2016 has once again provided a number of significant developments and challenges in labour and employment law that will have implications for employers. A tussle over labour laws in fact triggered the 2016 Federal election and changes in this area continue to be contested.

Courts and tribunals have handed down a series of important decisions in relation to a broad range of issues including sham contracting, reasonable notice and damages in racial discrimination matters. The Fair Work Commission (“FWC”) has continued with its four yearly review of modern awards, finalising its review of a number of important issues such as annual leave, with other award variations still to come.

This article provides insight for employers into these and a range of other developments. This includes changes to the law that will impact on their businesses, their relationship with their employees and the lessons that can be learnt from the experiences of other employers. It also looks at what lies ahead for labour and employment law in the next 12 months.

What do the cases tell us? Significant case law developments

Set out below is a selection of cases from the past year that demonstrate the type of matters that are being litigated and the approach of the courts and tribunals to the issues raised.

(i) Sham contracting provisions – representations about work conducted for third parties

In this High Court case, Quest and Contracting Solutions purported to enter into a “triangular contracting” arrangement, in which Contracting Solutions engaged two workers as independent contractors and had them provide housekeeping services for Quest. Quest, who was previously the employer of the workers in question, represented to the workers that under this new arrangement they were performing work as independent contractors, despite continuing to “perform precisely the same work for Quest in precisely the same manner as they had always done”.

The Federal Court found, at first instance, that section 357(1) of the Fair Work Act 2009 (Cth) (the “FW Act”) would only be contravened by an employer’s representation to an employee if it mischaracterised the contract that existed between the employee and the employer, and not the contract between the employee and a third party. However, the High Court held unanimously that Quest’s actions amounted to sham contracting under s357(1) of the FW Act, focusing on the primary purpose of the provisions, being to prohibit the misrepresentation of the true nature of an individual’s employment status.

(ii) Contracts of employment and implied terms

The concept of “reasonable notice” was explored recently in a case in which a claim for reasonable notice was made despite the employment contracts of the affected employees containing express terms relating to notice of termination.

The employees contended that the express term regarding notice did not apply because, at the time of their termination, they were performing duties which were materially different to the duties they were originally engaged to perform. Hence, they argued that an implied term of reasonable notice could co-exist with a provision giving rights of termination based on specified periods of notice.

The Federal Court found that a term of reasonable notice could not be implied in these circumstances, as it would interfere with existing contractual rights and would be inconsistent with the express terms in the contract. Despite the lack of success in this particular case, contractual claims remain an important feature of litigated employment law matters.

(iii) Unfair dismissal update

The 2015-2016 Annual Report of the FWC shows that unfair dismissal applications constitute more than 40 per cent of applications made to it. Over the past five years unfair dismissal applications have been consistently around 14,700 annually.

Employees and illicit substance abuse

Unfair dismissal claims often involve questions of misconduct and/or breach of an employer’s policies regarding appropriate behaviour. In this case, the Applicant was a Qantas pilot who made an unfair dismissal application following the termination of his employment that brought into question his behaviour while he was on a layover in Chile, including conduct that amounted to sexual harassment. Prior to the termination of the Applicant’s employment he had undergone a drug test that revealed the presence of cannabinoids.

The Applicant lodged an unfair dismissal application, claiming he had not ingested or smoked cannabis, but that his drink had been spiked. On this basis he asserted that there was no valid reason for his dismissal, but he did not deny the incident of sexual harassment.

The FWC accepted Qantas’ evidence and took the view that the Applicant had separated himself from his co-workers deliberately to ingest the illicit substance. The FWC also accepted that he was responsible for the sexual harassment as he made a conscious decision to ingest the substance that caused him to act in a reckless manner.

(iv) The anti-bullying jurisdiction

The anti-bullying jurisdiction has displayed a consistent trend since its introduction in January 2014, with fewer claims than initially anticipated and high settlement and withdrawal rates.

In the 2015 – 2016 reporting year, the FWC received 734 application for orders to stop bulling at work.

