A number of employment matters and HR issues can have disastrous consequences for a business if not handled correctly. My Business speaks with specialist SME law firm Teddington Legal about how to solve some of the trickiest legal issues in business.
Teddington Legal’s Mark Gardiner and Nicole Billett are problem-solvers standing at the forefront of the Australian legal system with expertise in immigration, business law, workplace relations and dispute resolution.
Speaking to the My Business team, Mark openly admits legal information can be hard to find. However, by seeking professional advice and educating one’s self on their obligations, he says business owners can minimise their risk of potential legal repercussions in the future.
Tune in to the My Business Podcast as Mark and Nicole broach common issues in the workplace – from unfair dismissal to health and safety for remote working employees, workplace bullying and the abolition of the 457 visa – as well as share their tips for employers to assist them in future-proofing their businesses.
Enjoy the show!
Adam: Welcome to the My Business Podcast. Thanks for tuning in, Adam Zuchetti here with my co-host Andy. Andy how you going?
Andy: I'm going well today Adam, how’s things with yourself?
Adam: I'm very well thank you. It's another interesting week in the SME space.
Andy: Always mate, always. I'm really excited about today's guests actually because I think all SME owners know that one of the things that comes up again are problems, problems, problems, of a variety and size. Today's guests are fundamentally problem solvers. They help SMEs and they help them solve their problems. They established their firm in 2009. They've got about 15 staff at the moment, and they've given advice to many hundreds of clients during that time and solved many hundreds of problems. But enough of my yacking, Adam why don't you introduce today's guests.
Adam: Too right, so trying to solve problems, we've got Nicole Billett and Mark Gardiner of Teddington Legal in house to try to answer some of the curly legal questions that a lot of business owners face. So Nicole and Mark, thanks so much for coming in and joining us.
Mark: It's a pleasure.
Nicole: Our pleasure, Adam.
Adam: So I suppose to kick off the discussion, employment contracts. It seems like a lot of business owners may not be putting enough rigour into the contracts and that's creating friction down the line, would you agree with that?
Mark: Yes indeed. If I could start by talking generally about employment law in Australia, we're seeing a lot of media about it lately. We're seeing a lot of franchisees and franchisors having issues with the Fair Work Ombudsman for underpaying staff and not paying penalty rates. We've got the penalty rates case before the Fair Work Commission. So there's general confusion about are our obligations, where do I find them, where do I go for help? And a lot of employers don't know and they don't know because quite frankly, it's really bloody hard.
The Fair Work Act is a commonwealth piece of legislation, been around now for a little while. And the Fair Work Act outlines the obligations of employers and sets out the rights and responsibilities of employees in an employment situation. As part of the Fair Work Act process, it modernised the award system in Australia and tried to bring down what was hundreds if not thousands of state based awards to a number of federal awards. And so what employers need to do first and foremost is when they're employing staff, is determine if the staff they're employing are covered by an award. And if there are award obligations they must comply with.
If they get that wrong, they could end up with some nasty penalties down the track for underpaying staff. And we're seeing that recently, of course George Calombaris who's had some issues generally and his company was discovered to have underpaid its staff by $2 million over a number of years. Now that was inadvertent it seems, and I'm not suggesting George went out of his way to do any harm at all to his staff, it was just complicated and they got it wrong. So it's important to understand what the obligations are. And obviously a law firm is a good place for advice in relation to that, but there's also the Fair Work Ombudsman, which has a really good website where people can go to get information about award coverage and the Fair Work Commission can also help. So that's the milestone, is the employee an award employee, and are there obligations you need to meet under the award?
The next step is, can you enter into what is called a flexible working agreement, a flexible employment agreement, with that employee. And that is, can you have somebody on a contract, which displaces the award? And the answer is yes you can, but the test is that the contractual entitlements in that contract must pass what's called a BOOT test, a Better Off Overall Test. So for example, if your standard hourly rate for an employee is $15 an hour, but on weekends you pay them $20 an hour, then if the contract of employment says your hourly rate is $22 an hour, does that make the employee better off overall than if they were getting penalty rates for the weekends? It can be very complicated, and often needs the support of an accountant, and certainly needs some support of a lawyer to get that right in the drafting of the agreement. But getting a good contractual agreement in place is key, but understanding what potential consequences are under awards is also very important. So it's a long winded start, but that's ... Seeing this a little at the moment in terms of confusion about award coverage.
