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Focus: Workplace Relations

30 October 2012

In this issue: we look at claiming unjustifiable hardship to resist a disability discrimination claim; liability for HR policy breaches; opt-out clauses and enterprise agreements; steps to avoid vicarious liability for sexual harassment; Fair Work Australia's approach to the 'better off overall' test; and amendments to the Fair Work legislation.

• Capping number of wheelchair passengers on flight
• Too much trust and confidence in HR policies
• Opt-out clauses are out
• Employers escape sexual harassment liability
• Court overturns refusal to approve enterprise agreement
• Fair Work Act Amendments

Capping number of wheelchair passengers on flight

In brief: A Full Court of the Federal Court recently found that a low cost airline's practice of limiting the number of passengers using wheelchairs to two per flight was not unlawful discrimination under the Disability Discrimination Act 1992 (Cth). Senior Associate Stacey Van der Meulen reports.

Background

Ms King has a disability which requires her to use a wheelchair.

Jetstar provides special assistance to passengers using wheelchairs so they can access its service, including when boarding and disembarking from its aircraft. However, Jetstar has a practice of capping the number of wheelchair passengers to two per flight.

Ms King attempted to book a flight with Jetstar from Adelaide to Brisbane for 23 September 2008. However, Jetstar refused to accept Ms King's booking because the two-wheelchair cap had already been met. Jetstar offered Ms King an alternative flight, which Ms King declined. Instead, she booked a flight with another airline, which cost $40 more than the Jetstar fare.

The claim

Ms King made a discrimination claim against Jetstar under the Act.

Ms King conducted her case on the basis that Jetstar should not have any cap on the number of passengers using wheelchairs on its flights. Jetstar denied it had unlawfully discriminated against Ms King, and claimed it was entitled to rely on the defence of unjustifiable hardship to resist the claim.

Unjustifiable hardship?

The Act provides that it is not unlawful for a person to discriminate against another on the ground of a disability if avoiding the discrimination would impose an unjustifiable hardship.

In determining whether there would be unjustifiable hardship, the Act requires all relevant circumstances of the case to be taken into account, including:

• the nature of the benefit or detriment likely to accrue to, or be suffered by, any person concerned;
• the effect of the disability of any person concerned;
• the financial circumstances, and the estimated amount of expenditure required to be made, by the person claiming unjustifiable hardship;
• the availability of financial and other assistance to the person claiming unjustifiable hardship; and
• any relevant action plans given under the Act.

The Federal Court found Jetstar had discriminated against Ms King on the ground of her disability by refusing to take her booking, but was satisfied that, if at the relevant time there had not been a cap on the number of wheelchair passengers, this would have imposed an unjustifiable hardship on Jetstar.¹

The Federal Court accepted Jetstar's evidence that:

• it was a low-cost carrier, with an operational model based on short turnaround times and high utilisation of aircraft and airport assets;
• its usual 30-minute turnaround times left only a short period to assist wheelchair passengers to board and disembark; and
• if there was no cap on the number of passengers using wheelchairs on each flight, delays were likely, with consequences for flight scheduling, turnaround times, and profit.

The court acknowledged that, if Jetstar did not apply the cap, Ms King would not have had to book alternative air travel at a higher fare. However, the court considered it was relevant that:

• Jetstar had offered to find an alternative flight for Ms King on the same route and to change Ms King's booking without any additional charge; and
• despite Ms King flying with Jetstar on nearly 20 separate occasions during the preceding few years, this was the first occasion when Jetstar's cap had prevented it accepting her booking.

Therefore, the court accepted that not having a cap would impose an unjustifiable hardship on Jetstar and it found that the airline had not unlawfully discriminated against Ms King. Ms King's claim was dismissed.

The appeal decision

On appeal by Ms King to the Full Federal Court, the Federal Court's decision was upheld in a unanimous judgment.² Notwithstanding that Jetstar successfully defended Ms King's claims, both at first instance and on appeal, its ability to recover its defence costs was limited because of orders at earlier hearings before the Federal Court capping the costs recoverable by the successful party to:

• $20,000 in the Federal Court proceedings; and
• $10,000 in the appeal proceedings.

