The latest issues, decisions and proposed changes impacting business and workplace risk 20 min read
By Emily Grutzner and Laura Miller
Two recent decisions of the Federal Circuit Court and Fair Work Commission have illustrated the approach that courts and tribunals may take to oral contracts and sham contracting following the decisions handed down by the High Court in Jamsek and Personnel (reported here).
- Even if a contract is not in writing, courts and tribunals are likely to make limited use of post-contractual conduct in determining whether an individual is an employee or independent contractor. In these circumstances, post-contractual conduct may only be used for the limited purpose of determining whether a contract was formed, who the parties were, and the terms of the agreement.
- It is possible that courts and tribunals may adopt a narrow definition of the types of arrangements that are regarded as 'sham' contracts. As a result, there may be very limited circumstances where post-contractual conduct is relevant to determining whether a worker is an employee. However, given the uncertainty in the meaning of 'sham' contracting arising from the Jamsek and Personnel decisions, we are likely to continue to see many cases run on the basis that the independent contractor agreement is a sham.
Pruessner v Caelli Constructions
Mr Pruessner claimed that he was employed by a construction company, pursuant to an oral contract, and sought employment-related entitlements.
The construction company denied that Mr Pruessner was an employee. It argued that Mr Pruessner was an independent contractor who provided services via a company he had established with family members (the family company).
Mr Pruessner argued that because the contract with the construction company was oral, the court should look past the family company structure and instead focus on the features of the work performed by Mr Pruessner for the construction company. These features included that he worked on a full-time basis according to site schedules, had no choice in the timing of his work, worked exclusively for the construction company, and was given authority to engage labour and purchase goods for the construction company. Mr Pruessner's view was that these features indicated that he was an employee.
The Federal Circuit Court found there was no employment relationship between Mr Pruessner and the construction company.
In reaching its decision, the court acknowledged that a number of the relationship features between Mr Pruessner and the construction company could indicate employment. However, the court considered itself bound to follow the approach of the High Court in Jamsek and Personnel, even though the contract in this case was wholly oral. The court concluded that the relevant contracting parties were the construction company and the family company, rather than Mr Pruessner individually. In the court's view, there was nothing in the oral contract between the parties that indicated an employment relationship between Mr Pruessner and the construction company. It was also of significance to the court that the tax arrangements of the family company indicated that Mr Pruessner was engaged by that company as either a director or employee.
In this case, the Federal Circuit Court did not endorse the use of post-contractual conduct as a way to characterise the overall relationship between the parties. Instead, the court indicated that post-contractual conduct could be used for the limited purposes of determining whether a contract was formed, who the parties were, and the terms of the agreement.
Chambers v Broadway Homes
Mr Chambers and Ms O'Brien made applications against Broadway Homes (Broadway) relating to their alleged dismissals, on the basis that they were employees of Broadway. Mr Chambers and Ms O'Brien made various arguments in support of their applications. Of particular relevance was an argument that, unlike the position in Personnel and Jamsek, the Fair Work Commission was required to consider the subsequent conduct of the parties because one of the agreements with Broadway was a sham.
Broadway objected to both applications on the basis neither Mr Chambers nor Ms O'Brien were employees. Broadway argued that the post-contractual conduct of the parties indicated Mr Chambers and Ms O'Brien were agents of a company run by Ms O'Brien.
The Commission ultimately found that neither Mr Chambers nor Ms O'Brien were Broadway's employees.
The Commission rejected the argument that one of the agreements was a sham. In doing so, the Commissioner made some observations about the types of 'sham' arrangements that might justify a court or tribunal relying on the post-contractual conduct of the parties. In particular, the Commissioner indicated that an arrangement may be regarded as a 'sham' where the contract indicates an objective to deliberately deceive third parties, and when the contracting parties intend that the contract have no true legal consequences. This is a narrow definition that would be difficult to satisfy.
The Commissioner found Broadway and Mr Chambers conducted their relationship in a way that demonstrated that they intended the contract to have legal consequence. For example, the method by which Mr Chambers received payment for his services was as set out in the contract. Consequently, the contract was not a sham.
