Employment Law Update – Autumn 2019

Modern Slavery Act

The Modern Slavery Act 2018 (Cth) (MS Act) commenced on 1 January 2019.  The MS Act creates mandatory reporting obligations on businesses with annual consolidated revenue exceeding $100 million.

Businesses with less than $100 million in annual revenue may choose to report voluntarily.

Those affected businesses will be required to file a “modern slavery statement” each year which outlines:

• the risks of modern slavery in their operations and supply chains;
• the actions they have taken to assess and address those risks; and
• the effectiveness of their response.

The board of directors or equivalent must approve the statement, and signed by a director.  All statements will be published on a central register maintained by the Federal Government.

The first reporting year will be 1 July 2019 to 30 June 2020.

Failure to lodge a statement will not result in any penalty.  However, the Minister for Home Affairs will have the power to name the company on a public registry if it does not comply with its reporting obligations.

At its broadest, the term ‘modern slavery’ refers to any situations of exploitation where a person cannot refuse or leave work because of threats, violence, coercion, abuse of power or deception.

Modern slavery will encompass slavery, servitude, the worst forms of child labour, forced labour, human trafficking, debt bondage, slavery-like practices, forced marriage and deceptive recruiting for labour or services.

NSW State Legislation                                                                  

For legal entities and employers that employ workers in NSW, a comparable NSW State law called the Modern Slavery Act 2018 (NSW) was passed in June 2018 which requires entities with an annual turnover of $50 million or more to prepare a similar modern slavery statement.

Unlike the Commonwealth law, the NSW law imposes penalties of up to $1.1 million for non-compliance. 

It is, therefore, possible to breach both/either the Commonwealth and State laws and experience different adverse consequences.

What Should Employers Do?

Employers should be taking steps now to:

• determine if they are required to prepare a statement for the Commonwealth register and/or the NSW register; and
• plan for and begin drafting their first modern slavery statement.

New Employee Wage Deduction Limitations In Modern Awards

From 1 November 2018, a number of modern awards have been varied to limit an employer’s ability to deduct wages from an adult employee’s final pay to one week of salary for the employee’s failure to give their required minimum notice of resignation.

Previously, an employer could deduct the full amount of the notice period that an employee failed to give.

Reading the model clause together with section 324 of the Fair Work Act 2009 (Cth) (which deals with lawful permitted wage deductions), no wage deductions can be made in respect of any notice periods failed given by any employee who is under 18 year of age.

This modern award variation does not affect employers and employees who are covered by a registered enterprise agreement.

Termination Of ‘Zombie’ Agreements

Over the last couple of months, we have seen increased activity in the termination of old ‘zombie’ agreements. 

Notably, the following significant agreements have been terminated.

Merivale

In January 2019, the FWC terminated Merivale’s 2007 collective agreement (which nominally expired in December 2012), an agreement which covered almost 3000 workers.

The termination took effect on 4 March 2019, after Merivale was granted a period of time to put in place necessary system changes across its numerous workplaces.

Employees of Merivale Hotel group are now covered by the Restaurant Industry Award 2010.

Pizza Hut

Between 30 June 2017 and 11 August 2017 the Shop, Distributive and Allied Employees Association (SDA) filed 27 separate agreement termination applications with the FWC to terminate 30 expired registered agreements. 

The FWC approved each of the 27 applications on 31 January 2019, and since then, thousands of Pizza Hut workers became covered by the Fast Food Industry Award 2010 (which provides penalty rates for weekend, public holiday and evening work).

Specialty Fashion Group (Now Called City Chic Collective And Noni B)

On 20 March 2017, the SDA filed an application to terminate the Specialty Fashion Group’s 2011 enterprise agreement, which nominally expired in 2014.  The agreement was officially terminated on 4 March 2019.

The General Retail Industry Award 2010 now applies to the wages and conditions of employees who were covered by the SFG National Retail Enterprise Agreement 2011.

FWO Strikes First Blow In Spotless “Ordinary And Customary Turnover Of Business” Challenge

The long-standing issue of when the ordinary and customary turnover of labour exception applies to avoid paying redundancy entitlements still remains unclear. 

In the recent decisions of United Voice v Berkeley Challenge Pty Ltd [2018] FCA 224 (the Berkeley case) and FWO v Spotless Services Australia [2019] FCA 9 (the Spotless case), the Federal Court has applied two different legal tests, creating uncertainty in the law. 

See our previous article on the Berkeley decision here.

In the Spotless case, Justice Colvin of the Federal Court held that Spotless Services Australia had also wrongly applied the “ordinary and customary turnover” exception.  The case involved redundancy pay for three Perth International Airport workers after Spotless lost its service contract with the airport.

Justice Colvin held that the exception can only apply if the termination was to be expected by the employee in the particular circumstances of the case.  Applying this test, Justice Colvin found that none of the employment contracts entered into by Spotless with its employees indicated that their employment would come to an end when the customer contract ends. 

As a result, the termination of their employment could not have been expected by the employees in these circumstances.

The difference between the Berkeley and Spotless cases is that the former looks at the employer’s decision while the latter looks at the expectation of the employees having regard to the circumstances of the case.

