into disrepute.

While the FWC found the posts meant there was a valid reason for the employee’s dismissal, it found the dismissal harsh because of mitigating factors, including the length (twenty years) and quality of the employee’s service, and that the dismissal was disproportionate “having regard to all the circumstances of [the] conduct, including that it bore no relationship to his actual work performance, caused no actual detriment to the Department, was situational in nature and engaged in impulsively rather than with deliberation, and consisted of a small number of widely interspersed comments over a period of years”.8 Further, it was held that there was no real risk that the misconduct would be repeated, and that the employee understood that his conduct was inappropriate.9

Cases like this reinforce the understandable concerns that management and human resources personnel may have about the workability of the employment relationship following reinstatement. In this respect, organisations should keep in mind the following strategies that can provide a framework to help deal with reinstated workers.

  • Acknowledge difficulty: potential difficulties associated with reinstatement should be acknowledged both internally, and between management and the reinstated employee (if appropriate) with the intent of developing an open and productive dialogue.
  • Communicate effectively with line managers: communication is key to tracking the pulse of the working relationship between a reinstated employee and his or her colleagues and line managers.
  • Consider mediation: particularly if the working relationship seems problematic or unproductive, or if the reinstated employee is required to work with personnel who played a role in his or her dismissal.
  • Act in good faith: managers must not be perceived as “out to get” a reinstated employee, who will have all the usual rights and protections of any other employee.
  • Reinstated employees are not a protected species: just as significantly, employers should maintain the confidence to deal with reinstated employees as they would the rest of their employees. Further or repeated misconduct or poor performance need not be tolerated and should be dealt with in accordance with usual policy.
  • Consider the big picture: organisations in which an employee has been reinstated should take the opportunity to review the procedures that led to that employee’s unfair dismissal in the first instance, and make improvements where necessary.

Key Takeaways

  1. While reinstatement remains the primary remedy of the unfair dismissal jurisdiction, it is not as common as employers might fear.
  2. Whether or not a worker will be reinstated will often come down to more than whether there has been a loss of trust and confidence in the employment relationship (which, on its own, may not be enough to prevent reinstatement).
  3. Employers should put in place strategies for dealing with reinstated workers (who should be treated as any other worker would be) and utilise the opportunity reinstatement presents to review any potential flaws in the disciplinary or performance management procedures that led to the dismissal.

1. Fair Work Act 2009 (Cth), s 390 (“FW Act”).

2. Productivity Commission, Productivity Commission Inquiry Report Volume 2 (30 November 2015), 595-6.

3. Fair Work Commission, Annual Report 2014-15 (13 October 2015), 76.

4. Nguyen v Vietnamese Community in Australia [2014] FWCFB 7198, [27] (“Nguyen”).

5. Nguyen, [28].

6. Smith v Coles Supermarkets Australia Pty Ltd [2015] FWC 5446, [136].

7. Marroun v State Transit Authority [2016] NSWIRComm 1003, [107]-[108].

8. Daniel Starr v Department of Human Services [2016] FWC 1460, [93] (“Starr”).

9. Starr, [97].

Causes for clauses: Fundamentals of the employment contract

James Zeng, Senior Associate

Many employers have template contracts of employment which are used when employees initially commence employment and when employees are promoted into new positions or change positions.

However, sometimes the person completing the template contract of employment does not always understand why a particular clause should be included as part of an employee’s contract of employment. This article looks at the key clauses found in standard contracts of employment and reasons why such clauses should be included.

1.  Termination

One of the most crucial clauses in a contract of employment is the termination of employment clause. Where the employment is for an indefinite period (that is permanent or ongoing) contracts of employment should clearly outline the circumstances when the employment may be terminated by one or both parties and how the termination of the employment can be carried out by either party. Employers should consider including an express right to make payment in lieu of notice and/or to direct the employee to perform some or none of their duties during the notice period. Employers should also consider types of conduct by the employee or certain events that might automatically trigger the immediate termination of the employment. While misconduct is perhaps the most obvious example, others may include the employee losing a requisite qualification or being charged with certain criminal offences.

The failure to have a proper termination of employment clause means that the employee might be entitled to reasonable notice implied by law. What is reasonable notice in the circumstances will then depend on a number of factors including but not limited to length of service, age of the employee, seniority and the likely period it might take for the employee to find a comparable role in the industry. Reasonable notice has been held by Courts to be up to 12 months in some circumstances. Therefore, it is important that an appropriately drafted termination of employment clause is included in all contracts of employment.

2.  Entire Agreement 

An often overlooked clause is the entire agreement clause. When interpreting contracts of employment, Courts will not consider evidence outside of the contract unless it can be shown that the written contract of employment was not intended by the parties to capture the entire agreement between them.

The failure to include an entire agreement clause in contracts of employment means that verbal representations, written policies and procedures and other non-contractual terms might be considered to form part of the terms and conditions of an employee’s employment. This is not an ideal situation for employers. The purpose of the entire agreement clause is to ensure that terms, whether written or unwritten, outside of the contract of employment are not incorporated into or form part of the written contract of employment.

Employers should be vigilant to ensure that their conduct both during the recruitment process and in the course of the employment relationship is consistent with the entire agreement clause and that all agreed terms are captured in the contract of employment as a stand-alone document.

3.  Policies and procedures

The effect of a clause dealing with policies and procedures under a contract of employment is to:

  • inform the employee that the employer has written policies and procedures;
  • impose a requirement (which also constitutes a lawful and reasonable direction) on the employee to comply with all of the employer’s written policies and procedures at all times in the course of employment; and
  • document a clear intention and agreement between the parties that the employer’s written policies and procedures do not form part of the contract of employment nor do such documents give rise to any contractual rights on the part of the employee.

Serious legal ramifications may arise where the contract does not make the non-contractual effect of polices and procedures clear. For example, the failure by the company to abide by its policies and procedures might give rise to a claim for damages by the employee for breach of the contract of employment or could hamper any disciplinary process an employer may wish to take against the employee for breach of policies and procedures.

