MESSAGE FROM THE EDITOR
In this month's Update, we focus on a number of recent developments which have attracted a great deal of media attention and are likely to significantly alter the landscape of labour & employment law in Australia. These include the ruling of the Fair Work Commission ("Commission") to increase the national minimum wage and the Coles decision recently handed down by the Full Bench of the Commission regarding the "better off overall test". We also revisit an issue discussed in last month's Update (the granting of legal representation before the Fair Work Commission) in a commentary that examines the broader implications of recent decisions involving section 596 of the Fair Work Act 2009 (Cth) and the effectiveness of that provision in affording parties procedural fairness.
IN THE PIPELINE—HIGHLIGHTING CHANGES OF INTEREST TO EMPLOYERS IN AUSTRALIA
Fair Work Commission's Expert Panel Lifts the National Minimum Wage by $15.80 per Week
In a highly anticipated ruling that will directly affect more
than 1.86 million employees, the Fair Work Commission Expert Panel
has decided to lift the minimum wage by $15.80 per week, bringing
it to $672.70 (an increase of 2.4 per cent). The ruling will affect
not only those workers whose wages are set by award rates, but
those under enterprise agreements (as these are required to leave
workers better off than the award entitlements). As part of its
annual review of the national minimum wage and minimum wages in
modern awards, the Expert Panel cited a number of compelling
economic factors in support of its decision, including on-trend
economic growth, stronger labour market conditions and historically
low levels of inflation and wages growth.
While various union groups were hoping for a substantial increase
of $30.00 a week, employer and industry groups called for more
modest increases of no more than 2 per cent, for fear that higher
increases could adversely affect employment figures and lead to job
cuts. In response to a submission by the United Voice union, the
Commission also signalled that it would hold a preliminary hearing
(as part of the 2016–17 review) into whether the Expert Panel
should adopt a medium-term target for the national minimum
wage.
Fair Work Ombudsman Inquiry into Housekeeping Services in Australian Hotels Uncovers Potential Contraventions of Fair Work Act 2009 (Cth) and Leads to Enforceable Undertakings
This month the Fair Work Ombudsman ("Ombudsman")
completed its inquiry into the procurement of housekeeping services
by a number of Australian four- and five-star hotel
operators.
The resulting report uncovered a range of potential contraventions
of the Act, many of which arose from a lack of awareness of
employers as to the applicable industrial instrument. For instance,
it was found that some workers were incorrectly paid under the
Hospitality Industry (General) Award 2010 rather than the Cleaning
Services Award 2010, whilst others were paid a flat rate for each
room they cleaned. Consequently, the Ombudsman recovered more than
$57,000 for over 120 underpaid workers. Of even greater concern to
the Ombudsman was that many of the housekeepers interviewed were
young, overseas workers who had a limited understanding of their
workplace entitlements and so were particularly vulnerable to
exploitation.
Legal Background. As outlined in previous
Updates, the Ombudsman is increasingly cracking down on
employers who mischaracterise employees as independent contractors
(intentionally or otherwise) and thus fail to provide them minimum
workplace protections. However, this recent inquiry demonstrates
that the practice is still prevalent within the commercial cleaning
sector.
In its report, the Ombudsman made a clear distinction between
"misclassification" by employers (which is unintentional)
and "sham contracting" (which it defined as "the
deliberate misrepresentation of [an] employment relationship as
[an] independent contracting arrangement"). While either
conduct may constitute a contravention of the Act, the latter will
likely lead to the imposition of harsh penalties and compensation
orders.
Findings. The Ombudsman investigated the
arrangements of Oaks Hotels & Resorts Limited
("Oaks") and its wholly owned subsidiary, Housekeepers
Pty Ltd ("Housekeepers"). Oaks was the sole principal
contractor for Housekeepers and had expressly set up the company to
provide housekeeping services. The Ombudsman found that the two
entities were engaging workers as subcontractors under contracts
for service when, at law, they were properly characterised as
employees. As a result, they allegedly failed to afford the
housekeeping workers their minimum entitlements under the Act and
the Hospitality Award in respect of wages and conditions, including
prescribed penalty rates, annual leave and sick leave
entitlements.
