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Focus: Workplace Relations

30 July 2013

In this issue: we look at the risks of dismissing an employee on the basis of a sham redundancy; the need to clearly document changes to employment arrangements; when legal representation before the Fair Work Commission will not be granted; an employer's duty of care in relation to workplace bullying; and a case illustrating the difference between adverse action and unfair dismissal.

Redundancy masked by unlawful adverse action

In brief: A recent Federal Court decision has highlighted the risks of dismissing employees on the basis of a redundancy, if that redundancy is a 'sham'. These risks are heightened if an employer fails to comply with voluntary redeployment obligations in the applicable enterprise agreement. Special Counsel Eleanor Jewell and Lawyer Arlou Arteta report.

How does it affect you?

  • An employer should ensure that when dismissing an employee on the basis of redundancy, it is a genuine redundancy.
  • The primary decision maker's evidence will be critical in demonstrating a dismissal was not for unlawful reasons, such as one related to the dismissed employee's workplace rights.
  • The court will determine penalties for unlawful adverse action, based on the severity of the breach, and any need for deterrence.
  • The obligations to avoid redundancies under enterprise agreements are real and substantive. Employers should be careful to comply with them.

Background

Professor Judith Bessant was dismissed from her employment with the Royal Melbourne Institute of Technology (RMIT), on the basis that her position was redundant. Professor Bessant and the National Tertiary Education Union (the NTEU) brought proceedings in the Federal Court, alleging that there was no genuine redundancy. It was alleged the dismissal amounted to unlawful adverse action against Professor Bessant because she had exercised, or had proposed to exercise, workplace rights. Professor Bessant and the NTEU also alleged RMIT was in breach of voluntary redeployment obligations under the relevant enterprise agreement (the agreement).

In 2009, the School of Global Studies, Social Science and Planning (the school) at RMIT went through a restructure, led by Professor David Hayward. During the reorganisation of the school, Professor Bessant and Professor Hayward came into conflict over a number of decisions that Professor Hayward made that affected Professor Bessant's work and position at the school.

In late 2009 and 2010, Professor Bessant made a number of written, and other, complaints that concerned bullying by, and management practices of, Professor Hayward. These complaints were made to WorkSafe Victoria, the RMIT Ombudsman, Vice-Chancellor Professor Margaret Gardner, Professor Hayward himself, the health and safety representative at RMIT, and to the NTEU. The complaints were alleged, and admitted, to be exercises of workplace rights by Professor Bessant. She alleged these were among the 'real' reasons for the decision to dismiss her.

RMIT alleged that Professor Gardner's decision to make Professor Bessant redundant was due to financial considerations and falling student enrolments.

Adverse action

The Federal Court found that Professor Gardner's decision to dismiss Professor Bessant amounted to adverse action related to her workplace rights. Professor Gardner was the primary decision maker, and her evidence did not demonstrate that the decision was unrelated to Professor Bessant's exercise, or proposed exercise, of her workplace rights. Further, there was inadequate evidence that financial considerations were key to Professor Bessant being dismissed.1

Penalty and reinstatement

The court found that the unlawful adverse action was a serious breach of RMIT's obligations. RMIT's failure to meet its obligations under the agreement by not invoking the voluntary redeployment process was also found to be a serious contravention.

The court found that a penalty involving an element of deterrence was necessary. This was to discourage RMIT (and other employers) from using redundancy processes to terminate the employment of an employee for reasons that would be in contravention of the Fair Work Act 2009 (Cth). The total penalty applied for the unlawful adverse action and the breach of the enterprise agreement was $37,000.

Professor Bessant was reinstated to the position she held before she was made redundant.

Key implications

When dismissing an employee for redundancy, it is critical that employers ensure that there are no other reasons involved in the decision to dismiss. In particular, employers should ensure that the primary decision maker's evidence will be adequate to demonstrate that the decision did not involve unlawful adverse action. This is particularly important in view of the reverse onus that applies in such claims – ie employers must be able to demonstrate that the substantial and operative reasons for the decision to dismiss were lawful, and did not involve any unlawful grounds, such as exercising a workplace right.

It is also critical that employers comply with any obligations in the relevant enterprise agreements when considering whether to dismiss an employee for redundancy. Failure to do so can result in civil penalties being imposed. Further, it may impact on the credibility of any evidence that the dismissal was genuinely due to redundancy.

New employer or amendment to existing agreement?

In brief: The Full Federal Court has awarded a retrenched Singapore-based employee almost $600,000 after finding that the identity of his Australian employer had not changed, despite changes in the location and contractual documentation governing his employment. Special Counsel Luke Gattuso and Lawyer Anna Loizou report.

