Insights & News

July 2, 2020

In a continuing uncertain environment, the Fair Work Commission’s (FWC) temporary variations to a number of modern awards sunsetted on 30 June 2020, but a lifeline has been extended, with the extension of the operation of a number of the temporary variations, with differing effects.

In the midst of the Commission’s efforts to provide employers and employees with temporary relief, planned changes to scope the Miscellaneous Award took effect from 1 July, with the effect that very few non-managerial/professional employees will be left without safety net modern award entitlements.

COVID-19 still warrants variations to award – FWC

In welcome news, the FWC has decided to extend the period of operation of the COVID-19 related variations to modern awards.

On 28 March this year, the FWC granted a joint application from employers and unions to vary the Clerks Award to help manage the challenges COVID-19 was placing on business and employees (read about the changes in our article here).

The FWC also granted similar variations to the Hospitality and Restaurant Industry Awards, the Vehicle Repair Award and a number of others. On its own motion, it varied a further 99 awards. The variations include an entitlement to unpaid ‘pandemic leave’ and the flexibility to take twice as much annual leave at half pay.

The temporary changes were due to end on 30 June 2020. However, the FWC has granted an application by parties to extend the application of the variations to between one and 12 months.

The FWC has extended the operation of the variations as follows:

No More Gaps – changes to the Miscellaneous Award effective 1 July

A Full Bench of the FWC, presided by Vice President Hatcher, recently confirmed its decision to vary the coverage of the Miscellaneous Award. The decision has wide ranging impacts for employers and employees, particularly those covered by industry awards that had confined classification descriptors.

The decision is effective from 1 July 2020.

What exactly has changed?

The key change is who is excluded from coverage of the Miscellaneous Award. Historically, it has not covered an employee whose employer was covered by an industry award, but who did not fall into one of the classification levels therein. The Commission has now removed this exclusion.

Who does the Miscellaneous Award now apply to?

The Miscellaneous Award covers employers in Australia and their employees who:

1. Fall into the classification levels in the award; and
2. Who are not covered by any other modern award.

It is designed to cover those employees who perform work that has traditionally been award covered but have somehow slipped through the cracks of award coverage.

However, the Miscellaneous Award does not cover:

• managerial employees and professional employees such as accountants and finance, marketing, legal, human resources, public relations and information technology specialists;
• employees who perform work that is not of a similar nature to work that has traditionally been regulated by awards; or
• employees who, because of the nature or seniority of their role, have traditionally not been covered by awards (whether Commonwealth or State awards).

Determining whether someone falls into these last two categories (Fair Work Act Exclusions) should be approached carefully. This is particularly so for low-paid employees performing lower-skilled manual work functions.

Who is the decision particularly relevant to?

The decision is most relevant for employers who employ people who are not managerial or professionals, but who consider those employees to be award free. It is possible those employees are covered by the Miscellaneous Award. For employers entering into bargaining, the extended application of the Miscellaneous Award may have implications on the assessment of the better off overall test for cohorts that have previously been assessed on the basis that they are award free.

To determine if an employee is covered by the Miscellaneous Award, you need to ask:

1. Does the employee work with a level of supervision and responsibility that means their position falls into the classification levels in the Miscellaneous Award?
2. Are they covered by any other modern award?
3. Are they managerial or professional employees?
4. Are they excluded from modern award coverage by the Fair Work Act Exclusions?

If the answer to the first question is ‘yes’, but ‘no’ to the remaining questions, then the position is now likely covered by the Miscellaneous Award. Answering the last question can be difficult and may require a detailed historical analysis of whether the work they perform has ever been regulated by awards.

Katie Sweatman
Partner
+61 3 9958 9605
[email protected]

Peter Willink
Lawyer
+61 2 9169 8413
[email protected]

June 24, 2020

COVID-19 has seen the Fair Work Act 2009 (Cth) (the Act) stand-down provisions being used like never before.

Historically, unpaid stand down has not been available in cases of business deterioration, raising questions about the capacity to stand employees down as a consequence of COVID-19 related impacts. The Fair Work Commission has now given some clarity to the application of these provisions, which will be of particular relevance to employers who do not have access to JobKeeper enabling directions.

