Australia: Workplace Relations Update
Gadens Lawyers News

Contents

• The Rise And Rise Of Adverse Action Claims
• Increase To High Income Threshold
• 'Serious And Flagrant' Bargaining Breach Results In Hefty Fine For Employer

The Rise And Rise Of Adverse Action Claims

Adverse action claims are the flavour of the month. More and more employees are bringing them, or threatening to bring them.

With their increasing popularity comes a slowly growing bank of authorities that are, helpfully, shedding some light on how to interpret and apply the adverse action provisions contained in the Fair Work Act 2009 (Cth) (Act). The recent decision in LHMU v Arnotts Biscuits Limited is one such authority.

The ingredients in the employee's claim

In LHMU v Arnotts Biscuits Limited, three long serving employees commenced adverse action claims against Arnotts after they were subjected to disciplinary action for engaging in serious misconduct. The serious misconduct was a failure by each of the employees to perform a safety procedure – called a 'lock out/tag out' – when cleaning a cutting machine on a production line.

Following the incident, Arnotts conducted an investigation which was, in the Court's opinion, procedurally fair. The employees were represented by the union in the investigation. Each employee admitted at interview that they had failed to perform the lock out/tag out procedure.

At the end of the investigation, the managers met to discuss appropriate disciplinary action. They formed the view that the employees' behaviour in failing to perform the safety procedure constituted conduct justifying summary dismissal. However, out of compassion for the three employees who had otherwise been good workers, one of the managers suggested that the company should consider, as an alternative, leave without pay for a month.

Neither the employees' contracts of employment, nor the Arnotts Biscuits Enterprise Bargaining Agreement 2006-2009 which applied to the employees, expressly permitted suspension without pay, or standing down without pay, for disciplinary reasons.

Arnotts' took legal advice about the leave without pay alternative. It was told that it was only an option if the employees agreed to it.

A manager subsequently met with each of the employees and advised them that Arnotts regarded their conduct as justifying dismissal. Each employee was then offered the alternative of leave without pay for a month and was given time to consider the offer and to take advice from, for example, the union.

Each of the employees accepted the leave without pay option, but reserved their rights in doing so.

The union subsequently commenced proceedings against Arnotts alleging that it had taken adverse action against the three employees by:

• threatening to dismiss them, and
• standing them down for a month without pay.

The union submitted that Arnotts had engaged in this adverse action:

• because the employees had a workplace right – namely a benefit under the agreement to attend work and be paid, as well as a benefit under the Act not to be stood down without pay in these circumstances; and
• with the intention of coercing the employees from exercising a workplace right (being the right to attend work and be paid under the agreement).

The union argued that Arnotts had adopted the approach it did towards the employees, not as an act of compassion, but because it:

• regarded a final warning as insufficient
• thought that termination of employment was excessive, and
• needed to threaten the employees with termination of employment to get them to agree to leave without pay.

The Court doesn't bite

While the Court found that the threat of dismissal constituted adverse action, it did not regard that conduct as having been made to prevent the exercise of a workplace right. Rather, it held that Arnotts had made the threat because it genuinely believed that it had grounds to summarily dismiss the employees. As a consequence, the Court found there was no causal connection between the adverse action and any workplace right to attend work and be paid. Further, it held that the workplace right to attend work and be paid was not unqualified or absolute, but was subject to Arnotts' lawful right to terminate the employment contract.

The Court found that the offer of suspension without pay did not fall within the examples of adverse action contained in the Act (although it may have been prepared to find otherwise if it had regarded the threat as a mere contrivance or façade). In particular, it found that the offer did not injure the employees in their employment, did not alter their position to their prejudice and did not discriminate against them and other employees, in large part because it could have had no operative effect until it was accepted.

The reason Arnotts was successful in this case was because it was able to demonstrate by way of evidence the reasons for its conduct and to show that those reasons had no causal connection with the employees' workplace rights. This evidence enabled it to effectively rebut the presumption that it had engaged in the adverse action (being a threat of dismissal) because the employees had a workplace right.

Key lessons for employers

Employers wanting to successfully defend adverse action claims should take a leaf out of Arnotts' book, and should:

• be clear about their reasons for engaging in potentially adverse action
• make sure that those reasons have no connection with the employees' workplace rights, and
• have contemporaneous and documentary evidence of those reasons.

By Stephanie Nicol

Increase To High Income Threshold

Under the Fair Work Act 2009 (Cth), the earnings threshold in relation to a guarantee of annual earnings, and for an employee who is not covered by an award to have access to an unfair dismissal remedy, increases with effect from 1 July each year. Fair Work Australia has recently confirmed that the relevant earnings threshold has increased from $108,300 to $113,800 with effect from 1 July 2010.

There are various elements of an employees remuneration which are included when calculating the employee's earnings (see our September 2009 update here).

