By Belinda Winter, Partner

The recent decision of Burdziejko v ERGT Australia Pty Ltd [2015] FWC 2308 has significant consequences for employers when offering direct employment to labour hire workers. The Fair Work Commission determined in that case that a transfer of business was triggered when the employer offered employment to the labour hire worker. This meant that the labour hire worker had access to unfair dismissal, as their service with the labour hire provider counted as service with the new employer.

The facts

On 10 June 2014, Ms Burdziejko was hired by Hays (a labour hire provider) to work at ERGT Australia Pty Ltd (ERGT). After three months, ERGT offered Ms Burdziejko employment with the company to continue the same work. Ms Burdziejko’s employment with ERGT was subsequently terminated, and she alleged that she had been unfairly dismissed.

The law

The Fair Work Act 2009 (Cth) (FWA) provides that an eligible employee must have been employed with an employer for at least six months to be protected from unfair dismissal (unless the employer is a small business, in which case the period is 12 months).

A period of employment with one employer will count as employment with another employer if a ‘transfer of business’ has occurred. A transfer of business will occur if:

• the employee’s employment with the old employer has terminated;

• within three months, the employee becomes employed by the new employer;

• the work that the employee is performing for the new employer is the same, or substantially the same, as they were performing for the old employer; and

• there is a ‘connection’ between the old and new employer.

This regular update is designed to keep you abreast of news and issues currently affecting employers, including safety, discrimination, employment and industrial law. If you have any queries or feedback on the issues discussed in this newsletter, please don’t hesitate to email us at workplacerelations@cgw.com.au and let us know.

May 2015

In this issue: » Offering employment to labour hire workers

constitutes a transfer of business

» Mental illness in the workplace: a cautionary tale for employers

» Federal Court resolves debate about annual leave loading termination payments

» Full Bench allows termination of Aurizon enterprise agreements

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Workplace Relations & Safety

RISK MANAGEMENT ADVISER

Offering employment to labour hire workers constitutes a transfer of business

• The issue in contention in this case was whether there was a connection between the old employer (Hays) and the new employer (ERGT) as the other three conditions were satisfied. Relevantly, a connection is said to exist where the new employer outsources the work to the old employer, but then ceases to outsource the work and returns to performing the work in-house.

The Fair Work Commission was satisfied that this had occurred and since ERGT had not expressly informed Ms Burdziekjo that it would not recognise her prior service with Hays for the purposes of unfair dismissal prior to her commencing employment with it, her service with Hays was counted. She therefore had served the minimum qualifying period and was able to pursue her unfair dismissal application.

Implications for employers

Employers should be aware that they may trigger a transfer of business if they outsource particular work to a labour hire provider and then directly employ its labour hire worker performing that work when bringing that function back in-house.

In practical terms, this means that the service of the labour hire worker with the labour hire provider may count as service with the new employer. This has consequences for access to unfair dismissal and leave accruals.

It also means that employers could be inadvertently bound by the terms of conditions of an industrial instrument (such as an enterprise agreement) of the labour hire provider upon transfer.

Mental illness in the workplace: a cautionary tale for employers

By Annie Smeaton, Partner

In the recent decision of Penglase v Allied Express Transport Pty Ltd [2015] FCCA 804, the Federal Circuit Court ordered an employer pay a penalty for engaging in adverse action in breach of section 351 of the Fair Work Act 2009 by offering an employee a reduced role at work because the employee was suffering from a mental disability and not because the employer was concerned about the employee’s health and welfare.

The facts

In late 2012, the employee returned to work after a week-long absence. The employee provided the employer with a medical certificate explaining that her absence was due to an anxiety related condition.

The employee subsequently requested further time off work due to her being unfit to work as a result of anxiety. Upon the employee returning to work on the second occasion, the employer requested the employee to attend a medical examination with the company doctor. The company doctor subsequently deemed the employee fit for work despite clear evidence that the employee was experiencing higher than normal levels of anxiety and stress.

On the basis of the findings of the doctor, the employer allegedly determined that the employee could not sustain her level of performance if she were to continue her usual duties. As a result, the employer gave the employee three options to choose between before the close of business that day:

• perform a telephonist role with a greatly reduced salary;

• move to the position of sales executive with a significant increase in workload; or

• resign.

The employer contended that these options were presented to the employee ‘solely by a desire to protect [her] health and welfare’.

The employee complained to the company that she felt bullied and believed she was being forced into resigning from her position, which was placing her under intense stress.

On account of her stress and anxiety, the employee sought an extra month of leave by way of a medical certificate citing her unfitness for work due to an anxiety condition.

The employee returned to work in early 2013 after the month off. However, on her return to work she was informed that her position had been made redundant, due to a restructure of the business. She was also informed that she was not considered a suitable candidate for the new position.

The law

In his decision, Judge Turner accepted that the decision to restructure the workplace was a ‘genuine’ decision to streamline the staff in the employee’s workgroup. This, in his Honour’s opinion, was evidenced by the fact that the employee was not being directly replaced. Rather, her position as account manager had disappeared completely, and an entirely new position at a much higher hierarchical level had been created and was being advertised for a much larger salary.

However, his Honour noted the employer’s recognition that the employee had been suffering from higher levels of stress and anxiety, and the employer’s subsequent attempt to alter the employee’s employment status due to her being so unwell.

