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Focus: Employment Law

19 September 2016

In this issue: we look at how redundancies can breach enterprise agreement provisions; whether union officials can exercise their right of entry entitlements before or after work; reasonable notice terms in employment contracts; and the processes a labour hire company should follow before dismissing an employee.

Redundancies breach enterprise agreement provisions

In brief: The Full Court of the Federal Court has reinstated employees retrenched in breach of the redundancy terms of their enterprise agreement, even though the employer had adequately consulted with them. Senior Associate Tarsha Gavin and Lawyer Tom Kavanagh report.

How does it affect you?
  • Employers must carefully consider an employee's terms and conditions of employment, including in an enterprise agreement, before retrenching them.
  • Employers should be especially wary of clauses in enterprise agreements that limit the circumstances in which employees can be retrenched (eg no forced redundancy) or require consideration of alternatives to forced redundancy (eg redeployment into alternative roles). 
Background

Port Kembla Coal Terminal (PKCT) decided to retrench three employees following an operational review. PKCT's enterprise agreement contained redundancy and consultation provisions requiring it to:

  • make use of redeployment and voluntary redundancy before implementing forced redundancies;
  • investigate all avenues to avoid forced redundancies, including a reduction in contractors; and
  • consult with employees where there is a major change in its workforce.

The Construction, Forestry, Mining and Energy Union (CFMEU) and the employees alleged that PKCT had failed to comply with these obligations. One of the employees was a CFMEU representative and so also commenced a general protections claim alleging that the termination of his employment was because he was an industrial representative. 

At first instance, the Federal Court agreed that PKCT had breached its enterprise agreement by failing to properly consult and to consider voluntary redundancy and redeployment opportunities for the employees. It also upheld the general protections claim. PKCT appealed the decision.

The decision

The majority of the Full Court1 upheld the finding that PKCT had failed to comply with its redundancy obligations in the enterprise agreement. In particular, the majority found that PKCT had not undertaken any assessment of the employees' skills and competencies to determine the viability of redeploying them into positions held by contractors. Further, the Full Court found that PKCT was obliged to undertake a voluntary redundancy round, offering voluntary redundancies to the retrenched employees or to employees who occupied positions to which the retrenched employees could have been redeployed.

However, the majority overturned the finding that PKCT had not complied with its consultation obligations, deciding that the operational review that resulted in the redundancies did not constitute a 'major change' that triggered the consultation requirement.

The majority also found error in the primary judge's decision that PKCT had breached the general protection provisions and so remitted this claim for a fresh hearing. 

Based on its findings that there had been a breach of PKCT's redundancy obligations, the court upheld the order for reinstatement of two of the employees with back-pay for the period since termination.

Union officials' right of entry limited to working hours

In brief: The Fair Work Commission has ruled that union officials cannot exercise their right of entry entitlements before or after work. Senior Associate Tarsha Gavin and Lawyer Miranda Scott report.

How does it affect you?

Union officials cannot exercise their right of entry entitlement to hold discussions with workers before or after work. Any such discussions must be held during a break in an employee's shift (eg a meal break).

The facts 

Officials of the Construction, Forestry, Mining and Energy Union (CFMEU) tried to exercise their right of entry to hold discussions with contractors of BHP Billiton Nickel West Pty Ltd on a site in Western Australia. These discussions were scheduled to occur before and after the contractors' rostered shifts.

Under the Fair Work Act 2009 (Cth), right of entry permit holders may enter premises for the purposes of holding discussions with employees they are entitled to represent. However, that right may be exercised only during mealtimes or other breaks. The CFMEU argued that the scheduled discussions fell within the definition of 'other breaks' under the Act, since the discussions were held within the ordinary working hours of the premises. 

The decision

The Fair Work Commission (FWC) decided2 that 'other breaks' did not include the periods before and after an employee's shift. A major consideration in reaching this conclusion was the fact that the word 'break' implies some interruption of work that is already underway. Where an employee had not yet started or had already finished their shift, it could not properly be described as a 'break'.

The FWC noted that holding discussions before or after work would not necessarily cause undue inconvenience to an employer or impede their ability to conduct their business, especially where such discussions are held during the normal working hours of the business. Despite this, the FWC was not prepared to read 'other breaks' as including discussions outside the employees' shift. The FWC pointed out the uncertainty that this could create and the potential for encroachment on the employer/occupier's property rights. For example, there would be issues concerning how long before or after an employee's shift the right of entry could properly be exercised, or whether the occupier of the site would be obliged to provide access if the scheduled discussions fell outside normal working hours.


Is reasonable notice necessary or should complying with the NES be enough?

In brief: The Federal Circuit Court of Australia has observed that the minimum notice period provided for by the National Employment Standards (NES) should not preclude implying a term requiring reasonable notice of termination into employment contracts that do not include an express termination clause. Senior Associate Chloe Wilton reports.

