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Allens Arthur Robinson

Focus: Workplace Relations – October 2003

In this issue: We look at compulsory superannuation contributions for casuals; part-time work after maternity leave; legal risks that arise from employment negotiations; how taking a hard line at conciliation can prove costly; and the desirability of finalising settlement terms at the conciliation conference.

Not such a super result for casuals

In brief: The High Court has weighed into the debate over compulsory superannuation contributions for casuals, deciding that only hours remunerated at the base rate of pay should be taken into account. Partner Jamie Wells (view CV) reports.

Calculating contributions

Compulsory superannuation contributions are made on the employee's notional earnings base. If an industrial award sets the formula for calculating the notional earnings base, that is the appropriate formula to apply. If an award provision is absent, the notional earning base is set by reference to ordinary time earnings. For permanent employees, the scope of ordinary time earnings is relatively clear. Superannuation Guarantee Ruling 94/4 assists by setting out express inclusions and exclusions.

Usually, hours remunerated at an overtime rate are excluded. For casuals, the distinction between ordinary time earnings and overtime earnings is less clear. Although many awards entitle casuals to overtime rates of pay, the inherent flexibility of casual employment leaves room for the possibility that wages paid at overtime rates should still be taken as ordinary time earnings.

The High Court reviewed the casual superannuation issue in the context of the Clerical Employees Award – State (Qld).1 The award had a clause dealing with superannuation contributions, and required contributions to be made on ordinary time earnings. Ordinary time earnings was specifically defined to exclude overtime, consistent with the meaning given under SGR 94/4.

Different views

The court considered three possible outcomes for casuals. Superannuation contributions might be due in relation to:

  • only those hours worked at the base rate of pay; or
  • all hours worked by casuals, regardless of the actual rate of pay for each hour. Ordinary time earnings would include all earnings for those hours, whether at the base rate or at the overtime rate; or
  • all hours worked by casuals, regardless of the actual rate of pay for each hour. However, for superannuation purposes, the base rate is applied for all hours.

The third option, taking into account all of the hours worked but only at the base rate was favoured on appeal to the Federal Court2. It adopted a middle ground in between the two options put forward by the parties. The right option was far from clear, because of the inherently poor fit between the superannuation legislation and the award classification. As a result, each option received its share of support as the dispute proceeded through the appeals process.

High Court decision

Ultimately, the first option was accepted by a majority of the High Court. This means that, in the context of that particular award, casuals might have a lower notional earnings base by excluding some of the hours actually worked. For a casual working only hours paid at overtime rates, the possibility remained that all hours might be excluded.

The scope of the High Court's decision is uncertain, other than for casuals employed under the Clerical Employees Award – State (Qld). However, many awards permit overtime rates to be paid to casuals and there is no reason to believe a similar approach should not be taken to casual superannuation under those awards.

Because of uncertainty in this area, the approach of employers to casual superannuation contributions has not been uniform. This decision now offers a rationale for preferring one option over another, giving the employer confidence that it has been considered at the highest level. There is enough in the decision to suggest it might be followed where there is no award provision in play and SGR 94/4 applies. Whether it assists in the context of other awards will depend on the precise formula set out in those awards.

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Part-time work after maternity leave

In brief: A recent decision of the Federal Magistrates Court3 adds to the growing body of case law that requires employers to reasonably accommodate requests for part-time work on return from parental leave. Lawyer Rosemary Bryant-Smith reports.

Request for part-time work

Ms Mayer was the business development manager of the Australian Nuclear Science and Technology Organisation (ANSTO). Ms Mayer took maternity leave for 12 months and her employment contract was due to expire during her period of leave. She requested that it be extended for two years, as ANSTO had done with the contracts of many other employees. ANSTO agreed to extend the contract for one year.

Prior to her return to work, Ms Mayer requested that she return on a part-time basis. ANSTO decided that no suitable part-time work was available.

Ms Mayer treated the refusal to accommodate part-time work as termination of her employment and claimed unlawful discrimination.

