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Workplace Relations

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Focus: Workplace Relations

10 May 2010

In this issue: we look at an unfair dismissal case that dealt with the issue of an employee failing to provide their employer with relevant medical information to assist in their return to work; the scope of enterprise agreements and common law obligations; the issue of a pay rise as an example of negotiating in bad faith; and the failure to comply with mandatory notice requirements in an enterprise bargaining agreement.

Illness management is legitimate

In brief: An employee's failure to provide information about medical conditions relevant to their employment can justify termination of their employment. Lawyer Alice Dillon reports.

How does it affect you?

  • Employers are entitled to request information of a general nature about an employee's medical condition to:
    • identify what steps the employer can take to help the employee return to work;
    • work out which of the employee's current duties are safe for them to perform; and
    • provide a safe environment for other employees in the workplace.
  • A repeated failure by an employee to co-operate by providing information required from them may be a valid reason for the termination of their employment.

Background

Mr Petkovski, an employee of SMS Management and Technology Limited (SMS), commenced sick leave on 22 June 2009 and remained on sick leave up until when his employment was terminated on 13 November 2009. Throughout this period, Mr Petkovski provided medical certificates simply stating he was unfit for work. This was essentially the only contact that Mr Petkovski had with his employer, despite repeated and unsuccessful attempts by his direct manager and the director of human resources to get in contact with Mr Petkovski, including seeking information through his treating doctor as to:

  • the nature of his condition;
  • his expected period of absence; and
  • any limitation he may have on returning to work.

No response was received, apart from a further medical certificate.

On 9 October 2009, SMS sent a further directive to Mr Petkovski, providing him with a final opportunity to respond, but again no response was received. In a subsequent letter of 16 October 2009, SMS advised Mr Petkovski that because of his repeated failures to respond over a period of nearly four months, a decision had been made to terminate his employment.

Mr Petkovski filed an unfair dismissal application.1

The decision

Fair Work Australia held that SMS's directive to Mr Petkovski was lawful because the purpose was to facilitate Mr Petkovski's return to work and to ascertain which duties it would be safe for him to perform. FWA held that the directive was reasonable because it had not been issued for the purpose of dismissing Mr Petkovski, but rather for ensuring the health and safety of Mr Petkovski and other employees.

FWA was also satisfied that Mr Petkovski had been given an opportunity to respond to the reason for his termination and had been appropriately notified of the reason for his termination. As such, FWA dismissed Mr Petkovski's claim.

Conclusion

The decision is consistent with other cases confirming that employers simply must have access to information about relevant illness and injuries to discharge their various duties to employees.

Provided that employers act reasonably, keep the inquiries relevant, and protect privacy as far as possible, they are entitled to certain information and to take action if employees do not co-operate.

FWA limits scope of enterprise agreement

In brief: Enterprise agreements cannot include common law obligations regarding confidentiality, intellectual property ownership and non-solicitation. Lawyer Andrew Stirling reports on a recent Fair Work Australia case.2

How does it affect you?

  • Fair Work Australia will not approve an enterprise agreement that includes clauses dealing with confidentiality, intellectual property, non-solicitation or similar common law obligations.
  • These obligations can still be agreed with employees, but included in each employee's contract or letter of employment, operating in conjunction with the enterprise agreement.

Background

Employees of Stephen & Nephew Pty Ltd (the employer) agreed to an enterprise agreement on 9 December 2009. The employer then applied to Fair Work Australia for approval of the agreement.

Unusually, the agreement included clauses dealing with confidentiality, intellectual property rights and non-solicitation.

The decision

Fair Work Australia refused to approve the enterprise agreement because of, among other things, the inclusion of confidentiality, intellectual property and non-solicitation clauses. Such clauses are more usually dealt with in contracts or letters of employment. The Commissioner said that these clauses could not be included in enterprise agreements because this would expose employees to civil penalties in the event of breach. Since this would expose the employee to enforcement actions by parties other than the employer, the inclusion of the clauses was inappropriate.

Conclusion

As things stand, obligations of confidentiality, intellectual property, non-solicitation or similar common law obligations should be included separately in each employee's employment agreement or letter of offer, rather than in an enterprise agreement. There are no real advantages to including these in an enterprise agreement, as the best remedies for enforcing the obligations are available under the general law. Because the enterprise bargaining framework mandates a number of procedural requirements, any issue that could send the employer back to square one is best left out and dealt with elsewhere.

How can a pay rise reflect bad faith?

In brief: Fair Work Australia has determined that the Commonwealth Bank of Australia was not bargaining in good faith when it delivered pay rises to staff outside the enterprise bargaining negotiating process.3 Senior Associate John Naughton reports.

How does it affect you?

  • An employer may breach good faith bargaining obligations under the Fair Work Act 2009 (Cth) (the Act), even if it involves unconditional benefits to employees.
  • Employers must consider whether their conduct might undermine the enterprise-level collective bargaining framework emphasised under the Act.
  • In particular, employers need to consider whether a particular proposal:
    • takes a position different from that put in enterprise bargaining negotiations; and
    • should be referred to bargaining representatives for negotiation before a decision is taken to implement it.

Background

After its last enterprise bargaining agreements expired in 2002, the Commonwealth Bank of Australia (CBA) awarded pay increases to staff without reference to the Finance Sector Union of Australia (FSU).

