Queensland Business Law Today

Ever wondered how to deal with that one employee who’s always taking a sick day? We all know the type. Either we’ve worked with them or they’ve worked for us. One thing’s for sure, they can cost your business not only money but also create an idle culture amongst staff.

Thankfully, case law tells us that we shouldn’t be afraid to dismiss such employees provided we have a valid reason.

I recently read the case of Anderson v Crown Melbourne. Here, the employer discovered from other staff members that the employee was intending to fly interstate to attend a football game.

In the days leading up to the ‘sicky’ the employee was warned by his employer on several occasions that he should apply for annual leave because any misuse of sick leave could result in termination of employment. To this, the employee responded with words to the effect “I’ll have a doctor’s certificate covering me for that day”. Needless to say the employee called in sick and was dismissed summarily, even though he provided a medical certificate. The dismissal was considered valid.

Another example is the case of Ropafadzo Tokoda v Wespac Banking Corporation where an employee tried to explain her absence by providing a false medical certificate. During an investigation into the matter, the employee alleged that she couldn’t afford to go to the doctor; hence she had to provide the false certificate. Despite this, she was dismissed for dishonest and fraudulent misconduct. Fair Work Australia found in favor of the employer because the employee was afforded due process by way of an investigation, conducted prior to the dismissal. 

Keep in mind though; Fair Work Australia is not so understanding of employers who think they can dismiss ailing employees on baseless grounds. Or worse still, refuse to afford procedural fairness. There is nothing tribunal members hate more than the employer who is apparently unfamiliar with procedural fairness and what is so obviously the law.  

Take the case of Kavassilas v Migration Training Australia Pty Ltd (No.2). Here, an employer dismissed a manager while she was on two days sick leave, as permitted by her contract.  The manager notified her employer that she would provide a medical certificate but was dismissed prior to being able to provide one. The dismissed manager was awarded compensation of $33,706.21 plus interest and costs. Not only that, but the employer was also ordered to pay a penalty of $20,000.00 for showing a “conscious disregard” for legal provisions relating to sick leave.

So remember, if you have a valid reason to dismiss a ‘sick’ employee, make sure you conduct a proper investigation first. And, if you think you don’t want to bother, just bite the bullet and investigate - because failing to conduct a proper investigation could cost your business big bucks.

Please feel free to contact me if you have any questions relating to Employment Law. 

Providing greater incentives to staff in a company may come with hidden consequences for both the company and the employee.

As a company grows, staff may be offered incentives such as shares in a company as well as profit sharing.  Payments of shares and profits may be made directly to an employee or into a Trust set up specifically for that purpose.

When entering into these arrangements, employers may or may not enter into written agreements with their staff as to how the shares and profits in a company will be distributed to the employee.

A distribution of company shares or profits in this way is likely to be viewed by the Australian Taxation Office as an employee share scheme, depending on the nature of the agreement.  The Australian Taxation Office has specific requirements for this.

For employees, some of the consequences of this arrangement may include the following:

• The employee may be taxed when they receive the shares or profits in the company, when they leave the company, or when various triggering events occur. 
• The tax payments could be significant and occur at a time which is not suitable for the employee.
• The scheme may still be viewed as an employee share scheme even if the shares are held by a Trust.
• Payments of income out of the trust to various beneficiaries may have further consequences for the employee in relation to their individual tax payments.
• There will be compliance and administration costs associated with the running of the Trust.
• The agreements may or may not cover who pays the tax and when it is to be paid.
• Tax implications when the shares in the company are subsequently sold by the employee.

Employers wishing to enter into such transactions would need to be mindful of the following consequences:

• Fringe Benefits Tax implications.
• Issues surrounding how the company is to be valued, the proportion of profits to be paid and when they are to be paid.
• The employees may have voting or other rights in the company which the employer may not have intended.

With the numerous tax and other consequences of providing employees with a share of the company and company profits, employers and employees need to very carefully consider their agreement and the consequences that follow.  Alternate, simple arrangements may also need to be considered.  Expert legal and accounting advice should also obtained.

