Insights & News

September 7, 2023

Under section 357(1) of the Fair Work Act (FW Act), an employer must not make representations that an employment relationship is an independent contracting arrangement. This is often called ‘sham contracting’. Engaging in sham contracting gives rise to civil penalties.

A defence to sham contracting is provided under section 357(2) if the employer proves (the burden of proof rests with the employer) that at the time of making the representation, the employer:

• did not know; and
• was not reckless as to whether,

there was an employment relationship.

What is proposed? A new defence

The Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 (Bill), if passed, will repeal the current defence and introduce a new one.

The proposed new defence will apply if the employer proves (the burden of proof remains with the employer) that at the time of making the representation, they “reasonably believed” that there was an independent contractor arrangement.

The Bill changes the defence from a subjective defence, based on an employer’s knowledge and recklessness, to an objective defence, based on an assessment of reasonableness.

The proposed legislative changes give the Courts wide discretion to determine whether an employer’s belief was reasonable.

The size and nature of the employer’s enterprise is the only mandatory consideration (which aligns with the FW Act’s objectives to acknowledge the special circumstances of small and medium sized businesses). Otherwise, a Court may consider “any other relevant matters”, examples of which include the following:

• the employer’s skills and experience;
• the employer’s industry;
• how long the employer has been operating;
• the presence or absence of a designated human resources or industrial relations team within the employer’s enterprise; and
• whether the employer sought legal or other professional advice about the proper classification of the individual and if so, acted in accordance with that advice.

The new test will only apply to representations made on or after the commencement of the Bill.

Why the change?

The Labor Government says that the current defence is not effective at deterring sham contracting, as it was far too easy for an employer to establish (the subjective defence) that they did not know the true nature of the engagement and did not act recklessly when making representations.

The new (objective) defence will require employers who have misrepresented employment as an independent contractor relationship to prove they “reasonably believed” that the employee was an independent contractor, not merely that they did not know and were not reckless as to an employee’s correct status.

What this means and what now?

If the changes are passed, then:

• Organisations (including labour hire providers) should carefully assess their independent contractor arrangements (including current arrangements which may expire, and be subject for renewal, after the Bill passes) to ensure they have a reasonable basis to classify independent contractors as such.
• Even if an organisation makes out the new defence (i.e. they prove that their belief at the time of the representation, which may be wrong, was reasonable), the employer may still be liable for other civil penalties and/or backpay in relation to contravening the National Employment Standards, modern awards or enterprise agreements. Again, a wholistic and careful assessment of independent contractor status is critical.
• Organisations, particularly medium to large organisations, should ensure their human resources team and other staff who engage employees or independent contractors, are aware of the fundamental differences between an independent contractor and an employee, and consider implementing training if necessary.
• The new defence does not alter the High Court’s position in ZG Operations Australia v Jamsek and CFMEU v Personnel Contracting for determining independent contractor status. As such, organisations should continue to ensure that their written contracts with independent contractors are fit for purpose.

Please get in touch with us if you would like to discuss the proposed changes and what they mean for you in further detail.

 

Christa Lenard Partner +61 2 9169 8404 [email protected]

Jia Pan Xiao Senior Associate +61 2 9169 8430 [email protected]

Georgie Chard Lawyer +61 2 9169 8418 [email protected]

September 6, 2023

The Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 (the Bill) has been introduced into parliament and proposes to make extensive and significant changes to Australia’s industrial landscape, including the nature of casual employment.

The Bill’s casual employment reforms propose to remove the focus on the employment contract and revert to the former test, which requires an employer to continuously consider the true nature of the employment relationship, even when a clear casual employment contract has been entered into with the employee.

The casual employment reforms are intended to come into effect on 1 July 2024. The Bill contains some controversial changes which are already being opposed by certain representative groups. This might make it less likely that the Bill will be passed quickly, however we still anticipate that the Bill will become law by the end of this year, leaving employers with limited time to prepare.

The key changes to casual employment are set out below.

The meaning of casual employment

The Fair Work Act currently defines a casual employee by reference to the terms of the employment contract, without consideration of the employment relationship in practice.

This definition was introduced to the Fair Work Act in 2021 to provide certainty to employers when employing casuals. The Bill proposes to revert to the previous test for casual employment that preceded the 2021 legislative reform, which involves reviewing how the employment relationship unfolds in practice, rather than in the terms of the contract.

The proposed definition of casual employment in the Bill states an employee will be a casual employee if there is no firm advance commitment to continuing and indefinite work and the employee is entitled to a casual loading.

This is the first time that the casual loading (which is traditionally contained in an industrial instrument), will be recognised in the Fair Work Act.

Whether there is a firm advance commitment to continuing and indefinite work will be determined by reviewing the real substance, practical reality and true nature of the employment relationship, including an assessment of whether:

• the employee has a regular pattern of work (with allowance for reasonable absences for illness, injury and recreation);
• the employer can decide not to offer the employee work and the employee can choose to reject work that is offered;
• the employer has full-time and part-time employees performing the same kind of work; and
• the work the employee performs for the employer is reasonably likely to be ongoing.

