Unfair dismissal and reinstatement: Fair Work Commission warns against the “sword or shield” of mutual trust and confidence breakdown
A Fair Work Commission (FWC) Full Bench recently reiterated that reinstatement is the primary remedy for unfair dismissal, 1 and that employers and employees should not use an alleged breakdown of mutual trust and confidence as a “sword or shield” in arguing for or against the appropriateness of reinstatement. Facts An employee of Bechtel Construction (Australia) Pty Ltd was summarily dismissed from his employment for serious misconduct. The reasons for the dismissal were that the employee was absent from work without authorisation on one occasion, and that he attended work for a pre-start meeting when he had been instructed to remain at home on stand down, as well as abusing his supervisor and questioning his abilities in front of the entire work crew. The employee brought a claim of unfair dismissal against Bechtel. Senior Deputy President richards of the FWC found that the employee had been unfairly dismissed and, in finding that reinstatement was inappropriate, ordered that Bechtel pay the employee an amount equivalent to six weeks’ pay in lieu of reinstatement. The employee appealed the decision not to reinstate him in his employment and, the level of compensation awarded. Bechtel also appealed, arguing that the level of compensation awarded was excessive in light of the employee’s failure to take reasonable steps to mitigate the loss suffered because of the dismissal. Decision In refusing both parties permission to appeal, the Full Bench of the FWC rejected the employee’s argument that, in finding against reinstatement, the Senior Deputy President failed to take into account if there had been a loss of trust and confidence between the employer and the employee. The Full Bench found that invoking the concept of mutual trust and confidence “should not be a mantra that can be relied upon as a sword or a shield in relation to the primary relief of reinstatement”. It found that the Senior Deputy President’s reasoning that it would be inappropriate for the employee to be reinstated was sound, based on evidence that the employee: • proposed that he utilise his accrued sick leave rather than undergo blood alcohol content (BaC) testing when he was onsite; • refused to accept a letter of warning in relation to BAC testing; would refuse to undergo BAC testing (in a zero tolerance work environment) at his discretion; • returned early to the crib hut, instead of seeking instructions from the immediate work area; • left the work area when he had been warned at a prior date not to do so without speaking to a supervisor; • refused to cooperate to complete an “incident form” when reasonably requested to do so; and • used aggressive language and displayed ill temper in disciplinerelated interactions with his employer. In relation to the amount of compensation awarded, the Full Bench found that there was no error that warranted appeal, and that the Senior Deputy President’s decision to discount the employee’s compensation by 50% was appropriate and reflected the conclusion that, while the employee’s misconduct was not sufficient to justify summary dismissal, it had contributed to Bechtel’s decision to dismiss him. Therefore the employee’s misconduct obliged the FWC to reduce the amount of compensation awarded to the employee. Bottom line for employers • Under the Fair Work Act 2009 (Cth), reinstatement is the primary remedy for unfair dismissal, and only where this is inappropriate will compensation be awarded in lieu. • Employers faced with a claim for unfair dismissal should not simply assert a breakdown of trust and confidence in arguing against reinstatement, but should ensure that all evidence relevant to the relationship between the employer and the employee – and any break-down in that relationship – is put to the FWC. the importance of procedural fairness T he Fair Work Commission (FWC) has awarded compensation to a former employee of Basin Sands Logistics Pty Ltd (BSl) after finding that, despite BSL having a valid reason to terminate his employment, it failed to afford him the requisite level of procedural fairness. 1 Background BSL provided labour and equipment to Bemax resources Pty Ltd and employed the employee, Mr Szentpaly, as a loader driver to work at Bemax’s mining operations in southwest New South Wales. Mr Szentpaly was rostered to work a 12-hour night shift at Bemax’s Ginko mine site. He claimed that sometime after commencing his shift he began experiencing problems with the hydraulic ride control and the driver’s seat of the loader. At approximately 11:30pm, five and a half hours into his shift, Mr Szentpaly determined that the loader was not safe to operate. Mr Szentpaly parked the loader and spent the next six and a half hours in the crib room at the mine site, where he remained until his normal finishing time of 6:00 am. The following shift, Mr Szentpaly’s manager questioned the limited amount of material carted by him on the previous shift. Mr Szentpaly told his manager about the problems he had encountered with the loader and was questioned as to why this was not reported to the workshop mechanics. During the following shift, and subsequent shifts, Mr Szentpaly continued to experience problems with the loader, resulting in him suffering pain in his lower back. As a result, during the shift, Mr Szentpaly parked the loader, stopped work and headed back to camp. This time, he telephoned the shift supervisor and told him that he was upset and needed to return home to Mildura. The following day he received a medical certificate stating that he was unfit for work. Three days after Mr Szentpaly left work, he was visited at his home by two BSL representatives and issued with a letter terminating his employment. Mr Szentpaly commenced unfair dismissal proceedings in the FWC, seeking to be reinstated to his previous position with BSL. a valid reason for