Andy: I think you hit on a key point there, because a lot of employers, they want to hire someone to do the job for them. A lot of employees want the job. If I believe you can do the job for me, if I believe I can do the job for you ... A lot of the time the idea of getting into legal paperwork and all those things doesn't really occur to anyone. We obviously see that leads to problems down the track. On a simplistic level, what are the three core things that you think every employer contract they write for an employee needs to have in it?
Mark: The key would be salary. People would need to understand what they're getting paid. I also think a really good job description is important. And that can be and probably should be appended to the contract so everyone knows what their obligations are. And then what to do when things go wrong – is there a dispute resolution mechanism, are there performance measurements? They can be in the context of an agreement or in policies which apply to an employment relationship. But it's like anything, when things start to go array, how do you fix that? How do you step in and short circuit a problem?
Adam: Particularly with smaller businesses, you were talking about the job description thing and that's all well and good when you bring someone in, but of course that role is going to change over time. Generally, the smaller the business, the faster that change, and the more variety that can come into it. How do you ensure that you're covering those kind of changes as and when it goes – do you really need update that employment contract, or should it from the outset say, look this is the majority of the job description, but we reserve the right to change and adapt that according to the needs of the business.
Mark: Yeah I think you should avoid rewriting contracts and going back to them again and again. But having them updated from time to time, having a job description updated and stuck in the employee's personnel file is not a bad idea. And again, you don't want to go back to the job description that says ... And you have a discussion with the employee that says well Item 3 says you should be doing X, in fact you're doing Y. You don't want to get down to that level of argument about job descriptions and you don't want the employee every coming to you and saying well that's not my job. Ideally you'll have this wonderful, collaborative, teamwork approach in any employment role, but it's important to have a record so people understand what broadly we're talking about.
Adam: So in terms of updating it every now and again, what kind of time frame would that be, are we talking about yearly, are we talking about every five years ... Would it actually depend on the person or the role and the level of change that is happening?
Mark: It would. If there was a substantial change, if someone had a significant promotion for example, and they're doing a very different job than what they're employed to do, then you might revisit the employment agreement altogether. If there's just some subtle changes, you might not. It's a matter of degree.
Adam: And how would that actually work in practice, would you essentially issue a new workplace agreement or would it be an adapted version that's ... This is a one page thing to say this is an addendum to your existing contract?
Mark: Either could work. The simplest of course would be the addendum. But it's also important that people keep good records. So how long's a person been there, have they taken leave, where is the employment file? All those are key. We sometimes see people, we had an instance recently where we had a client who was selling his business and wasn't able to easily quantify the leave liability of his employees. It caused some significant delays in settling the sales transaction. So it's important to have good records. And things like what is someone's job description, how much are they getting paid, what leave have they taken, how much sick leave have they taken – should be in a nice file somewhere. There's really good online HR software packages which can bolt onto people's accounting systems or can a standalone PR programme. But they can help with that kinda record keeping.
Adam: So you've dealt with hundreds of businesses over the years. In terms of the employment agreement and potentially flawed agreements, what are the key and really common problems that arise if they're not perfect from the outset?
Mark: We've seen agreements that are unlawful. I read one just the other day, which said it would be a ground for dismissal if someone had an issue under the Mental Health Act. That would be straight out discrimination. That's clearly a health issue and you can't discriminate based on someone's health.
The key issues really are understanding what the obligations are. It's not like, say, a building contract where you need to specify everything. Employment relationships are governed by the Act, but the Fair Work Act and what are called the national employment standards. So those pieces of legislation and regulation set out how many annual leave you're entitled to have, how many personal carers leave days, what are the maternity leave provisions. So they're all sort of legislatively mandated. To some extent, if they're not in the employment agreement, it's not so important because they are the law anyway.
Adam: Another big thing around employment is obviously unfair dismissal and we had an HR consultant on the podcast last year I believe. And she was saying that a lot of particularly smaller business owners feel very locked in and very unsure of their obligations or even their rights in terms of unfair dismissal. Can you talk us through that and sort of help shed some light on what is a really a dark and confusing issue?