The basis of a firm advance commitment can be in the form of a contract, or in the form of a mutual understanding or expectation between the employer and the employee, which may be inferred from the conduct of the employer and employee.

Employee notification of conversion

In addition to the existing casual conversion framework, casual employees will have the ability to give an employer written notification of their ‘choice’ to convert to full-time or part-time employment after 6 months of employment (or 12 months for small businesses), if the employee believes their employment no longer meets the definition of casual employment.

Employers will be required to consult with the employee about their written notification and provide a response within 21 days of receiving the written notification to convert.

The ability of an employer to not accept an employee’s written notification will be limited to where:

• the employer considers the employment still meets the definition of casual employment;
• the employer would have to make substantial changes to the employee’s terms and conditions of employment to convert the employment to part-time or full-time without contravening the relevant Award or Enterprise Agreement; or
• conversion would result in non-compliance with the employer’s recruitment obligations under law.

Fair Work Commission to deal with casual employment disputes

An employee can refer a dispute in relation to a written notification or casual conversion to the Fair Work Commission if the dispute has not resolved through discussion with the employer. The Fair Work Commission will be able to initially deal with a dispute as it deems appropriate, including by mediation, conciliation, making a recommendation or expressing an opinion, and can arbitrate disputes that remain unresolved after the initial dispute resolution process.

Where the Fair Work Commission arbitrates a dispute, the Commission can make an order for the employee to remain employed as a casual employee, or to convert to full-time or part-time employment.

Importantly, a Fair Work Commission order for an employee to convert to part-time or full-time employment cannot be retrospective and will take effect from the beginning of the employee’s first full pay period after the order is made, or a later date if specified.

This means employers will not be required to remediate an employee’s NES entitlements (such as annual leave and personal leave entitlements), that they would have accrued if they had been employed as a part-time or full-time employee for any period prior to the order taking effect.

Misrepresentation of casual employment (sham casual contracting)

While the Fair Work Commission’s powers to make orders in respect of a casual employment dispute are limited to prospective orders, an employee, or prospective employee, will be able to make a general protections claim if they believe an employer has misrepresented an employment contract as a contract for casual employment, which are subject to the civil penalty provisions of the Fair Work Act.

An employer will need to discharge the reverse onus of proof to defend such a claim by proving that the employer reasonably believed the contract was for casual employment. The Fair Work Commission will have a broad discretion in considering whether the employer’s belief was reasonable.

Casual Employment Information Statement

Employers will be required to give a casual employee a copy of the Casual Employment Information Statement:

• before, or as soon as practicable after, the casual employment commences; and
• as soon as practicable after the employee completes 12 months of employment.

Employers will also need to give existing (“continuing casuals”) a copy of the Information Statement within 3 months of commencement.

Please get in touch with us if you would like to discuss the proposed changes and what they mean for you in further detail.

 

Lucy Shanahan Partner +61 2 9169 8405 [email protected]

Shelley Williams Partner +61 7 3071 3110 [email protected]

Kat Bennett Associate +61 7 3071 3103 [email protected]

September 5, 2023

It was a reform package that was announced as being about closing loopholes and enhancing protections. However, on 4 September 2023, the Government introduced a raft of reforms which go much further than that.

The Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 has opened new fronts for debate and introduced new amendments which employers will have to grapple with in the coming months. This follows the last round of reforms some of which only commenced less than three months ago, on 6 June 2023.

Kingston Reid presents its first summary of the surprises the Government has included in its latest round of workplace relations reform. Stay tuned for our rolling coverage as Kingston Reid continues to analyse the Bill in depth over the coming days.

Casual Employment

What We Thought It Would Be About: They said it was a return to an objective test for casual employment.

What It Is Actually About: What has been introduced is a new definition of casual employment, along with a new system of employee driven notifications to convert to full time or part time within as little as 6 months service (for employers who are not a small business).

This is despite the existence of a simple and sensible system for casual conversion initially introduced into Modern Awards by the Fair Work Commission and translated into the National Employment Standards.

How It Works: The Bill will insert a new definition of casual employment which requires the employment relationship to be characterised by the absence of a firm and advance commitment to continuing and indefinite work, and the employee to be entitled to a casual loading. A loading must be paid to all casual employees regardless of how senior they are or how much they are paid and even if they are not award or agreement covered.

The new definition is to be applied having regard to various indicia, having regard to the “substance, practical reality and true nature” of the employment relationship over time (that is, it is not assessed at the time of contracting as is currently the case).

However, employees will not automatically convert to casual if the nature of their engagement becomes such that they no longer meet the definition of a casual employee. Rather, this provides a new basis on which the employee can covert to permanent after 6 months’ employment.

