Employee surveys, also known as pulse or culture surveys, can often serve as an early warning system for employers. They reveal work health and safety risks that an employer may not otherwise know about before it’s too late. 

Conducted anonymously, and often by an external organisation, these surveys can uncover a range of issues, from physical safety hazards due to inadequate equipment, to intangible hazards like the psychological impact of high workloads or systemic discrimination and bullying.

While a physical safety hazard that is called out in survey results, such as lack of PPE or dangerous plants or equipment, may be quickly and easily mitigated, psychosocial safety hazards can be harder to address. 

This article offers a practical guide for employers on what to do when employee pulse or culture surveys results indicate psychosocial work health and safety risks in their workplace.  

Australian employer obligations around psychosocial risks

Ensuring the safety and wellbeing of employees is a critical priority for employers. The Work Health and Safety Act 2011 (Cth) (WHS Act) and various state and territory laws lay down a robust framework requiring employers (broadly defined in the legislation as “person(s) conducting a business or undertaking”) to ensure a safe working environment for their employees. 

Employers are required to eliminate risks to the health and safety of workers as far as is reasonably practicable. If elimination is not reasonably practicable, employers must minimise those risks as far as is reasonably practicable. 

“Health” is defined as both physical and psychological health, meaning that as part of its primary duty, an employer must manage risks to a worker’s psychological health as far as is reasonably practicable. Some states and territories also now have regulations expressly requiring psychosocial hazards be eliminated or minimised. 

Psychosocial hazards refer to aspects of work and workplace situations that may give rise to a risk of physiological harm caused by the associated stress response. For example: 

• bullying, sexual harassment, and poor workplace relationships 
• high or low job demand and low on-the-job support 
• low job clarity or control, or lack of recognition and reward 
• poor systems of organisational change management, and organisational justice (where policies/decisions are applied unfairly or unequally)
• poor environmental conditions, and remote or isolated work. 

Employers also have obligations under the Sex Discrimination Act 1984 (Cth) and the Fair Work Act 2009 (Cth) to prevent the psychosocial hazards of sexual harassment and bullying from occurring. Employers can also be vicariously or accessorily liable for sexual harassment and bullying occurring. 

Assessing employee surveys to identify hazards 

Employers must scrutinise survey results for indicators of psychosocial risks. 

Some surveys will directly – but anonymously – allow employees to report disrespectful or toxic behaviour, bullying or sexual harassment. Depending on the structure of the survey, this can be through free-text responses, or targeted agree/disagree statements such as, “I have not experienced bullying or harassment at work” or, “I have witnessed or been subject to conduct of a sexual nature in the workplace”. 

Answers which indicate that the workplace is not free of bullying or harassment will put an employer on notice of a possible hazard that it must address.  

Other indicators of latent, unaddressed psychosocial hazards can be identified via poor scores in response to questions such as: 

• “I am confident I can report issues to my manager, and they will take them seriously.” (May possibly indicate poor organisational justice and possible unreported behavioural, bullying or harassment issues.)
• “I understand how decisions are made about my role and my career progression.” (May possibly indicate low job control, clarity or lack of reward and recognition.) 
• “I think the organisation holds people accountable for their unsatisfactory behaviour and actions.” (May possibly indicate unreported behaviour, bullying or harassment issues.) 
• “My manager allows and encourages me to make decisions and take responsibility for my work.” (May indicate low job control, low job demand and poor workplace relationships.) 

Acting on findings from employee surveys

Results from employee surveys that indicate a psychosocial safety hazard mean that an employer is on notice of possible safety risks. It must then take steps to apply the WHS risk assessment framework. Once a risk is identified, it must be assessed and controlled with measures to mitigate the risk. 

To properly identify and assess the risk, it is particularly important to be able to drill down into department, division, location or manager-level results. Where an employer can do so, it can use the survey results to decide on next steps, and assess and control identified risks more effectively. 

If not, a follow-up survey may be the first step, with more targeted questions and increased ability to filter results and determine areas of the business where psychosocial hazards are an issue.

Otherwise, depending on the scope and nature of the issue, and the extent to which results can be filtered to narrow in on where a problem may exist, we recommend the following identification and assessment measures: 

• HR meets with line managers or supervisors in an identified division or work group to discuss the survey results. HR representatives should be prepared to ask managers specific questions and may need to have hard conversations with managers about why the results are poor. These meetings should be followed up to ensure that managers are taking necessary action as required. 
• Additional monitoring by HR of an identified division or team, including arranging catch ups with members of the team to discuss wellbeing and experiences. 
• Engage experts to conduct wellbeing interviews with members of a team with poor survey results, to gather more specific information about concerns in that team.  
• Engage experts to conduct a culture review investigation by interviewing people throughout the organisation or selected teams to gather information about culture, leadership, organisational justice and misconduct management. 
• Review the practical impact of organisational policies and practices such as performance review processes, grievance handling procedures, remuneration and recognition.  
• Establish employee culture consultation committees or working groups to provide and collate information about psychosocial risks across business units and to provide specific and real-time feedback about how to address issues.   
• Review and promote the organisation’s grievance procedures and reporting mechanisms, including giving assurances about encouraging a “speak up” culture and having a no-tolerance approach to victimisation. 
• Introduce “contact officers” or “go-to” people for workers to report issues outside of the human resources and leadership teams. 
• Roll out training for line managers and supervisors on topics such as leadership, respectful behaviour, psychosocial safety, workload and capacity management and handling complaints. 

Understanding legal professional privilege 

When investigations, culture reviews, wellbeing interviews or other information gathering is conducted, we recommend seeking legal advice and, if possible, having external counsel conduct or engage culture reviews. This will ensure, as far as possible, that any findings about current psychosocial hazards in the workplace are covered by legal professional privilege* and legal risks can be mitigated confidentiality and effectively. 

In our experience, employers that take these steps following any concerning pulse survey results will be demonstrating compliance with their work health and safety duties. By acting on the early warning signs contained in survey results, employers can more effectively mitigate the risks associated with psychosocial hazards. The practical benefit of this, as well as being legally compliant, is a healthier, safer and more productive workforce, with higher retention rates and a reputation as a great place to work. 

*Legal professional privilege protects confidential communications and confidential documents between a lawyer and the client where they have been made for the dominant purpose of the lawyer providing legal advice or professional legal services to the client (or for use in current or anticipated litigation).

Aaron Goonrey is a Partner and leads the Australian and APAC Employment & Rewards practice at Pinsent Masons. Emma Lutwyche is a Special Counsel and Yuliya Chis is an Associate at Pinsent Masons. The advice in this article is general in nature and does not constitute formal legal advice.

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The Fair Work Commission (FWC) has made its first ruling under the new Same Job, Same Pay framework, after finding that the labour hire workers employed by a Queensland coal mine performed essentially the same work under the same conditions as the mine’s permanent employees.

As a result, more than 300 labour hire workers servicing the mine are set to receive pay increases of up to $20,000 per year as of November this year, when Same Job, Same Pay orders will come into effect.

Particularly for organisations in heavily unionised sectors, this decision serves as a reminder to evaluate employment practices to ensure compliance with the new legislation.

Labour hire workers perform the same work, argues union

The employer in this case, a Queensland-based open-cut coal mine, currently employs approximately 350 permanent employees who are covered by an enterprise agreement, and supplements its workforce with approximately 320 labour hire workers. 

Earlier this year, the Mining and Energy Union (MEU) put forward an application under the Same Job, Same Pay framework arguing that the labour hire workers’ roles were indistinguishable from those of the permanent employees, and they were thus entitled to the pay rates set out in the host employer’s enterprise agreement.

