Market Overview - Employment & WHS, Australia 2015

The below market overview was prepared for Doyle’s Guide by Anthony Longland, Sonia Millen & Tony Wood from Herbert Smith Freehills.

Industrial Relations, Employment and Occupational Health and Safety practitioners, across the breath of the legal market, have had a busy year during 2015/16. In many respects it has been a year of change involving significant reports from the Productivity Commission and the Trade Union Royal Commission; some important court and tribunal decisions, the first amendments to the Fair Work Act for some time and the completion (or near completion) of construction activities on a number of major projects across the nation. In health and safety, we have seen regulators following an international trend to become more involved in a broader scope of ‘public safety’ matters with the prosecution of Essendon Football club as a significant example, the ongoing use of, at times, costly Enforceable Undertakings in lieu of prosecution and the first attempts at prosecutions of officers under the Model WHS legislation.

We face the historic possibility of a double dissolution election during 2016 where it is likely that 2 pieces of legislation considered by the subsequent joint sitting of Parliament will deal with industrial relations.

Movements of practitioners have continued during the year including to smaller boutique firms, firms acquiring expertise in the area for the first time and international firms moving into the jurisdiction. Australia’s major corporates continue to build internal legal capability in this area.

Although perhaps not to the extent enjoyed by practitioners in other disciplines, employment, industrial relations and safety practitioners at the larger international firms are slowly increasing the international work they perform, either for clients investing in Australian businesses and assets or Australian clients expanding to overseas locations.

Whilst one expects a slowing of activity during a federal election year – particularly given the cessation of construction activities on numerous major projects, there is reason to believe there will be a further uptick of work during 2017, particularly if there is legislative change as a result of the federal election outcome. The creeping expansion of work health and safety legislation with significant changes mooted to the National Heavy Vehicle Laws to expand the duties of company officers serves as a key example.

The activities of the Fair Work Commission

The examination of the Fair Work Commission’s annual report (and the quarterly updates) is a useful guide to the activity of practitioners. Those statistics reveal:

In 2014/15 the Commission received 34,152 applications, which was a decrease of 7.9% from the previous year. This decrease however was largely the result of a significant decrease in the number of applications to terminate individual agreement based transitional instruments. Such applications decreased by 73%. The number of applications for approval of enterprise agreements also fell by 12.3%, with 832 fewer applications made. Other trends include:
applications from individuals under the General Protections provisions of the Fair Work Act increased by 17.5%, accounting for 9.9% of all applications made;
applications to deal with disputes under enterprise agreements or modern awards fell by 13.6%;
applications to deal with bargaining disputes increases slightly, off a low base, by 12.8% to 476 applications;
applications relating to industrial action continue to decline with 3.4% fewer applications made compared to the previous year which represents a large decline of 32.6% fewer applications than those made in 2011/12.
Practitioners will recall that the Fair Work Act’s anti-bullying jurisdiction commenced on 1 January 2014. During its second year of operation, some 694 applications were dealt with by the Tribunal.

The activities of the Fair Work Ombudsman

During 2014/15, the Fair Work Ombudsman (FWO) assisted parties involved in over 25,000 workplace disputes. Of these, around 18,000 formal allegations of non-compliance lodged through a dispute form, mostly from workers. The remaining 7,000 matters came through as phone or email enquiries and were referred to the FWO’s newly established ‘Early Intervention’ program.
The majority (68%) of disputes concerned minimum wages and conditions (49%), annual leave entitlements (10%), payment in lieu of notice (5%) and failure to provide a payslip in the required timeframe (4%).

Trends and developments in litigation

As can be seen above, regulators remained active during the course of the year. An important tool in their arsenal is the ability to agree penalties and other terms of settlements in proceedings concerning civil penalty provisions. In a series of recent Federal Court judgements, that practice was thrown into doubt.

However this year the High Court has confirmed that while the Court is not bound to accept the figure proffered by the parties, there is no impediment to the regulator seeking agreements in this way, and the Court may accept an agreed settlement if it considers appropriate in the circumstances (Commonwealth v Fair Work Building Industry Inspectorate). There is little doubt that this decision will encourage the ongoing activities of regulators and the use of litigation to achieve their objectives.