Mark: Look it is dark and confusing, it's dark and confusing even for lawyers sometimes. Broadly speaking, small businesses, and that is businesses with less than 15 employees have additional rights and protections under the Fair Work Act. They need to comply with the Small Business Unfair Dismissal Code, which is readily available on the Fair Work Commission website. And that runs through a checklist of what small businesses need to comply with to make sure they don't breach the law. So if someone has an issue and they're thinking about, “What do I need to do”, I'd recommend they go to the Fair Work Commission website. I think that's fwc.gov.au. It's a really good site.
Adam: How open to interpretation are some of those measures?
Mark: I think they're pretty clear. Where the issues are, is where you're not sure if you've compiled or not. Now I should say, small businesses have protection from an employee taking an unfair dismissal action in the first 12 months of that employee's employment with them. So the employee cannot go to the Fair Work Commission on an unfair dismissal claim in that first year of employment. They can of course go to the commission if they're making what's called an Adverse Action Claim, which is essentially when an employee's saying they've had action taken against them whilst they've wanted to exercise a workplace right, which is a different test. We can come back to that a little bit later on, but in terms of unfair dismissal, it's not the end of the world for employers. If you read some press, the press would say it's all doom and gloom from employers, it's not necessarily. There's a lot of misinformation in the marketplace about that.
Adam: Yeah I think businesses are quite afraid of it.
Adam: In the instance that they are faced with this, an employee does put this to them, from a legal perspective, what should they be doing?
Mark: If an employee has been dismissed and is taking an action? Is that what you're asking?
Mark: Sadly, it's really easy to take an unfair dismissal action. I say sadly, it's perhaps a bit over – sadly from an employer’s point of view. Because the Fair Work Commission will accept an application without assessing it initially, so the process starts, someone can get online, fill out a form, pay about $67 in filing fees to the Fair Work Commission, and the first thing an employer knows about it, is that they get a notice from the Fair Work Commission saying you've got seven days to respond to this notice.
What should they then do? They should go and get legal advice. The employer's response can be substantive in that it can respond to the allegation of the unfair dismissal and you need to respond and explain why the dismissal wasn’t unfair. Or it can be a procedural response and explain why the Fair Work Commission should not hear the application for unfair dismissal. And it's important to deal with that at the outset.
The steps from there is that generally within a month or so of the unfair dismissal response being received by the commission, the commission will then set a timetable for the matter. The first step is a mediation where the Fair Work Commission appoints a registrar or commissioner to deal with what is mostly a telephone mediation to try to see if an agreement can be reached in relation to that. Quite often, that will be a mediator wanting an employer to pay the dismissed employee some money to make it go away. And sometimes that's what employers have to do, sadly.
Andy: We talk about unfair dismissal and I think a lot of being dismissed or sacked or made redundant from any role is a very emotional process for the person it's happening to. A lot of time going to these unfair dismissal claims is almost a direct reaction of that emotion. Of course with unfair dismissals, there are also fair dismissals as well. If an employer knows that their employee is not right for the firm and is not doing what's required, what are the sort of steps they can take to ensure that they minimise that risk down the track of someone coming back with an unfair claim?
Mark: I think the key is performance management and having documented performance management processes so that if you get to a process where you decide an employee is not right for you, then you can work through management processes and manage a person out of the business. I sometimes say that getting rid of an employee involves time or money. And it's up to an employer, which one they want to do. They can effectively dismiss them and pay them additional money to go away, or they can take the time and work through and orderly system and process so that they can dismiss someone on fair grounds on the basis of poor performance or poor cultural feat or poor attitude. Difficult to do in a short time frame, but can be done over ... And it doesn't need to be months, it can weeks depending on the nature of the improvement required. But you need to go through one of those two processes, time or money.
Adam: Workplace flexibility is quite a big topic at the moment, from a business point of view, where do they stand if an employee says I want more flexibility, I want to work my own hours, I want to work remotely, whatever that kind of thing is – from a legal point of view, where does the business stand? Are they obliged to acquiesce any and all requests that they receive for sort of health and safety of the employee, or are they able to say this is our requirements, this is it, take it or leave it?
