Focus: workplace Relations
18 December 2015
In this issue: we look at sham contracting arrangements; gambling addiction as a possible protected attribute under anti-discrimination law; who is liable for costs associated with bullying claims; a failed general protections claim; when a lawful direction will be deemed reasonable; and employers' responsibilities in relation to an extension of parental leave request.
- High Court rules on sham 'Odco' independent contracting arrangements
- Gambling addiction may be a disability
- Costs awards in bullying claims
- No evidence of complaint leads to failed general protections claim
- When is a lawful direction reasonable?
- Refusing an extension to unpaid parental leave
In brief: The High Court has ruled that employers cannot avoid sham contracting provisions simply by re-engaging former employees as independent contractors through a third party. Special Counsel Eleanor Taylor and Managing Associate Andrew Stirling report.
How does it affect you?
- The sham contracting provisions in the Fair Work Act prohibit employers from misrepresenting employment relationships as independent contracting relationships.
- Those provisions can be breached by an employer even if a third party engages the workers as independent contractors and then on-supplies them to the employer.
- The risk of breaching sham contracting arrangements is especially high when former employees are dismissed so that they can be re-engaged as contractors.
Ms Best and Ms Roden were employed by Quest South Perth Holdings Pty Ltd (Quest) for a number of years as housekeepers. That employment was brought to an end and replaced with an arrangement under which:
- Ms Best and Ms Rodan were engaged by Contracting Solutions Pty Ltd as independent contractors; and
- Quest engaged Contracting Solutions for the supply of Ms Best's and Ms Rodan's housekeeping services.
Quest and Contracting Solutions represented to Ms Best and Ms Rodan that they were performing work as independent contractors. However, Ms Best and Ms Rodan continued to perform the same work as they had when they were employees.
The Fair Work Ombudsman prosecuted Quest and Contracting Solutions for breach of the sham contracting provisions in section 357 of the Fair Work Act 2009 (Cth). The full court of the Federal Court ruled that Quest's actions had not contravened s357. Although the court agreed that Ms Best and Ms Rodan were always Quest's employees, the court concluded that s357 did not apply if the independent contracting relationship was represented to be with a third party (in this case, Contracting Solutions).
The High Court unanimously set aside the decision of the Federal Court, concluding that employers are prohibited from misrepresenting to employees that they are performing work as an independent contractor under a contract with a third party.1
The High Court stated that the purpose of the section is 'to protect an individual who is in truth an employee from being misled' by their employer about their employment status. To confine the prohibition in the way suggested by the Federal Court would allow the employer to 'act with impunity' simply by having the employee engaged through a third party.
The High Court concluded that Ms Best and Ms Roden continued to perform the same work for Quest in the same manner as they had always done and that they never became independent contractors. The High Court stated that the 'misrepresentation attributed to Quest was squarely within the scope of the mischief to which the prohibition in s357(1) was directed and is caught by its terms'.
In brief: A tribunal decision has indicated that a gambling addiction may be a protected attribute under anti-discrimination laws. Partner Simon Dewberry and Lawyer Dana Rechtman report.
How does it affect you?
- Disability discrimination may include discrimination on the basis of a person’s gambling addiction or characteristics associated with the condition.
- It is possible that other addictive conditions or substance dependencies may also form the basis of a disability discrimination claim.
Ms Hinder was a store supervisor employed by The Salvation Army (NSW) Property Trust (the Salvation Army). She was suspended with pay in 2011. According to the Salvation Army, this was so it could conduct an investigation into complaints from customers, Ms Hinder's failure to follow directions to clean the shop, and her smoking in non-smoking areas. The suspension followed a report by the Organisational Risk Director that raised concerns in relation to OHS issues and Ms Hinder's performance as the store supervisor. Ms Hinder subsequently resigned before the investigation was complete.
Three years later, Ms Hinder made a claim under the Anti-Discrimination Act 1977 (NSW) (the Act) based on disability discrimination. She alleged that she was suspended because her supervisor fabricated evidence that she had been stealing from the store and that he did this because she was a problem gambler. The Anti-Discrimination Board declined to hear her case so Ms Hinder sought leave to continue with the complaint.