The capacity of the employer to decline conversion is limited to where they consider the employee still meets the definition of casual employment, there are limitations in an industrial instrument making conversion impracticable, or conversion would result in non-compliance with recruitment obligations under law.

The Bill also includes:

• anti-avoidance measures and prohibitions on dismissing an employee to reengage them to perform the same or substantially the same work on a casual basis;
• prohibitions on misrepresenting a contract of employment as being casual in nature (with there being a defence that the employer reasonably believed the employee was in fact a casual); and
• the ability for the Commission to deal with disputes, including by arbitration.

“Same Job, Same Pay”

What We Thought It Would Be About: They said they would close the labour hire loophole.

What It Is Actually About: What has been introduced is a labour hire harmonisation system which effectively benchmarks labour hire entities to host employers and allows employees and unions the capacity to seek orders which introduce pay parity across operations. The only exemptions are for training arrangements and short-term engagements not exceeding 3 months. Conceivably, labour hire operators, consultants and contractors can be caught by the scheme.

Further, an anti-avoidance scheme has been included which recognises conduct that takes place from 4 September 2023 (being the day this Bill was introduced to Parliament).

That’s right, any arrangement entered into from 4 September 2023 until the Bill receives royal assent can be caught by the anti-avoidance provisions.

How It Works: One major change under the Bill is to create a new (and relatively complex) scheme for labour hire rates of pay.

Under this scheme, the Commission can make “Regulated Labour Hire Arrangement Orders” which set the minimum rates of pay a labour hire provider must pay to employees. This “protected rate of pay” is the full rate (that is, inclusive of loadings, penalties and allowances etc) payable to direct employees of the host under its enterprise agreement (or other relevant industrial instrument).

The Commission can decline to make such an order, if it is satisfied it is not fair and reasonable to do so, having regard to submissions on a range of issues, including as to the history of industrial arrangements, the relationship between the host and the employer, the terms and nature of the engagement, and other matters.

There is also an obligation on the host to provide information necessary for the labour hire provider to determine the protected rate of pay, along with a capacity for the Commission to deal with disputes (including by arbitration).

There are limited exceptions to this scheme (including for short term engagements, and to some extent, small businesses) and anti-avoidance provisions.

Gig Economy Workers

What We Thought It Would Be About: They said it was about supporting gig economy workers.

What It Is Actually About: What has been introduced is a system that extends to gig economy workers but in the same breath revives the Federal Government’s regulation of the road transport industry with new powers introduced to set minimum standards for the road transport industry and hear disputes about unfair contract terms and disputes.

The Bill also features a new test for determining a worker’s employment status, even though this did not initially form part of the Federal Government’s suite of proposed industrial relations reforms at the May 2022 federal election. This proposed amendment extends beyond application to workers in the gig economy and has the potential to impact other non-employment-based work relationships.

How It Works: The Bill will insert a statutory test for employment into the Fair Work Act, which will be applied looking at the “totality of the relationship”, to ascertain the “real substance, practical reality and true nature of the relationship”.

This amendment is targeted at changing the approach adopted by Courts and Tribunals to determining the status of a worker following the High Court judgments in Jamsek and Personnel Contracting in early 2022, reverting largely back to the approach adopted by Courts and Tribunals since the High Court’s previous landmark judgment in Hollis v Vabu Pty Ltd (2001) 207 CLR 21.

The most extensive aspect of the Bill, comprising almost half the text, relates to the regulation of employee-like and road transport work. These two streams are dealt with largely separately in the Bill, but the framework for each is similar.

Minimum Standards Orders and Guidelines

This includes powers for the Fair Work Commission to make minimum standards orders and guidelines relating to the performance of work by regulated workers (including on its own initiative).

For the employee-like stream, this can include workers (including where they provide their services through an incorporated entity) who:

• perform work under a services contract with the operator of a digital labour platform, or which was facilitated by a digital labour platform; and
• the worker has low bargaining power, or receives less remuneration than an employee performing comparable work, or has a low degree of authority over the way they perform work (other factors can be prescribed by regulation).

For the road transport industry, this includes workers (including where they provide their services through an incorporated entity) who perform work under a services contract in the road transport industry.

Minimum standards orders must include terms specifying coverage, and also a procedure for settling disputes.

Minimum standards orders can also include terms dealing with payment terms; deductions; working time; record-keeping; insurance; consultation; representation; delegates’ rights; and cost recovery.

There are certain matters which cannot be included in an order (primarily relating to matters that are of a commercial nature not affecting terms and conditions of engagement or would change the form of the engagement).

Agreement making

The Bill sets out a process for collective agreements to be made between digital labour platforms or road transport businesses and organisations representing the industrial interests of the employee-like workers, or road transport contractors, who will be covered by it.

This process is commenced by the giving of a notice of a consultation period, which specifies who the proposed collective agreement will cover and what it will deal with. This notice must also be given to the Fair Work Commission, which will publish it on its website, and also to workers to be covered by the proposed agreement. The agreement making parties must also agree on a process for giving a notice to the relevant workers to be covered by the proposed agreement.

