Allens Arthur Robinson

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Focus: Workplace Relations – October 2008

In this issue: We look at employee's rights, and prohibitions, concerning freedom of association provisions; the operation of the Independent Contractors Act; limitations around the implied duty of good faith and fair dealing; and acceptable alternative employment in a transmission of business.

• Associated freedoms
• Contractors' contracts unfair?
• Implied duty of good faith and fair dealing
• Acceptable alternative employment includes redundancy rights
• Employer found guilty of dismissal for prohibited reasons

Associated freedoms

In brief: Employees may have individual rights to freedom of association, which encompass a right to make a complaint or participate in a proceeding under an industrial law. Senior Associate John Naughton and Law Graduate Will Brennan report.

Background

Mr Dowling was an employee of Fairfax Media Publications Pty Ltd (Fairfax), one of the largest publishers of newspapers and magazines in Australia.

In early 2007, Mr Dowling was aggrieved about certain work matters and proposed to make a complaint to Fairfax's human resources department. Mr Dowling believed that he was discouraged from doing so, which led to his making a later formal complaint about bullying and intimidation.

In April 2007, Mr Dowling informed senior management by email that he believed senior management had subjected him to 'gross amounts of bullying, intimidation and bastardisation'. After receiving a warning letter from Fairfax in May 2007, Mr Dowling told a member of Fairfax's management that he was going to make a complaint to WorkCover the next day. Fairfax then terminated his employment.

The decision

Mr Dowling claimed before the Federal Magistrates Court that the termination of his employment was unlawful, alleging that it had been based on a reason prohibited by the Act – namely, that he had made, or had proposed to make, an inquiry or complaint to WorkCover, and/or because he had participated in, or had proposed to participate in, a proceeding under the Act. This was alleged to have infringed upon Mr Dowling's right to freedom of association.

Mr Dowling's claim was dismissed initially by the Federal Magistrates Court, a decision he then appealed.¹ Before the Federal Court, Fairfax argued that a right to 'freedom of association' should be interpreted to mean a right to join or not to join, or to associate with, an industrial organisation, and that had nothing to do with individual rights.

However, the Federal Court disagreed, finding in Mr Dowling's favour, and holding that the language of the Act was sufficiently broad to anticipate the circumstances of Mr Dowling's claim against Fairfax, and an interpretation anticipating individual rights was consistent with the purpose of the Act as a whole. Accordingly, Mr Dowling's case was returned to the Federal Magistrates Court for further hearing.

Contractors' contracts unfair?

In brief: A recent decision to rewrite the provisions of an independent contract show that the Independent Contractors Act 2006 (Cth) has real teeth. Senior Associate John Naughton and Law Graduate Will Brennan report.

Background

Riteway Transport Pty Ltd (Riteway) is a freight trucking company that services businesses nationwide. Keldote Pty Ltd, L& D Lowe Transport Pty Ltd, and Tambo Waters Pty Ltd (the applicants) had all provided line-haul trucking services to Riteway for a number of years.

In early 2007, Riteway advised the applicants that it required them to replace the vehicles they were then using with 'B/double' trailers. Riteway told the applicants that if they did not comply, their services would not be required after 23 August 2007.

Riteway purported to make this requirement under the terms of an umbrella agreement between Riteway and the Transport Workers Union (the agreement), which governed the individual contractual relationships between Riteway and each party. The agreement provided that Riteway could require the applicants to use any transport stipulated by Riteway.

The applicants were content to make the upgrades, but only if their service fees were increased to reflect the additional cost. However, Riteway refused to pay any increased fees and reiterated its requirement.

The decision

The applicants applied to the Federal Magistrates Court for an order that the agreement was unfair or harsh under the Act. They alleged, among other things, that the unfairness or harshness arose because the agreement allowed Riteway to compel the applicants to purchase new equipment without adequate compensation.

The court agreed that the agreement was unfair for a number of reasons:²

• Although the agreement allowed Riteway to require the applicants to upgrade their vehicles, Riteway was not required to compensate the applicants for the expense of them doing so;
• Riteway's power to require upgrades could be abused, as there was no restriction on how often the power could be exercised; and
• The agreement could be used by Riteway to force the applicants to terminate their relationship with Riteway, leaving them in a position where they could not afford upgrades and would have no option but to find alternative work.

The court ordered that the agreement be varied to limit Riteway's power to require upgrades, by providing that Riteway could only require new vehicles with 'specifications reasonably equivalent to the vehicle to be replaced'.

Implied duty of good faith and fair dealing

In brief: In a recent decision, the New South Wales Court of Appeal has clarified the limitations of the implied duty of good faith and fair dealing in employment contracts. Senior Associate Nick Fletcher reports.

Background

Mr Russell was the Director of Music at St Mary's Cathedral, Sydney, until his employment was terminated following an investigation by the Catholic Church into his involvement in sexual misconduct by another employee.

Mr Russell was successful in unfair dismissal proceedings in the NSW Industrial Relations Commission and was reinstated.

He then brought proceedings in the Supreme Court of New South Wales against the Church for breach of contract. Justice Rothman found that Mr Russell's dismissal had been in breach of contract, including breach of the implied duties of good faith and mutual trust and confidence. However, he rejected each of the damages claims.

Mr Russell appealed to the Court of Appeal, including on the basis that he was entitled to damages for breach of the implied duties of good faith and mutual trust and confidence.

Decision of Court of Appeal

In dismissing Mr Russell's appeal³, the Court of Appeal accepted that there may be implied duties of good faith and mutual trust and confidence imposed on an employer. These duties were characterised as a single duty of good faith and fair dealing, the precise scope of which is unclear.