The effects of the increase are:

• employees earning less than $113,800 can now make an application for an unfair dismissal remedy regardless of whether they are covered by a modern award or an enterprise agreement
• employees earning more than $113,800 may only make an application for an unfair dismissal remedy if they are covered by a modern award or an enterprise agreement
• employees who have been given a guarantee of annual earnings must now earn at least $113,800 for the guarantee of annual earnings to be effective.

Employers should carefully review any 'guarantee of annual earnings' agreements they may have to ensure that:

• the current 'guarantee of annual earnings' agreements are still effective, and
• the 'guarantee of annual earnings' agreements are worded in such a way, that they will be effective if the high income threshold is increased in the future.

If a guarantee of annual earnings is no longer effective, employers should consider amending the guarantee of annual earnings it has provided to relevant employees, otherwise an employer will be required to comply with the obligations outlined in the modern award that applies to the relevant employees.

By Juvena Hannan

'Serious And Flagrant' Bargaining Breach Results In Hefty Fine For Employer

On 28 May 2010, the Federal Magistrates Court of Australia handed down its decision to fine an employer $11,000 under section 335(5) of the Workplace Relations Act 1996 (Cth) (WR Act) for refusing to recognise the union's appointment as a bargaining agent and steadfastly ignoring the repeated attempts of the union to negotiate on a proposed collective agreement.

The case

In December 2008, Achieve Cleaning Services (Achieve) informed its employees, many of whom were employed at the Anglo Coal Mine at Moura in Central Queensland, that it intended to make a new employee collective agreement. One of the employees at the site subsequently requested that an official from the Liquor Hospitality & Miscellaneous Union (LHMU) act as his bargaining agent in relation to the new collective agreement.

Under the WR Act, if a person (including an official of a union) was appointed as a bargaining agent for an employee, the employer was required to meet and confer with the bargaining agent during the seven day period before the collective agreement was to be approved by employees.

Following its formal appointment by the employee as bargaining agent, a LHMU official repeatedly attempted to contact Achieve and its senior managers over the course of a month. The union sent numerous faxes, letters and made phone calls to senior managers in order to arrange a meeting with Achieve without success. Achieve made no contact with the LHMU.

During this period, Achieve's Managing Director and Site Manager appeared at an off-site staff meeting held by officials of the LHMU to discuss the proposed collective agreement with employees. After observing the meeting from the car park, they interrupted the meeting and asked the LHMU to leave, informing them that 'We are not dealing with the LHMU about this. We do not want the unions involved.' The Site Manager also told employees to vote up the proposed agreement or they would go 'back to 15 bucks an hour and nothing else' under the Federal Award. The officials of the LHMU refused to leave and the meeting continued after the managers left.

The LHMU did not receive any further contact from the employer and, unbeknown to the LHMU, the employees voted in favour of the agreement in early January 2009. The agreement was subsequently approved a short time later by the Workplace Authority. Officials of the LHMU meanwhile continued in their attempts to contact Achieve, which remained unresponsive. The LHMU received no notice of the voting on the proposed collective agreement or any other decision process to approve the agreement.

The decision

Federal Magistrate Burnett considered Achieve's claim that the LHMU had not given proper notice of its appointment to act as bargaining agent and it therefore could not be held responsible for failing to recognise it in that capacity. While the LHMU did not directly advise Achieve that it had been appointed as a bargaining agent or provide it with a copy of the relevant certificate from the Workplace Authority, in its letters and calls the LHMU stated that it represented employees and requested meetings with the employer.

The court found that Achieve had not complied with its obligations to meet and confer with the LHMU in its capacity as a bargaining agent for the employee in breach of the WR Act. The court also found that the breach was serious and flagrant, demonstrating a deliberate refusal by Achieve to recognise the rights of the LHMU. Further, the court found that Achieve had shown no contrition nor sought to ameliorate any damage that may have been sustained. While Federal Magistrate Burnett acknowledged the possibility that a better outcome may have been achieved had the LHMU been afforded the opportunity to consult in the process, he held this was 'a matter of conjecture'.

Although the employer had no previous contraventions, a strong need to deter such conduct was found. Federal Magistrate Burnett described the employer's conduct as 'an egregious contravention and one warranting a significant penalty'. He fined the employer $11,000, of a maximum available penalty of $16,500, to be paid to the LHMU.

Key lessons for employers

While this decision considered the provisions of the WR Act, under the Fair Work Act 2009 (Cth) (FW Act), employers have obligations to meet, confer and bargain with an employees bargaining representative, and to bargain with those bargaining representatives in good faith, when they are engaged in enterprise bargaining. As we have outlined previously here , these obligations are considerably more onerous than the requirements which applied under the WR Act.

Further, under the FW Act, the first step to be taken if an employer does not comply with its obligations is the making of a bargaining order by Fair Work Australia requiring the employer to meet its obligations under the FW Act. If a bargaining order is made, and the employer fails to comply with the bargaining order, the penalties that may be imposed are $33,000 for a corporation (such as Achieve), or $6,600 for an individual, substantially higher than the penalties that were imposed, or could have been imposed, on Achieve.

By Meryl Remedios

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