Home
Category: Employment

Employment

Serious Misconduct Meaning

Serious misconduct meaning

Updated: 27 January 2022

Serious misconduct is a common ground for termination of an employee.

But, not every employer classifies serious misconduct correctly.

For this reason, it’s important to know what it means and if you have a valid reason to dismiss an employee for conduct that is in fact classed as serious misconduct.

What is serious misconduct ?

Serious misconduct is defined in section 1.07 of the Fair Work Regulation.

Serious misconduct is conduct that is wilful or deliberate and that is inconsistent with the continuation of the employment contract.

It is also conduct that causes a serious risk to the health and safety of a person or to the reputation, viability or profitability of your business, so its a reasonable ground for termination.

Serious misconduct includes:

theft
fraud
assault, intoxication at work and;
the refusal to carry out lawful and reasonable instructions in the employment contract.

No notice needed

Also, you don’t need to give the required week's notice per the Fair Work Act (restated below) if there is serious misconduct.

and the notice period above increases by 1 week for someone that's worked 2 continuous years.

Proportionate response

It's important that the dismissal is proportionate to the employee's conduct.

So you'll want to make sure the employee’s conduct is in fact serious misconduct.

Otherwise, Fair Work may deem the dismissal as disproportionate or harsh. Fair Work may make this finding if the employee applies for unfair dismissal.

The standard of proof - Bringshaw test

In this case, we are talking about a civil standard of proof on the 'balance of probabilities' that the employee’s conduct was in fact serious misconduct. For this test, we look at the Briginshaw test.

Here’s the key test for proof in Briginshaw v Briginshaw:

'The standard of proof remains the balance of probabilities but 'the nature of the issue necessarily affects the process by which reasonable satisfaction is attained' and such satisfaction 'should not be produced by inexact proofs, indefinite testimony, or indirect inferences' or 'by slender and exiguous proofs or circumstances pointing with a wavering finger to an affirmative conclusion.'

As always, get advice if you are in doubt before you dismiss an employee.

I need help with a termination

Employment

The expenses an employee should never have to cover

Photo by Webaroo.com.au on Unsplash

The expenses an employee should never have to cover

6 December 2019

Here’s what you need to know about expenses that employee’s should never have to cover so you can make sure your contracts are fair and Fair Work compliant.

Unreasonable requirements, for the employer's benefit

In a nutshell, the Fair Work Act says employee’s should never have to pay the employer or another person for unreasonable requirements OR make a payment that is either directly or indirectly for the employer’s benefit: s. 325 Fair Work Act 2009 (Cth).

Rule logic

So what’s the logic of section 325?

Section 325 exists to protect employee’s from being forced to pay for things that should be their employer's responsibility.

The contractor vs employee distinction is a really good guide for an unreasonable requirement for an employee to spend or pay money.

Why?

Because it guides our expectation of what employee's should and should not be responsible for.

We've covered the distinction between employees and contractors here. But, below are the relevant considerations for what's relevant for our section 325 analysis.

Risk

Employee’s don’t bear risk but contractors do. This means, they should not have to cover certain costs.

It's the employer that takes on the risk of hiring employees and this includes buying business insurance that covers employee and business risk generally.

So, under these circumstances, it's unreasonable for an employer to require an employee to pay an insurance excess - this is a common mistake that employer’s make. That is, to require an employee to pay for excess and worse, think that having a clause in an employee contract to this effect makes it okay.

Training

Employees are generally provided with the tools and resources they need to complete their work for an employer and this may sometimes include training.

So can an employer charge an employee for training costs?

An employer should not be charging employees for the initial training cost.

However, there are some contracts that have a claw back clause that allows them to recover training costs.

This means, if an employee leaves after a certain time period, they may have to pay the employer the training cost. These clauses are particularly common in the hair and beauty industry but also many other industries as well.

These claw back clauses can be legally binding if they are reasonable. For example, if you have a clause that says that an employee will have to pay back a portion of a $1,000 training course if they leave within 6 months of receiving that training.

But it's written

A contract, modern award or enterprise agreement may have an unreasonable requirement for an employee to spend money.

So, does that make these clauses legal?

It’s incorrect for employers to think a clause in a contract, modern award or enterprise agreement asking employees to pay for unreasonable amounts e.g. damage will make such a request acceptable and legal.

We know this because of section 326 of the Fair Work Act which makes it clear that an unreasonable request like this will have no effect.

Exceptions?

Are there any exceptions?

Yes. The exception is where the requirement for an employee to spend is not unreasonable.

In the case of a worker that does not act based on employer directions you could claim the cost back from the employee.

I’ll use the example of a worker using an employer’s vehicle to run an employer's errands and has an accident during working hours.

