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Focus: Workplace Relations – October 2002

In this issue: This month we look at issues relating to the ending of industrial disputes; insourcing a business activity; the special care required when drafting 'no extra claims' clauses in enterprise agreements; consultation with unions over redundancies; informing workers about maternity leave entitlements; employee conduct outside work hours; and changes to the division of superannuation in Family Court matters.

Quick response to industrial action placed at risk

In brief: The fast track method of ending industrial disputes by employers going straight to the Supreme Court has been put in doubt by recent Federal Court criticism. Partner Jamie Wells (view CV) reviews the implications.

Employers have, for some time, found it easier and quicker to end industrial action by avoiding industrial tribunals and obtaining orders to end industrial action from state Supreme Courts. Employers have preferred this option in view of:

  • the speed with which the Supreme Courts consider the issues;
  • the commitment of the Supreme Courts to uphold established rights; and
  • the immediate serious effect of the orders, sanctioned by penalty for contempt of court.

The Supreme Courts have been prepared to make orders ending industrial action, but they have done so only when there is clear evidence to suggest unlawful industrial action is being taken and there is no legitimate industrial or safety issue at stake.

Where does this leave s166A?

On the face of it, section 166A of the Workplace Relations Act 1996 prevents an employer from bringing 'an action in tort under the law of the state' without a certificate from the Australian Industrial Relations Commission. The process for obtaining a certificate is more cumbersome than the application to the Supreme Court and represents a substantial hurdle in moving forward with an action in tort. The Supreme Courts have interpreted those words as not applying to urgent orders to end industrial action. According to the Supreme Courts, s166A is directed primarily at final damages claims. Given that industrial disputes rarely get taken that far, s166A has had a minimal impact.

A growing tension

However, Justice Weinberg in the Federal Court recently expressed the view that s166A does prevent Supreme Courts from making orders to end industrial action, unless there has been a certificate given by the Commission. This is not the first time a Federal Court judge has expressed this view and there is now an uneasy tension between the Federal Court and the Supreme Courts over this issue.

Given that the Federal Court has power to hear appeals from decisions of Supreme Courts about matters arising under the Workplace Relations Act, there is every chance orders made by a Supreme Court will be appealed at some stage, based on s166A. Given the views already expressed in the Federal Court, there is every reason to believe employers may ultimately be forced to take their disputes back to the Commission.

Implications

The implications of this broad reading of s166A can be serious. Apart from losing a genuine and effective option, employers face as the alternative, a two-stage process through the Commission and the Federal Court to obtain orders of similar force and effect. Unlike the Supreme Courts, orders of the Commission have proven to be less effective in many cases and often required the employer to make an additional application to the Federal Court for corresponding orders. Unlike an application to the Supreme Courts, this two-stage process has proven inconvenient, and is not equipped to handle shorter bouts of industrial action taking place over a 24 or 48-hour period.

    ABB Australia Pty Ltd v CEPU [2002] FCA 1070

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Outsourcing and insourcing transmit differently

Insourcing a business activity is more likely to involve a transmission of business than outsourcing, binding the employer to awards and certified agreements applying to the former contractor. The Australian Industrial Relations Commission has found 1 that Geelong Grammar School was bound by two certified agreements when it took back maintenance activities which it previously outsourced to Kilpatrick Green Facility Management. Lawyer Peta Nowacki reports.

The transactions

In 1996, Geelong Grammar appointed Kilpatrick Green to manage its maintenance functions, and Kilpatrick Green offered positions to existing Geelong Grammar maintenance employees. Kilpatrick Green, the AWU and CFMEU made enterprise agreements that included an obligation on Kilpatrick Green to contribute to a fund to guarantee employee redundancy entitlements.

In 2001, Geelong Grammar ceased using Kilpatrick Green and offered permanent positions to the maintenance employees on the school's standard terms. Geelong Grammar refused to contribute to the redundancy fund and the unions argued that the certified agreements applied to the school as it was a transmittee of Kilpatrick Green's business or part of that business.

A transmission of business?

The Commission confirmed that the test for determining whether a transmission of business has occurred involves a comparison of the nature of the business of the first employer and the nature of the transferred business activities in the hands of the second employer2.

The Commission decided that there was a transmission of business in this case and the agreements applied to Geelong Grammar. The business of Kilpatrick Green involved the provision of maintenance work. The function taken over by Geelong Grammar was the business or part of the business of Kilpatrick Green. The Commission also observed that the nature of the business activity undertaken by Geelong Grammar included maintenance work, even though the core business of the school was educational services.

This application of the transmission rules creates a potential anomaly. When outsourcing, awards and certified agreements might not carry across if activities outsourced are not core businesses. However, if the same activities are later insourced, having been performed by a contractor specialising exclusively in those activities, there is likely to be a transmission.

