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Focus: Workplace Relations

11 July 2016

In this issue: we look at a Fair Work Commission decision that highlights the issue of costs in relation to a vexatious claim; the consequences for employment law in the wake of the Coalition's return to power; and an enforceable undertaking to reimburse a large number of underpaid employees.

Costs in unfair dismissal cases

In brief: A recent Fair Work Commission decision has highlighted that unsuccessful parties in unfair dismissal claims can be ordered to pay the successful party's costs. Senior Associate Sikeli Ratu and Law Graduate Harry Cook report. 

 
 

How does it affect you?

  • The Fair Work Commission (the FWC) has the power to order costs in unfair dismissal matters in certain circumstances.
  • Employers should consider the possibility and implications of costs orders, including when preparing settlement offers.

The FWC's costs powers

The FWC's unfair dismissal jurisdiction is often (and incorrectly) described as being 'no costs'. This is despite the fact that parties are able to seek costs orders against other parties in unfair dismissal claims.

Unlike courts, where a successful party will usually be able to recover some portion of its costs, the FWC exercises its costs powers only in cases where one party has been particularly unreasonable or vexatious in commencing, or maintaining, a claim.

A case 'founded upon a lie'

In a recent case, a truck driver was dismissed after failing a routine drugs test. During the disciplinary process that followed, the driver claimed that, immediately after testing positive for amphetamine and methamphetamine at work, he had seen his own doctor, to take a supplementary urine test. The driver told the employer that this supplementary test proved he did not have those drugs in his system.

Despite this, the driver was ultimately dismissed, and commenced an unfair dismissal claim.

Throughout the proceeding, including in his witness statement and under cross-examination, the driver repeated his claim he had taken a supplementary test that cleared him. He argued that because of this, his dismissal was unfair.

The employer called the driver's doctor to give evidence. The doctor's evidence clearly established that the driver had not passed the supplementary test. The doctor produced documents that showed the purported test results attached to the driver's witness statement had been fabricated.

After these revelations, the driver immediately instructed his representative to discontinue his claim.

The employer sought an order for indemnity costs. The Commissioner in this case found that the driver's claim was premised on a deliberate lie, and so was unreasonable and vexatious. As a result, the driver was ordered to pay his former employer more than $18,000 on an indemnity basis.

Lessons for employers

Employers should consider making an application for costs if the applicant has made false assertions in witness statements, or other documents, in an unfair dismissal proceeding.

If an employer suspects that an applicant's claim is premised on a lie, they should also consider referring to the possibility of costs orders during pre-trial settlement negotiations. This may help achieve a more reasonable settlement, by highlighting to the applicant the potentially expensive costs risks of proceeding to trial.

Election 2016 – consequences for employment law?

In brief: The trigger for the 2016 double dissolution election was a failed workplace relations Bill, but workplace relations policy did not feature prominently in the campaign. With the Coalition returned to power, Managing Associate Andrew Stirling and Associate Tegan Ayling look at the changes we can expect from the new parliament.

The Coalition's focus

With Malcolm Turnbull and the Coalition retaining power, we expect Bills for the reintroduction of the Australian Building and Construction Commission (ABCC), and changes to the rules regarding how registered organisations, including trade unions, are administered, to be reintroduced to Parliament. However, given the number of seats the Coalition has managed to secure, it will face difficulty in passing these Bills, even at a joint sitting.

Otherwise, the Coalition announced that it intends to implement the majority of the recommendations coming out of the Royal Commission into Trade Union Governance and Corruption. These include giving the court power to disqualify union officials who repeatedly breach workplace laws, and criminalising giving or receiving payments from employers to union officials.