How does it affect you?

  • The case highlights the importance of accurately documenting proposed changes in employment arrangements, including changes of the employer entity, and also the importance of making clear whether a new agreement is intended to amend or replace an existing contract.
  • Where there is uncertainty, the courts will determine the issues based on the objective facts and evidence as to the parties' intentions at the relevant time. 

Background

Dr Brian Cohen was a Singapore-based developer of information technology. His initial employment agreement (the 2000 agreement) was with an ASX-listed holding company (the Australian company). The 2000 agreement included a six-month notice provision, and was governed by the laws of NSW.

Due in part to the expansion of the corporate group, Dr Cohen was required to relocate to Bangalore, India, in 2006, and to go on a secondment to Chennai in 2007. These changes in his employment arrangements were documented in separate correspondence that was provided to him in 2006 and 2008, but contained unclear and contradictory references as to who was his employer.

Dr Cohen was retrenched in September 2011. He subsequently issued proceedings, seeking termination payments under the 2000 agreement that had not been made at the time of the termination, including a payment in lieu of notice and certain leave entitlements.

The central issue for determination was the proper identity of Dr Cohen's employer at the time he was retrenched. It was accepted initially by the Federal Court of Australia that his employer had changed to become a Singapore-based member of the corporate group, and so the 2000 agreement no longer applied.2

However, Dr Cohen appealed to the Full Federal Court, on the basis that the Australian company remained his employer in 2011.

The decision on appeal

The Full Federal Court upheld the appeal, concluding that the later employment arrangements only supplemented the 2000 agreement.3 The reasons for this decision included that:

  • there had been no discussions concerning a change of Dr Cohen's employer;
  • there were references to Dr Cohen's employment as 'continuing' (which was at odds with there being a new employment agreement with a different employer); and
  • Dr Cohen retained an eligibility to participate in particular share schemes that were not available to non-Australian company groups.

Dr Cohen was awarded $516,830, consisting of outstanding salary, a payment in lieu of six months' notice, and his long service and annual leave entitlements, plus interest and costs.

Legal representation before the Fair Work Commission

In brief: Lawyers must seek permission to represent a party in a matter before the Fair Work Commission. One of its recent decisions illustrates that permission will be refused if unfairness to the other party would result. Senior Associate John Naughton and Law Graduate Timothy Leschke report.

How does it affect you?

  • The Fair Work Act 2009 (Cth) (the Act) provides that, unless permitted by the Fair Work Commission (the FWC), a party may not be represented by a lawyer.
  • The FWC may grant permission only on the grounds of either 'complexity/efficiency', 'inability' or 'fairness'.
  • In many cases, this threshold will be met, as legal representation is often desirable, to promote efficiency and fairness in the determination of complex factual or legal matters before the FWC.
  • However, if permission is granted without proper consideration, the hearing may be found not to be 'fair and just'.

Background

On 29 January 2013, Mr Emmanuel Azzopardi filed an application for unfair dismissal, to which Serco Sodexo Defence Services Pty Ltd (SSDS) responded on 15 February 2013. On 8 April 2013, following an unsuccessful conciliation, SSDS's lawyers filed a 'notice of representative commencing to act' on behalf of SSDS. Mr Azzopardi, who was unrepresented, objected on the grounds of fairness and 'the interests of justice'. The FWC conducted a hearing to determine whether SSDS should be granted permission to have legal representation.4

The decision

The FWC noted that, under the Act, permission to have legal representation may be granted by the FWC only if:

  • it would enable the matter to be dealt with more efficiently, taking into account the complexity of the matter (the 'efficiency/complexity' ground);
  • it would be unfair not to allow the party to be represented, because it is unable to represent itself effectively (the 'inability' ground); or
  • it would be unfair not to allow the party to be represented, taking into account fairness between the person and other parties in the same matter (the 'fairness' ground).

The FWC observed that this was a more stringent test than the one that previously existed under the Workplace Relations Act 1996 (Cth).

In the FWC's view, as Mr Azzopardi was unrepresented, 'something of an imbalance would emerge' and this 'would create great potential for the absence of a fair and just hearing'.

The rationale

The FWC's decision relied on the recent Federal Court decision in Warrell v Walton.5 In that case, Mr Warrell had been dismissed by his employer, Bacto Laboratories Pty Ltd. He was self-represented, while Bacto had been 'impliedly' granted permission to have Mr Butterfield, a solicitor, appear on its behalf.

After Mr Warrell's unfair dismissal application was rejected by the Full Bench of the then Fair Work Australia (following a number of appeals), he ultimately applied to the Federal Court, on the grounds that the proceeding was not 'fair and just', by reason of Mr Butterfield having been impliedly granted permission to appear on behalf of Bacto.

