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Focus: Workplace Relations – September 2003

In this issue: We look at the pitfalls of restructuring as a means of diminishing union influence in the workplace, changes to severance entitlements in Queensland, terminating expired certified agreements, drug dependence and workplace discrimination, and redundancy developments in WA.

 

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The ongoing cost of restructuring

In brief: Controversy continues to surround restructuring as a means of reducing union influence in the workplace. Partner Jamie Wells reviews a Federal Court decision involving a dispute about freedom of association.

Background

The AMIEU v Belandra1 case arose out of the closure and reopening of Belandra's abattoir operations. Following a fire at one site, the operation was closed for an extended period and workers were put off. However, no severance payments were made, reflecting Belandra's expectation that the operation would resume in the future and the workers would be re-employed. This was consistent with a term in the applicable certified agreement, which allowed for severance payments to be withheld during closures for up to eight months.

Eventually, the severance payments fell due and were paid. Shortly after, Belandra decided to resume operations at another site to fill the void left by the closure. As part of the plan, operations were conducted through a management company, which had its labour requirements met through engaging labour-hire employees.

The Australasian Meat Industry Employees Union (AMIEU) claimed, on behalf of the retrenched workers, that the decision to use other labour was in breach of Part XA of the Workplace Relations Act 1996 (Cth), protecting freedom of association. In particular, the AMIEU claimed that the decision was taken because of:

  • the workers' rights under the certified agreement; and
  • the company's attitude to the workers' involvement with the AMIEU.

When considering the claim, the court had to consider a number of novel threshold issues before examining Belandra's motives. These included:

Was Belandra an employer?

For Part XA to apply to Belandra, it had to be an 'employer'. The court accepted that, even if Belandra did not employ anyone at the time operations were resumed, Belandra was still an employer for the purposes of Part XA. In this context, Belandra needed only to be 'usually' an employer and could be caught on that basis.

Refusal to employ

Part XA requires the workers to have suffered adversely at the hands of the employer. In this case, the AMIEU claimed that this occurred when Belandra 'refused to employ' the workers when resuming operations.

Belandra claimed that it had not refused to employ the workers, having no ongoing role in the employment of labour. In effect, having contracted out that part of the operations, there were no vacancies for Belandra to fill.

The court rejected that argument and accepted that there does not need to be a vacancy before the employer can be said to have refused to employ. Although the absence of a vacancy might help explain the employer's motive in refusing to employ, it does not change the fact that Belandra took a decision to contract out the role rather than to employ former workers.

Alteration to prejudice

Alternatively, the AMIEU described Belandra's conduct as altering the workers' position prejudicially.

Belandra countered by arguing that, when deciding to contract out the labour, the workers were not employed by Belandra and that nothing had changed.

The court rejected that argument in the unusual circumstances of this case. Because Belandra had legitimately withheld severance benefits after closure and termination (waiting to see if operations would resume within the eight-month time period), the workers had an expectation of being re-hired. When Belandra took the decision not to re-hire the workers, it took away their expectation and this involved prejudicial alteration to the workers' position.

Further, the workers retained rights under the certified agreement beyond termination of employment. If the operations did not resume within eight months, the workers could enforce redundancy rights, even though their employment had terminated well before.

Did Belandra act for a prohibited reason?

All of the threshold issues would be irrelevant if Belandra acted with a proper motive. It is lawful to refuse to employ a worker or to cause prejudicial alteration to the workers' position if the employer is motivated by a sound commercial rationale.

Belandra tried to argue a commercial basis for the decision but was unsuccessful. The court decided that Belandra's motives included:

  • a negative attitude to the workers' involvement with the AMIEU; and
  • the workers' entitlements under the certified agreement.

The court relied heavily on management's oral evidence. This indicated a clear dislike of the AMIEU and its impact on the workplace. As the employer carries the exceptional onus under Part XA of showing that it acted for other reasons only, the views of management were fatal to Belandra's case.

When considering the question of union involvement, the court took a broad view of the issue. In effect, an employer will be acting improperly if it takes action against employees 'because they had taken action as members of a union and because a union had taken action as an incident of that employee's membership of a union'.

This view is substantially broader than earlier comments in the Federal Court suggesting that it is the fact of union membership alone that must be behind the employer's decision.2 On the narrow view, an employer is in breach only it if objects to union membership, as opposed to the way in which a particular union campaign might be run.

Summary

Should other decisions follow the broad interpretations taken in this case, the reach of Part XA will be extremely broad. In many cases, a genuine restructure may, at first glance, offend and the risks will be high, given the reverse onus of proof.

