Skip to content.

Home

Allens Arthur Robinson

Focus: Workplace Relations – June 2004

In this issue: We look at an appeal over workplace bullying fines; common enterprise agreements; limits on union right of entry; unfair contracts and insolvency; and OHS penalties in the construction industry.

Stiffer penalty sought for directors over bullying

In brief: The NSW WorkCover Authority wants a bigger fine imposed on the first directors convicted of occupational health and safety breaches arising from workplace bullying in NSW. Senior Associate Andrew Cardell-Ree considers WorkCover's appeal to increase the $1,000 fine for each director.

Background

As reported in Focus: Workplace Relations, May 2004, the Chief Industrial Magistrate found1 that:

  • a number of employees bound a 16-year-old labourer to a trolley resting near a four-metre drop and, for half-an-hour, filled his mouth alternately with sawdust and glue, until a contracted site foreman cut him free;
  • the asthmatic labourer had serious trouble breathing during the 'initiation ceremony';
  • the company had no policy prohibiting bullying, undertook no investigation and took no action against any worker;
  • one of the directors was forewarned of the incident and did not discourage or prevent it, and another was the floor supervisor when the incident occurred;
  • neither of the remaining directors had a comparable level of involvement, so neither was charged; and
  • the bullying took place as part of a 'culture of initiation' rife throughout the company.

The court recorded a criminal conviction, fined the company $24,000 and fined the directors involved $1,000 each. WorkCover has now appealed to the Industrial Relations Commission of NSW, saying that the penalty imposed on the directors is too lenient in the circumstances.

Implications

Employers should not be surprised by the appeal. It signals very clearly WorkCover's new policy to prosecute individuals for breach of occupational health and safety (OHS) laws. WorkCover's March 2004 policy says that it will prosecute directors and managers for OHS breaches when appropriate. This decision indicates that WorkCover will consider a prosecution if the director or manager is involved in the breach, or does nothing to avoid the breach when under a duty to act.

Three factors may make a significantly higher penalty unlikely in this case, even if the appeal is successful:

  1. This is the first OHS prosecution of directors arising from workplace bullying, so even a relatively small penalty is likely to deter others from similar conduct.
  2. Prior to March 2004, WorkCover's policy was to prosecute companies and educate individuals. That policy required WorkCover to prosecute an individual only in unusual circumstances, such as if the company was a mere 'shell'. The Commission is not likely to impose a large penalty just because WorkCover has changed its policy.
  3. This was the first offence of the company and of each director.

On the other hand, in light of the labourer's asthma and the breathing difficulties he encountered, the initiation was potentially life-threatening, and therefore deserving of a high-range penalty. The court's decision to impose a fine of $24,000 on the company, of an available $55,000 for a first offence tends to support this argument.

Even if the directors' fines are not increased by some margin on appeal, the fines imposed on managers in future cases are likely to exceed the $1,000 imposed here. Now that there is an expectation that prosecution for bullying can happen, it will be more difficult to disclaim responsibility and managers who turn a blind eye now do so at their peril.

Return to top

Cappuccinos and commonality: the AIRC considers 'common enterprise'

In brief: The Australian Industrial Relations Commission has considered whether three businesses constitute the 'one employer' for the purposes of certifying an industrial agreement. Partner Julian Riekert and Articled Clerk Tess Hardy report.

Background

Three employers applied for certification of the Dome Coffees Australia – Certified Agreement 2004-20072.

Under the Workplace Relations Act, a full bench of the Commission can certify a 'multiple-business agreement' (section 170LC). As an alternative, s170LB(2)(a) provides for two or more employers to be taken as the one employer – for the purposes of entering into a certified agreement – if they carry on a business, project or undertaking as a joint venture or common enterprise. This provision effectively allows a single Commissioner to certify an agreement, even if more than one corporate entity will employ those covered by the agreement.