termination? In determining whether the employee had been unfairly dismissed, Commissioner Gregory first considered whether BSL had a valid reason to dismiss Mr Szentpaly. The following issues were considered. • Mr Szentpaly had “nodded off” whilst at work on previous occasions. • He had been issued with an “Official Final Written Warning” following a collision at the worksite earlier in 2013. • He did not report to the nurse on site or the mechanics in the workshop and did not attempt to make contact with the Supervisor on duty. • Another BSL employee who used the same loader, did not consider the problems with the loader’s hydraulics to be safety issues and said that they could be easily rectified. • Mr Szentpaly had not “parked and tagged” the loader or reported the issues with it. • He had made no attempt to seek treatment for the injuries he claimed to have sustained. • He marked the pre-start safety sheets “okay to use”, when describing the condition of the loader As a result, the Commissioner concluded that, “[i]n all the circumstances BSL may well have had a valid reason to dismiss Mr Szentpaly.” Procedural issues Despite this, however, the Commissioner went on to note that “... I am not satisfied BSL’s investigation of what occurred enabled it to actually be in a position to establish, at the time it made the decision to terminate Mr Szentpaly’s employment, whether it had a ‘valid reason’ or not.” The Commissioner cited the following issues as giving rise to this lack of procedural fairness. • Prior to dismissing Mr Szentpaly, BSL did not have a discussion with him which foreshadowed the possibility of his termination. • Mr Szentpaly was not given the opportunity to respond to the allegations against him. • Mr Szentpaly was not provided with the opportunity to have a support person present during discussions relating to his dismissal (because no such discussions took place). • The fact that Mr Szentpaly was not on site because he was on sick leave did not alleviate BSL’s responsibility to have disciplinary discussions with him prior to terminating his employment. Despite finding that Mr Szentpaly had been unfairly dismissed, the Commissioner concluded that reinstatement would not be an appropriate remedy. This was because Mr Szentpaly’s role required him to work in a safe and efficient manner with limited direct supervision, and the events in question and what followed had done much “to throw doubt on his ability and commitment to work in that way.” Mr Szentpaly was instead awarded a sum of $7,769.41 as compensation. Bottom line for employers This case demonstrates that in circumstances where employers have a valid reason to terminate an employee’s employment, they may nevertheless be found to have unfairly dismissed that employee if they do not afford them the requisite level of procedural fairness before making a decision to dismiss. Employee’s secret recordings destroy mutual trust and confidence and possibility of reinstatement I n a recent Fair Work Commission (FWC) decision, Deputy President Sams confirmed that secretly taping workplace discussions is contrary to the obligation of mutual trust and confidence. 1 Facts An employee of Newland Food Company Pty Ltd, located in Queensland, was dismissed from his employment for serious misconduct. The reasons for the dismissal were that the employee had abused the WorkCover system and had engaged in threatening, intimidatory and accusatory behaviour. The employee filed a claim for reinstatement, alleging that his dismissal was unfair. Decision Deputy President Sams found that there were no grounds for concluding that the employee had threatened the viability of Newland or the livelihoods of the employees, as alleged. The FWC accepted that the employee’s injuries and WorkCover claims were genuine and unlikely to have been premeditated. It observed that Newland’s perception of the employee “milking” the WorkCover system was based on the view that the employee was a “vexatious and sophisticated predator of the system.” As the alleged serious misconduct could not be proven, there was no valid reason for the employee’s dismissal. The FWC also found that the employee’s right to procedural fairness had been blatantly disregarded. The employee had not been given any: • notice of the reason for his dismissal before a decision had been made; • opportunity to respond to the allegations against him; or • opportunity to ask for a support person to be present because he did not know what the dismissal meeting was about. reinstatement The FWC noted the primary remedy for unfair dismissal is reinstatement. Only when reinstatement is found to be inappropriate, can the FWC then consider compensation as the alternative remedy. In this case, the FWC found that the overwhelming reason why the employee should not be reinstated was because he had, on a number of occasions, recorded his discussions with Newland’s Operations Manager, Human Resources Adviser and General Manager without their knowledge. The employee also recorded the meeting when he was dismissed. Although the employee’s conduct was not unlawful under the relevant Queensland legislation, as he was party to the private converstion, Deputy President Sams held the view there could hardly be an act which strikes at the heart of the employment relationship, such as to shatter any chance of re-establishing the trust and confidence necessary to maintain that relationship, than the secret recording by an employee of conversations he or she has with management. As reinstatement was deemed inappropriate, the FWC awarded the employee 26 weeks’ compensation, less four weeks’ notice and earnings he received from his employment after the dismissal. Bottom line for employers • The primary remedy for unfair dismissal is reinstatement. Only where the Commission is satisfied that reinstatement is inappropriate can it move on to consider compensation as the alternative to reinstatement. • The act of secretly