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In this issue

Welcome to the April edition of the Normans Corporate and Commercial Briefly.

>   Charities and Not-for-Profits – New governance standards for the not-for-profit sector
>   Employment – Will your drug and alcohol testing policy withstand challenge?

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Charities and Not-for-Profits – New governance standards for the not-for-profit sector

New governance standards for the regulation of entities registered with the Australian Charities and Not-for-profits Commission (ACNC) have now been released. The governance standards are contained within the Australian Charities and Not-for-profits Commission Amendment Regulation 2013 (No. 1) (Cth) (Regulations).

The Regulations provide guidance as to the requirements which will, subject to our comments below, be applicable from 1 July 2013 to charities and not-for-profits registered with the ACNC (Registered Entities). The Regulations are currently subject to a Motion to Disallow, and this Motion is expected to be voted on by the Senate on 14 May 2013. If the Motion is approved, the governance standards will not come into law in their current form.

The five governance standards can be summarised as follows:

  1. Purposes and not-for-profit character of an entity

    A Registered Entity must be able to demonstrate (by reference to its governing rules or its operations) its purposes and character as a not-for-profit entity, make information about its purposes readily available to the public, and comply with its purposes.
     
  2. Accountability to members

    A Registered Entity must take reasonable steps to ensure that it is accountable to its members and provides them with an adequate opportunity to raise concerns about the governance of the Registered Entity (for example, by holding an annual general meeting with a question and answer session).
     
  3. Compliance with Australian laws

    Compliance with Australian laws sets a minimum benchmark by which all entities should govern themselves to protect the interests of the public. A Registered Entity must not engage in conduct, or omit to engage in conduct, if the conduct or omission may be dealt with as an indictable offence (and in some circumstances, a summary office) under Australian Law, or with the imposition of a civil penalty of 60 penalty units or more.
     
  4. Suitability of responsible entities

    A Registered Entity must take reasonable steps to ensure that none of its responsible entities (such as its trustees or directors of trustees) are disqualified from the management of corporations (pursuant to the Corporations Act 2001 (Cth) (Corporations Act), or otherwise disqualified for acting as a responsible entity by the ACNC.
     
  5. Duties of responsible entities

    Registered Entities must take reasonable steps to ensure that its responsible entities comply with the following duties:

    5.1 to exercise the responsible entity’s powers and discharge the responsible entity’s duties with the degree of care and diligence that a reasonable individual would exercise those powers and discharge those duties;

    5.2 to act in good faith in the Registered Entity’s best interests, and to further the purposes of the Registered Entity;

    5.3 not to misuse the responsible entity’s position;

    5.4 not to misuse information obtained by the responsible entity in the performance of his or her duties as a responsible entity;

    5.5 to disclose perceived or actual material conflicts of interest of the responsible entity;

    5.6 to ensure that the Registered Entity’s financial affairs are managed in a responsible manner. The extent of this duty will have regard to the registered entity’s size and circumstances and the complexity of its financial affairs;

    5.7 not to allow the Registered Entity to operate while insolvent (as defined in the Corporations Act);

    (together the Duties).

    The Duties mirror the duties owed by directors (Directors’ Duties) which currently apply under the Corporations Act. If the governance standards come into effect as they are currently drafted, the Directors’ Duties will no longer apply to Registered Entities.

    Instead, Registered Entities will need to take reasonable steps to ensure that their responsible entities comply with the Duties. Currently, it is the individuals themselves who are responsible for upholding the Directors’ Duties.

    In all other cases, the Duties do not represent an exclusive list of obligations Registered Entities will be subject to. Other duties imposed under common law and equity will remain in force after the Regulations come into effect.

    In addition to the Duties, Standard 5 also provides for four ‘protections’, which can be used as defences against a claim of breach of the Duties.

If the Regulations become law, the governance standards will apply to Registered Entities from 1 July 2013. However, where Registered Entities have governing rules that prevent them from complying, the governance standards will not apply until 1 July 2017. This should provide such Registered Entities with enough time to amend their governing rules accordingly.

In addition, if a Registered Entity is an incorporated association subject to a law of a State or Territory and:

  1. that law sets out the duties owed by responsible entities to a Registered Entity; and
  2. the Registered Entity and each of its responsible entities is complying with that law

then the Registered Entity will be taken to comply with governance standard 5. This exemption will cease as and from 1 July 2017.

For more specific information on any of the material contained in this article please contact Kale Rigano on (08) 8210 1207 or krigano@normans.com.au or Nicola Pearce on (08) 8210 1240 or npearce@normans.com.au.