There has been ongoing litigation in a number of important areas in the Federal Court. Important decisions in relation to the application of the good faith bargaining obligations under the Fair Work Act (AMMA v MUA); the scope of the Fair Work Commission’s powers to halt industrial action (Esso Australia v AWU); the calculation of compensation awards for breaches of the Fair Work Act (MUA v Fair Work Ombudsman); the jurisdiction of the Fair Work Commission to dispose of appeals to its Full Bench (Gregory v Qantas Airways); and the rate of payment applicable for unused annual leave paid on termination (Centennial North Mining Services v CFMEU) are all areas which have been dealt with in some detail by the Court.

Since their introduction in 2010, the General Protection provisions in the Fair Work Act have produced steadily increasing work for employment lawyers across the market. In addition to the remedies provided to individuals who suffer adverse action in connection with their employment, the provisions also require careful navigation by employers restructuring or otherwise introducing changes into their workplace. If anything, the demand in this area increased following 2 decisions of the High Court in the Bendigo TAFE and BHP Coal decisions. This year, the full Federal Court issued an important decision on the scope of those provisions, the majority finding that an employer did not take adverse action against an employee for an impermissible reason by changing the employee’s roster on the basis of his persistent absences from work on authorised sick leave (CFMEU v Endeavour Coal). This involved an important clarification on the previous law to the effect that employers who focus on the operative effect of an employee’s actions (here their absence from work) rather than the underlying reason for that action (here the exercise of a workplace right to take sick leave) are not likely to be found to have breached the provisions. A special leave application was denied in the High Court in late December 2015. It is difficult to say whether the decision will herald a reduction in proceedings under the General Protection provisions. It may continue to generate work as employers seek to ensure that changes they implement in the workplace do not fall foul of these provisions.

The trend of increasing damages awards in sexual harassment claims, which was encouraged by the Full Federal Court decision in Richardson v Oracle in 2014, has continued, with larger amounts of general damages being awarded in a number of cases. This trend resulted in a Tribunal in Victoria late in 2015 ordering damages of $330,000, and a rare costs orders, in favour of an employee who had been sexually harassed at work (Collins v Smith).

Right of entry onto work sites by union officials remains a contentious topic, particularly (as always) in the resources sector. Recently, the Full Bench of the Fair Work Commission significant expanded the locations in which unions may exercise rights of entry, holding that an area (in this case the cabin of a dragline) which is used ‘in part’ for meals, can be considered a ‘crib room’ for the purposes of the right of entry provisions of the legislation (CFMEU v Central Queensland Services). This decision will have a far-reaching impact, and may cause substantial logistical difficulties for employers where their primarily functional working zones also provide amenities for employees. This decision has been appealed to the Federal Court. The Commission has also be willing to step into previously unchartered territory and significantly curtail the rights of unions to exercise right of entry to investigate suspected breaches of WHS laws, imposing significant restrictions on the CFMEU on the Eastern seaboard.

The use of Enforceable Undertakings by regulators in the states that have introduced laws based on the Model WHS Act has continue apace. These instruments allow for a negotiated outcome in lieu of prosecution, but they have proved costly for many businesses with organisations bound to commitments worth many hundreds of thousands and with the spectre that noncompliance with the conditions will result in prosecution in any event.

WHS regulators attempted to get some runs on the board with officer prosecutions. The regulator in the ACT unsurprisingly failed to prove that a project manager had the requisite degree of control over a business to be an officer under the WHS Act (B McKie v Munir Al-Hasani v Kenoss Contractors Pty Ltd (In Liq) [2015] ACTIC 1 (3 August 2015). However, regulators across the country continue to interrogate the role of officers following serious workplace health and safety incidents and there is perhaps a clear appetite for a major case under the requirements of the WHS Act that require officers to exercise ‘due diligence’ to ensure their organisation does not breach the laws.

Major disputes

This year saw the settlement of major disputes in the building and construction industry. As far back as 2013, a dispute at the Myer Emporium construction site in Victoria arose when the employer, Grocon, failed to agree to union demands concerning the employment of union nominated safety officers. The dispute lead to a ‘black ban’ on one of Grocon’s suppliers, Boral. Very significant litigation occurred between these 2 companies and the CFMEU for some years until settlements in 2015.

Both matters were settled in widely reported circumstances. Grocon was reported to have agreed an amount of damages of approximately $3.5 million and Boral an amount in excess of $4 million – together with an agreed new and unprecedented template of protection of lawful commerce from illegal union behaviour.

The 2 disputes are the most recent examples of very large civil damages actions being taken against unions, resulting in prolonged litigation and significant settlements.

In Western Australia, a widely reported matter before the Federal Court is moving closer to hearing where the major multinational Chevron has made a damages claim against the MUA for damages in excess of $20 million.