How does it affect you?
  • If an employment contract does not expressly include a termination clause, the courts have implied a term into the contract allowing either party to terminate by giving 'reasonable notice'.
  • There is significant uncertainty about what period of notice a court will consider to be reasonable.
  • Employers should ensure all employees are employed under a written employment agreement that expressly provides for notice of termination of employment by both parties. It is also better if the contract includes a clause saying that it will continue to apply despite any changes to the employee's position, duties or remuneration and may be amended only by agreement in writing between the parties.
Background

The court considered a general protections claim brought by a former employee of Direct Mail and Marketing Pty Ltd, which included a claim that he was entitled to be paid 12 months' as reasonable notice of termination of employment. The former employee commenced employment with Direct Mail in 1999 in accordance with a written employment contract that provided for notice of termination. The employment contract stated that it would continue 'until terminated in accordance with the provisions of this agreement or until superseded by a further agreement which explicitly replaces this agreement.'

The former employee was promoted to the position of Sales Manager in 2009 and to the position of Group General Manager in 2012. The 2012 promotion and the changes to the former employee's remuneration package were confirmed in a letter that stated 'this letter will now form part of your employment agreement as an amendment'.

The former employee argued that:

  • at the time of each promotion he and Direct Mail entered into a new employment agreement;
  • each new agreement did not include an express right of termination (as was included in the 1999 contract); and
  • in the event that either party was to terminate each new agreement, it was an implied term that they would provide the other party with reasonable notice of termination.
The court's decision

The court decided3 that, based on the plain words of the 1999 employment contract and the 2012 letter, the notice of termination of employment terms of the 1999 contract continued to form part of the employee's contract. This was because the 1999 contract clearly showed that the parties had agreed that the terms of the contract would continue to apply unless expressly agreed that they would not. There was no evidence of such an express agreement.

As a result, there could not be an implied term of reasonable notice. 

The court went on to consider an alternative argument put by Direct Mail which was that the operation of the notice of termination provisions of the NES prevented the implication of a term of reasonable notice. The court said that the NES are intended to provide a minimum notice period only, with any breach being subject to remedies provided for in the Fair Work Act. The court observed that it is strongly arguable that the NES notice of termination provisions should not mean courts should not imply a term of reasonable notice where the employment contract is silent as to notice of termination.


Labour hire worker 'incapacitated' by host employer's direction he be removed from site

In brief: The Fair Work Commission has concluded that, in certain circumstances, a labour hire company will have a valid reason to dismiss an employee following a host employer's direction that the employee be removed from its workplace. Partner Simon Dewberry and Lawyer David Hunt report.

How does it affect you?
  • A host employer's direction to remove a labour hire employee from site can be a valid reason justifying that employee's dismissal by the labour hire company.
  • However, the labour hire company should still follow proper process before dismissing the employee, including ensuring redeployment options are fully explored.
Background

Mr Pettifer was employed by labour hire company MODEC Management Services Pty Ltd and was placed with BHP Petroleum Inc.
Following Mr Pettifer's involvement in an incident in October 2015, BHP exercised its contractual right to direct MODEC to remove Mr Pettifer from its workplace.

MODEC removed Mr Pettifer from the workplace and made numerous attempts to find him alternative employment. However, it was unsuccessful in doing so and ultimately terminated his employment in November 2015.

Mr Pettifer subsequently made an unfair dismissal claim. In rejecting the claim, the Fair Work Commission concluded:

  • the reason for Mr Pettifer's dismissal was BHP's decision to exclude him from site;
  • this reason did not relate to Mr Pettifer's conduct or capacity; and
  • as a result, it was not necessary to consider whether BHP had a valid reason for dismissal.

Mr Pettifer appealed.

Was the dismissal unfair?

The key question for the Full Bench was whether the reason for Mr Pettifer's dismissal related to his capacity or conduct. If it did, then the Full Bench would need to consider whether there was a valid reason for his dismissal when determining whether it was unfair.

The Full Bench agreed4 that Mr Pettifer's conduct (ie his involvement in the incident) was not the reason for his dismissal. MODEC would have continued to employ him if it had found him a suitable position.

However, the Full Bench concluded that BHP's removal of Mr Pettifer from its workplace rendered him unable to perform the inherent requirements of his position. This meant that his subsequent dismissal was related to his capacity.

As a result of this finding, the Full Bench had to determine whether Mr Pettifer's incapacity represented a valid reason for his dismissal. It noted that a labour hire company that dismisses an employee who was excluded from a host employer's workplace cannot rely only on that exclusion to justify the employee's dismissal. To be a fair dismissal, the employer would need to explore redeployment opportunities. However, MODEC had made numerous, unsuccessful attempts to find Mr Pettifer alternative employment and so the Full Bench concluded that there was a valid reason for the dismissal.

Following consideration of other relevant factors, the Full Bench dismissed Mr Pettifer's appeal.

 
Footnotes
  1. Port Kembla Coal Terminal Ltd v CFMEU [2016] FCAFC 99.
  2. Construction, Forestry, Mining and Energy Union v BHP Billiton Nickel West Pty Ltd [2016] FWC 3829.
  3. McGowan v Direct Mail and Marketing Pty Ltd [2016], FCCA 2227 (30 August 2016).
  4. Pettifer v MODEC Management Services Pte Ltd [2016] FWC 3194.

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