If an employee was using the vehicle as authorised by the employer at the time of the accident, there’s no exception. The employer needs to cover the cost.

But, if the employee took the employer’s car without permission for a joy ride, this may give the employer the right to recover the excess and associated costs from the employee under tort law for negligence.

What to do if you have unreasonable spend clauses

Get advice.

Your business contracts including employee contracts should have fair and reasonable terms that can be upheld in court if need be.

If you have any agreements with your employees that have a requirement for your employee’s to spend an unreasonable amount, you should first get advice and have the clause removed or revised as appropriate.

Fair contracts attract good candidates and are great for your brand.

Got questions or comments? leave them below.

I wish you every success in your ventures!

I need help with an employment law query

Employment

The difference between Fair Work Commission & Fair Work Ombudsman

Photo by Sergi Ferrete on Unsplash

The difference between the Fair Work Ombudsman and the Fair Work Commission

Updated: 1 December 2019

Did you know that the Fair Work Commission and the Fair Work Ombudsman are both separate Australian government organisations?

We'll go through each of their roles below.

First, let's start with the ombudsman.

Fair Work Ombudsman

The ombudsman’s role is mostly to educate and to enforce laws like the Fair Work Act 2009 (Cth). Also, they provide advice about pay and work conditions to employees and employers.

Here are some examples of their work:

enforce workplace laws and apply penalties for breaches; and
also enforce certain orders made by the fair work commission.

So what exactly is the commission’s role? We’ll look at that next.

The Fair Work Commission

The fair work commission is a tribunal. They set minimum wages and workplace conditions.

Here are some examples of what they do:

help employees and employers make, vary or terminate enterprise agreements
deal with bullying applications
make orders about industrial action like work bans, lock-outs and lock-outs.
hold mediation, conciliation and public tribunals to resolve work disputes
make workplace determinations, hear and decide on equal pay cases, transfer of business, stand down, general protections and right of entry.

I need help with an employment law query

Employment

Your employee’s 10 minimum employee entitlements

Photo by Shridhar Gupta on Unsplash

Your employee’s 10 minimum employee entitlements

Updated: 13 February 2021

Hiring employees?

Then you'll need to know about the national employment entitlements (NES) which will apply for all your new hires.

So what exactly are the NES?

The NES are 10 minimum employee entitlements that you need to provide all of your employees in Australia.

Importantly, you can provide your employees more but not less generous terms than the NES.

Also, you should know that the Fair Work Legislation is updated frequently and this includes additional minimum entitlements for pandemics.

And I’ll walk you through each of the original minimum entitlements in detail below.

And if you are in a hurry, you can skip ahead.

Table of Contents

Maximum weekly hours

Flexible working arrangements

How to respond to a flexible workplace working arrangement request

Parental leave and related entitlements

Who is eligible?

Annual leave

Leave - personal/carer’s, compassionate, family and domestic violence

Personal/carer's leave

Immediate family member

Compassionate leave

Unpaid family and domestic violence leave

Close relative

Community service leave

Long service leave

Public holidays

Notice of termination and redundancy pay

Fair work information statement

Maximum weekly hours

Your full time employees have a right to work a maximum of 38 hours.

And, for your part time workers, it's the lesser of 38 hours and their ordinary hours.

Importantly, your employees may refuse to work unreasonable additional hours.

So what exactly is unreasonable?

Below are the factors taken into account:

work health and safety risks from working extra hours
personal situation like family responsibilities
your workplace needs
if your employee is entitled to overtime, penalty rates or other extra pay for the extra hours
notice to your employee of the extra work hours
notice by your employee to you of their refusal to work extra hours
the usual work patterns in your industry
your employee’s role and their level of responsibility
if the extra hours are covered by your industry award, an enterprise agreement or an agreement to average work hours with your employee; and
any other relevant factors.

Your source: section 62 Fair Work Act 2009 (Cth).

Next, we'll look at flexible working arrangements.

Flexible working arrangements

So what are flexible working arrangements?

Your employee may ask you for a change in their work hours , changes in the pattern and location of work in case of your employee being:

a parent or has responsibility for a child of school age or younger
carer
having a disability
is 55 or older
experiencing violence; or
providing care or support to a member of their family or household who needs support because they are experiencing violence.

So who is eligible?

Your employee has the right to ask you for a flexible workplace arrangement if they have been working for you at least 12 months.

In the case of a casual, your employee should be a long term casual employee and have a reasonable expectation of continuing employment on a regular and systematic basis.

To break this down further, your casual should be more than a fixed term casual for a holiday, they actually need to be working a set pattern of hours and they expect their employment to continue.

So how does your employee make the request?

Your employee will need to put their request in writing and set out the change sought and reasons for it.