The Fair Work Commission can assist in resolving disputes about the making of the agreement, but arbitration is not permitted. The Fair Work Commission is also responsible for registering a collective agreement, and also its termination (after the termination steps in the collective agreement have been completed).

Unfair deactivation and termination

The Bill also creates quasi-unfair dismissal rights in the Commission known as “Unfair Deactivation” in the case of the employee-like stream, or “unfair termination” in the road transport stream.

In each case, certain jurisdictional prerequisites apply (similarly to the unfair dismissal jurisdiction – including a contractor high income threshold) and the Commission will consider whether the deactivation or termination was unfair having regard to the existence or absence of a “valid reason”.

The minister also has the power to develop a code for each stream setting out other considerations, for example around fair deactivation or termination procedures.

In both streams, the Commission can order reactivation or reinstatement, and make orders for lost pay. However, orders for compensation in lieu of reinstatement are only available in the road safety stream.

Wage Theft

What We Thought It Would Be About: They said it was about criminalising wage theft.

What It Is Actually About: The Bill establishes new wage theft offences which carry penalties of up to 10 years imprisonment, and financial penalties of up to $1,565,000 for an individual and $7,825,000 for a corporation, or 3 times the value of the underpayment, whichever is higher.

The Bill also abrogates the privilege against self- incrimination to allow employee records maintained and kept by an employer to be used in subsequent proceedings. As noted in the explanatory memorandum, if an employer is lawfully required to produce and keep (or issue) these documents and records, then it is not reasonable for their use in evidence to be prevented.

How It Works: It will be a criminal offence to intentionally underpay employee entitlements arising under the Fair Work Act, modern awards or enterprise agreements (although the new offence will not apply to superannuation underpayments).

Prosecutions may only be commenced by the Australian Federal Police or the Commonwealth Director of Public Prosecutions

It will be a defence to demonstrate honest mistake or that the underpayment was not the result of intentional conduct – demonstrating due diligence will be critical for employers relying on the defence of honest mistake.

Employers may avoid criminal (but not civil) liability by:

• self-reporting and entering a ‘Cooperation Agreement’ with the Fair Work Ombudsman; or
• complying with a yet-to-be-developed voluntary Small Business Wage Compliance Code.

Delegates rights

What We Thought It Would Be About: They said it was about closing loopholes.

What It Is Actually About: What has been introduced is a new set of workplace rights for union delegates to be recognised in Modern Awards and Enterprise Agreements.

This is a new mandatory term in Enterprise Agreements with any less favourable terms seeing the Modern Award provision prevail.

How It Works: The Bill requires the Commission to include terms in modern awards dealing with union delegates’ rights, which prevail over any less beneficial delegates rights terms in enterprise agreements.

The Bill also enshrines stand-alone rights for delegates including to represent employees in disputes, reasonable communication with members (or eligible non-members) in relation to their industrial interests, reasonable access to the workplace and workplace facilities, and (other than for small business) access to paid time during normal working hours for training.

Unfair contract jurisdiction for independent contractors

What We Thought It Would Be About: They said it was about affordable access for independent contractors to enforce their rights.

What It Is Actually About: What has been introduced are new powers enabling the Fair Work Commission to deal with disputes about unfair terms in services contracts.

There have also been changes to the (existing) defence for misrepresenting employment as an independent contractor arrangement (known as ‘sham contracting’), from a subjective test of recklessness to an objective test of reasonableness, with the Courts having wide discretion to consider ‘any other relevant matters’ in assessing the reasonableness of the employer’s belief.

How It Works: The Fair Work Commission will have a new unfair contracts jurisdiction. This will enable independent contractors (or organisations representing their industrial interests) to seek orders varying or setting aside all or part of a contract if the Commission considers the contract to be “unfair”.

In determining unfairness, the Fair Work Commission will have regard to a range of factors including (but not limited to):

• the relative bargaining power between the independent contractor and the principal;
• whether the contract as a whole displays a significant imbalance of rights and obligations;
• whether the contract imposes a harsh, unjust or unreasonable requirement on a party; and
• whether the contract provides for total remuneration less than employees or regulated workers under minimum standards orders or guidelines.

Again, this is subject to an exclusion where the independent contractor earns above the contractor high income threshold (to be set by regulation).

