Resignation and constructive dismissal

Transcription

1 ISSUE 21 MARCH 2003 WORKPLACE RELATIONS Independent contractors Industrial disputes Workplace policies Rehabilitation Garden leave Anti-discrimination Inside: Your publication: If you would prefer to receive our publications in electronic format, please VISIT OUR WEB SITE TO READ ALL FOCUS EDITIONS Resignation and constructive dismissal The concept of constructive dismissal has proven to be particularly vexing in the field of unfair dismissal. Partner David Cross reports. State and federal legislation requires that a termination may only be the subject of a claim if it occurs at the instigation of the employer. It does not assist an employee who resigns. However, often the employee is left with no choice but to resign, and the termination is said to occur at the instigation of the employer, even though the form of the termination appears to be resignation. Constructive dismissal has been held to extend to cases where an employee resigned after the employer threatened to report the employee to the police 1, and where an employee under investigation resigned after the employer failed to provide reassurances that they would not be terminated. 2 However, a recent decision of the Australian Industrial Relations Commission (AIRC) suggests that this wider interpretation may no longer fi nd favour. 3 Ms Davies resigned after David Jones indicated that it could no longer continue with a special rostering pattern, which had been implemented on a trial basis solely to take account of her family circumstances. David Jones had indicated that it would adopt the special roster for a temporary period of three months and then review the situation. After this period, David Jones concluded that the roster had led to overstaffi ng at certain times and understaffi ng at others, and decided that it could not continue. The company advised the employee, at the same time indicating that it was prepared to discuss other options. However, the employee resigned immediately. 1 Mohazab v Dick Smith Electronics Pty Ltd (No.2) (1995) 62 IR Moran v St George Bank Limited, unreported decision, 2 August 1996, NI1288/96 3 Davies v David Jones Limited PR

2 MARCH 2003 Shortly afterwards, Ms Davies held discussions with her union and sought further negotiations with David Jones over the roster issue. However, David Jones indicated that Ms Davies resignation had been accepted and that no further discussions would be conducted. The AIRC found that there was no case of constructive dismissal because Ms Davies had not been left with no alternative but to resign. David Jones had trialled a roster for her benefi t, but determined that it did not meet its business needs. They had then discussed the issue with her and were prepared to discuss alternative options that may have resolved the matter. The application was therefore dismissed. Unlawful discrimination legislation obliges employers to take account of employees family responsibilities in developing roster arrangements. However, where an employer has demonstrated a willingness to meet its obligations, and the employee resigns, this will not be construed as a constructive dismissal except where the employee is left with no alternative. The decision refl ects an increasing willingness of the AIRC to reject claims from employees who prematurely resign their employment in response to a workplace issue, rather than attempting to fi nd a workable solution. Employee or independent contractor? A recent decision of the South Australian Workers Compensation Tribunal has emphasised that the classifi cation of a worker as an employee or independent contractor is of fundamental importance to the responsibilities of employers. Lawyer Emily Latif reports. Critical importance The distinction between an employee and independent contractor is of critical importance. Australian law imposes certain duties and obligations on employers in respect of employees but not independent contractors. Employees receive the benefi t of industrial award coverage, annual and long service leave, superannuation and the application of unfair dismissal and unfair contracts legislation. Additionally, employers are not vicariously liable for an independent contractor s negligent acts. The control test The common law control test is used to determine whether an individual is an employee or independent contractor. The application of this test involves the court examining the degree and nature of control that the principal has over the individual, and the manner in which the work is performed. Employers are not vicariously liable for an independent contractor s negligent acts. The court uses several factors to determine whether a person is an employee or a contractor. For example, a contractor is more likely to: be engaged in carrying out a particular task using his or her own skill and judgment; take on fi nancial risk; own and maintain their own equipment; be able to delegate responsibility; be paid per job; and be relatively unsupervised. An employee is more likely to: be subject to direction from an employer; be required to work exclusively for a single employer; be entitled to sick pay and annual leave; wear a uniform; and work set hours. Importantly, the court will place more emphasis on the true nature of the underlying relationship between the parties than on the parties actual intentions in creating that relationship. In the South Australian case, CMA, a labour hire company, placed the applicant as a tomato picker in a second company. 4 CMA followed a system of employment designed so as to avoid an employment relationship. The contracts clearly stated that the applicant was a contractor and that no employment relationship existed. 4 Slater v WorkCover [2002] SAWCT 27 2