A way out for the transmittee?

Although the Commission held that the certified agreements applied to Geelong Grammar, it accepted that the conditions offered to the maintenance employees by the school would better facilitate the integration of the maintenance activities with the school's business as a whole. The Commission suggested that, given that the agreements had passed their nominal expiry dates, it would be appropriate to resolve the matter by Geelong Grammar applying to have the certified agreements terminated. Similarly, in the context of awards, the Commission retains a power to order that the transmittee should not be bound if it would be inappropriate. The difficulty in most cases is that the transmittee may not appreciate its obligations until a claim is brought well after the fact.

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'No extra claims' no good

Special care is required when drafting 'no extra claims' clauses in enterprise agreements if they are to prevent further claims during the term of the agreement. Elizabeth Turnbull reviews a dispute in the Queensland Industrial Relations Commission (QIRC) that looked at the issues.

The Australian Industrial Relations Commission has accepted3 that there cannot be protected action taken to support additional claims made during the course of an enterprise agreement if either:

  • the claim involves an issue dealt with comprehensively by the agreement; or
  • the agreement has a 'no extra claims' clause, indicating there are to be no other claims about any employment matter.

In effect, once the deal is done, the parties are limited to those industrial agreements while the agreement is current.

However in BCC v AMWU4, the QIRC was faced with an apparent conflict in the terms of the enterprise agreement. This particular agreement had:

  • a no extra claims clause; and
  • another clause that recognised further review was required in relation to certain existing Local Area Agreements.

The union gave notice of its intention to negotiate a certified agreement relating to an eight-day fortnight and to take protected action in support of its claim. The eight-day fortnight was an issue covered by one of the Local Area Agreements.

In deciding that the union could not be restrained from taking protected action, the QIRC considered the no extra claims clause to be inadequate. As the agreement anticipated further review of the Local Area Agreements, the no extra claims clause did not prevent further action over the eight-day fortnight. In effect, the no extra claims clause was seen as applying to other matters not expressly identified as requiring further review.

In Focus: Workplace Relations, April 2002, we flagged that the Federal Court in Emwest5 specifically endorsed the use of a 'no further claims' clause to cover all aspects of the employment relationship and to prevent further claims. It now appears that serious attention must be given to the drafting of the clause and to the balance of the agreement, to ensure that no other provisions reflect a contrary intention.

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Redundancies stalled

The AIRC has reaffirmed its broad powers to order consultation with interested unions when 15 or more employees are being made redundant. In a recent decision, the AIRC went so far as to rule that it has jurisdiction to place a halt on redundancies taking place until consultation occurred and relevant information was provided. Lawyer Peta Nowacki reports.

The Finance Sector Union of Australia became aware of the Commonwealth Bank's plan to retrench more than 500 assistant managers and HR personnel. The union applied to the Commission for an order preventing the redundancies until meaningful consultation occurred and extensive relevant information was provided.

In a hearing on the jurisdiction of the Commission to make such an order, Commissioner Lawson decided against the Commonwealth Bank and confirmed that the Workplace Relations Act gives the Commission broad powers to make orders preventing redundancies taking place until an employer complies with all of its obligations under the Act.

The decision serves as a reminder to all employers of the importance of discussion with unions before mass redundancies, at the risk of redundancies being delayed by Commission order.

    FSU v Commonwealth Bank of Australia PR 921049

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Do your employees know their maternity leave rights?

A recent decision of the New South Wales Industrial Relations Commission reminds all employers to inform workers about maternity leave entitlements prior to maternity leave being taken. Lawyer Peta Nowacki reviews the decision.

This issue arose in a case where the Commission found that an employee was unfairly dismissed when she did not return to work after taking maternity leave. The employee was employed on a casual basis at Vetob Pty Ltd and took two weeks' leave for the birth of her child, which she considered to be maternity leave. However, she did not comply with her obligation to officially notify the employer of her maternity leave in accordance with the formal procedure in place. When she informed her employer that she was ready to return to work, she was told that business had slowed down and that there was no work for her at that time. She claimed that the employer then indicated he would call her when things picked up. However, that never happened.

In bringing an unfair dismissal claim, the employee argued she had not been informed of her entitlement to parental leave or her obligation to give notice of leave. She thought she had 12 months to return to work. The employer argued the employee had never made a formal application for maternity leave, nor discussed the matter with the employer.

The Commission found that the employee was unaware of the process required to apply for maternity leave and had not been advised of her entitlements or obligations. As a result, her termination was unfair and she received $4,000 in compensation.

    Topuvae v Vetob Pty Ltd (16 August 2002)

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What are your employees doing outside work hours?