recording workplace conversations is an act considered well outside the normal working environment and contrary to the well understood necessity for trust and fidelity in the relationship between employee and employer. • The secret (but lawful) recording of conversations does not give an employer a valid reason to terminate an employee’s employment. Directing an employee to undergo a medical assessment I n the decision of Schoeman v Director General, Department of Attorney-General and Justice, 1 the New South Wales Industrial relations Commission provides useful lessons for employers, particularly public sector employers, on what not to do when directing an employee to attend a medical assessment. Facts Ms Fiona Schoeman, was employed as a typist with the New South Wales Department of Attorney-General and Justice (Department). In July 2007, Ms Schoeman was having difficulties with certain staff members in the Department’s Crime Prevention Division (CPD). Ms Schoeman took a leave of absence and provided medical certificates, explaining that she was suffering from stress and an adjustment and anxious mood disorder (Psychological injury). On 5 May 2008, Ms Schoeman provided the Department with medical certificates, which stated that she was fit to work as long as she did not work in the CPD. The Department accommodated her request and she returned to work in July 2008. At the Department’s request, Ms Schoeman underwent a psychological assessment in August 2009. The doctor found that Ms Schoeman was “fully fit to carry on working productively” in her role, but she could not physically work in the CPD because “unresolved interpersonal/human resource issues” could exacerbate her Psychological Injury. In June 2010, Ms Schoeman was absent from work. She provided medical certificates, explaining that a pre-existing wrist injury was being exacerbated by repetitive typing. In March 2011, Ms Schoeman resumed her duties under a return-towork program that accommodated her wrist injury. After Ms Schoeman had returned to work in 2011, the Department directed her to attend a further psychiatric assessment on three separate occasions. On each occasion Ms Schoeman refused to attend, stating that the Department had no medical or legal basis for its direction. On 10 January 2013, the Department terminated Ms Schoeman’s employment on the basis of misconduct for refusing to comply with the Department’s directions to attend a psychiatric assessment. Decision Commissioner Newall found that the Department’s directions were not reasonable and lawful. At the time that the directions were given, there was no evidence that Ms Schoeman was suffering from a psychiatric condition. Her absence from work was related to her wrist injury, not her previous Psychological Injury, or any other psychiatric injury. Prior assessments had already found that Ms Schoeman was fit to carry out her duties, so long as she did not work in the CPD. Also, during communications with Ms Schoeman, the Department confirmed that it would not return Ms Schoeman to the CPD. Therefore, there was no reason for Ms Schoeman to undergo a psychiatric assessment. As the Department’s directions were unreasonable, its basis for Ms Schoeman’s alleged misconduct (and subsequent termination) was unfounded. Commissioner Newall stated that even if the Department’s directions were lawful and reasonable, the Director-General’s directions were not made in accordance with the relevant regulations. The Department sought to rely on the Public Sector Employment and Management (General) Regulations. However, before the Department could rely on the regulations, the DirectorGeneral was required to form a view that the employee concerned was not fit for work. The Commissioner found that the Director-General had not formed this view and that it was not possible for him to do so in the circumstances. As this pre-condition was not met, the Department did not have the power to make the directions. Commissioner Newall ordered that Ms Schoeman be reinstated with back pay. Bottom line for employers When an employer directs an employee to attend a medical assessment, it must ensure that the direction is lawful and reasonable. The employer should be able to establish a link between its direction and the specific requirements of the employee’s job. If an employer’s direction to an employee is not lawful and reasonable, then it is not entitled to take disciplinary action if the employee fails to comply. termination via facebook - confirm or deny? T he recent case of Corrie v Sheen Panel Service (Vic) Pty Ltd T/A Sheen Panel Service (Vic) 1 examined whether an employee had been dismissed by her employer after the employee received a facebook message from the Company Director’s daughter suggesting that her employment had been terminated. Facts Ms Sheridan Corrie worked for a number of companies within the Sheen Panel Service group (SPS Group) over a three and a half year period. Ms Corrie was initially employed with Sheen Panel Service (Vic) Pty Ltd (SPS (Vic)) and her most recent employment was with SPSBUL Pty Ltd (SPS Bulleen). On 30 April 2013, Ms Corrie received a facebook message from Ms Lana Denys, who was an employee of the SPS Group and the daughter of Mr Blair Denys, a Director of SPS (Vic). In this facebook message, Ms Denys called Ms Corrie a “horrible human being” and told her to “wait for Karma to come back and bite… in the ass.” When Ms Corrie asked what she had done, Ms Denys stated that “if it’s true that you’re engaged whilst STILL being married. We all think (blair included) that it’s inappropriate for you to come back to work (sic).” When Ms Corrie asked whether Mr Brett Keating, a director of SPS Bulleen, had been informed, Ms Denys said that he had. Ms Corrie’s work mobile phone was disconnected the next day. On 6 May 2013, Ms Corrie telephoned Mr Keating and requested a separation certificate. When Ms Corrie received the certificate, her employer recorded the