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Allens Arthur Robinson

Focus: Workplace Relations – November 2005

In this issue: we look at an AIRC decision endorsing a Work Choices protest; the limited scope of coercion; unfair dismissal and eligible termination payments; union activities protected under freedom of association provisions; and managers' responsibility for workplace safety. 

AIRC endorses Work Choices protest

In brief: The AIRC's flexible approach to unlawful industrial action has enabled workers to attend a protest against the Federal Government's Work Choices reforms. Partner Jamie Wells (view CV)reports.

Background

In a remarkable decision by the Australian Industrial Relations Commission (AIRC), McCain Foods (Aust) Pty Ltd (McCain) was refused section 127 orders1 designed to require workers to work as rostered, rather than attend a protest rally in Bathurst. McCain asked the AIRC to make orders when its offer of allowing a representative group to attend the rally on full pay was rejected by the workforce.

Decision

The AIRC accepted that it had the power to issue s127 orders, as the action proposed was clearly going to take place and would have an adverse impact on McCain.

However, the AIRC chose to exercise its discretion against making orders, on the bases that:

  • the Work Choices reforms are likely to have a profound effect on workers;
  • it is proper and vital that workers be fully informed of the proposed changes;
  • it is appropriate that workers obtain information and guidance from their unions; and
  • the proposed action was not intended to punish McCain.2
Comment

It is clear that a s127 order cannot prevent the taking of protected action. Further, the AIRC has always taken the view that unprotected action does not necessarily mean that an order will be made. A s127 order usually involves industrial action that is both unprotected and in some way illegitimate. However, the disturbing trend in s127 applications involving industrial or political agendas outside the relevant workplace is to allow workers great latitude, to the point where illegitimacy becomes an excessively narrow and subjective concept.

One may also wonder whether, in view of the extensive material publicly available on the Work Choices reforms, the rationale about information gathering and guidance can stand up to scrutiny. This is particularly so when the organisers of the rallies have consistently emphasised the protest factor. What is not made clear from the decision is:

  • the other sources available to workers to receive the information and guidance intended to be provided during the protest rally;
  • why such information was not available to workers outside of rostered hours; and
  • why McCain's offer of allowing a delegation of workers to attend the protest rally would not have guaranteed sufficient information and guidance to other workers to whom the delegates could report.

The refusal of the AIRC to treat this type of industrial action as illegitimate gets very close to a right to strike, a concept discounted by the courts years ago.

Effectiveness of s127?

The McCain decision coincides with a report about another s127 application made by Kenworth Trucks, in which the AIRC indicated it 'would not be able to hear all the evidence in the time available and therefore could not issue orders one way or the other...'3

These reports suggest strongly that, as a means of heading off unprotected and unlawful industrial action, s127 is not providing a consistent and satisfactory remedy. Although the AIRC is to retain its dispute resolution powers following the introduction of the Work Choices reforms, the power to make orders against unlawful action will be tighter, limiting the AIRC's discretion once it is satisfied that the action is occurring or threatened.

Further, if the AIRC cannot determine the application within 48 hours, it will be obliged to make temporary orders until it can do so. The ongoing flaw in the reform proposal is that the changes will offer little assistance to an employer in the face of a reluctant AIRC during the first 48 hours.

Whether the changes improve the situation will depend on both:

  • the lead time available to the employer to get into the AIRC before the action starts; and
  • the attitude of the AIRC in dealing with these applications, involving a preparedness to determine issues in a less comprehensive way.

Unless the reforms deliver greater certainty and consistency in s127 applications, employers will need to consider carefully all available options before committing to a s127 strategy.

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Prohibiting coercion

In brief: In last month's edition of Focus: Workplace Relations, we reported on the case of Ponzio v Multiplex Limited, in which the Federal Court of Australia dismissed a complaint against Multiplex that it coerced a subcontractor in breach of s170NC of the Workplace Relations Act 1996. The Federal Court has rejected another s170NC claim in a subsequent Queensland case. Lawyer John Naughton reports.

Background

Section 170NC of the Workplace Relations Act 1996 (Cth) (the Act) prohibits taking or threatening 'industrial action or other action' with intent to coerce another person to make a certified agreement.

The proceedings arose out of a construction project in Brisbane. The contractor of the building works, FKP Constructions Pty Ltd (FKP), engaged several on-site subcontractors. FKP entered into a pro forma subcontract agreement with each subcontractor, requiring each to:

  • ensure that any secondary subcontractor maintain WorkCover and Workplace Personal Injuries Insurance; and
  • comply with the terms and conditions of the industry award and make contributions to the relevant superannuation, redundancy or other statutory funds required to be paid.

During the course of the project, employees on site became concerned that some subcontractors were not making the required contributions to the Building Employees Redundancy Trust (BERT), the Building Union Superannuation Scheme (BUSS), and Construction Income Protection Queensland (CIPQ).

