Notice of Termination Cannot Run Concurrently to a Period of Leave

In Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Kentz (Australia) Pty Ltd[2016] FWC 669 (3 February 2016), the Fair Work Commission ("FWC") found that Kentz (Australia) ("Kentz") was in breach of its enterprise agreement when it gave notice of termination to employees just before a period of rest and recreation ("R&R").

Kentz, an electrical contracting company, which was involved in the Ichthys LNG project, gave 150 fly-in fly-out workers notice of retrenchment directly before a designated R&R period provided for in their enterprise agreement (the "Agreement"). Under the Agreement, the employees worked four weeks "on" followed by one week of unpaid rest. The Electrical Trades Union used the dispute resolution provision of the Agreement to refer the matter to the FWC. 

The first question which the Commission was asked to determine was whether the Agreement permitted notice of termination to run concurrently with the employees' period of R&R. The Electrical Trades Union ("ETU") submitted that the employees' entitlement to R&R, which formed part of the working cycle, could not be offset against other entitlements such as notice of termination. 

Kentz argued that the matter in dispute was what amount of payment in lieu of notice should be provided rather than whether notice could run concurrently with a period of R&R. Section 117(2)(b) of the Fair Work Act 2009 (Cth) states that the worker must receive his or her full rate of payfor the hours the employee would have worked during the notice period. Since the R&R period is unpaid, Kentz submitted that its employees were not entitled to receive payment where they were paid in lieu of notice for that week (had the notice period run its course, they would not have received payment in this week). 

In the alternative, the ETU asked the Commission to determine that the Agreement did not permit employees to be put on a period of R&R where there was less than two weeks' work for the employees remaining on the project. 

It was held that Kentz failed to comply with its Agreement because R&R was considered a type of regulated and approved leave and that notice of termination under the Agreement could not run concurrently with a period of leave. 

Further, Commissioner Bissett rejected the interpretation of section 117(2)(b) advanced by Kentz. Commissioner Bissett considered that payment in lieu of notice cannot be reduced based on the assumption that the employee is on unpaid leave for part of the notice period. 

Additionally, the Commissioner was satisfied under the Agreement that the employees could not be put on R&R within their last two weeks of work. Therefore, where workers were paid in lieu of notice, this had to be calculated as if they had worked for the entirety of the notice period.

Lesson for Employers. This decision is somewhat problematic, as it treats a period of rest mandated by an enterprise agreement as a form of leave. Alternatively, the R&R period can be thought of as the accumulated weekend days the employees missed by working four weeks "on". It will be interesting to see whether Kentz appeals the decision and whether it is upheld by the Full Bench of the FWC. 

Nevertheless, the decision demonstrates that employers should take care when planning the implementation of large-scale redundancies. As a result of this decision, Kentz may now be required to pay the 150 retrenched employees substantial amounts in lieu of this additional week of notice of termination. 

$200,000 Fine for Essendon Football Club for Endangering Players

The Victorian Magistrates Court has imposed a penalty of $200,000 on the Essendon Football Club ("Club"). The Court found that during its 2011–2012 Supplements Program, the Club risked players' health and failed to keep a safe workplace.

The Club was investigated in 2013 by the Australian Sports Anti-Doping Authority and the World Anti-Doping Agency over its supplements program for the 2012 Australian Football League ("AFL") season and preceding preseason. The Club was found to have injected its players with banned peptide Thymosin beta-4. As a result, 34 of its players who were part of the program were suspended from the AFL, and various other staff members were subject to disciplinary action.

Essendon pleaded guilty to two charges under section 21 of theOccupational Health and Safety Act 2004 (Vic) ("Act") brought by Worksafe Victoria in November 2015 arising from the 2011–2012 supplements program. The charges included failure to provide and maintain for employees a work environment and system of work that is, so far as is reasonably practicable, safe and without risk to health. The maximum fine that could have been imposed was more than $300,000 per offence, although a higher court could have imposed a larger fine.

Magistrate Reardon found that the Club was in breach of section 21 of the Act. He referred to a "blatant disregard" for the safety of players, many of whom were young and vulnerable, and noted that the supplements program was conducted under a veil of secrecy. 

In response to concerns raised by senior players regarding the scheme in January 2012, protocols were introduced requiring the informed consent of players, for substances to be cleared by the Club's doctor and for the doctor to advise on the effects of substances and the suitability for individual players. Magistrate Reardon found that those protocols were "totally ignored" and that people at the Club did not proactively ensure that the protocols were being followed. He stated that the case involved "the proactive involvement of an employer intent on doing something to its employees, namely to inject with supplements". 

As such, Magistrate Reardon found that the players were exposed to risks to their personal health and safety by Essendon's failure to provide and maintain a safe workplace. The Magistrate ordered the Club to pay $20,000 in legal costs and $200,000 in fines. In setting the penalty, Magistrate Reardon took into account Essendon's lack of prior offences and the penalties it had already faced as a result of the supplements program, including a $2 million fine from the AFL. 

This case involved the criminal prosecution of the Club for endangering players' health. It remains to be seen whether any of the 34 players who participated in the supplements program will pursue civil action to recover compensation for their personal and/or financial losses.

Lessons for Employers. Employers have an obligation to provide and maintain a healthy and safe workplace for their employees, regardless of the duties that the employees are performing. This case demonstrates that regulators are not afraid to penalise employers where they do not meet those obligations.