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Focus: Workplace Relations

9 September 2013

In this issue: we look at an employee's termination for expressing political views on Twitter; whether an employee could rely on the protection of company policies inconsistent with terms in his employment contract; an adverse finding against an employer for disciplining an employee over health and safety issues; when redistribution of work responsibilities will amount to repudiation; unreasonable refusal to offer part-time employment following parental leave; and the distinction between contractual and other employment obligations. 

Employee's right to 'tweet' protected by the constitution? That's not the #vibe

In brief: The Federal Circuit Court of Australia dismissed an employee's application for an injunction to prevent her employer from terminating her employment for expressing her political views on social media. Senior Associate Veronica Siow and Lawyer Rebecca Allen report.  

How does it affect you?

  • Political views expressed by an employee are not protected by the implied freedom of political communication in the Constitution.
  • Where such political views are expressed in a manner which breaches the employment contract and the employer's code of conduct and social media policies, disciplinary action taken by the employer may not be unlawful adverse action.  

Background

Ms Michaela Banerji was employed as a 'public affairs officer' in the Department of Immigration and Citizenship (DIAC). A frequent 'tweeter' and using the Twitter handle of '@LALegale', Ms Banerji tweeted her views (which the court noted were sometimes mocking, sometimes critical) about, among other matters, various politicians and employees of DIAC. In particular, she made disparaging comments about the Federal Government's immigration policy and was critical of the policies and practices of one of the security service providers for Commonwealth immigration detention centres. Ms Banerji's Twitter account was anonymous.

Ms Banerji was notified in October 2012 that an investigation by DIAC into her conduct on Twitter had concluded that she had breached sections of the Australia Public Service (APS) Code of Conduct and that the proposed sanction for this conduct was termination of her employment.

Ms Banerji sought a declaration that any finding by DIAC that she had breached the APS Code of Conduct would contravene the implied constitutional freedom of political communication. She also sought an interlocutory injunction preventing her dismissal by DIAC.

The decision

The Federal Circuit Court found that the political comments being tweeted by Ms Banerji while she was employed by DIAC were not constitutionally protected.1 The court therefore:

  • rejected Ms Banerji's argument that she had a constitutional 'right' to political comment while breaching her employment contract, the APS Code of Conduct and departmental social media guidelines; and
  • refused to grant an injunction restraining DIAC from terminating Ms Banerji's employment, noting that she would be adequately protected by alternative remedies of damages and/or reinstatement if dismissal eventuated.

The court also accepted DIAC's submission that Ms Banerji's application for injunctive relief was premature, since no final decision had been made to dismiss her. It considered that the internal departmental review already commenced should be allowed to continue and make its final recommendations to DIAC. The court noted that Ms Banerji would not be precluded from filing a further application once the decision of DIAC had been confirmed and she was given an opportunity to respond to it. It is now up to DIAC to decide whether or not it will terminate Ms Banerji's employment – #staytuned.

Supreme Court allows summary termination with notice under contract

In brief: A recent Victorian Supreme Court decision held that an employee summarily dismissed in accordance with his employment contract could not rely on terms of company policies and procedures that were inconsistent with express contractual terms. Senior Associate John Naughton and Law Graduate Timothy Leschke report.

How does it affect you?

  • Terms of company policies and procedures will not be incorporated into an employment contract if they are inconsistent with express terms.
  • Subject to statutory protections, notice clauses give an employer a right to terminate without providing a reason.
  • Where a restructure results in termination of a senior executive's employment, a court will look carefully to determine the genuineness of the restructure and termination.
  • The implied term of mutual trust and confidence does not apply to dismissal itself.  

Background

Mr Z was employed by Flexovit in 1987, which subsequently became Abrasives when it was purchased by Saint-Gobain (SG) in 1999. At this time, Mr Z assumed the role of General Manager – Commercial Operations, and reported directly to Abrasive's Managing Director, Mr Freeman, until mid-2010 when Mr Freeman retired. Mr Z wanted to take over as Managing Director, but an external candidate, Mr Steven Chaur, was appointed. Mr Chaur sought to implement a '100 day plan' to bring Abrasives within the global SG group framework and to lift client satisfaction.