Discrimination claim

Ms Mayer claimed that ANSTO had discriminated against her by:

  • not offering her a two-year extension of her employment contract; and
  • requiring her to work full-time.

ANSTO was found to have directly discriminated against Ms Mayer on the basis of her pregnancy, by refusing to grant an extension of her employment contract for a period of greater than one year. Ms Mayer was treated less favourably than other employees of ANSTO receiving a longer contract extension. The court held that ANSTO's practice of renewing contracts gave rise to a reasonable expectation that her contract would be renewed for two years.

The court also held that ANSTO had indirectly discriminated against Ms Mayer, on the basis of her sex, when it refused her request for part-time work. The court commented that very little effort was made by ANSTO to determine the feasibility of part-time work, and that ANSTO had produced little evidence about why part-time work was not viable.

The court upheld the views expressed in previous cases4 that women are disadvantaged if expected to work full-time, because women are more likely than men to require at least some periods of part-time work to meet family responsibilities. Therefore, to expect an employee to work full-time can involve unlawful discrimination.

Implications

While there is no automatic right to part-time work, recent cases have provided remedies for women denied access to part-time work, if they can demonstrate that their employer's requirement that they work full-time is not reasonable in the circumstances.

In many of the cases in which discrimination has been proved, the employer refused to consider job-share arrangements or part-time options or, alternatively, it was clear that there were part-time options available for the female employee and yet the employer did not try to accommodate the employee's requests. These circumstances made it easier for the employees to prove that the employer's demand that they work full-time was unreasonable.

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Representations during negotiations

In brief: A recent Federal Court decision confirms that rash or vague promises made during employment negotiations can fall foul of the Trade Practices Act 1974. Consultant Kirk Lovric outlines some of the legal risks that arise from employment negotiations.

Background

In this case5, the employment negotiation involved a significant salary and was complicated by a bonus arrangement, unclear commitments about the position on offer, the requirement for flexible start dates and the role of the recruitment company that negotiated on behalf of the employer. The negotiations involved numerous people over a lengthy period of time, became confused and, in the court's view, led the employee to rely on the assurances from the employer. When the employer failed to meet those assurances, the court held the employer liable for misleading and deceptive conduct.

Reducing the risks

Employers should focus on a number of key areas during negotiations to reduce the risk of claims:

  1. Employers and recruitment companies should avoid overstating the nature of the role and other benefits associated with working with the company.
  2. It is important to manage the relationship with the recruitment company to control the flow of information.
  3. All relevant discussions should be documented, with the employment contract setting out all terms and conditions to apply. Collateral arrangements are risky unless specifically referred to in the contract. As commitments change, the documents should be updated to reflect the variation.

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Hard line at conciliation proves costly

In brief: A recent decision of the Industrial Court of Queensland is of concern to employers defending unfair dismissal claims rather than settling during conciliation. Lawyer Simon Dewberry reports.

Costs awarded

Ms O'Reilly applied to the Queensland Industrial Relations Commission claiming that dismissal from her employment at a Coco's fruit store was harsh, unjust or unreasonable. Ms O'Reilly was successful and was awarded compensation and costs.

Despite finding that Coco's clearly had an arguable case, the Commission held that the failure to enter into settlement negotiations and to consider settlement offers was an 'unreasonable omission connected with the conduct of the application', triggering the Commission's discretion to award costs.

During the compulsory conference, Coco's flatly rejected one settlement offer and did not respond to other offers at all.

Appeal

According to the Industrial Court, the critical issue on appeal was whether a refusal to mediate in a constructive way and, in particular, a failure to respond to settlement offers, could be an unreasonable omission connected with the conduct of the application. President Hall commented that:

[A]s a matter of first impression, the proposition is a little startling. If the primary purpose of [the costs rules in the Industrial Relations Act 1999 ] be to protect the right of a party to litigate free of fear of an adverse costs order. It is more than a little difficult to accept that the power to award costs may be triggered by the exercise of the right to litigate.

Nevertheless, the President held that failing to accept a reasonable settlement offer could justify a costs order. The President reasoned that the parties would be adequately protected by the discretion of the Commission not to award costs in a given case.