His Honour held that by forcing the employee to choose between the three options, the employer had breached section 351 of the Fair Work Act by taking steps that constituted ‘adverse action’. His Honour expressed significant doubt at the veracity of the employer’s claim that the offering of the three options to the employee was ‘motivated solely by a desire to protect the health and welfare’ of the employee, particularly given one option encompassed an increase in workload.

What should employers take from this decision?

This case highlights the challenges employers face managing employees suffering from legitimate mental disabilities at work. Employers that find themselves in these types of situations should carefully consider medical reports and other evidence to ensure they engage in sound and lawful decision making concerning any change that may adversely impact on the employee with a disability.

By Tobey Knight

Since 2010 there has been ongoing confusion about whether annual leave loading (and other payments associated with annual leave) must be paid to employees upon termination of their employment.

The Fair Work Act 2009 (Cth) requires an employer to pay an employee during a period of paid annual leave at their base rate of pay for the ordinary hours, which would have been worked during the period.

The Act also requires that when paying out accrued annual leave upon termination of employment, the employer must pay the amount that would have been payable had the employee taken that period of leave during employment.

Despite this, some modern awards and enterprise agreements contain clauses requiring payment of annual leave loading (or other additional payments) during annual leave but not when paying out accrued annual leave upon termination of employment.

In the recent decision of Centennial Northern Mining Services Pty Ltd. v CFMEU (No. 2) [2015] FCA 136 the Federal Court determined that Centennial’s employees who were covered by the relevant enterprise agreement were entitled to annual leave loading (and other payments associated with annual leave) upon termination of their employment. This was despite the enterprise agreement stating that upon termination of employment, employees were only entitled to payment of accrued annual leave based on their ordinary rate of pay plus an average of their bonus.

The Federal Court found that the provisions of the Act meant that an employee should not suffer a reduction in the value of unpaid annual leave if employment comes to an end while paid annual leave remains undertaken.

The Federal Court also found that the provision in Centennial’s enterprise agreement in relation to payment of unused annual leave had no effect because it operated in a way that excludes the operation of the Act. Therefore, upon termination of

employment, employees covered by Centennial’s enterprise agreement are entitled to be paid out their accrued annual leave at the same rate they would have been entitled to if they had taken the leave during employment.

What does this mean for employers?

For the moment, this means that despite what is in an agreement or award, upon termination of employment an employee is entitled to payment for accrued but unused annual leave and, if applicable, annual leave loading.

The Fair Work Amendment Bill 2014 proposes to amend the Act so that accrued but untaken annual leave is required to be paid at the employee’s base rate of pay. If this amendment is passed, then upon termination of employment, employees will only be entitled to payment of annual leave loading if their award, agreement or contract requires it.

We will keep you updated about these amendments.

Full Bench allows termination of Aurizon enterprise agreements

Federal Court resolves debate about annual leave loading termination payments

By Emma Le Roy

Despite strong union and employee opposition, the Full Bench of the Fair Work Commission (FWC) permitted the termination of 12 enterprise agreements that had passed their nominal expiry date while the parties were bargaining for a new agreement. We discuss the Commission’s decision of Aurizon Operations Limited; Aurizon Network Pty Ltd; Australian Eastern Railroad Pty Ltd [2015] FWCFB 540 and its implications for employers briefly below.

The Facts

Aurizon was formally known as QR National before it was privatised in 2010. Aurizon brought an application before

the FWC to terminate 12 enterprise agreements (EAs) after bargaining negotiations reached a deadlock. The EAs had been negotiated prior to the privatisation process and contained a number of generous ‘legacy provisions’ reflective of the government policies at the time.

These clauses included:

• strict work demarcations that regularly resulted in employees being idle for significant portions of their shift;

• no forced redundancies;

• inflexible rostering arrangements;

• limited means of drug and alcohol testing;

Belinda WinterPartnerT +61 7 3231 2498E belinda.winter@cgw.com.au

Annie SmeatonPartnerT +61 7 3231 2946E annie.smeaton@cgw.com.au

Tobey KnightAssociateT +61 7 3231 2933E tobey.knight@cgw.com.au

Emma Le RoyLawyerT +61 7 3231 2565E emma.leroy@cgw.com.au

Our team If you would like to find out more about any of the above issues, don’t hesitate to contact a member of our team.

• free rail travel for employees, dependents and partners;

• recruitment restrictions with requirements to internally advertise all vacant positions; and

• a dispute resolution clause that enabled the unions to delay workplace changes.

Aurizon argued that the clauses constrained its ability to operate effectively, productively and competitively. In particular, Aurizon submitted that its EAs were placing it in a position of competitive disadvantage when tendering for work.

Objections from Aurizon employees

A large number of employees and relevant unions opposed the termination of the EAs. In particular, the unions argued that given Aurizon was engaging in bargaining for new EAs, the termination of the existing EAs would diminish any incentive for Aurizon to bargain while it had a cost advantage, and therefore, giving it an unfair advantage in the current bargaining process.

The decision of the Full Bench

The FWC considered extensive evidence from both Aurizon and the unions, including an analysis of its competitor’s EA and economic data on current market conditions. The FWC rejected the union’s argument that the termination would give Aurizon an unfair advantage. It stated that there should be no ‘predisposition’ against terminating an EA and that it cannot be expected that once a nominal expiry date has passed, terms and conditions in an EA should continue in perpetuity.

Implications for employers

There have been numerous cases where members of the FWC have declined to terminate EAs when requested by an employer to do so. However, this decision is a positive development for employers seeking to terminate expired enterprise agreements that are no longer suited to the current economic climate and its operating environment.