Welcome to the first edition of the E&IR newsletter for
2011. We hope you find this monthly update helpful and informative.
If there are any particular topics you would enjoy seeing more on
in 2011, please let us know!
This month, trainee Jane O'Brien joined our team. Jane completed
a double degree in Commerce (Accounting) and Law at the University
of Adelaide before coming to Cornwalls to complete a seasonal
clerkship at the end of 2008. Jane moved to Melbourne at the start
of 2010 to begin her traineeship with Cornwalls. This is Jane's
final rotation before admission.
New Fair Work Australia Rules & Forms available
From 1 January 2011, new Fair Work Australia Rules 2010
and associated forms have commenced.
The new rules are largely similar to the interim Fair Work
Australia Rules that have been in operation since the commencement
of the Fair Work Act 2009.
However, there have been amendments to each form. In the
majority of cases the changes have been minimal, although service
requirements have been clarified for a number of forms. Notably,
Form F3 has been amended to take into account the new small
business employer definition and two new forms (F23A and F23B) have
been devised to accompany Form F23 (Application for Approval of
Variation of Enterprise Agreement).
The new version of the Rules is available on the FWA website.
The new rules and forms should be referred to before initiating any
proceeding at FWA.
Small business - a new method of calculation for unfair
dismissal
Under the Fair Work Act 2009 (Cth) (FW
Act) a 'small business' employer is one who employs fewer
than 15 employees. The method of calculating the number of
employees in a business for the purposes of unfair dismissal has
recently changed.
Calculating the number of
employees
From 1 January 2011, the method of calculation is based on a
simple headcount of the number of employees in the
business, irrespective of how many hours they work. The headcount
includes casuals employed on a regular and systematic basis and
employees of associated entities.
The previous definition of 'small business' referred to an
employer of less than 15 'full-time' equivalent employees, which
was calculated by adding the total number of hours worked by all
employees in a business and dividing it by 38.
This change brings the unfair dismissal definition of a 'small
business' into line with other elements of the FW Act, including
redundancy.
Why this so important
Under the national Fair Work system, the termination of an
employee from a small business cannot be regarded as an unfair
dismissal if the employer has followed the Small Business Fair
Dismissal Code (Code).
An updated version of the Code is now available.
It is important to note that for some employers, the new method
of calculation may change whether you are considered a small
business and whether you can rely on the Code. Employers
should seek advice if they are unsure.
'Sickie?'
Fair Work Australia (FWA) has reinstated an
employee who was dismissed after noting 'sickie?' on his
roster in advance of taking sick leave.
The employee submitted that he wrote 'sickie?' on his
roster to remind himself to take carer's leave (which he considered
to be the same as sick leave) to care for his wife, who suffers
from Parkinson's disease. The employee forgot to complete the
relevant leave form prior to the leave date, but in any event
claimed he was unable to attend work that day, being unwell due to
food poisoning.
Prior to commencement of his rostered shift, the employee's wife
rang to notify the company that her husband would not be attending
work. The company, which had become aware of the employee's notated
roster, said this confirmed its suspicions that he intended to fake
sickness and arranged a meeting with the employee upon his return
to work.
Following three meetings between the parties, the employee was
dismissed. The company had formed the view that the employee had
been dishonest in relation to his absence and thus had intended to
defraud the company.
In her decision Commissioner Ashbury stated she was not
satisfied that, on the balance of probabilities, the employee had
engaged in fraud or behaviour amounting to serious misconduct. The
company did not have sufficient grounds to form the view that the
employee intended to take a sick day to which he was not entitled,
and it was unreasonable for management to assume that the employee
was being dishonest when questioned about the notation. The company
was aware that the employee's wife was ill and should have
considered this fact in forming its view.
Commissioner Ashbury considered that it was at least equally
likely that the employee was sick from food poisoning as it was
that he took sick leave in circumstances where he was not really
sick and, therefore, it could not be said that clear and cogent
proof of fraud existed in support of a valid reason for dismissal.