The NSW Civil and Administrative Tribunal understood Ms Hinder's claim to be that a tendency to steal money is a characteristic that is generally imputed to people who are gambling addicts. The Tribunal said that for Ms Hinder to succeed she would have to prove that her gambling problem was a disability and that she was suspended because of her gambling addiction or a characteristic associated with her disability (ie, stealing money). The Tribunal found that both points were arguable and granted leave for Ms Hinder to proceed with her complaint.2
The issue of whether a gambling addiction could be a disability or impairment was also considered by the Victorian Civil and Administrative Tribunal in 2006 when it rejected an employer’s strike out application.3 The Victorian Tribunal was ultimately not satisfied that the complainant was suffering from a gambling addiction and that an impairment was established on the facts. However, it did not find that a gambling addiction could not constitute an impairment.4
In brief: The Fair Work Commission has confirmed that there are limited circumstances in which it will exercise the discretion to award costs against a party to a bullying claim. Senior Associate Chloe Wilton reports.
How does it affect you?
- In deciding whether to award costs against an applicant in a bullying claim, the Fair Work Commission will only consider the applicant's conduct in making the application and not any subsequent conduct.
- Employers should carefully consider the utility of applying for costs incurred in defending a bullying claim.
The Fair Work Commission (the Commission) heard a bullying application brought by the Administration Manager and Chief Executive Officer (the Applicants) of the Collie Chamber of Commerce and Industry Inc against three members of the Chamber’s management committee (the Respondents).5
At the hearing of the matter, the Applicants withdrew their applications. A new management committee had recently been voted in and this did not include the Respondents. As a result, the Applicants did not wish to proceed with their applications because they would no longer have contact with the Respondents and so would not continue to be bullied.
The Respondents subsequently sought an order that the Applicants pay the Respondents' costs of responding to the applications.
When may the Commission order costs against an applicant in a bullying application?
As a general rule, parties must bear their own costs in relation to a matter before the Commission. However the Commission may order an applicant to pay a respondent's costs if it is satisfied that:
- the applicant made the application vexatiously or without reasonable cause; or
- it should have been reasonably apparent to the applicant that the application had no reasonable prospect of success.
The Commission emphasised that:
- the general rule that a party must bear its own costs must only be departed from with caution and in a clear case; and
- the Commission must determine whether, when the application was made, it was vexatious, without reasonable cause or had no reasonable prospect of success. This means the applicant's subsequent conduct during the proceedings is irrelevant.
The Commission observed that an application is made 'without reasonable cause' or with 'no reasonable prospect of success' only if it was 'manifestly untenable or groundless', while an application will only have been made vexatiously if 'the predominant purpose in instituting the proceeding is to harass or embarrass the other party, or to gain a collateral advantage'.
Were the applications made vexatiously, without reasonable cause or with no reasonable prospect of success?
The Commission refused to order that the Applicants pay the Respondents' costs, deciding that:
- it was appropriate for the Applicants to discontinue their applications once it was clear that the Respondents would no longer come into contact with the Applicants. The discontinuance was consistent with previous decisions in which the Commission has declined to make a stop bullying order because the applicant no longer worked with the respondents; and
- on the evidence before the Commission, the applications were not manifestly untenable or groundless and were not motivated by the predominant purpose of harassing or embarrassing the Respondents or to gain a collateral advantage. As a result, the limited circumstances in which costs may be ordered were not established and the Respondents' application for costs was dismissed.
In brief: The Federal Court has rejected an employee's claim that her employer took adverse action against her by re-allocating her duties to other employees and ultimately terminating her employment. Senior Associate Tristan Garcia reports on the decision.
How does it affect you?
- Employees who allege adverse action on the basis of complaints in relation to their employment must prove that they made a complaint at the relevant time and that it was brought to their employer's attention.
Ms Wroughton was employed by the Catholic Education Office (Catholic Education) Diocese of Parramatta. Her employment was terminated in November 2014 following an investigation into allegations of bullying and harassment that had been raised against her.6 As a result of that investigation, Catholic Education determined that Ms Wroughton had created a 'climate of intimidation and fear of retribution', including by:
- withholding information vital to other employees' effective work performance;
- isolating employees and giving them the 'silent treatment'; and
- otherwise taking action to make other employees appear incompetent, in hope of prompting their resignation.
Ms Wroughton brought Federal Court proceedings, alleging Catholic Education had taken adverse action against her by redistributing her workload to other employees and ultimately terminating her employment. She also made allegations of sexual harassment and discrimination against Catholic Education's chief executive.
The Federal Court dismissed Ms Wroughton's claims. With respect to the adverse action claim, the court decided that:
- the redistribution of her duties was the result of changes to the organisation's reporting structure and that these changes had nothing to do with any exercise by her of a workplace right;
- Ms Wroughton had not established that she had ever exercised a workplace right by making a complaint; and
- her dismissal was based on the findings of the report into the allegations of bullying and harassment that had been made against her, not on account of any workplace right.