On 26 October 2010, Mr Chaur terminated Mr Z's employment under his contract without warning, claiming unsatisfactory work performance and lack of responsiveness, including to specific requests made of him.

The claim

Mr Z responded by bringing proceedings claiming that termination of his employment immediately – without his first being subject to a period of performance management:

  • breached terms of SG's disciplinary and termination procedures which allegedly formed part of his contract;
  • breached the implied term of mutual trust and confidence; and
  • was in fact a termination by way of redundancy (entitling him, because of his lengthy service, to a $750,000 severance payment).

While Mr Z's contract allowed either party to terminate without reason with four weeks' notice to the other, it also provided that SG's 'Policy and Procedures are deemed to be included in and form part of this contract'.

Mr Z alleged that termination without a period of performance management contravened SG's disciplinary and termination procedures which had been incorporated into the contract. Generally, these required a protracted performance management process before employment could be terminated. SG submitted that terms of these procedures could not be incorporated into the contract given their inconsistency with an express term of the contract (namely, the notice clause).

The decision

The Victorian Supreme Court agreed with SG's submission that the requirements of the company's policies and procedures must give way to the notice provision due to inconsistency, and to impose such a requirement would take away a right expressly conferred by the contract.2

Contrived redundancy, or genuine performance concerns?

In relation to Mr Z's redundancy claim, the court considered that Mr Z's employment or position was not surplus to requirements at the time of his termination. However, the court noted there was a restructuring of Mr Z's duties and responsibilities following his departure without engaging a person to perform them, meaning the critical question as to redundancy was whether:

  • the restructure was planned and caused Mr Z's termination; or
  • his termination (due to Mr Chaur's performance concerns) caused the restructure.

In considering this question, the court scrutinised whether Mr Chaur's concerns about Mr Z's performance were contrived in order to justify a performance-based termination (when in reality it was a planned redundancy), or whether they were genuine.

Overall, the court was satisfied there was no plan for redundancy in place and that there was a basis for Mr Chaur's concerns about Mr Z's performance and willingness to participate constructively in the new regime.

Implied term of mutual trust and confidence?

In rejecting Mr Z's claim that SG had breached the implied term of mutual trust and confidence, the court:

  • indicated that 'the purpose of such a term is to facilitate the proper functioning of the contract, to preserve the relationship and protect the employee from oppression, harassment and loss of job satisfaction'; but
  • confirmed that such a term 'has been held to be inapplicable to dismissals, as the duty not to damage or destroy the relationship does not apply to the exercise of the power to terminate the relationship.'
     

Disciplinary action for safety reasons adverse

In brief: A recent Federal Court decision considered whether disciplinary action taken for an employee's failure to co-operate with the employer's decision regarding health and safety matters constituted adverse action under the Fair Work regime. Lawyer Emma Reilly and Law Graduate Michela Agnoletti report.

How does it affect you?

  • Employers should be cautious when disciplining employees on the basis of conduct relating to their responsibilities under occupational health and safety legislation.
  • Adverse action can include various aspects of the disciplinary process, including initiating a misconduct investigation, suspending an employee from his or her employment, and issuing a warning in relation to misconduct.  

Background

On 5 August 2011, Mr Zwart, (a Visy factory worker, health and safety representative and delegate of the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (the AMWU)), 'tagged' two forklifts he believed presented a health and safety risk. Tagging was an approved process at the workplace involving the attachment of a tag to plant or equipment to indicate that it was faulty or unsafe.

Following Mr Zwart's tagging, management held a number of meetings with him to resolve the safety issues regarding the forklifts. Each of the managers involved in these meetings took the view that Mr Zwart acted uncooperatively and obstructively at these meetings. As a result, Mr Zwart was suspended from his employment pending the outcome of an investigation into his conduct. Ultimately, Mr Zwart was issued with a first and final warning in relation to his behaviour at these meetings.