reason for separation as “shortage of work”. Decision Commissioner roe found that given Mr Denys’ role as a Director and his relationship with Ms Denys, Ms Denys’ facebook conversation with Ms Corrie constituted dismissal by her employer. Commissioner roe was also satisfied that Mr Keating’s actions from 1 May 2013 affirmed the termination of Ms Corrie’s employment. Mr Keating was aware of the facebook conversation and, had termination not been intended, he could have corrected this error. The disconnection of Ms Corrie’s mobile phone and the reason given in the separation certificate further supported this conclusion. Having found that Ms Corrie’s employment had been terminated by the employer, Commissioner roe referred the matter back to the Fair Work Commission to determine whether the dismissal was unfair. Bottom line for employers This case is an example of the breadth of behaviour that can amount to a “dismissal”. It also illustrates that if an employee acts without authorisation towards another employee, the onus is on the employer to quickly address and correct any misconception that may arise as a result. Union official’s termination due to misconduct, not industrial activity A recent application alleging the dismissal of a union delegate at a BHP coal mine constituted adverse action has been dismissed by the Federal Court 1 . It found that BHP Coal Pty Ltd terminated the employment of an employee for being physically and verbally abusive towards other employees, and not because of his activities as a union delegate. Facts The employee sought reinstatement, compensation and the imposition of penalties following the termination of his employment at BHP’s Peak Downs coal mine in central Queensland. He claimed that the termination of his employment resulted from ‘heated’ discussions he had instigated with two employees regarding the appropriate application of overtime policies. Both BHP and the union had policies relating to overtime shifts worked at the mine, and the employee sought to establish that the termination of his employment resulted from him advancing the views and interests of his union and acting as an officer or member of that union. Justice Collier rejected this argument for a number of reasons. One of the two employees involved in the ‘heated’ discussions with the employee in question was not a union member, but was employed through a contractor business. Additionally, the employee gave evidence that the discussions he had with the other two employees related to terms appearing in BHP’s overtime policy and not the union’s. BHP asserted that by initiating the discussions, the employee had assumed the authority to enforce its overtime policy despite no such authority being granted to him. Allegations that he had done so through intimidating and violent means were substantiated by an internal investigation and amounted to serious misconduct that warranted dismissal, according to Justice Collier. adverse action and the burden of proof Under the adverse action provisions of the Fair Work Act, an employer is prohibited from taking adverse action against an employee because they are a member or an officer of an industrial association (such as a union) or because they engaged in industrial activity. Generally, the employee (or union) alleging a breach of the adverse action provisions must firstly establish that the relevant employee was a member or an officer of an industrial association and/ or had engaged in industrial activity and that the employee has been subjected to adverse action by the employer. Once this is established, the onus of proof then shifts to the employer to show that the adverse action was not taken because of the employee’s membership of an industrial association or because they engaged in industrial activity. Decision Justice Collier found that the claim could not succeed because, according to the employee’s own evidence, he was seeking to enforce BHP’s overtime policy, not the union’s. Therefore, it could not be said that the employee was engaged in industrial activity. Despite the claim falling at the first hurdle, Justice Collier went on to find that even if it could be established that the employee had engaged in industrial activity, she was satisfied that the action was taken due to BHP finding that the employee had engaged in serious misconduct by improperly directing other employees as to when they could and couldn’t work and by physically and verbally abusing co-workers. In short, Justice Collier found that while his union membership may have motivated the employee to act in the way he did, it was not a factor that affected BHP’s decision. Bottom line for employers Of particular interest for employers is the manner in which Justice Collier considered the credibility of key witnesses, particularly those company witnesses who gave evidence regarding the reasons for the employee’s dismissal. Justice Collier accepted the reliability of the evidence given by those decision makers in relation to the reasons for the employee’s dismissal, finding the three company decision makers to be credible witnesses. All three witnesses stated the employee was dismissed due to their concerns about his behaviour towards coworkers and in one case to stem a growing and undesirable culture of inappropriate behaviour. This case provides a further example to employers of the importance of carefully documenting and considering reasons for any decisions regarding the discipline or dismissal of employees. no discount for ignorance of minimum rates of pay I n the recent decision of Fair Work Ombudsman v Rocky Holdings Pty Ltd & Ors 1 , the Federal Circuit Court imposed a hefty fine of $123,690 against a Sydney medical practice and its two directors for discriminating against a young, visually impaired woman and underpaying her $20,847.94 over a period of nearly two years. Facts The employee, Ms Heba El-Ali, has a disability which includes a vision impairment. In January 