The Court of Appeal held that Mr Russell was not entitled to damages for damaged reputation or injured feelings caused by the alleged breach of the implied duty of good faith and fair dealing in relation to the termination of his employment. To find otherwise would be inconsistent with the existing statutory regime for unfair dismissal.

In addition, the Court of Appeal found that Mr Russell was not entitled to damages for any breach of the implied duty of good faith and fair dealing based on steps the Catholic Church took leading up to his dismissal (ie the investigation that ultimately led to his dismissal).

The Court of Appeal held that even if there was a right to damages for breach of the implied duty of good faith and fair dealing, the failure of the Catholic Church to take certain steps in investigating Mr Russell's conduct (eg its failure to interview an interstate witness face to face, rather than over the telephone) did not amount to a breach of the implied duty.

Acceptable alternative employment includes redundancy rights

In brief: The Australian Industrial Relations Commission has recently found that an offer of employment in the context of a transmission of a business did not constitute acceptable alternative employment because it did not include comparable redundancy entitlements. Lawyer Catherine Ware reports.

Background

Mr Brinskele had been an employee of Nuplex Industries Australia Pty Ltd (Nuplex) for almost 33 years. The preserved collective State agreement applicable to his employment (the agreement) provided for more favourable redundancy entitlements than the relevant State award (the award).

Upon the transmission of Nuplex's business to Lomb (Australia) Pty Ltd (Lomb), Mr Brinskele was offered employment by Lomb that did not incorporate his redundancy entitlements arising under the agreement (notwithstanding the transmission of business rules in the Act), or continuity of his employment for the purposes of any future redundancy entitlements.

Mr Brinskele did not accept the offer of employment on this basis, and sought a redundancy package from Nuplex under the agreement.

Nuplex argued that it had obtained acceptable alternative employment for Mr Brinskele which, according to the award, allowed Nuplex to avoid paying redundancy entitlements.

The decision

Senior Deputy President Drake found:⁴

• Nuplex did not obtain acceptable alternative employment for Mr Brinskele; and
• Nuplex was required to pay him his redundancy entitlements under the terms of the agreement.

There was no relevant offer of acceptable alternative employment, as Lomb would not be providing Mr Brinskele with comparable redundancy entitlements (including by reference to the fact that Lomb would not recognise Mr Brinskele's service with Nuplex).

In addition:

• Lomb's work premises were still under construction and would not be completed for some time; and
• Mr Brinskele would be subject to geographical difficulties in travelling to the proposed new workplace.

As a result, despite Mr Brinskele's proposed salary with Lomb being comparable, and the transfer of other credits, Senior Deputy President Drake found that, on an overall basis, Lomb's employment offer did not constitute acceptable alternative employment. Mr Brinskele was entitled to his full redundancy entitlements under the agreement to be paid by Nuplex.

Employer found guilty of dismissal for prohibited reasons

In brief: The Federal Court of Australia recently held that an employer unlawfully terminated three of its employees for prohibited reasons, contravening freedom of association provisions under the Workplace Relations Act 1996 (Cth). Senior Associate Joanna Musk and Articled Clerk Hugh Foley report.

Background

During late 2005, before legislative changes brought about by WorkChoices, the Automotive, Foods, Metals, Engineering, Printing and Kindred Industries Union (AMWU) wished to negotiate a new collective agreement with Thornton Engineering Australia Pty Ltd (Thornton). Shortly after attending a union meeting regarding this proposal, three employees who were members of the AMWU were dismissed.

Thornton claimed that the reason for dismissing two of the employees was a general reduction in the workforce due to the loss of a major contract, and that the reason for the other employee's dismissal was his unsuitability for the job.

The employees claimed that they were dismissed for reasons that included:

• their union membership; and
• that they were dissatisfied with their terms and conditions of employment and the AMWU was seeking better conditions on their behalf,

contrary to the freedom of association provisions of the Act.

The decision

The Federal Court of Australia held⁵ that there was evidence of deep-seated antagonism to the AMWU, and to union membership, by Mr Thornton, who ran the day-to-day operations of the business and whose father had founded Thornton. In reaching its decision, the court took into account other significant factors, including that:

• there was evidence of candidate interviewing scripts that were clearly intended to filter out applicants with union sympathies;
• despite Thornton's evidence regarding the general reduction of the workforce, it had advertised a number of vacant positions soon after the dismissals, and a number of new staff had started work;
• Mr Thornton admitted that the loss of the major contract was not a major consideration regarding staffing because the business was able to absorb some degree of labour fluctuation; and
• the timing of the dismissals was within days of the union meeting.

The court also drew adverse inferences from Thornton's failure to call a number of key witnesses who could have given evidence to support its case.

For these reasons, the court preferred the employees' version of events and held that they had been unlawfully terminated.

Footnotes

1. Dowling v Fairfax Media Publications Pty Ltd (formerly John Fairfax Publications Pty Ltd) [2008] FCA 1470
2. Keldote Pty Ltd & Ors v Riteway Transport Pty Ltd [2008] FMCA 1167 (22 August 2008)
3. Russell v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2008] NSWCA 217
4. Application by Nuplex Industries Australia Pty Ltd [2008] AIRC 1133 (26 September 2008)
5. Automotive, Foods, Metals, Engineering, Printing and Kindred Industries Unions v Thornton Engineering Australia Pty Ltd [2008] FCA 1484

For further information, please contact:

• Jamie WellsPartner, Brisbane
  Ph: +61 7 3334 3268
  Jamie.Wells@aar.com.au
• Peter ArthurPartner, Sydney
  Ph: +61 2 9230 4728
  Peter.Arthur@aar.com.au
• Gavin MacLarenPartner, Melbourne
  Ph: +61 3 9613 8941
  Gavin.MacLaren@aar.com.au