Too much trust and confidence in HR policies

In brief: An employer can be liable for substantial damages for breach of an HR policy, even if the employment contract makes it clear those policies are not binding. In a recent decision, the Federal Court found an employer had breached an implied term of trust and confidence when failing to follow its redeployment policy before terminating the employment of a senior bank employee. Partner Jamie Wells and Lawyer Emma Reilly report.

Background

Mr Barker commenced employment in 1981 in an executive manager role at the bank. From late 2008 to early 2009, the bank undertook a review that resulted in Mr Barker's position being made redundant.

Mr Barker was notified of this decision at a meeting on 2 March 2009, and provided with a termination letter, information about retrenchment and career support and an indicative termination payment amount. The termination letter confirmed that Mr Barker's position was redundant 'effective COB today' and that the redeployment process would commence immediately with 'the Bank's preference being to redeploy [him] to a suitable position'.

Mr Barker was advised to work out the day, clear his desk and hand in his keys and mobile phone. He was told that he would be on paid leave for the redeployment period and, if redeployment was unsuccessful, his termination date would be 2 April 2009. Following the meeting, Mr Barker was introduced to an outplacement consultant and the bank terminated his access to its intranet and email facilities.

The bank confirmed by email its preference to redeploy Mr Barker and invited him to apply for a role, attaching a position description. Shortly afterwards, Mr Barker's solicitor was advised by the bank that it had tried to contact Mr Barker's business phone and email for several weeks and that it was not aware he did not have access. Despite being paid his termination entitlements on 6 April 2009, by email on 7 April 2009 the bank advised Mr Barker's solicitor that his exit date had been extended to 9 April 2009 'to give him every opportunity to participate in the redeployment process'.

At trial, the court accepted that the bank's dealings with Mr Barker did not comply with aspects of its redeployment policy.

Following termination, Mr Barker claimed damages from the bank, alleging breach of his employment contract on two bases:

• first, that the bank's redeployment policy was contractually binding; and
• second, that the contract had an implied term of mutual trust and confidence and that breach of the redeployment policy constituted a breach of the implied term.

The decision and its implications

The Federal Court rejected the first argument, noting there was a specific statement confirming the parties' intention that policies not be binding. However, despite that common intention, the court:

• found there was an implied term of mutual trust and confidence in Mr Barker's employment contract; and
• held that the bank's breach of the redeployment policy was sufficiently serious to constitute a breach of the implied term.³

The decision is concerning in a number of ways.

The implied term of trust and confidence has been contentious, with different courts taking different views as to its existence and effect. The court's recognition of the term continues an ongoing theme of inconsistency, with outcomes depending on the approach of the sitting judge.

The decision also offers little guidance on the scope of the term, except to say that 'the term only operates where a party does not have reasonable and proper cause for his or her conduct and the conduct is likely to destroy or seriously damage the relationship of confidence and trust between the employer and employee'. The objective of implying the term does not sit easily with its most common application – the employer's conduct in the lead up to termination. All decisions accept that the term does not extend to an employer's conduct when terminating. Many decisions attempt to distinguish the termination process from steps taken in the lead up to termination, but rarely is the reasoning compelling.

Finally, the decision emphasises that not all breaches of policy will breach the implied term. It is only a breach that is likely to destroy or seriously damage the relationship. But applying the implied term in this way seems likely to create more controversy than it resolves. One can expect endless debate about degree whenever an employer breaches a policy, with a court having to resolve whether the breach is sufficiently serious to also breach the contract.

As the decision demonstrates, the consequences can be severe. The court assessed damages by looking at Mr Barker's loss of a chance of redeployment, had the policy been followed. In finding that he had a 25 per cent chance of being redeployed, the court awarded Mr Barker $317,500 for past and future economic loss, but rejected his arguments about damages for pain and suffering, loss of reputation and aggravated damages. The bank has filed an appeal.

Opt-out clauses are out

In brief: A Full Bench of Fair Work Australia has decided once and for all that opt-out clauses are not permitted in enterprise agreements. Lawyer Emily Harvey reports.

Background

Earlier this year, an enterprise agreement containing an 'opt out' clause was approved by a single Commissioner of Fair Work Australia (FWA).⁴ The Construction, Forestry, Mining and Energy Union appealed on the basis the Commissioner had erred by approving an agreement that included a scope provision permitting employees to 'opt out' of coverage by the agreement.

