Thinking | 11 September 2012

The Working Paper Issue 10

Union right of entry – an employer’s right to make ‘reasonable’ requests as to where union discussions can be held

Employer liability for sexual harassment

Micro enterprises and SMEs under the spotlight in the ATO’s Compliance Program 2012/2013

Union right of entry – an employer’s right to make ‘reasonable’ requests as to where union discussions can be held

In the recent case of Australasian Meat Industry Employees’ Union v Fair Work Australia [2012] FCAFC 85, the Full Federal Court (Court) upheld a decision by the Full Bench of Fair Work Australia (FWA) that it was reasonable for an employer to request that a union representative use a training room rather than the lunchroom to hold discussions with its employees.

What does this mean for employers?

Under the Fair Work Act 2009 (Cth), a permit holder (in most cases, a union representative) who enters an employer’s premises for the purpose of holding discussions with its employees must comply with any reasonable request by the employer to hold discussions in a particular room or area of its premises. An employer’s request may be unreasonable where (among other things):
- the room or area is not fit for conducting interviews or discussions;
- the employer’s request is intended to discourage, intimidate or make it difficult for employees to participate in discussions.
When determining whether an employer’s request is reasonable, the courts will endeavour to balance the right of unions to enter an employer’s premises to represent and hold discussions with their members against the right of employers to go about their business without undue inconvenience.
In requesting that a particular room be used for employee meetings, it is ‘reasonable’ for an employer to consider any inconvenience to employees who may not wish to engage in discussions with a union representative.

The case in brief

The AMIEU exercised its right of entry permit to enter Somerville Retail Services Pty Ltd’s (Somerville’s) premises to hold meetings with Somerville’s employees. The AMIEU preferred that discussions be held in the lunch room so that its representative could have better access to (and meet with a greater number of) Somerville’s employees. Somerville requested that the meetings be held in its training room, rather than the lunch room. Somerville objected to union discussions being held in the lunch room on the basis that it would inconvenience employees who did not wish to be involved in those discussions.

At first instance, FWA found that Somerville’s request was reasonable. The AMIEU disputed this and appealed FWA’s decision to the Court.

In its appeal, the AMIEU argued that Somerville’s request that it use the training room was unreasonable because the training room was unfit for the purpose of interviewing and holding discussions with employees.

In particular, the training room only held 20-25 people which the AMIEU contended was too small for it to hold meetings with a large number of employees, and infringed on the right of employees to receive information and representation from the union. Further, it was more difficult for union representatives to directly approach employees and request them to participate in discussions.

The decision

The Court rejected the AMIEU’s contention that Somerville’s request was unreasonable.

The Court held that the right conferred on union representatives to enter premises should be no greater than is necessary to achieve the objective of allowing unions to represent their members and to hold discussions with potential members. The Court found that the ability to decide where the union representatives could meet with employees was not essential to this right and therefore, the decision was the employer’s (provided that its request for a particular room or area to be used for meetings was reasonable and the union representative’s rights could be effectively exercised).

Although the Court accepted that the training room was significantly smaller than the lunchroom, it found that it was still fit for the purpose of holding employee discussions. The Court noted that there was no suggestion that Somerville’s request had restricted the ability of its employees to meet with and to receive information from their union representatives. The Court also found that there was no suggestion of any intimidation or discouragement of employees by Somerville in making its request.

Tips for employers

In making a request for union representatives to hold discussions in a particular room or area, employers should take care to ensure that their request is ‘reasonable’.
In selecting a particular room or area for union representatives to hold those discussions, it is reasonable for an employer to consider the interests of employees who may not wish to be involved in those discussions.
Employers should ensure that the meeting room is easily accessible for employees, so that they are provided with the maximum amount of time to meet with their union representatives. Notably, last year Commissioner Lewin in The Australian Workers’ Union v Rio Tinto Aluminium (Bell Bay) Ltd [2011] FWA 3878 held that Rio Tinto’s request to hold union meetings in an administration building was not reasonable given the distance that employees had to travel to reach the administration building, and the relatively short breaks that some employees were entitled to.

Employer liability for sexual harassment

In the recent case of Menere v Poolrite Equipment Pty Ltd and Anor [2012] QCAT 252, the employer, Poolrite, was found not to be vicariously liable for sexual harassment engaged in by one of its employees.

What does this mean for employers?

This case demonstrates that employers who have done ‘more than merely have a policy in place’ for preventing and dealing with sexual harassment will be better placed to avoid vicarious liability for sexual harassment engaged in by an employee.

The case in brief

Mr Menere was employed by Poolrite as a casual assembly line worker. On a number of occasions over a four month period in 2008, Mr Menere experienced unwelcome conduct from Mr Singh, another Poolrite employee, including inappropriate comments, gestures and physical contact of a sexual nature.

When Poolrite’s operations manager became aware of the incidents, he conducted an investigation into the matter and, when Mr Singh failed to deny Mr Menere’s allegations, Poolrite summarily terminate Mr Singh’s employment.