And how should you handle these requests?

How to respond to a flexible workplace working arrangement request

You’ll need to reply in writing to your employee within 21 days.

Importantly, you can only refuse your employee’s request on reasonable business grounds.

And reasonable business grounds may include costs, capacity to accommodate their request, productivity or efficiency losses or negative impacts on customer service.

Finally, you will need to state the reason for any refusal of your employee’s request.

These requirements are in section 65 of the Fair Work Act 2009 (Cth).

As a reminder, the minimum entitlements are just that. There’s nothing stopping you from having a more generous or flexible flexible workplace arrangement for your employees.

What about parental leave? I'll walk you this entitlement next.

Parental leave and related entitlements

Your employees can get parental leave when their child is born or adopted. Entitlements include:

maternity leave
paternity and partner leave
adoption leave
special maternity leave
safe job and no safe job leave; and
right to return to old job.

Your employees have the right to 12 months of unpaid parental leave. And, they can also request an extra 12 months of leave.

So which of your employees are eligible?

Who is eligible?

All employees in Australia are entitled to parental leave if they have worked for you at least 12 months before:

their expected date of birth;
before their date of adoption; or
when the leave starts (if the leave is taken after another person cares for the child or takes parental leave)
they will have a responsibility for the care of a child.

Your casuals have the same rights if they have been working for you on a regular and systematic basis for at least 12 months and have a reasonable expectation to do so.

Also, if your employee has another child, they don’t have to wait another 12 months before taking another period of parental leave.

Your source is section 70 to section 79B of the Fair Work Act 2009 (Cth).

Annual leave

All your employees (except casuals) are entitled to annual leave.

Your fill time employees get 4 weeks per calendar year.

And your part-time employees get a pro-rata based on their ordinary hours of work.

For example if your employee works 20 hours per week for a year, during that year, they will accumulate 80 hours of annual leave.

Your shift workers may be entitled to up to 5 weeks of annual leave if your industry award includes this.

So how does your employee’s annual leave accumulate?

Your employees will accumulate annual leave on their paid leave, community service leave and long service leave.

Now, your employee’s annual leave will not accumulate when your employee is on unpaid annual, sick/carers, parental and family and domestic violence leave.

Also, your employee will not accumulate any annual leave while being paid by the Paid Parental Leave Scheme.

This annual leave information is in section 87 of the Fair Work Act 2009 (Cth).

Leave - personal/carer’s, compassionate, family and domestic violence

Personal/carer's leave

Personal/carer's leave lets your employees take time off for personal illness or to care for their immediate family or household members.

So who exactly is an immediate family member?

Immediate family member

An immediate family member includes a spouse, former spouse, de facto partner, child, parent, grandparent, grandchild, sibling OR the child, parent, grandparent, grandchild or sibling of the employee’s spouse or de facto partner (or former spouse or de facto partner).

And step relations also benefit from this leave.

Importantly, both your full and part-time employees are paid 10 days for each year of their employment. There’s no pro rata for your part-time employees.

So how does personal/carer's leave accumulate?

Your Full-time and part-time employees accumulate personal and carer’s leave from their first day of work. This leave also accumulates when your employee is on paid annual leave, paid sick and carer’s leave, community service leave including jury duty and long service leave and long service leave.

However, your employees will not accumulate personal/carer’s leave when they are taking unpaid annual, personal/carer’s, parental leave or family and domestic violence leave.

And how much leave can your employees take?

The answer is that there’s no minimum or maximum limit on the amount of paid sick leave that your employee can take.

Now, if your employee’s personal/carer's leave runs out, they may be able to take unpaid carer’s leave.

The above information for personal/carer’s leave is based on section 96 and 97 of the Fair Work Act 2009 (Cth).

Compassionate leave

All of your employees (including casuals) may take compassionate leave (sometimes called bereavement leave).

Your employees may take compassionate leave if a member of their immediate family or household dies or contracts or develops a life-threatening illness or injury.

The immediate family definition was explained previously, you can refer to the personal/carer’s leave section for this.

So what is the leave entitlement for your employees?

Your employees are entitled to 2 days of compassionate leave each time an immediate family or household member dies or suffers a life threatening illness or injury.

Your employees can take the leave either as a 2-day period or 2 separate periods of 1 day each or any separate periods that you agree with your employee.

So which employees are paid for compassionate leave?

Your full-time and part-time employees are paid compassionate leave and your casual employees receive unpaid leave.

And, the calculation is based on the ordinary hours your employee’s would have worked during the leave.

Also, you can make reasonable requests for evidence e.g. death, funeral notice or statutory declaration.

Your source reference for compassionate leave is section 12 and 104 - 106 of the Fair Work Act 2009 (Cth).