Although the capacity to stand down employees without pay in response to the sudden impact of COVID-19 has been unclear so far, the Fair Work Commission (FWC) decision in Michael Marson v Coral Princess Cruises has provided some certainty to employers relying on these provisions under s 524 of the Act to survive commercial fallout.

This decision supports the position that extraordinary plunges in market demand may trigger the lawful stand down of employees because they cannot be usefully employed. The decision also offers some useful insights into what it means for an employee to be ‘usefully employed’.

Employers eligible for JobKeeper can issue JobKeeper enabling stand-down directions to eligible employees. The principles applicable to a s 524 stand down will have some application to aspects of such a stand down under the JobKeeper legislation; however, the critical distinction is that a complete stoppage of work is not necessary to invoke a stand-down direction.

Background to Michael Marson v Coral Princess Cruises

In March 2020, Coral Princess Cruises faced desperate commercial circumstances when government directives aimed at suppressing the spread of COVID-19 caused the cruise line’s business operations to be suspended. To mitigate mounting losses, Coral Princess Cruises stood down 107 employees without pay under s 524.

One employee, Mr Marson, notified the FWC, arguing that because certain day-to-day administrative functions remained, there was no stoppage of work requisite to invoke the stand down. Mr Marson also argued that he could still be usefully employed by carrying out small administrative tasks.

The FWC held that Mr Marson’s stand down was lawful, clarifying the availability of stand down as a mitigating action available to businesses in times of overwhelming economic catastrophe – a good outcome for employers.

When can you stand down an employee without pay

Under s 524(1) of the Act, an employer can stand down an employee if that employee cannot be usefully employed for prescribed reasons, including:

‘a stoppage of work for any cause for which the employer cannot reasonably be held responsible’.

To meet the requirements of the section, the stoppage of works must mean that the employee is temporarily unable to be usefully employed.

An employee will not be treated as being stood down pursuant to s 524 where they are taking authorised paid or unpaid leave (see s 525). The Federal Court recently clarified that a period of personal leave does not affect a period of stand down, as discussed in our Legal Insight here.

What constitutes a ‘stoppage of work’

Implementing a s 524 stand down requires a relevant stoppage of work.

As a reflection of the rapidly evolving law in this area, what constitutes a stoppage of work will be further considered by the Federal Court in Qantas Airways Ltd v Australian Licensed Aircraft Engineers Association.

In this case, the ALAEA is challenging the validity of the stand down of Qantas aircraft engineers on the basis of both:

1. whether there was a ‘stoppage of work’; and
2. whether the volume of work available justified the extent of the stand downs.

The key question for the Court in the Qantas case is whether there was a sufficient stoppage of work to trigger the stand-down provisions in the circumstances that a skeleton crew was able to continue work while the engineers were stood down.

In the Coral Princess Cruises case, the FWC confirmed that a total cessation of the employer’s trade or business constituted a ‘stoppage’ for these purposes.

Mr Marson’s argument that there had not been a ‘stoppage’ because he still had residual administrative tasks was not successful.

The FWC accepted Coral Princess Cruises’ argument that although administrative functions incidental to the business’ core activities remained, they did not go to the issue of whether the ‘work’ of the employer (carrying passengers) had ‘stopped’.

Therefore, any residual, maintenance, or administrative tasks still being done by a reduced workforce does not affect a ‘stoppage of work’ for the core workforce for the purposes of s 524(1)(c).

When is an employee not ‘usefully employed’

The other key element of a s 524 stand down is the need to establish that the employee cannot be usefully employed because of the stoppage of work.

The employee’s capacity to be usefully employed must be considered in relation to their work role, not the employee themselves. Once performance of an employee’s role no longer generates a ‘net benefit’ to the business, it may mean there is no useful employment for the employee for the relevant period.

Where there is not the volume of work available to keep an employee ‘usefully employed’, the employer is not required to create alternative work.

In this case, the FWC has maintained the position that s 524 requires that in order to rely on the provision, there must be a substantiated causal link between the stoppage of work and the circumstance where the employee cannot be usefully employed.

Accordingly, if there are other factors that mean that an employee cannot attend work (for example, if the employee is suspended due to alleged misconduct) this may not be treated as a stand down.

If an employee cannot be usefully employed for a prolonged period, a redundancy situation may arise.

