Kathryn Dent, Director
On a fine winter’s morning in June 2013 set against the iconic Sydney Harbour backdrop, some of PCS’ valued clients and supporters attended our latest Breakfast Briefing, interested to learn more about the personal risks inherent in managing people.
PCS Directors Kathryn Dent and Nichola Constant shared the stage and exchanged their experiences and extrapolated workplace scenarios where there was, or could be, exposure to personal as well as organisational liability. The practical examples given and experiences recalled highlighted to the attendees the need for vigilance in managing people not only to protect their organisations from legal action, but also themselves, and how they might effectively achieve this.
Section 550 of the Fair Work Act 2009 (Cth)
An exploration of this section was a recurring theme throughout the morning given that it imposes liability on individuals where they are “involved in” breaches of the Fair Work Act 2009 (Cth) (the “FW Act”). Both Directors explained throughout the morning that the phrase “involved in” was broad and covered the acts of aiding, abetting, counselling, procuring, inducing, directly or indirectly (being) knowingly concerned in or party to, or conspiring. As a consequence, members of the audience were encouraged, in order to avoid a charge under section 550, to take such action as required (given the circumstances of the issue) to demonstrate no involvement in any breach or better still, to show attempts at compliance with the FW Act.
This was logically the rst area reviewed during the Briefing given that prior to the commencement of any working relationship employers (and their internal advisors such as HR Managers) have to decide whether to engage or employ a worker, that is, decide whether the worker is being contracted as an independent contractor or an employee. Kathryn highlighted that sections 357-359 of the FW Act were an incentive to ensure correct characterisation as these sections make it an offence to engage in “sham contracting”. Also, because of the operation of section 550, individuals who are part of that decision-making process may be personally liable, as was demonstrated in several cases discussed including Fair Work Building Inspectorate v Supernova Contractors Pty Ltd & Anor; Australian Building & Construction Commissioner v Inner Strength Steel Fixing Pty Ltd ).1
Similar provisions imposing personal liability could arise in this area if it was determined that the scheme was for tax avoidance purposes.
In addition to the defence of “not being involved” in the offence, speci cally with sham contracting, an individual who could demonstrate other relevant defences, including that they did not know or were not reckless to the character of the contract, might escape liability, such as occurred in Fenwick v World of Maths.2 Establishing this defence would require the individual to understand the indicia of employees and independent contractors and to characterise and enter into the relationship on this basis.
Recruitment and Selection
Concurrent with the characterisation process is the recruitment and selection process of the individual who will be physically performing the work. That of itself leads to another area of exposure to personal liability, with Nichola traversing the laws that govern what employers, and individuals acting on their behalf (as employees or agents such as recruiters) should and should not say to these workers, including representations which could be the subject of misleading and deceptive conduct allegations under the Competition and Consumer Act 2010 (Cth).
Pay Records and Benefits
If an organisation, following the above process, decided to employ an employee, as opposed to an independent contractor, then the employer is obliged to issue payslips, keep employment records and comply with a minimum set of terms and conditions derived from a modern award, an enterprise agreement, or the National Employment Standards all of which are governed by the FW Act (the “FW Act minima”), and other legislation, including long service leave obligations under State and Territory legislation. Kathryn indicated that a breach of any of the FW Act minima could trigger a civil penalty and by virtue of section 550, liability would extend to any involvement by an individual in these breaches. Common examples given of these breaches were underpayment of award rates of pay and penalty rates and failure to issue payslips and maintain employee records as was demonstrated in Fair Work Ombudsman v Nicole Patrice Dawe.3
While privacy obligations were discussed, given the exemption for “employee records”, the extent to which an individual within an organisation dealing with workplace matters could be held liable for a breach of the Privacy Act 1988 (Cth) was not clear.
Not only does the breach of an enterprise agreement potentially implicate individuals but so may the process of entering into one. Nichola highlighted the various obligations required during the process of making an enterprise agreement and where individuals may be liable.