The line between acting unlawfully in breach of Part XA and acting lawfully for commercial reasons can be fine. This is particularly so if the commercial reasons flow from union involvement or an adverse certified agreement. To have to reconstruct the reasons behind a decision after the fact is an unreliable way to discharge the onus. Preparation needs to be careful, well-costed and well-documented to ensure that the reasons are clear and will stand up to independent scrutiny.

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Redundancy entitlements and unfair dismissal cap

In brief: The standard policy for redundancy entitlements in Queensland awards has recently been amended. Lawyer Simon Dewberry outlines the main changes below.

Severance pay

The Queensland Industrial Relations Commission has extended the severance pay scale to provide greater entitlements for employees with more than five years' of continuous service. The scale for employees with shorter service is unchanged. The new scale provides for a maximum 16 weeks' severance pay for employees with more than 12 years' continuous service. Previously, the maximum entitlement was eight weeks' pay for employees with four years' or more continuous service.

The new severance pay scale can be inserted into awards from the date of the decision (18 August 2003), but will only have effect from 1 December 2003.

Rejection of other claims

The Commission rejected the following claims made on behalf of workers:

  • a 25% loading on the severance pay entitlement for employees aged 45 years and over;
  • calculation of severance payments on total earnings, including allowances, loadings and penalty rates (rather than the current standard that applies the ordinary rate of pay);
  • severance payments to apply to long-term casual employees and seasonal employees;
  • removal of the offset against severance pay for benefits received under a superannuation scheme; and
  • removal of the exemption for employers who employ fewer than 15 employees.
Changes to wages cap

In other news, the wages cap for access to the reinstatement jurisdiction of the Commission has increased to $85,400. This increase took effect from 22 August 2003, but will still permit access by all employees covered by a Queensland award.

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New hurdle to terminating certified agreements

In brief: The Australian Industrial Relations Commission has refused to terminate an expired certified agreement and, in doing so, expanded the applicable test. Employers may now need to consider the impact of termination on the entitlements of employees.3  Lawyer Jonathan Morley reports.

Background

Geelong Wool Combing (the company) applied to the Commission to terminate a series of certified agreements with the Textile, Clothing and Footwear Union of Australia (TCFU). Ninety-three of the Company's employees were covered by the current certified agreement, arising out of successive agreements and enterprise bargaining since 1993.

Section 170MH of the Workplace Relations Act 1996 (Cth) provides that an employer may apply to the Commission to have a certified agreement terminated after its nominal expiry date. On receiving the application, the Commission must take such steps as it considers appropriate to obtain the views of persons bound by the agreement about whether it should be terminated. If the Commission then considers that it is not contrary to the public interest to terminate the agreement, the Commission must terminate the agreement.

The company argued that it would be in the public interest to terminate the agreement, because termination would provide a basis to move towards more competitive and economically sustainable terms and conditions for employees. Termination would also encourage a breakthrough in deadlocked negotiations, as the company had locked out the relevant employees from its site for the past five months as part of the bargaining process.

In response, the TCFU claimed that termination of the agreement would result in reversion to the relevant award, with terms and conditions less favourable to the employees.

Public interest test

The Commission concluded that the application was against the public interest, due to the uncertainty over the workers' contingent entitlements. The current agreement provided them with significant severance pay and increased long-service leave on retrenchment. The company gave no undertaking about the preservation of these entitlements, but it was a distinct possibility that the company might in the future consolidate its operations in Australia and relocate some of its plant to China. If the agreement was terminated, the employees would no longer have access to the redundancy and long-service leave entitlements. 

Implications

The decision goes against the prevailing trend of ignoring a reduction in benefits for particular employees when looking at the public interest. It suggests that the Commission should consider the effect of termination of an agreement on both the entitlements and contingent entitlements under the agreement. The Commission now appears prepared to consider any negative impact of termination on the employees' contingent entitlements.

Employers might consider the cost of undertaking to maintain such entitlements, to increase the likelihood that the Commission will terminate the agreement.

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Commission gives a hurry up

In brief: A recent change to the way the Industrial Relations Commission of New South Wales handles unfair dismissal claims means employers must be able to respond to claims more quickly than in the past, Senior Associate Andrew Cardell-Ree reports.

New Practice Direction

In a move designed to expedite unfair dismissal claims, the Commission has issued Practice Direction No. 11, effective from 24 June 2003. The practice direction requires the Commission:

  • to set the date of the conciliation conference (the first step in a claim) within 21 days of receiving an application; and
  • to postpone the conference only if there are clear and compelling reasons.

If a claim is not settled at conciliation, the new rule anticipates exchange of evidence within six weeks of the directions hearing. An employer may find it difficult to gather its evidence in time if it has not located all paperwork and witnesses before receiving the applicant's evidence, particularly if the claim is made by an employee at a remote branch office, or if the employer is not located in New South Wales.