However, in 2008 CBA and the FSU opened negotiations for a new enterprise agreement.

CBA's position in these negotiations was that it could not make a pay offer to staff:

  • because of uncertainty created by the global financial crisis; and
  • unless staff undertook to negotiate on certain conditions of employment.

The FSU considered that all matters should be up for negotiation – including any pay offer.

The application

Notwithstanding CBA's position, it delivered two wage increases to employees while negotiations were on foot – 1.5 per cent in July 2009, and 2 per cent in January 2010. Both decisions were taken by CBA without negotiation with or advance notice to the FSU, consistent with the practice for previous increases.

Following the second increase, the FSU applied to Fair Work Australia (FWA), seeking orders under section 229 of the Act that:

  • CBA provide a negotiating position on pay within seven days;
  • any further negotiations on pay be facilitated by FWA; and
  • CBA provide documentation to the FSU and FWA outlining projected employee budget and spend figures for the next two calendar years.

The FSU argued these orders were warranted because:

  • the payment of wage increases by CBA without negotiation or consultation with the FSU had undermined the FSU's role in the bargaining negotiations; and
  • CBA's approach to wage increases – ie. telling employees through bargaining representatives that no offer on wages would be made unless preconditions were met, while simultaneously increasing wages without those preconditions – was unfair.
The decision

FWA did not grant the orders requested by the FSU.

However, FWA accepted that CBA's approach had undermined collective bargaining.

On this basis, FWA:

  • made a finding that CBA had not met the good faith bargaining requirements for the disclosure of relevant information (in breach of s230(3)(a)(i) of the Act); and
  • ordered that CBA advise the FSU within 24 hours of any decision changing its position of not increasing wages.
Conclusion

While it may seem counter-intuitive that payment of wage increases to employees could breach an employer's good faith obligations, employers must consider whether matters ought be raised with bargaining representatives in advance of implementation. In all respects, the legitimacy of the proposal will depend on the content and context of the bargaining process. It is apparent from FWA's approach in this case that direct engagement of employees without reference to the collective process can have consequences through the employer's good faith bargaining obligations.

Right to vote on enterprise agreement

In brief: An employer's failure to comply with mandatory notice requirements means that an enterprise agreement will not be approved. Lawyer Chris Dalton reports on an unsuccessful application to Fair Work Australia.

How does it affect you?

When making an enterprise agreement, the employer must:

  • take all reasonable steps to give each employee to be covered by the agreement, notice of the right to be represented by a bargaining representative;
  • not request employees to approve the agreement until 21 days have passed after the last employee is given notice; and
  • ensure that the employees have access to the proposed agreement for at least seven days before the vote to approve the agreement.

Background

Jillcar Pty Ltd, trading as Semaphore Hotel (Jillcar), applied to Fair Work Australia for the approval of an enterprise agreement. Jillcar submitted an Employer's Declaration Form stating that the agreement was made on 29 December 2009 and that it applied to two employees only. The form did not state the date on which the employees were provided with the agreement or when they were told of the voting arrangements.

Following a request from Senior Deputy President O'Callaghan, Jillcar submitted that:

  • consultants were engaged by Jillcar to instruct on the voting methodology and the method and criteria for the preparation and distribution of the proposed agreement;
  • the consultants prepared the agreement and were to act as the bargaining agent for Jillcar;
  • on 7 December 2009, when the final agreement was distributed to employees and notification of the voting date and method was given, only two employees were eligible to vote on the agreement;
  • on 7 December 2009, all other employees were employed under individual agreements, all of which were to expire on the nominal expiry date of 31 December 2009; and
  • the distribution of the agreement and voting took place on 29 December 2009.

In the hearing, it emerged that there were three employees on the Jillcar payroll listing excluded from the list of employees previously provided by Jillcar. Jillcar submitted that as these employees were not employed when the enterprise agreement was distributed on 7 December 2009, they were not eligible to vote on the agreement, as they would not have held the agreement for the necessary notice period before the voting date.

The decision

Fair Work Australia held that Jillcar did not meet the mandatory agreement-making process and for that reason the application was rejected.4 Specifically, the application failed because Jillcar:

  • was required to give a bargaining representative notice to each employee who:
    • would be covered by the agreement; and
    • would be employed at the notification time of the agreement.
  • could not request that employees approve the agreement until at least 21 days after notice was given to the last employee; and
  • was required to give all employees who would be covered by the agreement a copy of the written text of the agreement, as well as any other material incorporated by reference in the agreement, no less than seven days prior to the date of the vote.

Therefore all employees to be covered by the agreement at the time of the vote were entitled both to see the agreement and to vote on it. Contrary to the consultants' advice, this included the three employees whose names appeared on the Jillcar payroll listing as at the voting date of 29 December 2009.

Conclusion

Employers should be mindful to take all positive steps to comply with the mandatory agreement-making process as set out in the Act, as they cannot be overlooked or excused.

Footnotes
  1. Petkovski v SMS Management and Technology Limited [2010] FWA 2297.
  2. Smith & Nephew Pty Ltd [2009] FWA 1442; QNU v The Corporation of the Roman Catholic Diocese of Toowoomba [2009] FWA 1553.
  3. Finance Sector Union of Australia [2010] FWA 2690.
  4. Jillcar Pty Ltd t/a Semaphore Hotel [2010] FWA 2715.

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