In the circumstances, the company should have given the employee
the benefit of the doubt.
Moreover, the Commissioner rejected the company's argument that
the employment relationship had broken down and that the employee's
word could not be relied upon. The employee had been with the
company for 11 years and had a previously unblemished record.
Commissioner Ashbury said there was no basis for a loss of trust
and confidence because the employee was not guilty of the
misconduct alleged against him. Therefore, reinstatement was
ordered (with continuity of service).
For employers
This case makes clear that employers should consider several
factors before deciding to terminate an employee, including the
employee's length of service, work history and personal
situation.
In addition, this case highlights FWA's willingness to order
reinstatement in preference to compensation.
Fruit of the poisoned tree - a ruling against admitting
covertly obtained evidence against an employee
In a recent unfair dismissal ruling, an employer who invaded the
privacy of one of its employees was ordered to pay the employee
$15,000 in compensation.
The company summarily dismissed the employee after another
worker reported seeing a trail of oil drips leading to the
employee's vehicle. The manager believed the employee had decanted
oil from a larger drum (belonging to the company) into two smaller
containers in the back of the ute.
Without the employee's consent, the manager took a sample from
one of the smaller containers (the ute sample) and
tested it to determine its origin. When questioning the employee
about the oil in his ute, the manager did not disclose that he had
taken the sample.
Some days later, the manager informed the employee of the ute
sample and stood the employee down on full pay.
The results of the company's tests indicated that the ute sample
and another sample taken from the large drum were 'without doubt'
from the same batch of oil. The employee was asked to attend a
disciplinary hearing, but refused to do so until he was provided
access to the report. The report was not provided and the employee
did not attend the meeting.
The employee then arranged to have the samples tested by an
alternative laboratory. In a subsequent meeting the employee
explained that he was obtaining his own expert report and, acting
on legal advice, would respond to the company's allegations against
him once this report was available.
On the basis that he had continually failed to respond to the
company's allegations of misconduct, the employee was summarily
dismissed. The employee's expert report ultimately found that the
samples tested did not match the company oil.
Commissioner Colin Thatcher excluded the evidence that the
company had covertly obtained to support its position that the
employee had misappropriated company property. He said that the ute
and the container were clearly the property of the employee and
that in obtaining the ute sample, the manager had technically
committed trespass and larceny (stealing). Under the rules of
evidence the manager's actions were unlawful, and evidence obtained
as a result of the unlawful act was inadmissible (the ute sample
and the analysis of same).
The Commissioner found that the timeframe adopted by the company
failed to provide the employee with an adequate opportunity to
respond to the 'incriminating material'.
Furthermore it was unreasonable for the company, once it became
aware of the employee's pending expert report, to insist that he
respond to allegations at the disciplinary meeting. Commissioner
Thatcher found the employee was not in a position to discuss the
results of the company's report, because he was not suitably
qualified and because he believed he did not steal the oil. Without
his own analysis, the employee could not have demonstrated to the
company that the ute sample was not the same oil as contained in
the company's drum.
The employee was found to have been unfairly dismissed and was
awarded $15,000.
For Employers
Employers should be conscious of the invasion of privacy in the
workplace. Any evidence obtained without the employee's consent is
likely to be considered 'fruit of the poisoned tree' and
inadmissible. At the very least, security checks of bags, parcels,
lockers and the like should not take place unless the employee
concerned is present, or the employee has given permission for such
a search to take place in his or her absence.
Non-compete clauses - protecting your business interests
There has been a sharp increase in litigation to enforce
non-compete agreements in the past decade. Employers are insisting
on relying on terms of agreements to prevent ex-employees from
working for competitors; this is a move that is increasingly being
backed by the courts.
