MONTHLY UPDATE AUSTRALIAN LABOUR & EMPLOYMENT

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1 JUNE 2015 MONTHLY UPDATE AUSTRALIAN LABOUR & EMPLOYMENT IN THE PIPELINE HIGHLIGHTING CHANGES OF INTEREST TO EMPLOYERS IN AUSTRALIA CONTENTS Increase in Income and Compensation Caps for Unfair Dismissal Claims 1 Fair Work Commission to Investigate Reduction of Award Complexity 1 Federal Court Upholds Female Engineer s Discrimination Claim 2 Full Federal Court Confirms Right to Annual Leave While an Employee Is Absent on Workers Compensation 2 Full Federal Court Upholds FWC s Order that Employer Make Redundancy Payout 3 Drunken Behaviour at Work Christmas Party Not Legitimate Grounds for Dismissal 4 Adam Salter Partner, Jones Day n INCREASE IN INCOME AND COMPENSATION CAPS FOR UNFAIR DISMISSAL CLAIMS From 1 July 2015, the income and compensation caps for unfair dismissal claims are set to increase. The high income threshold in unfair dismissal cases will rise from $133,000 to $136,700. The high income threshold restricts access to the unfair dismissal regime for employees not covered by an award or enterprise agreement. The maximum amount of compensation that can be awarded for unfair dismissal claims will also rise from $66,500 to $68,350. This increase in income and compensation caps is consistent with the 2.5 percent increase in the minimum wage which will take effect from 1 July 2015, which was reported in our May edition of the Monthly Update Australian Labour & Employment. n FAIR WORK COMMISSION TO INVESTIGATE REDUCTION OF AWARD COMPLEXITY Justice Iain Ross, president of the Fair Work Commission ( FWC ), has told a conference held on 26 June 2015 that the FWC plans to investigate ways to make award regulation less complex in workplaces which are subject to multiple award coverage. Justice Ross also stated that the FWC does not plan to reduce the complexity of award regulation by reducing the overall number of awards. In doing so, Justice Ross noted the success of the modern award review in reducing the regulatory complexity

2 associated with the overall reduction in industrial instruments. The FWC plans to produce a background paper on the issue which it intends to release in four to six weeks time. HOT OFF THE BENCH DECISIONS OF INTEREST FROM THE AUSTRALIAN COURTS n FEDERAL COURT UPHOLDS FEMALE ENGINEER S DISCRIMINATION CLAIM In Chang v CST Minerals Lady Annie Pty Ltd [2015] FCA 620 (22 June 2015), the Federal Court of Australia ( Federal Court ) refused an employer s attempt to dismiss a sex discrimination claim made by a senior chemical engineer. Decision. Justice Mortimer held that Ms Chang s claim should not be dismissed before trial. In addressing CST s contention that section 14(2) governs only conduct occurring during a person s employment, Her Honour recognised that the application of section 14(2) is not straightforward. There was at least some merit to CST s contention that section 14(2) may govern only the employment period, given that the words employee and employer are used, rather than person. However, there was also merit in Ms Chang s argument that section 14(2) is a protective provision which should be read beneficially, and that the terms employee and employer merely describe the relationship between the parties which gives rise to the conduct, but not in a temporal sense to restrict the operation of the prohibition. Factual Background. Tse Wei Chang was employed at the Lady Annie copper mine near Mt Isa until she resigned in July Ms Chang brought proceedings under the Sex Discrimination Act 1984 (Cth) ( Sex Discrimination Act ) seeking compensation for alleged sex discrimination during her employment with CST Minerals. The alleged discrimination involved disparity between the treatment of Ms Chang compared with male employees, in terms of reporting lines, supervisory and other responsibilities. Ms Chang also argued that male employees junior to her in qualifications, experience and position were given responsibilities and opportunities for advancement in preference to her. Legal Background. Section 14(2) of the Sex Discrimination Act states that it is unlawful for an employer to discriminate against an employee on the ground of the employee s sex (among other characteristics), in terms of employment conditions, opportunities for promotion, transfer, training or other benefits, dismissal or other detriment. In response to Ms Chang s sex discrimination claims, CST argued that the alleged conduct did not occur, and that regardless Ms Chang was not entitled to the alleged missed opportunities and responsibilities. CST brought an application for Ms Chang s claim to be dismissed before proceeding to trial. The basis for this application was CST s contention that section 14(2) of the Sex Discrimination Act governs only conduct that occurred during a person s employment, and that Ms Chang s allegations relate to conduct that occurred after her employment contract with CST had ended. Given that uncertainty and lack of previous relevant cases to be used as guidance, it was not appropriate to dismiss Ms Chang s claim before trial. Instead, Mortimer J decided that those issues should be determined in the context of a trial and full argument with full consideration of the applicable evidence. Lessons for Employers. Employers should monitor developments in this area in order to assess their exposure to sex discrimination claims. In the meantime, it would be prudent for employers to operate as though the broader interpretation of section 14(2) applies, and keep in mind that conduct occurring after the termination of an employee s employment may still give rise to sex discrimination claims. n FULL FEDERAL COURT CONFIRMS RIGHT TO ANNUAL LEAVE WHILE AN EMPLOYEE IS ABSENT ON WORKERS COMPENSATION In Anglican Care v NSW Nurses and Midwives Association [2015] FCAFC 81 (5 June 2015), the Full Federal Court of Australia ( FFC ) held that an employee can be entitled to dual receipt of workers compensation and annual leave payments in respect of the same period. As such, the FFC upheld an order of the Federal Circuit Court requiring an employer to pay a former employee the annual leave that the employee accrued while she was absent from the workplace on workers compensation leave. Factual Background. The employee worked for Anglican Care, an aged care provider. She sustained an injury in the 2

