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In this issue

Welcome to the August edition of our Corporate and Commercial briefly.

>   Employment - The high cost of sexual harassment
>   Impact of the new tax ruling on matrimonial property settlements
>   Workers Compensation – Sweeping reforms before State Parliament

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Employment - The high cost of sexual harassment

An employer has an obligation to take reasonable steps to prevent discrimination or harassment occurring. Failing to meet these obligations could now be much more expensive.

In the recent decision of Richardson v Oracle Corporation Australia Pty Ltd [2014] FCAFC 82 (Richardson), the Full Court of the Federal Court overturned an initial award of $18,000 and instead awarded $130,000 against an employer for the sexual harassment of a staff member.

Facts

Ms Richardson, a former consulting manager employed by Oracle Pty Ltd (Oracle), alleged that Mr Tucker, a sales representative within the same team, repeatedly made comments of a sexual nature to her over the course of six months. She lodged a complaint to her manager and human resources. Oracle conducted an investigation which substantiated Ms Richardson's claims. Mr Tucker issued an apology and Oracle reallocated her within the organisation. Ms Richardson subsequently resigned and brought sexual harassment claims against Oracle and Mr Tucker.

At first instance, the Federal Court found in favour of Ms Richardson and awarded $18,000 as general damages for emotional suffering. As evidence of the reasonable steps taken to prevent sexual harassment, Oracle claimed that it had policies in place and provided adequate training to employees. However, the trial Judge found that this was insufficient as the policy did not clearly state that sexual harassment was against the law, and the policies made no reference to Australian legislation, which prohibits sexual harassment.

Ms Richardson appealed the amount of damages awarded. The Full Court of the Federal Court allowed the appeal and stated that the award of $18,000 was ‘manifestly inadequate’. It determined that the assessment of damages should be made having regard to the nature and extent of injuries and ‘prevailing community standards’, and not based on the historical range of figures awarded in past sexual harassment cases. The decision considers that a greater value should be placed on the pain, suffering and the loss of enjoyment of life.

Ms Richardson's award was increased seven-fold from $18,000 to $100,000 in general damages, and also an additional $30,000 for economic loss.

Implications for Employers

Employers should be mindful of the shift in the judiciary’s approach to the award of damages. The decision does not indicate a change to employers' obligations or liability under anti-discrimination law, but it represents a significant increase in the financial consequences for employers if found in breach of anti-discrimination laws.

Employers should regularly review and update workplace policies dealing with discrimination and harassment, and ensure that employees are aware of the importance of the adherence to, and the consequences, of a breach of these policies. Training of employees in relation to policies and obligations is also important, as is continuous monitoring of employee behaviour.

An employer should take immediate action when it becomes aware of inappropriate conduct and not wait until a complaint is lodged. Managers should also receive training on the risk in this area and their obligation to monitor, prevent and manage inappropriate conduct in the workplace.

For more specific information on any of the material contained in this article please contact Sathish Dasan on 8210 1253 or sdasan@normans.com.au.



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Impact of the new tax ruling on matrimonial property settlements

On 30 June 2014, the Australian Taxation Office issued its new Tax Ruling (TR 2014/5) which deals with certain taxation consequences that may arise as a result of the payment of money or transfer of property by a private company to a shareholder (or their associate) in matrimonial property settlement matters.

The Family Court of Australia (and the Federal Circuit Court of Australia) (the Court) has the power to make an order for:

  • a private company to pay money or transfer property to a party to matrimonial property settlement proceedings;
  • a party to matrimonial property settlement proceedings to cause a private company to pay money or transfer property to a party to matrimonial property settlement proceedings.

Prior to the issuing of the new Tax Ruling, the party to the matrimonial property settlement proceedings who received the money or the property from an associated company could receive it tax free.  This is no longer the case.

The new Tax Ruling impacts on matrimonial property settlements when the Court order causes the payment of money or transfer of property to be made to:

  • a shareholder of a private company. This will be considered an “ordinary dividend” to the extent that it is paid out of the private company profits and it will be assessable income of the shareholder pursuant to Section 44 of the Income Tax Assessment Act 1936 (ITAA).
  • an associate of a shareholder of a private company (for example, where the recipient is not a shareholder of the company). This will be considered a payment for the purposes of subsection 109C(3) of the ITAA and, as a consequence, will be deemed to be an “ordinary dividend” and so assessable income of the recipient pursuant to Section 44 of the ITAA.

Therefore, the party to the matrimonial property settlement proceedings who is the recipient of the payment of money or transfer of property from the private company will now be subject to a taxation liability.

The money or property received will be assessed for taxation purposes as income. To the extent that the private company has franking credits, these payments can be franked to reflect the corporate tax paid on the payment. 

The new Tax Ruling is applicable to cases both before and after 30 June 2014 with the exception that it will not apply in respect to any family law orders made before the ruling was issued.