The discussion then turned to a very topical issue, that of “workplace culture” and more speci cally in the context of individual liability, behaviours that negatively impact on it, for example, harassment, discrimination and bullying. Kathryn reminded the audience that the laws prohibiting discrimination apply not only during recruitment and selection but throughout the relationship and on termination.
Kathryn discussed the provisions within the Anti Discrimination Act 1977 (NSW) (the “AD Act”) that make it unlawful for a person to cause, instruct, induce, aid or permit another person to do an act that is unlawful by reason of a provision of the AD Act.
Additionally the AD Act and the Sex Discrimination Act 1984 (Cth), both directly impose personal liability by making it unlawful for individuals (for example an employee, a contract worker or a “workplace participant”) to engage in sexual harassment and two cases were discussed where individuals were held liable.4
The acts of inciting, assisting or promoting were highlighted as giving rise to individual liability under the Racial Discrimination Act 1975 (Cth) and the Disability Discrimination Act 1992 (Cth) as was any discriminatory conduct under section 550 through a breach of section 351 (which is in the general protections provisions of the FW Act).
At the time of the Briefing, the Fair Work Amendment Act 2013 (the “FW Amendment Act”), had not yet been passed by Parliament but was discussed and given it is now law, the reality (as foreshadowed) is that after 1 January 2014, if an anti-bullying order is made by the Fair Work Commission a breach of it may implicate individuals if they have the requisite degree of “involvement” to attract section 550.
Bullying can also result in prosecutions under work health and safety laws. These laws themselves impose obligations on organisations and all individuals from Board level to “worker” so there is plenty of scope for an individual to be prosecuted, at some level, where the work health and safety risk emanates from bullying behaviour. This occurred in Inspector Gregory Maddaford v Graham Gerard Coleman & Anor.5
Work Health and Safety
Nichola then proceeded to highlight more generally individuals’ liabilities for work health and safety. Individuals under the Work Health and Safety Act 2011 (NSW) ranges from “officers” who must exercise “due diligence” to “workers” who must exercise “reasonable care”. The concept of personal liability in this area is not new.
In addition to discrimination and adverse action considerations, individuals’ liabilities in a termination situation could also arise in relation to the giving of notice under the National Employment Standards (or the applicable industrial instrument) and also in the payments that must be made in relation to accrued annual leave, and if applicable, redundancy. Any involvement in relation to these entitlements could trigger section 550 but Kathryn described how an individual’s lack of involvement (for which evidence must be adduced) would exonerate them as occurred in Guirguis v Ten Twelve Pty Ltd & Anor.6
Restraints of Trade
While not specifically an area in which individuals were likely to be prosecuted, Nichola discussed this “last stage” of the work relationship to bring the Briefing full circle as the enforcement of any contractual restraints in relation to activity and relationships post-termination depend on the reasonableness of the restraint which was determined at the beginning of the relationship. It was a timely reminder to individuals that such clauses being held to be unenforceable by virtue of being uncertain or unreasonable whilst not rendering them liable for prosecution could leave them open to criticism if they did not seek advice and/or properly consider and draft such a clause.
The journey through the work relationship demonstrated that at each significant step an individual’s actions, be it in characterising a worker, hiring them, being responsible for their terms and conditions including environment and payment or terminating their employment, could result in that individual being prosecuted for various breaches, usually where the organisation was also liable. As a result of drawing these matters to our guests’ attention, PCS trusts that its clients and supporters are now armed having been forewarned.
-  FMCA 935;  FCA 499.
-  FMCA 131.
-  FMCA 191.
- Lee v Smith & Ors (No.2) (2007) EOC 93-465; Kraus v Menzie  FCA FC 144.
- (2005) EOC 93-366.
-  FMCA 307.
Mars Australia Pty Ltd T/A Mars Chocolate Australia v CEPU & AMWU  FWAA 4482
Kirryn West, ASSOCIATE
PCS recently represented one of its clients, Mars Australia Pty Ltd (“Mars”), before Fair Work Australia (“FWA”) in a significant case that concerned an area of the Fair Work Act 2009 (“FW Act”) which has remained largely untested.
