Australia: Court Permits Employer To Offer Workers One Month's Leave Without Pay Instead Of Terminating Their Employment, Where Major Breach Of Safety Occurred

Curwoods Case Note
Last Updated: 23 August 2010
Article by Michael Mitchell

Liquor Hospitality and Miscellaneous Union v Arnotts Biscuits Ltd [2010] FCA 770. Federal Court of Australia, 23 July 20101.

In Brief

  • Workers who breached safety were offered the alternative of taking one month's leave without pay instead of being terminated.
  • In the particular circumstances, the court held that this was not a breach of ss 340 or 343 of the Fair Work Act 2009 (Cth), as the employer first formed the intention to dismiss the workers, and then decided to offer them leave without pay as an alternative to dismissal.


The respondent employer (Arnotts) owned a biscuit manufacturing plant in Brisbane.

Prior to the relevant incident, Arnotts gave a directive to its employees at the plant to carry out a process known as "lock-out/tag-out" or "positive isolation" when performing maintenance work on a machine, so that the electricity supply was isolated from the machine and it could not be turned on during the maintenance process. This involved not only turning off the power supply, but also by each employee involved in the maintenance inserting his own lock into the switch. This prevented the switch from being turned on until each lock was removed. The locks also carried a tag stating "Danger do not start".

As well as issuing the directive, Arnotts also conducted training for its employees in the "lock-out/tag-out" procedure. This included warnings that positive isolation was compulsory and that failure to follow the new procedure may lead to termination of employment.

Shortly after this, on 28 September 2009, three long-serving full time employees of Arnotts were engaged in performing cleaning work on a machine on one of the production lines. Each of them neglected to implement the "lock-out/tag-out" procedure.

A supervisor noted this and reported it. An investigation was carried out. The judge later observed that Arnotts "scrupulously observed procedural fairness" in conducting the investigation. At their request, the union representing the men (the Liquor Hospitality and Miscellaneous Union – LHMU) was invited to take part in the investigation, and it provided the workers with representation and advice.

All three employees had good work records and were well-regarded by their employer.

On 29 September 2009, the responsible manager at Arnotts concluded during a meeting with other management staff that the men's conduct was such as to warrant summary dismissal. The work supervisor then proposed that the men be given the option of taking leave without pay instead, as he had observed this used in another industry.

Arnotts took legal advice, which confirmed that neither the individual employment contracts of the workers nor the governing industrial instrument (a certified agreement entitled "Arnott's Biscuits Enterprise Bargaining Certified Agreement 2006-2009"2) made any provision for suspension without pay of workers for disciplinary reasons, nor indeed for any right to stand down a worker without pay for any reason. Arnotts was therefore advised that it could only send the men on leave without pay if they agreed to this course.

On 30 September 2009, Arnotts summoned each of the employees to a meeting. The Human Resources Manager of Arnotts informed them:

  1. Arnotts considered that he had committed a serious safety breach;
  2. Arnotts further considered that as a result it had the right to terminate his employment;
  3. In order to show some leniency, given the newness of the procedure and the time which it takes to effect procedural change, Arnotts was prepared to offer him a suspension without pay for one month if he agreed; and
  4. He had 24 hours to consider the proposal.

A letter in similar terms was given to each employee.

Each of the men took advice from his union, the LHMU. Each, via his union, agreed to take the leave without pay, but reserved the right to challenge the decision later.

The employees then went on leave without pay for one month. They then returned to work and continued to work for Arnotts.

Application by the trade union to the Federal Court of Australia

The LHMU brought proceedings on behalf of the men in the Federal Court of Australia, claiming breaches of ss 340 and 343 of the Fair Work Act 2009 (Cth) and seeking reimbursement of the lost month's wages.

Section 340(1) of the Fair Work Act provides:

(1) A person must not take adverse action against another person:
(a) because the other person:
(i) has a workplace right; or
(ii) has, or has not, exercised a workplace right; or
(iii) proposes or proposes not to, or has at any time proposed or proposed not to, exercise a workplace right; or
(b) to prevent the exercise of a workplace right by the other person.