A term in a contract of employment that prevents an employee
from working in a particular field, for a particular time or in a
particular area, is known as a non-compete clause or covenant in
restraint of trade. Many employers include such clauses in
employment contracts; however, these clauses will be enforceable
only if they are reasonably necessary to protect the employer's
business.
A non-compete clause that operates during the
employee's employment is more likely to be considered enforceable.
This is because, while the employee is rendering services, the
employee's duty of fidelity supports such a restraint. However,
once actual employment ceases, a restraint will only be enforced
if:
- the prohibition operates to protect a legitimate commercial
interest (eg the employer's confidential information or the
prevention of the solicitation of clients or employees) and not
merely to preclude competition; and
- the prohibition is drawn so as not to exceed what is necessary
for the protection of the employer.
Post-employment restraints must also be limited in time. The
onus of establishing the reasonableness of the restraint lies with
the employer.
Interestingly, the courts have been prepared to sever any
unreasonable part from the remainder of a clause, rather than
declaring the whole of a restraint clause void. However, throughout
most of Australia this will only be done in circumstances where the
unenforceable part, if severed, would leave the remainder of the
restraint reasonable and readable.
In New South Wales, the legislative approach permits the reading
down of an unreasonable restraint (meaning that a court may redraw
an unreasonably wide restraint).
A valid non-compete clause can be enforced by declaration or an
injunction. A court may however refuse to grant an injunction to
restrain an employee if it considers that the employee's breach
would not cause the employer any significant damage,
notwithstanding that the restraint is otherwise reasonable.
In order to ensure your restraints are valid, please contact a
member of the Cornwalls E&IR team for assistance.
Workplace Relations Highlights
- Our thoughts go out to the many families affected by the
floods. We urge you to exercise caution when in the flood-affected
regions and to be aware of the numerous additional hazards you may
encounter. Please stay safe. Employers who need advice on how to
operate during these emergency conditions should contact a member
of our E&IR team.
- Draft Work Health and Safety Regulations and model Codes of
Practice were released last month. The public comment period for
the draft Regulations and Codes of Practice closes on 4 April 2011.
The National Work Health and Safety Act and Regulations are
scheduled to commence in January 2012. More information is
available via the Safe Work
Australia website.
- A former CFO was awarded $250,000 after discovering via an 'all
staff' email that he would be replaced in his position. The
employee argued that by unilaterally removing him from the role of
CFO and failing to offer him an alternative equivalent position,
the company had repudiated his employment contract. The court found
that the employment had been terminated, and consequently the
employee was entitled to the termination payment specified in the
contract (equal to 12 months' base salary): Earney v
Australian Property Investment Strategic Pty Ltd [2010] VSC
621.
- There have been further developments regarding annual leave
cashing out provisions included in enterprise agreements
(EA); see article from our November 2010
newsletter. On appeal, Fair Work Australia's
(FWA) original decision (in refusing to approve
three EAs because of their 'cashing provisions') was
quashed.
The Full Bench held that a provision
allowing an employee to cash out annual leave, in accordance with
the safeguards set out in the Fair Work Act 2009 (Cth)
(FW Act), is a valid term and will not prevent FWA
from approving an EA.
The Full Bench went on to clarify the
effect of EA provisions allowing employees to cash out long service
leave (LSL) (which is not expressly provided
for in the Act). In doing so, the Full Bench distinguished between
employees to whom state long service leave laws applied and those
whose entitlement was contained in a federal (pre-Modern) award and
is preserved under the FW Act.
In relation to the former, if the
relevant state LSL law permits cashing out, then EA provisions
reflecting this ability are valid. If an EA contains LSL terms that
are inconsistent with state LSL law, it will not prevent FWA from
approving the EA, however the inconsistent EA term will have no
effect.
For employees who are otherwise
subject to federal award LSL provisions, the EA must not provide
for the cashing out of LSL unless the federal award allows cashing
out. Nonetheless, despite an offending term, the EA may still be
approved by FWA subject to the provision of undertakings in respect
of the term.