Following initial interlocutory proceedings to stop the investigation and suspension3, the AMWU and Mr Zwart applied to the Federal Court seeking declarations and penalties against Visy and the two managers involved in the disciplinary process, alleging breach of the general protection provisions under the Fair Work Act 2009 (Cth). In particular, the applicants argued that the respondents had taken adverse action against Mr Zwart for a prohibited reason – namely, that Mr Zwart had exercised his rights and duties under OHS legislation.

The decision

The Federal Court held that:

  • Mr Zwart had exercised workplace rights under OHS legislation (by tagging the forklifts he considered unsafe and by advocating his position regarding safety matters during the meetings with management); and
  • the respondents had taken adverse action against him for this reason.4

The court found that the managers took disciplinary action against Mr Zwart, including suspending him from his employment, because they believed Mr Zwart was intent on deliberately disrupting production.

However, the court determined that the suspension, misconduct investigation, and first and final warning each constituted adverse action against Mr Zwart. One of the managers involved in the disciplinary process was found liable as an accessory.

The court found that:

  • Mr Zwart's suspension constituted adverse action because it resulted in 'a deterioration in the advantages otherwise enjoyed by Mr Zwart in his employment';
  • the misconduct investigation amounted to adverse action because it exposed Mr Zwart to a reduction in the security of his future employment; and
  • the final warning involved adverse action because it reduced the future security of Mr Zwart's employment at Visy.

The applicants were ordered to file proposed orders and penalties against the respondents.

When does redistributing duties amount to repudiation of an employment contract?

In brief: During periods of organisational change, employers sometimes seek to redefine roles by creating new duties or redistributing existing responsibilities. Employers should take care, as this can amount to a repudiation of existing employment contracts, inviting claims for damages. The New South Wales Supreme Court recently confirmed the principles that apply when assessing whether a repudiation had occurred. Senior Associate Veronica Siow and Lawyer Sikeli Ratu report.

How does it affect you?

  • Repudiation may be established by conduct showing an unwillingness to perform the obligations of the employment contract. A significant diminution in the remuneration, benefits, status or responsibilities of an employee's position may constitute a repudiation by an employer giving rise to a damages claim by an employee.
  • Employers are entitled to seek to negotiate variations to employment contracts and the courts accept that employment contracts require a degree of flexibility.
  • However, before attempting to vary an employee's position, an employer should carefully consider the scope of a position (including the formal contractual duties, the responsibilities of the position in practice, and the perceived status of a position) and should seek, where possible, to make changes that maintain that scope.
  • When proposals to reallocate significant responsibilities between positions (especially senior executive positions) result in changes in the scope of the positions, employers should seek advice. 

Background

The Campaign Palace (TCP) is a national advertising agency and part of a global corporate group (the Group). TCP employed Mr Fishlock in 2003 in the position of 'Chairman – Executive Creative Director'. The contract of employment did not detail the responsibilities of that position extensively, other than noting that Mr Fishlock occupied his position in respect of TCP's Australian advertising business and confirming that he reported to the regional chairman and CEO of the Group.

By late 2010, TCP was not performing as well as the Group wanted. In October that year, a creative director who reported to Mr Fishlock resigned. At around this time, TCP became aware that Mr Collins, a successful advertising executive from a foreign agency, was interested in coming to work for TCP.

Mr Collins was not willing to join TCP in a subordinate creative role and asked for his role to be known as Chief Creative Officer (CCO) (which would be a new position). TCP agreed and planned to redistribute some of Mr Fishlock's responsibilities to this new position. In particular, Mr Collins was to have 'ultimate creative responsibility' for TCP's Australian business. TCP recognised that it needed to discuss this with Mr Fishlock. Discussions with Mr Fishlock did not go smoothly and, while these discussions were taking place, a TCP client was given a presentation in which Mr Collins was presented as the CCO of TCP, while Mr Fishlock was described only as 'Chairman'.

A couple of weeks after this presentation, Mr Fishlock told TCP that, in his view, TCP had repudiated his employment contract, and that he accepted their repudiation and the employment contract was terminated.

