OHS and flexible work arrangements: a balancing act for employers
The case of Hargreaves v Telstra Corporation Limited [2011] AATA 417 highlights that employers must turn their mind to issues of safety when considering working from home arrangements. Such arrangements will not necessarily mean an employer will escape liability for injuries suffered by the employee when working from home.
What does this mean for employers?
- Eligible employees have a legal right to request flexible work arrangements, which may include working from home on a temporary or permanent basis.
- Employers must consider such requests and can only refuse them on reasonable business grounds.
- Employers also have a legal responsibility under work health and safety laws to identify safety risks associated with a work from home arrangement and to take reasonably practicable steps to minimise those risks.
- Risks to the employee’s health and safety can support a decision to refuse a request for flexible work. However, if there are reasonable measures that can be taken to address identified risks, even if they will incur some cost to the employer, it is unlikely a court would consider that this is a proper basis to refuse a work from home request.
The case in brief
Ms Hargreaves worked for Telstra in a campaign management role which allowed her to work two days a week from home and three days from Telstra’s city office.
Whilst working at home, Ms Hargreaves injured herself on two separate occasions when descending the stairs of her home whilst coughing, causing her to lose her balance and fall.
The first incident occurred in August 2006 when Ms Hargreaves left her upstairs work station and was going downstairs to get cough mixture. The Administrative Appeals Tribunal (the Tribunal) accepted the evidence that Ms Hargreaves had been logged into Telstra’s computer systems at the time of her fall. The first incident was not initially reported by Ms Hargreaves to Telstra.
The second incident occurred in October 2006 when Ms Hargreaves was again going downstairs from her upstairs work station to lock the door after her son left for school. The Tribunal accepted evidence that at that time Ms Hargreaves was logged into Telstra’s computer systems and that she was locking the door as required by Telstra while she was working from home as there had been a burglary in her local area the year before.
In the case the Tribunal was required to determine whether Ms Hargreaves had a compensable injury under the Commonwealth Safety Rehabilitation Compensation Act 1988, specifically, whether Ms Hargreaves injury occurred during the course of her employment. The Tribunal found that Ms Hargreaves’ injury did occur during the course of her employment. In relation to the first fall, the Tribunal accepted that Ms Hargreaves' absence from her work station occurred while she was in an episode of work ‘relieving the necessities of nature’. The Tribunal likened her need to obtain cough medicine, to a toilet break or meal break. In relation to the second fall, the Tribunal found that Hargreaves had been complying with Telstra’s instruction when she left her work station to lock the front door.
Tips for employers
- Consider flexible work requests (including requests to work from home) and respond to them consistent with employer obligations under the Fair Work Act 2009 (Cth) and the Equal Opportunity Act 2011 (Vic).
- Ensure that the type of work that is to be performed at home is clearly defined and understood by the employee and that a risk assessment of the home work environment is completed before the arrangement commences.
- There are a number of ways a risk assessment could be carried out, including a self assessment by the employee or an assessment arranged by the employer. Which type of assessment is appropriate and suitably discharges the employer’s obligation will depend on the circumstances of each work from home arrangement, and there is unlikely to be a ‘one size fits all’ approach.
- Treat a risk assessment of a working from home arrangement in the same way as a risk assessment undertaken at the office. At a minimum, employers should be satisfied that risks common to working in any office environment are addressed in the employee’s home. This includes that ergonomic factors are addressed, there is adequate lighting, heating, cooling, ventilation, and welfare facilities and that work equipment is in a safe and working condition.
- Implement policies on working from home arrangements that make clear the employee’s obligations when they are undertaking work from home, including obligations to comply with existing policies and procedures and to report safety incidents that occur at the home whilst work is being performed.
- Ensure employees who perform work from home or another remote location are appropriately educated on the appropriate precautions they should take to work safely from home.
Common law contract not enough to support a general protections claim
In an important decision for employers and employees, the Federal Court has ruled that the existence of a common law employment contract is not enough to support an employee’s general protections claim under the Fair Work Act 2009 (Cth) (FW Act).
What does this mean for employers?
- Since their introduction in 2009, the general protections provisions of the FW Act have been increasingly relied on by current and former employees. Adverse action applications relating to dismissals have risen by 60 per cent in the past year.