Other Changes

Other changes include:

• Changes to the multi-employer bargaining framework:
  • the Bill will modify the rules that regulate the interaction between enterprise agreements, with the effect that single-enterprise agreements will prevail over existing supported bargaining and single interest multi-employer enterprise agreements, even where those multi-employer agreements have not passed their nominal expiry date.
  • However, this change is limited somewhat by the fact that in order for an employer to put a single-enterprise agreement to vote of a workforce covered by an “in-term” multi-employer agreement, the written agreement of an employee organisation is required (or otherwise a voting request order from the Fair Work Commission).
  • In addition, under the Bill, when the single-enterprise agreement is assessed by the Commission to determine whether it passes the “better off overall test”, the terms of the multi-employer enterprise agreement is a relevant comparator.
• A new limitation on the existing small business exclusion on the obligation to make redundancy pay: under the Bill, this exclusion will not apply, in essence, where the employer became a small business due to insolvency;
• The inclusion of family and domestic violence as a protected attribute for anti-discrimination protections;
• An expansion of the affected member certificate regime to included cases of underpayment (meaning permit holders can seek approval from the Fair Work Commission to exercise right of entry without providing advance notice);
• Winding back the changes made to the de-amalgamation process for unions, which enabled this to occur when the relevant constituent part amalgamated more than 5 years prior; and
• Various changes to asbestos and work health and safety, including the introduction of a new industrial manslaughter offence in the Work Health and Safety Act 2011 (Cth) and increased penalties for Category 1 offences.

 

Duncan Fletcher Partner +61 8 6381 7050 [email protected]	Brendan Milne Partner +61 3 9958 9611 [email protected]	Tae Kim Lawyer +61 8 6381 7068 [email protected]
Brad Popple Special Counsel +61 3 9958 9613 [email protected]	James Parkinson Special Counsel +61 8 6381 7053 [email protected]	Frank Daly Paralegal +61 8 6381 7051 [email protected]

August 31, 2023

In a bid to strengthen Workplace Health and Safety (WHS) standards, Safe Work Australia has introduced a consultation paper outlining a range of suggested amendments to incident reporting obligations. These changes are aimed at enhancing the visibility of workplace incidents for WHS regulators. However, while the proposed amendments to incident reporting are no doubt well-intentioned, they risk imposing undue administrative burdens on businesses and overburdening safety regulators. This is especially concerning given that the businesses and regulators are still coming to grips with how to effectively manage psychosocial risks and the skill sets required to do so.

Below we set out the proposed changes and the number of variables proposed in each notification approach.

Proposed Change 1 – Periodic Reporting of Incapacity Periods

Currently, incident notification for psychological injuries is only required in cases of death, immediate hospitalisation, or dangerous incidents. For physical injuries, incidents necessitating immediate treatment are also covered.

What Could Change?

Safe Work Australia proposes amending the model WHS legislation to introduce periodic reporting every six months of incapacitation periods lasting ten or more consecutive days due to work-related psychological or physical injuries, illnesses, or harm.

This change would require a person conducting a business or undertaking (PCBU) to assess whether a worker’s illness or injury resulted from the conduct of the business or undertaking. The consultation paper suggests potential evidence that may aid this determination includes:

• Specific events leading up to the worker’s absence;
• Reports from supervisors; or
• Self-reporting by workers.

Proposed Change 2 – Attempted Suicide, Suicide, and Other Deaths

Currently, suicide or death due to psychological harm is reportable. A suicide attempt ‘arising from the conduct of the business or undertaking’ requires notification when the person needs immediate treatment as an inpatient in a hospital or immediate treatment for specific injuries.

What Could Change?

Option 1: Suicide and other Worker deaths

Safe Work Australia proposes clarifying guidance material to encompass the death of a person from:

• Suicide due to psychological harm arising from business operations;
• Other deaths resulting from exposure to psychosocial hazards linked to business activities (e.g., heart attack from work stress); and
• Suicide of a person in a workplace with an identified suicide risk.

Option 1 also includes amending guidance material to provide examples of circumstances and evidence indicating that psychological harm contributing to a person’s suicide may have arisen from the business or undertaking’s conduct. Examples include:

• Occurring while the worker is ‘at work,’ in the workplace, or at a place associated with work (e.g., worker accommodation);
• Evidence of a direct link to work (e.g., notes, testimonies);
• History of exposure to psychosocial hazards at work (e.g., traumatic events, reports of bullying, prolonged high job demands, or fatigue);
• Worker had a work-related psychological injury or illness; and
• Recent difficulties at work.

Option 2: Suicide of a Worker whether or not death arises from conduct of PCBU

A second option suggests broadening the definition of a notifiable incident to include a worker’s suicide, regardless of whether the act arises from business operations. This would eliminate the need for PCBUs to speculate on the potential causes of the suicide. Upon a suicide occurring, a PCBU would be required to promptly report the incident to the WHS regulator.

Option 3: Attempted Suicide of a Worker stemming from business activities

A recommendation revising incident notification provisions to mandate immediate reporting by PCBUs to WHS regulators upon becoming aware of an attempted suicide stemming from business activities.

Under this change, notification would be required when a reasonable suspicion exists that the attempt resulted from severe or prolonged exposure to psychosocial hazards at work. Notification would only be necessary where the attempt posed a high risk of death or serious injury. PCBUs would not need to notify if that threshold was not met.