2010, she was a patient at the Sydney medical practice, “Medical Centre 2000” (owned by Rocky Holdings Pty Ltd) (Employer) when the directors, Dr Ahmed Mohamed and Dr Ismail Mohamed, who are also doctors at the practice, offered her part-time work as a medical receptionist. Ms el-Ali worked unpaid with the employer for six weeks before commencing paid employment. From February 2010 to February 2012, Ms el-Ali was paid between $7.00 and $8.00 per hour. Her hourly rate was lower than the rate paid to other employees performing the same role at the medical practice and lower than the relevant award rate which stipulated she should have been paid between $10.52 and $14.18 per hour. The employer also failed to pay Ms el-Ali other entitlements, such as public holiday rates and annual leave. In late 2011, Ms el-Ali and Catholic Care, which provided support to Ms elAli, advised the employer that she was being underpaid. The employer refused to increase Ms el-Ali’s rate of pay. As a result, Ms el-Ali ceased employment with the employer in February 2012. It was not until May 2013, following an investigation by the Fair Work Ombudsman and the commencement of legal proceedings, that the employer paid Ms el-Ali the outstanding wages of $20,847.94. The employer also agreed to pay Ms el-Ali $5,000 for noneconomic loss. Decision Justice Emmett determined that the employer and its directors had contravened the Fair Work Act 2009 (Cth) by: • taking adverse action by discriminating against Ms el-Ali because of her disability and paying her a lower hourly rate than other employees; and • underpaying Ms El-Ali minimum rates of pay, Sunday overtime rates, Saturday penalty rates, public holiday rates, training rates, annual leave, annual leave loading, personal/carer’s leave and absence on public holidays amounting to $20,847.94. the outcome Justice Emmett determined that only a “modest” penalty should be imposed for the adverse action contraventions: $3,300 against the employer and $660 against each of the directors (10 per cent of the maximum penalty available). Her Honour stated that this was because the employer and the directors believed they had been dealing with Ms el-Ali “appropriately and fairly” on the assumption that her salary was being subsidised by Centrelink until it was drawn to their attention in late 2011 that this was not the case. With regard to the underpayments, Justice Emmett imposed a significant penalty of $77,320 against the employer and $15,200 against each of the directors. In reaching these figures, her Honour noted that: • the loss suffered by Ms El-Ali was significant, amounting to approximately 43 per cent of her actual entitlement over the two year period; • the underpayments were not addressed by the employer even after it was brought to its attention in late 2011; • the Employer received a wage subsidy payment through the Disabled Australian Apprentice Wage Support though it was not complying with the obligations of the program; • the Employer had previously been investigated by the Workplace Ombudsman for failing to pay overtime and Sunday and public holiday rates to employees; and • the Employer had the financial resources to obtain advice, including professional legal advice, in respect of the obligations owed to its employees and was aware of the availability of the Fair Work Infoline. Her Honour also imposed a fine of $8,250 on the medical practice and $1,550 on each of the directors for the failure to provide pay slips. Bottom line for employers This case demonstrates that the courts are willing to impose significant penalties on employers and directors who underpay employees, especially in instances where an employee is in a position of vulnerability. employers are expected to make appropriate enquiries to ensure that each of their employees is receiving their correct entitlements and, in order to minimise hefty penalties, it is advisable to remedy any errors promptly. Safe Work australia - looking forward to 2014 E stablished by the Safe Work Australia Act 2008 and operating since 1 November 2009, Safe Work has delivered a number of improvements to work health and safety (WHS) and workers’ compensation arrangements across Australia since its inception. But what is Safe Work’s role really about and what does it have in store for 2014? What’s it all about? Despite having operated for some time now, there are still some misconceptions about Safe Work’s functions and its role within the Australian WHS regime generally. Under the Safe Work Australia Act 2008, the key functions of Safe Work include: • developing a national policy for WHS and workers’ compensation; • preparing a model WHS Act and regulations; • publishing model codes of practice and other guidance material relating to WHS; • collecting, analysing and publishing data, information and research relating to WHS and workers’ compensation to develop or evaluate policies in respect to those issues; and • developing and promoting national strategies to raise awareness of WHS and workers’ compensation. Critically, Safe Work does not regulate and enforce WHS laws. Comcare and other national industry specific regulators, as well as the state and territory based workplace regulators, continue to retain responsibility for the administration, regulation and enforcement of their own WHS laws and regulations in their respective jurisdictions. rather, Safe Work is an independent Commonwealth government statutory agency that performs its functions in accordance with strategic and operational plans agreed by the Select Council on Workplace relations on an annual basis. It is charged with the responsibility of fostering and promoting a nationally consistent approach to WHS and workers’ compensation policies, compliance and enforcement throughout Australia. Safe Work has largely achieved this objective, as the Commonwealth and each state and territory (with the exception of Victoria and Western Australia) have adopted the model WHS