4.  Confidentiality 

Contracts of employment will often include a clause requiring the employee to protect and keep secret the employer’s confidential information. A confidentiality clause, while not necessary in all circumstances or types of employment, will be important in situations where the employee deals with or has access to the employer’s confidential information.

5.  Intellectual property 

Intellectual property clauses provide a clear outline of the obligations of the parties under relevant legislation dealing with intellectual property rights and confirm that that the work performed by an employee in the course of employment belongs to the employer. Employers should ensure that intellectual property clauses deal with inventions and designs, copyright and moral rights. This is especially important in the software development and information technology industry.

Employers should also consider provisions dealing with an employee’s misuse of intellectual property belonging to the employer.

6.  Variations 

A contract of employment should include a clearly drafted variation clause that specifies how the contract of employment may be varied by the parties. This helps to reinforce the entire agreement clause (discussed above) and avoid situations where, because of the way the parties have conducted themselves, the parties are taken to have agreed to vary the existing contract of employment.

Often, the nature of an employee’s employment will vary over the term of the employment relationship. Therefore, employers should include a provision (within the variation clause) outlining that the contract of employment continues to apply notwithstanding any change to an employee’s position, remuneration or location. This avoids any potential argument that the employee’s original contract of employment no longer applies because of a change in the employment, or that the notice period is no longer adequate and that a reasonable notice requirement should be imposed.

7.  Absorption 

Absorption clauses are important for employees covered by an industrial instrument such as a modern award or an enterprise agreement. An absorption clause properly drafted will allow the employer to off-set amounts paid to the employee above the minimum required by the industrial instrument against other monetary amounts owed to the employee. Such a clause helps to protect employers against claims by employees for additional entitlements under an industrial instrument, or claims that a payment has not been made in accordance with the industrial instrument.

8.  Workplace surveillance

In addition to any policies and procedures an employer may have on workplace surveillance, employers (especially those based in States with workplace surveillance legislation) should ensure that an appropriate clause is included as part of the employee’s contract of employment constituting notice of workplace surveillance and outlining the employer’s right to monitor and review internet browsing, computer usage and emails. The failure to give appropriate notice will not only result in the employer potentially being in breach of legislation but could also prevent the employer from relying on material obtained through workplace surveillance in any disciplinary process or employment related litigation.

Key Takeaways

  • By understanding the reasons for certain clauses in employment contracts, employers can help ensure that their employment contracts accurately reflect the terms and conditions of the employment relationship and sufficiently protect their interests.
  • Employment contracts should be reviewed and amended whenever there are material changes to an employee’s role, particularly when an employee is moved into a new position.
  • If in doubt as to the effectiveness of a clause, or how a particular clause works, an employer should obtain proper advice, and should certainly do so before making amendments.

Pay Now or Pay Later? Key watch outs for unpaid work arrangements

Kathryn Dent, Director and David Weiler, Associate

The obligations owed to interns and those engaged in unpaid work experience, and their status under employment and labour laws, has become the subject of increased concern and scrutiny.

The job market in Australia is such that many new graduates are seeking to enter industries, such as media, recruiting or event management, where there are simply far more applicants than paying jobs. This has created a situation where job seekers may find themselves needing to work without payment for a period in order to get relevant experience and hence a foothold in the industry. On the other hand, universities and other institutions that qualify young people (and older workers looking to change careers) for these fields quite legitimately can require work-experience as a prerequisite for the completion of a degree in order to enhance the work readiness of its graduates and improve graduate employment outcomes.

In order to accommodate the provision of genuine work experience opportunities for potential job seekers, the Fair Work Act 2009 (Cth) (“FW Act”) exempts employers from the obligations otherwise applicable in respect of employees such as payment of wages, minimum award rates and casual loading in certain circumstances, for example, if the arrangement qualifies as a “vocational placement”. However, as has been routinely reported for several years, this system has the potential to facilitate exploitation, particularly of young people or those who may already feel their situation is precarious in terms of securing employment, such as former international students.1

This risk was explored in a report commissioned by the Fair Work Ombudsman (“FWO”) from Professors Andrew Stewart and Rosemary Owens on the issue of internships and unpaid work experience in the Australian context, entitled The Nature, Prevalence and Regulation of Unpaid Work Experience, Internships and Trial Periods in Australia: Experience or Exploitation (“FWO Report”).2

Potential exploitation of unpaid work experience

The genesis of the FWO Report was a 2011 Sydney Morning Herald (“SMH”) article entitled “Eager workers can be free and easy”.3 The article touted the benefits of hiring unpaid labour at a time when this issue was at the forefront of the media. About eight months prior to the SMH article, the American magazine Forbes published an article online by Katherine Lewis that explored the reasons businesses are eager to engage free labour and provided quotes from the CEO of a Toronto/New York start-up, Kelly Fallis:4

“People who work for free are far hungrier than anybody who has a salary, so they’re going to outperform, they’re going to try to please, they’re going to be creative.”

“From a cost savings perspective, to get something off the ground, it’s huge. Especially if you’re a small business.”

The article revealed that Ms Fallis had “used about 50 unpaid interns for duties in marketing, editorial, advertising, sales, account management and public relations.” Ms Fallis was also quoted as lamenting the labour law protections applicable: “[u]nfortunately for many employers hoping to use unpaid labor to advance their business goals, there are strict federal and state rules that workers must be paid the minimum wage and paid for overtime, and must abide by other provisions in [federal labour legislation]”.

Guidance for employers

If an employer is considering offering work place experience that could create an employment relationship, it will likely need to abide by its obligations with respect to employees under the FW Act (including the payment of minimum wages and, if the employee is covered by a modern award, the terms and conditions of that award) unless the arrangement qualifies as a vocational placement.

What is a vocational placement exception for unpaid work under FW Act?

(a)  Must be undertaken as a requirement of an education or training course. This is accepted as meaning “to complete a program” (e.g. Certificate in Business Administration, Diploma of Education or Bachelor of Laws).

(b)  Must be authorised under a law or an administrative arrangement of the Commonwealth, a state or a territory. This means that the education or training course itself must be authorised under such a law.

