A couple of significant legal decisions for employers this week.

Employee or contractor?

All employers need to be familiar with the difference between independent contractors and employees - it's an area of the law fraught with difficulties for employers , particularly those seeking (intentionally or otherwise) to rely on the "contractor" label when in reality a contractor is an employee. The main risk of course for the employer is that the employee who is incorrectly labelled a contractor and treated as such is and remains entitled to the rights of any other employee , including in relation to unfair dismissal, notice of termination and a host of other entitlements.

A recent decision by the High Court has underlined the need for care in this area by employers. The Fair Work Act effectively provides that by telling an employee that he or she is a contractor does not make it so - when the reality is that the employee is an employee. The High Court ruled in the case of two employees engaged as cleaners in a holiday apartment block in Perth . The owner of the apartment block, Quest, had employed two cleaners as employees. However, Crest then attempted to remove their employee status by converting them to independent contractors engaged through a third party labour hire company, Contracting Solutions.

The High Court ruled that the introduction of a third party labour hire company did not take away their status as employees of Crest. They continued to perform exactly the same work , in the same way that they always had done and Crest could not argue that they were no longer employees of theirs , just because of the introduction of Contracting Solutions into the arrangements.

If you have any questions about the difference between contractors and employees and its implications for your business, please contact Polly Harding at Counsel on Demand. 0401 816290 or This email address is being protected from spambots. You need JavaScript enabled to view it..

Unfairly dismissed for being too fat ?

A case in the Fair Work Commission considered an employer's rights and obligations in the dismissal of an excessively overweight employee . The employee was a forklift driver with a dairy company, Parmalat and his weight exceeded the safe limit for the nature of his duties . The company had medical reports to support this position. In addition, the medical evidence demonstrated that the employee suffered from sleep apnoea.

The Commission ruled that Parmalat was entitled to dismiss the forklift driver and that an employer is entitled to require an employee to be generally fit and well and suitable to carry out the work for which they are engaged.

Significantly, Parmalat was able to demonstrate to the Commission that their internal policies and procedures were followed, and that they were engaged with and participated in a long period of consultation with the employee prior to dismissing him.This was highly relevant to the finding that the ultimate dismissal was fair.

The lesson here is to make sure that your internal policies are detailed and well thought out , that they are followed and , critically, that an employee is given adequate opportunity to remedy a situation as part of a consultation process.

If you have any questions about internal policies and procedures and their impact on the fairness or otherwise of a dismissal, contact Polly Harding of Counsel on Demand on 0401 816290 or on This email address is being protected from spambots. You need JavaScript enabled to view it..

 

Eagle eyed readers of Counsel on Demand Legal Updates will have seen our recent update on changes to rights and obligations of small businesses in relation to potentially unfair contract terms in standard form contracts. What we didn't know then, but do now, is that the law will take effect on 16 November 2016.

Currently, similar unfair contract term protections apply to consumers , but the protections have not until now applied to business to business contracts.

What will happen on 16 November 2016?

The law will start to apply to relevant standard form contracts entered into by a small business on or after that date. It would apply equally to a contract between two small businesses. At least one of the parties to the contract needs to be a small business for the law to apply.

What is a small business ?

A small business is a business with less than 20 employees, including regular casuals. The law would apply equally to an unfair contract term in a small business's standard terms, even if that business is contracting with a larger business.

What is a standard form contract ?

A standard form contract is one that has been prepared by one party to the contract where the other has little or no opportunity to negotiate or change its terms - a take it or leave it situation.

Are all contracts which small businesses enter into covered ?

No. The law applies to contracts for the supply of goods or services, where the upfront price payable is less than $300,000 or $1million if the contract is for more than twelve months. So a small business purchasing a piece of equipment for $400, 000 would not be covered.

What is an unfair contract term?

 The law doesn't set out exactly what is and what isn't unfair, but does give some examples. These include :-

• terms that include one party (but not another) to avoid or limit their obligations under the contract ;
• terms that enable one party (but not another) to terminate the contract.

So what does the law do about these potentially unfair terms ?

A court or tribunal can find that the unfair term is VOID. The effect of this is that the party whose term it is can't rely on it - the term is effectively removed. So in the second example above , if a court decided that a particular termination clause was unfair, the termination clause would have no effect - it would be as if it was never in the contract and the party to the contract could not terminate it.

Terms not covered

Terms which set the upfront price payable (whatever that price is) cannot be caught, nor can terms which define the main subject matter of the contract .

What do small businesses need to do before 16 November?

If you either are a small business or contract with small businesses, you need to review your standard term contracts to ensure that there are no potentially unfair terms. The new law means that the protections which you believe your terms give you , cannot necessarily be relied on.

Any contract renewed, entered into or varied(to the extent of the varied terms) on or after that date is caught by the new provisions. Any required changes therefore need to be in place by 16 November, 2016.

Counsel on Demand specialises in contracts for small and medium sized businesses. Please contact Polly Harding if you would like us to review your own standard terms or your suppliers' standard terms for potentially unfair terms.

Polly Harding, principal lawyer, Counsel on Demand

 

 

Probation periods

Today's legal update focuses on probation periods - and the common questions asked by employers about their rights and obligations concerning probation periods for new employees.

Does an employer still have to give notice if he or she decides not to keep an employee on during or at the end of the new employee's period of probation?

Yes - unless there has been gross misconduct. Even if an employee has been told he or she is on probation or it is written into the contract of employment, the legal notice obligations do not change.

How much notice needs to be given if an employer wishes to terminate employment during the probation period?

Every employee is entitled to a minimum of one week's notice during the first  year of employment (increasing after that). This applies regardless of any probation period - however communicated , unless there is gross misonduct.

Can the notice requirement for a probationary period be more than one week?

Yes, if the contract stipulates that the employer will give more than one week's notice, the employer is bound by what is in the contract . Notice can not , other than for gross misconduct be less than one week , because that is the statutory entitlement of all employees at commencement of employment.

What if the employer dismisses an employee without notice during the probation period?

If the employer fails to give one week's notice or to give notice in line with the contract (whichever is more) or to make payment in lieu of a notice period , the employee can bring a legal claim for that payment against the employee. The use of a probation period is no defence to this claim.

Can an employee bring a claim for unfair dismissal if notice is given during or immediately after the probation period?

The laws of unfair dismissal apply equally to employees on probation as any other employees. Primarily, an employee employed by any employer which is not a small employer  may bring a claim for unfair dismissal in respect of a period of employment of six months or more. For an employee of a small employer (less than 15 employees), the equivalent period is twelve months. See my last employment law update for some more information about unfair dismissal and small business.

An employee employed for less  than six months by a larger employer or less than twelve months for a smaller employer may not in event bring a claim for unfair dismissal. A dismissal on the basis of an unsuccessful probation period will be no exception to that rule.

What is the legal effect of a probation period?

A probation period sets a line in the sand in terms of expectation on an employee and the timeframe within which the employee is to be monitored closely under any probationary period. It is not a "get out of jail" card for an employer. The rules around notice and unfair dismissal will apply regardless of any label of 'probationary period' placed on an employee -whether in writing or verbally.

An employer should also be aware that any accumulated annual leave, however little , should be paid out on termination.

Do the rules on probationary periods apply to casuals?

Look out for Counsel on Demand's forthcoming legal update on myths around employing casuals for more detailed information about the use of casuals and other categories of employees.

Counsel on Demand specialises in advising businesses on their legal obligations around employing staff- whether full time, part time or casual. Contact Polly Harding if you wish to discuss probation periods or any other legal aspects of employment rights and obligations. 0401 816920