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Focus: Workplace Relations – September 2007

In this issue: We report on the Australian Labor Party's workplace relations policy; the Federal Court's reprimand of the Commonwealth regarding annual and flexitime leave to attend an anti-WorkChoices protest; post-employment restraints; and a successful appeal in a 'genuine operational reasons' application.

• Australian Labor Party's proposed workplace reform
• Commonwealth reprimanded over WorkChoices protest
• Rules of thumb for drafting enforceable restraints
• Operational reasons – a win for the employer

Australian Labor Party's proposed workplace reform

In brief: The Australian Labor Party has released its policy implementation plan for workplace relations. Partner Jamie Wells (view CV) and Law Graduate Andrew Stirling report.

Forward with Fairness Policy Implementation Plan

The Australian Labor Party (the ALP) has proposed to make the following amendments to the workplace relations landscape:

• The Australian Industrial Relations Commission, Workplace Ombudsman, Workplace Authority and Australian Building and Construction Commissioner are to be replaced by an all-encompassing body called Fair Work Australia. Fair Work Australia is to commence operation on 31 January 2010.
• Ten National Employment Standards, guaranteeing basic conditions, will apply to all employees (regardless of income) covered by the Commonwealth scheme. These standards will be:

1. hours of work;
2. flexible work for parents;
3. parental leave (which the ALP has indicated may be for up to two years);
4. annual leave;
5. personal carers' and compassionate leave;
6. community service leave;
7. public holidays;
8. information in the workplace;
9. notice of termination and redundancy (redundancy payments will not need to be made by small businesses); and
10. long-service leave.

•  Awards are to be simplified and rationalised. In addition to providing industry specific content in relation to the National Employment Standards, awards will provide for a further 10 minimum conditions and entitlements:

1. minimum wages;
2. the type of work performed (eg. permanent, casual);
3. ordinary hours of work and other arrangements for when work is performed;
4. overtime rates;
5. penalty rates;
6. shift work;
7. allowances;
8. leave and related matters;
9. superannuation; and
10. consultation, representation and dispute-settling procedures.

• Employees who earn more than $100,000 a year (indexed to average full-time income) will not be covered by awards. During the transition period, these employees will be able to negotiate out of the award system.
• Australian Workplace Agreements (AWAs) are to be phased out over a transition period. Existing AWAs will continue in accordance with the current laws and will be terminable by 90 days' notice after the nominal expiry date of the agreement. Until the end of 2009, employers who have an employee on an AWA as at 1 December 2007 may engage new employees or re-engage employees already on an AWA on an Individual Transitional Employment Agreement. The Individual Transitional Employment Agreement will be subject to a no-disadvantage test (in comparison with any applicable collective agreement, award or Fair Pay and Conditions Standard).
• All awards and collective agreements will be required to include flexibility clauses that will allow employees covered by awards to negotiate flexible arrangements with their employer on certain matters. A model flexibility clause will be published by Fair Work Australia.
• Unions will have no right of involvement in collective agreements negotiated with non-union enterprises.
• The small business exemption for unfair dismissal claims will be reduced to employers with only 15 employees or less but only for employees who have been employed for less than one year. Redundancy will be retained as a reason for dismissal, although it appears unlikely that the 'genuine operational reasons' exclusion will remain.
• A Fair Dismissal Code is to be drafted for small business. Any dismissal complying with the Code will be considered a fair dismissal. It is unclear if this will be extended to all unfair dismissal claims.
• Current laws in relation to protected industrial action and union right of entry will be preserved. 

Commonwealth reprimanded over WorkChoices protest

In brief: The Federal Court has held that written advice regarding annual and flexitime leave to attend anti-WorkChoices rallies breached the freedom of association provisions in the Workplace Relations Act 1996 (Cth). Lawyer Maree Norton reports.

Background

In late 2005, the Community and Public Sector Union (the CPSU) organised a national 'Day of Protest' to voice opposition to the Federal Government's WorkChoices reforms. The CPSU encouraged its members to seek authorised leave to attend the protest.

In the lead-up to the 'Day of Protest', the Department of Employment and Workplace Relations (the DEWR) issued written advice to various government agencies. Among other things, the advice advised agencies to deny applications for leave (including access to flexitime credits) to facilitate employee participation in the 'Day of Protest'.

The freedom of association provisions in the Workplace Relations Act 1996 (Cth) (the Act) state that an employer must not for a prohibited reason (or for reasons that include a prohibited reason) alter, or threaten to alter, the position of an employee to the employee's detriment. The Act defines 'prohibited reason' to include the fact that an employee 'is, has been, proposes to become or has at any time proposed to become an officer, delegate or member of an industrial association'.

The CPSU (in conjunction with several individual applicants) filed a proceeding in the Federal Court claiming that the freedom of association provisions in the Act had been breached by:

• DEWR in providing the advice; and
• Federal Government agencies in deciding to refuse applications for annual or flexitime leave to attend the 'Day of Protest'.

The applicants further contended that, in refusing specific applications for annual and flexitime leave, the Commonwealth had acted in breach of applicable industrial instruments.

Decision

Justice Branson held¹ that the DEWR had breached the freedom of association provisions under the Act on the basis that:

• the advice had been issued because of the significant CPSU membership within the Commonwealth public service and the concern that CPSU member employees would attend the 'Day of Protest', and this purpose constituted a 'prohibited reason' under the Act; and
• because government agencies considered themselves bound to comply with the DEWR advice, the position of Commonwealth employees (in particular, Commonwealth employees who were also CPSU members) was compromised to the detriment of those employees.

Justice Branson dismissed the claim that the refusal by agencies to approve leave was for a prohibited reason, instead finding that those decisions were made because the agencies considered themselves bound to comply with the DEWR advice.