By Courtney Logue and Starr Brenton
Australian Licensed Aircraft Engineers Association v Qantas Airways Limited  FCAFC 50
A majority in the Full Court of the Federal Court has confirmed that the 'extreme' economic conditions experienced during the COVID-19 pandemic, which resulted in Qantas and Jetstar dramatically reducing their flying operations, was a 'stoppage of work' within the meaning of the relevant enterprise agreements. This meant that the airlines were entitled to stand down aircraft engineers without pay.
This decision helps to clarify the proper approach to causation when determining whether there has been a 'stoppage of work' that will allow an employer to rely on stand down provisions.
This case was an appeal by the Australian Licensed Aircraft Engineers Association against declarations made by the Federal Court that the decision by Qantas and Jetstar to stand down aircraft engineers without pay during the COVID-19 pandemic was a 'stoppage of work' within the meaning of their respective enterprise agreements. An overview of the preceding case can be found here.
The Qantas enterprise agreement contained a clause that enabled it to stand down employees without pay in circumstances where the employee cannot be usefully employed because of a strike or stoppage of work through any cause for which the employer cannot be reasonably held responsible. The Jetstar enterprise agreement was similar but stipulated that a stoppage of work was only permitted if Jetstar could not have reasonably prevented it.
The key issue in this case was the proper construction and application of those clauses. This necessarily required determination of what caused the stoppage and whether Qantas or Jetstar should be attributed responsibility for it.
The majority of the Full Court identified the direct cause of the 'stoppage of work' to be Qantas and Jetstar's decision to downsize its flying operations. However, the majority held that the language of the enterprise agreements required the court to consider not only the direct cause but also the sequence of events which led to it. As such, consideration should be given to the 'real, substantial or effective cause.'
The court said that while 'mere fluctuations or reductions in profitability' cannot be used to rely on stand down provisions, economic considerations may be relevant where the text (and context) permits it. This was the case here. Qantas and Jetstar faced 'an almost complete collapse of the international and domestic market for airline services as a result of the COVID-19 pandemic'. This was an 'extreme' case that was relevant to (and ultimately determinative of) the assessment of whether Qantas and Jetstar were responsible (or could have prevented it).
By Sarah Lunny and Stephanie Paolino
The Work Health and Safety Act 2020 (WA) (WHS Act) and accompanying regulations came into effect on 31 March 2022.
- In welcome news to national employers, the new laws harmonise WA's safety regime with other Australian jurisdictions in which the model WHS legislation are already in place (all states and territories other than Victoria).
- The new laws bring together work health and safety obligations for general industry, mines and petroleum operations in WA under a single WHS Act.
- Although transitional arrangements are in place for certain obligations under the regulations, employers are subject to the overarching health and safety duties from the commencement of the WHS Act.
Overview of the new WHS Act
The key features of the new laws include:
- a broader range of workplace relationships and risks are covered by the legislation, including:
- the imposition of health and safety duties on 'persons conducting a business or undertaking' (PCBUs) and their 'officers' (which includes directors and senior managers who participate in decision making that affect the business);
- PCBUs have a duty to ensure the health and safety of 'workers', which includes a wider range of individuals than 'employees' (the term used in the former legislation); and
- the duty to ensure health and safety includes both physical and psychological health, which extends the duty to cover psychosocial risks to health such as stress, fatigue and bullying;
- officers of PCBUs have a positive obligation to conduct due diligence to ensure the PCBU complies with its safety obligations;
- the introduction of the indictable offence of industrial manslaughter, bringing WA into line with Victoria, Queensland, the Australian Capital Territory and the Northern Territory. The offence carries a maximum penalty for an individual PCBU or officer of imprisonment for 20 years or a $5,000,000 fine, and a $10,000,000 fine for a body corporate;
- requirements for PCBUs to consult, cooperate and coordinate with others who have a safety duty in relation to the same matter;
- new notifiable incidents and response requirements; and
- changes around indemnity insurance. While under the former WHS legislation, a company officer's insurance could pay for legal fees and fines or penalties arising from a prosecution, under the new legislation, a company officer can only be insured for their legal fees.
By Starr Brenton, Alana Perna, Maddie Toohey, Ruby Evans
On 29 March 2022, the Federal Government issued its 2022-23 Federal Budget. The Budget contains a range of spending measures directed towards women in the workplace.