Do employers have the right to investigate and take disciplinary action against employees over conduct outside work hours and away from the employer's premises? Solicitor Natalie Shaw and Senior Associate Karen Hasluck-Janes review a recent decision where the WA Court of Appeal held that an employer could investigate an employee's alleged sexual misconduct because there was a connection between the employee's conduct and his employment.

While this case involved a public sector employee and WA public sector legislation, the decision has broad relevance to employers because the court also reviewed the general law position.

The allegation

The case arose out of the Department of Community Development's decision to investigate an allegation of misconduct against a senior public servant in a managerial position (Mr H). A junior female welfare officer (Ms S) alleged that Mr H sexually assaulted her after a departmental training course.

At the conclusion of the training course, Mr H, Ms S and some other public servants attending the training course socialised at a hotel before returning to Ms S's house. Large quantities of alcohol were consumed, and it was Mr H's behaviour during the course of a consensual massage that led to the complaint.

Conduct was relevant

The court considered that the test to be applied in such situations is whether the misconduct is 'relevant to the employment' or has a 'relevant connection with the employment'. In this case, the court considered that, on the face of it, there was a connection between the alleged misconduct and Mr H's employment for reasons including:

  • Mr H had met and befriended Ms S at the training course that he had conducted and in which she had participated;
  • The group meeting for drinks after the training course were all public sector employees who had attended the training course; and
  • As Mr H was a senior employee, discreditable behaviour on the part of Mr H might tend to diminish his status, authority and influence within the Department and might affect his fitness to carry out his duties.

Against this background, it was considered appropriate for the Department to investigate the allegations.

Another issue that the court considered was whether the Department was barred from conducting disciplinary proceedings against Mr H because criminal charges against Mr H had been withdrawn. The court considered that this issue did not impact on the decision to investigate and did not stop the Department from conducting an investigation of Ms S's complaint.

Types of incidents

Conduct can be linked to the workplace in two clear situations. First, the conduct is relevant if it casts doubt on the employee's ability to perform the role. For example, an employer cannot easily ignore evidence of fraud against an employee responsible for handling funds, simply because the evidence involves conduct outside of the workplace. Second, conduct may be linked with work if, as in the WA decision, there is a work connection established by other means.

Employers should give some thought to counselling employees before work-related social functions to conduct themselves appropriately, making it clear that inappropriate conduct may result in disciplinary action.

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Superannuation splitting on marriage breakdown

From 28 December this year, superannuation interests will be treated as property, and will be able to be divided by the Family Court, together with all other assets. Trustees of superannuation funds will be bound by court orders dealing with superannuation entitlements. Partner Heather Gray and Cynthea Reynolds outline the new provisions.

Agreements

Financial agreements dealing with the division of property in the event of a separation or divorce have been allowed since December 2000. These are often known as 'pre-nuptial' agreements, although they can be entered into before, during or even after a marriage. From 28 December this year, spouses and intending spouses will be able to include superannuation interests in such agreements. These agreements will, however, only operate in respect of superannuation entitlements after the parties have separated.

Information

Spouses, and people intending to enter into agreements dealing with superannuation, will be able to apply to the trustee of a superannuation fund for information about the superannuation interests of a fund member. The trustee will be obliged to respond, and will also be bound by secrecy requirements: a trustee must not tell the fund member that an application for information has been received, and must not give a spouse the address of a fund member. The information that trustees must provide in these circumstances is very detailed, including the value of the member's superannuation entitlements, and details of any payments (such as pensions) that are being made.

Splitting

The Family Court can order, or spouses can agree, that a member's superannuation payments must be split between the member and their spouse. This can be done on a percentage basis, or a dollar figure 'base amount' can be used, which earns interest until the time for payment arrives.

Flagging

The Family Court can order, or spouses can agree, that a superannuation interest be 'flagged'. In effect, the interest is frozen – superannuation payments cannot be made while the flag is in place, unless the Family Court or the fund member and their spouse agree. Separating spouses will be able to use 'flagging' to protect their position while an agreement is negotiated, or orders are obtained from the Family Court, or they take time to consider how they want to proceed.

Going forward

Lawyers operating in the Family Law jurisdiction have indicated that a large number of separating couples are waiting for the new laws to come into effect so that they can obtain information about their spouse's superannuation entitlements, or move to enter into superannuation agreements or to obtain court orders dealing with superannuation entitlements. Human resources staff can expect to receive queries from staff who are affected by separation or divorce, and are anxious to know what rights their spouse may be able to exercise regarding their superannuation.

Footnotes
  1. AWU & CFMEU v Geelong Grammar School (PR 922401)
  2. PP Consultants Pty Ltd v Finance Sector Union [2002] 176 ALR 205
  3. Bradken Resources v AMWU (PR 914464)
  4. BCC v AMWU (Blades C, 11 September 2002)
  5. Emwest Products v AMWU [2002] FCA 61

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