In its ruling, the FWC noted that the labour hire workers and permanent employees attended the same pre-start meetings each day, performed the same production work using the same equipment, wore the same uniforms and followed the same procedure for requesting annual and personal leave, among other similarities.

“If they’re being treated the same as employees on the site in terms of the nature of the work itself and the operational aspects, that’s where it becomes very compelling,” says Aaron Goonrey, Partner at Pinsent Masons.

The FWC was ultimately satisfied that the labour hire employees were entitled to the same rate of pay as their permanent counterparts.

Significantly, neither the labour hire company nor the host employer opposed the application, acknowledging these similarities and accepting the order to bring the labour hire workers’ pay rates in line with the host employer’s enterprise agreement.

“The decision is not contentious in the facts – these people did the same role,” says Goonrey.

“But there will likely be some upcoming applications which will be more complicated because they will be defended by labour hire companies or by the host company.”

The MEU has expressed its intent to assess the circumstances for labour hire workers at each work site and make further applications under the Same Job, Same Pay framework.

“This decision is going to be part of the case law that helps guide employers who use labour hire companies in terms of how they can avoid an order like this being made,” he says.

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Understanding the Same Job, Same Pay framework

The Same Job, Same Pay legislation was passed by the Albanese government in December last year as part of the Closing Loopholes Bill. The laws are designed to prevent employers from using labour hire to undercut the wages and/or conditions afforded to permanent employees via their enterprise agreements.

The legislation applies to businesses which have 15 or more employees, are covered by an enterprise agreement, and whose workforce is supplemented with labour hire workers. Sectors like construction, manufacturing, transport and healthcare in particular are likely to be impacted.

Under the new laws, the FWC can order labour hire companies to pay workers the same amount that would be paid to them under the host employer’s enterprise agreement, if they have been working for the host employer for more than three months and perform the same work as permanent employees.  

While Same Job, Same Pay orders will not kick in until November this year, applications can still be submitted beforehand, as occurred in this case. Any pay increases ordered by the FWC will become effective in November.

Anti-avoidance provisions have also been put in place to prohibit schemes that prevent the FWC from making a Same Job, Same Pay order or avoid the application of an order. 

A possible example would be trying to engage labour hire workers as contractors to deprive them of the new protections, or intentionally turning over the workers to stay under the three-month placement period. Deliberate attempts like this to skirt the new laws or game the system could attract significant civil penalties. 

“If they’re being treated the same as employees on the site in terms of the nature of the work itself and the operational aspects, that’s where it becomes very compelling.” – Aaron Goonrey, Partner at Pinset Masons

Is this the end of labour hire? 

This ruling signals the first of many decisions with significant financial impact on employers who use labour hire, particularly in heavily unionised industries like mining. Goonrey says this may prompt some employers to reevaluate their use of labour hire and its benefits.

“A lot of companies that use labour hire may be resigned to the fact that they will now have to pay a premium for that labour hire. Or, they’ll go to market and employ employees directly, which is part of the reason [why this policy was introduced] – to try and give more permanency.”

With that said, he disagrees with the notion that this policy will signal a “death knell” for labour hire. 

“There will still be a place for labour hire. I think a lot of companies will simply say, ‘We’re willing to pay the premium just for that flexibility.’ And there are a number of companies that are already paying their labour hire providers the same as what they’re paying their employees.”

For employers who engage labour hire workers and have an enterprise agreement in place, Goonrey suggests conducting a thorough analysis of the makeup of the labour hire workforce and the potential ramifications of a Same Job, Same Pay order to determine whether it would be beneficial to adapt or reduce the use of labour hire.

“It will become a finance issue, an operational issue and ultimately a business issue… [So], realistically, what you should be doing is bringing all the relevant business stakeholders together – finance, HR, operational – and working out, if an application was made, how much would this cost you?

“You’re better off being armed with the information about what the ultimate cost could be, as opposed to saying, ‘Let’s wait and see what happens.’”

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A recent case has provided further guidance in Australian employment law on the role of multiple decision-makers in matters involving the termination of employment. 

This case serves as a critical lesson for HR and employers on the importance of either a unified approach by all decision-makers involved in the termination process, or having a single impartial decision maker. 

The case also illustrates the importance of employers providing thorough and transparent reasons for termination of employment.

A brief outline of the case in question

In April 2020, a former employee and truck driver for a freight and logistics employer filed an adverse action application, alleging that the employer wrongfully dismissed him from his position.      

Among other allegations, he claimed that this action was in contravention of statutory protections, as he had exercised a workplace right and believed that the dismissal was in response to him exercising this right.

The Federal Circuit and Family Court found that the former employee’s dismissal was not due to alleged safety breaches or unprofessional behaviour as asserted by the managers. Rather, the Court found that the dismissal constituted unlawful adverse action against the former employee by the employer in relation to having exercised workplace rights, including requesting flexible work arrangements, querying the alleged underpayment and initiating proceedings with the Fair Work Commission.

The dismissal occurred after the national HR manager perceived the former employee’s queries about a flexible work arrangement to care for his child, and his queries about alleged underpayment, as “badgering” and “harassing”. 

The Court found that most of the former employee’s email interactions were respectful, and that he was seeking solutions to genuine issues, not harassing the HR manager. 

The HR manager acknowledged to the Court that in the event of significant safety violations involving an employee, it would be standard procedure for the overseeing manager to initiate a comprehensive investigation. However, the HR manager admitted that there was no paperwork before the Court about any investigation having been conducted into any of the alleged safety matters involving the former employee.

The Court highlighted that there was no documented evidence showing how the single alleged safety incident, which reportedly resulted in a “verbal warning”, transformed into a history of safety issues in breach of the employer’s ‘Three Strike Policy’, or “continual breaches” of that policy, which were given by the employer as reasons for the dismissal decision. 

The Court pointed out that there was a deficiency of credible evidence from the employer regarding the investigation and clarification of supposed safety issues involving the former employee. Moreover, evidence of the explanations provided by the employer for the dismissal was either non-existent or lacked credibility as to how the alleged safety concerns were factored into the decision to terminate the worker’s employment. 

This lack of evidence and plausible explanation convinced the Court that the alleged safety issues likely never occurred. Further, the Court held that the safety issues could not have been significant or influential factors in the decision to dismiss the former employee. 

The Court found no evidence of the serious safety issues that were claimed to have occurred, and accordingly, concluded that these could not have been substantive or valid reasons for the dismissal.

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The intricacies of decision-making in dismissal cases

A key aspect of this case was the involvement of multiple decision-makers, including the national HR manager, a partner of the business, the national transport manager and two state-level managers. 

Despite there being five decision makers, only two of these individuals provided evidence to the Court about the reasons for the dismissal of the former employee – the national HR manager, and the national transport manager. 

The Court found no explanation or evidence capable of discharging the reverse onus imposed on the employer in matters like this. 

Accordingly, the Court was satisfied that adverse action had been taken against the former employee by the employer in dismissing him from his employment for exercising his workplace rights.

Understanding the reverse onus of proof 

Under the applicable Australian law, once an employee establishes an apparent case that their dismissal may have been due to the exercise of workplace right(s), the onus shifts to the employer to prove otherwise. 

In this case, the employer had failed to discharge the reverse onus as it did not provide sufficient evidence or explanation from all decision-makers involved in the dismissal of the former employee.

The Court determined that the employer did not provide adequate evidence to counter the presumption that the former employee was dismissed for exercising his workplace rights. 

The absence of evidence from other decision-makers besides the national HR and transport managers left the Court without a substantive defence from the employer. 

