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Allens Arthur Robinson

Focus: Workplace Relations – April 2005

In this issue: We look at a High Court decision regarding reinstatement of an employee; psychiatric illness damages claims; greater protection for injured workers from workplace prejudice; unfair commercial contracts; and industrial relations reform in Queensland.

Show me more than the money

In brief: The High Court has confirmed that reinstatement of an employee means more than just payment of remuneration and requires full restoration of pre-termination duties.1 Partner Jamie Wells(view CV) and Lawyer Dana Wintermantel look at the impact of the appeal on employment relationships.

Background

Mr Blackadder was employed by Ramsey Butchering Services as a boner at an abattoir, where he performed boning work on pre-chilled beef carcasses. One day he was directed to perform hot neck-boning, a task he had not previously performed. Mr Blackadder had safety concerns about performing that task, given his lack of training and a pre-existing injury to his right arm. He refused to perform hot neck-boning and his employment was terminated.

An application challenging the termination was successful and the Australian Industrial Relations Commission (AIRC) ordered that he be reinstated to his former position.

In response to the order, Ramsey Butchering Services sent Mr Blackadder a letter informing him that he was reinstated as a boner, but indicating he was not required to report for work until given a medical clearance. Mr Blackadder objected, arguing that the reinstatement order was not conditional on a further medical clearance.

Federal Court

Mr Blackadder commenced proceedings in the Federal Court to enforce the order for reinstatement. He was initially successful but, on appeal, a majority of the Full Court reversed the decision, finding that there is no obligation on an employer under an employment contract to provide work to an employee except when:

  • the contract specifically requires that it be provided;
  • the employee needs to maintain a profile (such as an actor);
  • the employee's career and future prospects depend on the employee working in a particular way; or
  • the employee's remuneration depends on the amount of actual work performed by the employee.

In the Full Court's view, an order for reinstatement simply revives the contract of employment and is not intended to give the employee a right to work that could not be enforced during the ordinary performance of the contract.

Mr Blackadder appealed to the High Court.

Decision

The High Court steered the debate away from the issue of rights under the employment contract. Instead, the appeal was decided by looking at:

  • the specific terms of the AIRC's reinstatement order; and
  • the legislation granting the AIRC the power to reinstate.

Section 170CH(3)(a) of the Workplace Relations Act 1996 (Cth) grants the AIRC the power to make an order to reinstate an employee by 'appointing the employee to the position in which the employee was employed immediately before termination' or to 'another position no less favourable' than the employee's former position.

The High Court held that an order for reinstatement requires restoration of the terms and conditions of employment immediately before the termination in the 'broadest sense'. This includes being provided with work of the same kind and volume as was being performed before termination.

The High Court's reasoning was based on the language of s170CH(3) and, in particular, the use of the words 'reinstate', 'appoint' and 'position'. A number of the judges noted that the power to reinstate is alternate to a power to re-employ to another position within the employer's business. If reinstatement means nothing more than restoration of the contract and payment of benefits under it, the distinction between those two remedies would be undermined.

Implications

The High Court confined its decision to the interpretation of the AIRC's power to order the reinstatement of an unfairly dismissed employee.

Two issues remain unresolved:

  • Does the High Court's approach affect the employer's right to withhold duties during the ordinary performance of the contract?
  • For how long must an employer continue to employ a reinstated employee in the reinstated role? For example, there may be a power in the employee's contract, certified agreement, or award that allows for transfer to other duties or to terminate for independent reasons.

Dealing with the first issue, the Full Court's decision was helpful to employers as a means of enforcing rights of suspension on full pay or when compelling an employee to take garden leave during a notice period. Although the High Court appeal succeeded, the position on suspension and garden leave has not necessarily changed. Some judges noted that 'in modern times, a desire for what has been called 'job satisfaction', and a need for employees of various kinds, to keep and to be seen to have kept their hands in by actual work have a role to play in determining whether work in fact should be provided'. However, these comments do not necessarily limit the employer's rights beyond the types of situations that impose a material disadvantage on the employee if they are not able to actually work.

In terms of the second issue, dealing with the ongoing relationship after reinstatement, the High Court's decision is not particularly helpful. Of the judges that dealt with the issue, all accepted that the employment relationship cannot be static and further changes to the employee's duties may need to be made further down the track. However, there is also a suggestion that the legitimacy of those changes will depend on the circumstances and, if the changes occur in a way that is designed to 'nullify the effect of the reinstatement order', the changes breach the reinstatement order.

This is a fine distinction to draw and one that an employer will need to consider very carefully when proposing a change of duties following reinstatement.

The best way to deal with these risks is to ensure that the contract of employment defines an employee's position in the broadest possible terms and gives an employer the specific right to withhold duties, and to change the tasks to be performed by the employee, the employee's place of work and the area in which the employee is to work.

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Psychiatric illness claim

In brief: The High Court has denied an employee damages for stress caused by overwork. Dr Kirk Lovric and Articled Clerk Erin Hawthorne examine the impact of this decision.