Option 4: Attempted Suicide of a Worker

This recommendation requires notification of attempted suicide by workers, irrespective of whether the attempt arises from the conduct of the business or undertaking. This approach would eliminate the need for PCBUs to speculate on the potential causes of the attempted suicide.

Proposed Change 3 – Reporting Workplace Violence

Currently, reporting workplace violence is only mandatory if it leads to death, immediate hospitalisation or treatment, or results in illness requiring medical attention within 48 hours.

What Could Change?

Safe Work Australia proposes amending the model WHS legislation to mandate immediate notification to the WHS regulator for cases of serious workplace violence and threats. Immediate notification would be required for incidents such as:

• Sexual assault: Non-consensual sexual behaviour that is threatening or violent, occurring within the context of the business or undertaking;
• Serious physical assault: Instances of assault with a weapon or physical harm;
• Deprivation of liberty: Situations where a person’s freedom is restricted or denied by another individual; and
• Threat of serious violence: Express or implied threats causing genuine fear of death, serious sexual assault, or severe injury.

These proposed changes would be triggered by verbal, written, or otherwise communicated threats of serious violence, posing an immediate or imminent serious risk to health and safety. Excluded would be threats where the person making the threat lacks capability or intent to carry it out or where the threat does not involve serious violence.

Optional Add-On: Tailored Reporting Arrangements

Another facet of these changes is the optional inclusion of allowing WHS regulators to approve alternative reporting arrangements for certain PCBUs. This aims to offer reporting flexibility for industries with high incident volumes, where immediate reporting to the WHS regulator may be unfeasible.

Proposed Change 4 – Periodic Reporting of Exposure to Traumatic Events

Current provisions only require notification of notifiable fatalities, serious injuries, or dangerous incidents arising from business activities with a focus on physical harm, rather than psychosocial risks.

What Could Change?

Safe Work Australia proposes amending the model WHS legislation by introducing a new requirement for PCBUs to periodically report to the WHS regulator on exposures to serious injuries and fatalities, as well as instances of abuse or neglect likely to be experienced as traumatic by workers or others. This would encompass exposures to situations, materials, and reports.

Optional Add-On: Tailored Reporting Arrangements

An optional add-on recommends allowing alternative reporting arrangements for certain PCBUs to reduce administrative burden (such as first responders).

Proposed Change 5 – Periodic Reporting of Bullying and Harassment

Current incident notification provisions only capture bullying and harassment where it results in the person requiring immediate treatment for a serious injury (e.g. the person is physically assaulted).

What Could Change?

Option 1: Unreasonable Behaviours

This option suggests amending the model WHS legislation to mandate periodic reporting (every six months) of de-identified data related to complaints or instances of:

1. Repeated and unreasonable behaviour (bullying) towards a worker or group of workers; and
2. Unreasonable behaviour towards a worker(s) that a reasonable person would consider abusive, aggressive, offensive, humiliating, intimidating, victimising, or threatening, including sexual harassment or harassment of any kind.

Option 2: Bullying, Sexual Harassment, and Harassment on Protected Grounds

Similar to option 1, this option proposes amending the model WHS legislation to mandate periodic reporting every six months, focusing on complaints or instances of:

1. Workplace bullying – repeated, unreasonable behaviour towards a worker(s) or group of workers;
2. Workplace sexual harassment of a worker(s); and
3. Workplace harassment of a worker(s) based on protected characteristics (e.g., race, sex, gender, sexual orientation, age, disability).

Proposed Change 6 – Reporting of Long Latency Disease

Current incident notification provisions focus on immediate effects of substance exposure, such as injuries or illnesses requiring treatment within 48 hours. Dangerous incidents cover serious risks from uncontrolled substance exposure. However, these arrangements allegedly do not cover long latency diseases that may appear years after exposure.

What Could Change?

Safe Work Australia is soliciting feedback on how reporting on long latency diseases could be conducted. Although no specific proposal has been presented, it appears that four options are under consideration:

Option 1: Record and Report Latent Disease Exposures

Introduce a mechanism to record and report exposure to hazardous substances leading to long latency diseases.

Option 2: Enhance Exposure Monitoring

Explore advanced technologies beyond air and health monitoring to provide real-time data on substance exposure levels for a more accurate understanding of potential risks.

Option 3: Reporting Exceedances of Exposure Standards

Incorporate a requirement for PCBUs to record and report instances where the workplace exposure standard is exceeded.

Option 4: Broadening Statement of Exposure Records

Extend the requirement to maintain records of exposure documents to include substances known to cause long latency diseases for a comprehensive WHS approach.

Proposed Change 7 – Reporting Serious Head Injuries

Presently, serious head injuries are reported based on specific criteria, including the need for “immediate treatment.” Concerns have arisen that this provision may not sufficiently cover head injuries that worsen over time.

What Could Change?

Option 1: Broaden the Definition of Serious Head Injury

Amend the model WHS legislation to broaden the definition of “serious head injuries” without requiring “immediate treatment.” This change would empower PCBUs to determine the severity of the head injury, providing a more comprehensive reporting framework. Guidance materials would aid PCBUs in identifying reportable cases.