The ruling stated: ‘There was no opportunity for the state of mind or mental processes of the not-called other joint decision-makers to be exposed to or considered by the Court. Further, the Court can also infer that those other joint decision-makers were not called because their evidence may not have assisted [the employer’s] case that the reasons for the dismissal were limited to alleged safety issues and alleged unprofessional behaviour.” 

The judge noted that the former employee’s minor disrespect in an email came late in a series of communications and did not justify dismissal. Instead, the timing suggested that a reason for dismissal may have been the former employee’s threat to involve the Fair Work Ombudsman, which occurred the day before the discussion of his dismissal.

Further, the national HR manager and national transport manager admitted that they had omitted some reasons for the former employee’s dismissal in the dismissal letter. The Court found that these omitted reasons included the former employee’s complaints about underpayment, which are a protected workplace right. 

Lessons for HR and employers 

This case highlights several important lessons for HR and employers. Firstly, it’s essential that all decision-makers are aligned and that their reasons for termination are comprehensively documented and presented. 

Had the employer in this case led uniform evidence from all the decision-makers about the reasons for termination, the result may have been different. Discrepancies or omissions in the reasons for dismissal will likely be detrimental, as seen in this case.

Secondly, employers must be aware of the reverse onus of proof where purported workplace rights are being exercised and prepare accordingly. This involves having a clear, documented rationale for termination that is not related to an employee exercising a workplace right. 

Finally, where possible, employers should elect to have an impartial and sole decision maker in dismissal matters – ideally, someone who is not involved in any previous process or the facts of a matter which may lead to the dismissal of an employee. 

The decision maker should ideally not be familiar with or involved in any workplace rights that the employee may have, or have exercised. Their decision regarding any disciplinary action, including dismissal, should be based objectively on the employee’s performance, conduct or behaviour. Accordingly the decision maker’s lack of knowledge about any workplace rights in the matter, would be advantageous. 

This decision is a reminder of the consequences of inadequate preparation and inconsistent decision-making in adverse action cases. 

The matter is set to proceed to a penalty hearing for the contravention of the relevant legislations, with legal costs reserved.

Aaron Goonrey is a Partner and leads the Australian and APAC Employment & Rewards practice at Pinsent Masons and Yuliya Chis is an Associate at Pinsent Masons. The advice in this article is general in nature and does not constitute formal legal advice.

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Following the recent passing of the Fair Work Amendment (Closing Loopholes No 2) Bill, employers will soon be subject to new laws governing the conversion of casual workers to permanent status – the ‘employee choice’ framework.

These changes, effective from 26 August 2024, will introduce a new definition of casual employment, along with new pathways for casual workers to convert to permanent employment if they wish to.

The new definition of casual employment shifts the focus from the terms of the employment contract to the practical reality of the employment relationship. This means that rejecting a casual worker’s request to become permanent will be more complex, since HR will no longer be able to lean on contracts to establish casual status.

However, these laws will also make it more difficult for casual workers to gain the protections of permanent employment, as the framework is only available if the employee no longer satisfies the definition of a casual employee. There will also still be many instances where an employer has reasonable grounds to refuse a request. 

In preparation for the new legislation to come into effect, here are some key legal considerations to keep in mind when determining whether a casual worker is entitled to convert to permanent status.

Understanding new laws around casual conversion

One of the most significant changes coming from the new legislation is the removal of employers’ obligation to initiate casual conversion.

The process is transitioning from one which is reliant on the employer checking employment status and offering conversion accordingly to one that places the onus on employees to notify the employers that they no longer meet the definition of a casual and therefore should be permanent employees. 

For HR, this shift has the potential to eliminate much of the busywork involved in checking on the length and status of employment and offering conversion to employees who may not wish to become permanent. The changes reflect the reality that many workers, particularly in sectors like retail and hospitality, are casual by choice and do not wish to lose the casual loading or flexibility this status gives them. 

With that said, the upcoming legislation also has measures in place to allow workers who do wish to convert to permanent status to do so and gain protections such as paid leave, notice of termination and redundancy pay. 

This is likely to have most impact in industries such as aged care, community services, childcare and labour hire companies, where work tends to be predictable, but where it has traditionally been challenging for some workers to convert to permanent status.

Particularly for employers in these industries, it’s crucial to understand what will constitute reasonable grounds to refuse a request under the new laws. 

This is especially true in light of the increased anti-avoidance penalties for improperly engaging casual workers, which were introduced in February this year. 

Employers now face significant civil penalties (up to $93,900 for individuals and $469,500 for body corporates) for breaches, such as dismissing or threatening to dismiss an employee with the plan to re-engage them as casual, making false statements to persuade an individual to enter a casual employment contract or misrepresenting employment as casual. 

Read more about new laws for engaging casual workers and how they could impact your business here.

Grounds for refusing a casual conversion request  

Under the new employee choice framework, employers can reject a request if the employee still fits the new definition of a casual employee. Employers will also retain the ability to reject a request based on fair and reasonable operational grounds. 

These grounds are situations such as where converting a casual employee to a permanent status would cause significant disruption to the business operations or substantial changes would be required to the way in which the employer’s work is organised. 

For instance, if the work is highly weather-dependent or heavily influenced by varying customer demand, employers may argue that maintaining a casual, flexible workforce is essential. Industries such as quarrying, where operations can be halted due to weather, or retail, where the volume of work varies greatly, are typical examples of where these grounds might apply. 

“Even if an employee works a regular pattern of hours, this does not necessarily mean they are entitled to permanent employment.”

An employer can also reject a conversion request on the grounds that there is an absence of a firm advance commitment to continuing and indefinite (i.e. they still fall within the new definition of a casual employee).

Currently, the absence of a firm advance commitment is largely determined by the terms of a contract. Under the new legislation, to refuse a request on the basis that they still fit the definition of a casual employee, employers will need to demonstrate that there is no such commitment by assessing how the relationship plays out in reality and not just having regard to the terms of the contract.

This involves considering factors such as the employee’s ability to turn down shifts or the variability of their work hours. If an employee can decline work or if their schedule lacks consistency, that will support the notion that they still meet the casual employee definition. 

Another factor that may be relevant is how far in advance an employee is informed of their shifts and patterns of work. This issue was raised in Workpac vs Skene, a 2018 Federal Court case where a casual worker was found to fit the definition of a permanent employee in part because he was provided with 12-month rosters in advance.

Employers may also assess whether there are full- or part-time employees performing exactly the same work as the casual employee. If this is the case, this can indicate the presence of a firm advance commitment to continuing and definite work, potentially making them eligible for permanent employment.

Importantly, even if an employee works a regular pattern of hours, this does not necessarily mean they are entitled to permanent employment. 

Best practice for rejecting a casual conversion request

If an employer determines that the employee still meets the casual employee definition or they have fair and reasonable operational grounds kto refuse a request, it’s important to communicate this decision to the employee the right way.

When rejecting a request on the basis of fair and reasonable operational grounds, employers must clearly articulate the specific operational reasons for the rejection in writing, this might include outlining the business’s need for flexibility and any negative impact a permanent conversion might have. 

It’s important to thoroughly communicate the context of customer needs or other variables, and why the current casual arrangement is necessary for their operations. 

Providing clear and detailed written responses is crucial not only to avoid disputes, but also to help employees understand the decision, manage their expectations and avoid misunderstandings. 

While employment contracts are no longer the sole factor in determining whether an employee is casual or not, it remains important to include clear contractual terms that align with the new definition of a casual employee, and keep clear records of the casual loading that has been paid to employees based on their employment status. 