Background

Ms Koehler worked three days a week as a sales representative. Ms Koehler complained to her employer that she could not complete the work assigned to her and repeatedly requested changes in workload, time extensions or extra help. Management refused her requests.

Ms Koehler subsequently developed a psychiatric illness, and a medical expert attributed it to overwork. Ms Koehler sued her employer for damages, claiming breach of her employment contract and a duty of care to provide a safe system of work.

Decision

Ms Koehler was initially awarded $856,742. The employer successfully appealed the decision and Ms Koehler then appealed to the High Court.

The High Court held that the employer was not liable.2 There was evidence that Ms Koehler's duties were, by industry standards, excessive. However, the High Court accepted that 'within the bounds set by applicable statutory regulation, parties are free to contract as they choose about the work one will do for the other'.

The High Court found that it was reasonable for the employer to assume that Ms Koehler's complaint of overwork, following a reduction in her days of work from five to three, was an industrial relations dispute. Ms Koehler had not complained about psychiatric illness. Further, Ms Koehler's condition was not made obvious by visible distress or absence from work. The High Court concluded that the employer could not have foreseen the risk of psychiatric injury.

Implications

This case does not spell the end of stress-related illness as a potentially compensable injury. It is possible that in other circumstances, particularly if there are warning signs pointing to stress, psychological injury may be actionable.

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Greater protection for injured workers from workplace prejudice

In brief: Recent amendments to the Workers' Compensation and Rehabilitation Act 2003 (Qld) prohibit employers from obtaining and using documents relating to a person's workers' compensation history. Lawyer Stacey Kelly reports.

Prohibition on access to documents

The amendments to the Workers' Compensation and Rehabilitation Act 2003 (Qld) (the Act), which commenced on 1 April 2005, are designed to better protect workers with a history of workplace injury from workplace prejudice.

In particular, a new section 572A has been inserted into the Act, which makes it an offence for a person to:

  • obtain or attempt to obtain a workers' compensation document about a worker; or
  • use or attempt to use a workers' compensation document about the worker,

for a purpose relating to the employment of a worker by the person or another person.

Purpose relating to employment

Employment means any process for selecting a person for employment or for deciding whether the employment of a person is to continue, and would include a decision about whether or not a probationary worker should survive probation. The prohibition extends to third parties and employment agencies, not just employers.

Workers' compensation documents

Access to any document relating to a worker's application for compensation or claim for damages under the Act is prohibited. The prohibition does not apply to any documents required for the purpose of assisting a worker's rehabilitation and early return to work under the injury management provisions of the Act.

Prosecution and penalty

The Workers' Compensation Regulatory Authority and WorkCover Queensland have the power to prosecute a person or organisation who breaches the Act. There are penalties of up to $7500 for a person and $37,500 for a corporation found to be in breach of the new s572A.

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Commercial contracts are fair game

In brief: The Industrial Court of Queensland has confirmed that the Queensland Industrial Relations Commission's power to review unfair contracts extends to commercial contracts.3 Lawyer John Naughton reports.

Previous decision

In Focus: Workplace Relations, January 2005, we reported on the case of Tomac Enterprises Pty Ltd v Newmont Pajingo Pty Ltd,4 where the Queensland Industrial Relations Commission (QIRC) declared a contract to be unfair and ordered Newmont to pay Tomac Enterprises $414,250. The decision meant that the unfair contracts jurisdiction in Queensland extends to commercial contracts between corporations, and that contractors are not restricted by the statutory salary cap that applies to employees bringing unfair contract claims.

Decision on appeal

The main grounds of appeal were that:

  • the QIRC's decision did not adequately identify the basis of the contract found to be unfair; and
  • the QIRC applied the values of reinstatement litigation to robust commercial negotiations.

The Industrial Court dismissed the appeal, finding that even if all of the terms of the arrangement between the parties were not certain, the QIRC's decision had identified sufficient signposts to indicate the contract was unfair. The Industrial Court rejected the view that the QIRC had applied values specific to the industrial relations system to a purely commercial relationship in reaching its decision.

Future decisions

The decision of the Industrial Court is not subject to appeal and will inform any future consideration by the QIRC of applications to amend or void contracts on the basis of unfairness. Because of its cost-effectiveness and informality, the QIRC's unfair contracts jurisdiction is likely to invite more applications that would previously have been heard in the courts as breach of contract, misrepresentation, or misleading and deceptive conduct actions. Given the anomalous result that sees contractors given protection superior to highly paid employees in a way unlikely to have been intended, there is a need for the unfair contract legislation to be reconsidered as a matter of urgency.

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Queensland IR reform

In brief: The Queensland Government has taken the opportunity to further reform its Industrial Relations Act 1999 (Qld) and to address some ongoing anomalies. Partner Jamie Wells(view CV) and Articled Clerk Alexandra Feros report.