- An employer is prohibited from taking ‘adverse action’ against an employee because they have a ‘workplace right’ which includes having a role or responsibility under a ‘workplace instrument’.
- This case shows that an employee’s common law contract of employment does not constitute a ‘workplace instrument’ for the purpose of the adverse action provisions.
- An employee who falls outside the unfair dismissal regime, for example because they earn more than the remuneration cap, will not be able to bring a claim of adverse action relating to their dismissal merely because they were employed to perform a role under a contract of employment.
- Employers and principals should seek advice on the scope of the general protections regime (particularly on termination) to ensure that any action taken in relation to an employee or contractor is not likely to offend these provisions of the FW Act.
The case in brief
An employer is prohibited from taking ‘adverse action’ against an employee for a number of specified reasons under the general protections provisions of the FW Act. One of these prohibited reasons is that the employee has ‘workplace right’ or has exercised a ‘workplace right’. It was on this basis that Barnett, a former manager for Territory Insurance Office (TIO), brought a general protections claim against his former employer after his employment was terminated without any prior notice or warning. (Barnett v Territory Insurance Office [2011] FCA 968)
Under the FW Act, a person has a workplace right if (among other things) he or she ‘is entitled to the benefit of, or has a role or responsibility under, a workplace law, a workplace instrument or order made by an industrial body’.
Barnett argued that he had the ‘role or responsibility’ of managing TIO staff under what he argued was a ‘workplace instrument,’ his common law employment contract with TIO.
The Court was therefore required to consider whether a common law contract satisfied the FW Act’s definition of ‘workplace instrument’, which is ‘an instrument that is made under, or recognised by, a workplace law (including the FW Act) and concerns the relationships between employers and employees’.
Barnett argued that his common law employment contract:
- was an instrument ‘recognised’ by the FW Act; and
- concerned the relationship between employers and employees.
The Court, however, rejected this argument, and held that the FW Act did not ‘recognise’ an employment contract merely because it acknowledges the existence of, or treats as valid, the contract’s terms.
The Court held that a workplace law ‘recognition’ of a workplace instrument should mean that the instrument in question has been given ‘legal effect’ or ‘legal life’ by the workplace law. This would include, for example, an enterprise agreement or transitional instrument such as a pre-reform certified agreement (made under the predecessor to the FW Act but continued by transitional legislation), which are instruments created under statute.
Given Barnett’s common law employment contract did not depend on the existence of the FW Act to have ‘legal effect’, or any other ‘workplace law’ for that matter, the Court rejected the argument that the contract was a ‘workplace instrument’. As such, Barnett was unable to show that he had exercised a ‘workplace right’ by exercising a ‘role or responsibility’ under a ‘workplace instrument’. This meant his general protections claim against the TIO could not proceed.
The decision is a significant step in clarifying the limits of the general protections jurisdiction.
When good intentions go bad
An employer that mistakenly paid a senior employee a redundancy payment has been told by the Victorian Supreme Court that the employee can keep the payment.
What does this mean for employers?
- Employers need to understand their severance payment obligations when making employees redundant.
- Employers should not assume that, just because some employees have certain entitlements, all their employees have the same entitlements, particularly since the commencement of the National Employment Standards (NES) and modern awards on 1 January 2010.
- Under the NES and/or a modern award, employees may have an entitlement to redundancy pay based on years of service. Employers need to be aware that some employees whose service prior to 1 January 2010 will not count for the purposes of calculating redundancy pay and other employees whose service before that date will count for that purpose.
- It is likely that if the employer in this case had realised the mistake straight away and taken action to recover the mistakenly paid amount, the outcome would have been different. Delay can be fatal in situations such as this.
The case in brief
In the case TRA Global Pty Ltd v Vesna Kebakoska [2011] VSC 480, Ms Kebakoska was the National Operations Manager at recruitment company TRA Global Pty Ltd, on a salary package of $130,000 per year. Her employment was made redundant in June 2008.
Upon termination of her employment, TRA Global paid Ms Kebakoska, amongst other things, a redundancy payment of 12 weeks pay, amounting to $27,314.57. TRA Global believed that this was the payment she was entitled to under the relevant award.
Ms Kebakoska was not legally entitled to this payment. Following the termination of her employment, she was unemployed for eight months. As a consequence, Ms Kebakoska spent most of the redundancy payment on living expenses.