While the upcoming legislation aims to reduce the burden on employers whilst still providing a pathway for casual employees to convert to permanent status, employers may still have valid grounds to refuse these requests (such as because the employee still fits the casual definition, or due to fair and reasonable operational grounds). By assessing, documenting and clearly communicating their  reasons for rejection, employers can mitigate legal risk and maintain the necessary flexibility in their workforce.

Will Snow is a Director and Molly Shanahan is an Associate at Snow Legal.

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Over the past week, there have been numerous media reports about the mishandling of sexual harassment and toxic workplace complaints and investigations, alleged cover-ups of senior executive misconduct and unsatisfactory complaint handling within organisations.

This might seem relatively surprising given changing community and business standards, not to mention the recent legislative reforms that place a positive duty on businesses to eliminate, as far as possible, various unlawful behaviours relating to sexual conduct in the workplace or in connection to work. 

If you speak to business leaders, seasoned HR professionals and people managers, they will usually respond by declaring that their organisation has addressed the positive duty and has robust systems for handling sexual harassment and toxic workplace behaviour.

However, this response may be analogous to when some employers previously proclaimed they did not have issues with underpayments of employee wages, only to find out some time later that they had been underpaying employees over many years, albeit, in many cases, unintentionally. 

So, what’s missing? Why does it seem organisations are still getting it wrong?

The Australian Human Rights Commission published guidelines in August 2023 that included practical examples of what employers should proactively be doing to comply with their positive duty to eliminate unlawful sexual behaviour in the workplace. The 112-page guideline makes it clear that it’s simply not enough for organisations to undergo a box-ticking exercise.

The guidelines comprehensively indicate that companies with strong culture and governance can effectively prevent and respond to workplace misconduct by:

• Having clear complaint handling procedures that are well-known within the organisation, so employees feel safe to report unsatisfactory workplace behaviour at an early stage.
• Creating support mechanisms for workers to feel safe and assisted by the organisation in raising issues about unsatisfactory workplace behaviour. For example, this could look like internal support through nominating workers or asking for volunteers to act as contact officers, and creating peer support networks and ensuring they’re trained in receiving disclosures of relevant unlawful conduct and harm. Organisations could also engage external specialist support through work-funded Employee Assistance Programs.   
• Ensuring investigations into allegations of unsatisfactory workplace conduct are undertaken in a fair and consistent manner to provide workers with confidence that their organisation is committed to creating a safe and inclusive work environment.

Below, we provide an overview of what boards, senior managers, HR, legal and risk professionals should be doing at a minimum and offer best-practice tips in relation to complaint handling and investigations to ensure the safety of their workers.  

This should help employers and HR avoid any reputational damage that their organisations may face when these issues are not managed to the high standards now expected by both workers, the government and the broader community. 

Best-practice complaint handling    

While best practice will look different in different businesses, depending on organisation size, operations (e.g. remote or international), HR and employee relations capacity, etc., employers should generally be implementing the following best-practice steps to ensure complaints are handled appropriately:

1. Consult with workers about existing and proposed complaint handling measures within the organisation.    

As persons conducting a business or undertaking, employers must, so far as reasonably practicable, consult with workers (which includes employees, contractors, volunteers and anyone else who carries out work for the business) who are or are likely to be directly affected by a health and safety matter.

Inevitably, many complaints about unsatisfactory workplace behaviour relate to safety matters, including psychosocial hazards.  

In engaging and consulting with workers about complaint handling measures and mechanisms, organisations are able to obtain real and practical knowledge and experience to make improved and informed decisions about how to handle complaints in a safe manner.

2. Implement a workplace policy that sets out the organisation’s complaint handling procedure

The policy should set out in clear, concise and plain language for workers to understand:

1. The who, what, where, why and how of making a complaint or raising a concern (including various options based on the level and rank of the person being complained about and the information required).   
2. That the process will be undertaken as confidentially as possible, explaining that information may need to be disclosed on a need-to-know basis.   
3. That their complaints or concerns will be taken seriously.   
4. What immediate action will be taken by the organisation after a complaint or concern is raised, including expected time frames.   
5. Options available to the worker to ensure their safety and wellbeing (e.g. if required, temporary adjustments to reporting lines, access to leave, etc.).   
6. Informal and formal options available to resolve the complaint where appropriate.   
7. An outline of possible consequences if misconduct in breach of an organisation’s policy or law is found to have occurred    
8. Where workers can provide feedback about the policy.

3. Implement a bystander policy

This policy should set out the organisation’s expectations for workers to report any inappropriate conduct witnessed as a bystander.

4. Regular and continuous communication

Organisations should regularly communicate the existence of relevant policies and procedures to employees and where they are located.

This should not be an exercise limited to the induction and starter packs for new workers, but part of a wider HR strategy to ensure workers are embedded with knowledge about the organisation’s expectations and the rules that govern the workplace.

5. Access to information

The complaint handling policy and procedures should be easily accessible and publicised to all workers (for example, located on the organisation’s intranet, on staff notice boards and provided as part of the welcome pack for new workers). The regular communication, mentioned above, should capture this point.

6. Appropriate training

Provide tailored training to all workers, and separate training specifically designed for managers and those who have people management responsibilities, to ensure they:

1. Understand the obligations they have in the complaint handling procedure.  
2. Equip them with the knowledge and information to discharge their obligations    
3. Know how to respond and/or escalate the matter appropriately, by testing them on the training content.

The training for everyone may be conducted by way of an interactive learning module or workshop that simulates different scenarios and guides decision-making depending on the type and severity of the allegations, and tests employees on the content covered.

Organisations may also like to consider offering mental health first aid training to equip front-line managers with recognising and responding to workers experiencing a mental health crisis arising from workplace conduct experienced or witnessed by workers.

“Communication is key throughout the investigation process to limit prolonged uncertainty and anxiety for all parties involved.”

Best-practice investigations    

Once a complaint or concern has been reported, and the organisation is aware of an issue, appropriate action must be taken by the organisation within a reasonable timeframe, and taking into account its available resources.

This is because there is a potential hazard that the organisation has been made aware of and needs to address promptly. Failing to act swiftly is the equivalent of leaving hazards such as a puddle in the middle of a shopfront, or a loose screw in a piece of machinery, meaning it often becomes too late to act.    

Appropriate action may take the form of a factual investigation to determine whether the allegations are more likely to have occurred than not, on the balance of probabilities, and should involve at least the following steps:

1. Undertake a risk assessment and determine whether any workplace adjustments are required to protect the safety of the complainant, and ensure confidentiality      

Depending on the nature of the allegations and proximity of working relationship between the complainant and the alleged perpetrator, workplace adjustments may need to be made to ensure everyone’s safety while the investigation is being undertaken.

For example, temporarily changing reporting lines, directing one of the parties to work from home or, in serious matters, suspending the alleged perpetrator from work until further notice.

2. Determine whether the investigation will be undertaken internally or by an external/independent party, and select an appropriate investigator

Subject to the seriousness of the allegations, it may be appropriate to conduct the investigation internally, by way of desktop review, etc; or seek legal advice; and/or engage an external third party to conduct the investigation.

Whatever way the matter is to be investigated, the investigator must be impartial, which means the investigator should not have any conflict of interest (either actual or perceived) – such as a former manager or close colleague – with the parties involved in the complaint; and should ideally be trained with undertaking investigations.

3. Communicate next steps clearly      

Communicate appropriately, and as applicable to all relevant parties, that a complaint has been made, who will be undertaking the investigation, what the investigation process will involve – including estimated timeframes – and what some of the potential outcomes could involve. 

This may also involve strategic communications with relevant teams to ensure confidentiality is maintained and the organisation’s commitment to a safe and inclusive workplace environment is highlighted. 