Mr Menere brought a claim against Mr Singh and Poolrite for the anxiety and other symptoms he suffered as a result of Mr Singh’s conduct. Mr Menere sought financial compensation for past and future medical expenses, as well as damages for hurt and humiliation.

The decision

Poolrite argued that it was not vicariously liable for Mr Singh’s conduct because it had taken reasonable steps to prevent Mr Singh from engaging in sexual harassment.

In considering whether Poolrite had taken all reasonable steps to prevent the conduct, the Tribunal placed particular emphasis on the following factors:

As part of its induction process, Poolrite provided all employees, including Mr Singh, with an employee handbook which included a detailed section dealing with sexual harassment.
Poolrite caused its employees to attend training on sexual harassment in the workplace on a number of occasions, both before and after the incidents occurred.
Once Poolrite’s operations manager became aware of the incidents, he conducted an investigation and terminated Mr Singh’s employment.

The Tribunal held that Poolrite was not vicariously liable for Mr Menere’s conduct because it had taken ‘sufficient positive steps to ensure awareness and attempted compliance with appropriate workplace practices’.

Tips for employers

Employers should ensure that their employees are made aware of and provided with copies of the applicable sexual harassment policy and/or code of conduct.
Employees should receive training in the areas of sexual harassment, bullying and equal employment opportunity on a regular basis.
Employers should ensure that if sexual harassment does occur in the workplace, they investigate the incident swiftly and deal with the matter appropriately.

Micro enterprises and SMEs under the spotlight in the ATO’s Compliance Program 2012/2013

The ATO’s recently released Compliance Program 2012-2013 provides an overview of the issues the ATO will be focusing on for micro to medium sized employers over the next year.

A key focus area is sham contracting arrangements. This issue is particularly topical given a number of recent decisions involving the vexed issue of whether independent contractors are genuinely contracting on their own behalf or whether they are employees at common law.

In Working Paper Issue 9, we provided an update on ACE Insurance Ltd v Trifunovski [2011] FCA 1204 where the Federal Court ruled that five former insurance sales representatives were employees, not independent contractors. The Federal Court has subsequently ordered penalties and approximately $500,000 in damages against Ace Insurance, including an award of $333,130 for annual and long service leave entitlements for the highest paid agent who had been with the company for seven years.

What is happening?

The ATO has announced it will increase scrutiny on compliance with:

employer obligations in micro enterprises;
fringe benefits tax (FBT) rules in SMEs; and
superannuation guarantee obligations.

The ATO intends on auditing industries and employers and those with a high-risk of non-compliance with their superannuation guarantee obligations. In particular, the ATO will be focusing its compliance activities on employers running cafes and restaurants, real estate businesses and carpentry businesses in home building or construction.

Employer obligations

For employers running micro enterprises, the ATO’s compliance activities will focus on employer obligations in relation to the correct treatment and disclosure of salary and wage payments.

The ATO is pledging to review the tax affairs of more than 20,000 businesses to ensure that the correct amounts of PAYG withholding are reported. Further, the ATO will use intelligence and information matching to detect cases of non-compliance and follow this up with reviews and audits where necessary.

As mentioned earlier, the ATO also intends continuing its crack down on employers who try to avoid their tax and superannuation responsibilities by engaging sham contractors rather than employees, even though, legally, these workers are their employees. The ATO is concerned that such practices mean that workers who should be classified as employees are missing out on entitlements, such as superannuation. The ATO is also concerned that these arrangements are facilitating the ‘non-reporting of income by unscrupulous contractors’.

Fringe benefits tax

For SME employers, the Compliance Program includes a focus on compliance with the FBT regime.

In particular, the ATO intends to take action against SME employers who:

fail to lodge returns when required;
fail to identify and correctly treat fringe benefits; and
incorrectly apply valuation, exemption and reductions rules.

The ATO intends on conducting approximately 200 reviews and audits and has stated that it will be taking firmer action against employers who choose not to comply with their FBT obligations.

Tips for employers

Employers should conduct their own audit regarding the status of any contractors, and consider whether those persons should instead be engaged as employees.
Employers should seek tax advice regarding their FBT obligations and ensure that they are meeting those obligations.
If audited by the ATO, employers should cooperate with the ATO but should also seek advice about how best to respond to ATO enquiries and the grounds on which they can refuse to produce information.
Employers can refuse to hand over legally privileged documents, but should ensure that they deal with and store such documents in a way that does not waive that privilege.

Redundancy and restructures

Two recent decisions provide some timely guidance to employers involved in restructuring.

Consultation obligations

In Communication, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v QR National Ltd, the Federal Court (Court) ordered QR National to comply with its enterprise agreement consultation obligations before acting on any expressions of interest for voluntary redundancy that it had received from its employees.

What does this mean for employers?

