Workplace Relations Update, November 2006

Contents

• High Court rules WorkChoices is here to stay
• Did you know.... the Australian Fair Pay Commission recently handed down a decision increasing the Federal Minimum Wage
• WorkChoices – more tinkering
• Victorian Long Service Leave
• It's time to review those employment policies
• Court of Appeal warns employers about OH&S Obligations

The High Court of Australia has today handed down the much-anticipated decision on the challenge brought by the States and unions in relation to the validity of WorkChoices.

The High Court has, by a 5:2 majority comprising Chief Justice Gleeson and Justices Gummow, Hayne, Heydon and Crennan, dismissed the challenge to the validity of WorkChoices stating that "the plaintiffs' several challenges to the validity of the Amending Act (WorkChoices) all fail" and upheld WorkChoices in its entirety.

The basis of the challenge centred on the submission that the corporations power, under the Constitution, was restricted to a power to regulate the dealings of constitutional corporations with persons external to the corporation, but not with employees (or prospective employees). It was also argued that the corporations power should be read down in light of the Commonwealth's power in relation to conciliation and arbitration.

The majority questioned:

Dissenting Justices Kirby and Callinan both held that WorkChoices was invalid.

Employers should have been complying with WorkChoices since 27 March 2006. The decision today confirms that the majority of employers now fall within federal system.
by Mark Sant

The Australian Fair Pay Commission (the Commission) has recently handed down its first federal wage-setting decision under WorkChoices.

The decision affects all employers who are covered by WorkChoices. However, the decision does not apply to employees:

1. covered by a five-year transitional federal award;
2. covered by an Australian Workplace Agreement or certified agreements approved prior to the commencement of WorkChoices; or
3. covered by a preserved state agreement.

The decision increases minimum wages for affected employees.

While the decision is expressed as taking effect from 1 December 2006, this is defined as meaning midnight, 30 November 2006. This distinction is important for businesses who have affected employees working night shift.

The Commission has increased the Federal Minimum Wage (the FMW) and adjusted the basic periodic rates of pay in Australian Pay and Classification Scales (the Pay Scales) that were derived from minimum wage provisions contained in pre-reform wage instruments (i.e. federal or state awards instruments in existence immediately before 27 March 2006).

The Commission's first decision has three elements:

1. an increase of $27.36 per week to the standard FMW;
2. an increase of $27.36 per week to all Pay Scales up to and including $700 per week; and
3. an increase of $22.04 per week to all Pay Scales over $700 per week.

This means that based on a 38-hour week, the standard FMW and all Pay Scales up to and including $700 per week are increased by $0.72 per hour and all Pay Scales over $700 per week are increased by $0.58 per hour.

Pay Scales derived from a pre-reform federal wage instrument that was not adjusted for the Australian Industrial Relations Commission's (the AIRC's) 2005 Safety New Review but

• was adjusted in accordance with the AIRC’s 2004 Safety Net Review decision;
• were not adjusted in accordance with the AIRC’s 2004 Safety Net Review decision but received a safety net adjustment during the 12 months prior to 27 March 2006; or
• took effect after the AIRC’s 2004 Safety Net Review decision,

are further increased by $17 per week in addition to the increases referred to above.

Casual employees will also receive the benefit of the increases as the base rates to which their casual loading will apply is also increased by the above amounts.

Junior employees and employees to whom training arrangements apply will also receive the benefit of the increases as the base rates against which their pay rates are calculated are also increased by the above amounts as follows:

• where there are existing formulas for the calculation of the wage rate (eg. 60 per cent of a specified adult rate), the employee will continue to receive 60 per cent of the new higher rate; or
• where there is no formula, the increase will be pro-rated so that the junior rate retains its relativity to the relevant adult rate.

Employers should determine whether the increases apply to their business.

If increases apply, employers should ensure that affected employees are paid a base rate equal to or greater than the applicable minimum rate of pay (contained in the Pay Scale and if no Pay Scale applies, the standard FMW) from midnight, 30 November 2006.

The Commission has stated that it will deliver its second general wage-setting decision mid 2007.
by Mark Sant and Nicole Linton

On 13 November 2006, the Federal Government announced further changes to WorkChoices. These changes will:

• preserve redundancy entitlements of employees under terminated workplace agreements, for a period of twelve months;
• cap the accrual of annual leave and personal/carer's leave where employees work more than 38 hours a week;
• change the payment rules for paid personal/carer's leave;
• provide for the cashing out of paid personal/carer's leave subject to a floor;
• provide a right to stand down employees where work is unavailable due to factors outside the control of employers; and
• change the record keeping requirements to reduce the administrative burden on employers.

We will provide you with further information about the proposed changes once the draft amendments are available. In the meantime, click here to see Kevin Andrews media release.

The above proposed changes are on top of the changes made to the WorkChoices regulations on 22 September 2006.

The most significant change is that employers are provided with a further six-month period to comply with the record keeping requirements.

The amendments also affect the rules relating to personal and annual leave under the Australian Fair Pay and Conditions Standard and prohibited content rules.

The key aspects of the amendments are summarised below.