Unpaid family and domestic violence leave

All of your employees (including part-time and casual) get 5 days unpaid family and domestic violence leave each year.

Domestic violence means violent, threatening or other abusive behaviour by an employee’s close relative that seeks to coerce or control the employee or cause them harm or fear.

And who is a close relative?

Close relative

Your employee’s close relative includes their current or former spouse, de facto partner, partner, child, parent, grandparent, grandchild or sibling.

Also, this includes a person related to the employee according to Aboriginal or Torres Strait Islander kinship rules.

The source reference for family and domestic violence leave is sections 106A - 106E and section 107 of the Fair Work Act 2009 (Cth).

Community service leave

Your full time, part-time and causal employees get community service leave for voluntary emergency management activities and jury duty.

Your employee’s are able to take community service leave while they are engaged in the activity and for reasonable travel and rest time. Also, there is no limit on the amount of community service an employee can take.

Your employees must give you a notice of absence as soon as possible which may be after their leave starts and tell you how long they expect to be away.

This legal information about community service leave is from section 110 of the Fair Work Act 2009 (Cth).

Long service leave

Your employee’s get long service leave after working for you a long time. And, your employee’s entitlements are based on the state or territory they are working in.

The weeks below are rounded up, in many cases there is an extra ⅓ or ⅔ week because of the definition of a month.

New South Wales

In New South Wales, the Long Service Leave Act 1955 applies. Your employees get at least 2 months of long service leave after 10 years of continuous service.

Also, for each additional 5 years, they are entitled to an additional month of leave.

Victoria

In Victoria, the Long Service Leave Act 1992 applies. Your employees get 8 weeks of leave after completing 10 years of continuous employment. Also, for each additional 5 years, employees receive 4 extra weeks of leave.

Queensland

In Queensland, the Industrial Relations Act 1999 applies. From 3 June 2001, your employee’s long service leave is 8 weeks after 10 years of continuous employment and extra long service for each extra 5 years of work.

And, if your employees start date was before 3 June 2001, there are some transitional arrangements in place.

Australian Capital Territory

In the Australian Capital Territory, the Long Service Leave Act 1976 applies.

Your employees receive 6 weeks of leave after working at least 7 years of continuous service. And, for each year of continuous service, your employees accrue ⅕ of a month long service leave.

The above leave does not apply for public sector employees or some employees in the building and construction industry, contract cleaning industry or employees covered by the Portable Schemes Act 2009.

Western Australia

In Western Australia, your employees receive 8 weeks of long service leave after 10 years of continuous employment. Also, after each 5 years they receive 4 weeks leave.

Northern Territory

In the Northern Territory, your employees are covered by the Long Service Leave Act 1976.

Your employees receive 13 weeks of long service leave after 10 years continuous service. They also receive an extra week of leave for each extra 5 years of service.

South Australia

In South Australia, your employees are covered by the Long Service Leave Act 1976.

Your employees receive 13 weeks long service leave after completing at least 10 years of continuous employment. Also, they receive 4 weeks leave for each extra 5 years of continuous service.

And finally, last but not least, Tasmania…

Tasmania

In Tasmania, your employees are covered by the Long Service Leave Act 1976. Your employees receive 8 weeks long service leave after 10 years of continuous employment and 4 weeks for each extra 5 years.

Like long service leave, public holidays vary based on the state your employees work in. We’ll discuss public holiday’s next.

Public holidays

Your employees may reasonably refuse to work on a public holiday and they are entitled to be paid for those public holidays.

Under the national employment standards, the days below are public holidays:

1 January (New Year’s Day)
26 January (Australia Day)
Good Friday
Easter Monday
25 April (Anzac Day)
Queens birthday
25 December (Christmas Day)
26 December (Boxing Day)
Any other day or part-day under a state or territory law that is to be observed generally as a public holiday.

You may have an industry awards that allows you and your employees to agree to substitute public holidays for another day.

So what are reasonable grounds for requesting or refusing to work on a public holiday? Below are the factors.

your workplace - business requirements and your employee’s role
your employee’s personal circumstances
if your employee could expect that they may be required to work on a public holiday
if the employee is entitled to overtime, penalty or other extra pay to cover for instances where they may need to work public holidays
your employee’s status as full-time, part-time, casual or shift worker
yours and your employee’s amount of notice before the public holiday
any other relevant matter.

And what do you need to pay your workers if they are not working because of a public holiday?

You’ll only need to pay your employees for a public holiday if the public holiday would be one of their workers.

For example, a part-time employee is not entitled to payment if their part-time hours do not include the day of the week which the public holiday falls.

Notice of termination and redundancy pay

Notice

Your employees are entitled to a notice period when their employment ends.