Leave calculations for commission-remunerated employees

The industrial relations system has always struggled with issues surrounding employees remunerated on a commission basis. Quantifying the amount due when leave is taken has never been easy, because of the unpredictable nature of commission earnings.

The new amendments to the Act include a default calculation for annual leave and long-service leave entitlements for employees remunerated wholly or partly by commission. Before the amendments, the Queensland Industrial Relations Commission (QIRC) had suggested a method of calculating long-service entitlements for these employees,5 but the method involved nothing higher than a general 'rule of thumb'. The default calculations are based on average commissions in the 12 months prior to taking leave.

The QIRC will retain the power to make an alternative order if the default calculation is not fair in a particular case.

Extension of unfair dismissal rights

The amendments extend protection of short-term casuals against termination for all invalid reasons, as opposed to a few select ones relating to absence on parental leave or to discrimination. It will now include:

  • temporary absence from work because of illness or injury;
  • seeking office, or having acted in the capacity of an employees' representative;
  • filing a complaint against an employer; and
  • refusing to negotiate for, make, sign, extend, amend or terminate a certified agreement or QWA.
Reverse onus of proof in freedom of association actions

The amendments reverse the onus of proof in freedom of association cases. A party accused of conduct in breach of these provisions will now be presumed to have done so for an offensive reason, unless they can prove otherwise. The specific amendment is designed to overcome the significant difficulty of proving the motives of the other party. For example, if a person's employment is terminated and they allege it is because of union involvement, the employer will be required to prove it was for another reason.

Incorporation of certified agreement terms in awards

The amendments will allow provisions from certified agreements to be incorporated into awards if the parties to the relevant certified agreement agree. Previously, these provisions were only able to be incorporated where they were consistent with wage-fixing principles and not contrary to the public interest. The provisions that flow into an award under this section will apply only to the parties to the relevant certified agreement who are also bound by the award.

Content of awards

The amendments require the QIRC to ensure an award:

  • takes into account employees' family responsibilities; and
  • (whenever possible) contains facilitative provisions that allow agreements to be reached on work and family responsibilities at the workplace or enterprise level.

It is anticipated that this provision will see an increase in the number of applications seeking the inclusion of family-friendly initiatives in Queensland state awards.

Award superannuation funds

The amendments remove the ability of employers and employees to agree to contribute superannuation to a complying fund not specified in their industrial instrument. However, employers already contributing to another agreed superannuation fund will not be affected. The amendments will not affect the operation of pending federal legislation regarding choice of superannuation for employees.

Use of injury information

One of the amendments prohibits obtaining and using any personal workers' compensation claims information for employment or prospective employment purposes. The amendments respond to concerns about the substantial number of requests for workers' compensation claims histories, and potential misuse of this information. This is covered in a separate article in this Focus edition.

Accident pay

The amendments place restrictions on contracts of employment providing for accident pay or other payments to an incapacitated worker. The amendments also restrict the QIRC's power to amend or declare void a contract due to the provision, or lack of provision, for accident pay or other payment on account of the worker sustaining an injury.

The amendments respond, in part, to the decision of the QIRC in Gersten v Cape York Land Council,6 which was criticised in Focus: Workplace Relations, January 2005. In that case, the QIRC held that Mr Gersten's employment contract operated unfairly because it did not contain a term requiring the employer to pay the difference between statutory workers' compensation and his usual remuneration. This opened up the risk of substantial claims if the employee alleged unfair conduct on the employer's part.

Further reforms?

It was noteworthy that the Queensland Government did not take the opportunity to review the salary cap for the purposes of unfair dismissal. The current provision requires a person to be receiving in excess of $90,400 annual salary to be excluded from the jurisdiction of this legislation. Most other jurisdictions use remuneration as the benchmark, as it is a more accurate reflection of the employee's true earnings. An employee may still make a claim if they earn a cash salary below this amount, even if their remuneration package may have been supplemented substantially by the inclusion of non-salary benefits.

As noted elsewhere in this Focus edition, the anomaly remains between contractors and employees when bringing unfair contract claims. This is a matter that deserves attention, not only because it treats employees less favourably but, more importantly, because it exposes commercial agreements to review in a way that undermines established rules of contract.

Footnotes
  1. Blackadder v Ramsey Butchering Services Pty Ltd [2005] HCA 22.
  2. Koehler v Cerebos (Australia) Ltd [2005] HCA 15.
  3. Newmont Pajingo Pty Ltd v Tomac Enterprises Pty Ltd (Industrial Court of Queensland, President Hall, 11 April 2005).
  4. Tomac Enterprises Pty Ltd v Newmont Pajingo Pty Ltd [2005] 178 QGIG 35.
  5. See Trovas Holdings Pty Ltd v Gannon (1999) 162 QGIG 337; Wendy Denise Ussher v Pharlark Pty Ltd t/a Tarrants Ford and Hyundai (2004) 175 QGIG 1152.
  6. (1995) 178 QGIG 55.

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