Communication is key throughout the investigation process to limit prolonged uncertainty and anxiety for all parties involved.

It provides assurance to complainants that their complaint is being treated seriously and managed appropriately, and keeps alleged perpetrators abreast of when findings are expected to be made.

4. Review the organisation’s policies and procedures with respect to complaint handling and investigations      

If the organisation has committed to a policy or procedure in relation to how complaint handling and investigations will be undertaken, these must be complied with, as all employees will expect that the process they have been notified about will be followed.

5. Conduct fair and objective interviews with the complainant, all relevant witnesses, and the alleged perpetrator

Give all parties the benefit of the doubt. Everyone involved should be treated in a fair and uniform way. Questions should be prepared in advance so interviewees will be able to tell their side of the story fully. Leading questions such as, “You knew what you were doing was wrong, didn’t you?”, should be avoided as theymmay lead to a biased response.

Where additional witnesses are identified during interviews, care must be taken to determine whether or not they should be spoken to, to ensure all available evidence is collected before any factual findings are made.

6. Record keeping

Keep a clear and comprehensive record of all steps taken, including keeping all interview transcripts, notes and evidence collected.

7. Investigation report

In many instances, the investigator should prepare a report at the conclusion of their enquiries. The report must contain the findings of fact and, if asked by the organisation, make recommendations and/or a determination.

If the investigation has been conducted in order for the organisation to obtain legal advice, the report should only be provided to the ultimate decision-maker(s) and not to any other parties.

8. Findings

The organisation should, after receiving the investigator’s findings, communicate those findings and any decision appropriately to all the parties involved.

The ultimate decision maker should ensure the final decision is proportionate to the findings made. Where adverse findings and outcomes are proposed, the organisation should provide the alleged perpetrator with the opportunity to respond before a final decision is made.

 This ensures the alleged perpetrator is given a procedurally fair process to provide any additional information that may not have been disclosed and could therefore impact the findings and outcome proposed.

What should HR do next? 

It’s clear that workers and the wider community are increasingly placing a higher standard on businesses and organisations to provide a safe and inclusive work environment. 

Accordingly, it’s more important than ever that organisations review their governance structure to ensure they have an effective ‘prevention and response plan’.

Such plans should include adequate complaint handling systems and ensuring workplace investigations are conducted correctly.

 As has been seen recently, failure to do so has far-reaching consequences, not only in damaging the organisation’s reputation with the public, but internally damaging workplace culture and creating a loss of trust in leadership, which will take significant time and resources to repair, if they are, indeed, repairable at all. 

Aaron Goonrey is a Partner and leads the Australian Employment & Rewards practice at Pinsent Masons and Jessica Park is an Associate at Pinsent Masons. The advice in this article is general in nature and does not constitute formal legal advice.

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The Fair Work Amendment (Closing Loopholes No 2) Bill was recently passed, making significant changes to the Fair Work Act 2009 (FW Act). Among these changes is a new definition of ‘casual employee’ which will come into effect on 26 August 2024. 

Previously, under section 15A of the FW Act, the definition of casual employment was if:

1. An offer of employment by the employer is made on the basis of no firm advance commitment to continuing and indefinite work according to an agreed pattern of work.
2. The person accepts the offer.  
3. The person is an employee as a result of the acceptance. 

The new definition of casual employment considers the practical reality of the relationship, as opposed to merely the terms in the employment contract (as was previously the case). Broadly put, the new definition encompasses an absence of a firm advance commitment to continuing and indefinite work, and in circumstances where the employee is entitled to a casual loading or specific rate of casual pay under an industrial instrument. 

There are a broad range of considerations to determine whether there is an absence of firm advance commitment to continuing and indefinite work, including the real substance, practical reality and true nature of the employment relationship, and whether: 

• There is an inability of the employer to elect to offer work, or an inability of the employee to accept or reject work.
• It is reasonably likely there will be future availability of continuing work.
• There are full-time or part-time employees performing the same kind of work.
• There is a regular pattern of work for the employee.
• These amendments acknowledge a firm advance can take a range of different forms, including in an employment contract, but importantly, through a mutual understanding or reasonable expectation.

New pathways for casual workers to convert to permanent employment

The changes also include a new pathway for employees to change to permanent employment status, previously known as casual conversion. The new pathway replaces the existing right to casual conversion. 

If an employee has been employed for six months (12 months in a small business), they can choose to change their employment status to permanent. There must be a specific event which clearly shows the transition, and it’s now up to the employee to initiate the shift to employment. 

The upside is that the onus is no longer on the employer to review and offer casual conversion.

“The new definition of casual employment considers the practical reality of the relationship, as opposed to merely the terms in the employment contract.”  

Akin to requests for flexible work arrangements, casuals can write to their employer to notify them that they’d like to change their employment status, and employers are required to respond within 21 days. 

An employer may refuse a notification on any one of the following grounds:

• They believe the employee has been correctly classified as a casual employee, e.g. they aren’t working on a systematic basis.
• There are fair and reasonable operational grounds for not accepting the notification, such as if substantial changes would be required to the way work in the business is organised to allow the employee to convert. 
• A change of employment status to full-time or part-time would not comply with a recruitment or selection process required by law, such as the Public Service Act 1999, which outlines that casuals cannot convert without a competitive selection process.

Avoidance penalties to be aware of

The changes will also introduce new anti-avoidance provisions to prevent employers from improperly engaging casual workers. This means employers must not: 

• Dismiss or threaten to dismiss an employee with the plan to then re-engage them as casual. 
• Make false statements to persuade an individual to enter a casual employment contract, such as telling them they will be financially better off.
• Misrepresent employment as casual.

Breaching these provisions can attract civil penalties. The maximum payable under the FW Act increased by 500 per cent for both standard civil contraventions and serious contraventions from 27 February 2024. Companies can now face fines of $469,500, or $4,695,000 for serious contraventions.

Implications for employers engaging casual workers

HR professionals should get across these changes and update their casual conversion processes and procedures to ensure a smooth transition and compliance with the new regime.  Factors to consider include: 

• While not having a firm advance commitment to continuing work is a consideration in determining whether an employee is casual, employers should still consider any conduct on their behalf which could suggest the employee is not a casual (e.g. while a contract says there will not be commitment, sending a text to the casual promising to give them a specific shift every week).
• Ensuring casuals are paid a casual rate or casual loading where they would otherwise be entitled to one under an industrial instrument.
• Being aware that casuals can now request conversion to permanency, and considering what grounds (if any) an employer has to reject such a request.

Fay Calderone is an Employment Partner at Hall and Wilcox. 

A version of this article was first published in the June 2024 edition of HRM Magazine.

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A recent Federal Court ruling has shed light on confusion about when employers are required to pay certain entitlements to an employee following their termination, including payment in lieu of notice, accrued but untaken annual leave and redundancy pay. 

The Fair Work Act (FW Act) itself does not prescribe a deadline or express time frame, aside from the general provision governing payments and frequency of salary under section 323(1) of the FW Act that requires all amounts payable to an employee to be paid in full and at least monthly. 

However, the Federal Court has recently examined the section of the FW Act governing the payment of accrued but untaken annual leave and found that it must be paid out on the day the termination took place.

The case concerned an employee who received payment of their accrued but untaken annual leave three months after their termination. The Federal Court held that this payment was three months late and in contravention of section 90(2) of the FW Act. As a result, the Court handed down a penalty of $17,000, which comprised approximately 25 per cent of the maximum applicable penalty.  

In an unusual twist, the Court also awarded $10,000 general damages to the Applicant due to the material effect the delay had on them, which resulted in distress due to the financial strain he experienced. 

