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Norman Waterhouse

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In this issue

Welcome to the September edition of our Local Government 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 — Income protection clarified in a win for Local Government employers
>   Town Planning - Changing the use of part of an existing building - What about the balance?
>   Property – Strategic management of council’s assets – Leasing and licensing policies
>   Employment – The implied term of mutual trust and confidence: A development as important as it is ambiguous
>   Town Planning - Impacts to solar panels – New development and acceptable overshadowing

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Employment — Income protection clarified in a win for Local Government employers

Earlier this year, the District Council of Cleve (the Council) applied to the South Australian Industrial Relations Commission (the Commission) for approval of a new enterprise agreement.

At the hearing of the application, the Commission accepted the argument of the Australian Services Union that an employee covered by the South Australian Municipal Salaried Officers Award (SAMSO Award) should accrue annual and sick leave entitlements while on a period of income protection, or at least access equivalent unpaid leave if desired.

On instructions from the Council, we contested that position and were successful in having the position reversed. The result is a win for Local Government employers, and aids in clarifying the interaction between income protection, periods of service and leave entitlements.

Income protection generally

The term ‘income protection’ describes a scheme under which employers contribute a portion of their employees’ salary or wages into a mutual fund. Employees of those employers who then are involuntarily absent from work (generally due to an illness or injury which is non-compensable from a workers’ compensation perspective) may in some instances draw upon those funds as a form of income during their absence. It is similar to insurance.

Income protection is an added benefit to employees to ensure that non work-related long absences do not necessarily adversely affect the employee’s employment or their financial security. Income protection is not a feature of the SAMSO Award. In South Australia, councils often incorporate income protection into the employment relationship through enterprise agreements.

Effect of the recent decision

The Commission has now adopted our position that annual leave and sick leave entitlements do not accrue to an employee during a period of income protection, subject to enterprise agreement wording.

Clause 7.5 of the SAMSO Award operates in a manner rendering an absence due to illness, disease or injury as not breaking continuity of service, but, if the employee does not or is not entitled to ‘receive pay’ for the period, then that period does not count towards service. An employee on income protection receives money from the mutual fund. Such an employee is not receiving any money from the employer during that period. Accordingly, such an employee should not be considered as ‘receiving pay’ for the purposes of Clause 7.5 of the SAMSO Award.

The above clarifies that in relation to the Council:

  • A period of income protection for illness or injury does not interrupt the concept of continuity of service for the purpose of deriving entitlements; and
  • Entitlements do not actually accrue during the period because an employee on income protection is not receiving any pay.

In other words, an employee’s accrual of entitlements ‘freezes’ during a period of income protection, with no new entitlements accruing but with continuity being preserved (however note that the above does not apply to long service leave, which is generally governed by its own legislation).

By way of example, consider Clause 6.1.1 of the SAMSO Award, which provides that:

‘[a]ll employees shall, after the completion of twelve months continuous service, be entitled to four weeks annual leave exclusive of public holidays, such leave to be paid at a normal weekly salary.’

An employee who works for six months, goes on income protection for six months and then returns to work for six months will, in that 18-month period, have accrued four weeks of annual leave. This is because they performed a total of 12 months of service, bisected by a period of income protection which did not break continuity but during which no service was performed and thus no annual leave entitlements accrued.

Tips for employers regarding income protection

First and foremost, employers must understand that income protection is in essence a period of unpaid leave. The employee is absent from work, and the employer is paying no money to the employee. The money that the employee is receiving is coming from a third party. However, income protection is still relevant to a consideration of the fairness of a dismissal, as terminating a contract in such an instance could withdraw a person’s access to income protection.

In some cases, an employer may be entitled to consider an employment relationship as over if a period of income protection has continued for a significant time and there is no reasonable prospect of a return to the relevant employee’s substantive position. It could be argued in such a case that the employment contract has ‘frustrated’ (i.e. is unable to continue) because the object of the contract — the provision of specified services by the employee — is no longer possible. An instance of frustration is to be distinguished from dismissal.

An employer might seek to incorporate into their enterprise agreement (or, if this is not feasible at the negotiating table, into new employment contracts or simply workplace policy) a clause to the effect that the employer and employees agree that, if a period or periods of income protection last a certain duration (e.g. 12 months in a 24-month period) and there is no reasonable prospect of a return to the employee’s substantive position, then the parties will treat the employment contract as at an end. The contract would thus end by consent in those circumstances. Such an event would be reasonably insulated from the unfair dismissal jurisdiction.

Implications for employers

This recent decision of the Commission vastly improves the certainty surrounding the status of income protection with respect to leave entitlements. While an employee is on a period of income protection, they may be considered by their employer to be on unpaid leave.

However, treatment of an employee on income protection must necessarily differ slightly from treatment of a regular unpaid absence, as the risk of a termination being found unfair is higher in respect of employees on income protection as opposed to other employees on unpaid absences.