The overriding intent of the anti-bullying jurisdiction is to address the presence of behaviour that constitutes bullying. On this basis, it stands to reason that proactive steps taken by employers to address bullying may obviate the need for the FWC to make an order. For example, this year the FWC has refused to issue an anti-bullying order in the below circumstances:

• on the basis that there was no longer any risk of bullying, because the alleged perpetrators had since resigned; and
• against a high profile restaurant because management had implemented positive measures specifically to address the unreasonable behaviour in question.

(v) Damages awarded for racial discrimination

One highly publicised case saw an Australia Post employee awarded $40,000 in general damages as compensation for contraventions of the Racial Discrimination Act 1975 (Cth). The Applicant was subject to harsh racial taunts by a co-worker over a significant period of time.

The Applicant pursued a claim for general damages for pain, suffering, distress and humiliation in the sum of $100,000 and aggravated damages of $100,000 and/or exemplary damages.

The Applicant was awarded $40,000 in general damages, but no order for aggravated or exemplary damages was made despite the Court’s acknowledgment that the conduct would have been lessened (and so too the damage to the Applicant) had Australia Post acted more promptly in addressing the Applicant’s grievance.

The general damages awarded in this case are not of the magnitude awarded in the landmark case of Richardson v Oracle Corporation Australia Pty Ltd [2014] FCAFC 82, which suggests that case is not as yet having the impact on the assessment of damages in discrimination and harassment matters that was anticipated. The decision also confirms that aggravated and/or exemplary damages are rarely awarded with respect to discrimination claims.

(vi) Immigration – foreign-national employees working on vessels in offshore activities

In the migration space, this year saw an end to the longstanding dispute between the Federal Government and the Maritime Union of Australia (“MUA”) relating to the visa status that should apply to offshore workers in the oil and gas industries. The issue arose due to uncertainty regarding the extent of the “Migration Zone” as defined by the Migration Act 1958 (Cth) (“Migration Act”) and its application to offshore resources industries, a question that has been in contention since 1982.

In 2012, the Federal Court ruled that non-citizens employed on two offshore pipe-laying vessels were not within the “Migration Zone”, thereby allowing the industries to continue to employ foreign nationals without visas.

Following this decision the former Labor Government introduced a Bill to amend the Migration Act and extend the definition of the “Migration Zone” to include any “offshore resource activity”. This change would have the effect of imposing the requirement of a permanent visa, or a visa for this prescribed purpose, on foreign-national workers. This was not well-received and widely perceived as introducing a regulatory burden on the resources industry.

The Coalition government has sought to reverse this change in a number of ways. The latest of these has been via a determination made by Senator Michaela Cash under section 9A(6) of the Migration Act to remove the defined content of “offshore resource activity” from the definition of “Migration Zone”. In response, the MUA and the Maritime Officers Union commenced proceedings challenging the validity of the determination.

The High Court unanimously found that the determination did exceed the limits of the Government’s powers. The High Court ruled that the Migration Act only permits such exceptions for certain activities or operations, which did not apply to these circumstances. Further it found that the determination was made to undermine the intention of the 2013 amendments to the Migration Act, rendering it invalid.

As a result, non-citizens working in the offshore, oil and gas industries will be required to hold a permanent visa, or a visa prescribed for such work. To date, the visas used for such purposes are the Short Work (Skilled) (Subclass 457) visa (which provides up to four years of working rights), and, for short-term, one-off projects involving highly specialised workers, the Temporary (Short-Stay) (Subclass 400) visa.

The Modern Award Review

As part of the Modern Award Review that takes place every four years, the FWC has determined, or is in the process of determining, new award provisions on a range of common issues. The range of issues include:

• annual leave;
• annualised salaries;
• award flexibility;
• casual employment;
• family and domestic violence clause;
• family friendly work arrangements;
• part-time employment;
• payment of wages; and
• public holidays.

In addition to the above, the FWC is also reviewing penalty rates in a number of awards in the hospitality and retail sectors. Below we have outlined the new award provisions in a number of key areas.

Annual leave

The provisions with respect to annual leave have been varied in a number of awards. The changes include terms relating to excessive annual leave and cashing out annual leave.