The decision

The court agreed with Mr Fishlock, stating the following principles applied when determining whether a repudiation has occurred:

  • it is not necessary to show that a party intended to repudiate the contract;
  • the question of repudiation is a question of fact and is a serious matter that the courts will not infer lightly;
  • repudiating conduct can be one single serious act, or a series of more minor acts; and
  • in the context of employment contracts, a significant reduction in status or responsibility (even where the employee retains the same remuneration and title) can amount to a repudiation. 5 

Although Mr Fishlock retained some reporting lines to the Group, the court found that, in practice, he had previously been the most senior 'creative' person in Australia and had sole responsibility to direct, supervise and control the creative work of TCP in Australia. TCP's creation of the new CCO position was at the expense of Mr Fishlock's position, ie several of his key leadership responsibilities were transferred to the CCO position.

Accordingly, the court found that TCP's actions amounted to a 'clear act' designed to 'signal' to Mr Fishlock that TCP no longer intended to regard him as having ultimate responsibility for TCP's Australian creative business. TCP had therefore repudiated Mr Fishlock's employment contract and was liable for damages amounting to $268,259 (which represented approximately the total of Mr Fishlock's contractual notice period).

Constructive dismissal after parental leave

In brief: A recent decision of the Fair Work Commission found that an employer constructively dismissed an employee when it unreasonably refused to allow her to work part-time, following a period of parental leave. Lawyer Emily Harvey and Law Graduate Michela Agnoletti report.

How does it affect you?

  • Employers must make considerable efforts to accommodate an employee's request to work part-time following parental leave.
  • When determining disputes relating to requests for part-time work, courts and tribunals are likely to be informed by contemporary attitudes towards flexible working arrangements and parental responsibilities.

Background

Ms Rind was employed by the Australian Institute of Superannuation Trustees (AIST) as an IT systems administrator on a full-time basis. Under the terms of an enterprise agreement, Ms Rind had a right to request part-time work following a period of parental leave, and AIST was permitted to refuse only on reasonable business grounds. The Fair Work Act 2009 (Cth) establishes a similar right.

Following a period of parental leave, Ms Rind requested that she be allowed to return to work on a graduated basis, eventually returning for three days per week. AIST initially refused her request on the basis that the business required a full-time IT systems administrator, but later agreed to consider Ms Rind returning to work part-time, on the condition that it was able to find a suitable candidate to job-share.

Ms Rind responded that she considered that a return to work was no longer a safe or viable option, and her employment came to an end.

The decision

The Fair Work Commission found that the conditional nature of AIST's agreement was effectively a refusal to agree to Ms Hind's request to work part-time.6 The Commission found the refusal was unreasonable because:

  • while Ms Rind was on parental leave, AIST had contracted with an external service provider for 12 hours per week to fill her role;
  • all proposals by AIST in response to the request required attendance of five days per week or were otherwise conditional in nature;
  • there was no evidence of an attempt to recruit a full-time IT systems administrator since Ms Hind's employment relationship came to an end, meaning that AIST had been operating on 'part-time' performance of the IT systems administrator role; and
  • the refusal did not seem to be reasonable, based on the impact on AIST's customer service.

In determining that the refusal forced Ms Rind to resign, the Commissioner considered contemporary views about the importance of women being able to give birth 'without foreclosing their employment'. Ms Rind was entitled to treat her employment as at an end because there was an unreasonable refusal by AIST to allow her to work part-time. Therefore, she was constructively dismissed.

As this case concerned a jurisdictional objection, regarding whether Ms Rind was dismissed, the case was then listed for a further conference before the Commission.

Breach of EBAs and employment policies will not usually give rise to contractual remedy

In brief: A recent Queensland Supreme Court decision indicated that relevant enterprise bargaining agreements, policies and procedures referred to in an employment agreement will not usually be contractual terms. This decision highlights the important distinction between contractual and other obligations in an employment relationship. Senior Associate John Naughton and Law Graduate Timothy Leschke report.

How does it affect you?