If you terminate a worker, you’ll need to give them written notice and you can do this by:

delivering it personally
leaving it at the employee’s last known address; or
sending it by pre-paid post to the employee’s last know address.

And, if your employee has resigned, they can give you notice verbally, it does not have to be in writing.

Also, notice can be paid out instead of worked. These are the options you have:

you can let your employee work through the notice period;
you can pay it out to them (pay in lieu of notice); or
give a combination of the two.

Even if you end your employee’s employment during probation, they are still paid notice.

And in the case of serious misconduct, you don’t need to give your employee any notice of termination.

But, you will still have to pay your employee all their entitlements.For example, time worked, annual leave and long service leave if its owed.

Serious misconduct examples include: theft, fraud, assault, refusing to carry out a lawful and reasonable instruction and causing a risk to someone’s health and safety or to the reputation or profits of your business.

Redundancy pay

Your employee’s position will be redundant if you don’t need their position to be done by anyone or if you become insolvent or bankrupt.

You’ll have to make sure that you follow the rules in any industry award or enterprise agreement or other registered agreement.

Your employee’s may lodge an unfair dismissal claim against your business if their dismissal is not a case of genuine redundancy.

For example, if any of the below apply, it won’t be a genuine redundancy.

the employee’s job still needs to be done by someone;
you did you follow consultation requirements; and
you could have reasonably given your employee another job in your business or an associated entity.

Fair work information statement

As an employer, you’ll need to give your new employees a copy of the fair work information statement. It has information about your employee’s condition of employment. This is a mandatory fair work requirement.

And, you can find the information statement on the fair work website.

You can give the statement to your employee in person, by mail, email, by sending a link to the fair work website or by fax.

I wish you every success in your ventures!

I need help with an employee query

Employment

How to avoid a sham contracting claim

Photo credit: Gabrielle Henderson from unsplash

How to avoid a sham contracting claim

Updated: 3 November 2022

Are you thinking of hiring a contractor for your business? This is a fantastic idea when you do not need another employee. But you need to be careful. While a contractor can cost you less because you only pay for the hours they actually work, and you do not need to pay for sick days or holidays, you need to ensure it will truly be an employee-contractor relationship. You do not want a sham contracting claim made against you in the future. It can cost you a lot of money.

So, what exactly is sham contracting?

Table of Contents

Meaning of sham contracting

Under the Fair Work Act 2009 (Cth), an employer cannot:

Difference between a contractor and an employee

Employee

Contractor

Changing contractor status to become an employee

Meaning of sham contracting

Contractors have different rights and obligations than employees do. Sham contracting occurs when an employer misrepresents a job as a contractor’s role when it is really an employee role.

A contractor is truly independent. They have a lot of control over where, when and how they work as opposed to an employee who follows their employer’s instructions.

So why would an employer misrepresent an employment opportunity as a contract position?

Sometimes it is because they make a mistake. But usually it is so the employer can avoid paying employee entitlements such as annual leave, sick pay and superannuation.

**Under the Fair Work Act 2009 (Cth), an employer cannot:**

Misrepresent an employment relationship or a proposed employment arrangement as a contracting arrangement, or

Dismiss or threaten to dismiss an employee for the purpose of rehiring them as a contractor, or

Knowingly make false statements to persuade or influence an employee to become a contractor.

So, misrepresenting an employee’s job as a contracting job is illegal. And there are penalties for sham contracting if it goes to court. The penalties can be up to $13,320 for an individual and up to $66,600 for corporations for each occurrence. So do not do it.

How do you know if you should hire an employee or a contractor?

There are major differences.

And, if you are in doubt, always get advice.

Difference between a contractor and an employee

It is important to know what the differences are between an employee and a contractor.

For example, contractors have more autonomy about how they complete the work, they may set their own work hours and have insurance to cover their work.

On the other hand, employees receive direction about when and how to complete work, they do not need insurance, and receive paid entitlements like annual and sick leave. You can read more about the differences here.

The following will help you decide whether it is an employee or a contractor you want to hire:

Employee

You want to hire an employee if you:

Pay them a salary or wage for the work they do.
Withhold tax from their pay.
Tell them what hours you expect them to work.
Pay sick and annual leave, and superannuation.
Cover them under your workers compensation.
Require them to fill out timesheets to receive payment.
Supply all equipment or tools.

Contractor

A contractor:

Pays some of their business expenses.
Invoices you to receive payment.
Works the hours they want and how they want to.
Can contract someone else to do the work.
Can work for other businesses.
Pay their own tax and superannuation.
Have their own place of work.
Use their own equipment and tools.

Now, which one of the above sounds more like what you expect to do after hiring someone new?