In the Dome Coffees case, the primary issue before the Commission was whether the three employers were carrying on a business, project or undertaking as a common enterprise.

Test

The Commission adopted the view that, to prove the existence of a common enterprise, it was not necessary to show a joint participation in all the elements and activities that constitute the enterprise. Rather, it will be enough that the operations constituting the enterprise contribute to the overall purpose that unites them.

The decision

The Commission noted that there was:

  • a common mission and vision statement for employees covered by the application;
  • a common management structure and audit process;
  • a common corporate culture facilitated by the attendance of meetings, retreats and conferences by all employees;
  • a common business process, including administrative systems, quality controls and supply of goods and services; and
  • frequent transfer or promotion of employees between the various coffee shops.

The Commission held that these combined factors evidenced a declared collective intent or commonality of interest, which meant that the three employers could be taken to be carrying on a business or undertaking as a common enterprise. The Commission decided that they should be taken to be one employer for the purposes of the application for certification.

This decision gives some guidance to the approach that the Commission will take in considering applications for the certification of industrial agreements by more than one corporate entity, as a common enterprise, particularly in the case of franchised businesses.

Return to top

What limits exist on a permit-holder's right of entry?

In brief: The Australian Industrial Relations Commission recently considered a bank's attempt to place limits on the right of entry of permit-holding union representatives. Lawyer Rosemary Bryant-Smith reports.

Background

The Finance Sector Union of Australia (FSU) sought to have its officers and officials enter certain premises of the ANZ Banking Group Ltd (ANZ) under section 285B(3) of the Workplace Relations Act 1996 (Cth) (the Act). This provision of the Act enables a permit-holder, who suspects that a breach of the Act, an award or a certified agreement has occurred, to enter a premises, interview employees during working hours about the suspected breach, and inspect documents such as timesheets.

ANZ sought further details of the breach alleged by the FSU, and to place conditions on the FSU's right of entry.

Purpose of entry?

At the hearing before the Australian Industrial Relations Commission, ANZ submitted that the FSU was using the right of entry under s285B for recruitment purposes. In contrast, the FSU sought orders that:

  • its representatives could walk through ANZ's premises and invite ANZ's employees to speak;
  • ANZ would provide the premises and time to allow them to interview the employees; and
  • ANZ employees would not be penalised by ANZ for speaking to FSU representatives.
Claimed limits on the FSU's right of entry

The Commission noted that the union must suspect a breach in order to have a right of entry under s285B, and the employer should be made aware of the nature of the suspected breach. The Commission found the FSU had provided information to ANZ about the breaches it suspected, its suspicions were bona fide, and the FSU was not required to further particularise the breaches to obtain the right of entry under the provision.

The Commission then considered ANZ's argument that the FSU should not be permitted entry in any case, on the grounds that:

  • privacy considerations meant that FSU officials should not visit work areas;
  • employees preferred not to be disturbed at work by union officials; and
  • there was an alternative proposal for interviewing employees that did not disrupt their work.
    (This involved ANZ notifying the relevant employees at least 24 hours prior to the union's intended visit, providing a meeting room, plus a list of those employees who wished to meet with the FSU, and then rostering these employees off work for 20 minutes each to participate in interviews.)
Commission's decision

The Commission's decision involved an assessment of 'where the balance lies between a right conferred by the Act and the conduct of the employer's business'.3

The Commission rejected ANZ's argument that the FSU entering the premises would pose an unacceptable risk to the bank's privacy obligations, on the basis that FSU officials could sign confidentiality protocols similar to the undertakings given by labour hire employees performing work on ANZ's premises.

The evidence of two ANZ employees who said that they felt uncomfortable and pressured by being approached by the FSU officials was not considered to be representative of employee views generally.

The Commission then turned to issues of balance and fairness. The Commissioner accepted that work at ANZ may be disrupted, and that ANZ had developed protocols in relation to 'walk-throughs' by the FSU that were developed in the best interests of ANZ and its employees. At the same time, the Commissioner noted that the FSU, as a registered representative body, should not be regarded as a stranger in the workplace.