Both Oaks and Housekeepers agreed to enter into enforceable
undertakings on 9 May 2016 after the Ombudsman threatened to launch
legal action in respect of the alleged breaches of the Act. As part
of these enforceable undertakings, Oaks recognised that its
operating model led to its workers being vulnerable to exploitation
and acknowledged its responsibility to ensure its entities and
individuals act in compliance with the relevant workplace
legislation. It undertook, amongst other things, to implement
changes to its labour engagement practices by ensuring that all
individuals engaged by Oaks to perform cleaning work are, or will
be, engaged as employees, not independent contractors and that any
underpaid workers are repaid their full entitlements. Housekeepers
gave similar undertakings and, in addition, undertook to provide
its directors with workplace relations training and to make a
donation of $20,000 to the Cleaning Accountability Framework to
fund education about workplace rights.
The Ombudsman's inquiry report also contained general
recommendations to the subsector as a whole. This included a
recommendation that other named hotel and resort operators enter
into compliance partnerships with the Ombudsman (which are
formalised through Proactive Compliance Deeds) as a means of
publicly demonstrating their commitment to compliance with
Australian workplace legislation. As a result of the inquiry, the
Ombudsman entered into three Enforceable Undertakings and issued
eight letters of caution, six compliance notices and two
infringement notices in total.
Restricted Legal Representation Before the Fair Work Commission
Under section 596 of the Fair Work Act 2009 (Cth)
("Act"), a lawyer can appear on behalf of a party in a
matter before the Commission only if leave is granted or if the
lawyer works as a party's in-house counsel or for a trade union
or peak industry body. While designed to reduce the cost and
complexity of workplace disputes and to ensure a fairer outcome for
both employees and employers, in practice section 596 of the Act
has not delivered those outcomes.
Efficiency, Costs and the Achievement of a Fair
Outcome. It has been argued that the absence of lawyers in
matters before the Commission may create fairer and more
cost-effective outcomes and save unnecessary formality. However,
experience suggests that the absence of legal representatives
imposes an additional administrative burden on the Commission (and
hence increased public costs) and also creates substantive fairness
concerns insofar as all material factual intricacies and pertinent
legal decisions may not be drawn to the Commission's attention.
The potential for lawyers to improve, rather than inhibit,
efficiency and fairness in hearings has been recognised by the
Commission in several recent decisions.
Appearing as of Right: In-House Counsel and Lawyers
Employed by Trade Unions and Peak Industry Bodies. The
ability of in-house lawyers and lawyers employed by trade unions,
peak councils and other similar organisations to appear as of right
in matters before the Commission under section 596(4) of the Act is
anomalous. Why should the same right not also be provided to other
parties, such as non-unionised employees and small business
employers that do not have the benefit of an in-house legal
team?
Despite the anomaly, and notwithstanding previous decisions to the
contrary, the Commission has sensibly recognised in more recent
cases that an employer cannot automatically be considered to be on
an equal bargaining footing with an employee during a hearing
simply because it can rely on its dedicated human resources team.
For example, in Wilcox v Holcim (Australia) Pty Ltd,
[2016] FWC 2359, the Commission granted leave for a large employer
with specialised human resources personnel to have legal
representation because the personnel were not legally qualified and
also lacked any detailed understanding of the Act and advocacy
experience. Further, some of the key personnel would have had to
perform the dual roles of advocate and witness during the hearing,
imposing an unfair burden for individuals without any legal
knowledge or experience.
Conclusion. The Commission's recent decisions
indicate that employers will likely be granted leave for legal
representation where their in-house personnel do not have legal
qualifications or procedural or advocacy experience and/or are
required to act as both witnesses and advocates during a
hearing.