(c) Must not involve a person being entitled to any “remuneration”. Remuneration is not defined but case law suggests it is broader than “wages” and would include “recompense or reward for services rendered, including non-cash benefits”. Reimbursement for expenses incurred is not ordinarily treated as remuneration. Note that gratuities or bonuses without “entitlement” do not preclude meeting the requirements of the exemption.

(d) Stewart and Owens also note that the FW Act provisions make reference to a “placement”, and argue that this suggests there must be some procedure or process for the “placing” of individuals.

Fair Work Ombudsman prosecutes work experience provider

In early 2015, a sports media company which produced radio and television programmes for advertisers was prosecuted by the FWO for not complying with various provisions of the FW Act in respect of its employees. In its Federal Circuit Court application, the FWO alleged that Crocmedia Pty Ltd (“Crocmedia”) had failed to appropriately pay two employees, who had initially performed unpaid work experience for approximately three weeks, when they were subsequently engaged on a casual basis.5 The FWO alleged that when the employees did get paid, the payments were made in reference to “reimbursements for expenses”6 and not for the performance of work.

“…the benefits that participants can receive from such a program can be invaluable to students and recent graduates…”

It was agreed by the parties that Crocmedia failed to pay the employees in accordance with the relevant award after the initial period of three weeks’ work experience, and as a consequence the employer was found to have breached the FW Act by failing to:

(a) pay minimum wages;
(b) pay casual loadings;
(c) pay in full, at least monthly; and
(d) provide pay slips.

In his decision, Riethmuller J commented that “the Respondent cannot avoid the proposition that it is, at best, dishonourable to profit from the work of volunteers, and at worst, exploitative”7, and held that it was “clear that the Respondent was content to receive the benefits that flowed from the arrangement, and that the arrangement itself, when viewed objectively, was exploitative.”8 It should be made clear that the exploitative nature was not the three week period of unpaid work but rather the extension of that program where the students were only reimbursed for their costs.

Despite the strong language used by the Court, when deciding the appropriate penalty for Crocmedia, the Court took into consideration the company’s contrition, corrective action following, and cooperation with, the FWO’s investigation. The fact that the employees had been paid the balance of the underpayments owed to them was a considerable mitigating factor in the Court’s determination that the appropriate penalty for Crocmedia’s breaches of the FW Act was a total of $24,000 (the maximum possible total penalty being $115,500).

The Court also considered the context in which this decision was made and emphasised the need for deterrence in the industry. It was not lost on Riethmuller J that the FWO Report (which was cited at length in the judgment) identifies media as the industry with the highest prevalence of unpaid work experience.9


1. J Price, ‘Despite rorting of internship programs, they’re still worthwhile’, The Conversation, 18 November 2014 (http:// theconversation.com/despite-rorting-of-internship- programs-theyre-still-worthwhile-34082); D Cullen, ‘Hidden cost of free labour: interns’, The Australian, 6 January 2011; W Wood, ‘Unpaid internships are exploited by the wealthiest in the creative industry’, The Guardian, 30 November 2011.

2. This was also the subject of a paper presented by Stewart and Owens at the International Labour Organization’s Conference on Developing and Implementing Policies for a Better Future at Work entitled Regulating for Decent Work Experience: Meeting the Challenge of the Rise of the Intern.

3.  V Khoo, ‘Eager workers can be free and easy’, Sydney Morning Herald, 13 August 2011. The same article appeared on the same day in The Age newspaper, under the title ‘How to get Free Labour’.

4.  http://fortune.com/2011/03/25/unpaid-jobs-the-new- normal/

5. FWO v Crocmedia Pty Ltd [2015] FCCA 140

6. Ibid., [13].

Diversity in the Workplace: facing up to challenges

Elizabeth Kenny, Associate

A new year brings new challenges and opportunities for employers, particularly in dealing with a diverse cross section of employees in the workplace. This article aims to explore some cultural issues in the workplace that have attracted attention in recent times and provide useful strategies for organisations to minimise legal exposure and develop an inclusive culture.

The role employers can play in supporting victims of domestic violence has been an important public policy question and employers may wish to consider taking a proactive role in developing strategies to support not only victims of domestic violence but also those who are supporting victims of domestic violence. This conversation is likely to consider the impact of domestic violence on the workplace and the ways in which employers can provide support to those affected by domestic violence through policies, employee support systems and workplace initiatives.

Another matter increasingly requiring the careful consideration by employers involves managing the transition or integration of transgender employees in the workplace. Many will remember 2015 as a defining year for transgender members of society with various celebrities and public figures publically announcing their support for transgender persons or sharing their own experiences as a transgender person. Employers may wish to consider how they can accommodate transgender employees in their organisation given that traditional workplaces pose particular challenges for transgender employees.

RESPONDING TO DOMESTIC VIOLENCE 

The Australian Bureau of Statistics estimates that 17% of women aged 18 years and over and 5.3% of all men aged 18 years and over had experienced violence by a partner during the year 2012.1 This tragic and staggering number inevitably touches all aspects of life, including the workplace. While Australia has developed domestic violence services and corresponding legal protections, until recently, these measures have primarily been criminal in nature.

Recent law and policy measures have sought to address the broader range of harms associated with domestic violence and corresponding protections. Importantly, the financial security for victims of domestic violence has increasingly been recognised as critical to the safety of the victim and the victim’s ability to escape a violent relationship. However, the difficulty for employers lies with many victims being reluctant to disclose their status and receive the support needed. It is in light of this that many companies have taken a proactive stance in relation to domestic violence, with companies such as NAB and Telstra implementing large scale initiatives to support victims of domestic violence including the allowance of extra days off and consideration of flexible working arrangements to accommodate the victim to continue to work despite their personal circumstances.

Victims of domestic violence and employees supporting a member of their immediate family who is experiencing domestic violence have a statutory entitlement to request a flexible work arrangement. While this entitlement does not automatically grant the employee a flexible work arrangement, it recognises the importance of supporting victims and making sure that victims stay in paid work. Paid leave associated with domestic violence is also becoming increasingly common in enterprise agreements as discretionary leave, however, the right to domestic violence leave may become a legal entitlement for employees covered by modern awards, with the Australian Council of Trade Unions recently applying to the Fair Work Commission in relation to their modern award review process to vary all awards to include 10 days’ paid domestic violence leave.