Family lawyers must now ensure that they identify this potential liability and have the liability assessed and taken into account at matrimonial property settlement.  Court Orders will need to be carefully drafted to cover possible taxation liabilities and thought will need to be given as to how best to divide the matrimonial asset pool to minimise these possible new taxation liabilities.

Although this change has the potential to severely impact matrimonial property settlements, there are strategies which can be adopted to minimise the effect of the new Ruling. While the tax rules regarding this area are complex, Norman Waterhouse has the expertise to assist clients in structuring a tax effective settlement.

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 Siobhan Parker in relation to family law on 08 8210 1231 or sparker@normans.com.au.



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Workers Compensation – Sweeping reforms before State Parliament

On 6 August 2014, the State Government introduced into South Australian Parliament the Return to Work Bill 2014 (RTW Bill) and the South Australian Employment Tribunal Bill 2014 (SAET Bill). These Bills are intended to overhaul South Australia’s workers compensation framework, and were foreshadowed by pre-election policy statements of the now returned State Government.

We provide a brief overview of the major changes in each Bill below.

Return to Work Bill 2014

The RTW Bill repeals the Workers Rehabilitation and Compensation Act 1986 (SA) in its entirety. It is envisioned that the new legislation will streamline the current framework, in turn leading to efficiency benefits and lower premiums. WorkCover will be renamed as the ‘Return to Work Corporation’. Self insurance will continue to apply.

The RTW Bill provides a scheme which, while similar in some respects to the present scheme, has certain substantial differences.

Return to work obligations

The most important difference flows from the fact that the new framework is particularly focused on an injured worker's swift return to work. The powers to enforce return to work will be much more prescriptive.

The emphasis on return to work leads to the imposition of even greater obligations on employers. The RTW Bill imposes the familiar obligation upon employers to provide work for incapacitated workers. However, the RTW Bill then provides that workers can apply to the South Australian Employment Tribunal for an order that their pre-injury employer provide them with specified employment if that employer ‘fails, within a reasonable time, to provide suitable employment to the worker’. It is not clear if that obligation to provide suitable employment will continue after a worker’s entitlement to compensation ceases.

‘Seriously injured’ workers

The RTW Bill changes a worker’s entitlement to weekly compensation by introducing a distinction between ‘seriously injured’ workers (being Whole Person Impairment (WPI) of 30% or more) and other, non-seriously injured workers. The RTW Bill imposes an income support cap of two years for non-seriously injured workers (with an entitlement to payment of medical expenses extending for one year from the cessation of income maintenance). A worker assessed with less than 30% WPI has no ongoing entitlement to weekly compensation after two years from the date of the injury.

Common law

Of additional importance to employers are the provisions in the RTW Bill which introduce potential liability for damages under common law for employers, in certain circumstances. Accordingly, employers may be liable in negligence, breach of statutory duty or other common law proceedings separately from their liabilities in the workers compensation framework. This is a substantial change to the existing regime. It is expected that a worker will need to meet a threshold of 30% WPI before a right to claim common law damages will arise. The liability to pay such damages will rest with the Return to Work Corporation.

Retrospective application

It is presently envisaged that the new framework will apply to all existing injuries as though they occurred on the day the new framework comes into effect. This would have the significant effect that workers who previously had an ongoing entitlement to weekly compensation will lose that ongoing entitlement if they are not ‘seriously injured’.

South Australian Employment Tribunal Bill 2014

The SAET Bill seeks to replace the Workers Compensation Tribunal with a ‘South Australian Employment Tribunal’ (SAET). The procedures and powers of the SAET are proposed to be markedly different to those of the present Tribunal. The SAET Bill seeks to confer upon the SAET powers to compel the attendance of persons and production of evidence, to visits land and buildings, and to refer questions to an expert for investigation and report to the SAET. These inquisitorial powers will be coupled with overall informal and non-technical procedures.

The Attorney-General has likened the proposed procedures and powers of the SAET to those of the South Australian Civil and Administrative Tribunal (which you can read about here).

Next steps

At this stage, the Bills have not undergone any debate in Parliament. It is likely that such debate will result in some degree of amendment before either Bill becomes law. While we note that there appears to be general support for workers compensation reforms, there is always a possibility of substantial amendments to the either or both of the RTW Bill and the SAET Bill as they progress through Parliament. Additionally, there is ultimately a possibility of the rejection of the Bills or their referral to a Committee (and associated delays).

If the Bills are passed this year, the Government envisages that the new ‘Return to Work’ framework will be operational by 1 July 2015. We will keep you informed of all material developments regarding these important reform proposals.

For more specific information on any of the material contained in this article please contact Sathish Dasan on 08 8210 1253 or sdasan@normans.com.au or John Ward on 08 8210 1219 or jward@normans.com.au.



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