Nevertheless, to address procedural inefficiency and substantive
fairness concerns, reforms to section 596 of the Act may be
warranted. Even if the restriction on legal representation is not
removed entirely, more clarity needs to be provided, particularly
for employers, as to the circumstances when leave for legal
representation will be granted.
HOT OFF THE BENCH—DECISIONS OF INTEREST FROM THE AUSTRALIAN COURTS
Fair Work Commission Confirms that Coles Supermarkets
Underpaid Workers After Negotiating Agreement with Union that Led
to Penalty Rates and Casual Loadings Below the Minimum Award
Entitlements
The Full Bench of the Commission has considered an appeal against a
decision approving an enterprise agreement that was negotiated
between Coles and the Shop, Distributive and Allied Employees
Association ("SDA"). The Full Bench was not satisfied
that the Coles Store Team Enterprise Agreement 2014-17
("Agreement") passed the "better off overall
test" ("BOOT").
Factual Background. The Commission approved the
Agreement on 10 July 2015, having been satisfied that it passed the
BOOT. Two appeals of that decision were brought by Duncan Hart (a
student and part-time employee) and the Australasian Meat Industry
Employees Union and were heard together.
The Agreement provided a higher hourly rate than the relevant rate
under the General Retail Industry Award 2010
("Award") but applied lower penalty rates for evenings,
weekends and public holidays. The Agreement also provided various
benefits for employees, including additional penalties for ordinary
hours, rest and meal breaks, payment when on annual leave, wage
increases, pre-approved leave arrangements, blood donor leave,
defence service leave, accident makeup pay, carer's leave,
compassionate leave, emergency services leave, natural disaster
leave, redundancy pay, enhanced well-being, support for non-work
activities, support for domestic violence and support for care
responsibilities.
Legal Background. Under section 193(1) of the Act,
an enterprise agreement passes the BOOT if the Commission is
satisfied, as at the test time "that each award covered
employee, and each prospective award covered employee, for the
agreement would be better off overall if the agreement applied to
the employee than if the relevant modern award applied to the
employee".
The Full Bench noted that it was well established that this test
requires: (i) the identification of terms which are more beneficial
for an employee; (ii) the identification of terms which are less
beneficial for an employee; and (iii) an overall assessment of
whether an employee would be better off under the agreement.
Decision. The Full Bench considered the impact on
Mr Hart and seven other employees who worked at Coles stores in
Northcote and Benalla in Victoria and found that on base wages
alone, the lower penalty rates for evenings, weekends and public
holidays meant they lost between $142 and $3,506 annually under the
Agreement. The Full Bench considered that the monetary loss was
potentially significant for those who work primarily at times which
attract lower penalty rates under the Agreement, for example,
part-time and casual employees.
The Full Bench also considered whether the benefits provided in the
Agreement could make up for the loss. This was, however, not the
case, as some of the benefits could not be quantified or had been
overstated. Therefore, the Full Bench found that each employee and
prospective employee was not "better off overall" under
the Agreement.
As a result, Coles was given the opportunity to remedy the failure
by giving an undertaking to make an adjustment in payments to
employees who would not otherwise be better off (for example,
employees working a sufficiently high proportion of penalty
shifts). Alternatively, they could provide an undertaking limiting
the number of penalty hours that could be worked by employees. The
Full Bench held that should Coles not provide an appropriate
undertaking, it would make an order allowing the appeal and
quashing the decision to approve the Agreement.
In a recent response to the decision, Coles has indicated that it
will not be providing any undertakings, citing the impracticality
of the Commission's proposals. Instead, the 77,000 workers
covered by the impugned Agreement will revert to a previous
enterprise agreement that dates back to 2011. However, Coles
indicated it would preserve wage and penalty rates (as contained in
the Agreement) and honour a previously agreed-upon pay rise of 1.5
per cent.
Lessons for Employers. This decision is a
cautionary tale for employers with similar enterprise agreements,
as it confirms that in determining whether an enterprise agreement
passes the BOOT under section 193(1) of the Act, the interests of
those employees most adversely affected by an agreement will be
taken into account. The fact that the majority of workers will be
better off overall is not sufficient to satisfy the test. All
employees must be better off overall when an agreement is compared
to the relevant award.