In addition, employers may also consider implementing safety measures designed to protect victims, including increased physical and cyber security where it is known that an employee is subject to domestic violence and measures that alert security if the perpetrator wants to contact or visit the employee and help ensure that any abusive contact is restricted by managing emails and phone calls.

TRANSGENDER EMPLOYEES 

Transgender discrimination in the workplace is deemed to be unlawful under various pieces of anti-discrimination legislation, including the Sex Discrimination Act 1984 (Cth). Employers therefore have a legal responsibility to take all reasonable steps to prevent discrimination and harassment in the workplace, or they may be found to be vicariously liable for any workplace discrimination or harassment engaged in by their employees.

Employers must be aware that there is an important distinction between the legal rights in the workplace of those who identify as transgender and those who are legally a “recognised transgender person” (that is, recognised at law as their identified gender rather than their birth gender). For example, if a transgender person who was born as a male but identifies as a female applies for a role that is open to females only, the employer cannot be required to give the role to the transgender person as they are not considered to be female in a legal sense.

Practical Challenges

It is important that employers consider how they can best manage hostile reactions and ensure their workplace behaviour policies reflect the organisation’s stance on having an inclusive environment and train employees on their obligations under anti-discrimination law. For example, some employees may express their discomfort or openly oppose transgender employees using facilities that are appropriate for their affirmed gender. Transgender employees should be able to use toilets, change rooms and other facilities that are appropriate to their affirmed gender when they commence transition. Employers may also consider working with individual transgender employees to develop transition plans specific to the individual employee which can include strategies on how the employee wishes to be addressed, how the matter will be addressed with colleagues in the workplace and any other matters relevant to each individual case.

Issues for Consideration

There are a number of issues that we recommend an employer consider in determining how best to manage transgender employees in the workplace, not only for the transgender employee, but all employees who may be impacted by the transition of existing transgender employees, or integration of new transgender employees.

  1. Do any administrative changes need to be made to reflect the transgender employee’s preferred gender such as email accounts, mailing lists, or other documentation?
  2. Does your organisation need to engage in any communications or education with internal and/ or external stakeholders to manage the transition or integration of the transgender employee into the workplace and to raise awareness of relevant issues?
  3. Does the transgender employee wish to use toilets or other facilities that are designated to the gender with which they identify? What reasonable accommodations may be made to facilitate use of those facilities by the transgender employee?
  4. What additional support or assistance could or should your organisation provide for the transgender employee or other employees to assist with the transition or integration?

Responding to domestic violence, particularly the impact of domestic violence on an employee and the workplace, and the management of the integration or transition of transgender employees are sensitive issues that require careful consideration by an organisation. Employers must acknowledge that there is no “one size fits all” approach to matters that involve an employee’s personal circumstances and the organisation must ensure it has a clear process and structure on dealing with sensitive matters in a supportive and inclusive manner. In managing and supporting employees during difficult times or times of change, an organisation will also benefit through retention of key staff and the development of an inclusive and diverse culture.

KEY TAKEAWAYS

  • Managing diversity in the workplace is not just a legal issue, but about developing inclusive and rich workplace cultures. 
  • Victims of domestic violence, or those supporting victims of domestic violence, may benefit from additional leave entitlements or recognising the employee’s need for a flexible work arrangement. 
  • Transgender employees should be supported not just in the physical aspects of the workplace, but also through policies and procedures that educate other employees in relation to the transition and integration of transgender employees.

1 The Australian Bureau of Statistics Personal Safety Survey 2012, Experience of Partner Violence (http://www.abs.gov.au/ausstats/[email protected]/Latestprod…)

Forecasting 2016: hot topics and trends for the year ahead

Erin Lynch, Senior Associate

As we all return from what has hopefully been a refreshing and relaxing break, the team at PCS are excited about what 2016 has to offer and are making our predictions for the year ahead.

Here is a list of the hot topics for labour and employment law in 2016:

  1. the death of the yearly performance appraisal;
  2. diversity in the workplace;
  3. the Final Report of the Productivity Commission; and
  4. the debate over penalty rates.

Performance Appraisals

Employers are increasingly recognising that, in some instances, a once a year, “tick-a-box” performance appraisal is an arbitrary method of assessing an employee’s performance and an ineffective means of building employee engagement.

Rather, a trend is emerging towards more organic and fluid styles of performance appraisal that seek to align the goals of the organisation and the employee. This new style of performance appraisal involves:

1. A focus on career development – while assessing previous performance is important, employees will respond better if a performance appraisal looks at their future and how they can develop and progress through the organisation.

2. Setting clear and measurable goals – it’s easy to use language that is ambiguous and set unrealistic goals, or goals that the employee is not aligned to. The employee should have “buy-in”, the goals should be achievable and there should be a clear path on how they will be achieved.

3. Customising your method – if the same appraisal method or goals are used across your organisation you run the risk of failing to recognise the individual skills and talents of your employees.

4. Engaging regularly – it’s common in a once-a-year performance appraisal for an employee to be surprised by any negative feedback that is being raised.

That’s usually because it is only discussed with the employee at this juncture. If employees receive regular performance feedback, quarterly, or even monthly, there is less room for surprises, employees are more likely to achieve their goals and there is a greater alignment of expectations.

Diversity in the Workplace

PCS has seen a surge in clients looking for ways to properly include employees from diverse backgrounds (for example, transgender employees) within their policies, and the importance of this topic is highlighted by the fact that a whole article is dedicated to it in this issue of Strateg-Eyes.

This area of law remains a developing one, and as such there are a number of questions that are yet to be answered about how far the protections afforded by the law extend and how they are applied in practice, including in the workplace. For example, while it is clear that, from a discrimination perspective, transgender employees must not be prevented from using toilets and change rooms and other facilities designated to the gender with which they identify should they choose to do so, it is less clear what employers are required to do in a number of administrative matters relating to the employment of transgender employees, such as whether a transgender employee who is not a “recognised transgender person” can insist that their employment records reflect their preferred gender.