3 course of her employment, and from then on was unable to work. On termination, the employee was not paid the value of any annual leave that would have accrued while she was receiving workers compensation payments. Legal Background. Section 130(1) of the Fair Work Act 2009 (Cth) ( FWA ) removes an employee s entitlement to take or accrue leave during a period in which the employee is absent from work and receiving workers compensation. However, under section 130(2) of the FWA, an employee can take or accrue leave while absent from work and receiving workers compensation if doing so is permitted by a compensation law. The compensation law at issue here was section 49 of the Workers Compensation Act 1987 (NSW) ( WCA ). Section 49 of the WCA provides that compensation is payable to an employee in respect of any period of incapacity even if the employee is entitled to receive an allowance or benefit for annual or long service leave in respect of that period. Anglican Care argued that section 130(2) of the FWA applies only where taking or accruing leave is actually provided for or conferred by the relevant compensation law, and that section 49 of the WCA conferred no such positive entitlement. Decision. In considering the meaning of the phrase permitted by in section 130(2) of the FWA, Jessup J noted that use of the word permitted in section 130(2) is curious. This is because generally, workers compensation statutes are concerned with a worker s entitlement to regular payments to compensate for loss of earnings brought about by inability to work on account of a compensable injury and ordinarily, such statutes do not generally either permit or prohibit the taking of leave. of s 130(2) to compensation laws which actually created or conferred entitlements to leave. As such, on a beneficial construction of section 130(2), section 49 of the WCA permits receipt of entitlements, in the sense that it does not prevent a worker from receiving both compensation and accruing annual leave. This beneficial construction was supported by the purpose of the FWA in terms of setting up a scheme of entitlements for employees, and the effect of the law as it stood before section 130 of the FWA was introduced. Lessons for Employers. This case confirms that in most cases an employee will be entitled to accrue or take annual leave while absent from work and receiving workers compensation payments. n FULL FEDERAL COURT UPHOLDS FWC S ORDER THAT EMPLOYER MAKE REDUNDANCY PAYOUT The FFC has upheld a ruling of a full bench of the Fair Work Commission ( FWC ) requiring an employer to make severance payments to 49 employees. The liability to make severance payments arose from a finding that the employer failed to do enough to obtain acceptable employment for employees after it lost a major contract. Factual Background. FBIS International Protective Services (Aust) Pty Ltd ( FBIS ) lost its contract to supply security services to a stevedoring operator in October 2013, with ACG National Pty Ltd ( ACG ) winning the new tender. ACG employed 49 FBIS workers from 1 November 2013, after FBIS provided ACG with workers contact details. FBIS applied to the FWC for an exemption from making redundancy payments to those workers pursuant to section 120 of the FWA, on the basis that it had obtained other acceptable employment for the workers. In that context, Jessup J decided that, consistent with prior case law and the nature of the FWA, the words permitted by should be construed in the sense of not prevented, prohibited or restrained, instead of requiring the conferral of a positive entitlement. In accordance with that meaning, section 49 does permit the taking or accrual of annual leave while receiving workers compensation, because it does not prevent, prohibit or restrain those things. Similarly, Bromberg and Katzmann JJ noted that [i]t would be odd if Parliament s intention were to confine the operation Legal Background. Under section 119 of the FWA, employees have a right to redundancy pay. However, section 120 of the FWA gives the FWC the power to reduce or eliminate an employer s obligation to make redundancy payments if the employer obtains other acceptable employment for the employee. Decision. The FFC held that although the employment with ACG was clearly acceptable, by providing ACG with the workers contact details, FBIS had not obtained employment for the workers with the ACG as required under section