Mark: A business is required to have a good reason for not agreeing to a flexible working arrangement. If someone has family responsibilities, say a woman is returning to work from maternity leave, or a father from paternity leave – I shouldn't be sexist about it – or who needs some flexibility around caring for children, an employer should be ... It can refuse the request, but it has to have good reasons for refusing the request. Aside from the family obligations, an employer has an ability to run its workplace how it sees fit and can refuse those requests. But one thing that's important in terms of, say somebody wants to work from home ... And what employers need to know and need to be aware of is that as an employer, you have an obligation to provide a safe working environment. So you need to ensure that the person's work from arrangements are a safe work environment because if someone is injured in their home during work hours whilst performing work duties, then they can make a worker's compensation claim.
Adam: That's gotta open a complete can of worms because it could be their own fault, their own negligence, their own...
Nicole: Tripped over power cord.
Adam: Anything. Yes. I think there was a really high profile case of a state government employee sued because she was injured having sex on a work trip.
Mark: The falling chandelier.
Mark: Commonwealth government employee. It went to the high court.
Adam: But you've also got, sort of privacy, so it's not like the employer can go into the person's house and say look that's not safe, that's not safe.
Mark: Some employers do that.
Adam: They do?
Mark: Absolutely. They do that.
Adam: And they have the right to do that?
Mark: If the person wants to work from home, then the employer has an obligation to make sure they're working in a safe environment. Now most employers, and I've just assisted an employer by putting together a checklist that the employee self-assesses and submits the checklist to their manager, establishing that they're working in a safe work environment. But yes, certainly some large corporations and some tertiary institutions will actually physically visit the premise and ensure it's a safe work environment.
A good example for you, if someone, say, wants to work from home, and they're a computer worker of some sort, they're on their computer all day, but all they have is a laptop and a couch, and they're sitting in a way all day every day where they're gonna get some kind of injury – neck injury, iris eye type of injury – then they're being injured by their employment. So an employer would be liable for that. So an employer needs to make sure that if any employee has a requirement or request for working from home, that they have a safe working environment.
Adam: Okay. Something else that is obviously a really big issue is conflict in the workplace. And we were talking off air about bullying. And there's some concerns around what actually constitutes bullying.
Mark: Yeah, bullying is a difficult area of law. It's gained some, I guess notoriety is not quite the right word, but prominence from some horrible instances. Brady's Law in Victoria is the key where a poor woman was bullied in a workplace to the point where she committed suicide. And so what it did was focus governments and regulators around the country on making sure that they're a safe working environments. Now the old days of hazing an apprentice or junior employee – generally absolutely not acceptable in a modern workplace. And so an employer has an obligation to provide a safe working environment goes back to what we were talking about before with worker's compensation, but it's broader than that. It's about having someone under your care and control and you're obliged to make sure they're safe. And bullying can make a workplace unsafe.
Now bullying isn't a one off incident. It isn't an exchange of views on a single incident, which might offend someone's sensibilities, it's ongoing and repeated behaviour. And an employer has an obligation at law to stop that. Now the bullying can be between work colleagues, it can be a manager to one of their reports, and it can be a bullying up, it can be an employee who is bullying their manager. Essentially, the employer as a whole has an obligation to stop that and make sure it doesn't continue.
Adam: What about the business owner themselves, because they're working in the business, so if that upward bullying is affecting them, they're the victim, are they covered because they're technically an employee of the business?
Mark: Technically they would be covered, but it's very difficult. Because the remedy would be for the bullied person to potentially go to the Fair Work Commission and to get a stop bullying order, which imposes obligations on the company. But if you own the company, you wouldn't do that, you'd probably take some other measures along the way.
Andy: I think every good firm has what we're euphemistically referring to as banter within it, between employees, between employers and employees, and so forth. At what point does banter become bullying?
Mark: When it's unwanted, when it has the potential to offend and when it's complained about – would be three rough areas I think.
Andy: And what should an employer be aware of to notice that banter is moving to bullying?
Adam: Or even harassment.
Mark: Indeed and become discrimination basis, if someone's being ... If the banter is because for example, someone could be gay, or someone could be of a different faith. They can all be friendly banter, but have a sinister impact. So an employer has a general obligation to be aware but the employee, importantly needs to respond appropriately once it becomes aware. So if a manager is sitting in an office and doesn't see what's happening in a core centre or on the floor of a factory, then they can't be presumed to know. But they have an obligation to have good policies and procedures both in terms of stating what is and what is not acceptable behaviour in workplace, and then policies and procedures, which deal with how to respond to issues when they're raised.