Record keeping – the transitional period for compliance with the record keeping requirements is extended to 26 March 2007. Penalties apply for non-compliance after this period and a number of industries have been identified by the Office of Workplace Services for targeted audits.

Accruing annual leave in advance – the amendments confirm that accruing of annual leave in advance of service does not provide a less-favourable outcome than the Standard under WorkChoices.

Leave accrued before the Australian Fair Pay and Conditions Standard – the amendments:

• provide that the Standard does not apply to personal leave or paid compassionate leave entitlements accrued before the Standard applied to an employee. This regulation will cease to have effect at the end of a five-year transitional period on 26 March 2011;
• clarify that the annual leave rules under the Standard will not apply to annual leave accrued before the Standard applied.

This means that rules regarding rates of payment, crediting, accrual, notice and evidentiary requirements do not apply to leave accrued before the Standard applied to an employee. Significantly, it also means that the limitations imposed by the Standard on the amount of annual and personal leave that may be cashed out by an employee do not apply to leave accrued before the Standard applied to an employee.

The amendments provide that a workplace agreement which permits the cashing out of leave entitlements, other than at the written election of an employee, will breach the prohibited content rules.

New regulations have been introduced which restrict and/or prohibit the operation of provisions in agreements that penalise employees for:

• an absence due to illness, injury or emergency affecting the employee or a member of their immediate family or household; or
• failing to provide the required evidence or notice for personal/carer’s or compassionate leave.

by John-Anthony Hodgens

Employers should be aware of recent further amendments to the Service Leave (Preservation of Entitlements) Act 2006 (VIC) which have been made in response to WorkChoices.

The Act came into effect on 1 October 2006 to protect employees’ accrued long service leave entitlements and preserve any superior long service leave standards contained in current industry awards.

The amendments require employers to give their employees at least seven days' notice if any workplace agreement has the effect of modifying their long service leave entitlements. Therefore, if a new collective agreement or Australian Workplace Agreement modifies the previous long service leave entitlement, including under the Victorian Long Service Leave Act, formal notice must be given to the employees.
by Dan Feldman and Mark Steogen

A recent decision of the Federal Court highlights the need for all employers to carefully review any policies they have in place and ensure that they are up-to-date and accurately reflect the relevant employer’s position as the policies may form part of an employee’s contract of employment.

The relevant case is that of Nikolich v Goldman Sachs J B Were Services Pty Limited [2006] FCA 784.

In May 2000, Nikolich accepted an offer of employment as a financial adviser with Goldman Sachs (the Company). At the time he was given his letter of offer, he was provided with several documents, including the Company’s 'Working With Us' policy (the Policy). The Policy set out information about the Company, including codes of conduct relating to harassment, support for health and wellbeing and procedures for handling of concerns and grievances. The letter of offer contained a paragraph that referred to the Policy by stating: "from time to time the Company has issued and will in the future issue office memoranda and instructions with which it will expect you to comply".

Nikolich had his employment terminated by the Company on 6 December 2004 following a long-running dispute during which Nikolich made a number of complaints in relation to the conduct of his supervisor. This led to the deterioration in their relationship to the point where Nikolich claimed his supervisor was aggressive, intimidating and threatening towards him. Nikolich claimed that his complaints were not handled in accordance with the Company's Policy and that his work conditions resulted in him suffering work-related stress and depression which was also not managed by the Company in accordance with the Policy. Nikolich's absence from work, due to this illness, was the reason his employment was ultimately terminated.

While a number of the arguments raised by Nikolich were dismissed, of significance was Justice Wilcox’s finding that the terms of the Policy formed part of Nikolich's contract of employment and was binding on the Company and Nikolich.

Justice Wilcox referred to the decision of Riverwood International Australia Pty Limited v McCormick [2000] FAC 889, which held that a document called "Human Resources Policies and Procedures Manual" bound the employer so as to entitle an ex-employee to redundancy benefits. In that case, Justice Mansfield held that:

In the current case, Justice Wilcox found that it was difficult to accept that the parties did not intend, at least, that the obligations contained in the Policy, that were obligations customarily found in employment contracts, would be contractually binding. The question then became whether the Company had any contractually binding obligations as the result of provisions in the Policy dealing with behavioural standards.

Justice Wilcox held that as the Company insisted that Nikolich comply with the behavioural standards, and directions of the Company, the Company also had contractually binding obligations to comply with the behavioural standards and promises contained in the Policy.

The Company was held to have breached Nikolich's contract of employment where it was shown that it breached various parts of the Policy including:

Grievance procedures – the Company had not responded to a problem or complaint in the manner promised or assumed in the Policy. Justice Wilcox held that the promise of support for health and well-being includes an implied promise to carry out an adequate and timely investigation into the merit of any complaint or grievance and to endeavour to achieve a result that will resolve the problem and accord with the Company’s culture of each member of the team being able to "work positively and productively". The investigatory steps taken by the Company’s HR manager, and the delay in which any action was taken, was inadequate.