Fairness and Good Faith Requirement

The FWC stressed that a decision as to whether an employee is ‘useful’ must be made with fairness and in good faith.

However, as pointed out by the FWC, while a crisis is still unfolding it is rarely possible to know all the facts, deliberate on those facts, and act upon them in a reasoned way.

Therefore, when considering if an employer has acted with fairness and in good faith, their actions will be considered broadly and not compared to the standard available with hindsight.

This decision is relevant to employers considering whether a stand down may be the answer to safeguarding their business’ financial position while preserving as much of the employment relationship with employees as possible.

For employers eligible for JobKeeper

For eligible employers, an alternative to invoking s 524 is to issue a JobKeeper enabling stand-down direction. Unlike a stand down under s 524, the JobKeeper provisions do not require a stoppage of work.

However, JobKeeper enabling stand-down directions are only exercisable in respect of employees receiving JobKeeper payments.

A JobKeeper enabling stand down may be exercised to direct employees:

1. not to work on one or more days that they usually work; or
2. to work:
   1. for a shorter period than usual; or
   2. less hours overall than usual.

Given the greater flexibility under a JobKeeper enabled stand down, eligible employers may wish to consider standing employees back up from any s 524 direction, and then issuing a JobKeeper enabled stand down for all or part of their hours of work.

Kingston Reid can guide employers through this process.

Key Takeaways

Stand down is intended to be a last resort to ease financial pressure on employers while enabling both employer and employees to preserve the employment relationship.

The making of a stand-down direction, under either s 524 or the JobKeeper provisions, is not without a degree of legal risk, but the evolving interpretation of these provisions will give some comfort and clarity to employers forced to stand down large parts of their workforces.

The FWC decision does serve as a useful reminder of the need to consider carefully whether an employee can perform useful work, and this consideration should be undertaken on an ongoing basis.

Even if the Federal Court reaches a similar view to the FWC in the Qantas proceedings, it is likely that stand downs that extend for a prolonged time will be scrutinised, and pressure placed on employers to stand employees back up at the earliest opportunity.

Katie Sweatman
Special Counsel
+61 3 9958 9605
[email protected]

Aimee Ford
Lawyer
+61 3 9958 9610
[email protected]

June 22, 2020

In the midst of robust discussions about the potential reform of Australia’s industrial relations system, late on 16 June, the Victorian Parliament passed the Wage Theft Bill 2020.

Upon commencement on a date to be proclaimed or else from 1 July 2021, the wage theft laws will make it a criminal offence, punishable by fines of up to $198,264 for individuals, $991,320 for companies, or up to 10 years’ imprisonment, to dishonestly withhold employee entitlements, dishonestly falsify an employee’s employment records or dishonestly fail to keep employee entitlement records.

The wage theft laws have noble aims, but their critical deficiency is that they are disconnected from the regulation and enforcement system they are intended to supplement. With limited exceptions around long service leave, child employment and other discrete areas of employment law, our minimum employment entitlements are derived from Federal, not State, law.

This creates two critical questions: one, whether the laws have constitutional validity and, two, whether they are reasonably capable of achieving their aims.

In 1996, Victoria referred the bulk of its industrial relations powers to the Commonwealth Government. Put very simply, this gave the Commonwealth Government its power to legislate the Fair Work Act 2009 and predecessor workplace laws to cover Victorian employers and employees, the Fair Work Ombudsman the power to regulate those laws, and the Fair Work Commission, Federal Circuit Court and Federal Court the jurisdiction to enforce those laws.

To keep things neat, the Australian Constitution provides that, to the extent of any inconsistency, a law of the Commonwealth will prevail over a law of the State. So, while the States do have power to make laws about criminal matters, the Commonwealth has power to make laws about the regulation and enforcement of workplace matters. A live question accordingly arises as to whether the Victorian wage theft laws have constitutional validity, particularly if the Commonwealth creates its own wage theft laws, as has been mooted by the Industrial Relations Minister, Christian Porter.

More fundamentally, the wage theft laws do nothing to make it easier for employers to understand and comply with their minimum wages obligations. The wage theft laws also do nothing to support the Fair Work Ombudsman to regulate employer compliance with their minimum wages obligations.