One of the numerous lengthy and difficult enterprise bargaining disputes which occurred during the year involved rail operator Aurizon. In a significant decision in April 2015, a Full Bench of the Fair Work Commission ordered the termination of 14 of Aurizon’s enterprise agreements. The orders led to intense negotiations and the settlement of replacement agreements not long afterwards. That decision – which was subsequently affirmed on appeal by the Full Court of the Federal Court, has had a significant impact on enterprise bargaining and is a real game-changer for employers seeking changes to unsustainable enterprise agreements. It has been recently followed by a senior member of the Tribunal who ordered the termination of enterprise agreement applying to coal miner Peabody.

Two major enquiries

Workplace lawyers from around the country were engaged in a variety of capacities advising parties and appearing before the Heydon Royal Commission into various trade union activities. Originally slated to be completed during 2014, the enquiry was extended and ran through 2015. A lengthy 6 volume report was delivered to the responsible minister at the end of 2015. The ramifications from the report will be many and varied and will continue to occupy workplace lawyers particularly if, as expected, legislation to reinvigorate the former industry regulator, the Australian Building and Construction Commission, passes through the parliament.

The Productivity Commission delivered its draft report on the operation of the fair work legislation in August 2015. After further industry consultation, its final report was delivered early in 2016. The report makes widespread recommendations for change and the responsible minister has indicated a preparedness to consider all of them.

Each of these enquiries create the very real possibility of ongoing legislative change in the near future.

Legislative change

Important amendments to the Fair Work Act passed the parliament in November 2015 overhauling the Greenfields enterprise agreement making process, giving the Fair Work Commission power, in certain circumstances, to arbitrate an outcome where the parties have been able to reach an agreement after 6 months of negotiations.

The legislation also includes other amendments concerning protected industrial action.

These are the first amendments made to the legislation for some time. Advising on their ramifications has occupied practitioners for some time.

In March 2016, consultation was held on proposals to significantly expand officer duties in the chain of responsibility and other road transport safety requirements under the National Heavy Vehicle laws.

We also saw the increasing acceptance of drug testing on work sites with the introduction of mandatory drug and alcohol testing on Commonwealth funded projects.

Employment and union membership statistics

These statistics also tend to point to activity for practitioners in the area. Growing employment (and reducing unemployment) creates the conditions for more competition in the labour market and hence an environment more conducive to disputation.

Over the past 12 months, trend employment increased by 302,500 (or 2.6%), which was above the average year on year growth over the last 20 years of 1.8%. Over the past 12 months trend unemployment decreased by 29,800 (or 3.9%), with a trend unemployment rate decreasing from 6.2% to 5.8%. The participation rate (up 0.5 percentage points) and employment to population ratio (up 0.7 percentage points) both increased over this period.

Data released by the Australian Bureau of Statistics late in 2015 suggests that the long-term decline in union density continued during 2015, with union membership falling from around 1.74 million to 1.6 million, an 8% decrease over the 12 months to August 2015. There also continues to be a stark contrast in union density between the public and private sectors, with public sector membership sitting at around 39%, compared with 11% in the private sector. Overall, union density has fallen from around 40% in 1992 to a little over 15% in 2015. Interestingly, despite this reduction in total union membership, the ABS has also reported that the number of industrial disputes for the year ending September 2015 (220) was actually greater than those in the previous 12 months (193), however, the total number of working days lost to industrial disputes was significantly down (80,900 compared with 90,600).

This year has seen an increasing tendency of unions to consider amalgamations and mergers apparently in order to fight this decline in union membership and increase their influence within the labour movement. Besides the high profile CFMEU/MUA merger, which has just been endorsed at the MUA National Conference in February 2016, and would see 2 of Australia’s most militant unions combining forces, the CFMEU has also been in talks to merge with the smaller TCFUA. Similarly, the AMWU and United Voice have reportedly been in discussions for amalgamation which would see them create Australia’s 4th–biggest union. As there is scant detail publically available about these mergers, it is unclear what impact, if any, they will have for employers.

Employee wellbeing

The mental health and wellbeing of employees continues to be a key trend, with the conclusion of inquiries into the mental health of fly in fly out workers in Western Australia and Queensland. Regulators are increasingly flexing regulatory muscle in this space with active auditing of mental health and wellbeing across white and blue collar environments. It is clear that expectations of society and regulators will continue with employers being actively encouraged to do more in this space.