Harassment – the supervisor's behaviour was intimidating and demeaning and it was foreseeable that such behaviour might cause psychological damage to Nikolich. He was in breach of the Policy which stated that "all people within the team will work together to prevent any unwelcome, uninvited or unwanted conduct".

Safe and healthy work environment – his supervisor's behaviour, the lack of urgency in carrying out and resolving Nikolich’s complaint and not taking action to terminate the supervisor's supervision of Nikolich (if appropriate) was inconsistent with the Company’s promise to take "every practicable step to provide and maintain a safe and healthy work environment". It was also inconsistent with the statement asserting that "each person is able to work positively and is treated with respected and courtesy".

Also of significance for employers is the large damages payout that was awarded to Nikolich as a result of the findings. Nikolich was awarded damages of around $500,000 which was equivalent to approximately two and half years pay.

The Company has appealed the decision.

• HR policies can be found to form a relevant and important part of an employee's contract of employment
• Employers must comply with the terms of such policies or they may be liable for a breach of contract claim
• Employers should be mindful of what appears to be an increased willingness on the part of the courts to award large amounts of damages.

by Nicole Linton

A recent decision of the Victorian Supreme Court of Appeal sends a strong warning to employers as to steps to take to ensure workplace safety.

In September, the Court of Appeal considered an appeal by Commercial Industrial Construction Group Pty Ltd (CIC) against a $35,000 sentence, imposed on it by the County Court of Victoria, for a breach of the Victorian Occupational Health and Safety Act 1985 (OH&S Act). CIC had pleaded guilty to a charge of failing to provide and maintain, as far as practicable, for employees a working environment that is safe and without risks to health.

CIC was engaged in refurbishing a four-storey building. Part of the building works involved the removal of a section of the roof. The site manager of CIC directed an employee to erect some scaffolding beneath the roof. The employee had no scaffolding qualifications. The scaffolding he erected was unsafe and was in the wrong place so that the roof work had to subsequently be completed from the roof itself.

Before any work on the roof could begin, CIC’s safety management system required the site manager to carry out a job safety analysis. However, the site manager did not do so. A labourer was sent onto the roof without any safety protection or safety instruction. While working on the roof, the labourer slipped through an opening in the roof and fell three metres to the concrete floor below. He suffered reasonably minor injuries and was off work for one week.

The following morning, the site manager directed another employee up onto the roof to finish the job. The site manager did not give the second employee any safety instructions or put in place any additional safety procedures or fall protection. The hole in the roof had not been fixed. The second employee continued to work on the roof for over an hour. At that point, union officials arrived and stopped the work because of safety concerns. A WorkSafe Inspector was called and issued a prohibition notice on working at heights at the site.

In court, CIC argued that, although the failings of the site manager were to be attributed to the company, as a matter of law, the company had done all it could by establishing a safety management system and providing training for the site manager in that system – including the need to conduct job safety analyses.

In dismissing the appeals, the court restated that employers have an obligation to ensure, so far as is reasonably practicable, that working environments are safe. If a safety breach occurs, it is immaterial whether it occurs at the highest or lowest level of the employer’s workforce. The only question is whether, having regard to what had occurred, the company had fulfilled its duty to ensure the safety of its employees.

The Court stated that the employer had a statutory duty to provide information, instruction, training and supervision to its employees, so as to ensure that they perform their work in a safe manner. The Court stated that:

The Court did not accept CIC's submission that it's 'employees had failed the company'. In the Court’s view, the events suggested a poor or deliberate disregard of the safety management system by the site manager and the two employees were a consequence of the company’s failure over time to supervise and monitor employees sufficiently.

The Court believed that because of the gross safety breaches that occurred, the fine of $35,000 was very lenient and that, even though there was no Crown appeal against the sentence, in the Court’s view, the judge would have been well-justified in imposing a considerably higher fine.

The case has some significant implications for employers in relation to health and safety. The Court made the following findings:

1. the formal adoption of a satisfactory safety management system will not have the beneficial effects intended unless it is accompanied by the employer’s active implementation of the system in the workplace. The employer’s duty will not be discharged simply by creating a safe system of work. The obligation requires that the procedures are actively and positively complied with by employees.
2. employer’s should recognise that it is common experience that human error will be encountered in the workplace. Error can range from inadvertence, lack of attention or haste through foolish disregard of personal safety, to deliberate non-compliance with the prescribed safe system of work. An employer’s responsibility for the safety of its workers will not be discharged unless the employer takes 'an active imaginative and flexible approach to potential dangers in the knowledge that human frailty is an ever present reality'.
3. the hierarchical level at which a safety breach occurs is immaterial. However, when the employee in question is the person with supervisory responsibilities, including responsibility for ensuring safety at the site, the gravity of the company’s breach is increased, not reduced.

Employers should note that since the date of the offence in question, the OH&S Act 1985 has been replaced by the OH&S Act 2004. The new Act contains the same general safety duty and the wording is generally unchanged. The Court of Appeal noted that the maximum penalty for a breach under the old OH&S Act was $250,000 and that this had been increased under the new OH&S Act to over $920,000.
by Dan Feldman and Mark Steogen

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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.