The central issue in the case was whether Mars had satisfied the pre-approval steps required by the FW Act in relation to its proposed Enterprise Agreement.
The specific pre-approval step in issue required Mars to provide a 7-day access period ending immediately before the start of the voting process during which Associates have a copy of the Enterprise Agreement (Mars refers to its employees as Associates). A dispute arose between Mars and the Unions in relation to whether the access period provided was in fact a 7-day period.
Mars had engaged in negotiations with its Associates and the Unions in relation to the content of its Enterprise Agreement. Following a lengthy consultation period, Mars decided to put the proposed Enterprise Agreement to vote. Mars works a shift work pattern and provided all Associates with an access period equivalent to 7 x 24 hours.
The Unions argued that the access period provided by Mars was insuf cient on the basis that the day on which the voting process commenced could not be counted when calculating the 7-day access period. In practice, this would require an 8-day access period to be provided and the Unions relied upon a previous decision of FWA where this interpretation of the access period had been adopted.
Vice President Watson of FWA held that the 7-day period referred to in the FW Act does not exclude the day during which the voting process commenced. As such, providing Associates with a 7 x 24 hour period satisfied the definition of the access period under the FW Act.
Fair Work Australia specifically noted that:
“I have considered all of the submissions in the matter and the alternative submissions regarding previous decisions of this Tribunal and its predecessor and the application of the Acts Interpretation Act 1901. In my view in all of the circumstances, given the wording of s.180(4), the seven day period referred to therein does not exclude the day during which the voting process commenced. In other words, the seven day period operates from that point of time being, midday on 22 February 2012 and goes backwards to midday on 15 February 2012.”
Mars was found to have complied with all pre-approval steps required by the FW Act, and its Enterprise Agreement (of which a majority of Associates had voted in favour) was approved.
Key Learnings for Employers
This case shows that the 7-day access period does not include the day on which the voting process commences and, as such, the access period can be a period equivalent to 7 x 24 hours. This is particularly important for workplaces where the majority of workers are shift workers who work a continuous shiftwork roster.
The grounding of the Qantas feet, and the lockout of employees at Schweppes in recent times, has highlighted one of the less utilised bargaining strategies that employers can use in countering employee industrial action during enterprise bargaining.
A lockout is considered by many employers as a last resort which can result in significant losses to profitability, negative publicity and the disturbance to relationships with customers and suppliers. Below we examine other options employers can consider when they are not willing to concede to union demands.
1. Withholding Wages
The Fair Work Act 2009 (Cth) (“FW Act”) prohibits employers from making wage payments to employees while they are taking protected industrial action. This obligation applies if an employee refuses to attend for work or refuses to perform any work at all. Prohibition on paying wages during the strike period has often been a disincentive for employees to take strike action. However, more employee organisations are organising industrial action which falls short of a full scale strike. This is known as a partial work ban in which employees stop performing their full range of duties for a short period of time. When employees take part in a partial work ban, an employer has the option to:
- pay employees in full;
- withhold a portion of the employees pay; or
- not pay the employees at all.
Providing employees with partial pay, however, can mean that employees who refuse to do crucial tasks, but which take a short amount of time, will not suffer a significant wage penalty by engaging in industrial action. Employers will therefore need to consider whether it is more appropriate to pay employees partially or not at all during partial work bans.
2. Payments in Kind
As well as withholding wages during industrial action, an employer can withhold various payments in kind. This can be a useful bargaining tool during negotiations. In the recent case of CFMEU v Mammoet Australia Pty Limited  FMCA 802 Fair Work Australia (“FWA”) ruled that employer-provided accommodation was a form of payment which the employer was prohibited from making while the workers were on strike. Employers should carefully review any additional payments in kind they make to employees and consider whether they should be withheld during industrial action.