Approval requirements

To approve an enterprise agreement, section 186 of the Fair Work Act 2009 (Cth) (the Act) requires that FWA be satisfied that the group of employees covered by the agreement was fairly chosen. There have been conflicting decisions by FWA members as to whether the 'fairly chosen' test could be satisfied in circumstances where the agreement being considered contained an opt-out clause.

Decision

The Full Bench found that the opt-out provision contained in the enterprise agreement was contrary to the purpose or policy of the Act and that the group of employees covered by the agreement was not fairly chosen within the meaning of s186(3).⁵

The Full Bench recognised that the opt-out clause was part of a collective bargain made between the employer and the employee. However, it noted that, if that was determinative, then no provision of a collective agreement could be said to undermine the integrity of the legislative scheme.

The Full Bench found that the opt-out clause was not consistent with the purpose or policy of the Act for three reasons:

• The Act is directed at providing certainty around bargaining outcomes, permitting variation or termination in limited circumstances only. An opt-out clause would permit employees to elect to opt out and then take protected industrial action, undermining bargaining certainty.
• An opt-out clause could facilitate an outcome whereby the agreement covers only one employee, contrary to the clear intention of the Act to promote collective bargaining.
• The Act provides flexibility by mandating the inclusion of individual flexibility terms in enterprise agreements. However, opt-out clauses provide a degree of flexibility not contemplated by the statutory framework.

The finding that the opt-out mechanism was contrary to the purpose and policy of the Act, and the fact that the group of employees covered by the agreement was not geographically, operationally or organisationally distinct, led the Full Bench to conclude that the group of employees covered by the agreement was not fairly chosen. The decision approving the enterprise agreement was therefore overturned.

Employers escape sexual harassment liability

In brief: Two recent workplace sexual harassment cases have illustrated what steps employers should take to prevent sexual harassment and avoid vicarious liability. Senior Associate John Naughton and Law Graduate Byron Frost report.

Background

In Hughes v Narrabri Bowling Motel Limited⁶, the claimant was an employee of the Narrabri Bowling Motor Inn. She alleged she was subjected to sexual harassment by the motel's new manager, including an unwelcome request for a sexual favour.

In Menere v Poolrite Equipment Pty Ltd and Anor⁷, a Poolrite assembly line worker was the victim of repeated sexual harassment by a fellow worker, including physical contact of a sexual nature and offensive sexual remarks.

In both cases, the complainants brought proceedings against their alleged harassers as well as their employers.

Although some of Ms Hughes' claims against the motel's manager were dismissed by the New South Wales Administrative Decisions Tribunal (NSWADT), she was awarded $7500 in damages. Mr Menere was awarded a total of $8000 (comprising $5000 damages plus $3000 for medical expenses) by the Queensland Civil and Administrative Tribunal (QCAT) in respect of his claim.

In both cases, the vicarious liability claims against each of the employers were rejected.

Reasonable steps

This was because, in each case, the employers were able to show they took reasonable steps prior to the incidents, and that they responded with appropriate urgency when they became aware of the complaints.

In Hughes, the NSWADT held that:

• each staff member had been given a handbook that dealt with expected behaviour in the workplace;
• motel committee members commenced investigating the complaints the morning after they were first made aware of them; and
• this swift response was an effective and sufficient means of preventing any further incidents of sexual harassment.

The NSWADT noted that it was '... difficult to envisage what more an employer could have done, short of prevention'.

In Menere, QCAT emphasised the need to do more than simply have a policy in place. It noted that Poolrite had:

• maintained an employee handbook containing a detailed section on sexual harassment and workplace bullying; and
• trained its employees in relation to sexual harassment within the workplace both prior to and after the incidents that resulted in Mr Menere's claim.

QCAT held that Poolrite had taken steps to ensure awareness and compliance with workforce practices sufficient to avoid vicarious liability under the Anti-Discrimination Act 1991 (Qld).

Court overturns refusal to approve enterprise agreement

In brief: The Full Bench of Fair Work Australia has overturned an earlier decision by Fair Work Australia to refuse to approve an enterprise agreement, at the same time explaining the approach to be taken in applying the 'better off overall' test. Senior Associate Veronica Siow and Lawyer James Ebert report.