The court accepted that the Full Bench failed to take into account a number of factors in granting permission for legal representation, including:

  • the failure on the part of the Senior Deputy President at first instance to:
    • make findings of fact relevant to her apparent conclusion that one of the grounds to grant permission (ie complexity/efficiency, inability, or fairness) had been satisfied; and
    • provide reasons for apparently granting permission for legal representation; and
  • the fact that Mr Warrell was functionally illiterate and brain damaged; and
  • the manifest advantages that Bacto would have in cross-examining Mr Warrell, and the manifest difficulties confronting Mr Warrell in his questioning of those providing evidence on Bacto's behalf.

The court found these factors operated to provide 'unfairness' to Mr Warrell and that the 'damage was done' by allowing Mr Butterfield to appear. The court quashed the Full Bench's decision and ordered the matter be reconsidered.

Implications

Lawyers may appear in the FWC only if they have the Commission's permission. In most cases, the granting of permission will be non-contentious, either because both parties have legal representation or because the issues in dispute make representation desirable. However, legal representation may not be allowed in a range of circumstances, including where only one of the parties is self-represented, or when the matters in dispute are relatively straightforward.

Win for employer in bullying case

In brief: A recent Victorian decision addresses an employer's duty of care to employees who allege workplace bullying. Partner Simon Dewberry and Lawyer Bridget Little report.

How does it affect you?

  • Allegations of bullying must be carefully managed by employers, especially where the employer knows, or ought to know, that an employee is suffering from stress or anxiety.
  • However, employers should not assume that all legal claims relating to bullying are indefensible, especially where the employer has in place a robust policy and a system for handling complaints.

Background

Ms Brown was a salaried partner and head of the family law department at Maurice Blackburn Cashman lawyers (MBC). She alleged she was bullied by another partner who reported to her. Specifically, Ms Brown alleged the other partner had systematically undermined her, sought to isolate her from her colleagues, interfered with her maternity leave and made unjustifiable complaints against her.

Ms Brown instituted proceedings against MBC, claiming she had developed a psychiatric injury as a result of the bullying. She alleged that MBC was vicariously liable for the acts of bullying.

The trial judge held that Ms Brown was not the victim of bullying.6 Further, the trial judge held that it was not reasonably foreseeable that she might suffer psychiatric injury as a result of the alleged events.

The appeal decision

The Victorian Court of Appeal confirmed that an employer owes a non-delegable duty of care to its employees to take reasonable care to avoid exposing them to unnecessary risks of injury. When considering this duty of care in relation to psychiatric injury, the courts will take into account whether the risk of a particular employee sustaining psychiatric injury was reasonably foreseeable.

While Ms Brown had made complaints to the firm's managing partner, the court found that, at that time, there was no indication that she was vulnerable to psychiatric injury.7 It held that it was only once MBC had been put on notice of Ms Brown's stress, and the risk of psychiatric injury became foreseeable, that its duty of care was engaged.

Further, relying on the High Court decision of Koehler v Cerebos,8 the court considered that the fact Ms Brown continued to act as department head and to conduct her practice successfully, ran contrary to her contention that MBC ought to have known that she was at risk of psychiatric injury.

The court was satisfied that MBC had taken reasonable steps to address the risk of psychiatric injury. In particular, it observed that the managing partner was fully aware of the issues surrounding bullying in the workplace, had sufficient training and experience to deal with staffing issues, and had attempted mediation as quickly as possible.

Lessons for employers

Employers must have in place robust policies that address bullying and appropriate mechanisms for handling complaints. They should also respond to bullying complaints without delay.

Adverse action v unfair dismissal

In brief: A recent Federal Court of Australia decision points to a key difference between a claim for adverse action and a claim for unfair dismissal under the Fair Work Act 2009 (Cth). Senior Associate John Naughton and Law Graduate Brent Reading report.

How does it affect you?

  • Where a claim for adverse action is brought, the employer must demonstrate that any adverse action that was taken was for a lawful reason, rather than for the reason asserted by the employee.
  • In some cases, it will be possible to satisfy this requirement with only limited objective evidence.
  • When dismissing an employee, an employer should be careful to retain any corroborative evidence supporting its reasons for its decision to terminate.

Background

On 25 August 2011, Mr Vink commenced employment, as a qualified accountant, with LED Technologies Pty Ltd. At the relevant time, he was 66 years old. His employment was authorised by Mr Tony Ottobre, the managing director of LED, who was in the United States at the time Mr Vink was engaged.