3 The Workers Compensation Tribunal emphasised that the nature of the relationship must be examined and that elaborate documentation will not override a true employment relationship. Importantly, the applicant was paid by the hour, supplied no equipment or skill, and had no capacity to delegate. CMA argued that the control test was not satisfied. The Tribunal held that the employer s inability to supervise the applicant when hired to the end user did not preclude them from having the requisite control to establish an employment relationship. The Tribunal found that the notion that the applicant was running her own enterprise was intuitively unsound and found an employment relationship between the applicant and the labour hire company did exist. The distinction between employees and independent contractors has potentially serious implications for employers and the duties they owe to their workers. Employers who structure relationships in an attempt to avoid employment obligations must be aware that the court will always examine the true character of the relationship, and the extent of control exercised by principal over individual. What is an industrial dispute? Sarah Holthusen reports on a recent decision of the Australian Industrial Relations Commission that considers the genuineness of a paper dispute. The Musician s Union of Australia (MUA) served a letter of demand and log of claims on 34 companies in the entertainment and broadcasting industries with the aim of making a new award. The MUA subsequently notifi ed an industrial dispute to the Commission. The issue for the Commission was whether an industrial dispute existed. At fi rst instance, the Commission found that a dispute arose out of the log of claims. It dismissed the entertainment companies contention that the dispute was not genuine because they did not employ musicians and did not intend to do so in the future. Appeal On appeal, a Full Bench of the Commission held that whether an industrial dispute exists is essentially a question of fact. However, a person who does not employ or intend to employ labour cannot be a party to a dispute with a union that makes a demand about the pay and conditions of employees. 5 A person who does not employ or intend to employ labour cannot be a party to a dispute with a union that makes a demand about the pay and conditions of employees. The Full Bench concluded that in this case the companies were not in a position to infl uence the terms and conditions of employment of musicians and, consequently, no industrial dispute existed. The evidence showed, at most, that some companies engaged musicians, but not necessarily as employees. Industrial disputes initiated by unions who serve employers with a letter of demand and log of claims are generally regarded by the Commission as genuine. However, if the employer can show that they neither presently employ the class of employee represented by the union, nor propose to do so in the future, there may be no genuine dispute. The effect is that the employer will be able to avoid being roped in to the award. 5 Gibbs CJ in The Queen v Alley, Ex parte PGEU (1981) 153 CLR 376 at 381 3

4 Employees reinstated after breaching alcohol policy In the February Focus, we referred to two cases illustrating the challenges that employers face in relying upon human resources policies as a basis for terminating employment. This month, Partner David Cross looks at a recent decision of the Australian Industrial Relations Commission that illustrates further complexities in the area. 6 The Commission heard four separate applications alleging unfair dismissal under the Workplace Relations Act 1996 (Cth). The four applicants had been terminated for consuming alcohol during their lunch break in breach of Nationwide News drugs and alcohol policy. The policy stated that strict adherence was required and that breaches might result in termination of employment. The policy had been communicated to all employees, including the four applicants, at verbal addresses given by supervisory staff shortly before the events leading to their terminations. In communicating a new policy, the employer must emphasise that any transgression could result in termination of employment, notwithstanding that in the past a lesser penalty might have applied. While the Commission found that breach of the policy gave the employer a valid reason for dismissing the employees, he determined that the terminations were harsh because: 6 Agnew & Ors v Nationwide News Limited PR the written policy in relation to alcohol consumption had not always been clear cut; Nationwide News had been battling a culture of drinking during and before working time, and previous transgressions of the policy had not generally been punished by termination; there were mixed signals about the policy and the consequences of drinking during lunch breaks; and each of the employees had substantial periods of service with the company. He ordered that each of the employees should be reinstated. The case suggests that when employers are introducing policies in areas that have previously been unregulated, or only partially regulated, they should emphasise that the new policy represents a clean break, and that indulgences, which might have applied previously, will no longer apply. In practice, this means that in communicating a new policy, the employer must emphasise that any transgression could result in termination of employment, notwithstanding that in the past a lesser penalty might have applied. Rehabilitation: a two-way street A recent decision of the Queensland Industrial Relations Commission emphasises that, while employers need to provide reasonable rehabilitation opportunities for injured employees, employees also need to cooperate. Lawyer John Naughton reports. Mr Lawson worked for the Gold Coast City Council as a gardener for approximately 12 months, before applying for workers compensation for a lower back injury. Mr Lawson did not return to work for more than two years, during which time the Council tried to facilitate his return to work by: 4