Implications

The Commission is also considering changes to clear a backlog of about 1,100 unfair contract claims. Given that agenda, the Commission is likely to enforce the time limits of Practice Direction No. 11 strictly. If so, now, more than ever, employers need to devote time and resources to gathering evidence and preparing to respond to claims promptly.

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The disabling effects of drug addiction

In brief: Discrimination against employees on the basis of drug addiction may support a disability discrimination claim. Senior Associate Cathy Scalzo reports on a decision that considered the 'prohibited drug exception' under the New South Wales law.4  

Facts of the case

Mr Carr was employed by the City of Botany Council as a labourer. After a period of heroin use, he spent four years on a registered methadone program. Mr Carr brought a discrimination complaint against the council, alleging that once it discovered his methadone use, it treated him less favourably than other employees. The council applied to dismiss Mr Carr's complaint, arguing that his methadone addiction was not a 'disability' under the Anti-Discrimination Act 1977 (NSW). 

Is methadone addiction a disability?

Under the Act, 'disability' includes a 'disorder, illness or disease that affects a person's thought processes, perception of reality, emotions or judgment or that results in disturbed behaviour'. The council argued that, because Mr Carr did not manifest any of these characteristics at the time of the alleged discrimination, he could not be said to have a disability.

The Administrative Decisions Tribunal rejected this approach, finding that:

  • Mr Carr's addiction to methadone was a 'disorder'; and
  • just because Mr Carr was able to lead a normal life (as a result of appropriate methadone treatment), this did not mean that he no longer had a disability.

The Tribunal accepted expert evidence that if Mr Carr discontinued his methadone treatment, he would suffer disturbed behaviour, and severe effects on his thought processes, perception of reality, emotions or judgment.

Prohibited drug exception

The Council argued that an addiction to methadone was equivalent to heroin addiction, and noted that the Act had been amended to allow discrimination on the grounds of disability if the person's disability related to their addiction to a prohibited drug.

However, the Tribunal found that this 'prohibited drug exception' did not bar Mr Carr's discrimination complaint, because while the exemption applied in relation to heroin addiction, it did not apply in relation to other drugs used in the treatment of heroin addiction, such as methadone and buprenorphine.

Implications for employers

The decision is consistent with an earlier Federal Court ruling dealing with a similar issue.5 This uniformity in approach suggests that employers will need to consider carefully their treatment of such people, even though the addiction may not relate to the workplace at all. In New South Wales, employers should not assume that the prohibited drug exception applies in all cases, and it may be necessary to assess whether any adverse treatment of the employee can be justified on an independent basis.

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No legal obligation to make redundancy payments

In brief: Employers in Western Australia have no obligation to make redundancy payments as a matter of fairness if there is no contractual or award right. Law Graduate Bronwyn Byrnes and Partner Tom Yuncken review recent developments in WA.

Background

Until recently, employees have argued before the WA Industrial Relations Commission that they were entitled to redundancy payments even if there was no contractual or award entitlement. These arguments have been put on the basis that:

  • there was an implied term in the employment contract or award; or
  • redundancy payments were allowable as compensation for unfair dismissal.

Since Dellys v Elderslie Finance Corporation Limited,6 the first argument cannot be relied upon. This meant employees could only use the second argument, ie that a termination for redundancy not accompanied by a reasonable redundancy payment was harsh, unjust or unreasonable.7

However, in Epath WA Pty Ltd v Adriansz,8 the Full Court of the WA Supreme Court has now ruled that the Commission has no power under the unfair dismissal provisions to order an employer to make a redundancy payment to an employee where no legal entitlement exists.

This is in stark contrast with the position both federally and in other states, where employees can base a claim solely on the fairness of a severance payout.

Comment

This decision confirms that, in WA, an employer has no obligation to make redundancy payments to employees unless they are provided for in a contract of employment, award or agreement.

This creates greater certainty, as employers in Western Australia now know that compliance with strict redundancy entitlements will satisfy any expectation that the employee might have about the fairness of a payment.

References
  1. [2003] FCA 910
  2. AWU v BHP Iron - Ore (2000) 106 FCR 482
  3. Geelong Wool Combing Ltd re Geelong Wool Combing Ltd Enterprise Agreement 1993 and others PR937499 (5 September 2003)
  4. Carr v Botany Bay Council & Anor [2003] NSW ADT 2009 (9 September 2003)
  5. Marsden v Human Rights & Equal Opportunity Commission [2000] FCA 1619
  6. [2002] WASCA 161
  7. Rogers v Leighton Contractors (1999) 79 WAIG 3551; Wynn Winegrowers v Foster 16 IR 381 at 381
  8. (2003) WASCA 175 

 

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