The court also concluded that Ms Wroughton's claims of sexual harassment could not be substantiated and had not been raised by her prior to the termination of her employment. Although this would not preclude such matters from being raised subsequently, in the circumstances of the case it was held that her failure to raise complaints when the incidents occurred could be relevant to an assessment of the seriousness with which she viewed the conduct at that time.
In any event, since Ms Wroughton had not made a complaint to the Australian Human Rights Commission with respect to those allegations, the court had no jurisdiction to deal with the claims.
In brief: The Fair Work Commission recently considered whether an employer's direction was reasonable in the context of a workplace smoking ban. Associate Tegan Ayling reports.
How does it affect you?
- Employees must comply with their employer's lawful and reasonable directions.
- Whether a direction is reasonable depends on the circumstances, which might include the impact of the direction on employees, the employer's obligations and, in some cases, any efforts by the employer to consult and notify affected employees.
- Including broad dispute resolution clauses in enterprise agreements allows employees and unions to dispute matters that would otherwise clearly fall within managerial prerogative.
Glencore Mt Owen Pty Ltd introduced a smoking ban that applied to employees at its Mt Owen Complex. The CFMEU filed a dispute with the Fair Work Commission under the dispute resolution clause in the relevant enterprise agreement, arguing that the direction was unreasonable.7 The dispute resolution clause allowed for the Commission to consider disputes arising between Glencore and its employees in the course of employment (not just those arising under the National Employment Standards or the enterprise agreement).
The Commission concluded that Glencore's direction was reasonable. The Commissioner considered several factors in coming to the decision. Those against Glencore included that:
- it would be difficult for some employees to comply with the direction if they were addicted to smoking; and
- the ban was a restriction on the employees' rights (ie smoking is lawful).
The other considerations made by the Commissioner fell in favour of Glencore. For example:
- Glencore had taken measures to reduce the impact of the ban by offering assistance to employees to quit smoking;
- Glencore had to comply with its health and safety obligations, including eliminating risks to health and safety, such as those caused by smoking;
- similar smoking bans had been introduced at other Glencore open cut mines; and
- Glencore consulted with employees for about 19 months leading up to the implementation of the ban and provided six months' notice to employees before it took effect.
It was irrelevant whether there was a 'more appropriate' or 'better' direction available to Glencore to deal with smoking at the workplace (eg nominating dedicated smoking areas).
In brief: Recent amendments to the Fair Work Act 2009 (Cth) include a new requirement that employers give employees a reasonable opportunity to discuss requests to extend their parental leave. Senior Associate Michelle Metham reports.
How does it affect you?
- The National Employment Standards (NES) provide employees who have completed at least 12 months' continuous service with a 12 month unpaid parental leave entitlement and return-to-work guarantee.
- Under the Fair Work Act 2009 (Cth) (the Act), an employee has the right to request an additional 12 months' unpaid parental leave, which can only be refused by the employer on reasonable business grounds.
- There is a new statutory requirement that employers must discuss such requests with the employee before they can be refused.
There have been a number of 'family friendly' changes to the Act since its review in 2012 and the subsequent publication of the report, Towards More Productive and Equitable Workplaces: An evaluation of the Fair Work Legislation (the Report). The key 'family friendly' changes that came into effect on 1 July 2013 comprised:
- expanding the group of employees who have a right to request flexible working arrangements; and
- setting out a non-exhaustive list in the Act of what may constitute reasonable business grounds upon which an employer may refuse a flexible working request.
Recent amendments to the Act responded to an outstanding family friendly recommendation contained in the Report that employers should be required to discuss an employee's requests for extended unpaid parental leave with the employee before such a request can be refused. This derived from concerns that some employers were refusing such requests without giving them due consideration.
The required discussion does not have to take place in a face-to-face meeting, but can take place over the phone or by videoconference. Further, the change does not impose any obligation on the employer to accept the request. A request for flexible working can still be refused by an employer on reasonable business grounds.
- Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd & Ors  HCA 45.
- Hinder v The Salvation Army (NSW) Property Trust  NSWCATAD 239.
- McDougall v Kimberley-Clark Australia  VCAT 1563.
- McDougall v Kimberley-Clark Australia  VCAT 2211.
- Woods & Anor v Collie Chamber of Commerce and Industry Inc & Ors  FWC 6620.
- Wroughton v Catholic Education Office Diocese of Parramatta  FCA 1236.
- Construction, Forestry, Mining and Energy Union v Glencore Mt Owen Pty Ltd  FWC 7752.
- Simon DewberryPartner,
Ph: +61 3 9613 8110
- Veronica SiowPartner,
Ph: +61 2 9230 4135
- Peter ArthurSenior Employment Counsel,
Ph: +61 2 9230 4728
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