One of these subcontractors, Mar Gra Pty Limited (Mar Gra) was covered by a state award and remunerated its employees correctly according to that award. However, it was not making the BERT, BUSS and CIPQ contributions required by the subcontract agreement with FKP.

When the Construction, Forestry, Mining and Energy Union (CFMEU) became aware that Mar Gra had failed to pay these, it threatened – and employees subsequently took – strike action. Mr Dorber, an inspector, brought an application alleging that the CFMEU and two of its employees had coerced (or attempted to coerce) Mar Gra to enter into a certified agreement with the CFMEU, in breach of s170NC of the Act.

Evidence

There was conflicting evidence between FKP's site manager and the CFMEU officials. While the CFMEU admitted that it wished to enter into an agreement with Mar Gra, the Federal Court accepted evidence that the industrial action taken by CFMEU members was for the sole purpose of ensuring Mar Gra paid the entitlements required by the subcontract agreement with FKP.4

Conclusion

The court accepted that:

  • if the CFMEU had instructed its members to go on strike solely because Mar Gra would not enter into an agreement with it, that would constitute a breach of the Act; and
  • it would be sufficient to prove a breach if the intent to coerce Mar Gra into entering into a certified agreement was merely one of the objects of the CFMEU officials.

However, neither could be established here, excluding the limited scope of s170NC as a means of controlling unlawful industrial action.

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Compensation order subject to income tax obligations

In brief: The Industrial Appeal Court of Western Australia has held that compensation for unfair dismissal is an eligible termination payment, and the employer is obliged to withhold tax accordingly. Senior Associate Rowan Kelly reports.

Background

On 19 March 2004, the Western Australian Industrial Relations Commission ordered that Mr Bennett and Mr Dix, trading as Finesse Painting & Property Maintenance (Finesse), pay compensation of $2006.40 to Mr Higgins, after finding:

  • an employment relationship between Finesse and Mr Higgins; and
  • that Mr Higgins had been unfairly dismissed.

In satisfaction of the order, Finesse deducted the PAYG amount, together with the PAYG amounts due from Mr Higgins' previous earnings – to respond to the Commission's finding that Mr Higgins was in fact an employee.

The effect of making these deductions was that Mr Higgins did not receive any compensation from Finesse directly. However, he did get the benefit of PAYG payments to the Australian Taxation Office to discharge his tax liability.

Industrial Magistrates Court decision

Mr Higgins commenced proceedings in the Industrial Magistrates Court, seeking enforcement of the order, costs and the imposition of a penalty.

The court found that the actions of Finesse were aimed to render the order nugatory and therefore ordered Finesse to pay the amount fixed under the order, together with a penalty and costs (on the basis that it had defended Mr Higgins' proceedings frivolously and vexatiously). The court observed that Finesse's 'initial unhappiness [regarding the finding that Mr Higgins was at all material times an employee] has developed into a high degree of bitterness'.

Appeal decision

Ultimately, an appeal went to the Industrial Appeal Court of Western Australia (IAC).5 The IAC allowed the appeal, setting aside the order of the court and ordering that Mr Higgins' application be dismissed.

The IAC found that the compensation was an eligible termination payment for the purposes of the Taxation Administration Act 1953 (Cth) and that Finesse was obliged to withhold the PAYG amount when making a payment to Mr Higgins.

However, the IAC found that Finesse was neither required nor permitted to withhold a PAYG amount that should have been withheld from an amount paid to Mr Higgins without deduction on an earlier occasion. The IAC observed that the opportunity to withhold PAYG amounts is lost once an amount is paid to an employee.

Implications

The case confirms that an order for compensation for unfair dismissal is an eligible termination payment and that such orders must be read consistently with the Commonwealth tax regime.

However, the decision does not give an employer licence to deduct those amounts that the employer should have previously deducted from the employee's salary, but failed to do so.

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Immunity for acts in representative capacity?

In brief: Union activities may be protected under freedom of association provisions even if they involve improper conduct. Lawyer John Naughton reports.

Background

ACI Operations Pty Ltd (ACI) terminated Colin Williams' employment on 12 October 2005, when he organised and chaired a stop-work meeting during work hours, and then failed to disband the meeting and return to work immediately when instructed to do so.

Arguments

Mr Williams argued that ACI dismissed him because of his status as a delegate with the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU). He contended that ACI had opportunistically terminated his employment and that its real reason for doing so was in response to him raising grievances with ACI management over a number of previous years through his representative role with the CEPU.

ACI argued that it was entitled to terminate Mr Williams' employment and that his dismissal had nothing whatever to do with his role as a CEPU delegate.

Until his dismissal, Mr Williams had represented the CEPU in discussions with ACI, which had recognised and treated him as an accredited representative of the CEPU in accordance with the prevailing certified agreement.