The ALP's campaign offering

In its bid for office, the ALP had promised to:

  • 'protect' weekend penalty rates – at this stage, this policy goes no further than promising to make submissions to the Fair Work Commission in favour of retaining existing rates;
  • introduce five days' paid domestic violence leave, as a new National Employment Standard – the unions have been advocating paid domestic violence leave, but so far very few employers have agreed to it. This policy would make paid domestic violence leave a universal entitlement in Australia;
  • reintroduce the Road Safety Remuneration Tribunal;
  • develop definitions of internship and casual employment, to address underpayment and possible exploitation; and
  • introduce a national licensing regime for labour hire agencies – labour hire licences would be subject to a 'fit and proper' person test. Persons who knowingly or recklessly use an agency without a licence would be penalised, and unpaid wages would be able to be recovered from host employers.
Possible future consensus

Regardless of who won the election, we expect:

  • higher penalties for employers who underpay employees or breach sham contracting provisions – there have been high-profile examples of employee underpayments and sham contracting reported in the press over the last 18 months or so. Both parties are promising tough action on this behaviour, particularly for serious and intentional breaches;
  • increased powers and resources for the Fair Work Ombudsman to prosecute employee underpayment and sham contracting cases;
  • laws to make franchisors and parent companies liable for breaches of workplace laws committed by their franchisees and subsidiaries – the Coalition initially proposed to introduce these laws, and the ALP has since adopted a similar policy, including changing the franchising code; and
  • enhanced laws to protect migrant workers from exploitation.

There appeared to be some consensus between the major parties about these issues. How the ALP and the crossbench in the Senate chose to deal with them now remains to be seen.

Enforceable undertaking for large underpayment

In brief: The Fair Work Ombudsman has accepted an enforceable undertaking requiring an employer to pay more than $2 million to the more than 200 employees it underpaid, along with a range of other remedial activities. Senior Associate Sikeli Ratu reports.

 
 

How does it affect you?

  • An employer who pays staff below award rates because of incorrect advice about, or a miscalculation of, award entitlements may still have committed a breach of the Fair Work Act 2009 (Cth) (the Act).
  • The Fair Work Ombudsman (the FWO) has extensive powers to investigate suspected breaches and take action against employers. In certain circumstances, the Act allows the FWO to accept an enforceable undertaking from an employer to rectify a contravention, instead of pursuing the employer through the courts.

Enforceable undertakings under the Act

Employees and others can refer alleged breaches of the Act to the FWO, which will typically investigate the alleged breach using the wide range of powers the Act gives it. If the FWO reasonably believes that an employer has contravened the Act, the FWO can take enforcement action against them. For serious contraventions, the FWO may commence court proceedings against the employer.

However, as an alternative to court proceedings, the FWO may accept from an employer a formal 'enforceable undertaking' under which the employer agrees to admit to the contravention, commits to taking specified remedial steps to address the contravention and promises to adopt future measures to ensure compliance.

More than $2 million in additional payments

In a recent case, the FWO accepted an enforceable undertaking from an employer to pay former and current employees more than $2 million and take other action.

The employer's workers were covered by a complex arrangement of old state-based awards, a transitional award and a modern award. The employer admitted that it did not apply penalty rates and allowances, apparently because of a misunderstanding about the application of the various awards, and due to advice that the employer had received. Some employees were underpaid more than $50,000. In total, more than 200 employees had been underpaid.

Once the underpayment error was identified, the employer worked cooperatively with the FWO's investigation. Before executing the enforceable undertaking, the employer voluntarily took remedial steps, such as hiring a new specialist HR manager and making contact with affected employees.

In light of the employer's willingness to admit to the contravention (which employers must do if they want to use an enforceable undertaking as an alternative to going to court), the FWO accepted an enforceable undertaking. In addition to making back payments of more than $2 million, the employer committed to:

  • establishing new systems to ensure compliance with the Act;
  • paying for specific training for management on the employer's obligations under the Act, the applicable award and the employer's new compliance systems;
  • future auditing of the employer's compliance with its obligations under the Act;
  • issuing an apology letter to all affected employees;
  • displaying notices at the workplace and running an advertisement in the Herald-Sun about the contraventions and the enforceable undertaking; and
  • making a payment of $15,000 to a local community legal centre.

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