legislation. The Intergovernmental Agreement for regulatory and Operational Reform in OHS, which was agreed by the Council of Australian Governments (CoaG) in July 2008, formalises the cooperation between the Commonwealth, state and territory governments to achieve this end. Safe Work collaborates with all Australian workplace regulators and other key stakeholders, including international bodies such as the International Labour Organization (ilo), World Health Organisation (WHo), Organization for Economic Co-operation and Development (oECD) and Asia Pacific economic Co-operation (aPEC) etc. What’s ahead in 2014? The coming year promises to be a challenging one for Safe Work. We have outlined below some of the key areas which Safe Work has indicated it will be focusing on in 2014. • Safe Work will continue to work with key stakeholders to make a number of technical amendments to model WHS regulations to correct inadvertent errors, clarify policy objectives and address workability issues. The authorisation of prosecutions and enabling regulations in NSW is a case in point. • Following the Pike River Coal Tragedy in November 2010 and the ensuing royal Commission and prosecution of Pike river Coal Ltd (and others), New Zealand will adopt model WHS laws and regulations and establish a dedicated workplace regulator based on the Australian experience. This will necessitate dialogue and guidance from Safe Work to the NZ government and other relevant authorities. • Registrable plant, exposure standards for the regulation of airborne contaminants in the workplace, licensing and units of competency of high risk work have all been earmarked for review. • Once approved by the Ministerial Council , the model WHS (Mines) Regulations will apply to mining operations in Queensland, Victoria and Western Australia whereas the exisiting model WHS laws and regulations will continue to apply to the remaining jurisdictions in relation to mining. • Safe Work will conduct research projects on psychological factors and compliance with WHS regulation in SMEs. Perceptions of WHS harmonisation and regulatory burden on organisations will be collected from businesses to assess changes over time. • Safe Work will develop a list of scheduled diseases for workers’ compensation. A final report including the list of scheduled diseases and supporting guidance material will be presented to the Members of Safe Work by August 2014. • Safe Work will endeavour to achieve nationally consistent explosives laws. This will include consistency between explosives laws and WHS laws to the extent possible. Western Australia and Victoria are unlikely to adopt the principal WHS Act and regulations in 2014. Whilst it is committed to the principle of harmonisation, the Western Australian government has indicated it will not adopt the entirety of the WHS laws but will probably adopt the majority of them. In drafting its own WHS Bill, it has confirmed it will also draft and finalise a corresponding Bill for the mining industry. The Victorian government has remained staunchly opposed to adopting the WHS laws and regulations in their current form. Bottom line for employers Safe Work will continue to work towards a truly harmonised WHS regime throughout Australia. If your business has national operations or is operating in a state or territory that has adopted the model WHS laws, it will be subject to the harmonised laws. If your business operates under the Comcare scheme or is working in Federal workplaces, then the model WHS laws will apply. Work or business being conducted solely in Victoria and Western Australia will continue to be governed by their existing OHS and OSH legislation respectively. Safe Work will not come knocking on your door to assess compliance or otherwise with WHS laws. Instead, they may call upon your business to collect valuable data or provide information for surveys or research in respect to WHS or workers’ compensation issues generally. In 2014, Safe Work will continue to be a great source of information, guidance and assistance across WHS and workers’ compensation. If draft regulations, codes or guidance material may affect your business or industry, you can make an impact by drafting a submission to Safe Work. The “public comment” section of WorkSafe’s website 1 indicates which publications are open for comment. Principal contractor obligations don’t end with SWMSs and contracting out supervision. A New South Wales Industrial Court ruling gives yet another indication that the law around principal contractor liability is still continuing to develop. The Court ruled that principal contractors who contract out supervision must ensure that the supervision is being properly carried out - even in respect of tasks that a principal contractor has not planned nor instructed its contractors to perform. Facts Eastern Star Gas Ltd (now known as Santos NSW Pty Ltd) (Eastern Star) engaged Austerberry as a contractor to install pipeline at eastern Star’s Narrabri site. Eastern Star did not require Austerberry to provide safe work method statements (SWMSs) for the project, instead accepting 42 SWMSs from a previous Austerberry project. eastern Star did not check that these SWMSs were adequate or whether they addressed the relevant work that was to going to be undertaken at the site. The drilling of the pipeline was supervised by Austerberry. When the pipeline became stuck in a bore hole beneath a creek, a toolbox meeting was held between Austerberry, GD Pipelines (another contractor) and Mr Austin, director of Saver Guys Pty Ltd (another contractor). Austerberry attempted to remove the pipeline using an excavator and chain, and instructed Mr Austin to sit behind a tree approximately 17 metres away in case the pipe recoiled. On the first attempt, the chain broke and the pipeline shifted. The chain was reattached two more times, with more of the pipeline being extracted each time before the chain sheared off the pipe. As the pipeline