  • Without express and explicit incorporation, relevant enterprise bargaining agreements (EBA), policies and procedures will not usually form a binding part of an employment contract.
  • Terms of good faith and mutual trust and confidence, will be implied terms of employment contract only when they are necessary to give business efficacy to the contract.
  • These documents will still govern the employment relationship, but not give rise to contractual damages.
  • Employers should review their employment contracts and ensure that EBAs, policies and procedures are specifically excluded as contractual terms to avoid the risk of incurring unwanted contractual obligations. 

Background

On 3 July 2009, Dr Dimitri Gramotnev's employment as a lecturer of physics at the Queensland University of Technology (QUT) was terminated for serious misconduct. Dr Gramotnev subsequently brought proceedings claiming QUT breached his employment contract through failures to comply with policies and procedures allegedly forming contractual terms of the employment agreement. He also alleged bullying, harassment, psychological abuse and 'abuse of power'. He sought damages in excess of $2.5 million.

Key issues

The key questions before the Queensland Supreme Court were:

  • whether QUT's EBAs, manual of policies and procedures (MOPP), and/or QUT's statutes formed part of Dr Gramotnev's employment contract (either expressly or impliedly); and
  • whether Dr Gramotnev's employment contract contained various implied terms, including a duty of good faith in the performance of the employment contract and a duty not to act in a manner likely to destroy or seriously damage the relationship of trust and confidence between the parties.7
Express incorporation?

The court identified the test for determining whether the EBA, MOPP and/or statutes were incorporated into Dr Gramotnev's employment contract was whether a reasonable person would have understood this to be the case.

Relevantly, the conditions of Dr Gramotnev's appointment were 'prescribed' by the relevant EBAs and 'included' the provisions of the MOPP, relevant University statutes and policies. He argued these 'could not be clearer' in indicating that the EBA, MOPP and statutes have contractual force.

The court, however, preferred to draw a distinction between employment contract terms where a breach allows an employee to claim damages for breach of contract, and terms which govern the employment relationship but are not contractual in nature and so do not permit a damages claim.

The court ultimately reached the conclusion that a reasonable person in the position of Dr Gramotnev could not have reasonably understood the EBAs, MOPP or statutes to form binding contractual terms.

Implied incorporation?

In relation to implied incorporation of EBAs, MOPP and statutes, the court relied on the High Court decision in Byrne8 as authority for the proposition that, in order to imply a term into an employment contract on the basis of a party's presumed intention or imputed intention, each of the factors set out in BP Refinery9 must be met. Namely, the implication must:

  • be reasonable and equitable;
  • be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
  • be so obvious that 'it goes without saying';
  • be capable of clear expression; and
  • not contradict any express term of the contract.

The court applied Byrne and considered that generally there is no scope for the implication of terms of an EBA into an employment contract as there is no general custom to this effect, no principle of law that requires implication, and no need for implication to give business efficacy to the contract. The court reached a similar conclusion in respect of the MOPP and statutes, in that there was no necessity for their implication to give business efficacy to the contract.

Implied terms of good faith and trust and confidence

The court also concluded that while a term of 'good faith' or 'mutual trust and confidence' may be implied by law into contracts of employment:

  • it will not be implied where there is no necessity to do so to enable the contract to work effectively; and
  • no such necessity arose in this case.
Footnotes
  1. Banerji v Bowles [2013] FCCA 1052 (9 August 2013).
  2. Z v Saint-Gobain Administration Pty Ltd [2013] VSC 377 (24 July 2013).
  3. Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v Visy Packaging Pty Ltd (No 2) [2011] FCA 953 (31 August 2011).
  4. Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v Visy Packaging Pty Ltd (No 3) [2013] FCA 525 (29 May 2013).
  5. Paul Fishlock v The Campaign Palace Pty Limited [2013] NSWSC 531 (9 May 2013).
  6. Ms Hanina Rind v Australian Institute of Superannuation Trustees [2013] FWC 3144 (31 May 2013).
  7. Gramotnev v Queensland University of Technology [2013] QSC 158 (19 June 2013).
  8. Byrne v Australian Airlines Ltd (1995) 185 CLR 410 (11 October 1995).
  9. BP Refinery (Westernport) Pty Ltd v Hastings Shire (1994) 180 CLR 266 (27 July 1977).

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