3. Standing Down Provisions
In addition to the above provisions, the FW Act also allows employers to stand down employees in circumstances where they cannot be usefully employed. In particular, these provisions allow employers to stand down an employee during a period of industrial action. Employers need to ensure that if their workforce is covered by an enterprise agreement they review any stand down provisions contained in it and comply with those provisions instead. In particular, an enterprise agreement may impose more obligations on an employer in relation to consultation and notice prior to a stand down occurring.
Requirements for partial pay
Requirements for no pay
4. Fair Work Australia orders
An employer who is faced with ongoing industrial action during a bargaining period can also apply to FWA to suspend or terminate the industrial action. However, recent cases suggest that FWA is reluctant to issue such an order unless there are exceptional circumstances.
Qantas grounded its eet in preparation for a full scale lockout in response to industrial action taken by three trade unions representing licensed aircraft maintenance engineers, baggage handlers and pilots. Partial work bans had been taking place for some time which delayed flights, and due to the lockout, the Federal Government applied to FWA to terminate the industrial action engaged in by Qantas. The Federal Government argued that Qantas’ response threatened to cause significant damage to the Australian economy. It was held that Qantas’ action did not have to be reasonable, proportionate or rational – the only requirement was that it had a causal link to the employee action.
A decision to lock out employees does have significant legal consequences, including the risk that FWA will move to compulsory arbitration of the industrial dispute and make a workplace determination binding on the parties. Full scale lockouts also cause disruption and attract negative publicity. Most employers consider the lock out provisions a last resort when bargaining has completely stalled and employee industrial action is already disrupting the business.
Dealing with industrial action can be difficult and challenging, and an employer’s response to such action should always be carefully considered.
In the recent case of AMWU v McCain Foods (Aust) Pty Ltd  FWA 6810, maintenance employees went on strike at a McCain Foods manufacturing site. As a result, McCain Foods stood down some of the production employees on the day of the strike. FWA stated that the employees that were stood down could not have been usefully employed as the work they performed would have been of no bene t to McCain Foods and a threat to safe and productive operations.
This case illustrates how an employer can minimise economic loss in situations where only part of the workforce is engaging in industrial action. Standing down other employees may also encourage those striking to return to work.
Joellen Riley, Consultant
A number of the cases before Fair Work Australia (“FWA”) alleging breach of the “good faith bargaining” obligations in s 228 of the Fair Work Act 2009 (Cth) (“FW Act”) have involved union complaints that employers have communicated directly with employees about a proposed enterprise agreement, instead of working only through the union bargaining representatives.
These complaints of “direct dealing” misconceive the FW Act’s enterprise bargaining framework.
Unlike enterprise bargaining in the United States, where a collective bargain is struck between an employer and the single trade union that has secured the right to represent the entire workforce, enterprise bargaining under the FW Act requires the employer to make an enterprise agreement directly with employees. Under the FW Act there are no longer any agreements (apart from greenfields agreements1) made between employers and unions. Agreements must be voted up by a majority of the employees. Unions will only become parties to enterprise agreements if they specifically request to be named as a party when FWA approves the agreement.
Unions play an important role in the Fair Work bargaining system as bargaining representatives, but ultimately agreements are made directly with employees, and employers must be mindful of their obligations to inform employees directly of the content of any proposed enterprise agreement, and the arrangements for voting.
It is useful to think of enterprise agreement-making as a two stage process: the bargaining phase, and the agreement-making phase.
Employers’ obligations during bargaining
In the bargaining phase, it is the employer’s responsibility to take all reasonable steps to notify employees of their right to appoint a bargaining representative for the purpose of negotiating the terms of an enterprise agreement. The employer must give this notice no more than 14 days after the employer has initiated bargaining, or agreed to bargain. So even if the employer begins to engage in enterprise bargaining only because it has been asked to do so by a union, or because it has been ordered to do so by FWA issuing a majority support determination,2 it is still the employer’s responsibility to notify all employees of their right to appoint a bargaining representative.