Federal Circuit Court Orders University Academic to Pay More Than $130,000 for Vexatious Dismissal Claim
The Federal Circuit Court of Australia ("FCCA") has
ordered an academic to pay her former employer, the University of
Sydney, more than $130,000 for bringing claims for unfair dismissal
in the Commission and the FCCA. Part of the monetary sum consisted
of a $103,000 costs order for instituting the FCCA proceedings
vexatiously and without reasonable cause.
Factual Background. In March 2014, Ms Simin
Maleknia filed an unfair dismissal claim under the Act in the
Commission against her former employer, the University of Sydney.
However, the Commission dismissed the proceedings because her
application was filed out of time. Her employment as an academic
had been terminated in December 2013, at the end of a fixed-term
contract with the University. Ms Maleknia appealed to the Full
Bench of the Commission but failed on appeal and was ordered to pay
the university $1,240 in indemnity costs. The Commission also made
a further costs order of $17,823 due to Ms Maleknia's attitude
and conduct throughout the proceedings.
On 15 May 2015, Ms Maleknia filed a claim in the FCCA for unfair
dismissal under the Act. The University brought a motion for
summary dismissal of those proceedings. Separately, the University
filed a claim in the FCCA on 17 December 2015 for Ms Maleknia's
failure to pay the respective Commission costs orders.
Legal Background. Under section 611(2) of the Act,
the Commission may order costs where an application has been made
vexatiously or without reasonable cause or where it should have
been reasonably apparent that the application had no reasonable
prospect of success. As section 611 is a civil remedy provision,
any failure to comply with such an order is subject to civil
remedies under the Act.
In relation to civil remedies, section 545(1) provides that the
FCCA may make an order if the court is satisfied that a person has
contravened a civil remedy provision. Further, section 545(2)(b)
provides that such an order may involve an award of compensation
for loss that has been suffered by a person because of the
contravention.
In addition, section 570(2) provides for the making of costs orders
by courts, including the FCCA, where: (i) the court is satisfied
that the party instituted the proceedings vexatiously or without
reasonable cause; or (ii) the court is satisfied that the
party's unreasonable act or omission caused the other party to
incur the costs.
Decision. In relation to the Commission costs
orders, the FCCA was satisfied that it was appropriate to order
that Ms Maleknia pay $19,063 in compensation in respect of the loss
suffered by the University due to her failure to comply with those
orders (i.e. the sum of the Commission costs orders), and $492.07
in interest. Further, the FCCA made an order under section
570(2)(b) that Ms Maleknia pay the University's costs in the
amount of $11,000, due to her unreasonable act or omission in
failing to comply with the Commission costs orders.
In a separate decision, the FCCA dismissed Ms Maleknia's claim
for unfair dismissal and noted that "the proceedings were on
their face, vexatious and included allegations of a kind entirely
extraneous to the Fair Work Act 2009." In particular,
Ms Maleknia failed to appear in court on a number of occasions and
filed voluminous material, including a 180-page application and a
600-page affidavit. The FCCA found that due to the unreasonable
conduct of Ms Maleknia, she had caused the University to incur loss
in respect of costs incurred in defending those proceedings. This
was enough to satisfy the FCCA that Ms Maleknia had instituted the
proceedings vexatiously and without reasonable cause within the
meaning of section 570(2)(a), and it ordered she pay costs in the
amount of $103,000, which were the party/party costs incurred by
the University.
Lessons for Employers. These decisions highlight
some of the circumstances where costs may be awarded against an
employee in proceedings brought under the Act in the FCCA, in
contrast to the ordinary rule that each party bear its own costs.
Where an unfair dismissal claim is brought by an employee, an
employer may be able to seek an order for costs under section
570(2), should the employee's application be found to have been
brought vexatiously or without reasonable cause.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.