Employers should prefer the approach adopted by Justice Colvin in the Spotless case because it gives some control over accessing the ordinary and customary turnover of labour exception by setting employee expectations in their employment contracts.

$600,000 A Year Dentist Ruled To Be An ‘Independent’ Contractor

The issue of “contractor vs employee” is a long-standing and contentious one.

In the case of Li v KC Dental, the Federal Circuit Court had to decide whether a high earning dentist, Dr Li, was an employee or independent contractor before deciding on whether KC Dental had taken unlawful adverse action against Dr Li.

Dr Li relied on “control factors” to argue she was an employee, including that she:

• Was not able to book her own patients;
• Had worked regular and systematic hours;
• Had restricted access to the clinic at certain times;
• Had no ability to sub-contract or delegate her duties; and
• Was not permitted to work for other clinics or market her own business.

KC Dental focused on the existing multi-factorial test previously developed by the Courts and argued that Dr Li:

• Used an ABN for invoicing and was registered for GST;
• Made her own superannuation contributions;
• Did not claim or take any annual leave, sick leave or long service leave;
• Paid fees for clinic space hire (e.g. dentist’s chair);
• Received commissions calculated from a percentage of client fees;
• Could have delegated her work (and did so on one occasion);
• Was responsible for managing her own client appointments; and
• Had in her tax returns claimed business expense deductions for service fees charged for laboratory costs, equipment and administration.

The Court decided not to focus solely on “control” as the determinative factor; instead it reinforced existing authority that a multi-factorial test should be applied.

Ultimately, the Court determined that Dr Li was an independent contractor.

FWO Pursues Sushi Stores Under The Reverse Onus Of Proof Laws In Relation To Keeping Proper Time And Wage Records

In September 2017, the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 introduced a reverse onus of proof in relation to keeping employee time and wage records.

In 2018, Fair Work Inspectors audited 79 Sushi outlets based in Brassall, Ipswich, Currimundi and on the Sunshine Coast as part of a proactive auditing activity.

As a result of these audits, the FWO has recently commenced an action using the new ‘reverse onus of proof’ laws against a sushi operator in Queensland, A & K Property Services Pty Ltd (A & K).

It is alleged that A & K failed to keep proper time and wage records, resulting in underpayments of approximately $20,000 to a number of its workers from South Korea on temporary visas.

A & K faces penalties of up to $63,000 per contravention of the Fair Work Act 2009 (Cth).

The matter is listed for a directions hearing in the Federal Circuit Court in Brisbane on 25 March 2019.

It has always been the employer’s obligation under the law to keep accurate records of hours worked by every employee.  The recent changes to the law, however, means that absent reliable records, a business must disprove an employee’s account of hours worked and hourly rates of pay.

The reverse onus laws have already been used by the Courts in the case Fair Work Ombudsman v Pulis Plumbing Pty Ltd [2017] FCCA 3013 in which the Court made the following comments in relation to time and wage records:

 [19] Whilst the admissions were made, the timesheets were never produced to the Court or the FWO, leaving the office to rely upon the employee’s records of the hours worked. I note that it is not an uncommon occurrence for employers to not produce timesheets or records for employees, which appears to create impediments to the investigation of these matters and the calculation of the proper entitlements of the employees. Given the statutory requirements upon employers with respect to record-keeping, it appears to me that, ordinarily, a Court would accept even the most slight and generalised evidence of an employee as to the hours of employment in circumstances where an employer does not produce appropriate records. More recently, the FW Act has been amended to ensure that an employer who does not keep records required by the Act in ss 535 and 536, then the employer has the burden of disproving the allegations about those matters: see s 557C. In short, in future if the employer fails to keep time sheets and provide payslips the employer has the burden of disproving an employee’s claim about hours worked and payments made.

Manager Loses Redundancy Pay Following Rejection Of Alternative Role Requiring Him To Report To ‘Peer’

The FWC has let national auto auction firm Manheim off the hook for redundancy payments, ruling the company found an acceptable alternative role for a manager who then rejected the role because it meant reporting to someone he considered a peer.

The company argued it offered the applicant, Cordiner, an acceptable alternative role as defined in s120 of the Fair Work Act 2009 (Cth).

Cordiner’s previous role was “head of truck and machinery”. When this role was made redundant, he was offered “head of industrial operations” on the same salary of $200,000 per year but with an extra reporting line to Cordiner’s “peer”.

In his decision, Deputy President Coleman:

• Noted Cordiner’s pay, hours of work and location would not have changed and the “central contention” had to do with reporting lines.
• Cited Cordiner’s 2017 employment contract, which included a clause stating “Manheim may vary your reporting line from time to time”.
• Noted the sentence in his employment contract “[a]ccordingly, even if the restructure had not occurred, Manheim could have changed Mr Cordiner’s reporting line”.
• Reduced Cordiner’s redundancy entitlement to zero, saying that was “fair” in the circumstances.
• Concluded with the statement “acceptable alternative employment was offered to Mr Cordiner and I do not consider there to be any countervailing considerations telling against the exercise of my discretion.”