Changing contractor status to become an employee

Sometimes you may want to change the status of a contractor to become an employee. Of course you need to discuss this with them and get their agreement. But keep in mind, some people actually prefer to be a contractor rather than an employee.

But if you are giving the contractor lots of direction, need them to work set times or your project was extended so they spend most of their time at your business they may no longer fit the definition of a contractor. In these cases you may want to consider changing the contract agreement to an employee agreement. And, if your contractor does not want to become an employee, you may need to change how you work together or hire a new employee.

Read more about when to make the switch from a contractor to an employee agreement right here.

I wish you every success in your ventures!

And, as always if you need advice, get in contact.

I need help with a contractor query

Employment

Is my business a national system employer?

Photo by Joey Csunyo on Unsplash

Is my business a national system employer?

Updated: 2 December 2019

Is my business a national system employer?

And, why should you care?

Because a national system employer is covered and bound by Australian national workplace relations law.

Coverage

The national workplace system covers:

All employees in Victoria, Northern Territory and the Australian Capital Territory (there are some exceptions for state public sector employees)
All employees on Norfolk Island, the Territory of Christmas Island and the Territory of Cocos (Keeling) Islands
Private enterprise in New South Wales, Queensland, South Australia and Tasmania
Government employees in Tasmania
Those employed by the Commonwealth or a Commonwealth authority
Waterside employees, maritime employees or flight crew officers in interstate or overseas trade or commerce.

Below is a diagram courtesy of the Fair Work Commission, to help you see the coverage more clearly.

Laws

If your business is a national system employer your business is bound by the national workplace relations system and your workers are protected by those laws.

As always, if you are in doubt, get advice.

I wish you every success in your ventures!

I need help with a business structure

Employment

Employment termination payments & legal requirements

Photo from Unsplash

A guide to Employment Termination Payments (ETP's)

Updated: 26 January 2022

When an employee leaves your business, you might make a lump sum payment to them.

An employment termination payment, also known as an ETP, is a payment made to an employee when they are leaving your business.

You can pay an employee an ETP simply because they are leaving, or if there is some legal agreement to pay an ETP.

ETP classification

Why does it matter if a payment is called an ETP ?

Employee's pay less tax for an ETP than their regular income.

In the case of a wrongful dismissal, the amount needs to be paid within within 12 months of the employee's termination to be a valid ETP.

ETP Examples

An ETP includes:

Notice payments - payments in lieu of notice;
Unpaid rostered days off (RDO's)
Genuine redundancy payments or early retirement scheme payments (that exceed the tax free limit)
Compensation for loss of job or wrongful dismissal

ETP's may also include: gratuity or ‘golden handshake’.

Although not a common term these days, a golden handshake is a payment that’s given to someone for retiring early and unpaid sick leave (though this is not common).

ETP exclusions

And these items below are not ETP’s:

Lump sum payments for unused annual or long service leave
Tax free part of a genuine redundancy payment
Superannuation benefits
Foreign termination payments.

You can also learn more about how ETP’s are taxed on the Australian Taxation Office website.

Employer obligations

Employers must give employee's pay slips showing a breakdown of any payment made to them.

And ETP’s are no different. It’s important to provide a breakdown to employees to avoid any misunderstandings or disputes.

Deed of release for ETP's?

A deed of release for an employment termination may set out key terms for finalising an employment relationship including ETPs but you don't always need one.

Release from any future legal claim by an employee is the main reason to have a deed of release in place.

It's important to note that employee's do not have to sign deed of release to get paid their legal entitlements because they are exactly that, a legal entitlement that employee has a right to be paid in any event.

So what exactly is a legal entitlement? I'm glad you asked.

Legal entitlements include notice pay, sick leave and annual leave and long service leave.

However, if you are paying an employee a ex gratia payment (an extra payment thats not legally required), in this case, the entitlements and ex gratia payment can both be set out in the deed of release.

If the employee signs the deed of release, they get the ex gratia payment, if they don’t, then they won’t get paid anything more than their legal entitlements.

Contract vs Fair Work Act minimum entitlements

If an employee’s contract has more favourable entitlements for example, extra notice than the Fair Work Act, then those entitlements apply and must be paid.

You can read more about the relationship between contracts and Fair Work legislation requirements here.

Finally, you cannot force an employee to sign a deed of release and It’s a good idea to get legal and accounting advice if you are unsure of how to handle a termination or an ETP.

Be sure to leave. your questions and comments below or contact us if you have any questions.

I need help with an ETP ?

Employment

Director and employee duties after resigning from an Australian company

Photo by rawpixel on Unsplash

Director and employee duties after resigning from an Australian company

Updated: 18 April 2020

Directors still have duties after they resign from an Australian company.