About a month after the termination of her employment, Ms Kebakoska applied to Centrelink for unemployment benefits. However her application was refused because she had received the redundancy payment.
Subsequently, Ms Kebakoska sued her former employer for a bonus that she claimed she was entitled to. TRA Global counterclaimed for the redundancy payment, arguing that it had made a mistake in making the payment to Ms Kebakoska, and the Court should order her to repay the full redundancy payment amount.
The decision of the Victorian Supreme Court
The Victorian Supreme Court reviewed previous cases where a party has sought to recover payment that has been made because that party mistakenly believed they were legally obliged to make the payment.
The cases show that where a party by mistake makes a payment in ignorance of its legal position and subsequently discovers that it was not legally obliged to make that payment, that party usually has a right to sue to recover the payment.
However, the Victorian Supreme Court found that Ms Kebakoska did not have to repay the redundancy payment because she had a number of defences against TRA Global.
The legal argument in the case canvassed the history of a number of different legal doctrines, but in summary, the Court allowed Ms Kebakoska to keep the payment because she had suffered a detriment in being denied unemployment benefits and she would not have suffered that detriment if she had not relied on what TRA Global had told her, which was that she was entitled to the redundancy payment.
Whilst it will generally not be a defence in these circumstances to argue merely that the money has been spent on living expenses, in this case, as Ms Kebakoska changed her position – that voided her entitlement to unemployment benefits – in reliance on the redundancy pay, the Court found that it would have been unjust to require her to repay the redundancy pay.
Given that Ms Kebakoska did not make her application for unemployment benefits until approximately a month after the redundancy payment was made to her, it is arguable that if TRA Global had realised its mistake sooner and acted swiftly to seek to recover the redundancy payment from the employee, it would have stood a much stronger chance of obtaining a favourable decision.
Tips for employers
- When implementing a redundancy programme, always review the employee’s contract, enterprise agreement and any applicable modern awards to assess their entitlement to any severance payments, including notice and redundancy.
- Seek legal advice if unsure about the relevant entitlements, particularly regarding payments to directors or senior executives which may also require approval from shareholders under the Corporations Act 2001 (Cth).
- Act quickly to recover any overpayments if payments have been miscalculated.
Restraints in labour hire agreements
Two decisions by the Federal Court earlier this year confirm the ability of labour-hire and outsource provider companies to protect revenue streams by relying on non-solicitation restraints to prevent contractors from dealing directly with clients. They also significantly limit a contractor’s ability to seek damages for an ‘unfair contract’ under the Independent Contractors Act 2006 (Cth) (Independent Contractors Act).
What does this mean for labour hire and outsource providers?
- Labour-hire and outsource providers can potentially restrain clients and contractors from dealing directly with each other and cutting the labour-hire or outsource provider out of the commercial relationship. This is because the courts have recognised that labour-hire and outsource firms have a legitimate interest in protecting the profit made from providing labour to clients.
- However, excessive and unenforceable restraints in client and contractor agreements may render the principal/contractor agreement ‘unfair’ under the Independent Contractors Act , although damages resulting from that unfairness will be limited to any future, but not past, conduct.
- Therefore, labour-hire and outsource providers need to take steps to ensure that non-solicitation restraint clauses are reasonable and go no further than is necessary to protect their business interests (particularly where separate non-solicitation restraints are contained in contractor and client agreements).
The cases in brief
Informax No 1 - enforceability of restraint clauses
In February 2007 a labour-hire firm, Candle Australia Ltd (now called Clarius Group Ltd), placed an IT project manager with Woolworths. The IT project manager provided her services to Woolworths through her company, Informax International Pty Ltd.
Candle’s contract with Informax contained a restraint clause which sought to prevent Informax from contracting directly with Woolworths for six months after the contract was terminated (Informax Restraint).
Candle also had a separate Preferred Supplier Agreement with Woolworths, which contained a non-solicitation clause preventing Woolworths from directly engaging any Candle contractor after they had ceased working for Candle (Woolworths Restraint).
After a series of engagements with Woolworths under the contract between Informax and Candle lasting about 15 months, Informax began providing IT services directly to Woolworths (thereby cutting Candle out of the relationship). When Candle discovered this, it contacted Woolworths and claimed that the new agreement was likely to be in breach of the Woolworths Restraint. Woolworths subsequently terminated its contract with Informax.