Ignorance of the law is “no excuse” 

Whether an employee leaves your organisation voluntarily or if they are fired or dismissed because of redundancy, you must pay their unused annual leave.

In this case, the employer submitted that the delay in payment was due to limited knowledge of Australian employment law, and concerns about the accuracy of the leave records. 

The payment was processed once the employer was made aware that they needed to meet their obligation to pay the accrued annual leave as they had no explicit proof that the annual leave records were incorrect.  

The Court highlighted that to achieve general deterrence, a clear signal needs to be sent to the Australian community that all employers must know and understand their obligations under the FW Act and that lack of care and ignorance of the law is no excuse.  

This decision serves as a reminder to not only fulfil your obligation as an employer to know and understand the law, but, if in doubt as to whether an entitlement is payable or not, take adequate steps to investigate or seek expert advice. 

Following best-practice guidelines may not be enough to ensure compliance if you’re not up to date with case law.

As summarised by the Court, “It is not sufficient that one can have a mistaken belief and then take no steps to verify the circumstances.”  

“Following best-practice guidelines may not be enough to ensure compliance if you’re not up to date with case law.” – Michael Kriewaldt, Associate, Jewell Hancock Employment Lawyers

The legal implications 

Interestingly, this decision follows another Federal Court decision concerning paying notice upon termination. On appeal, the Court held that under section 117(2)(b) of the FW Act, payment in lieu of notice is a mandatory prerequisite to lawful termination and must be paid before the dismissal comes into effect.

It has become common practice for employers to provide payments in lieu of notice to outgoing employees after the termination date of their employment due to conflicting information available online. This decision makes it clear that to be considered a lawful termination, notice payments must not occur after the date the employment has ended.

A legal interpretation of the two Federal Court decisions suggests payment of notice and any accrued unused entitlements must be received by the outgoing employee on the day employment ends – something that’s not widely known by employers.      

These two decisions are particularly significant because they’re likely to be binding authorities for any junior courts, such as the Federal Circuit and Family Court of Australia, where the majority of termination entitlements disputes are ventilated. 

Further, it seems likely that the timing of redundancy payments would follow the same reasoning.

Ensuring compliance  

The decision to terminate an employee is generally demanding and can be challenging to enact.      

Before moving to terminate, it’s imperative to understand your obligations as set out in the FW Act and any applicable award or agreement. Non-compliance with these obligations will contravene the FW Act and may subject your organisation to pecuniary penalties. 

Employers should always practice procedural fairness when determining whether to end an employment relationship. 

The employee should receive written notice of their termination, which states the date that the dismissal will take effect from and ensure payment of any owed entitlements on termination. This includes any outstanding wages owed, notice, accrued annual leave, long service leave, the balance of any time off instead of overtime, and any redundancy pay, as applicable. 

Michael Kriewaldt is an Associate at Jewell Hancock Employment Lawyers.

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In times of cutbacks, identifying opportunities for redeployment can be a strategic way to retain valuable talent and prevent job losses. However, when issuing a redeployment offer, failing to consider the suitability of the new role can open employers up to legal challenges, as highlighted by a recent case heard by the Fair Work Commission (FWC). 

In this case, a building services company filed an application with the FWC to reduce an employee’s redundancy payment on the grounds that the employee had rejected the offer of redeployment to an alternative role. 

However, the FWC’s investigation revealed that the employer had not adequately assessed the employee’s ability to perform the new role, and had withheld essential information about the role from the offer. As a result, the employer’s bid to reduce the payout was unsuccessful.

“This case is a good reminder to HR of the general factors that need to be considered when you’re looking at what constitutes acceptable redeployment,” says Amy Zhang, Team Leader and Executive Counsel at Harmers Workplace Lawyers.

“It’s also a good warning to employers to not simply offer any old job just to try and avoid payment of redundancy pay.”

Redeployment offer was “substantially different” from existing role

The employee in this case had been working for the business as a project manager for around eight years when, in January 2023, he was informed of the company’s impending closure.

Soon afterwards, he was offered an alternative role at an associated hardware company. The new role was in business development management, which significantly differed from the employee’s original role. Citing his lack of suitable skills and experience, the employee rejected the offer. 

When his employment was officially terminated in late 2023, the employer did not pay out the agreed redundancy sum of $40,000. Instead, it filed an application with the FWC to reduce the payment to zero. It argued that it had provided the employee with an alternative employment opportunity, which the employee rejected, and claimed financial incapacity to pay the redundancy.

During its investigation, the FWC examined whether the new role was suitable based on an assessment of various factors, including job content, employee skills and experience, working conditions, remuneration and location.

Despite similarities in basic employment terms such as salary and working hours, it found that the core functions of the roles were “substantially different”. The new role involved responsibilities that the employee has no experience with, nor had he shown interest or competence in those areas. 

“The more information that you can impart about the process involved, the more that may help with managing stress and anxiety about the situation.” – Amy Zhang, Team Leader and Executive Counsel at Harmers Workplace Lawyers

Crucially, the employer also failed to disclose essential information about the new role, including a hefty annual sales target of $2.5 million. This lack of transparency was a major factor in determining that the redeployment offer was not suitable.

“Employers need to be careful to give the complete picture of what the new proposed role looks like,” says Zhang. 

“If you give a half-hearted or incomplete picture, and you’re not clear about the duties and responsibilities, the Commission could look at that and say it’s not acceptable alternative employment.”

Regarding the employer’s claim that it was financially incapable of paying out the redundancy package, the FWC noted that the employer’s associated entities were financially intertwined, suggesting potential sources of funds were available.

Ultimately, it concluded that the employer had not met the necessary conditions to warrant a reduction in redundancy pay, resulting in the preservation of the employee’s full entitlement of $40,000 in redundancy pay.

4 tips to manage redeployment offers fairly and legally

The current economic climate means many leaders are facing the challenge of cutting costs and headcount without opening their organisations up to legal, ethical or reputational risk. 

When handled correctly, redeployment can provide a mutually beneficial way to redirect talent to the parts of the business where it’s most needed. However, in light of the FWC’s ruling on this case, there are a number of legal and compliance considerations that employers should take into account when issuing a redeployment offer. 

To protect your organisation, Zhang recommends the following:

1. Ensure clear communication and documentation

The employer’s crucial misstep in this case was its lack of transparency, communication and documentation around the redeployment offer, says Zhang. 

“If an employer properly consults with an employee, these sorts of things can be discussed and managed in a positive and amicable way, and it doesn’t lead to this level of distrust.”

HR should also ensure job offers provide a thorough and accurate representation of the new role.

“At the minimum, you should be providing information about the specific duties, responsibilities, sales targets or other performance indicators, if there are employees that you need to be managing and overseeing – as much information as possible about the particular role to allow the employee to make an informed assessment. It’s not enough simply to say, ‘Here’s the job title, and this is what we loosely think it might involve.’”

2. Assess the suitability of an alternative job offer from all sides

When considering the suitability of an offer of redeployment, Zhang stresses that the assessment should not be based merely on assumptions or broad categorisations of work duties.

“The Commission can consider any relevant factor [to determine suitability], and it will depend on the particular job you’re looking at.

“If you’re offering a job that’s in a very different location to the previous role, or that has different shifts or hours of work, all of those things will be relevant. So it’s not just about the job and the duties and responsibilities. Sometimes job titles can be very important as well, [particularly] if it looks like it’s a demotion.”

3. Consult the employee involved

Engaging with affected employees during a redundancy or redeployment process is crucial to achieving a fair outcome, says Zhang. 

“Even if there’s no strict obligation under the law, it’s still best practice to consult because it engenders trust, and it can also help create new ideas about other ways to retain or redeploy the employee,” she says.

