Merv Saltmarsh ARTICLE
A re Your Employment Contracts Compliant?
Two recent decisions heighten the need to ensure your business is mitigating potential risk with employment contracts that are cut and paste add on wording is high risk. 1. Fixed Term Contract and clauses that created an issue for the employer Dismissal claim proceeds: contract wasn't 'fixed-term' A contract that allowed either party to give one week’s notice at any time wasn’t a “fixed-term” contract for unfair dismissal legislation purposes, even though its term was set at 12 months. The employee was therefore eligible to lodge a claim of unfair dismissal. Facts of case Magdalini Nesci was employed by a hotel as a food and beverage supervisor. Her contract specified the following terms: • Length of 12 months • First six months was an “automatic unprotected minimum employment period”, during which either party could give one week’s notice of termination • First three months was a probationary period, after which either party could provide notice of termination in compliance with the applicable award and National Employment Standards • After 12 months, either party could give one week’s notice of termination After about 10.5 months, Ms Nesci was dismissed and lodged a claim of unfair dismissal. The hotel objected, claiming that she was a fixed- term employee and therefore ineligible to claim. In issue: The case turned on whether the clause in the contract allowing either party to terminate the contract with one week’s notice stopped the contract from being classified as fixed-term. To be “fixed-term”, a contract has to operate for a specific period of time. If it is to run until a future event of uncertain timing occurs, it is not fixed-term. Previous decisions had found that contracts that provided for termination by either party before the specified expiry date were not fixed-term contracts. Decision: The Fair Work Commission dismissed the employer’s objection to Ms Nesci’s claim. It said that the nature of fixed-term contracts was to give both parties certainty about the duration of the employment relationship. The provisions for termination during the contract meant that the “expiry date” became an outer limit, not a specified termination date, so the contract was not for a fixed term. It allowed Ms Nesci’s claim to proceed to a hearing. Bottom Line: A fixed-term contract must run for a specified period of time with an expiry date clearly set out. If it includes provisions for termination of employment before the expiry date, it will no longer be fixed-term and the employee may be eligible to lodge a claim of unfair dismissal. 2. Casual Contract had implications for annual leave FEDERAL COURT AWARDS CASUAL EMPLOYEE ANNUAL LEAVE Commentary: In a recent decision, the Federal Court of Australia has found that a casual employee was entitled to payment for untaken annual leave following the termination of their employment. The employee was a fly-in fly-out worker employed at a mining site in Queensland, and worked in accordance with rosters set 12 months in advance. The employee was paid a flat hourly rate, which the employer contended included a casual loading, but did not specify
this in his employment agreement. The Federal Court of Australia held that in determining whether or not the employee was entitled to annual leave under the National Employment Standards, the ‘practical reality and true nature of the relationship’ needs to be assessed, rather than how the employment may be designated under a modern award or enterprise agreement, or otherwise labelled by the parties. Where an employee has a firm advanced commitment as to the duration of the employment and/or the days and hours the employee will work, the employee is more than likely to be something other than casual. Conversely, where the employment relationship is marked by irregular work patterns, uncertainty or unpredictability, without any firm advanced commitment, the employee is more likely to be a casual employee. What does this mean for the hospitality industry? This decision draws a clear line in the sand regarding the approach to take in assessing casual employment for the purposes of the application of the National Employment Standards. If you are employing casual employees for long periods, with set rosters, week-in week-out, year-on-year, it may be argued that those employees are not casual, and a claim for the annual leave and the other entitlements associated with full-time or part-time employment may arise. It remains to be seen whether the matter will be subject to further proceedings before the High Court of Australia, and/or whether there will be any legislative response through the parliament. What action should employers take? It is recommended that members review the true nature of any casual employment relationships; • Consider moving those working regular and predictable patterns into full-time or part-time employment – any conversion offer and response should be in writing and retained; • Ensure you have clear written casual employment contracts specifying the nature of the work, that a casual loading applies and what it compensates for, and an effective ‘set-off’ clause – THA can assist in reviewing What is the THA doing? The THA/AHA will continue to monitor this situation and whether it proceeds to the High Court of Australia and will provide further updates in due course. THA have offered and provided internal self-check audits previously be it Fair Work or THA Tool Kit however we encourage you have your current employment contracts checked. These two recent decisions and summaries provide a basis for you to understand the potential and as part of your membership services as the “point of difference” we provide you proactive risk management capability. Takeaway? Don’t Cut and Paste or add nice words or hours other than 38 for ordinary hours and ensure they comply. THA offers the member service to review contracts and rosters where any concerns may exist by contacting; Merv Saltmarsh Employment Relations – Business Improvement Manager on merv@tha.asn.au or ring 0362207305
December 2018 www.tha.asn.au
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