Changes to the Paid Parental Leave scheme
The current Paid Parental Leave (PPL) scheme offers 18 weeks of paid primary carer leave and two weeks of 'Dad and Partner Pay'. The government has announced the Enhanced Paid Parental Leave scheme which will combine PPL and Dad and Partner Pay into a single scheme providing for up to 20 weeks which may be taken by either eligible parent at any time within two years of the birth or adoption of a child. The income test will also be broadened to allow for high-income households earning up to a maximum of $350,000 annually to remain eligible for the Enhanced Paid Parental Leave scheme.
The government will also extend unpaid leave entitlements to foster and kinship carers.
Potential changes to the method used to calculate redundancy payments
The government announced that it will consult on amendments to change how redundancy pay is calculated under the National Employment Standards in the Fair Work Act 2009 (Cth) with a view to implementing changes to make it fairer for women whose employment is more likely to fluctuate between part-time and full-time across their careers. Currently, redundancy pay is calculated based on an employee's current base rate of pay for his or her ordinary hours or work.
Funding in response to the Respect@Work Report
In line with the recommendations made in the Respect@Work Report, the government has committed to funding the establishment of a specialist outreach team for historical workplace sexual harassment allegations. The team will be housed within the Australian Human Rights Commission and will develop frameworks and guidelines to deal with allegations of historical workplace sexual harassment and support those who come forward.
Funding for the Workplace Gender Equality Agency
The government is investing $18.5 million over four years to implement the recommendations of the review of the Workplace Gender Equality Act 2012 (Cth). The investment is designed to support state and territory governments in establishing better gender equity reporting (among other initiatives such as the establishment of Excellence in Workplace Gender Equality Awards to reward employer action on gender equality in workplaces).
Continued child care funding
The government will continue its investment of $19.4 million over five years to the Community Child Care Fund, establishing new child care services in rural, remote and regional areas where there is limited supply of current child care services.
By Sarah Lunny and Alana Perna
Application by Ranmeet Kaur  FWC 487
The Fair Work Commission (FWC) has issued its second decision in the anti-sexual harassment jurisdiction.1 The FWC dismissed the application after finding there was no ongoing risk that the applicant would experience sexual harassment at work because she had resigned.
- The FWC can make an order to stop sexual harassment if it's satisfied that a worker has been sexually harassed at work and there is a risk that the sexual harassment will continue.
- Although accepting that the applicant had experienced sexual harassment at work before resigning, the FWC determined that it did not have power to make an order because there was no risk that the applicant would continue to be sexually harassed in the future. The decision emphasises that the objective of the anti-sexual harassment regime is to prevent future harm, not to address past wrongdoing.
The applicant, a chef at The Riverton Bar & Grill (the Respondent), applied to the FWC for an order to stop sexual harassment in relation to behaviour by her manager, the Respondent's head chef. The applicant alleged that the head chef had asked her for sex, was pushing for her to be his girlfriend, and told her that if she did what he wanted then she would not face any problems at work. The applicant had secretly recorded some of these discussions on her mobile phone and presented this evidence to the FWC. Shortly after making her application, the applicant resigned from her employment.
After considering the evidence, including the recordings, the FWC accepted the applicant had experienced sexual harassment at work. However, because the applicant was no longer employed by the Respondent, the FWC dismissed the application because there was no risk that the applicant would experience sexual harassment at work in the future.
By Courtney Logue and Starr Brenton
Oliver v Bassari (Human Rights)  VCAT 329
An employer who failed to take reasonable precautions to prevent sexual harassment in its workplace has been found vicariously liable for the actions of its employee and ordered to pay $150,000 in damages to the victim.
- Employers should not rely solely on the existence of an employee handbook or policies as a means of preventing sexual harassment.
- In addition to having in place appropriate policies dealing with sexual harassment and discrimination, employers must, amongst other things, ensure they have processes to monitor compliance with those policies and conduct specific anti-discrimination and sexual harassment training.
Ms Oliver applied to the Victorian Civil and Administrative Tribunal (the Tribunal) seeking a remedy under the Equal Opportunity Act 2010 (Vic) on the grounds that she had been sexually harassed by her co-worker Mr Catalfamo. Mr Catalfamo's conduct included, among other things, making suggestive comments, jokes and sex noises, enquiring about Ms Oliver's sex life and requesting sex with Ms Oliver whilst at work. This behaviour culminated in an incident of sexual assault on 30 November 2018.