Towards the end of October 2011, Mr Ottobre returned from the United States. Shortly after he returned, Mr Ottobre accused Mr Vink of not answering his emails, of sabotaging LED's email system and of not paying certain of Mr Ottobre's personal bills. Mr Clerk (who was a manager of LED at the time) also accused Mr Vink of causing Mr Ottobre's telephone to be disconnected.

On 10 November 2011, Mr Clerk dismissed Mr Vink, on behalf of Mr Ottobre. Mr Vink claimed that during the interview with Mr Clerk in which he was dismissed, Mr Clerk had told him that he was being dismissed because Mr Ottobre wanted a 'youthful and vibrant' work atmosphere at LED. Mr Vink believed he had been dismissed because of his age. Mr Ottobre alleged, however, that Mr Vink's employment with LED was terminated because he was incompetent.

Relevant provisions

Mr Vink commenced an adverse action claim against LED under section 351 of the Fair Work Act 2009 (Cth) (the Act), which prohibits an employer taking 'adverse action' against a person who is an employee, or prospective employee, of the employer, because of the person's age. Adverse action includes the dismissal of an employee.

Section 361(1) of the Act provides that when an employee makes a claim of adverse action against an employer, it will be the employer's onus to establish that it did not dismiss the employee for the reasons the employee alleges. This meant LED was required to establish that it did not dismiss Mr Vink because of his age.

The Federal Magistrates Court proceedings

Before the Federal Magistrates Court of Australia (now the Federal Circuit Court of Australia), Mr Vink sought an order that he be reinstated to his position with LED or, in the alternative, be paid monetary compensation and provided with a reference from LED. He also sought a pecuniary penalty for LED for its actions.

The court accepted that it was more probable than not that Mr Clerk told Mr Vink that Mr Ottobre wanted a 'vibrant and youthful culture in the company'. However, the court held that, regardless of what Mr Clerk might or might not have said to Mr Vink, it was required to determine only Mr Ottobre's reasons for dismissing Mr Vink.

The court ultimately decided that Mr Ottobre had dismissed Mr Vink because he was incompetent. It did not accept that the applicant's age, although possibly a factor, was the 'substantial and operative' reason for his dismissal. As such, the application was dismissed.9

The appeal

On appeal, the Federal Court again considered whether LED, acting through Mr Ottobre, had dismissed Mr Vink because of his age, contrary to s351 of the Act. The court agreed that it was presumed LED had acted for this reason, unless LED established the contrary.

However, the court found that Mr Ottobre had given unchallenged evidence that he dismissed Mr Vink because he considered he was incompetent. As there was objective evidence that supported Mr Ottobre's claim to have acted for a lawful reason in dismissing Mr Vink, the court found that the termination was lawful and the presumption set up by s361 of the Act was displaced.

The court also confirmed that the focus was on the substantial and operative reasons that motivated Mr Ottobre to dismiss Mr Vink. The court accepted (as had the Federal Magistrates Court) that Mr Ottobre decided that Mr Vink was incompetent, and should be dismissed for that reason, and that he had not dismissed Mr Vink's because of his age.

Interestingly, the court noted that had Mr Vink made a claim for unfair dismissal, the fact that there was little corroborative evidence to support Mr Ottobre's claim of incompetence against him might well have invited a conclusion that Mr Ottobre was mistaken in his assessment of his performance, or that there was insufficient evidence before Mr Ottobre to justify him dismissing Mr Vink. However, it considered there was sufficient objective evidence to resist Mr Vink's adverse action claim.10 Accordingly, Mr Vink's appeal was dismissed, with costs awarded to LED.

Footnotes
  1. National Tertiary Education Union v Royal Melbourne Institute of Technology [2013] FCA 451 (16 May 2013).
  2. Cohen v iSoft Group Pty Limited [2012] FCA 1071 (28 September 2012).
  3. Cohen v iSOFT Group Pty Limited [2013] FCAFC 49 (8 May 2013).
  4. Mr Emmanuel Azzopardi v Serco Sodexo Defence Services Pty Limited [2013] FWC 3405 (29 May 2013).
  5. Warrell v Walton [2013] FCA 291 (4 April 2013).
  6. Brown v Maurice Blackburn Cashman [2012] VCC 647 (18 May 2012).
  7. Brown v Maurice Blackburn Cashman [2013] VSCA 122 (22 May 2013).
  8. Koehler v Cerebos (Australia) Ltd (2005) 222 CLR 44 (6 April 2005).
  9. Vink v LED Technologies Pty Ltd [2012] FMCA 917 (9 October 2012).
  10. Vink v LED Technologies Pty Ltd [2013] FCA 443 (16 May 2013).

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