5 meeting to establish a rehabilitation and return to work program; developing a suitable duties program with an occupational therapist; assessing alternative labour market opportunities with a job placement services agency; investigating superannuation or pension entitlements; and holding discussions with Mr Lawson s union representative. Mr Lawson returned to work briefl y on a trial arrangement in the city cleaning section, but this was ultimately unsuccessful. His employment was terminated after he refused to attend a meeting to discuss his continued employment. The Commission refused Mr Lawson s application for reinstatement because Mr Lawson: had declined to discuss his continued employment; had declined to participate in a further work trial; was off work for more than two years; and was unable to perform the requirements of his position safely. The Commission held that Mr Lawson had been warned in advance of the likely consequences of his failure to participate in return to work arrangements, and was notifi ed appropriately of the reasons for his dismissal. 7 The decision illustrates that rehabilitation of injured employees is a two-way street. Where an employer terminates an employee without making adequate efforts to rehabilitate, termination may be regarded as harsh, unjust or unreasonable. However, termination is unlikely to be harsh, unjust or unreasonable if an employee unreasonably refuses to participate in rehabilitation initiatives. Garden leave: a viable option once more The Federal Court has confi rmed that employers will usually be entitled to direct a terminating employee to take garden leave during the notice period. 8 Senior Associate Suzanne Weingott reports. By majority of 2:1, and overturning an earlier decision of the Federal Court (reported in our Focus: Workplace Relations July 2002 issue), the Full Court found that the strategy of putting an employee on garden leave will be lawful in most circumstances. 9 This allows the employer to continue the employee s employment without being obliged to allocate any duties. The advantage is that the employer can move forward without the employee but still ensure that the employee cannot compete while the employment relationship continues to exist. Rationale The majority went back to fi rst principles and noted that an employer who is paying an employee appropriately is obliged to provide an employee with meaningful work only in limited circumstances such as where the employee has a specifi c or unique skill, and where it is clear that the employee s future employment depends on maintaining this skill. Good examples are employees in the entertainment and sporting industries, such as television producers and professional footballers, where garden leave may blunt their skills. 7 John Lawson v Gold Coast City Council (No. B515 of 2002) Industrial Relations Commission (Qld) (Edwards C) 18 December Ramsey Butchering Services Pty Ltd v Blackadder [2003] FCAFC 20 9 Blackadder v Ramsey Butchering Services Pty Ltd [2002] FCA 603 5

6 MARCH 2003 The good news for employers is that a failure to provide work will not automatically give rise to a breach of contract claim even if the parties do not include a term in the contract that garden leave is legitimate. As a matter of practice, and to ensure the employee cannot argue they fall within a special skill category, employers should continue to include clauses in employment contracts which allow them to: make a payment in lieu of notice; or require the employee to take garden leave. The Full Court found that the strategy of putting an employee on garden leave will be lawful in most circumstances. This allows the employer to continue the employee s employment without being obliged to allocate any duties. Do you need to update your anti-discrimination policy? Sexuality, gender identity and family responsibilities will be some of the new grounds for discrimination in Queensland when amendments to the Queensland Anti-Discrimination Act 1991 come into effect. Suzanne Weingott reports. The Discrimination Law Amendment Act 2002, which is expected to come into effect on April 1, makes a number of signifi cant changes to the discrimination legislation in Queensland, and expands the circumstances in which employers can be found liable. This legislative expansion of liability comes amid a number of important tribunal decisions across Australia that will affect the way in which an employer manages its obligations. Keeping your anti-discrimination policies and procedures up-to-date is critical. With all of these developments, now is a good time for a review. For further information, please contact: Jamie Wells Partner, Brisbane Ph: Jamie.Wells@aar.com.au Adam Lunn Partner, Singapore Ph: Adam.Lunn@aar.com.au Tim Frost Partner, Melbourne Ph: Tim.Frost@aar.com.au David Cross Partner, Sydney Ph: David.Cross@aar.com.au Sydney Melbourne Brisbane Perth Port Moresby Singapore Hong Kong Jakarta Shanghai Bangkok Phnom Penh 7807 Peter Arthur Partner, Sydney Ph: Peter.Arthur@aar.com.au Have your details changed? Julian Riekert Partner, Melbourne Ph: Julian.Riekert@aar.com.au If your details have changed or you would like to subscribe or unsubscribe to this publication or others, please go to or contact Barbara Leis on or Barbara.Leis@aar.com.au 6 Tom Yuncken Partner, Perth Ph: Tom.Yuncken@aar.com.au