In this case, despite the Commission's view that Coco's had an arguable case, the President was not persuaded that the Commission had made an error in exercising its discretion to award costs.

Lesson for employers

The Industrial Court's decision does not go as far as saying that employers must accept offers of settlement made by employees at conciliation conferences, or that employers are obliged to make their own offers. However, given the reasoning in this decision, parties should make efforts to treat the conciliation process seriously and consider settlement offers in light of the strength of the case.

Although this decision went against the employer, the theory should work both ways and employees refusing to accept reasonable offers do so at their peril.

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When is a deal a deal?

In brief: Some recent decisions of the Queensland Industrial Relations Commission point to the desirability of finalising settlement terms at the conciliation conference, rather than simply agreeing to work out the finer details later. Lawyer John Naughton reports.

Three possibilities

It is sometimes uncertain whether an agreement struck during an unfair dismissal conciliation conference will be considered final. There are three possibilities:

  1. the parties have reached agreement and intend to be bound immediately;
  2. the parties have reached agreement, but intend performance of one or more of the terms to be conditional upon the execution of a formal document; or
  3. the parties might not have intended to reach a concluded bargain until they had executed a formal contract.

It is not always clear which description applies in a given situation. The party trying to back out of the alleged agreement will push for the third option, while the party pleased with the terms will argue to the contrary.

Department of Families v Burgess

In this case, there was a compulsory conference between the Department of Families and Mr Burgess, at which the Department accepted in principle an offer to settle from Mr Burgess. The arrangement was that the Department was to confirm its position by the end of the day.

That afternoon, the Department contacted Mr Burgess' agent and advised that it had agreed to the terms put by Mr Burgess to settle the matter. The Department confirmed this in a letter to Mr Burgess' agent on the same day, attaching a release for Mr Burgess' signature.

By the time the release reached Mr Burgess, he had taken legal advice and decided he would sign the release in its current terms only if he received a much larger settlement sum than that which had been agreed at the conference.

The question for the Commission was whether the unsigned release was a binding agreement, or whether Mr Burgess was entitled to pursue the claim.

The Commission considered that the arrangement fell into the first class of case. It held that the agreement reached during the conference was subject to confirmation by the Department later that day, but that when this confirmation had been received, the agreement was final. It followed that Mr Burgess could not pursue his claim.

Larorb Pty Ltd v Ball

In this case, both parties and the Commissioner conducting the conciliation signed a memorandum of terms. It was said to reflect an agreed position in relation to a number of disputed issues.

Larorb Pty Ltd argued that the document was a final agreement, falling within either the first or second type of case. However, following the conference, there was correspondence between the parties which indicated that neither party believed that a concluded agreement had been reached. This impression was fortified when the Commission subsequently issued a certificate which stated that 'all reasonable attempts to settle the matter by conciliation are, or are likely to be, unsuccessful'. In addition, a subsequent written document confirming the memorandum of terms included a range of terms that were not even considered at the conciliation conference.

The Commission concluded that the case was in the third category, and that the agreement – although signed by each of the parties – was not a concluded bargain.

Implications

These cases demonstrate that it is best to document with finality the terms of settlement, even if the memorandum of terms might not be expressed in the detail of a formal settlement agreement. If the agreement is to be made subject to executing a formal settlement agreement, it is important that the memorandum of terms signed at the conference is clear in its terms and comprehensive in covering all relevant issues.

An applicant who walks away from a deal struck at a conference may seek further advice and be exposed to alternate views regarding the merits of the settlement – and a change of heart will rarely work in an employer's favour.

Footnotes
  1. Australian Communication Exchange v DCT [2003] HCA 55
  2. DCT v Australian Communication Exchange [2001] FCA 1664
  3. Mayer v Australian Nuclear Science and Technology Organisation [2003] FMCA 209
  4. Escobar v Rainbow Printing, and Hickie v Hunt and Hunt
  5. David Walker v Salomon Smith Barney Pty Ltd & Anor [2003] FCA 1099

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