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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Town Planning - Changing the use of part of an existing building - What about the balance?

Sandford v The Corporation of the City Of Marion [2013] SAERDC 42 concerned a rather unusual planning application, and an unusual decision.

It provides a timely reminder that when assessing an application to change the use for a portion of a building a relevant authority needs to also consider the balance of the site.

A proposed mortuary

Development plan consent was granted for the temporary holding of up to 24 deceased persons (outside of normal business hours and prior to their transportation to a funeral parlour) within the rear portion of an existing building.

The effect of the proposed development was to create a second tenancy within the existing building and introduce an additional use onto the land. A group of third party representors appealed.

A preliminary issue

At first instance, the Council had limited its planning assessment to the proposed mortuary use and apparently ignored the use of the balance of the land. In addition, the planning and traffic experts assisting the Court had similarly limited their assessment to the proposed mortuary only.

It was only during the course of the hearing that some background was found. This suggested that the building was used as a factory in 1995, had recently been used as a retail showroom, an external roller-door had been recently installed, and an opening in a dividing wall had been “bricked up” to separate the proposed tenancy from the balance of the building.

The Court was concerned to understand:

  • what were the existing use rights of the proposed tenancy and of the whole of the subject land;
  • was the “excising” of the proposed tenancy from the balance of the land lawful; and
  • what were the planning impacts of the proposal on the ongoing use of the balance of the building (i.e. loading and unloading of vehicles, waste storage, parking, and traffic movement and manoeuvrability).

There was no evidence on these points before the Court. The experts had made limited inquiries during the course of the hearing, and offered limited opinions. These were not considered a substitute for a proper planning assessment and an understanding of the operations on the balance of the land.

Commissioner Nolan upheld the appeal on the basis that the application should not have been assessed without consideration of the ongoing use of the balance of the land. A “full and proper assessment of the application for use of the land as a whole” was required to determine that the land could in fact operate as two separate “sites” given the proposed introduction of a new and additional use to the land.

Whether it might have been appropriate to adjourn the proceedings to afford the experts time to assess the additional matters is another question.

Need to consider the planning impacts upon the whole site

When a development application proposes a change in use for a portion of an existing building or site, the planning authority must understand and appreciate the whole site. It must assess the relevant planning impacts of the proposed new use and the existing/residual use for the remainder of the building or site.

In particular, reliance upon previous development which is unauthorised risks invalidity. In Bade v Rural City of Murray Bridge (2008) 100 SASR 31 the Full Court of the Supreme Court held that an approval for a dwelling located on top of an existing and unapproved boat shed structure was invalid.

If previous works or uses on the site appear to be unauthorised, planning authorities should decline to process the application until the unauthorised works have been assessed and approved.

Alternatively, the planning authority should invite the applicant to amend the application to also include the balance of the site.  If that is done, the authority should be mindful of the limits upon variations to development applications and the requirements to re-refer and re-notify in some circumstances.

For more specific information on any of the material contained in this article please contact Peter Psaltis on 8210 1297 or ppsaltis@normans.com.au.


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Property – Strategic management of council’s assets – Leasing and licensing policies

South Australian councils are owners of, and custodians for, over $7 billion worth of land and building assets.  The management of these assets places a significant burden on council resources and budgets.  As such, it is imperative that councils make strategic decisions on the use of their assets to maximise their value and minimise their operational costs.

Section 49(a1) of the Local Government Act 1999 (Act) requires councils to develop and maintain policies, practices and procedures directed towards obtaining value in the expenditure of public money, providing for the fair and ethical treatment of participants and ensuring probity, accountability and transparency in procurement operations.  Section 49(a1) was inserted into the Act as part of the local government accountability framework amendments made to the Act in 2009, which were directed at improving the governance practices of local governments. 

Section 49(1)(d) of the Act specifically requires councils to prepare and adopt policies on the sale or disposal of land or other assets.  It is arguable that this requirement extends to a requirement for councils to adopt policies for not just the disposal of fee simple estates in land, but also the disposal of lesser interests such as the grant of leases.

In any event, there are significant benefits to be derived by councils in adopting policies on the leasing and licensing of local government assets.  These benefits include:

  • Ensuring the council’s compliance with the requirements of section 49 of the Act and implementing good governance practices more generally.
  • Establishing an approved framework to guide decision making by councils and administrative staff, resulting in more legally defensible council decision making and fairer treatment of potential and successful lessees. This is particularly important in light of the increased scrutiny of local government operations heralded by the Independent Commissioner Against Corruption Act 2012.
  • Identifying and securing the best potential occupants for local government assets via competitive processes to maximise the return for councils, particularly for assets of commercial value.
  • Identifying and taking opportunities, where available, to maximise the use of local government assets, including via joint use and co-location arrangements. This will assist to reduce the burden of maintenance and usage costs on councils and users groups by sharing these costs among a larger group of users.