“It’s already a very stressful, distressing process for employees, and the more information that you can impart about the process involved, the more that may help with managing stress and anxiety about the situation.”

4. Provide adequate training and support

In addition to providing adequate information about the new role, demonstrating how you will support the employee through their transition is essential for a smooth redeployment, particularly if the role requires them to acquire a new skillset.

For example, if their new role requires more face-time with a client, how will you support them to develop their presentation, communication or influencing skills?

Equally important is ensuring that employees are properly supported when a suitable redeployment opportunity is not available.

“Make sure that you’re keeping an eye on your safety obligations,” says Zhang. “It’s always best practice to offer EAP services. We also quite often see [employers using] outplacement services as well to assist employees to be able to transition and find new employment.”

By keeping these legal considerations in mind, employers can design redeployment policies that stand up to scrutiny and provide maximum benefit to both parties.

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Non-com­pete claus­es are currently under scrutiny from var­i­ous quarters.

Broad­ly speak­ing, non-com­pete claus­es are a form of post-employ­ment restraint that pro­hib­it an employ­ee from work­ing for a com­peti­tor of their pre­vi­ous employ­er for a spec­i­fied peri­od in a defined geo­graph­ic area.

The ratio­nale for non-com­pete claus­es being imposed on depart­ing employ­ees is to pro­tect the legit­i­mate busi­ness inter­ests of the for­mer employ­er, usu­al­ly con­fi­den­tial infor­ma­tion and cus­tomer rela­tion­ships. This pro­tec­tion, how­ev­er, needs to be bal­anced against the right and need of the for­mer employ­ee to ply their trade or pro­fes­sion and earn a liv­ing. 

This bal­ance is why there is a ques­tion as to the enforce­abil­i­ty of non-com­pete restraints, with courts called upon to adju­di­cate as to whether a non-com­pete restraint should be enforced against a for­mer employ­ee and, if so, to what extent (in terms of time peri­od and geo­graph­ic scope). 

A court will not enforce the restraint beyond what is rea­son­ably nec­es­sary to pro­tect the legit­i­mate busi­ness inter­ests of the for­mer employ­er seek­ing to rely upon it. As a rule of thumb, it’s usually senior employ­ees who have sig­nif­i­cant access to con­fi­den­tial infor­ma­tion and cus­tomer rela­tion­ships who may have their non-compete clauses enforced. 

As such, there can be a prop­er basis for impos­ing a non-com­pete restraint against such employ­ees, as they can dam­age the busi­ness inter­ests of the for­mer employ­er by mov­ing to a com­peti­tor. There is a real prospect a court will enforce a non-com­pete in such circumstances.

However, there is an increas­ing­ly influ­en­tial view that it may be unfair for employ­ers to impose restraints on rel­a­tive­ly junior or low­er-lev­el employ­ees who have not had access to con­fi­den­tial infor­ma­tion or cus­tomer rela­tion­ships.This unjus­ti­fi­ably keeps those employ­ees from oppor­tu­ni­ties with oth­er employ­ers, and impedes labour mar­ket mobil­i­ty. In these cir­cum­stances, a court would like­ly give any attempt by an employ­er to enforce such a restraint against a for­mer employ­ee short shrift.

Unfair dismissal case brings non-compete clause into question 

In a recent unfair dis­missal deci­sion, the Fair Work Com­mis­sion con­sid­ered the impact of a non-com­pete clause imposed on an appli­cant on his oblig­a­tion to mit­i­gate the loss from his dismissal. 

The appli­cant in this case was a sales­per­son sell­ing grout­ing and grout­ing ser­vices. The FWC addressed the issue of the non-com­pete clause and its rel­e­vance to mit­i­ga­tion of loss.

Deputy Pres­i­dent Col­man, by way of back­ground, observed:

“Sec­tion 392(2)(d) requires the Com­mis­sion to con­sid­er the efforts of the per­son to mit­i­gate the loss suf­fered as a result of the dis­missal. [the applicant] said that he had applied for hun­dreds of jobs on ​‘Seek’, includ­ing sales jobs, in which he had a lot of expe­ri­ence. How­ev­er, he said that he had not applied for jobs in the same sec­tor as his pre­vi­ous work, because of the pres­ence of a post-employ­ment restraint pro­vi­sion in his con­tract of employ­ment (clause 10.1). 

“This stat­ed that for a peri­od of 12 months after the ter­mi­na­tion of his con­tract of employ­ment, [he] was not to work as an employ­ee or con­trac­tor or advi­sor or in any oth­er capac­i­ty in any busi­ness which was ​‘engaged in activ­i­ties sub­stan­tial­ly sim­i­lar or iden­ti­cal to the Com­pa­ny and pro­vides ser­vices sub­stan­tial­ly sim­i­lar or ser­vices offered by the Company.’”

Deputy Pres­i­dent Col­man then pro­vid­ed com­men­tary on the restraint, rel­e­vant to the appli­cant but also of inter­est more broad­ly on the issue of post-employ­ment restraints imposed on ​‘ordi­nary’ workers:

“One won­ders why such restraint of trade pro­vi­sions are so com­mon­ly found in the con­tracts of ordi­nary work­ers and whether they real­ly pro­tect any legit­i­mate busi­ness inter­est of the employ­er, or mere­ly serve to fet­ter the abil­i­ty of work­ers to ply their trade, and to reduce com­pe­ti­tion for labour and ser­vices.

Ordi­nar­i­ly, one would expect a per­son to have applied for jobs in the sec­tor of their exper­tise as a rea­son­able step in mit­i­gat­ing loss. How the pres­ence of a non-com­pete pro­vi­sion in his con­tract explains [the applicant’s] deci­sion not to do so.

“A court will not enforce the restraint beyond what is rea­son­ably nec­es­sary to pro­tect the legit­i­mate busi­ness inter­ests of the for­mer employ­er.”

Although the pro­vi­sion is most like­ly unen­force­able on the basis that its scope is unrea­son­able, an ordi­nary work­er can­not be expect­ed to know this, and it is under­stand­able that [the applicant] would not want to risk embroil­ing him­self in a legal con­tro­ver­sy by act­ing con­trary to an express pro­vi­sion in his con­tract.”

As a result, the FWC refused to reduce the amount of compensation awarded to the applicant for unfair dismissal.

This decision highlights the disconnect between legal principles for non-compete clauses and how many employers enforce these restrictions on employees, regardless of whether they had enough access to confidential information or customer relationships to justify the restrictions.

This sit­u­a­tion often aris­es from employ­ers using pro for­ma employ­ment agree­ments which con­tain, as part of their stan­dard terms, post-employ­ment restraints such as non-com­pete and non-solic­it claus­es. 

Often lit­tle thought or con­sid­er­a­tion is giv­en to whether to include the post-employ­ment restraints or to their ulti­mate enforce­abil­i­ty if test­ed. Indeed, there may be no inten­tion on the part of the employ­er to ever enforce the restraints. 

Of course, employ­ees are not to know this – as far as they are con­cerned there is a post-employ­ment restraint in their con­tract and, as Deputy Pres­i­dent Col­man observed, they may not want to be poten­tial­ly drawn into a legal dis­pute with a for­mer employ­er and so com­ply with the restraint, even if the employ­er had no inten­tion of enforc­ing it. 

Reviews of non-competes in the USA and Australia

This deci­sion comes at a time when post-employ­ment restraints are under review, both in Aus­tralia and the USA. 

In the USA, the Fed­er­al Trade Com­mis­sion (FTC) has tak­en the dras­tic step of ban­ning non-com­pete claus­es in employ­ment con­tracts com­plete­ly. 