Final report of the productivity commission

On 21 December 2015 the Productivity Commission released its final report on its assessment of Australia’s workplace relations framework. The purpose of the inquiry was to examine the current operation of the Fair Work laws and identify future options to improve the laws, bearing in mind the need to ensure workers are protected and the need for business to be able to grow, prosper and employ.1

Of particular interest in the final report were recommendations that the Government should:

1. amend the Fair Work Act 2009 (Cth) (“FW Act”) to create a new employment instrument, the enterprise contract, that would allow businesses the flexibility to vary an award or awards for a class of employees (as nominated by the employer) to suit their business operations;2

2. give the Fair Work Commission more discretion to order that an employment arrangement (such as an enterprise agreement) of an old employer does not transfer to a new employer, where that improves the prospects of employees gaining employment with the new employer;3

3. remove the emphasis on reinstatement as the primary goal of the unfair dismissal provisions in the FW Act;4 and

4. create a statutorily independent Workplace Standards Commission with responsibility for reviewing and varying the national minimum wage and modern awards (including the making of equal remuneration orders).5

It will be interesting to see if these recommendations play out in changes to legislation or government policy.

Debate over penalty rates

One of the hottest topics in 2016 will be penalty rates and their role in the modern workplace relations system. How this plays out may be dependent on the outcome of this year’s Federal election.

The Australian Government is under increasing pressure from stakeholders in affected industries (including retail, hospitality and entertainment) to make changes to the current penalty rates system, particularly with respect to new public holidays and Sunday penalty rates.

Defenders of the penalty rates regime argue that it is necessary to compensate employees working “unsocial” hours and that the increase in revenue for businesses that attaches to public holidays largely offsets any increase in wages.

While the Labor Party is attempting to persuade voters that Prime Minister Turnbull is in favour of slashing penalty rates, Employment Minister Michaelia Cash has said that, while the idea was something the Fair Work Commission may adopt, the Turnbull Government currently has no plans to change the penalty rates regime.6


1. Productivity Commission, Productivity Commission Inquiry Report Volume 1 (30 November 2015), v.

2. Productivity Commission, Productivity Commission Inquiry Report Volume 1 (30 November 2015), 63.

3. Productivity Commission, Productivity Commission Inquiry Report Volume 1 (30 November 2015), 65.

4. Productivity Commission, Productivity Commission Inquiry Report Volume 1 (30 November 2015), 56.

5. Productivity Commission, Productivity Commission Inquiry Report Volume 1 (30 November 2015), 49.

6. Gareth Hutchens, Coalition voters reject cut in Sunday penalty rates, Sydney Morning Herald (27 December 2015).

In the Spotlight: Alternative Dispute Resolution

Lyndall Humphries, Senior Associate

Alternative dispute resolution (“ADR”) is now a familiar part of the workplace relations landscape, both before and after the commencement of litigation. There are a lot of cases in which ADR is not only appropriate but a much better way of reaching an outcome than by way of legal proceedings.

WHAT IS ADR?

ADR encompasses a wide range of processes designed to resolve disputes without judicial determination. ADR most commonly involves an independent person helping people in dispute resolve the issues between them. The flexibility of ADR means that it can be used for almost any kind of dispute and is particularly well suited to workplace grievances including where there is an ongoing employment relationship.

In some cases it is a voluntary process engaged in with the agreement of all parties and in other cases legislation or an industrial instrument may require parties to participate in a particular form of ADR. The name ADR suggests that it is an alternative to litigation. However, these days, it is often incorporated into the litigation process or used alongside legal proceedings.

TYPES OF ADR

There are many different types of ADR processes that can be used to manage a dispute. This article focuses on mediation due to its suitability for workplace disputes. However, we also draw your attention to other types of ADR commonly used in the workplace:

Negotiations

When a workplace dispute has arisen, negotiation is the most simple and flexible form of ADR. This process is suitable if the parties can discuss matters directly and want some control over the outcome. Settlement negotiations can be conducted by telephone, in correspondence or face-to-face. If there has been a breakdown in the employment relationship, it may assist to have another person, such as a lawyer, helping with the negotiations. Employment lawyers are experienced at resolving workplace grievances and negotiating outcomes for clients. Either party to legal proceedings may serve an offer of settlement or compromise on the opposing party. Offers to settle may also be made by way of a Calderbank offer. Consideration needs to be given to the potential cost consequences of making or rejecting offers of settlement in the context of negotiation and litigation.

Conciliation

Conciliation is a similar process to mediation. A conciliator will assist the parties to identify the disputed issues, develop and explore possible options and ultimately reach an agreement. The conciliator may take an advisory role and usually has specialist knowledge. Conciliation can be helpful when parties want an expert view or where self-represented litigants would like to reach an agreement on technical legal issues. Conciliation may be voluntary, court ordered or required as part of a contract or industrial instrument.

Arbitration

Arbitration involves the parties to a dispute presenting arguments and evidence to an arbitrator for determination. The arbitrator’s decision is binding and enforceable. The arbitrator may be a lawyer and usually has specialist knowledge. Arbitration is the most similar process to legal proceedings and parties are often legally represented. Arbitration may be useful when the parties want a decision made for them other than imposed by legal proceedings.

The flexibility of ADR means that hybrid models of the above processes are sometimes used. In addition, online ADR is becoming increasingly more prevalent as ADR is taking place via email, Skype and video conferencing.

INTERACTION WITH LEGISLATION

The emphasis on settling disputes by means of ADR processes is sometimes set out in legislation. For example, the Fair Work Act 2009 (“FW Act”) requires that all modern awards include a term which sets out a procedure for resolving disputes between employers and employees about any matter arising under the modern award and the National Employment Standards. In addition, when making an enterprise agreement, the FW Act requires the parties to include a dispute resolution clause. Enterprise agreements lodged without such a clause will not be approved. The FW Act also requires that parties to a contested unfair dismissal or general protections dismissal application attend a conciliation conference.

FOCUS ON MEDIATION

Mediation is the process of assisted negotiation guided by an independent and impartial professional who helps to clarify the issues in dispute, identify options, consider alternatives and jointly agree the details of any settlement. The mediator generally does not give opinions or advice.

