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Aitken Legal Workplace Forum

The Fair Work Ombudsman’s view on major compliance issues for employers and dealing with the Fair Work Ombudsman

Nicholas Wilson[1]

Friday2nd November 2012

PREAMBLE

  1. I begin by respectfully acknowledging the traditional owners of the land on which we meet today, the Kombumerri people, and pay my respects to Elders both past and present.
  2. It is also appropriate to acknowledge the Fair Work Ombudsman institutes proceedings in the Federal Magistrates’ Court and Federal Magistrate Whelan, who you will hear from shortly, is one of the judicial officers who hears those cases. Nothing said today will involve a matter that is before Federal Magistrate Whelan and nothing in this presentation is intended to influence Her Honour in anyway. Similarly, I acknowledge the attendance of Senator Abetz and record that nothing I say is intended to comment on the policies of either the Government or of the Liberal-National Party Coalition.
  3. I congratulate Aitken Legal for showing leadership in convening this forum and ensuring their clients and others can connect with the latest developments in the Fair Work system. Employers in regional Australia deserve to have the same opportunities as those in our largest cities to learn of these developments.
  4. I record that the views expressed are my own and do not necessarily reflect Government policy, and I take responsibility for any errors in the text.

INTRODUCTION

  1. My brief is to report to you on two things relevant to employers –my perceptions about major compliance issues andworking with the Fair Work Ombudsman.
  2. So much of our work arises when trust and respect has broken down. You don’t want to be there – underpayment; de-motivation; dismissal; harassment.
  3. Employers generally comply quite well with their obligations, or perhaps, as well as can be expected. If there are failings with payment obligations; anti-discrimination or fair dismissal obligations, perhaps those failings are sourced not just in the obvious non-observances, but also in the underlying systems and cultures of the business and its managers.
  4. What do you think is being said by the workplace where someone is sacked for being too young?[2] What do you think is being said by the workplace where an employee is routinely required to attend extensive unpaid training?[3] What is being said when someone feels so strongly about the relationships in their workplace they want to complain about it publicly through social media?[4]
  5. Is there an inevitability to trouble with the Fair Work system? Not in my view – at least not for workplaces that have constructive management practices and strong positive employment cultures. All things considered, the number of occasions on which businesses find themselves the subject of industrial action or a claim of unfair dismissal or a claim for underpaid wages is low.
  6. On those occasions a problem does arise, the severity of the problem can be reduced through sound advice and good judgement.

WHY ARE YOU EMPLOYING?

  1. A question for any employer should be – why are you employing? Not because there is something wrong with employing people, but because the answer to the question will reveal some things about your values and expectations and how you go about managing – and perhaps about the risk you may have of getting into employment trouble. You should ask yourself - what is your employment proposition?
  2. Are you just in it for the short term profit and to heck with the longer term consequences?
  3. Or is you view that you want the business to survive and be sustainable and grow as much as it can?
  4. If your employment proposition fits the second category, then you will most likelywant the best staff you can get, with the best skills and the best motivation. If you are in the category of wanting your business to survive and flourish, you will probably see the people around you as an asset; you will care for them; be friends with them; and will want them to be motivated, safe and well paid. You will realise that the pathway to your goals – profit and sustainability – is going to be easier with the cooperation of your workforce.
  5. So what advice do I have for an employer in the first category, where people are just a commodity and their quality and motivation will not affect their ongoing reputation or business? Even though my best advice should probably be that you don’t want to be in such a category, my pragmatic advice would quickly become to ascertain your minimum obligations; observe them and document how you have observed them.
  6. Of course, I am aware that not everyone agrees with the safety net’s standards, or with employee benefits like unfair dismissal. However, ignoring these standards or trying to circumvent them is dangerous and shouldnot be tried.

BEFORE EMPLOYMENT STARTS

  1. Whichever category of employer you might be, you should consider some practical issues before employment starts. Sometimes, not everything is as it seems.
  2. In particular, sometimes people who are said not to be employees are actually employees, and sometimes people who are said to be casual employees are actually part-time employees; and other times people who are said to be one classification are actually another. Don’t ever be blind to the possibility that you may not be able to do what you want to do.
  3. So, when is an arrangement employment and not something else? In Australia, generally someone becomes an employee because their circumstances match the common law definition of an employee. Even though a person might be called an intern or a contractor, they may well be an employee, and that means they become entitled to pay in accordance with the Fair Work Act; they may be entitled to claim superannuation contributions from you; and they may well have rights to claim unfair dismissal. In some cases, they may have access to workers compensation if they are injured at work.