Option 2: Include Suspected Serious Head Injury

Amend the model WHS legislationto include “suspected serious head injuries” requiring immediate treatment. This modification would identify cases where the injury’s severity may not be immediately evident but necessitates urgent care. The existing threshold of “immediate treatment” would remain.

Option 3: Clarify the Concept of Immediate Treatment

Clarify the concept of “immediate treatment” for serious head injuries to ensure it is not perceived as limited to surgical interventions. Use an “incapacity period” to capture injuries worsening over time and leading to work incapacity.

Proposed Change 8 – Reporting Incidents Involving Large Mobile Plant

Presently, dangerous incident provisions cover plant collapse, malfunction, or damage posing a significant health and safety risk. Safe Work Australia has identified that dangerous incidents involving mobile plant, such as collisions, overturning, or loss of control, are not reported unless they meet specific criteria (e.g., resulting in fatality or serious injury).

What Could Change?

Amend the dangerous incident provisions in the model WHS Act to require immediate notification of powered mobile plant malfunction or loss of control exposing individuals to a serious health and safety risk. This provision would specifically cover incidents listed under Regulation 214 of the model WHS Regulations, including overturning, entrapment, collisions, and roll-aways. Clear guidance material would accompany the provision to offer comprehensive examples and ensure accurate reporting.

Proposed Change 9 – Capturing the Fall of a Person

Interestingly, Safe Work Australia has found that the current provisions relating to falls from height do not encompass the fall of a person unless the incident results in a fatality or serious injury, or involves another notifiable dangerous incident. Current provisions primarily relate to the risk of objects falling from a height rather than the fall itself.

What Could Change?

Amend the dangerous incident provisions in the Model WHS Act to include the fall of a person exposing individuals to a serious health and safety risk. This would cover falls into holes, pits, trenches, crevices, and bodies of water.

Other Proposed Changes

Causal Link Principle: Amend the model WHS Act to emphasise the ‘causal link principle’, requiring incidents to relate to the business or undertaking’s conduct. This aims to prevent the notification of non-work-related incidents.

Objective Test: Amend incident notification provisions to explicitly reflect that the test for serious injury or illness is objective. This change ensures consideration of whether the injury or illness could reasonably warrant medical treatment, regardless of actual administration. This clarification aims to guide PCBUs in applying the objective test.

Clearer Description of Terms: Amend guidance material to provide clearer descriptions of terms such as ‘immediate treatment,’ ‘inpatient,’ and ‘hospital.’ This will enhance PCBUs’ understanding of notification requirements, even in situations where treatment is not immediately administered or in a conventional hospital setting.

Loss of Bodily Function: Enhance guidance to provide better understanding of the injuries and illnesses encompassed under this category.

Medical Treatment for Exposure to Substances: Contemplate expanding the ‘medical treatment’ definition to include health professionals beyond doctors. This would reflect the broader range of professionals, like paramedics and registered nurses, providing urgent treatment after substance exposure.

Exposure to Human Blood and Body Substances: Offer improved guidance to PCBUs regarding notifications required for exposures to human blood and body substances.

Infections and Zoonoses: Provide prominent information on these requirements to enhance compliance and reporting accuracy.

Simplifying Dangerous Incident Provisions: Consider amendments to simplify dangerous incident provisions while preserving policy intentions.

Improving Reporting of Electrical Hazards: Amendments to better capture incidents involving electrical hazards, such as electric shock, electrical explosion, and arc flash explosion.

Mutual Duty to Notify: Introduce a mutual duty for PCBUs and individuals with workplace management or control to notify each other upon becoming aware of notifiable incidents.

What do these changes mean for businesses?

The consultation period for feedback to Safe Work Australia closes on 11 September 2023, which does not leave businesses significant time for considering the proposed changes and raising any concerns.

The current incident reporting framework, outlined in the model WHS legislation, mandates that a PCBU must notify the safety regulator of specific incidents, including deaths, serious injuries or illnesses, and dangerous incidents. That current notification framework applies to incidents which arise out of the conduct of the business or undertaking at a workplace.

Safe Work Australia’s proposed amendments in relation to clarifying existing reporting obligations are welcome. However proposed amendments to psychosocial risk incident reporting seek to introduce language which is, in a number of respects, ambiguous and open for interpretation. For example, some proposed changes have a link to the workplace, for example, using language such as “work related”, “arising from business operation” and “linked to business activities”. As has been apparent from the current notification requirements, there are many incidents where it is not clear if there is a link to the workplace. This raises issues of who will ultimately assess whether these incidents are notifiable, and what are those persons’ skills or qualifications in assessing them to be e.g., their particular expertise in assessing psychosocial risks.

Other proposed changes by Safe Work Australia do not require any link to the workplace and are purely event based. This appears at odds with the general obligations in the model WHS legislation which require a causal link to the business or undertaking.