Only exist­ing non-com­pete claus­es for senior exec­u­tives (a cohort of less than 0.75 per cent of work­ers in the US) will con­tin­ue to be enforce­able. Moving forward, there can be no new non-com­pete restraints for any employ­ees, includ­ing senior executives. 

In Aus­tralia, the Com­pe­ti­tion Review Task­force is present­ly exam­in­ing non-com­pete claus­es and var­i­ous oth­er form of employ­ment restraints, with sub­mis­sions being sought. 

The Issues Paper released by the Com­pe­ti­tion Review Task­force pro­vides this summary:

“Sev­er­al issues have been iden­ti­fied relat­ing to the use and impact of non-com­pete claus­es. Many issues iden­ti­fied in empir­i­cal analy­sis have been affirmed as prac­ti­cal issues affect­ing Aus­tralia today through the Com­pe­ti­tion Review Taskforce’s ear­ly engage­ment, and include con­cerns about:

• The ​“chill­ing effect” of restraint claus­es on work­er mobil­i­ty, par­tic­u­lar­ly among low­er-income work­ers, to choose bet­ter-pay­ing jobs, and the abil­i­ty for busi­ness­es to start up, recruit tal­ent and grow.
• The high cost of lit­i­ga­tion, the lack of clear guid­ance and ​‘bright line’ rules, and the use of cas­cad­ing claus­es or the ​‘blue pen­cil test’, which can leave both work­ers and busi­ness­es with an unclear under­stand­ing whether an agreed restraint will be upheld as rea­son­able and enforce­able.
• The eco­nom­ic con­se­quences of poten­tial­ly inef­fi­cient allo­ca­tion of labour and infor­ma­tion, which may be ham­per­ing pro­duc­tiv­i­ty growth and innovation.”

These are rea­son­able con­cerns, but they can be addressed with­out ban­ning non-com­pete claus­es alto­geth­er. 

In deter­min­ing the enforce­abil­i­ty of such restraints, the courts, through prin­ci­ples devel­oped over decades of judi­cial con­sid­er­a­tion, care­ful­ly endeav­our to ensure an appro­pri­ate bal­ance is struck between the right of employ­ers to pro­tect their legit­i­mate busi­ness inter­ests and the right of employ­ees to change posi­tions and earn a liv­ing. 

Do you think non-compete clauses should be banned? Let us know in the comment section.

Michael Byrnes is a Partner at Swaab. A version of this article first appeared on Swaab’s website. You can view the original here.

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Under new federal laws, our understanding of the distinction between an independent contractor and an employee is changing.

Passed on 12 February – and coming into effect in the first and second half of 2024, and in early 2025 – the Fair Work Legislation Amendment (Closing Loopholes No. 2) Bill 2023 introduces statutory guidance for defining the relationship between an employer and a worker. 

This guidance states that the relationship should be determined by ascertaining the “real substance, practical reality and true nature of the relationship”.

In other words, explains David Sigler, Senior Associate, Koffels Solicitors and Barristers, “To determine whether a worker is an independent contractor or an employee, regard must be had to the totality of the relationship between the parties. 

“[This] means a multifactorial test will apply,” says Sigler.

• Factors include, but are not limited to: 
• Who controls the work performed, and how it is performed.
• Where financial responsibility and risk lies. 
• Who supplies the tools and equipment.
• The worker’s ability to delegate or subcontract the work.
• Whether the worker is engaged by other businesses.
• The expected work hours.
• The expectation of work continuing.

The multifactorial test is not new. Rather, it was usually applied by courts until 2022 – when, in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1 and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2, the High Court of Australia determined that where a contract exists, the employer-worker relationship should be determined by that contract – and that the multifactorial test should only apply in the absence of a contract. 

Under the new law, the practical reality of the working relationship should always be considered, whether there’s a contract or not.

What might these changes mean in practice? In short, an employer can no longer simply point to a contract to prove that a worker should be considered a contractor rather than an employee. 

Instead, it is necessary to assess the relationship holistically, considering the factors listed earlier, as well as others, such as those listed below:

In doing so, it’s important not to rely on any single factor. 

“The test doesn’t place any one, or other, indicia as completely indicative of the relationship,” says James True, Practice Group Leader, Employment Law, LegalVision. “All indicia need to be weighed in making the determination.” 

An example in action

Practically applying the factors can be somewhat challenging, given there is yet to be a case decided under the new laws. However, previous cases can provide some guidance for HR professionals and employers. 

In one such case, a worker was engaged as a tiler/grouter with a company from May 2022 to June 2023. There was no written contract. The worker argued she was an employee, while the company said she was a contractor.

The FWC, in applying the multifactorial test, agreed that the worker was an employee due to a range of factors. First, she did not work for other businesses, and therefore did not carry on a trade or business of her own. 

“Where [the worker] exclusively works for the principal or employer, this can indicate employment,” says True.

The fact that the worker submitted an ABN, provided invoices and was responsible for taxation were considered as potentially indicative of an independent contractor relationship, but “not strong reflections of the reality of the working relationship”.

Second, when it came to assessing the level and nature of control over the work performed, the FWC held that the worker could not freely refuse work. This conclusion was based on messages between her and the employer, including the following exchange: 

Worker: Can I please have a day off tomorrow? 

Her manager: [Expletive], you cannot take a day off. [ADDRESS REDACTED], Go there and roll the glue.

Further, the worker, in performing tasks set by the employer, was required to follow instructions, and did not control her hours, nor how she completed the work.

“Where controls exist [on the employer’s part], it’s indicative of an employment relationship,” says True. 

Third, even though the worker supplied tools and equipment, in that she bought the materials needed to perform the job, these purchases took place according to the employer’s instructions. 

“Typically, an independent contractor would have their own tools of trade.”

The FWC emphasised that the outcome of the multifactorial test should be determined “on balance and considering the totality of the evidence”. 

How can HR prepare?

The first step for HR is to review existing engagements with independent contractors.

“[When] the legislation comes into effect, it will be necessary to ensure that the entire relationship between the parties is considered – in other words, the multifactorial test is applied – to determine whether the relationship has been appropriately characterised,” says True. 

It won’t be enough to consider the contract only. HR must look at how the relationship operates practically.

“Where controls exist [on the employer’s part], it’s indicative of an employment relationship.” – James True, Practice Group Leader, Employment Law, LegalVision

If it emerges that, despite a contract, an arrangement resembles an employer-employee relationship, then the employer should make adjustments to ensure the worker receives appropriate entitlements and rights, such as general protections.

“Where [a relationship] hasn’t [been appropriately characterised], there can be exposure to back-payment claims of employment entitlements or penalties for sham contracting,” says True.

Template contracts should be examined particularly thoroughly to ensure there are no unfair contract terms. Terms that could introduce risk might include paying a contractor less than an employee for the same work, placing restrictions on the contractor or insisting on unreasonable working hours. 

In addition, HR should be aware that high earners who are already contracted can choose to retain contractor status. 

“Existing independent contractors who earn more than the contractor high income threshold may opt out of becoming employees,” says Sigler. 

“The contractor high income threshold has not been set, and it may be the same as the employee high income threshold, which is $167,500.”

Finally, it should be noted that the changes won’t apply to businesses that are only “national system employers” due to a state’s referral of powers to the Commonwealth. For these businesses, the cases decided by the High Court in 2022 will still apply.

With just months to go before the new laws are implemented, it’s time for HR to take the bull by the horns and get in early. 

This will optimise employer-worker relationships and ensure that all workers – be they contractors or employees – receive the legal rights and remuneration due to them.

This article originally appeared in the April-May 2024 edition of HRM Magazine.

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