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Allens Arthur Robinson

Focus: Workplace Relations – January 2008

In this issue: we look at a case in which an employer was held vicariously liable for a serious assault on an employee by a co-worker; a new Act regulating wage deductions; the Federal Government's proposed reforms to occupational health and safety and workers' compensation; and exemptions from equal opportunity obligations.

Employer held vicariously liable for shooting

In brief: An employer was held vicariously liable for a serious assault on a co-worker by a colleague. Senior Associate Veronica Siow and Lawyer Rima Hor report.

How does it affect you?

  • An employer may be held vicariously liable for the criminal behaviour of third parties directed to one of their employees.
  • Incidents of workplace violence must be taken seriously and managed appropriately.
  • Appropriate management may involve dismissing the recalcitrant employee or, at the very least, issuing serious and 'last chance' warnings, undertaking a proper investigation of the incident, close and constant monitoring of the employee and, where appropriate, offering counselling services.

Background

Mr Pavkovic and his colleague, Mr Lee, worked together at Gittani Stone as stonemasons. Mr Lee was described as a 'violent, irrational man' who frequently swore and was aggressive to his colleagues.

On one occasion in 2000, Mr Lee committed an unprovoked assault on Mr Pavkovic, punching him in the head and picking up a heavy bar with the intention of striking him, before others intervened. Gittani Stone did not take any meaningful disciplinary action against Mr Lee or investigate the incident.

In December 2001, Mr Lee again became angry and aggressive towards Mr Pavkovic. After an altercation, a director of the employer made the two employees shake hands, but took no other disciplinary measures against Mr Lee, even though he remained obviously angry. Mr Lee left the workplace without permission and was heard threatening that he would wait for Mr Pavkovic. Later that evening, as Mr Pavkovic was sitting in his car (which was parked outside his place of employment), Mr Lee shot him three times, seriously injuring him.

Mr Pavkovic sued Gittani Stone for negligence and succeeded at first instance. Gittani Stone appealed the decision.

Decision

The NSW Court of Appeal held that the employer breached its duty of care to provide a safe workplace because it was reasonably foreseeable that Mr Lee might inflict serious harm on his co-workers.1 Gittani Stone's failure to dismiss Mr Lee after the first serious assault on Mr Pavkovic exposed his fellow employees to risk of injury by irrational acts of violence. While it might not have been foreseeable that Mr Lee would have used a gun, his behaviour in previous incidents indicated that he was a 'sinister menace' on the workshop floor and that he was ready to resort to violence. The fact that Mr Lee's act was committed outside work hours in a public street did not mitigate against an employer's liability.

Gittani Stone's appeal was dismissed, and the original judgment, in which Gittani Stone was ordered to pay Mr Pavkovic $861,197 in damages, was upheld.

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New Act regulates employer wage deductions

In brief: The Workers' Wage Protection Act 2007 (Vic) regulates the ability of an employer to make deductions from an employee's wage. Lawyer Maree Norton and Articled Clerk Carly Dunn report

How does it affect you?

  • An employer must obtain an employee's valid written authorisation for a deduction of any amount from the employee's wage. Such deductions must be 'reasonable' in all of the circumstances.
  • The court may impose a civil penalty of up to $10,000 for each contravention of the Workers' Wage Protection Act 2007 (Vic) or order payment of an amount reimbursing the employee, if satisfied that a deduction was not lawful.

Overview of legislation

The Workers' Wage Protection Act 2007 (Vic) (the Act) creates statutory obligations for employers in respect of wage deductions. The Act comes into operation on 1 December 2008, unless proclaimed earlier. There is a six-month grace period for parties to ensure any pre-existing agreement authorising a deduction from an employee's wage is compliant with the Act. Following the expiration of the grace period, any pre-existing agreement that does not comply with the Act will cease to have effect.

The Act provides that deductions from wages may be lawfully made if:

  • the employee has provided a valid written authorisation of the deduction, and the employer complies with that authorisation; or
  • the employer is required to make the deduction by law, court order or an industrial instrument.