You can benefit from seeing the courts view.

So, below is here’s what we can learn from the case of Advanced Fuels Technology v Blythe & Ors [2018] (AFT case).

In a hurry? jump ahead.

Quick Navigation

Case background

Targeting customers

Restraint of trade

Fraudulent and dishonest conduct

Lawful competition defence

Fiduciary’s personal benefit or gain

Good faith - s. 181 civil obligation

Use of position - s. 182 civil obligation

Use of information - s. 183 civil obligation

Can an employee be an officer?

Employee's use of information & position

Retention or misuse of confidential information (Blythe and Wilson)

Dishonest and fraudulent design

An employee’s duty after resignation

Fiduciary duties after resignation

Balancing a non-compete and the freedom of competition

The outcome

No breach of duties

Case background

The question in the AFT case: did Blythe (a former director), Wilson (former employee) and other associates lawfully obtain business belonging to AFT, a company they previously worked at?

On 18 February 2013, Blythe resigned.

Blythe took up a consultancy role with Clean Air Power (CAP), a client of AFT. A few weeks later, Wilson also left to work for NGV group.

Also, the case addresses whether Blythe or Wilson's continuing participation in the gas industry gives rise to any liability to pay damages or equitable compensation to AFT.

Targeting customers

AFT allege that NGV and Environtrans (a majority shareholder of NGV) took up contracts with customers or business prospects of AFT.

Restraint of trade

In this case, there was no restraint of trade in either Blythe or Wilson's employment contract.

Important reader note: the absence of a restraint did not stop AFT from taking legal action.

So what exactly did AFT allege? we'll discuss this next.

Fraudulent and dishonest conduct

AFT alleges that Blythe and Wilson had a plan to resign from AFT, set up a business called NGV and use information wrongfully taken from AFT so NGV could take up AFT’s business opportunities.

Both Blythe and Wilson deny the allegations.

Blythe admits he was a director and had fiduciary and statutory duties, but denies he was an employee; he says he was a consultant.

Wilson admits he was an employee but denies a fiduciary duty as senior management or that he was an officer at AFT.

Both Blythe and Wilson deny allegations for breaches of the duties, dishonest and fraudulent conduct or wrongfully keeping or using AFT property or information.

Lawful competition defence

The defence: both Wilson and Blythe say it was lawful competition using know-how they were free to use.

Fiduciary’s personal benefit or gain

Briefly, a person that’s under a fiduciary obligation must account to the person to whom the duty is owed for any benefit or gain where a conflict or possibility of conflict exists between the fiduciary duty and the personal interest.

Good faith - s. 181 civil obligation

A director or other officer must exercise their powers and duties in good faith in the best interests of the company and for a proper purpose.

Use of position - s. 182 civil obligation

A director, secretary, other officer or employee must not improperly use their position to gain an advantage for themselves or someone else or cause harm to the company.

Use of information - s. 183 civil obligation

Section 183 also applies to directors, officers and employees; they cannot improperly use information to gain an advantage for themselves or someone else or cause harm to the company.

Can an employee be an officer?

In this case it was held that Wilson did not hold a senior role at AFT to justify characterising him as a fiduciary to the company.

Here are the details of Wilsons role - branch manager of AFT operations with a $56,000 per annum salary.

Also, Wilson had no power to bind the company to business or to decisions he made.

The Corporation Act's section 9 definition of ‘officer’ was taken into account to see if Wilson would be subject to section 181 (good faith).

An officer is someone that makes decisions that affect the whole or a substantial part of the business of the company.

And there was no evidence Wilson had capacity to affect the company’s financial standing.

Also relevant - the AFT directors did not act on Wilson’s directions or wishes, so the court view is that he’s not an officer.

Employee's use of information & position

However, Wilson was subject to s. 182 (use of position) and section 183 (use of information) as an employee.

Retention or misuse of confidential information (Blythe and Wilson)

Wilson and Blythe kept customer and supplier contact information.

The court held the information was not confidential because the information was available from public sources.

Blythe and Wilson did not deprive AFT of the information. They gave back laptops and mobile phones with AFT data.

Dishonest and fraudulent design

When attempting to purchase shares from a majority shareholder Mrs Thompson said Blythe made made statements about the value of the company’s affairs that were pessimistic in outlook.

This allegation was made because Blythe was aware of business opportunities and there were existing businesses contract renewals.

Despite this, the court held that independent valuation was an available option. So, Blythe was not attempting to shield Mrs Thompson from another picture of the company valuation.

Also, the court did not believe that there were discussions to establish a new business and divert business from AFT prior to Blythe's resignation so there was no dishonest and fraudulent design.