4 While [i]t may have facilitated the opportunity for them to apply for employment with ACG... what is obtained for them was something less than offers of employment which they could accept or decline as a matter of choice. FBIS argued that obtain means merely that the employer was a strong moving force towards the creation of the available opportunity, otherwise no employer would be able to avail itself of section 120 in a change of contractor situation. That argument was rejected. Instead, the FFC court expressed the view that obtain should be interpreted with its ordinary English meaning of to acquire, get. Further, there was more that FBIS could have done to obtain employment with ACG for the workers. Lessons for Employers. This case suggests that employers seeking to avoid their obligation to make redundancy payments by finding other acceptable employment for employees must do more than just avail workers of an opportunity to enter the recruitment process by providing workers contact details to the potential alternative employer. Employers must take active steps to actually acquire or get offers of alternative employment for workers. n DRUNKEN BEHAVIOUR AT WORK CHRISTMAS PARTY NOT LEGITIMATE GROUNDS FOR DISMISSAL In Keenan v Leighton Boral Amey Joint Venture [2015] FWC 3156 (26 June 2015), the Fair Work Commission ( FWC ) held that the dismissal of a team leader for aberrant conduct at a Christmas Party was harsh and unjust. Factual Background. During and after the Leighton Boral Amey Joint Venture ( LBAJV ) Christmas function, at which Mr Keenan became heavily intoxicated, Mr Keenan used inappropriate language with superiors and intimidated and sexually harassed a number of female colleagues, including an unsolicited kiss. Mr Keenan was later dismissed, with LBAJV relying on the conduct above in the letter of termination. Previously there has been no issue with the quality of Mr Keenan s performance, and his employment record only contained one blemish. related to the person s conduct, whether the person was notified of that reason, whether the person was given a chance to respond to the reason, and, any other relevant matters. Section 387 states that the FWC must take the procedural fairness afforded to the employee into account in deciding whether the dismissal was harsh, unjust or unreasonable. Decision. LBAJV submitted that out of hours conduct could constitute a valid reason for dismissal where such conduct has a significant potential to damage the employer s interests. Since Mr Keenan s conduct amounted to sexual harassment (for the purposes of the Sex Discrimination Act 1984 (Cth)) for which LBAJV could be held vicariously liable, LBAJV s interests could be damaged. In rejecting this submission, the vice president held that the two incidents relied upon by LBAJV did not occur in the temporal and physical boundaries of the party but in a private social setting. Although it was abundantly clear that the kiss incident fell within the definition of sexual harassment, it lacked the requisite connection with employment to establish vicarious liability and reputational damage. The other incident included in the termination letter lacked the sexual nature required to amount to sexual harassment and was not a valid reason for dismissal. The FWC accepted that LBAJV could rely on conduct not included in the termination letter as grounds for dismissal. Aggressive, intimidatory and bullying conduct at the party did constitute a valid reason for dismissal; however, as the substance of the allegation was not put to Mr Keenan, reliance on this conduct as a ground for dismissal would be unjust. Others matters that weighed in favour of a finding that the dismissal was harsh were the alternative less serious disciplinary action available and the fact that unsupervised service of alcohol by LBAJV exacerbated the situation. Lessons for Employers. This decision is unsettling for employers. It demonstrates how lax cultures and a failure by employers to require employees to behave professionally can tie an employer s hands and limit an employer s ability to discipline employees where they overstep the mark. Legal Background. In considering whether a dismissal is harsh, unjust or unreasonable, section 387 of the FWA requires the FWC to take into account a number of matters, including whether there was a valid reason for dismissal Employers need to be careful to avoid encouraging unprofessional cultures or behaviour where offensive and vulgar behaviour are commonplace. 4

5 ACKNOWLEDGEMENTS Thanks to Associates Michael Whitbread and Stephanie Crosbie and Graduate Talia Calgaro for their assistance in the preparation of this Update. QUESTIONS If you have any questions arising out of the contents of this Update, please do not hesitate to contact Adam Salter, Partner. Adam can be contacted by at jonesday.com or by phone on UNSUBSCRIBE If you no longer wish to receive the Monthly Update Australian Labour & Employment, please send an to with the subject UNSUBSCRIBE. JONES DAY GLOBAL LOCATIONS ALKHOBAR CLEVELAND HONG KONG MADRID PARIS SHANGHAI AMSTERDAM COLUMBUS HOUSTON MEXICO CITY PERTH SILICON VALLEY ATLANTA DALLAS INDIA MIAMI PITTSBURGH SINGAPORE BEIJING DETROIT IRVINE MILAN RIYADH SYDNEY BOSTON DUBAI JEDDAH MOSCOW SAN DIEGO TAIPEI BRUSSELS DÜSSELDORF LONDON MUNICH SAN FRANCISCO TOKYO CHICAGO FRANKFURT LOS ANGELES NEW YORK SÃO PAULO WASHINGTON Jones Day publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information purposes only and may not be quoted or referred to in any other publication or proceeding without the prior written consent of the Firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our Contact Us form, which can be found on our web site at The mailing of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship. The views set forth herein are the personal views of the authors and do not necessarily reflect those of the Firm Jones Day. All rights reserved. Printed in the U.S.A.