Additionally, Ms Oliver claimed that her employer, Hebeich Pty Ltd (the Company) was vicariously liable for the conduct of Mr Catalfamo and that its sole director and office manager also assisted, authorised and/ or encouraged the sexual harassment.
In relation to the vicarious liability claim brought against the Company, it was noted that an employer may be held vicariously liable for the unlawful conduct of its employee unless it can prove on the balance of probabilities that it took reasonable precautions to prevent the conduct. The only precautions the Company took to prevent the sexual harassment was to make available, electronically, an employee handbook which included, among other things, an anti-discrimination and equal opportunity policy, a specific section on sexual harassment and a complaints handling procedure. It discussed this handbook in one staff meeting in 2018.
The Tribunal decided that these precautions fell 'well short' of what would be considered reasonable precautions in the circumstances and accordingly found the Company vicariously liable for the sexual harassment Ms Oliver was subjected to.
The Tribunal made a number of recommendations of additional precautions the Company could have taken, including investigating Ms Oliver's complaints; warning and threatening to discipline Mr Catalfamo; providing training to Mr Catalfamo regarding sexual harassment; and ensuring Mr Catalfamo had accessed, read and understood the Company's anti-discrimination and equal opportunity policy in the employee handbook.
The Tribunal determined that as a consequence of the sexual harassment, Ms Oliver suffered distress, hurt and humiliation and the exacerbation of her pre-existing mental health conditions. The Company was consequently ordered to pay Ms Oliver $150,000 as general damages.
By Muirgen O'Seighin and Tarsha Gavin
The Federal Senate Economics References Committee has handed down its long-awaited report into the unlawful non-payment and underpayment of employees (the Report).
- The Committee has made several recommendations to amend the Fair Work Act 2009 (Cth) (the FW Act) to address wage underpayment issues, including criminalising wage theft, increasing civil penalties for wage theft and broadening the network of regulators responsible for investigating and rectifying underpayments.
- Whether some of the recommendations will be pursued by the current government remains to be seen, however, even if only a few of the recommendations are adopted, they are likely to have a significant impact on employers and the business community.
Summary of the report's recommendations
- Penalties for wage theft: The Committee recommends that wage theft should become a criminal offence nationally and civil penalties for wage theft should also be increased. Relatedly, the Committee recommends that the Competition and Consumer Act 2010 (Cth) be amended to incorporate wage theft as an anti-competitive practice.
- Pursuit of wage theft claims: The Committee described the process for employees to pursue repayment of their entitlements as 'disconnected, inaccessible, and daunting'. To address this issue, the Committee recommends the establishment of a small claims tribunal co-located with the FWC to create a straight-forward process for employees to pursue repayments. The Committee also recommends modifications to the roles of the ATO and right-of-entry permit holders to investigate or rectify underpayment issues.
- Superannuation theft: The Committee identifies the underpayment of superannuation contributions as a key issue for employees and Australia's economy in the future. The Committee's recommendations include aligning the payment of superannuation contributions with the payment of wages, amending the National Employment Standards to include superannuation, and requiring the ATO to improve its communication with individuals in relation to their superannuation non-compliance cases. Six of the 19 recommendations relate to the underpayment of superannuation contributions. A more proactive role for the ATO is a strong theme throughout the Report.
- Migrant workers: The Report finds that migrant workers such as international students and workers on temporary visas are particularly vulnerable to wage theft. The Committee's recommendations include establishing a legally binding firewall between FWO and the Department of Home Affairs to protect people who report underpayments.
Demoted but not dismissed – clarity on the relationship between pay reductions, demotions and unfair dismissal
By Kathleen Weston and Hayden O'Halloran
NSW Trains v Mr Todd James  FWCFB 55
A Full Bench of the Fair Work Commission (FWC) has held that an employee was not dismissed for the purposes of the unfair dismissal provisions under the Fair Work Act 2009 (Cth) (FW Act) when he was demoted and his pay was reduced.2
An employee who remains employed with an employer, despite a demotion or significant pay reduction, will only be able to bring an unfair dismissal claim in specific circumstances.