To the extent that there are flaws in our workplace relations system around the enforcement of minimum wage and employee recordkeeping laws, the proper mechanism for dealing with this is under Commonwealth law. The neighbour’s guard dog might create some level of dissuasion for burglars scoping out your property, but it will ultimately not remedy the gaps in your own security perimeter.

For Victorian employers considering how the wage theft laws will affect them, the Victorian Government has been clear that employers who make honest mistakes or who exercise due diligence in paying wages and other employee entitlements will not be subject to the legislation.

Notwithstanding that the concept of “wage theft” has largely emerged out of a run of high-profile self-reports of wages non-compliance in big business arising from payroll system problems, these big business errors will not be the primary focus of the new Wage Inspectorate’s attention.

The wage theft laws will however elevate the existing risk for small businesses utilising a level of “cashie” labour, and it is foreseeable that small businesses without dedicated human resources and payroll staff will be disproportionately exposed to the wage theft laws, with a line to be defined between an incompetent failure to make and amend employee records and a dishonest failure to make and amend employee records.

In the absence of a simplified workplace regulatory system and enhanced education around wages obligations, the threat of throwing small business owners behind bars only creates anxiety for those trying to do the right thing, and incentivises others to do a better job of hiding their books.

It will accordingly remain to be seen whether the laws will turn out to be more bite or more bark.

Katie Sweatman
Special Counsel
+61 3 9958 9605
[email protected]

June 19, 2020

National Minimum Wage increased by 1.75% from 1 July 2020.

On Friday 19 June 2020 the Fair Work Commission handed down the Annual Wage Review 2019–20 decision.

Key Feature of the Decision

• The National Minimum Wage has been increased by 1.75% to $753.80 per week, or $19.84 per hour. The minimum wage increase will take effect from the first full pay period on or after 1 July 2020.
• Modern Award minimum rates of pay will also increase by 1.75%. Modern Award increases will have staggered operational times:
  

  Award Group	Operative Date
  Group 1	1 July 2020
  Group 2	1 November 2020
  Group 3	1 February 2021

  See below for a list of the Modern Awards in each group. 

What this means for businesses

Businesses that pay employees in line with the National Minimum Wage need to make sure that employees are paid in accordance with the new minimum rates from the first full pay period on or after 1 July 2020.

Business that pay employees in line with Modern Awards need to make sure that employees are paid in accordance with the new minimum rates from the first full pay period on or after the operative day for the relevant Modern Award.

For enterprise agreement covered employees, business must ensure that the base rates in the enterprise agreement will not fall below the new base rates in the relevant Modern Award or the National Minimum Wage.

Minimum Wage Award Groupings

Emily Baxter
Senior Associate
+61 2 9169 8411
[email protected]

June 15, 2020

Recent legislative and case law developments have put the spotlight back on the now real consequences of failing to address known and foreseeable risks in the workplace. Whilst lots of attention has been placed on mitigating COVID-19 risks, workplaces need to make sure they don’t neglect other risks which can lead to significant consequences for their organisations and decision makers.

In this Insight, we look at one recent case and legislative amendments which will mean that businesses will need to be proactive and methodical in identifying and addressing risks to avoid prosecution and the wider implications that come with that.

First Industrial Manslaughter Conviction – Brisbane Auto Recycling decision

On 11 June 2020, sentences were recorded against Brisbane Auto Recycling Pty Ltd (Brisbane Auto), and two of its directors, for an incident at the workplace resulting in the death of an employee. Brisbane Auto was an auto wrecking business in Rocklea, Queensland. The employee was struck by a reversing forklift whose operator was not licensed. The directors supervised the work activities at the workplace.

Following the incident, one director told a treating paramedic that the employee had fallen from a truck. Eight days later, on 25 May 2019, the employee died from the injuries he had sustained. The incident was captured on CCTV.

Brisbane Auto was charged with the offence of industrial manslaughter under section 34C of the Work Health and Safety Act 2011 (Qld) (WHS Act). The two directors were not charged with industrial manslaughter but rather category 1 breaches of the officers’ duty of due diligence.

All three defendants pleaded guilty at an early stage.

The maximum penalty in Queensland for an offence of industrial manslaughter committed by a body corporate is a $10 million fine. The maximum penalty for a category 1 offence by an officer is a $600,000 fine or 5 years imprisonment.