Section 342 defines "adverse action" to include termination of employment or the threat of termination of employment.

Logan J summarised the competing submissions by each party in the following way:

Broadly therefore, the question which is raised is whether Arnott's, in effect, took the law into its own hands and thereby contravened the Fair Work Act as alleged such that it is liable to penalties or whether this a case where Arnott's has permissibly tempered justice with mercy in the workplace in relation to a breach of a safety requirement?3

Logan J noted that Arnotts was under a common law duty with respect to the provision, maintenance and enforcement of safety in the workplace4, and additional statutory duties of similar nature. He held that it was "a corollary" of such duties that an employer is entitled to give reasonable directions to employees directed to its fulfilment of that duty. The union submitted that in reality Arnotts, through its manager, considered that a final warning was insufficient punishment but that termination was excessive in all of the circumstances. It therefore threatened the workers with dismissal in the event that they did not agree to be stood down without pay. This in turn amounted to a threat of adverse action if they did not agree to forego a "workplace right" (being the right to work and be paid for the minimum hours provided for in the certified agreement) and was therefore in breach of s 340.

Logan J accepted that the right to be paid for the minimum hours under an industrial instrument was a "workplace right" as per s 340. He also accepted that Arnotts was aware that it had no power on its own initiative to suspend any of the men without pay. However, he observed the relevant managers of Arnotts in the witness box and concluded that the letter given to the employees on 30 September 2009 accurately reflected the decisions that the company had made. He held:

Section 340 does not effect a blanket prohibition of the dismissal of an employee or a threat of the same. Rather, it prohibits such action if taken for one of the reasons set out in that section. In this case, the reason why the threat was made, and the only reason in the circumstances, was because Arnott's considered that it had grounds to dismiss each of the men by reason of his conduct on 28 September 2009. It is to be remembered, too, that the workplace right at least to perform, for the rates of pay there set out, the hours of work set out in the certified agreement was not an unqualified or absolute right. That right was always subject to such right as the employer had lawfully to terminate the contract of employment.
In the circumstances of this case there is no relevant causative relationship between the "adverse action" and the exercise or the prevention of the exercise of a workplace right.
[emphasis added]

His Honour noted that the position would be different if the threat were "a mere contrivance, a façade", but that was not the case on this occasion.

The union also claimed that Arnotts' actions had breached s 343(1) of the Fair Work Act, which Provides:

A person must not organise or take, or threaten to organise or take, any action against another person with intent to coerce the other person, or a third person, to:
a) exercise or not exercise, or propose to exercise or not exercise, a workplace right; or
b) exercise, or propose to exercise, a workplace right in a particular way.

Logan J held, on the facts, that the threat of dismissal was not made for the purpose of inducing the workers to accept the offer of leave without pay. Rather, the threat of dismissal was made because the employer considered that it was warranted, and because it had every intention of dismissing them.

His Honour noted:

I can well understand that it may have seemed to [the employees] that the alternatives before them were such as to make acceptance of the offer of one month's unpaid suspension attractive, but it does not follow from this that Arnott's intended to coerce them in that choice.6


It is important to note particular factual issues which may distinguish this case from others: the case involved a breach of safety with potential danger to life and limb; the employer observed procedural fairness throughout and facilitated the workers taking advice; the evidence established that the only reason that the employer intended to dismiss the workers was because of the breach of safety; and it only decided to offer the leave without pay due to the newness of the particular procedure and in recognition that learned behaviour takes time to change. In another case where these circumstances were different, the result might well also be different.

Regardless of the result, the judgment provides relevant guidance on how to interpret ss 340 and 343 of the Fair Work Act 2009 (Cth), in particular as to the meaning of "workplace right" in this particular context.

1. Logan J

2. Originally made pursuant to the Industrial Relations Act 1999 (Qld) but continued in application by the Workplace Relations Act 1996 (Cth) and the Fair Work Act 2009 (Cth)

3. Judgment at paragraph 12

4. See eg McLean v Tedman (1984) 155 CLR 306 at 313 per Mason, Wilson, Brennan and Dawson JJ

5. Judgment, paragraphs 54-55

6. Judgment, paragraph 69

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