Other changes, for example in relation to workplace violence, require notifications in all cases. It is unclear whether any regulatory impact has been undertaken to assess how such notifications will impact a situation where, for example, an incident investigation is yet to have commenced or be completed and the alleged perpetrator is to be given due process whilst the investigation is undertaken. This is even more significant when external authorities such as the police may have become involved and are investigating a criminal offence.

Without clear and unambiguous regulatory guidance (which has not been developed and which needs to be provided so that PCBUs can consider the impacts) the proposed changes may lead to confusion and complexity for workplaces. Implementing the proposed changes will undoubtedly place significant administrative burdens on PCBUs, strain safety regulator resources, and divert focus from immediate safety concerns. Policymakers should carefully consider the efficacy of the current framework, necessary guidance and evaluate potential consequences before introducing unnecessary changes.

It will be important for employer representative associations and organisations to consider the proposed changes on behalf of their employer members and provide advocacy on potential impacts before any changes are legislated.

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

Liam Fraser Partner +61 7 3071 3113 [email protected]

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

 

Sarah-Jayne Rayner Senior Associate +61 7 3071 3122 [email protected]

George Stent Lawyer +61 2 9169 8421 [email protected]

August 8, 2023

The recent decision of the High Court in CCIG Investments Pty Ltd v Schokman [2023] HCA 21 (Decision) serves to clarify when employers will, and importantly will not, be liable for acts of their employees which cause harm to other people.

The case involved familiar issues of negligence or misconduct by an employee (Negligent Employee) of the appellant company (Employer) after drinking alcohol on work premises, leading to an injury to another employee (Injured Employee).

Background

The Employer employed the Negligent Employee and the Injured Employee (Employees) in the restaurant at a resort it managed in the Whitsunday Islands. The Employees’ roles required them to live on the island at the resort. At the relevant time, the Employees shared a room in accommodation provided by the Employer.

One evening, the Employees both went for a drink at the staff bar after finishing work. The Employees returned to their room at about 1:00am, but the Negligent Employee left shortly afterwards for some more drinks and the Injured Employee went to bed. Some hours later, the Injured Employee heard the Negligent Employee vomiting in the bathroom and walking around hiccupping. About half an hour later, the Injured Employee was again woken up by the Negligent Employee urinating on him in his bed. The Injured Employee inhaled and choked on the urine, and suffered a cataplectic attack caused by the emotional stress of the situation.

The question before the High Court was: was the Employer liable for the Negligent Employee’s acts?

When is an employer liable for an employee’s acts?

The High Court confirmed the long-standing principle that an employer will be liable for the acts of employees committed in the course or scope of the employment. In accordance with the Decision, the courts will assess what that scope is, the nature of the acts of the employee, and whether that nature of the conduct fell within the relevant scope.

The assessment of the scope or course of employment is directed to the question of what an employee is actually employed to do. Relevant considerations include the nature of the role, the ordinary duties, when the employee performs their duties and where they are employed to do it.

The assessment of whether the conduct fell within the scope of the employment requires an employer to have done more than just create an opportunity for the conduct to occur. Rather it requires the consideration being given to the level of connection of those acts with the core of the employment relationship. The Court determined that it is not necessary for the relevant conduct to be authorised by an employer. While authorised acts will almost certainly fall within the scope of the employment, unauthorised and even criminal acts which are found to be within the scope of employment may render an employer liable. Acts which are incidental to, or closely connected with, the employee’s duties will fall within the scope of the employment.

When is an employee on a frolic of their own?

The Court considered that an employer will not be liable where conduct is so remote from an employee’s duty to be considered outside of and unconnected with their employment. This is often described as an employee being on a ‘frolic of their own’.

Conduct will be found to be a ‘frolic’ where an employee is acting outside the ordinary course of the business of the employer. This includes where behaviour which occurs during working hours is so far removed from what can be expected from an employee in their position.

In the Decision, the Court found that, the Employer created, at most, an opportunity for the Negligent Employee to engage in the conduct he did. However the timing, nature and circumstances of his conduct were so far removed from his duties working in the restaurant that the Employer was not liable.

A caution!

While employers should be aware of the Decision and the principles contained in it, employers may still have other responsibilities in respect to the management of their employees, even in circumstances where common law vicarious liability will not attach to their conduct. Under work health and safety legislation, businesses have a responsibility to ensure the health and safety of workers and visitors so far as is reasonably practicable. Under anti-discrimination legislation, employers may have a responsibility to take reasonable and proportionate steps to eliminate forms of discrimination and harassment. These provisions may contemplate taking steps to prevent employees from going on ‘frolics’ of their own.

Our team at Kingston Reid is available to advise businesses on meeting their obligations, responding to issues of misconduct and limiting liability for unauthorised employee conduct. Please reach out if you require any assistance.

 

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

Luke Maroney Senior Associate +61 2 9169 8433 [email protected]