Conclusion

Weighing the issues, the Commission, while finding that the elements of s285B of the Act had been established, limited the number of 'walk-throughs' to two occasions. On this basis, the Commission appears to have been persuaded at least to some degree by ANZ's arguments that the right of entry arrangement, at least under this provision of the Act, should be undertaken in a manner designed to take account of workplace disruption, employee preference, and privacy concerns.

Return to top

NSW unfair contracts power used to create a new employment contract

In brief: The NSW Industrial Relations Commission Full Bench has confirmed that a related company of an insolvent employer should be regarded as the employer and be liable for entitlements. As Partner David Cross reports, the decision has some significant implications.

The decision

In AOS Group Australia Pty Limited (In Liquidation) v Arrogante & Ors 4, a Full Bench of the New South Wales Industrial Relations Commission upheld the finding of the trial judge that 22 contracts of employment be varied so that the identity of the employer is changed from one company (Services) to a related company (Group).

Services and Group were members of a consortium that acquired the AOS business from administrators. Group received all of the assets. Services offered employment to the existing staff on the basis that it would assume responsibility for accrued entitlements.

Both Group and Services themselves went into liquidation not long after the transaction. Services had no assets. As a result, Services could not pay any of the entitlements of the employees. Group, on the other hand, had assets from which it would be able to pay a dividend of about 33 cents in the dollar to its creditors.

A total of 22 employees of Services brought proceedings in the unfair contract jurisdiction (arising under section 106 of the Industrial Relations Act 1996 (NSW)), seeking an order that their contracts of employment be varied so as to substitute Group as the employer. Such specific orders were sought because the employees wished to have the priority that the Corporations Act assigns to employees in the winding-up of Group.

A wider scope for s106

The case is interesting because it has long been established that the jurisdiction under s106 enables the Commission to order that damages be paid by parties who were associated with the unfair contract, even if they were not actually part of the contract. Such a result in this case, however, would not have 'delivered the goods' to the complainant employee. They needed to be made employees of Group, so as to have priority in Group's winding up.

Group defended the proceedings on the basis that the power granted to the Commission under s106 does not permit it to create an employment contract where none had previously existed. The trial judge concluded that the arrangements between Group and Services were unfair in that it was consciously decided to place the employees in a company with no assets. The trial judge decided that s106 gives the Commissioner powers broad enough to remedy unfairness and, in the exercise of those powers, orders could be made varying the contracts so as to substitute Group as the employer.

On appeal, Group again argued that the result involved the creation of employment contracts where none had previously existed. The Full Bench did not directly rule on the question of whether the power under s106 allows the Commission to create new contracts. The Full Bench ruled that the original decision was correct because it was within the Commission's power to remedy unfairness.

Implications

In spite of the Full Bench's caution around the 'new contract' issue, it is clear that the result in this case could only have been reached on the basis that s106 empowers new contracts to be created. This principle has great implications, not only for liquidators and administrators, but also for participants in labour hire and other forms of indirect labour arrangements.

Return to top

OHS: high fines and novel penalties in the construction industry

In brief: Victorian courts are now imposing higher penalties introduced in 1997 for OHS offences and exercising expanded powers in sentencing. Special Counsel Del Bobeff and Consultants Ric Morgan and Dr Kirk Lovric examine the direction the courts are taking in applying OHS penalties in Victoria.

Background

In 1997, occupational health and safety (OHS) penalties in Victoria increased from $40,000 to $250,000 for a breach by a corporation. For some time, sentencing legislation has allowed courts to impose other conditions on convicted defendants, but these have rarely been exercised for OHS offences. In 1999, when some pre-1997 offences were still being heard in the courts, the average fine in Victoria was $14,673. WorkCover Victoria highlighted as exceptional the $60,000 fine that was handed down by the Sale Magistrates Court in 1999 for a fatality that occurred in 1998.5

In 1999, most prosecutions for indictable OHS crimes6 were heard in the Magistrates Court, which cannot impose fines higher than $100,000. It seems that indictable OHS offences are now being prosecuted in the County Court, allowing higher penalties and exposing corporations to increased media attention.