Parties are not restricted to discussing matters that would be the subject of legal proceedings and parties can generally bring any issues to the table. It is interest-based in that parties are free to reach settlements that are based on interests rather than legal entitlements.

Mediation is confidential and this is essential to encourage the parties to engage in open dialogue. Anything that is said during discussions cannot later be used as evidence in litigation, much like without prejudice negotiations.

Decisions on settlement are made by the parties themselves and, as there is no imposed outcome, mediations do not always conclude with resolution of the dispute.

It is important that those attending the mediation have the necessary authority, or delegated authority, to settle a legal claim. This enables the mediation to end with clarity about whether the dispute has settled, in full or in part, and if so what the terms of settlement are.

CHOOSING A MEDIATOR

Mediators do not have to be lawyers, but they often are. Parties attending a mediation on a workplace dispute are likely to engage a mediator who is a workplace relations specialist. In addition to expertise, personal style and approach will impact on the mediation’s success.

REPRESENTATION AT MEDIATION

Mediation is about establishing a dialogue between the parties and who is best placed to do this will depend on the particular case. Whether it is a lawyer or the parties themselves who speak will depend on status, confidence and impact. Regardless of who speaks, a lawyer may assist by framing realistic expectations with regard to legal rights or by drawing up the settlement agreement.

THE MEDIATION PROCESS

Mediation is not as informal as one might think. It uses a structured approach to identify the issues in dispute, discuss desired outcomes and explore possible solutions whilst encouraging the parties to be realistic in their expectations.

Generally, the first phase is a joint meeting and the second phase is separate private sessions with the mediator shuttling between the parties. The final stage of the mediation process may be the settlement agreement and closure. The mediator will ensure that the parties are clear about what has been agreed in writing at the time.

KEY TAKEAWAYS 

  • Use of ADR processes can be considered both before or throughout any legal proceedings. 
  • There are a range of ADR processes that are suitable for resolving workplace disputes including negotiation, conciliation, arbitration and mediation. 
  • Effective use of ADR may offer benefits over litigation including reduced time and costs and increased settlement, certainty and control over the outcome.

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The Fair Work Act in a Global Setting: the low down on employing foreign nationals in Australia

Adriana Bedon, Senior Associate

It is becoming a well-worn cliché that expats living in Australia are happier and living a greater quality of life than their counterparts at home. This perception resonates throughout the annual survey rankings of the world’s cities that offer the highest quality of life. 2015 was no exception, ranking both Sydney and Melbourne in the top 5.1

This promotion has served not only to attract skilled talent for recruitment purposes, but provides international employers with a powerful engagement and retention tool, should they wish to offer transfers and secondments to their respective Australian offices.

Given the above, Australia has become one of the most popular ex-pat hubs and as a result, HR departments globally are facing a growing need to become well acquainted with Australian labour laws and the skilled migration programs that work in tandem with these laws.

We set out a useful guide to this maze of overlapping laws and requirements below.

Migration check-in: requirements to be addressed from the outset

It is all too often the case that migration requirements are not considered until the last stage of a global mobility plan’s execution. For such a plan to move forward, all migration requirements need to be fully met before any transfers or secondments can commence, irrespective of the seniority of the visa applicant, or the urgency of their arrival.

In order to be able to sponsor foreign nationals for employment under the commonly known Subclass 457 Visa scheme (“Visa”), employers must become registered as “Business Sponsors” for Visa purposes.

(i) Employers with an established Australian office

International employers with an Australian office that has been in operation for 12 months or more are required to apply for a Standard Business Sponsorship (“SBS”).

Generally speaking, employers are required to demonstrate that they have lawful and financially viable Australian operations in place and are further required to meet training benchmark requirements.

Training benchmark requirements are met by providing evidence that the business has spent more than 1% of annual payroll on training related activities for the benefit of their Australian employees in the 12 months prior to making the application. Alternatively, employers with no Australian employees may make a donation in the amount of 2% of their annual payroll to an industry relevant training fund to meet this requirement.

(ii) Overseas employers with no Australian office

International employers that do not have an Australian presence but need an employee to carry out business in Australia on their behalf, or establish their Australian operations, may apply for an Overseas Business Sponsorship (“OBS”).

This application is essentially the same as that involved for an SBS, without the requirement of meeting the training benchmark. Instead, OBS applicants are required to provide supporting documentation to evidence the business requirement their foreign national employee will be addressing, or a business plan to evidence their intention of establishing Australian operations.

(iii) New entrants to the Australian market

Australian start-ups (less than 12 months in operation) may also be eligible to sponsor foreign nationals for a Visa. Start-up businesses do not need to meet training benchmark requirements but must provide an auditable training plan to demonstrate how they will meet such training benchmarks once they reach the 12 month mark.

Nominating an employee

Once an employer is registered as an Australian business sponsor they may proceed to nominate a foreign national provided there is a genuine need for the nominated role to be filled.

Further, the nominee must be coming in to take a role that is able to be sponsored, fits within the nature and scope of the business and, in some instances, employers will also be required to meet labour market testing requirements.

There are also requirements that apply with respect to a nominee’s salary. In this regard, a nominee’s Guaranteed Annual Earnings (“GAE”) must comply with two basic standards: in the first instance the GAE must at the least be equal to or above the Temporary Skilled Migration Income Threshold (“TSMIT”) and, more importantly, this amount must comply with Australian market rates for the nominated role.

In addition to the above, the GAE and other benefits must comply with rates imposed by any Modern Award or Enterprise Agreement, where applicable. Finally, the nominee must have the requisite skill level for their nominated occupation and meet a series of other thresholds to obtain the corresponding Visa. This includes mainly health, character and English language requirements.

Are employers required to issue a written employment contract to new recruits commencing in their Australian offices?

There is no statutory requirement to issue a written employment contract to a new recruit in Australia.

However, we strongly advise that our clients issue contracts or transfer agreements that have been drafted to cater for their intentions on entering into the employment relationship so as to pre-emptively position the resolution of a dispute in their favour.

In particular, we recommend that Australian employment contracts issued to foreign nationals be drafted to include clauses that make the employment relationship contingent on the foreign national’s ability to ascertain and maintain a valid visa with working rights. This will facilitate an employer’s ability to terminate an employee should they breach visa conditions or otherwise compromise their visa status.