Before demoting an employee or reducing their pay, employers should carefully consider the following questions:
- Will a demotion and/or pay reduction effectively result in the termination of one employment contract and the start of another? If yes, there is a risk the employee can bring an unfair dismissal claim.
- Is the demotion authorised by an award, enterprise agreement, the employment contract or legislation? If yes, then the demotion will generally not be a dismissal for unfair dismissal purposes.
Mr James was demoted following an investigation into alleged misconduct. While the demotion resulted in a 10% pay reduction, Mr James continued to perform the same duties at the same location. He filed an unfair dismissal application while continuing to work.
The FWC decided that the demotion amounted to dismissal because of the significant reduction in remuneration. The Full Bench disagreed, specifically taking issue with the Commissioner's interpretation of 'dismissal' in s.386 of the FW Act. The Bench rejected the single member's reasoning that, given the FW Act provides that a person is not dismissed if their demotion does not involve a significant reduction in remuneration, a demotion involving a significant reduction in remuneration must amount to a dismissal. The majority of the Full Bench said that the words of the provision did not justify that implication.
The Full Bench said that an employee who has been demoted has only been ‘dismissed’ if the person’s employment has been terminated on the employer’s initiative within the meaning of s.386(1)(a) of the FW Act.
Further, the Full Bench determined that where a demotion is authorised by an employment contract or industrial instrument and pursuant to that instrument demotion does not constitute dismissal, then the demotion will not constitute dismissal for the purposes of the unfair dismissal provisions of the FW Act. In this matter, the demotion was in accordance with the enterprise agreement and the Full Bench said it did not give rise to a dismissal under the FW Act.
By Kathleen Weston and Katherine Polazzon
Tsikos v Austin Health  VSC 174
A single judge of the Victorian Supreme Court (the Court) has ordered the Victorian Civil and Administrative Tribunal (the Tribunal) to reconsider its decision that an employee was not treated unfavourably because of her age or sex when she sought to negotiate her salary. The court found that it was open to the Tribunal to decide that the employee had been denied the opportunity to negotiate and receive salary above enterprise agreement-rates because of her sex.3
- The Equal Opportunity Act 2010 (Vic) may cover discrimination that is unconscious or unintentional, if it is open on the evidence.
- Determining direct discrimination under The Equal Opportunity Act 2010 (Vic) does not require comparison between the treatment of the applicant and another person without the relevant attribute.
Between 2011 and 2018 the Applicant, Ms Tsikos, made attempts to negotiate with her employer about her remuneration, after discovering that five of her male subordinates were on salaries above their classification in the enterprise agreement. Ms Tsikos made an application to the Tribunal under the Equal Opportunity Act 2010 (Vic) (the Act) on the grounds that her employer had discriminated against her by limiting her opportunity to negotiate her remuneration, to be paid above enterprise-agreement rates and to be paid at or above the rate paid to a male employee because of her sex and age.
The Tribunal dismissed Ms Tsikos' application, deciding that Ms Tsikos failed to demonstrate that:
- the alleged treatment amounted to 'unfavourable treatment'; and
- even if this had occurred, that it was because of her sex or age.
The court decided that the Tribunal incorrectly applied the test for direct discrimination under the Act when the Tribunal:
- took the unnecessary step of considering whether Ms Tsikos had been treated less favourably than a comparator; and
- did not consider the alleged unfavourable treatment as a whole.
The court said that if the Tribunal had not made these errors, it would have been open to find that Austin Health treated Ms Tsikos unfavourably.
Because of sex or age
The court decided it was not 'improbable' that Ms Tsikos had been treated unfavourably due to her sex, when considering all evidence, including uncontested expert evidence about '…the presence in the Department of factors known to contribute to entrenched gender pay inequality in the broader workforce'.
The court further identified that Austin Health should have been concerned that it was paying above enterprise-agreement rates to only men in the department. The court noted that the Act creates a positive duty to take 'reasonable and proportionate measures to eliminate discrimination as far as is possible' and that the Gender Equality Act 2020 (Vic) requires employers to 'assess the state and nature of gender inequality in the workplace having regard to the specified workplace gender equality indicators, which include equal remuneration for work of equal or comparable value across all levels of the workforce'.
Application by Ranmeet Kaur  FWC 487
NSW Trains v Mr Todd James  FWCFB 55.
Tsikos v Austin Health  VSC 174.