Every employee has a right to appoint his or her own bargaining representative. Even employees who are members of trade unions are entitled to appoint a different bargaining representative if they wish. The union will be their default bargaining representative if they make no explicit appointment.
It has become more common since the commencement of the FW Act for employers to bargain with a number of different bargaining representatives. For example in Qantas Airways Ltd  FWA 3632, the employer bargained with the Australian Services Union, and also with a separate group of part-time employees based in Brisbane, who were represented by two individual bargaining representatives, in order to reach an agreement covering flight attendants. The independent bargaining representatives unsuccessfully challenged approval of the agreement on a number of grounds. Fortunately for Qantas, it was able to demonstrate that it had bargained in good faith with all representatives in order to secure approval of the agreement.
In Bowers v Victorian Police  FWA 2862, the Victorian Police department was required to bargain with the Police Federation of Australia, and also with Sergeant Richard Bowers who represented himself and another 132 police prosecutors.
The good faith bargaining obligations in s228 require that all bargaining representatives (including employees, unions, and any other person appointed as a bargaining representative) engage cooperatively in negotiations for an agreement.
An employer cannot exclude any bargaining representative from negotiations, and cannot act in a way that undermines employees’ rights to freedom of association. However that does not mean that employers cannot speak directly to their staff during negotiations for an enterprise agreement. The Full Bench decision in CFMEU v Tahmoor Coal Pty Ltd  FWAFB 3510 at  makes it clear that so long as the employer does not seek to mislead or deceive employees, and puts forward the same information as has been provided to bargaining representatives, it will not be a breach of the good faith obligation for an employer to hold its own meetings directly with employees to explain its bargaining position.
Employers’ obligations in the agreement-making phase
Once negotiations for an agreement are either settled, or have reached an impasse, the employer may put a proposed enterprise agreement to a vote of the employees who will be bound by the agreement. A vote cannot take place until at least 21 days have passed since employees received notice of their right to appoint a bargaining representative. A decision to put an agreement to a vote may be delayed by an FWA bargaining order if a bargaining representative is able to persuade FWA that the employer has not met its good faith bargaining obligations. This occurred in Alphington Aged Care  FWA 301 where a nursing home employer put an agreement to a vote of employees without telling the union bargaining representative that it intended to do so. FWA refused to approve the agreement in these circumstances. Nevertheless, so long as the employer has continued to communicate with bargaining representatives and believes that an impasse has been reached, the employer is entitled to put an agreement to a vote of the employees.
Before putting an agreement to a vote, the employer must take reasonable steps to ensure that employees either have a copy of, or access to a copy of, the proposed agreement. Employees must have access for at least a seven-day period before the time that the vote is taken. The employer must also take all reasonable steps to inform employees of when, where and how, the vote will be taken. If employees are on leave during this time, the employer should make reasonable attempts to contact them by mail, phone or email.
The employer also bears the responsibility of taking reasonable steps to explain to employees the terms of the agreement and the effect of those terms. Typically, these explanations will include information about which terms and conditions of employment will change as a result of making the new agreement. These explanations need to be appropriate to the employees’ circumstances. The FW Act stipulates that what steps are “reasonable” must take account of language and cultural diversity in the workplace, and the needs of young people. The employer cannot leave it to unions or other bargaining representatives to explain the agreement, although the extent to which an employee has been actively represented by a union will be a circumstance that is taken into account in determining whether the employer has taken reasonable steps to inform those employees.
Clearly, the framework of the FW Act positively requires employers to deal directly with their employees. While it is important that employers respect the role of unions as bargaining representatives, and do not act in ways calculated to undermine the unions’ participation in negotiations, ultimately, it is the employer who bears the onus of ensuring that employees are informed at the agreement-making stage. Union representatives also need to appreciate that employers bear these responsibilities under the FW Act. It is a misconception that unions have a monopoly in representing employees in collective bargaining. The Fair Work system is very different in this respect from North American enterprise bargaining systems.