Informax commenced proceedings in the Federal Court claiming (among other things) that the Informax Restraint and Woolworths Restraint were invalid. Consequently, the contract between Informax and Candle was ‘unfair’ under the Independent Contractors Act and should be varied so that the restraints could not be enforced. Informax needed to show that both restraints were invalid because the Informax Restraint was not used by Candle directly against it, rather it had sought to enforce the Woolworths Restraint.
In its decision, the Court made two important findings. These were that in relation to:
- the principal/contractor agreement - labour-hire companies have a legitimate business interest in maintaining client connections and protecting against the risk of contractors poaching clients; and
- the principal/client agreement - for the first time in Australian law, a labour-hire company has a legitimate business interest in preventing a client from cutting it out of the commercial relationship (called ‘opportunistic disintermediation’). In doing so, the Court found that because a labour-hire company typically incurs expenses in discovering client opportunities and sourcing and providing labour to those clients, it is entitled to recoup its costs and make a profit. However, the interest only extends to the principal’s right to recoup its expenditure with a profit component for example, once there is sufficient revenue to offset the costs, there will no longer be a protectable interest.
Despite this, the Court found on the facts that both the Informax Restraint and the Woolworths Restraint were unenforceable. This was because Candle had not provided enough evidence to demonstrate a sufficient interest in its customer connection, and it had already recouped its expenditure through revenue received from Woolworths over the 15 month contract with Informax.
The Court accepted that it was unfair for Candle to seek to persuade Woolworths to break up the relationship with Informax in circumstances where the Woolworths restraint was unenforceable. This rendered the contract between Informax and Candle unfair within the meaning of the Independent Contractors Act. The Court made orders varying the contract between Candle and Informax so that Candle could not take any steps to enforce the Woolworths Restraint.
Informax No 2 - the ability to seek damages under the Independent Contractors Act
On the basis of the Court’s order in Informax No 1 to vary the contract, Informax then sought to amend its application to include a claim for damages against Candle. The damages claim related to Candle’s conduct (which took place before the Court’s order) in relying on the Informax Restraint (which the Court ordered was unenforceable).
This required the Court to consider whether the order in Informax No 1 had retrospective effect. Ultimately, the Court found that the Independent Contractors Act prohibited the making of retrospective orders and therefore, Informax could not obtain damages against Candle for past conduct.
The effect of this finding is that a contract can only be amended ‘going forward’ with respect to future conduct. Therefore, a contractor cannot obtain damages as a result of conduct which occurred before the Court makes an order to vary the contract.
What the cases show
The decision in Informax No 1 is to some degree a win for labour-hire and outsource providers. For the first time in Australian law, it recognises that labour-hire companies have a legitimate interest in not being cut out as the ‘middle man’ in the commercial relationship with its clients, and that a restraint clause can protect this interest. However, labour hire companies need to think carefully about how long it will take with each client to recoup its expenditure in sourcing that contract to ensure the restraint period is narrowly drafted.
The decision in Informax No 2 is also good news for principals in that it’s a significant limitation on the ability of contractors to seek redress under the ‘unfair contracts’ provisions of the Independent Contractors Act. In the context of commercial negotiations between contractors and principals, a contract will rarely still be on foot by the time proceedings are issued. This decision means that it is now unlikely that contractors will rely on the Independent Contractors Act to remedy a harsh or unfair contract.
Tips for labour-hire providers
It is common for labour-hire companies to protect their interests by entering into non-solicitation restraints under separate contracts with contractors and clients. To minimise the risk of either restraint being found to be unenforceable, labour-hire companies should:
- seek legal advice to ensure that the restraint goes no further than is reasonably necessary to protect their legitimate interests;
- inform contractors and clients at the outset of any parallel non-solicitation restraint that the company has with the client/contractor; and
- consider the operation of any placement fees charged to clients in conjunction with using restraints against contractors and clients.
Informax International Pty Ltd v Clarius Group Limited [2011] FCA 183 (4 March 2011); Informax International Pty Ltd v Clarius Group Limited (No 2) [2011] FCA 934 (18 August 2011)
For further information, please contact:
Or a member of the Hall & Wilcox Employment team.