The content of each council’s leasing and licensing policy will differ depending on the particular requirements of their council.  However, a council’s leasing and licensing policy may cover matters such as:

  • The objectives and principles that are to guide decision making by councils on whether to grant leases of local government assets to third parties.
  • The procurement methods that will be employed by councils to identify and enter into leases and licences with potential lessees and licensees.
  • The basis of calculating rent, fees and other charges payable by lessees and licensees, the circumstances in which rebates may be applied for and the basis on which applications for rebates will be assessed.
  • The extent to which the council will use public funds to fund maintenance, repairs and upgrades of local government assets utilised by third parties.
  • The establishment of sinking funds to assist councils to fund major repairs and maintenance. 
  • The recognition of third party ownership of assets on local government land.
  • Joint use and co-location opportunities and targets.

Adopting a policy is only the first step in the process.  Councils need to ensure that they have appropriate tools to give effect to their policy, including appropriate leasing and licensing documentation which in consistent with the policy’s requirements and decisions that are ultimately made by the council in accordance with it. We will consider this in further details in part two of this article in next month’s Norman Waterhouse Briefly.

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, Lisa Hubbard on 8217 1369 or lhubbard@normans.com.au or Peter Varacalli on 8210 1215 or pvaracalli@normans.com.au.


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Employment – The implied term of mutual trust and confidence: A development as important as it is ambiguous

The Full Court of the Federal Court of Australia has, in the case of Commonwealth Bank of Australia v Barker [2013] FCAFC 83, taken the stance that an implied term of mutual trust and confidence exists in Australian employment law. This is a significant development which has the potential to introduce an entirely new species of common law dispute. The content of the implied term is different for every individual employer-employee relationship, and precisely what that content is will only be clear after a breach has actually occurred.

In addition to establishing the implied term of mutual trust and confidence, the case has usefully examined the way in which that term interacts with workplace policies. This is an important aspect of the case from the perspective of many workplaces, including local government workplaces and many private enterprises.

Facts

Over the course of more than 20 years with the Commonwealth Bank of Australia (CBA), Mr Barker (the Employee) ascended to the role of Executive Manager for Corporate Banking, Adelaide. The contract of employment provided that employment will be terminated due to redundancy if the Employee’s position became redundant and CBA:

‘is unable to place the Employee in an alternative position with [CBA] or one of its related bodies, in keeping with the Employee’s skills and experience’.

CBA also had a detailed Redundancy Policy (the Policy), which was not incorporated into the contract of employment.

The Employee’s role was eventually made redundant. CBA advised the Employee that attempts would be made to redeploy him, but essentially made no real effort to secure redeployment. The Employee’s employment was terminated on the grounds of redundancy.

The Employee was successful in a 2012 challenge against CBA in the Federal Court, and again more recently in 2013 in the Full Court of the Federal Court.

The implied term of trust and confidence generally

In both the 2012 and 2013 decisions, the Court has advocated the position (a position which is entrenched in the law of the United Kingdom but which has long been debated and treated with caution in Australian courts) that, in the absence of any express clause to the contrary, an employment contract shall be deemed to contain an ‘implied term of mutual trust and confidence’. This term is implied by law, not fact. This means that the presence of the term does not depend on the factual circumstances of each particular case.

Simply put, the implied term imposes a mutual responsibility on both employee and employer not to engage, without reasonable cause, in conduct that is likely to ‘destroy or seriously damage’ the relationship of confidence and trust between employer and employee. Precisely what will constitute such conduct will be different for all separate employer-employee relationships, and will be influenced by a variety of factors including the other terms of the contract, the employee’s role, length of service and the nature of the enterprise.

Importantly, the implied term of mutual trust and confidence only applies to conduct which occurs prior to termination and which is not ‘inextricably bound up with termination’. In this case, failures regarding redeployment processes were considered not to be inextricably bound up with dismissal and thus were subject to the operation of the implied term.

Interaction of the implied term with workplace policies

In the 2012 decision, the Court held that the implied term was breached because the Policy was breached. This was in spite of the fact that the Policy was not incorporated into the contract. The Court held at that time that the breach of the Policy was a breach of the implied term because of the seriousness of the breach and because the detailed nature of the Policy gave rise to specific expectations.

While the Court in the 2013 decision agreed that the implied term was breached, it came to the conclusion differently. Importantly, the Court decided that a breach of a policy that has not been incorporated into a contract cannot constitute a breach of the implied term, however serious. Thus, the breach of the Policy in this case was held not to be a breach of the implied term.

