The Fair Work Commission ("FWC") has, in two recent matters, considered what is an unreasonable JobKeeper enabling direction ("JED"). Section 789GK of the Fair Work Act 2009 (Cth) ("FWA") provides that a JED will not be valid if the direction is unreasonable in all the circumstances.
Live Events case
In a decision dated 3 July 2020, the FWC had to determine whether the employer's direction did not apply to an employee on the grounds that it was an unreasonable JobKeeper enabling direction. The Applicant, a broadcast engineer, was employed on a full-time basis by Live Events, a business that contracts with networks to broadcast events, including horse racing. The Applicant's role was primarily focused on technical support for racing events in Western Australia. While COVID-19 has impacted the employer's business, and they qualify for the JobKeeper subsidy, horse racing events have largely continued to run in WA. The Applicant had accordingly continued to work 80 hours per fortnight, although he had not been required to work his usual overtime hours he worked pre-COVID-19.
Unreasonable JobKeeper enabling direction
On 24 March 2020, the employer asked all staff to agree to a 40% reduction in salary and working hours. All staff except for the Applicant agreed to the proposal. On 14 May 2020 the employer advised its employees that operations were expected to return to a "normal" working week sooner than expected. The employer confirmed that by June 2020 the 40% reduction agreements would be replaced with only a 20% reduction in salary and hours, unless employees had more work. It was hoped that salaries would return to 100% by July 2020, however this did not happen.
On 18 June 2020 the employer advised staff that the 80% salary guarantee would continue until the end of July. The employer then proposed a further extension to 27 September 2020. The employee once again, refused to sign the variation letter. He argued that it was not a reasonable direction as there was sufficient work for his 80 hours per fortnight roster and the employer had only recently advised staff that the company's situation was improving. On 11 June 2020, the company issued a JED to only the employee, reducing his minimum hours of work to 48 hours per fortnight, representing a 40% reduction. The employee filed a dispute application alleging that the direction issued on 11 June 2020 was an unreasonable JobKeeper enabling direction.
The issue to be determined was whether the JED was unreasonable in all of the circumstances. The FWC confirmed that this involves not just factors relevant to the employee, but also matters that are relevant to the employer, "including overall business circumstances and its rights and obligations as an employer to its workforce as a whole."
The FWC concluded that the JED was reasonable on the basis that:
- there had been a significant downturn in the employer's business as a whole;
- it was reasonable for the employer to be concerned about the interest of all employees; and
- there was no guarantee that there won't be an interruption to horse racing events in WA.
However, the FWC found that the employer had "overplayed its hand" as the reduction provided by the JED was disproportionate to the reasonable forecasted rostered hours for the employee. On this basis, the FWC substituted the direction of a minimum of 48 hours of work per fortnight, for a direction of no less than 64 hours per fortnight. Accordingly, the FWC found that a 20% reduction and not a 40% reduction was reasonable in all the circumstances.
On 13 July 2020, the Full Bench of the FWC upheld the union's appeal against the decision of Deputy President Sams (see our earlier Blog, Increasing Hours for JobKeeper Employees). By way of background, Prosegur had issued a blanket direction for a minimum 25-hour work week for their armoured vehicle operators at its Moorooka depot covering full-time, part-time and casual employees. The union argued that the JED was unreasonable on the basis that it had a disproportionate impact on full-time employees who had previously worked up to 50 hours per week. Deputy President Sams noted that full-time employees were generally working about 38 hours a week, which was the award minimum and that working overtime is not a guaranteed arrangement. The FWC at first instance found that the JED was not unreasonable in the circumstances.
On appeal, the Full Bench found that Deputy President Sams relied on an administrative law construction of an unreasonable decision looking at whether there was a "rational or logical basis" for the direction. The Full Bench preferred the definition of "unreasonable" as being "inequitable, unfair; unjustifiable." The Full Bench found that the terms of Prosegur's direction unfairly and disproportionality affected full-time employees.
The Full Bench held that while the employer's direction was unreasonable in all of the circumstances, it also found that the union's suggested direction was unreasonable. TWU had put forward the alternative direction of a proportional reduction in hours. The Full Bench held that it "must be administratively workable and allow Prosegur to conduct its operations efficiently." The parties were directed to urgently confer on an alternative direction.
On 23 July 2020 the Full Bench accepted Prosegur's new proposed JED which sees the full-time drivers receive a guaranteed 60-hour fortnightly wage.
Maximise commercial benefit of JobKeeper subsidy
Prosegur said that it was its intention to provide those part-time and casual employees who were working more than 50 hours a fortnight pre-COVID-19 with a minimum of 50 hours per fortnight. However, it was legally unnecessary to issue the proposed direction to part-time employees due to an existing collective agreement. Prosegur stated that it wanted to "guarantee" minimum hours for its casual employees who make up almost 50% of the drivers. The Full Bench agreed that by providing casuals with a minimum of 25 hours per week, the company could "maximise the commercial benefit for the JobKeeper wage subsidies" allowing it to obtain a "fair benefit out of the arrangement."
An unintended consequence of the JobKeeper wage subsidy is that some casual employees are better off receiving the $1,500 fortnightly wage. It is therefore helpful that the FWC recognises the fairness of employers getting maximum commercial benefit from the subsidy.
Key takeaways for employers
- These two decisions show the FWC's willingness to examine the workability of employer directions by considering various operational factors of the employer's business.
- If employers are to succeed in the reasonableness test, they should set out clear evidence on what alternatives have been considered and the reasons for rejection.
- If the JED is unreasonable, the FWC may order an alternative JED or the employer may be given a tight deadline to agree a new JED with the union/employees.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.