Employers need to be aware of and comply with their consultation obligations under applicable awards/enterprise agreements when implementing major changes at the workplace (including in relation to redundancies/restructures).
Failure to consult in accordance with such clauses will likely lead to a challenge by a union by way of a dispute brought in Fair Work Australia (FWA) or the Court. Breach of consultation obligations can attract fines of up to $33,000 per breach.
In addition, under the Fair Work Act 2009 (Cth) (FW Act), an employer cannot rely on the exemption from unfair dismissal for a ‘genuine redundancy’ unless it has, among other things, complied with consultation requirements in a modern award or enterprise agreement.

The case in brief

In June this year, QR National announced its plan to shed over 500 positions as part of its restructuring. The ASX announcement stated that QR National was commencing consultation with employees and unions and called for expressions of interest for voluntary redundancy. The AMWU and the ETU initiated disputes under six enterprise agreements regarding QR National’s consultation obligations and called on FWA to ensure that QR National complied with these obligations before making any decisions about the expressions of interest.

In addition to the order that QR National comply with its consultation obligations, the Court ordered that QR National:

allow any employee who had lodged an expression of interest to withdraw it within five days of the resolution of the disputes;
allow an employee who had not lodged an expression of interest an extra five days following the resolution of the disputes to do so; and
make no final decision in relation to any expressions of interest until all expressions of interest had been received.

QR National had also been fined $249,600 in 2010 following failure to consult under the enterprise agreements in relation to the privatisation of some of its operations.

Tips for employers

Employers should review the consultation clauses under relevant awards and enterprise agreements. The model consultation clause in the FW Act calls for consultation to commence once a definite decision about major change has been made, but the wording of the particular enterprise agreement may be more onerous with regard to timing and provision of information.
Employers do not have to obtain consent from unions/employees as to the changes, but must give enough information and allow enough time for the consultation process to be meaningful.
Employers should also consider and consult about redeployment opportunities to ensure that they can rely on the genuine redundancy exemption from unfair dismissal.

Transfer of employment

Employers involved in a transfer of business (e.g through an asset sale or outsourcing/insourcing arrangements) need to be aware of the decision of FWA in Australian Nursing Federation [2012] FWA 6460.

In this case, an employee who rejected an offer of employment in the context of a transfer of business was entitled to redundancy pay from the old employer because the offer did not recognise the employee’s service for the qualifying period for an unfair dismissal claim. FWA found that job security was a fundamental term of the employment which rendered the offer overall less favourable.

What does this mean for employers?

Under the NES, there is an exemption from the requirement to pay redundancy pay in a transfer of business scenario where the employee rejects an offer of employment on substantially similar and overall no less favourable terms and which recognises prior service, at least for the purpose of calculating redundancy pay.
A similar exemption may exist in relation to redundancy pay under an enterprise agreement or modern award, although such exemption may require recognition of service for all purposes, not just redundancy.
Unless there is a transfer between associated entities, the FW Act allows the new employer not to recognise prior service for certain purposes, including the qualifying period for unfair dismissal (six months for an employer with 15 or more employees).
However, if the new employer does not recognise service for the purpose of unfair dismissal, the old employer is likely to have to pay redundancy pay in the event that the employee rejects an offer from the new employer, even if the other terms and conditions are the same.

The case in brief

There was a proposed transfer of business from Calvert Manor Pty Ltd (Calvert Manor) to Lasting Changes Pty Ltd (Lasting Changes).

Calvert Manor’s enterprise agreement (Agreement) provided that redundancy pay was not owed to an employee in the event that they rejected an offer of employment with a new employer in which the ‘terms and conditions are substantially similar and no less favourable’ as the terms and conditions of their previous employment with Calvert Manor.

Ms Sodoma, a part time personal care attendant, was offered employment with Lasting Changes on the ‘terms and conditions outlined in the Agreement’. However, the terms of engagement with Lasting Changes also stated that Ms Sodoma’s prior service with Calvert Manor would not be recognised for the purposes of unfair dismissal and that a new unfair dismissal qualifying period of six months would apply.

Ms Sodoma rejected the offer of employment and argued that the inclusion of the new minimum employment period in the offer of employment from Lasting Changes entitled her to redundancy pay as the offer was not ‘substantially similar and no less favourable’ than her previous employment.

FWA held that, although the new position with Lasting Changes was essentially the same as her position with Calvert Manor in terms of classification and pay, the loss of job security rendered the position ‘fundamentally different’, and that she was entitled to redundancy pay.

Tips for employers

Employers involved in a transfer of business who wish to avoid redundancy liability for employees being made offers by the new employer, should:

understand the source of redundancy entitlements (the NES/modern award/enterprise agreement/contract);
check the terms of any exemptions from the obligation to make severance payments;
negotiate with the new employer to make offers of employment on terms which will satisfy those exemptions (including that the new employer recognises service for the purpose of the unfair dismissal qualifying period); and
if possible, make it a condition of the sale/outsourcing agreement that they have the right to approve such offers before they are given to the employees.