Independent contractor

  1. There are a number of things that can help tell the difference between an employee and a contractor. Essentially, an independent contractor is someone in business for themselves, which your business is using for part of their time to do things in your business. “Independent contractors run their own business, hiring out their services to other organisations. Unlike most employees, independent contractors negotiate their own fees and working arrangements, and can work for a variety of clients at one time.”[5]There isn’t one thing that makes the difference on its own - you need to consider everything together. The Fair Work Ombudsman website has several resources which can help a business determine whether or not a person is an independent contractor or an employee.[6]

a)Employees usually;

  • do ongoing work that is controlled by their employer;
  • work hours they’re told to work by their employer;
  • are not responsible for financial risk;
  • are entitled to superannuation from their employer;
  • are entitled to minimum wages;
  • have income tax taken out of their pay;
  • are paid regularly (weekly / fortnightly / monthly);
  • are generally entitled to paid leave if they are permanent employees.

b)Independent contractors usually;

  • decide how to do their work and what skills they need to do it;
  • decide whether to employ someone else to do the work;
  • carry the risk of making a profit or loss;
  • pay their own superannuation and tax, including GST;
  • have their own insurance;
  • are contracted to work for a set time or do a set task;
  • decide what hours to work;
  • invoice for their work or get paid at the end of the contract or project;
  • don’t get paid leave.

Interns

  1. In relation to whether or not someone is an intern, the Fair Work Actrecognises formal work experience arrangements that are a mandatory part of an educationor training course. These arrangements are referred to as vocational placements, and are defined as being:

a)undertaken as a requirement of an Australian based educational or training course; and

b)authorised under a law or an administrative arrangement of the Commonwealth, a State or Territory; and

c)undertaken with an employer for which a person is not entitled to be paid any remuneration.

  1. If all of these criteria are met, the person will not be covered by the FW Act and is therefore not entitled to the minimum wage and other entitlements provided in the National Employment Standards and modern awards. If those criteria are not met, the person may well be an employee and therefore entitled to payment.
  2. Because of these possibilities, you should sort out before they start working for your businesswhether or not the person is an employee.
  3. If you’ve made the decision that the person working for you is an employee, you need to decide on their conditions of employment and document them. Are they to be an ongoing employee or casual? Are they to be subject to a probation period before they are confirmed in employment? Maybe before employment starts you need to check their credentials. Do they actually have the qualifications they say they have? Are you working in a field where a background check is required before employment can be offered?
  4. You will also need to make some judgements about what you should pay the person and what will be their conditions of employment.

DURING EMPLOYMENT

  1. Once employment has started, an employee is entitled to a variety of benefits and conditions:

a)First and foremost, they’re entitled to a safe workplace, which includes not only being safe from the worst hazards, but being safe from psychological hazards, such as bullying, intimidation and harassment.

b)Secondly, every employee in Australia is entitled to be paid at least their minimum entitlements for all hours worked. They are also entitled to fair treatment at work, and the extent to which you may go about doing this is especially important if the relationship sours and you end up dismissing them – sometimes this is known as “a fair go all round”.

c)A workplace free of unlawful discrimination is also the entitlement of every employee.

  1. Of course, I realise that employing people can be difficult and especially for small and medium sized family owned businesses. Resources are thin; market conditions are tough; and there are constant competing demands for management’s limited time. Even so, you need to recognise that every employer and manager has to spend time on delivering employees their entitlements.
  2. On the one hand, if you mistakenly get enough people’s pay wrong for long enough, your margins won’t reflect the disrupted cash-flow that might be taken up with repaying the underpaid wages.[7] On the other hand, I haven’t met too many employees who don’t already know their entitlements, at least in general terms – treat them sufficiently poorly for long enough (even through error) and they will vote with their feet, which can be costly and disruptive for any employer.
  3. So what advice can I give employers and managers? Gratuitously, the third best piece of advice I can give any manager would be to ask you to “do unto others as you would have them do to you”. Perhaps my second best advice is to never, ever, practice “psychic management”.
  4. Beyond these moments, my best advice would be to have you reflect on the subject with which I started – what kind of employer do you want to be? A positive workplace culture is going to be the very best employment protection you can find. It may well help your goals of profit and sustainability.