- A “greenfields agreement” is made before any employees are engaged at a site. Greenfields agreements can be made by an employer with a union or unions who are entitled to represent the industrial interests of the occupations who will be engaged when the site commences operations.
- A “majority support determination” is an order by FWA that the employer must agree to bargain collectively with employees, because a bargaining representative has convinced FWA that a majority of employees want to engage in collective bargaining: s 237.
Ed Austin-Woods, Associate
Employers in the process of bargaining for a new Enterprise Agreement (“Agreement”), and who are considering terminating an expired Agreement, should consider their strategy in light of a recent FWA ruling.
Under the previous Workplace Relations Act 1996 (Cth), a party to an expired agreement did not experience a high degree of difficulty in seeking to have it terminated. However, that position has now markedly changed.
In Tahmoor Coal Pty Ltd  FWA 6468, Vice President Lawler (“Vice President”) considered FWA’s discretionary power to terminate agreements under s 226 of the Fair Work Act 2009 (Cth) (“FW Act”).
Tahmoor Coal Pty Ltd (“Tahmoor”) applied to FWA to terminate two agreements that had nominally expired in April 2008 and April 2009 respectively.
At the time, Tahmoor was bargaining with the CFMEU for a replacement agreement. The negotiations could best be described as robust and had involved a high degree of animosity. The bargaining had continued for more than 18 months. There had been almost 60 bargaining meetings and significant industrial action which included both a number of employee strikes and an employer lockout. The parties had also brought proceedings in FWA in relation to the bargaining process.
The expired agreements imposed a number of commercial constraints and operational restrictions on Tahmoor that adversely affected its profitability to “a material degree”. This included restrictions on the hours of work, shift arrangements, contractors and minimum manning requirements.
The central issue was whether it was “appropriate” to terminate the agreements under the new “appropriateness test” in the FW Act.
The Vice President highlighted that FWA must not only be satisfied that terminating an agreement is not contrary to the public interest, but that FWA considers it “appropriate” to take this action after taking into account all of the circumstances.
The Vice President stated that in determining “appropriateness”, FWA must necessarily examine the objects of the FW Act which indicate that enterprise bargaining “is the central way in which, in the framework that has been established by the FW Act, productivity benefits are to be achieved”.
The Vice President further stated that the FW Act emphasises that a key role of FWA is to facilitate good faith bargaining and the making of agreements. Consequently, FWA must consider how termination will influence the prospects of the parties concluding a new agreement.
The Vice President held that it was not appropriate to terminate the two agreements because it would reduce the chance of the parties reaching agreement during their current bargaining process. This would be contrary to the objects of the FW Act.
He reasoned that termination would give Tahmoor all of the productivity benefits that it was seeking in a new deal which would naturally reduce its appetite for a new agreement. Conversely, it would also result in the employees, and the unions, becoming “disproportionately” worse off and significantly weaken their bargaining position.
Furthermore, and most importantly, the Vice President stated that it will generally not be appropriate to terminate an expired agreement if bargaining for a new agreement is ongoing and there remains a reasonable prospect for success, even where the process has become “protracted”.
This decision is highly problematic for employers that have an expired EA and are seeking to have it terminated. The process is no longer a “tick-the- box” exercise and a mere formality, particularly where negotiations for a new agreement have commenced.
Terminating an agreement has now become measurably more difficult and employers will need to carefully consider their industrial strategy in light of this decision.
The “appropriateness test” means that FWA has a broad discretion to examine all of the surrounding circumstances relating to an agreement, and will pay particular attention to whether bargaining has commenced and the effect termination will have on the respective position of the parties.
Your Key Actions:
- Review your agreement and determine whether it should be terminated before bargaining for a new instrument commences.
- Remain informed on the latest bargaining and industrial developments, and contemplate their consequences and implications.
- Create a sound industrial strategy which is carefully planned and considered.
- Understand that an agreement’s nominal expiry date does not mean that it will cease to operate on that date.
- Ensure that you are prepared for an agreement to continue to apply beyond its stated nominal expiry date.