Rather, the 2013 decision saw the breach of the implied term being founded in several other factors. The contract specifically contemplated that termination for redundancy would only occur if a suitable alternative position could not be found. Furthermore, the Employee was a senior employee with CBA, and had been for many years. In addition, CBA is a large corporate employer with a significant workforce.

The Court considered that, with the above factors in mind, the implied term of mutual trust and confidence in this case required CBA to take positive steps to consult with the Employee regarding redeployment and to provide the Employee with the opportunity to apply for alternative positions within the organisation. CBA’s failures with respect to redeployment thus constituted a breach of the implied term of mutual trust and confidence in the contract between the Employee and CBA.

Take home message

It must be noted that the 2013 decision was carried by a majority of 2:1. The one dissenting judge gave a comprehensive and technical dissection of the implied term both in the United Kingdom and in Australia, and ultimately concluded that there is not an implied term in Australian law. The majority decision has been appealed to the High Court, so that Court’s decision regarding whether or not the implied term exists in Australia will be a watershed moment for employment law. Adoption of the implied term by the High Court would secure its place in the industrial relations landscape. Rejection of the implied term would be equally and oppositely significant.

However, until a decision is made by the High Court, the prevailing position in Australia is now that employers and employees owe a duty of trust and confidence to one another, unless this duty has been specifically excluded by contract. The implied term is somewhat amorphous, and precisely what constitutes a breach of it will only be clear after such a breach has occurred. It is for this reason that the dissenting judge in the 2013 decision has described the implied term as a ‘Trojan Horse’ which may give rise to previously unforeseen obligations only after those obligations have been breached.

An employer must give thought as to whether any action may damage trust and confidence between it and one or more of its employees. Employers may also wish to insert clauses into employment contracts to expressly exclude the operation of the implied term of mutual trust and confidence.

For more specific information on any of the material contained in this article please contact Lincoln Smith on 8210 1203 or lsmith@normans.com.au.


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Town Planning - Impacts to solar panels – New development and acceptable overshadowing

The overshadowing of neighbouring solar panel systems by new development is likely to become a contentious issue for planning authorities in the near future.

Overshadowing of a neighbouring property is often an unavoidable consequence of new development. Planning officers regularly grapple with the issue of how much is reasonable, particularly in the context of maintaining adequate sunlight access to neighbouring areas of private open space and windows of habitable rooms.

Given that solar panel systems require access to direct sunlight, what constitutes an acceptable level of overshadowing when a new building threatens a neighbour’s solar panels? The Victorian Civil and Administrative Tribunal (‘VCAT’) recently considered this issue in John Gurry & Assoc Pty Ltd v Moonee Valley CC [2013] VCAT 1258.

The facts in John Gurry

Approval was sought for construction of 14 dwellings. A two storey dwelling within this redevelopment (“the proposed dwelling”) threatened to overshadow an existing single storey dwelling (“the neighbouring dwelling”) which was located on adjoining land to its west. The rear (and north-facing) skillion roof section of the neighbouring dwelling hosted a solar panel system. The panels were positioned in an east-west alignment and oriented at right angles to the common side boundary.

What constituted an acceptable level of overshadowing?

The relevant Victorian State planning policies only made generic references to solar panels, such as:

“To promote the provision of renewable energy in a manner that ensures appropriate siting and design considerations are met;” and

“Facilitate renewable energy development in appropriate locations.”

Given the absence of quantitative or qualitative factors to determine how much impact upon existing solar panels is acceptable, the VCAT identified four principles upon which such assessments should be based.

  • The planning authority must take the site and neighbouring properties as they are. It is not enough for neighbours to merely flag the possibility of installing solar panels at some future stage.
  • Any overshadowing impacts on the adjacent existing solar panels must be reasonable. The ultimate test for the approval of any one planning proposal is not that it needs to be optimal, but rather that it must be ‘acceptable’.
  • Are there ‘legitimate development expectations’ based on the content of the relevant planning policies? That is, more weight should be afforded to protecting sunlight access where planning policies seek a minimal level of built form change. Conversely, less weight should be afforded in areas where the policies support more intense built form.
  • It is necessary to balance the position of solar panels in a convenient place “to embrace and effectively utilise alternative and environmentally friendly energy sources” against a location which is “vulnerable or susceptible to the impacts of development on the neighbouring property.”

The VCAT decision

The VCAT decided that the extent of overshadowing caused by the proposed dwelling was acceptable and within reasonable parameters. This was due to the position and orientation of the neighbouring dwelling’s solar panels. The only likely overshadowing was to those panels located closest to the common boundary, and this would only be in the late afternoon around the spring equinox (apparently the appropriate date to use in Victoria; in South Australia the winter solstice is usually used to assess overshadowing impacts). Such impacts were therefore held to be acceptable.

For more specific information on any of the material contained in this article please contact John Watson on 8210 1245 or jwatson@normans.com.au.


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