The Court imposed the following sentences:

1. Brisbane Auto – Conviction recorded and a $3 million fine
2. The directors – Convictions recorded and both sentenced to 10 months imprisonment, wholly suspended for an operational period of 20 months.

The Court noted that there were no safety systems in place at Brisbane Auto and the defendants knew of the potential consequences of the risk, which ultimately was catastrophic. There were steps available that could have been easily taken to lessen, minimise or remove the risk. These included a proper risk assessment of the task, measures to control the interaction between mobile plant and the workers, and proper supervision of the work. These steps were available but not taken.

The directors received suspended sentences in large part because of the risk of their deportation and the role they had as financial supporters of their respective families.

Workplace Manslaughter laws to commence in Victoria on 1 July 2020

Victorian businesses and officers will need to take notice of the Queensland decision as workplace manslaughter laws will commence in Victoria from 1 July 2020.

Under those provisions, the following persons can be found guilty of a workplace manslaughter offence:

1. Any person (other than an employee or volunteer) who owes a duty under Part 3 of the OHS Act. This means that any employer (whether incorporated or unincorporated) can be charged with workplace manslaughter.
2. An officer of a body corporate, unincorporated body, unincorporated association or partnership.

The offence is one of negligence (not recklessness) and requires the relevant persons to have a duty, and breach that duty which results in the death of a person.

When first enacted, the provisions provided for maximum penalties of a $16.5 million fine for a body corporate and up to 20 years imprisonment for an individual. However, in late May, the legislation was amended to increase the maximum penalty for individuals from 20 years to 25 years imprisonment.

Amendments to NSW WHS Act

Unlike Queensland and Victoria, NSW is not introducing industrial manslaughter provisions into its WHS legislation. Rather, the NSW Work Health and Safety Amendment (Review) Bill 2020 has been passed by parliament which clarifies that an offence of industrial manslaughter can be commenced under the Crimes Act.

The amendments also introduce the following changes:

• Increasing WHS fines. For example, the maximum fine for a category 1 WHS breach will jump from $3 million to $3,463,000. Maximum fines for category 2 and category 3 contraventions will go from $1.5 million to $1,731,500, and from $500,000 to $577,000, respectively,
• Making it easier to secure category 1 convictions (by expanding that category to include ‘gross negligence’ in addition to recklessness),
• Creating a new WHS offence relating to entering into, providing or benefiting from insurance and/or indemnity arrangements for the payment of WHS penalties, and
• Allowing inspectors to exercise their entry powers under s171 of the WHS Act for a period of 30 days.

The debate continues in WA

The Western Australian Parliament continues to debate the Work Health and Safety Bill 2019 which passed the Legislative Assembly (Lower House) on 20 February 2020.

Importantly, the Bill includes two separate offences for industrial manslaughter:

1. Industrial manslaughter – crime
   This provision contains the highest penalties for a work health safety offence with:
   •  an individual exposed to imprisonment for 20 years and a fine of $5,000,000; and
   •  a body corporate exposed to a fine of $10,000,000
2. Industrial manslaughter – simple offence
   This provision contains penalties for a work health safety offence with:
   •  an individual exposed to imprisonment for 10 years and a fine of $2,500,000; and
   •  a body corporate exposed to a fine of $5,000,000

What does the Queensland case and these legislative changes mean?

The Queensland decision and the amendments in Victoria and NSW (and the introduction of industrial manslaughter offences more generally in a number of jurisdictions), highlights the importance of organisations and their officers carefully scrutinising the adequacy of their existing safety management systems, reviewing those systems on a regular basis and ensuring that deficiencies are rectified as quickly as possible.

These developments also demonstrate that there are various options available to safety regulators to prosecute corporate officers for negligent or reckless conduct, including where it cannot be proved that an officer’s conduct caused a workplace death.

If you would like to discuss how these developments impact upon your business please do not hesitate to contact our team.

John Makris
Partner
+61 2 9169 8407
[email protected]

Michael Stutley
Partner
+61 8 6381 7060
[email protected]

Dominic Fleeton
Special Counsel
+61 3 9958 9616
[email protected]

Erica Elliott
Special Counsel
+61 2 9169 8409
[email protected]

Sevasti Xanthos
Lawyer
+61 3 9958 9609
[email protected]

Kathleen Weston
Lawyer
+61 2 9169 8415
[email protected]