Recent decisions

In August 2001, Baulderstone Hornibrook was constructing a block of apartments in Southbank, Melbourne. At one stage, further height was being added to the crane. It was windy and personnel were inexperienced and working without supervision. After the crane was elevated, the boom crashed due to the windy conditions and a 20-tonne counterweight slid off the end of the crane and killed an employee in a nearby elevator. On 31 May 2004, Baulderstone Hornibrook was found to be have failed in its duties to undertake hazard identification, provide supervision, and ensure a safe system of work. It was fined $375,000 in the County Court.

In January 2000, Leighton Contractors began construction of a railway overpass on the Geelong – Melbourne Highway. Leighton sub-contracted tasks to different companies. Materials for the project were not up to engineering specification. Leighton also did not check work undertaken by sub-contractors to ensure it was up to specification and did not check whether second-hand steelwork to be used was of appropriate quality. An employee was killed when the bridge collapsed. On 27 May 2004, Leighton was found to have failed to provide a safe workplace for employees, and for persons other than employees, and failed to provide safe plant and equipment in two separate circumstances. It was fined $525,000, also in the County Court.

In May 2002, Krueger Shopfitters was involved in shop upgrade works at Southland Shopping Centre in Melbourne. An employee working at a height of 1.45 metres on a ladder overbalanced, suffered head injuries and died. In mid-June 2004, the Magistrates Court imposed a fine of $100,000, the maximum penalty available to it.

New direction in penalties

Increases in fines in other states, particularly NSW, combined with pressures to increase penalties for OHS offences are filtering through to convictions. Courts are now imposing penalties towards the upper end of the range available.

In each of the County Court cases mentioned above, although there was only one incident, the defendants were found guilty of multiple breaches of the OHS Act, and the court attached the potential maximum of $250,000 to each breach. This approach to OHS offences had been formally established by Justice Cummins in the decision regarding the gas explosion at Esso's gas plant at Longford7 and allows the aggregation of the total penalty. In the Baulderstone decision, the total fine was made up of three separate breaches. In the Leighton decision, the total fine was made up of four breaches.

In addition, in the Leighton decision, the court used its ability to require the defendant to fulfil specified conditions. The judge ordered the fine for one breach to be paid to different charities and trusts. The court required the company to pay the fine imposed for another breach into a trust to fund a training program for workers involved in the construction of bridge beams. The court also made use of its expanded sentencing powers by requiring the company directors to meet with Victorian WorkSafe representatives three times a year to discuss Victorian projects and report these meetings in the company's annual report.

Return to top

Footnotes
  1. Inspector Gregory Maddaford v M A Coleman Joinery (NSW) Pty Ltd, Brian Gerard Coleman & Graham Gerard Coleman, NSWCIMC (5 May 2004).
  2. 16 April 2004, Commissioner Thatcher, PR945864.
  3. ANZ Banking Group Ltd v Finance Sector Union of Australia, 6 May 2004, Commissioner Smith, PR946294.
  4. [2004] NSWIRComm 80.
  5. Johnstone, R (2002), 'Safety, Courts and Crime', National Research Centre for OHS Regulation, Working Paper 6, August 2002, p10.
  6. See WorkCover v John Vardy Transport, 11 May 1999, Sale Magistrates Court.
  7. In Victoria, an offence under the OHS Act is regarded as an indictable crime, whereas an offence under the OHS regulations is not regarded as an indictable crime.

Return to top

For further information, please contact:

Return to top

Share with

What are these?

 

 

Recent Workplace Relations publications