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

Walking the Talk – Industrial Relations in the Real World
Full Day Seminar
4th April 2014

Following our highly successful industrial relations conference in 2013, the Norman Waterhouse Employment and Industrial Relations Team invites you to join them again for a full day of in-depth and interactive analysis of workplace issues.

Please click here to download a printable flyer.

This is your chance to submit your topics of interest to marketing@normans.com.au.

>   Employment – When non-adherence with an enterprise bargaining agreement becomes constructive dismissal
>   Construction – An alternative form of Security of Payment challenge
>   Work Health and Safety – Two recent developments in South Australia

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Employment – When non-adherence with an enterprise bargaining agreement becomes constructive dismissal

The recent Fair Work Commission (FWC) case of Rind v Australian Institute of Superannuation Trustees [2013] FWC 3144 has demonstrated that an employer’s failure to adhere to an enterprise agreement may, if an employee then leaves their employment as a result, form the basis of the ‘constructive dismissal’ of that employee. An employee who has been constructively dismissed has the same rights and remedies available to them as employees dismissed in more conventional ways. This case is relevant to all employers, as the doctrine of constructive dismissal applies in all Australian industrial relations jurisdictions — this includes both the Federal and the South Australian State jurisdictions.

The case also demonstrates the increasing significance bestowed upon parental leave rights in the Australian industrial law landscape.

The Facts

The employee had been employed as a full-time data administrator before commencing parental leave, which was made up of paid leave for several weeks, followed by unpaid leave. Towards the end of her parental leave period, she entered into discussions with the employer regarding her return to work. Some provisional negotiations took place, during which the idea of a phased part-time to full-time return to work strategy was advanced by the employee.

The employer offered the employee a strategy that would have her back at full-time after approximately 3 months. The employee declined, stating that she would prefer an indefinite period of part-time work, which she would seek to elevate to full-time once she considered herself ready. The relevant enterprise agreement entitled the employee to request a return to work on a part-time basis, and to remain part-time ‘until the child reaches school age’. The enterprise agreement permitted the employer to refuse such a request only ‘on reasonable grounds’.

The employer refused the employee’s request for part-time work, stating that the employee’s role of data administrator was a full-time role, and that this was necessary considering the role of the data administrator in the workplace. The employer contended that the need for a full-time, on-site data administrator was supported by the employer’s engagement during the employee’s absence of a part-time, external contractor, an arrangement which the employer contended was not satisfactory.

The proceedings – consideration of ‘constructive dismissal’

After some further failed negotiations, the employee severed her ties with the employer and lodged an application for the FWC to deal with a dispute involving a dismissal (a general protections application, not an unfair dismissal application). The employer accordingly contended that the employee had in fact not been dismissed at all, and thus the application should not be heard.

The question that the FWC was required to answer was whether the employee had been dismissed. The FWC examined the doctrine of ‘constructive dismissal’, whereby an employee may be held in law to have been dismissed if, as a result of employer conduct which is sufficiently ‘inimical’ (or, in other words, ‘adverse, unfriendly or hostile’) to the continuance of the employment relationship and contract (despite the absence of any express termination event), the employee treats their employment as at an end. Constructive dismissal is a common law concept, and thus is applicable to all employers in all jurisdictions in Australia.

Upon examining the facts of the case, the FWC considered that the employer’s arguments about the necessity of a full-time data administrator were undermined by the fact that the employer evidenced no intention to hire a new full-time data administrator. The FWC noted that the part-time external contractor arrangement was still in place and there was no suggestion that this arrangement would cease. Accordingly, the FWC considered that the employee could have returned on a part-time basis. She could have replaced the external contractor and provided a higher quality of service, even in a part-time role.

This refusal of the employee’s request to return to work part-time was held to be a breach of the enterprise agreement. The employer was entitled under the enterprise agreement to refuse a request for part-time employment following parental leave only ‘on reasonable grounds’. The FWC considered that the employer’s refusal was unreasonable, and thus breached the terms of the enterprise agreement.

The FWC then determined that the employer’s failure to carry out its obligations under the enterprise agreement was relevant conduct for the purposes of determining whether the employee had been constructively dismissed. The FWC, taking into account the importance placed on parental leave in modern times, considered that the seriousness of the conduct was sufficiently ‘inimical’ to the continuance of the employment relationship and contract to form the basis of constructive dismissal. Therefore, the employee was entitled to treat her employment as at an end, and be considered constructively dismissed.

Take home message

While an enterprise agreement and a common law contract of employment are distinct legal instruments, this case demonstrates a profound way in which an employer’s deficiencies in adhering to the former may impact upon the status of the latter. In this case, an employer’s failure to properly discharge its obligations under an enterprise agreement was held to be conduct sufficiently inimical to the continuance of the employment relationship and contract. This entitled the employee to ‘walk away’ from the employment and be considered ‘constructively dismissed’.

Employers should understand and adhere to procedures and requirements imposed by their enterprise bargaining agreements. Particular attention must be paid where there is a parental leave clause in an enterprise bargaining agreement and an employee is looking to return to work after a period of parental leave. The FWC has now endowed such provisions with significant weight when considering whether non-adherence with an enterprise agreement may form the basis of constructive dismissal.