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Employment – Will your drug and alcohol testing policy withstand challenge?

Both State-system and Federal-system employers can draw lessons from the recent Fair Work Commission (FWC) decision of Briggs v AWH Pty Ltd [2013] FWC 2017. In that case, an employee’s challenge to a drug and alcohol testing policy was defeated due to the Employer’s diligence at the contract, policy and procedural levels.

The facts

Contract and Policy

Mr Raymond Briggs (Employee) was employed by AWH (Employer). His contract contained express clauses requiring him to observe the policies, directions, orders and instructions of the Employer. His contract also expressly provided that he must not be under the influence of alcohol and/or other drugs while performing his duties, and must comply with any requirement to undertake a drug test.

The Employer’s Alcohol and Drug Misuse Policy (Policy) expressly indentified that the Employer may direct the participation of employees in urine testing, and that the procedures for such urine testing would be in accordance with the relevant Australian Standard. The Policy also expressly provided that refusal by an employee to undergo tests in accordance with the Policy is a ground for disciplinary action, including termination.

Refusal to undergo urine testing

The Employee refused to undergo urine testing. The Employee did however propose to submit to oral swab testing instead. The Employee considered that oral swab testing was a more reliable means of testing whether or not an employee is impaired by alcohol or other drugs. The Employee indicated a specific provision of the Australian Standard relevant to urine testing which supported his contention. The Employee had raised his concerns prior to the testing date.

Disciplinary procedures

The request for an oral swab test was denied, and a meeting was called to discuss the Employee’s refusal to undergo urine testing. The Employer made clear that the meeting was not concerned with the validity of testing procedures but rather was to request that the Employee follows the Employer’s Policy and procedures as directed. After continued refusal to submit to testing, a more formal meeting was called and the Employee was given an opportunity to provide written reasons for his refusal.

The reasons were essentially that oral swab testing is presently ‘best practice’, and as such he considered that the Employer should use oral swab testing instead of urine testing. In a further meeting to discuss his response, the Employee contended that the because the Policy was not ‘best practice’, it was not relevant. The refusal continued, and so the Employee was sent a letter requiring attendance at a specified time and place for a urine test. The letter was expressly stated to be a ‘final warning’, non-compliance with which may result in termination.

The Employee did not attend the testing appointment and his employment was accordingly terminated. The Employee commenced unfair dismissal proceedings in the FWC, contending that the Policy was unsound and thus that he was entitled to refuse to engage with it.

Findings of the Fair Work Commission

The FWC firstly and importantly highlighted the importance of the contractual provisions requiring directions to be followed, the provisions of the Policy which specifically outline consequences for breach of the Policy, and the incorporation of the Policy into the contract of employment.

The FWC then considered whether or not the directions to undergo testing and/or the Policy itself were unreasonable. Case law specifically on the point of drug testing methodology was examined, and the FWC concluded that urine testing is a reasonable and legitimate form of testing. Because urine testing is reasonable, an employer may choose to adopt and require urine testing regardless of whether one or more employees would prefer an alternative approach.

The implementation of workplace policies is a part of an employer’s right to determine how it will manage its business. Choosing a particular method of drug testing and requiring all employees to submit to that particular method is a part of this right. Employees do not have a general right to refuse to submit to a particular method of drug testing merely because they do not consider the method to be ‘best practice’.

The Policy was deemed reasonable. The directions to undergo testing were also deemed reasonable because they were consistent with the Policy. The FWC also considered that the various interactions between the Employee and Employer from the time of the initial refusal up to and including termination were procedurally fair.

The FWC determined that the Employer was entitled to dismiss the Employee for failing to follow a lawful and reasonable direction to undertake urine drug testing.

Take home message

The decision canvasses many aspects of the law surrounding drug testing in employment, ranging from technical points such as the suitability of certain testing methodologies to broad considerations of employers’ rights to introduce policies.

The Employer’s actions withstood the Employee’s challenge not simply because the Policy prescribed a valid testing methodology. Of critical importance were the contractual requirements to comply with policies and directions, including directions to submit to drug tests. Furthermore, the Policy expressly outlined the consequences for non-compliance. Also of significance was the Employer’s conduct after the refusal; all relevant statutory procedural fairness requirements were adhered to. All of these factors should be present for a drug and alcohol testing-based dismissal to be valid.

For more specific information on any of the material contained in this article please contact Michael Foley on 08 8217 1355 or mfoley@normans.com.au.


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