WHAT IF THERE IS A PROBLEM?

  1. Admittedly, as a regulator, I have seen the worst of employment. I have seen cases where people have been dreadfully exploited or harassed and even allegations about conditions that verge on slavery[8]. I have also seen cases of extreme bullying and where safety standards have been ignored and people killed as a result. No-one deserves these things.
  2. I have worked for around 15 years in regulatory roles and have been personally involved in several thousand cases, which mainly by definition are the more serious ones requiring the attention of a senior manager. I have also probably seen several thousand other cases in the first part of my working life as a representative of employers. The nature of the legislation I now deal with means that all but a handful of these cases are investigations into the actions of managers or employers.
  3. Despite seeing this tide of misery and attempted or actual law avoidance, I am and remain, incredibly optimistic about Australian managers and employers. Mostly we do a very good job and mostly the attitude of employees rises above the cynical to the point of accepting the boss as doing OK. Millions of us go to work every day and return home as safe as we were in the morning and the majority of us stay in our work for years at a time.
  4. Even so, we should not be blind to the fact that employment problems can and do occur. As managers, you and I need to be prepared for what occurs when the relationship sours.

Performance Management

  1. Firstly, you need to recognise that managing performance is a skill. It is as much a skill as any trade or profession and it requires practice to be done well. It will be as poorly performed by the unskilled as the home handyperson trying to build something when they have no carpentry skills or the home book-keeper trying to prepare a complex tax return.
  2. If you need to performance manage someone working for you, then seek expert advice. You are about to do something that could cost your business thousands of dollars. If you do it very badly, it might even cost you many tens of thousands of dollars. The cost of advice will usually be small compared with your potential risk.
  3. When looking at dismissals, industrial tribunals will look at whether employers have done several things. These are set out in s387 of the Fair Work Act, which provides as follows;

“387 Criteria for considering harshness etc.

In considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable, FWA must take into account:

(a)whether there was a valid reason for the dismissal related to the person’s capacity or conduct (including its effect on the safety and welfare of other employees); and

(b)whether the person was notified of that reason; and

(c)whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person; and

(d)any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal; and

(e)if the dismissal related to unsatisfactory performance by the person—whether the person had been warned about that unsatisfactory performance before the dismissal; and

(f)the degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

(g)the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

(h)any other matters that FWA considers relevant.”

  1. The principle of there being a “fair go all round” is a guiding light, not only in the legislation, but also in how a tribunal will examine a case. The principle stems from a decision in 1971, in which it was said;

“The objective in these cases is always industrial justice and to this end weight must be given in varying degrees according to the requirements of each case to the importance but not the inviolability of the right of the employer to manage his business, the nature and quality of the work in question, the circumstances surrounding the dismissal and the likely practical outcome if an order or reinstatement is made.”[9]

  1. Over the years, this principle has developed to include consideration of not only whether a decision to dismiss was unfair, but also whether the procedure followed by an employer to form that view was itself unfair, which principle is now set out in the Act.
  2. There are some basic principles you should follow if you need to performance manage someone. While endeavouring to summarise these principles in a complex and constantlyevolving environment is a challenge, experience suggests there are at least these categories for consideration – knowledge about the problem; assistance with overcoming the problem; fair warning and time for improvement. Lastly, there is the need for any manager to obtain professional and competent advice before they act.

KnowledgeAbout The Problem

a)Both sides must have precise knowledge of what is required of the job and what is not (in the view of the employer) being done properly. The work performance problem must be real – by the time the employer moves to dismiss, they must have a valid reason (s387(a))

b)Before you start discussing the matter with your employee, try this out – make a list with two columns. In the first column, write down how you know the employee is not performing to your standards; and in the second column how you know the employee knows what they had to do. Experience suggests that often what is written in the first column is broader than that in the second column. There is danger in acting on what you assume to be shared knowledge.