Among other things:

• employees will now be permitted to request accrued annual leave to be paid out subject to certain eligibility requirements;
• employers are able to “direct” employees who have an excessive leave balance accrued to take annual leave, subject to certain requirements;
• employees may now request annual leave prior to accruing the balance required for the requested leave period; and
• employers are entitled to deduct an amount of annual leave taken but not yet accrued on termination of employment.

The majority of the variations to the annual leave clauses in the affected modern awards have been incorporated into the “current” version of the awards on the FWC website and took effect from 29 July 2016 (with other changes deferred until 29 July 2017). The FWC has developed template agreements for employers and employees to use in respect of cashing out agreements and agreements to grant annual leave in advance.

Time off in lieu

The FWC has reviewed the time-off-in-lieu (“TOIL”) terms in a range of modern awards following applications to vary or insert TOIL terms in various modern awards as part of the Modern Award Review.

A decision of the Full Bench on 8 July 2016 determined a redrafted model term for providing time off instead of payment for overtime. A decision of the Full Bench on 11 July 2016 varied awards which either provided for overtime but did not give employees the option of taking time off instead of payment for working overtime and those that provided TOIL at “ordinary rates” (i.e. an hour off for an hour of overtime worked). On 22 August 2016 the FWC published a schedule of determinations varying 72 modern awards further to the 8 July 2016 and 11 July 2016 decisions.

A decision of the Full Bench of 31 August 2016 determined TOIL provisions in another 13 awards, including those in the maritime industry and the resources sector. On 16 September 2016 the FWC published a schedule of determinations varying a further 8 modern awards further to the 31 August 2016 decision.

Looking ahead: what’s on the horizon for 2017?

While we have seen a number of changes flow through this calendar year, we have also seen a variety of proposed changes that may proceed in 2017. Some of the anticipated areas of change are set out below.

Further variations to model award provisions

• Family violence: The Modern Award Review has included submissions from the ACTU requesting 10 days of paid domestic and family violence leave across all modern awards. The Ai Group, in response, has requested that the proposed wording make more specific reference to the benefit for the victim in a domestic violence dispute. This is due to concerns that the domestic violence leave clause, as currently proposed, could result in the provision of entitlements to perpetrators as well as victims. The application for this amendment is listed for hearing from 14 November 2016 to 2 December 2016.
• Family friendly working arrangements: The Modern Award Review has included deliberations over the common issue of family friendly work arrangements, including claims relating to the right to return to part-time work or reduced hours following periods of parental or antenatal leave. A timetable for preparation of evidence and submissions has been issued by the Full Bench with a view to conducting a hearing into the matter in mid August 2017.
• Annualised salary: The FWC intends to review all annualised salary terms in modern awards following applications to vary or insert annualised salary terms in various awards as part of the Modern Award Review. The applications were referred to a Full Bench on 31 May 2016 and are listed for hearing from 5 December 2016 to 7 December 2016.
• Casual and part-time employment: The FWC is also reviewing the terms of modern awards relating to casual and part-time employment following applications to vary or insert relevant terms in various modern awards as part of the Modern Award Review. There are a number of common and award-specific claims to be reviewed and determined by the Full Bench, and these claims are at varying stages of the review process. Specific terms under review include those in relation to:
  • part-time minimum engagement;
  • part-time rostering provisions and patterns of hours;
  • part-time overtime provisions;
  • casual minimum engagement;
  • casual conversion; and
  • restrictions on casual engagement.
• Penalty rates: The FWC’s review of penalty rates in the retail and hospitality sectors has been the subject of much public debate and a determination is likely to proceed in the New Year.

Other legislative developments

Bills to re-establish the Australian Building Construction Commission and to set up a Registered Organisations Commission have been introduced into Federal Parliament and will be on the legislative agenda in future parliamentary sittings. Strengthening the powers and the resources of the Fair Work Ombudsman has also been flagged as a priority. Additionally, changes to parental leave arrangements and further protections for vulnerable workers, including migrant workers, may also re-emerge as the subject of legislative change over the next 12 months.

As part of the Modern Award Review, the FWC has determined, or is in the process of determining, new award provisions on a range of common issues.