Background

Solar Systems applied to Fair Work Australia (FWA) for approval of its enterprise agreement (made with its employees in December 2011). In refusing to approve the agreement, the Commissioner raised a number of concerns with the agreement including that:

• the dispute resolution clause did not provide for arbitration by FWA and as such was not more beneficial to the employees than the equivalent provision under the award; and
• the averaging of hours over a 12-month period and spread of hours permitted under the agreement would not lead to employees being better off, even with the above-award pay rates proposed.⁸

The Full Bench decision

On appeal, the Full Bench found the matters that had been raised by the Commissioner as concerns should not have been relevant to the BOOT test because they were neither advantageous nor disadvantageous when compared to the position under the award. The Full Bench held that:

• while the dispute resolution clause in the agreement did not provide the benefit of a unilateral right to arbitration, the employees would have been in the same position under the award; and
• the position under the agreement in relation to the averaging and spread of hours was also similar to the position under the relevant award, and so, were not matters relevant to the BOOT test.⁹

The Full Bench also concluded that it was inappropriate for the Commissioner to rely on the averaging period and the spread of hours as factors against approving the agreement, without affording Solar Systems an opportunity to address those concerns (for example by way of undertakings). The Full Bench remitted Solar Systems' application for determination by a different Commissioner of FWA and the agreement was subsequently approved.¹⁰

Fair Work Act Amendments

In brief: The Federal Minister for Employment and Workplace Relations, Bill Shorten, has announced a number of proposed amendments to the Fair Work Act 2009 (Cth) to be introduced into Federal Parliament later this year. Partner Simon Dewberry and Law Graduate Rosalind Ta'eed report.

Key proposed amendments

The amendments comprise roughly a third of the recommendations put forward by the Fair Work Act Review Panel, released in August. For more information on the full report, see our Client Update: Review into Fair Work Act released.

Enterprise agreements and bargaining

The amendments will preclude:

• enterprise agreements from being made with only one employee;
• enterprise agreements from allowing employees to 'opt out' of the agreement; and
• individual union officials from representing employees who are not eligible to join their union.

Unfair dismissal and general protections claims

The amendments will align the time limits within which employees must lodge an unfair dismissal claim or a general protections claim relating to termination at 21 days from when they were dismissed. Further proposed amendments will:

• expedite the resolution of these cases by encouraging applicants to provide full information when lodging applications;
• grant powers to Fair Work Australia (FWA) to dismiss applications of obstructive applicants; and
• broaden FWA's ability to award costs.

Footnotes

1. King v Jetstar Airways Pty Ltd (No 2) [2012] FCA 8 (13 January 2012).
2. King v Jetstar Airways Pty Limited [2012] FCAFC 115 (23 August 2012).
3. Barker v Commonwealth Bank of Australia [2012] FCA 942 (3 September 2012).
4. Queensland Bulk Handling Pty Ltd v Construction, Forestry, Mining and Energy Union [2012] FWA 4478 (23 May 2012).
5. Construction, Forestry, Mining, and Energy Union v Queensland Bulk Handling Pty Ltd [2012] FWAFB 7551 (3 September 2012).
6. Hughes v Narrabri Bowling Motel Limited [2012] NSWADT 161 (9 August 2012).
7. Menere v Poolrite Equipment Pty Ltd and Anor [2012] QCAT 252 (15 June 2012).
8. Solar Systems Pty Ltd [2012] FWA 4381 (7 June 2012).
9. Solar Systems Pty Ltd [2012] FWAFB 6397 (24 August 2012).
10. Solar Systems Pty Ltd [2012] FWAA 6554 (3 August 2012).

For further information, please contact:

• Tim FrostPartner, Sydney
  Ph: +61 2 9230 4930
  Tim.Frost@allens.com.au
• Peter ArthurPartner, Sydney
  Ph: +61 2 9230 4728
  Peter.Arthur@allens.com.au
• Jamie WellsPartner, Brisbane
  Ph: +61 7 3334 3268
  Jamie.Wells@allens.com.au
• Simon DewberryPartner, Melbourne
  Ph: +61 3 9613 8110
  Simon.Dewberry@allens.com.au