A deduction is defined as any amount not directly paid to the employee and includes, but is not limited to, salary sacrifice arrangements and payments to third parties.

In prescribed circumstances, an employer must provide an employee with a written notice before the employee gives written authorisation of a deduction.

Unauthorised deductions

Under the Act, a written authorisation given by an employee is of no effect if:

  • the authorisation was not freely given;
  • the deduction is for the direct or indirect financial benefit of the employer (or a related party of the employer), the employee is under 18 years of age and the employee's parent or guardian has not consented to the deduction; or
  • the deduction is for the direct or indirect financial benefit of the employer (or a related party of the employer) and it is considered 'unreasonable in all of the circumstances'.

A deduction may be considered unreasonable if the deduction:

  • results in an employee being paid less than the applicable minimum wage (unless this is authorised by a law, court order or industrial instrument);
  • relates to the cost of replacing any clothing, equipment or other property provided by the employer, where the loss or damage was not intentionally or recklessly caused by the employee;
  • is not in return for anything of value (ie a deduction to cover a shortfall in a till or float); or
  • is prescribed by the regulations as unreasonable.

In addition, the Act prohibits an employer from making deductions that relate to the provision of employment placement services or the provision of goods, services or accommodation for which the employer is required by law to pay.

Enforcement and remedies

A contravention of the Act does not attract criminal sanctions; however, the court may fine the employer up to $10,000 for each breach and/or order payment of an amount reimbursing the employee for unlawful deductions.

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OHS and workers' compensation reform under the new Federal Government

In brief: The new Labor Federal Government has proposed several reforms to occupational health and safety and workers' compensation. Senior Associate Ric Morgan and Articled Clerk Ben Ryde report.

How does it affect you?

  • Harmonisation of occupational health and safety law will reduce confusion and administrative burdens on multi-state employers.
  • Employers will have a voice through a new, independent, national body that will replace the Australian Safety and Compensation Council.
  • Pending a review of the Comcare scheme, no new licences to self-insure will be issued.

Proposed reforms

The new Federal Government will seek to address the current fragmentation of occupational health and safety (OHS) and workers' compensation laws, which place burdens on employers with businesses in more than one state. Within the next five years, the Government plans to:

  • harmonise the federal and state OHS laws through a process of 'cooperative federalism', resulting in consistent definitions and administrative requirements for each jurisdiction. Significantly, this harmonisation process will not involve federal legislation overriding state legislation;
  • reform the Comcare workers' compensation scheme; and
  • replace the existing Australian Safety and Compensation Council (ASCC) with an independent body to direct policy and process development.

While state and territory OHS laws are broadly consistent, there remains some fundamental differences between them. A 2004 Productivity Commission report presented compelling arguments for harmonisation, which included significant cost savings for both employers and the economy at large, and also equal standards and protections for employees.

The significant cost savings for employers under Comcare has resulted in an increasing number of self-insurers. Workplace Relations Minister Julia Gillard has noted that this is occurring without addressing the fundamentals needed to make such a system work. The Government plans to re-negotiate a memorandum of understanding to assist Comcare and state-based authorities to work cooperatively. Labor will also examine the results of a Comcare review undertaken by the previous Federal Government. In the interim, no new self-insurance licences will be granted.

Within its first term, the Federal Government has set itself a number of targets, including the development of common administrative processes for WorkCover claims and the production of common guidance material for employers, particularly those in the construction industry.

In order to drive these changes, Labor will replace the ASCC with a new national body. Unlike the ASCC, this new body will be empowered to direct policy development and evidence-based outcomes in a timely manner. All stakeholders, including employers, will have the opportunity to voice their concerns through this new body.

Implications

Harmonisation makes sense; however, there are a number of practical barriers to having a uniform system of OHS law. The duties of care in each jurisdiction contain subtle, yet important, differences. For example, New South Wales adopts a reverse onus of proof where companies and officers are guilty unless they prove themselves innocent, while Queensland has more duty holders than other jurisdictions. True harmonisation cannot occur without resolving these differences.