An employee’s duty after resignation

For Wilson, as an employee, only section 183 (use of information) is relevant, that is, his duty is not to improperly use information after resignation.

Also, he is not subject to the statutory duty of good faith as he was not an officer of the AFT.

As Director, Blythe is also subject to section 183 (not to improperly use information).

Fiduciary duties after resignation

There needs to be an actual or potential conflict between personal interest and the duty of fiduciary office.

The office ceases when the fiduciary resigns.

Blythe still had to comply with his fiduciary duty to not take for himself business opportunities for AFT that matured before he resigned.

Balancing a non-compete and the freedom of competition

The court notes a tension between the director's fiduciary duty not to compete on one hand and the freedom of competition on the other.

There was no evidence that Blythe sought to prepare his departure from AFT, build any new business to take over AFT’s opportunities or divert AFT business to his company.

The outcome

So the court held that there should be limits on any restraint on Blythe.

The restraint should limit Blythe in the short term from using information obtained while at AFT to compete.

Also, the restraint should be for customers of AFT or opportunities that they were very close to being secured by AFT as its own.

And, the final outcome...

No breach of duties

In this case AFT did not establish any breach of fiduciary duty by Blythe (a director).

Specifically, there was no breach for obtaining or pursuing or preventing AFT from opportunities to do business with other companies.

Finally, contact data kept by Wilson (an employee) was not confidential to AFT.

Also, use of the information after Wilson's resignation was not an improper use of information.

I need advice about my director or employee duties

When to switch from a contractor to an employment agreement

Business Purchase, Employment

When to switch a contractor to an employee agreement

Photo by Mimi Thian on Unsplash

When to switch a contractor to an employee agreement

Updated: 7 December 2019

There are differences between employees and contractors. You can read all about those here.

When to use a contractor agreement

The best use scenario for a contractor agreement is project work by a highly skilled worker.

Why?

Typically, contractors are autonomous workers that need little or no direction to perform their work which may be a specific project for which they are hired.

Also, contractors usually hold their own insurance and set their own hours of work.

The contractor test

We’ve taken you through the contractor test before and you can see the entire test as a refresher below.

The text excerpt below is courtesy of the Fair Work Ombudsman.

The tests and the court

The tests are simply indicators. There's no rule that you must meet all of the 9 tests to classify a worker either as an employee or contractor.

Of course, if a case is brought before a court then all the 9 factors will be taken into account and the court will make a definitive decision whether the worker is a contractor or employee.

Now, the best outcome is to prudently classify a worker as an employee if most of the employee tests are satisfied.

You should never let it get to the stage of testing the worker's classification in court because this can be expensive and time consuming.

Sham contracting

If a contractor takes a case like this to court, they'll be claiming that you are sham contracting - calling a worker a contractor to get out of paying employee entitlements like sick leave an annual leave.

When to switch to an employment agreement

If you can see a project will be ongoing, you are directing that worker about how to perform work and setting their work hours, it's likely they should be an employee and not a contractor, so don't risk it.

And, as always, if you’re in doubt, always get advice.

I wish you success in your ventures!

I need help with a worker agreement

Employment

Requests for flexible working arrangements

Photo credit: Dai KE, Unsplash

Requests for flexible working arrangements

Updated: 8 December 2019

Section 65 of the Fair Work Act 2009 (Cth) allows employees to request a change in their working conditions like hours and location or working part-time.

Example circumstances

Employee’s may request flexible working arrangements if they employee is:

the parent or has responsibility for a child of school age
a carer
has a disability
is 55 or older
experiencing violence from a member of their family
provides care or support to a member of the employee’s immediate family who needs support because they are experiencing violence.

The rules

An employee can make a request for flexible working arrangements if:

they completed 12 months of continuous service with the employer before making the request
if they are a casual - they are a long term casual employee and have a reasonable expectation of continuing employments.

How to make the request

Employees need to make their request in writing and set out details of the change sought and the reasons for the change.

The employer’s response

The employer needs to respond in writing within 21 days. Also, the employer may only refuse a request on reasonable business grounds and must include the reason in their response.

What are reasonable business grounds?

Here’s a non-exhaustive list of reasonable business grounds:

too costly for the employer
no capacity to change working arrangements of other employees to accommodate the employee’s request
impractical to change working arrangements of other employees
the change would result in a significant loss in efficiency or productivity
the change is likely to have a significant negative impact on customer services.

Summary

Employees can make a written request for a flexible working arrangement. Employers must respond in writing within 21 days. And employers may only refuse a request on reasonable business grounds.

Do you have any questions or comments about flexible working arrangements? Leave them below.

Help me with an employment contract question

Page [tcb_pagination_current_page] of [tcb_pagination_total_pages]

First

Last