The incident leading to Mr Williams calling the stop-work meeting involved the engagement of an external electrical contractor. Mr Williams (in his role as representative of the CEPU) did not accept this engagement was necessary on the basis that electricians employed directly by ACI possessed the requisite skills. He called a meeting of ACI electricians and it was during the course of that meeting that management representatives demanded Mr Williams cease the meeting and return to work.

Consideration by Federal Court

The Federal Court conceded that Mr Williams should have handled the dispute better, and observed that his failure to ensure the continuity of work may have been considered a breach of the dispute resolution procedure in the applicable certified agreement.

However, the court accepted that the management representative instructing Mr Williams to return to work did so in an overbearing and provocative way. The court observed that ACI failed to apply its own disciplinary policy in dismissing Mr Williams summarily, and concluded that his termination had been for a prohibited reason in breach of s298K of the Workplace Relations Act 1996 (Cth).6

Lesson

The decision suggests that a failure to follow lawful instructions, and even the act of encouraging others to breach their employment contracts, might not be regarded as a basis sufficient for termination if the individual is acting in a representative capacity. While this does not make union delegates in the workplace immune from disciplinary action, the possibility that the freedom of association provisions will be read broadly means that particular care needs to be taken when considering misconduct in the trade union context. Although, in principle, union representatives should not enjoy any elevated status over and above that of other employees charged with the same allegation7, the reverse onus that applies in these cases can complicate the situation once the dispute gets to court.

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Manager responsible for safety

In brief: Managers must meet a high standard of diligence to avoid responsibility for workplace health and safety incidents. Lawyer Jenny Thrum reports on two appeals in the NSW Court of Appeal.

Background

In 1998, the roof of an underground coalmine near Newcastle, NSW, collapsed, killing a miner. Charges were brought against two mine operators (Powercoal and Coal Operations Australia) and the mine manager (Mr Foster). The companies were charged on the ground that they had failed to provide an adequate system for assessing the roof of the mine and to notify employees working in the mine of weaknesses in the mine roof. Mr Foster was charged on the ground that he was a 'person concerned in the management of the corporation'. Section 50(1) of the OHS Act8 says that directors of a corporation and each person concerned in the management of the corporation will be taken to have automatically contravened the OHS Act if the corporation has been convicted of an offence under the OHS Act. The manager is excused if they:

  • were not in a position to influence the conduct of the corporation in relation to the breach; or
  • used all due diligence to prevent the breach.
Appeals

Each of the defendants appealed to the NSW Court of Appeal challenging the power of the NSW Industrial Relations Commission (IRC) to determine safety prosecutions and the IRC's approach to the liability of individual managers and directors.9 All grounds of appeal were dismissed.

Liability of individual managers and directors

Mr Foster argued that s50 applies only to persons at the highest levels of management, and not simply to a manager of a colliery. The court rejected Mr Foster's argument and took a broad view of s50, focusing on whether an individual director or manager of a corporation could be said to have a sufficient level of complicity in the commission of the OHS offence by the corporation. The court said that this complicity arises when the manager could have taken steps to ensure that the general objects of the OHS legislation were achieved. The court stated that s50 should not be read down to apply only to central management, but should include any aspect of the operations of the company affecting safety.

Control over safety

The court also considered s53 of the OHS Act,10 which provides general defences to contraventions of the OHS Act if it can be proved that:

  • it was not reasonably practicable for a person to comply; or
  • the commission of the offence was due to causes over which the person had no control.

To date, it has been assumed that the only defences available to individuals prosecuted under the OHS legislation are those under s50, and not the general defences under s53. Mr Foster argued that both defences should have been available to him. The court declined to decide the point, as the IRC had already concluded that the facts would not have supported the defences in his case anyway.

Implications

These cases have affirmed the broad reach of OHS obligations owed by managers and offer a timely reminder that a court will take a strict approach to their liability if there is a health and safety incident in the workplace.

Footnotes
  1. Section 127, Workplace Relations Act 1996 (Cth) – Orders to stop or prevent industrial action.
  2. McCain Foods (Aust) Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union, PR964944, Commissioner Eames, 14 November 2005.
  3. Workforce Daily, 14 November 2005.
  4. Dorber v Construction, Forestry, Mining & Energy Union [2005] FCA 1565.
  5. Bennett v Higgins [2005] WASCA 197.
  6. Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v ACI Operations Pty Ltd [2005] FCA 1662.
  7. Ruiz v Queensland Property Investments Pty Ltd [2005] FCA 54.
  8. Occupational Health and Safety Act 1983 (NSW), now s26(1) of the Occupational Health and Safety Act 2000 (NSW).
  9. Powercoal Pty Ltd v Industrial Relations Commission of New South Wales [2005] NSWCA 345, Coal Operations Australia Ltd v Industrial Relations Commission of New South Wales [2005] NSWCA 346.
  10. Occupational Health and Safety Act 1983 (NSW), now s28(1) of the Occupational Health and Safety Act 2000 (NSW). 

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