The Federal Government is relying on the new national body to lead the reform and implementation of nationally consistent OHS standards. This is an enormous task and it will require a lengthy consultative process with employers and industry associations. However, employers who operate across state boundaries will ultimately benefit from a reduction in 'red tape', and employees will have the same rights wherever they work.

Employers left in the state-based schemes are paying higher premiums as eligible employers leave to seek the cost savings that flow from self-insurance under Comcare. As Comcare was never designed to cover the diverse range of employers who currently self-insure under the scheme, it can be expected that, without reform, such cost savings will be eroded. Significant reforms are needed and hopefully the upcoming examination of Comcare will provide employers with some answers.

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Rationality basis for exemption from equal opportunity obligations

In brief: Tribunals may take into account the widest range of factors when determining whether to grant an exemption from equal opportunity obligations. Special Counsel Rowan Kelly reports.

How does it affect you?

  • A decision of the Western Australia Court of Appeal2 clarifies the test for exemptions under the Equal Opportunity Act 1984 (WA) in Western Australia. It also has application to equal opportunity laws in other jurisdictions.
  • Importantly, in determining whether to grant an exemption, it is not necessary for the exemption application to be for a 'positive discrimination' purpose, such as policies promoting equal recognition of males and females. Private and commercial benefits can also provide a basis for applying for an exemption.

Background

The ADI group of companies applied for an exemption from the operation of sections 37 and 39 of the Equal Opportunity Act 1984 (WA) (the EO Act), which make it unlawful to discriminate against a person on the ground of race in prescribed circumstances. The basis of the exemption was to enable ADI to undertake defence projects in compliance with the laws of the United States.

The State Administrative Tribunal granted ADI an exemption from the operation of s37 and s39 of the EO Act.

The Commissioner for Equal Opportunity, the Trade and Labour Council of Western Australia and the Western Australians for Racial Equality Inc appealed to the Court of Appeal of Western Australia. At the hearing, the issue to be decided by the court was narrowed as follows:

because the discretion conferred upon the Tribunal by s135 of the Act must be exercised in accordance with the objects, scope and purpose of the Act, the Tribunal erred by granting the exemptions sought because of the weight which it gave to the furtherance of public interest considerations which were unrelated to the avoidance of discrimination, being the public interest which the Tribunal had identified in the maintenance of employment within Western Australia, the maintenance of the Western Australian economy and Australia's defence capability.3
The legislation

Section 135(1) of the EO Act provides:

The Tribunal may, on application by a person, by order, grant to the person an exemption from the operation of a specified provision of Part II, IIAA, IIA, IIB, III, IV, IVA or IVB.
Decision

The court found that the discretion conferred on the tribunal to grant an exemption is constrained only 'by the objects, scope and purpose of the Act and that those matters are to be ascertained from a construction of the Act as a whole'.

In looking at this issue, the court noted that the EO Act had a number of specific exceptions that extended beyond 'positive discrimination'. The 'spirit' of the Act went further than the 'objects of the Act relating to the discouragement of discrimination'. As such, the tribunal, in considering an exemption for the operation of the Act, can take into account considerations beyond the anti-discriminatory objects of the Act.

The court held that:

provided there is a rational basis for the discriminatory conduct, it will fall to the Tribunal to determine whether the interests to be served by permitting that conduct outweigh the detriment which flows from discriminatory conduct. Often the interests properly considered by the Tribunal in that context will be public interests, but they need not be so.

In this regard, there was no onus on an applicant to demonstrate that if an exemption was not granted, this would result in an 'unreasonable' outcome.
In this case, the court held that the tribunal was entitled to take into account the considerations it did and to give those considerations 'determinative weight'. The appeal was dismissed.

Footnotes
  1. Gittani Stone Pty Limited v Pavkovic [2007] NSWCA 355.
  2. Commissioner for Equal Opportunity v ADI Limited [2007] WASCA 261.
  3. [2007] WASCA 261, at paragraph 39.

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