Australian HR teams should therefore execute contracts of employment with foreign nationals on engagement, as opposed to offering a simple letter confirming the basic terms and conditions. If an Australian employment contract is not executed, this may indicate that the law of the respective Australian state of the employment will govern future disputes. In such scenarios, the governing law of the contract in place may still govern remedies for breach of contract (i.e. post-termination restraints).

In Australia, a range of terms may be implied into an employment agreement such as duties relating to work health and safety, or to the provision of reasonable notice on termination of employment.

Which laws apply to foreign nationals once they commence their roles in Australia?

Once a foreign national commences their role in Australia they will be subject to Australia’s statutory employment law as per the Fair Work Act 2009 (Cth) (“FW Act”), regardless of the governing law of their employment contract, with some minor exceptions.

Irrespective of any written employment contract or lack thereof, employees working in Australia will be entitled to:

  • the standards set out in the ten National Employment Standards (“NES”); and
  • the minimum terms of employment set out in any Modern Award or Enterprise Agreement, if one applies to the foreign national’s role.

Negotiation considerations: holiday entitlements

The NES provide that Australian employees are entitled to 4 weeks of paid annual leave, calculated on a pro-rata basis. This is an accrued entitlement (which means it becomes available for use as it accrues).

Foreign nationals may find this to be a pleasant or not so pleasant surprise, depending on what they receive in their home-jurisdiction. On the one hand, this may be used as a point of negotiation when offering transfers to foreign nationals that are not accustomed to receiving this much leave. On the other hand, foreign nationals that are accustomed to 5.6 weeks of paid holiday leave (like our lucky UK counterparts) may need to be compensated with other benefits to address this shortfall.

Further, it is important to note that, unlike our UK counterparts, Australian employees retain all unused annual leave, meaning that it carries over from previous years when not used. For this reason, Australian employers will often have annual leave policies that require employees to take annual leave during mandatory shut down periods (for example, Christmas), or when it remains unused for a lengthy period of time, to avoid large pay-outs in the future.

What laws will govern disputes relating to visa holders in Australia who require intermittent travel to their home office

In today’s globalised work culture, employees are often travelling into different jurisdictions as part of their daily roles.

Whilst the nature of circumstances surrounding a dispute will determine the governing laws, in some circumstances, the FW Act’s provisions (such as the NES) or the conditions of a modern award extend to employees whilst overseas.

Accrued entitlements

In the same vein, it is important to note that the FW Act provides that employees will accrue the following entitlements on the basis of their length of service:

  1. annual leave;
  2. personal/carer’s leave;
  3. additional entitlements to notice periods on termination;
  4. redundancy pay;
  5. parental leave; and
  6. long service leave.

Long service leave (“LSL”) in particular can cause issues for employers who have globe-trotting employees. At present there is no definitive standpoint on whether LSL is available to employees in Australia for periods spent working overseas for the same employer. However, the current authority on this matter notes that an entitlement to LSL may arise if an employee is terminated while they are in the same state of Australia in which they were engaged, and their service during the relevant time period is seen as “substantially connected” to that state.

Given the above, we recommend that HR teams carefully monitor accrued entitlements for all foreign nationals, namely those initially engaged in Australia.

Terminating a visa holder

The threshold for what is considered to be a “harsh, unjust or unreasonable” termination is generally lower when it comes to Visa holders, given that their lawful stay in Australia is dependent on their ongoing employment.

Once terminated, Visa holders have 90 days to arrange for another visa or their departure from Australia. Given the gravity of the consequences for a Visa holder, a number of decisions have provided access to remedies under the FW Act, even in instances where the termination was for a valid reason.

HR teams need to ensure that procedural fairness is both offered and recorded to mitigate the “difficult circumstances” a Visa holder can be placed in on termination. It is also recommended that the services of a Registered Migration Agent be arranged to facilitate the Visa holder’s ability to remain in the country, if this is their preference.

On termination, HR teams should also be mindful of their sponsorship obligations, including communicating the termination to the Department of Immigration and Border Protection within a 28 day period and maintaining records.

HR teams should also be aware that they will have an obligation to cover reasonable return travel air fares (i.e. economy class) for recently terminated Visa holders who request this in writing.

Key takeaways 

  • address migration requirements from the outset; 
  • have robust Australian employment contracts and/or secondment agreements for prospective foreign national employees; 
  • ensure foreign nationals are across their entitlements on engagement; 
  • monitor accrued entitlements; and 
  • carefully execute termination of Visa holders.

1. Monocle, The Monocle Quality of Life Survey 2015

Navigating the Minefield: contracts of employment vs. independent contracts

Michael Starkey, Graduate Associate

Most employers are familiar with the distinction between an employee and an independent contractor in terms of the “end-game”: while employees are entitled to certain benefits of employment (such as paid annual and personal leave), independent contractors are not. For many employers, this distinction makes engaging certain workers as contractors an attractive proposition. While doing so can be a legitimate business strategy, certain assertions can set alarm bells ringing for lawyers: “she’s definitely a contractor”; “he’s on a contract”; “we’ve contracted them”.

The substantive distinction between whether a work arrangement is a contract of employment or a contract to provide services can be difficult to establish. Whether a worker is ultimately found to be engaged as an employee or a contractor is something that will be decided by a court or tribunal, rather than the label given to the worker by an employer.

To help navigate the minefield, this article takes a look at the factors that will be considered in determining whether a worker is an employee or a contractor, the consequences of getting it wrong, and strategies you can adopt to avoid the pitfalls.

SPOT THE DIFFERENCE: EMPLOYEES (ROOSTERS) AND CONTRACTORS (DUCKS)

A common misapprehension is that the way in which a work relationship is thought of by the parties or described by the contract will be determinative of how that relationship is actually characterised. While the understanding of the parties and the title used are relevant (particularly when a worker is more highly skilled or has a reasonable level of bargaining power), they are not decisive.

“The parties cannot create something which has every feature of a rooster, but call it a duck and insist that everybody else recognise it as a duck.”1

Whether a worker is an employee or contractor will depend on how the total relationship between the parties can be characterised and involves a number of considerations, including those below.

