Victorian Education Department Found to Have Unlawfully Deducted $20 Million for Laptop Use

In Australian Education Union v State of Victoria (Department of Education and Early Childhood Development) [2015] FCA 1196 (6 November 2015), the Federal Court found that the Department of Education and Early Childhood Development ("DEECD") had breached the Fair Work Act 2009(Cth) ("Act") in deducting more than $20 million from the salaries of more than 40,000 teachers and principals for laptops used primarily for work.

Factual Background. Between 1 July 2009 and 29 November 2013, the DEECD made fortnightly deductions of between $4 and $17 from the salaries of teachers and principals who participated in a scheme whereby the DEECD provided the employees with a laptop. More than 40,000 employees participated in the scheme, and more than $20 million was deducted from the salaries of participating employees.

Legal Background. Section 323(1) of the Act requires an employer to pay its employee amounts payable for the performance of work in full and in money, except where the deduction is permitted under section 324(1). Section 324(1) allows an employer to make deductions in specified circumstances, including where the deduction is authorised by the employee in accordance with an enterprise agreement or the deduction is authorised under state law. Section 325(1) prevents an employer from requiring an employee to spend amounts payable to the employee in any way that is "unreasonable in the circumstances". Additionally, section 326(1) invalidates any term of an enterprise agreement or employment contract that enables an employer to make a deduction which is for the benefit of the employer and is "unreasonable in the circumstances".

The Australian Education Union ("AEU") challenged the legality of the deductions and sought orders that the amounts deducted be repaid to the participating employees. The parties had agreed that the part of the claim relating to a sample group of 11 teachers, as well as a set of common questions, would be determined at an initial trial, while all other issues raised would be deferred to a later trial.

Decision. Firstly, Bromberg J held that the deductions were not permitted under section 324(1) of the Act. His Honour rejected the DEECD's contention that the deductions were authorised by the teachers in accordance with their enterprise agreement which provided for "salary packaging arrangements". His Honour held that the subject of a salary packaging arrangement is remuneration earned and its fundamental feature is the substitution of one form of remuneration for another. On that basis, his Honour concluded that the because the laptops were not provided to the teachers as remuneration, it was not a "salary packaging arrangement" and therefore not authorised in accordance with the enterprise agreement. Furthermore, his Honour rejected the contention that the deductions were authorised under a state law, being a Ministerial Order made on 19 December 2012 determining that section 324(1) did not apply retrospectively to a scheme which commenced operation in July 2009.

Second, Bromberg J determined that even if the deductions were authorised under section 324(1), they were inoperative under section 326(1) on the basis that they were "unreasonable in the circumstances". His Honour considered the deductions to be unreasonable because there was a lack of genuine choice regarding participation in the scheme, the rate of contribution to the cost was excessive, the deductions were not primarily for the benefit of the employees and the value of the benefit did not provide any counter justification.

Although deciding that the deductions were unlawful, Justice Bromberg's decision on orders to be made in relation to the 11 teachers as well as the disposition of the claims not yet decided will be determined in a further trial for which a directions hearing was listed for late November 2015.

Lesson for Employers. This case serves as a reminder that when making deductions from an employee's remuneration, employers must carefully consider not only whether such deductions are authorised under the Act, but also whether the deductions are reasonable in the circumstances and whether they impermissibly benefit the employer. Deductions are unlikely to be deemed reasonable if they are mandatory, excessive or detrimental to the employee. In the case of employees who are not covered by an enterprise agreement or award, the deduction must be authorised in writing by the employee and be principally for the employee's benefit.

Adverse Action Claim Dismissed after Employer Found to Have No Knowledge of Employee's Depression

In Kubat v Northern Health [2015] FCCA 3050 (17 November 2015), the Federal Court dismissed an employee's claim that disciplinary action taken against her and her eventual dismissal amounted to unlawful adverse action taken due to her mental illness.

Factual Background. The employee worked as a hospital-based Turkish interpreter. Throughout 2011–2012, Northern Health gave the employee various warnings and engaged in disciplinary meetings with the employee regarding her repeated lateness and absences from work. The employee told her managers that she had personal issues and "was not well in herself" but did not disclose her depression diagnosis.

In late 2012, Northern Health received medical evidence that the employee was suffering from depression and could return to work for only one half day per week and only if Northern Health could guarantee that she would not encounter undue stress or tension. Northern Health refused to allow the employee to return to work and eventually dismissed the employee in May 2014 on the basis that it could not accommodate those conditions.

Legal Background. Firstly, the employee claimed that prior to her dismissal, Northern Health had taken unreasonable disciplinary action in the form of disciplinary meetings and warnings. The employee argued that the action was unlawful adverse action because it was taken against her because of her mental disability, which is a prohibited reason under section 351 of the Fair Work Act 2009 (Cth) ("Act").

Second, the employee argued that her dismissal constituted unlawful adverse action taken because of her mental disability. However, as a defence, the employer relied on section 351(2)(b) of the Act, which states that the prohibition in section 351 does not apply to action "taken because of the inherent requirements of the particular position".

Decision. In relation to the employee's first claim, Judge Riley found that the disciplinary action in question could not have been based on her depression, because at the time the disciplinary action was taken, the employer was not aware that the employee was suffering from depression. The behaviour which the employee argued was sufficient to communicate her depression was found by Judge Riley to not necessarily be a clear indicator of depression. Her lateness and absences were found also to be consistent with a lack of commitment to work, and crying at disciplinary meetings was also considered to be a normal response in the context which did not unequivocally indicate that the employee was suffering from depression.

In relation to the second claim, Judge Riley accepted the employer's evidence that the employee was dismissed because it was impossible for Northern Health to create a work environment which guaranteed that the employee would not encounter conflicts or tension. Those elements were found to be inherent and unpredictable in the employee's role as a hospital interpreter for patients, and reasonable adjustments could not be made to eliminate those potential stressors. Since medical evidence showed that the employee could not work under those conditions, she was found to be unable to fulfil the inherent requirements of her role.

Lessons for Employers. Employers should be mindful that dismissing an employee or taking unreasonable disciplinary action on the basis of physical or mental disability amounts to unlawful adverse action. If such factors are present, employers should dismiss the employee only if the employee is unable to fulfil the inherent requirements of his or her role and reasonable adjustments to allow the employee to fulfil the inherent requirements of his/her role cannot be made.