was being pulled, the chain broke again and the pipe recoiled, striking Mr Austin, who was not sitting behind the trees as instructed, in the head causing fatal injury. The activity was unplanned, and eastern Star did not know that it was taking place. The activity had not been risk assessed and, therefore, there was no SWMS for the task. eastern Star was charged with a breach of the OHS Act for failing to ensure that people other than its employees, in particular, Mr Austin, were not exposed to risks to their health or safety while they were at eastern Star’s workplace. liability Despite having systems in place capable of ensuring safety, Justice Staff held that eastern Star had “failed to adopt its own procedures to check that there were safe work methods in place” at the Site, and failed to visit the Site or take steps to ensure the Site was properly supervised in its absence. His Honour also found that Eastern Star failed to require Austerberry to provide appropriate SWMSs for the project, or check that the SWMSs were adequate and addressed the work to be undertaken at the Site. Justice Staff also noted that where a company adopts the approach of contracting out supervision at a Site “then it is incumbent upon it to ensure that supervision is being properly carried out. This may involve audits.” In this case, eastern Star had a procedure for auditing and checking but it did not comply with this procedure, which resulted in its failure to carry out any checking of safety issues at the Site. Justice Staff found that the risk was obvious and foreseeable and this risk could have been reduced if safety measures were taken. After receiving a 25% discount for its guilty plea, cooperation and remorse, the Court fined eastern Star $120,000. Bottom line for principal contractors Principal contractors are still at risk of liability for a workplace incident even if they are not involved directly in, or have specific knowledge of, the circumstances leading to an incident. They have an overarching obligation to ensure that their sites are safe. Principal contractors must ensure that SWMSs are site and task specific, in that they are appropriate and relevant to the specific tasks that are to be undertaken at the site. SWMSs should be regularly checked, assessed and reviewed against the work undertaken at the site. Principal contractors who have contracted out supervision should regularly visit the site and take steps to ensure that supervision is being properly carried out, including instructing all entities involved in a project to stop work before any unplanned activity that hasn’t been subject to a risk assessment is undertaken where appropriate. Environmental management in 2014 - what are the major risks? F or any organisation, a core part of effective environmental compliance is the identification of legal developments and risks. Organisations that understand the changes will be best prepared for the challenges and opportunities posed by the changing regime. This article provides an overview of the environmental issues that we consider pose the greatest cost, legal or reputational risks, and administrative burden for organisations in 2014. Generally, the major risks fall into either those relating to the management and development of land; or those relating to environmental governance and compliance systems. In our view, the main legal risks in land management for 2014 are likely to be: • Contaminated land; • Asbestos and underground storage tanks; • Waste management; • Native vegetation; and • Environmental impact assessments. The main legal risks for environmental compliance in 2014 are likely to be: • Director and manager liability; • Incident notification; • Increased environmental enforcement; • Protecting documents in environmental audits and assessments; and • Sustainability and climate change reporting. land management risks Any organisation that owns, occupies, manages or intends to develop land will be aware of the legal risks associated with managing the environmental issues on, in, under and above their land. The most significant of these risks undoubtedly relates to the legal risks and costs associated with assessing, managing and remediating a contaminated site. In 2013, Australia’s primary national guidance for the assessment of site contamination 1 was amended. As a consequence, environmental commentators predict that the cost of site assessment will increase by up to 10-15%. In addition, those purchasing, selling or managing contaminated land are also likely to be exposed to greater levels of regulator activity arising from the issue of remedial or “clean up” notices by environmental regulators. Asbestos and underground storage tanks (USts) are two perennial risks for property portfolio managers. In 2014, we are likely to see greater emphasis on maintaining information about asbestos (through registers) and sharing that knowledge effectively (to affected and relevant persons) in order to manage reputational and health and safety risks. For organisations that have USTs on their sites, it is likely that the new notification obligations that were introduced in 2013 in all jurisdictions (except Victoria and Western Australia) will take effect and require compliance systems to be updated. The rules require an organisation to notify the state or territory workplace safety regulator when a UST that stored flammable liquids or gases has either not been used for two years or will not be used again. Both of these issues also bring to light the more pervasive question of whether or not an organisation is adequately managing all of its waste streams in compliance with the law. We predict that waste regulation and enforcement is likely to continue to be a key priority for legislators and regulators in 2014, in recognition of the increasing problem of illegal transport and dumping of waste. However, it is an issue that frequently causes many organisations difficulties irrespective of industry