On a more general note, this case demonstrates the growing recognition and importance that parental leave rights are gaining in Australian industrial law. The FWC noted in this case that:

‘while the opportunity for part-time work on return from parental leave might not long ago have been considered a fortunate privilege ... contemporary circumstances require a different view.’

Even where enterprise agreements do not contain a clause in the form demonstrated in this case, employers must still treat a request for a part-time return from parental leave fairly and refuse it only with good reason (particularly in light of the rights of federal system employees to ‘flexible working arrangements’ regarding parental responsibilities under Section 65(1) of the Fair Work Act 2009 (Cth)).

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.


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Construction – An alternative form of Security of Payment challenge

You will be aware that our Construction team has been closely following the application and impact of the Building and Construction Industry Security of Payment Act 2009 (SA) (Act).

A recent decision of the Supreme Court of South Australia has rejected a novel approach by a principal to challenge a payment claim and provided guidance on when, and for what reason, a party may appeal an adjudication determination made pursuant to the Act.

The Facts

The case in question is Adelaide Interior Linings Pty Ltd v Romaldi Constructions Pty Ltd [2013] SASC 110.

The appellant, Adelaide Interior Linings Pty Ltd (AIL) was engaged by the Respondent, Romaldi Constructions Pty Ltd (Romaldi), to supply and install internal and external lining at a construction site managed by Romaldi. The parties entered into a subcontract agreement for the provision of the works. AIL issued an invoice for progress payments to Romaldi for the work it had carried out.  This amount was not paid.

AIL then sought to recover the payment pursuant to the Act. It provided a payment claim to Romaldi who subsequently responded with a payment schedule, with which AIL disagreed. AIL referred the matter to adjudication under the Act and on adjudication it was determined that Romaldi was required to pay $51,219.83 to AIL.

Before AIL could obtain  an adjudication certificate for the adjudicated amount and file the certificate in the Court to establish a judgement debt against Romaldi, Romaldi brought an action in the District Court to prevent the enforcement of the adjudication determination. In these cases, the usual course of action to prevent the enforcement of an adjudication determination, which has been extensively used in New South Wales, is to seek judicial review of the adjudication determination and an injunction to prevent enforcement of the determination while the Court is considering the matter.  However, in this case, Romalidi sought an order for the preservation of property on the basis that there was a serious risk that AIL was trading insolvent. Romaldi also instigated proceedings against AIL seeking damages of $61,840.06 on the basis that AIL had abandoned the project site and failed to complete the construction works pursuant to the subcontract agreement.

The key issue for consideration by the Court in this matter was whether it was acceptable for Romaldi to effectively instigate ‘appeal’ proceedings outside the scope of the Act or whether the District Court action circumvented the intended objects and purpose of the Act.

The Act

The purpose of the Act is to ensure that subcontractors are entitled to claim progress payments and be paid accordingly for work performed under a construction contract. Where a subcontractor is not paid a progress payment they can follow the procedure set out in the Act which may ultimately see an adjudicator make a determination as to the amount to be paid in respect of the progress payment.  

A party who is required to pay an amount pursuant to an adjudication determination has limited ability under the Act to appeal the decision. Section 22(5) of the Act gives either the adjudicator or the parties the opportunity to correct an adjudication determination to the degree that there has been a clerical mistake, error from accidental slip or omission, a material miscalculation of the figures or a defect of form. The circumstances in which an adjudication determination can be changed pursuant to this section largely go to the form as opposed to the substance of the determination. Outside of section 22(5), there is no mechanism in the Act to appeal the adjudication determination.  

The Decision

The District Court initially accepted that Romaldi was entitled to bring its action in the Court and it granted an injunction to prevent AIL from pursuing the adjudication amount against Romaldi. This decision was rejected on appeal by the Supreme Court. Justice Anderson held that outside the scope of section 22(5) of the Act, Romaldi had no mechanism available to it by which it could appeal the adjudication determination. The Court held that once Romaldi had accepted the validity of the adjudication, which it acknowledged that it had, it would be circumventing the purpose of the Act to permit Romaldi to bring proceedings to prevent the adjudicated amount being paid.

Further to Justice Anderson’s reasons, his Honour highlighted that section 25(4) of the Act specifically prevents a person from taking action to set a judgement aside. Romaldi was attempting to do this in this instance. Justice Anderson, however, did acknowledge that judicial review against the adjudication determination would be available to Romaldi if there was a basis for judicial review proceedings to be pursued.

What does this decision mean?

This case highlights that where an adjudicator has made a determination in accordance with the Act, that adjudication may only be challenged under the Act where there has been a clear mistake in its drafting or form. The Act does not consider or permit a party who has a determination made against them to appeal against the decision of the adjudicator. However, Justice Anderson confirmed that judicial review of an adjudication determination remains available to the parties to the adjudication.  Judicial review is, however, a review of the legality of the exercise of the adjudicator’s powers and is not a review of the merits of the adjudicator’s decision.  Justice Anderson also confirmed that New South Wales case law could be used to provide guidance in the interpretation of the Act.