Finally, the court upheld the claims relating to the refusal of individual applications for leave when the refusal was based on the fact that the application was made to enable the employee to attend the 'Day of Protest'. The court found that requests for annual or flexitime leave to attend the 'Day of Protest' should have been assessed against operational requirements alone, and not by reference to the employee's reason for seeking the leave.

Rules of thumb for drafting enforceable restraints

In brief: What happens when your key employees leave? Will you be able to prevent them from going to work for a competitor, or from soliciting your customers or employees? Senior Associate Sarah Armstrong reports.

Types of post-employment restraints

In order to be able to prevent employees from going to work for a competitor, or from soliciting customers or other employees, the employment contract must contain an express restraint. Generally, the different types of restraints are reflected in:

• non-compete or non-dealing provisions;
• customer non-solicitation provisions; and
• employee non-solicitation provisions.

When is a restraint enforceable?

In New South Wales, by virtue of the Restraints of Trade Act 1976 (NSW), a restraint is valid to the extent that it is not against public policy. In other states and territories, a restraint will be valid only to the extent that it affords no more than adequate protection of the employer's legitimate protectable interests.

Legitimate protectable interests include:

• customer connections; and
• trade secrets and confidential information.

Drafting restraints

To ensure that a restraint will be enforceable, employers should keep in mind the following factors.

• The language of the restraint must be clear. Ambiguity will be construed in favour of the employee.
• One of the factors a court will consider is whether enforcing the restraint would cause unreasonable hardship to the former employee (for example, by preventing them from being able to earn a living). Paying the former employee for the term of the restraint may increase the likelihood of it being enforced.²
• The restriction should be limited to the geographic area in which the employee worked or in which the employee had knowledge of confidential information.
• The length of the restraint period should be tied to the longevity of confidential information or the time required to rebuild customer relationships.³ 
• A non-solicitation or non-dealing clause should be limited to the customers or employees with whom the former employee had direct dealings.⁴ 
• Restraints should be restricted to key competitors if only those competitors are relevant to the protection of an employer's legitimate interests. 

Operational reasons – a win for the employer

In brief: Lawyer Rima Hor considers the approach of the Full Bench of the Australian Industrial Relations Commission in determining whether a termination is for genuine operational reasons.

Background

Mr Acworth was employed by Boeing Australia Limited (Boeing) as an engineer, initially for a specific project. A term of the employment contract allowed Boeing to direct Mr Acworth into alternative projects, so long as the proposed role was comparable in nature with his previous roles. When Mr Acworth refused to undertake a new role, his employment was terminated as there were no alternative, commensurate roles available.

At first instance, Senior Deputy President Richards held that termination was not for operational reasons.⁵ According to SDP Richards, Mr Acworth's termination was not because there was no appropriate role available, but instead because Mr Acworth refused to accept the role he was being offered.⁶ The decision led to the curious result that, by trying to redeploy fairly, the employer cost itself use of the operational reasons argument.

Decision

On appeal⁷, the Full Bench of the AIRC disagreed with the conclusions reached by SDP Richards and emphasised that the critical factor in determining whether a termination is for operational reasons is the employer's reasons for termination. It was relevant that, as a result of Mr Acworth's refusal to accept an alternative role, there was no appropriate role for Mr Acworth to perform at Boeing once his current project expired. The Full Bench held that this was an operational reason to terminate, similar to a decision to terminate for redundancy.
The decision of the Full Bench corrects the curious result that flowed from the decision at first instance, so that employers who try but are unable to deploy employees can still use the operational reasons argument to terminate. The operational reason to terminate does not have to be the exclusive reason to terminate, so long as it is genuine. 

Footnotes

1. CPSU, The Community and Public Sector Union v Commonwealth of Australia [2007] FCA 1397.
2. For example, the payment made by the employer to the former employee was a factor taken into account by the New South Wales Court of Appeal in upholding a non-compete restraint in Woolworths v Olson [2004] NSWCA 372.
3. For example, in Koops Martin Financial Services Pty Limited v Reeves [2006] NSWCA 449, the New South Wales Court of Appeal held that a 12 month non-dealing restraint was reasonable because of the length of time required to allow a new financial planner the opportunity to establish client relationships.
4. For example, in Hartleys Limited v Martin (unreported, Victorian Supreme Court, Gillard J, 7 August 2002), the Supreme Court of Victoria upheld a non-dealing restraint which prevented the former employees, for three months from the end of their employment, from performing services for clients with whom they had direct dealings in the previous 12 months.
5. B Acworth v Boeing Australia Limited, Australian Industrial Relations Commission, Senior Deputy President Richards, Brisbane, 25 May 2007, PR977142.
6. See Focus: Workplace Relations – June 2007 for a more detailed summary of the decision at first instance.
7. B Acworth v Boeing Australia Limited, Australian Industrial Relations Commission, President Justice Giudice, Senior Deputy President Harrison and Commissioner Hoffman, Melbourne, 3 September 2007, PR978098.
   

For further information, please contact:

• Jamie WellsPartner, Brisbane
  Ph: +61 7 3334 3268
  Jamie.Wells@aar.com.au
• Tim FrostPartner, Sydney
  Ph: +61 2 9230 4930
  Tim.Frost@aar.com.au
• Peter ArthurPartner, Sydney
  Ph: +61 2 9230 4728
  Peter.Arthur@aar.com.au
• Gavin MacLarenPartner, Singapore
  Ph: +65 6535 6622
  Gavin.MacLaren@aar.com.au
• Rowan KellySpecial Counsel, Perth
  Ph: +61 8 9488 3804
  Rowan.Kelly@aar.com.au

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