sector. For those undertaking developments or managing land issues with flora and fauna present, there were some noteworthy changes in 2013 with regard to the assessment of environmental impacts and native vegetation protection laws. In particular, the NSW and Queensland governments entered into Memorandums of Understanding (MoUs) with the Federal Government to streamline the legal approvals processes. Further changes to both the assessment and approvals processes (at state and Federal level) are likely in 2014, with potential changes to state environmental assessment processes, in order to bring them into line with Federal standards. Several states and territories also significantly amended their native vegetation and habitat protection laws in 2013. Environmental compliance risks In addition to land management risks that may or may not apply to a particular business, several legal risks apply to all organisations. The most significant risk for many is criminal liability for directors and managers in relation to their organisation’s noncompliance with environmental laws and regulations. In 2013, there were extensive changes to the laws on director liability across Australia and several notable policy developments. Among them, the ACT environmental laws now provide guidance as what constitutes a defence under due diligence requirements and the environment Protection Authority Victoria also issued guidance material on its expectations for Boards of management. Accordingly, all organisations need to ensure their environmental governance and compliance systems are adequate and up-to-date, particularly as we saw an increase in environmental regulatory activity during 2013 which signals a trend towards the likelihood of increased environmental enforcement action in 2014 and consequent risk for non-compliant organisations. A risk for many businesses is how to effectively “audit” or assess environmental compliance and risk without the fear of proactive investigations being used against them. In the context of greater environmental regulatory enforcement action and contaminated land litigation, lawful ways to protect documents from disclosure, including under legal professional privilege and statutory privilege processes, are likely to become more significant. Two areas of particular risk in environmental management relate to notification of environmental incidents to the regulators, and sustainability and climate change reporting in sustainability reports and under the National Greenhouse and Energy reporting scheme (nGErs). As many organisations will be aware, all states and territories, with the exception of Victoria, currently require pollution incidents to be formally notified to the environmental regulator. In 2014, it is likely that new statutory pollution incident notification obligations will be introduced in Victoria for the first time. As environmental laws are different in each state and territory, if your organisation operates in more than one jurisdiction, works with contractors, or provides contracted services, there will be different rules on when, how and who to report incidents to. With heavy penalties for failing to report prescribed environmental incidents, this issue should be a priority for environmental managers. Sustainability reporting is also likely to be subject to greater risk in 2014, as investors and other stakeholders place greater scrutiny on sustainability reports. In September 2013, the Australian Stock Exchange Corporate Governance Council made a recommendation that corporations should disclose how their environmental, social, and economic sustainability risks are identified and managed. This significant change to sustainability reporting is likely to come into effect in 2014. In the meantime, organisations that currently report under NGERs will continue to do so for the near future as although the Carbon Price Mechanism (“carbon tax”) and related Jobs and Competitiveness Program are to be replaced by the introduction of a new emissions reduction Fund. Bottom line for employers • Ensure that your organisation is managing its legal obligations under environmental, health and safety laws at all sites but, in particular, any contaminated sites. • If you have USTs within your property portfolio, ensure that you have procedures in place to comply with the new UST notification and decommissioning requirements under safety legislation. • Check that your organisation has up-to-date asbestos registers and arrangements in place to share information about asbestos risks with contractors. • Check that lawful waste disposal processes are in place for all effluent streams (including waste water). • Before undertaking any development works or land management activities that may affect flora and fauna, check that environmental impacts have been appropriately assessed and that your organisation has obtained all relevant approvals at state, territory and/or Federal levels (as required). • Undertake a gap analysis of your organisation’s environmental management system and take appropriate management action to implement improvements. Consider what your documentation says about your organisation’s approach to environmental management and seek expert legal advice on environmental governance as necessary Check that your employees and senior managers have been trained and understand their incident notification obligations. • Review commercial contracts to ensure that environmental incident notification obligations are appropriately reflected, including delineating legal responsibility for notifying the regulator of any environmental and/or safety incident notification obligations. • Assess whether your organisation is adequately prepared for visits by the relevant environmental or safety regulator and seek legal advice where necessary. • If your organisation is reporting on sustainability, ensure that adequate review processes are in place to minimise legal and reputational risks.