If a principal or a contractor are aggrieved by an adjudication determination, the available and appropriate course of action for the aggrieved party will depend on the facts involved. Please contact us if you are involved in the processes under the Act and require assistance.

For more specific information on any of the material contained in this article please contact Mark Henderson on 8210 1220 or mhenderson@normans.com.au or Lisa Hubbard on 8217 1369 or lhubbard@normans.com.au.


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Work Health and Safety – Two recent developments in South Australia

The relatively new Work Health Safety Act 2012 (SA) (the WHS Act), which has regulated workplace safety in South Australia since 1 January 2013, has recently been the subject of two interesting developments. Firstly, a legislative amendment has removed an unintended privilege which allowed companies to refuse to answer questions. Secondly, the Magistrates Court of South Australia has highlighted the issue of insurance policies which indemnify persons against criminal penalties in the work health and safety setting.

The removal of companies’ privilege against self-incrimination

South Australia’s WHS Act diverges slightly from its interstate equivalents (‘harmonised’ does not equal identical). One unique South Australian feature at the time the WHS Act commenced was a privilege which allowed persons to refuse to answer inspectors’ questions and/or to provide information or documents, on the ground that the information ‘may tend to incriminate that individual’. This is a point of difference with most interstate work health and safety Acts, under which persons must answer questions and provide information despite a tendency for incrimination (but that information then cannot be used as evidence against the person).

A ‘person’ includes both natural individuals and companies. Thus, the South Australian provision, as originally drafted, allowed companies to rely on the privilege against self-incrimination and refuse to answer questions or provide information. This posed a clear problem for the proper inspection and investigation of an incident: if a company were being investigated in respect of an incident, the company could refuse to answer questions or provide information on the grounds that the information may indicate or establish a criminal offence. This would be unreasonable and unworkable, as whether or not such an offence has occurred is one of the most important things that an inspector would be seeking to determine.

In response to this issue, the South Australian Parliament amended the relevant provision of the WHS Act (Section 172) to refer only to ‘individuals’, rather than persons. Companies are thus excluded from the privilege.

What this means in practice is that an individual may still, on the grounds of self-incrimination, refuse to answer questions directed at them as an individual. However, if such an individual also has sufficient authority to be considered as a representative of a relevant company, an inspector may address a question to that individual in their capacity as a representative of the company. The individual would be required to answer such a question.

Companies should make clear who within their organisational structure is authorised to provide information to safety inspectors on behalf of the company. A clear understanding of such authorisation will diminish instances of inappropriate persons being compelled by inspectors to divulge information on behalf of the company.

Hillman v Ferro Con: Consideration of the status of indemnity against WHS penalties

The Magistrates Court of South Australia has drawn attention to an issue inherent in safety legislation throughout the nation in the case of Hillman v Ferro Con (SA) Pty Ltd (in liquidation) and Anor [2013] SAIRC 22.

That case related to a death that occurred during construction of the Lonsdale desalination plant after a steel beam fell from a sling onto a worker. The company and an individual director of the company were each prosecuted. The prosecutions were conducted under the old legislation due to the date of the incident, however a major aspect of the case is just as relevant under the WHS Act, a fact which the Court specifically highlighted.

That major aspect is that the company and the director had both taken out insurance policies which shielded each of them from having to pay all but a $10,000 excess of the $200,000 fines imposed upon them. The Court was aware of these policies, and so when imposing a penalty refused to grant any discount based upon the guilty pleas and the regret and remorse of the defendants. The Court was strongly critical of the defendants’ having ‘taken positive steps to avoid having to accept most of the legal consequences of their criminal conduct’.

It is established that insurance for intentional criminal acts is invalid. However, the way in which this doctrine fits in with Australian safety law has not been considered in great detail. The Court in this instance gave only passing consideration to whether it could find the insurance policy invalid on the grounds of public policy, as it could not in this case examine the actual provisions of the insurance policy.

The Court did however consider Section 272 of the WHS Act, which, at present, does render void any term of a contract which seeks to exclude, limit or modify the operation of the WHS Act or any duty owed under it, or to transfer any duty to another person. However, the Court considered that policies like the one exhibited in this case are not captured by that section, as they do not affect the operation of the Act and do not transfer any duty. The Court noted that it is up to Parliament whether to amend the WHS Act to expressly render such policies invalid.

Persons with such policies who breach WHS legislation can expect more strict sentences than would otherwise be the case, potentially including penalties of imprisonment wherever available to the Court. Under the WHS Act, the maximum penalty which can be imposed upon an officer of a person conducting a business or undertaking is a $600,000 fine plus 5 years’ imprisonment for a Category 1 offence.

Parliament may heed the concerns of the Court and change the law. It is also possible that at some stage in the future a court will approach this issue differently, as it may be arguable that such policies are indeed already illegal. All persons, particularly persons conducting a business or undertaking and officers for the purposes of the WHS Act, should thus be aware that the legality of policies excluding criminal penalties for safety breaches is now a live issue.

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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