Nicole: I think taking those policies and procedures and making them a living breathing part of the culture. So it's not okay just to sort of have a policy and have it filed and then let activity and behaviours kinda perpetuate throughout the business, but it's actually sort of raising that as a conversation, making everyone responsible for what is and isn't appropriate behaviour within the workplace. So it doesn't sit solely with that business owner having to be responsible across all elements. So I think it's that legal structural element to it, and it's that cultural management coming together to sort of really make it a part of how you do business and what you're comfortable with in having people engage with you.
Adam: Something else that's quite topical at the moment, shifting away from conflict and things like that, is immigration law in relation to employment. And of course we saw fairly recently 457 visas being scraped. Has that created a lot of confusion among business owners about what they can and can't do if they've got people who were scheduled to come in on the visa or that kind of thing. Where are businesses really sitting at the moment with that?
Mark: Completely up in the air. I think the process has been handled very poorly by the immigration department and it's caused a great deal of anxiety on individuals and confusion in business. It's one of the worst examples of change in policy I've seen in a very long time and it should be condemned. We're seeing it continuing. The budget on Tuesday introduced additional fees for employers, so employers who've got 457 employees right now will, as of next February, be required to pay additional fees. We're seeing people who have had applications before the department but they haven't been approved before April 19th, now not have a pathway to a visa. And the only option they have is to withdraw their application. It is very confusing. So what's happened is that essentially, the 457 visa as we know it is being abolished. It hasn't been abolished right now, it's a staged process over the next six to eight months.
Adam: But it means no new applications can be considered, as you were saying.
Mark: What it's done is introduce two new classes of visa it's introduced a short term temporary skills visa and a medium short term visa – a medium to long term temporary skills visa. So 457 lasted for four years and from there, there was a good pathway to permanent residency for most people who were here on a 457. And there were about 700 occupations on a list and if people fit into one of the occupations on the list, they were eligible for a 457 and in most cases, eligible to apply for permanent residency after a period of time.
A number of employment categories were taken off the list and completely abolished and people who had applied for an occupation that was taken off the list won't be able to apply for a new visa. The balanced list was divided into the medium and short term. Those employment categories, which are now on the short term list, have no pathway to permanent residency. So the visa will last for two years – it’s unlikely there’ll be any extensions to that granted and that occupation will not be eligible to apply for permanent residency visa after that period of time.
So you've got people who now here on 457s were expecting at the end of that 457 period to be eligible to apply for permanent residency visa and then progress through to citizenship from there, will no longer have that option. And then the permanent residency visas are being changed. The age of which someone can apply for PR has been reduced from 50 to 45. Language component is now extended through to all salary levels, whereas before it cut out at $96,000. So there's been some very significant changes made, the changes are continuing and the next stage of interlocution I think is December 31 and then March next year. In the meantime there's great confusion, there's great uncertainty, and the impact upon individuals’ lives is immense and the impact upon businesses is going to be large.
Adam: So what can business owners do in the meantime to try to overcome some of this confusion and get some semblance of normality going?
Mark: This is going to sound bias because I do immigration law, but they need to talk to an immigration lawyer. They need to talk to someone who's familiar with the changes. And familiar with the policy of the department, to get an understand of what changes apply now, what changes will apply through the changing process – through 2017/18 – and what the law will look like post 1 March 2018.
Adam: All right. And in terms of … You yourself are an immigration lawyer, where can people go to for advice if they want to discuss this in more detail with you?
Adam: All right, fantastic. Thank you so much Mark and Nicole for joining us. We've run out of time. But fascinating chat so I think you've answered a lot of questions that a lot of business owners are really struggling with. So thanks for the insights there. Andy, anything to add?
Andy: No nothing to add at all. Look I always think it's fascinating to I suppose, talk to real problem solvers.
Andy: Thanks guys.
Nicole: Bye bye.
Too many SMEs are making this mistake
By Adam Joy
Taking digitisation out of the ‘too hard’ basket for SMEs
By Jason Brouwers
The insanity of consumer expectations
By Jason Dooris