Control

A relationship is more likely to be regarded as one of employment where the putative employer exercises (or has the legal right to exercise) control over the work of the other party, including what work is performed, as well as when and where. A high degree of control need not be manifested in actual direct supervision – rather, the question is which party has the ultimate authority over the performance of work.

Investment and reward

A worker who brings his or her own tools of trade or highly specialised skills to a role is more likely to be characterised as an independent contractor than an employee.

Another question is who stands to reap the rewards of the worker’s work. A worker whose efforts benefit the other party – for example, by generating revenue or goodwill – and whose rights to any intellectual property created in the course of the work relationship are limited is more likely to be an employee.

Exclusivity of service

A strong indicator of employment is that the worker in question is not entitled to perform work for others. This may extend to the worker having restrictions on his or her ability to compete with a former employer after the employment relationship has come to an end. While certain types of restraint on a contractor may be warranted in particular circumstances (for example, if the contractor has access to highly confidential information), such restraints are less common than those imposed on employees.

A contractor is usually free to provide services to a number of parties at any one time and, additionally, has the capacity to subcontract work to others.

Whether a worker is permitted to advertise his or her own services independently of his or her putative employer may also be relevant.

Presentation of the business

The way in which a worker is presented to the world at large is a central consideration. For example, the identity of a worker’s employer may be ascertained, for example, from the uniform that worker is required to wear, or the use of business cards identifying the worker with the employer.

Method of payment

While an employee tends to be paid a regular wage or salary, a contractor is more likely to invoice a party for his or her services. Further, an employee’s salary is not usually linked to the completion of particular tasks, while a contractor’s fee for services may be.

GETTING IT WRONG: SOME OF THE CONSEQUENCES

Sham arrangements

The “sham arrangements” provisions of the Fair Work Act 2009 (Cth)2 (the “FW Act”) have recently been in the spotlight, with the High Court holding in December that Quest South Perth Holdings Pty Ltd (“Quest”) breached the provisions by making certain representations to two employees about the nature of their engagement.3

The two employees in question were cleaners, originally employed by Quest, whom Quest had purported to “convert” to independent contractors through a triangular arrangement with Contracting Solutions Pty Ltd (“Contracting Solutions”). It was held that this “conversion” was never effected, and Quest was found liable for representing to the employees that they were contractors of Contracting Solutions engaged to perform work for Quest, rather than employees employed by Quest itself.

The High Court overturned the Full Federal Court’s ruling4 that Quest had not breached the sham arrangements provisions because the representations it made were not about the relationship between Quest and the employees, but the purported relationship between Contracting Solutions and the employees. The decision reinforced the intention of the sham arrangements provisions to “protect an individual… from being misled by his or her employer about his or her employment status”.5

The significance of the High Court’s decision is that an organisation will be liable for a misrepresentation about the working relationship between a worker who is in truth an employee of that organisation, no matter the “counterparty” about which the representation is made. This risk reinforces the need for organisations to ensure any triangular contracting arrangements entered into are genuine and properly constructed (discussed below).

Liability for entitlements

If a worker purportedly engaged as an independent contractor is actually an employee, he or she will accrue employee entitlements for the entire period of their engagement. Employers may therefore find themselves “retrospectively liable” for those entitlements.

For example, in Fair Work Ombudsman v Crystal Carwash Cafe Pty Ltd (No 2) [2014] FCA 827 (“Crystal Carwash”), the employing entity and two of its senior managers were held liable for underpayment of wages to 359 employees, totalling almost $180,000 over a 10 month period. The workers were purportedly engaged as contractors by ten sham labour hire companies, but were ultimately found to be employees.

Additionally, $90,000 worth of penalties were imposed after the employer admitted the sham arrangement.

Organisations should be aware, however, that liability for entitlements will accrue even when the mischaracterisation of the employment relationship in question is not deliberate (although an “innocent” employer may not be exposed to the same penalty consequences as in Crystal Carwash).

STRUCTURING ARRANGEMENTS PROPERLY: TRIANGULAR CONTRACTING AGREEMENTS

If an organisation reaches the conclusion that a contracting arrangement is appropriate in the circumstances (for example, because the job to be done is of limited duration, is highly specialised or lies outside the organisation’s usual functions), a “triangular”, or “tripartite” contracting agreement is one way of structuring the relationship between the parties so as to limit an organisation’s exposure to claims that the worker engaged is actually an employee.

Triangular contracting arrangements are so named because they involve three parties:

  • the Principal (your organisation);
  • the Contractor (a second corporate entity); and
  • the Personnel (the individual who is to perform the work).

Triangular contracting arrangements which introduce a corporate party (the Contractor) to stand between your organisation (the Principal) and the individual performing work for it (the Personnel) are likely to reduce the chances of that worker being deemed an employee of your organisation, but:

  • only if the arrangement is constructed properly; and
  • the true relationship between the parties reflects both what is contained in the agreement and the nature of the work undertaken (in contrast to the situation in the Quest case discussed above).

A triangular contracting arrangement will not be effective if it is an attempt to disguise what is really an employment relationship.

KEY TAKEAWAYS 

  • Choose the right arrangement for the job: while independent contracting may be appropriate in certain situations, a square peg will never fit a round hole. 
  • Be aware of the difference between an employee and an independent contractor: the courts consider the actual nature of the relationship between the parties. Simply calling someone an independent contractor and paying them according to an invoice will be insufficient if other factors suggest the relationship is really that of employer and employee. 
  • Utilise strategies like triangular contracting arrangements: if you determine that independent contracting is right in the circumstances, record the arrangement in a well constructed agreement in consultation with your legal advisors. 
  • Know your obligations: an organisation that is aware of its statutory obligations to all workers, be they employees or independent contractors, will be better placed to limit its exposure to liability.

1. Re Porter [1989] FCA 226, at [13].

2. Fair Work Act 2009 (Cth), ss 357-359

3. Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd [2015] HCA 45 (“FWO v Quest”).

4. Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd [2015] FCAFC 37.

5. FWO v Quest, [16].