If you have any questions regarding the above, or questions generally regarding employment agreements and taxation, please do not hesitate to contact me.

When drafting employment agreements, I often get asked how to avoid a breakdown in employment relationships between the employer and employee. I usually suggest that employment relationships fail for three reasons:   

1.  The employee should never have been hired;

2.  There are no proper steps in place for resolving workplace issues;

3.  There is no proper plan in place for a smooth termination of employment.

To avoid mistake number one, make sure that as an employer you undertake a vigorous selection process when hiring staff. For example, research the candidates past employment history, or even have a look on Google. Facebook and Twitter is great for getting a feel for who the candidate is.

Obviously, it's important to be mindful of equal opportunity laws and privacy legislation. Equally as important, is making sure you do your homework to increase the likelihood of hiring the best possible candidate.

Resolving Issues and Terminating Employment  

Once an employee is hired, it is critical to put steps in place for resolving workplace issues. Here are a few practical suggestions:

• Set the standards that both the employee and employer will be bound by.
• Clearly outline the position description.
• Have clear policies for handling under-performance, workplace bullying,     workplace health and safety.
• Put everything in writing.

To achieve the above, I recommend you have a document which clearly sets out the expectations on both employer and employee. When conflicts arise, and they inevitably will, having a clearly thought out and mutually understood policy to follow is invaluable.

Further, all employment contracts should have a clearly drafted Termination Clause.  There are a number of circumstances which warrant immediate dismissal. Be aware of the relevant applicable Modern Award and the National Employment Standards which apply under the circumstances and particularly the notice periods required by the Fair Work Act 2009 (Cth).

If you have any further questions on Employment Relationships, please do not hesitate to contact me.

I have recently had a number of clients query as to whether they can hire people as contractors rather than employees.  The difference is substantial and the consequences are significant if not done properly

To give you an indication of the legal difference between an employee and a contractor I advise as follows:

Employee

An employee is generally a person who is employed under a “contract of service” to provide his or her personal service to the employer, usually either for a fixed or indefinite period of time.  An employment relationship can be easily identified provided that most components of the relationship are significantly controlled by the employer. 

This extends to what work is being performed by the employee and the manner in which it is being performed.  Often, the employer also controls where and when that work is performed by the employee.  The employer is also responsible for the payment of leave and superannuation payments.  In summary, the employer has a significant amount of control over the employee on a daily basis.

A checklist of indicators in an employee/employer relationship include:

1. The employer has substantial capacity for control;
2. The engagement of the employee is not limited by the completion of a particular task or project;
3. The employee performs the work personally and does not delegate;
4. The employee is an individual and not a corporation or trust;
5. The employee works exclusively/substantially for the employer;
6. The employee’s hours are set by the employer;
7. Most tools and equipment are provided to the employee by the employer;
8. The employer pays all work related expenses;
9. The employer is liable for any defects in the employee’s work;
10. Professional indemnity risks are ensured by the employer;
11. The employee is entitled to pay the leave benefits.

Contractor

A contractor is engaged under a “contract for service” to achieve a particular result, or to complete a particular task.  When preparing a Contractor Agreement the focus is placed more on the particular outcomes which the contractor is to achieve, rather than on the nature of the relationship between the contractor and principal.  The reason for this is that the principal has very little control over the manner in which the contractor goes about delivering the intended outcome, provided that the intended outcome is ultimately achieved. 

Unlike employee/employer relationships, the contractor is not necessarily required to individually provide the services personally.  The contractor can engage subcontractors to work with them to achieve the intended outcome.

A checklist of indicators for a principal and contractor relationship include:

1. The principal has no substantial capacity for control over the contractor;
2. The engagement is dependent on the completion of a particular project;
3. The contractor may perform the services by delegating them to a third party;
4. The contractor may be a corporation or trust;
5. The contractor is free to provide services to the world at large;
6. The contractor regulates its own hours of work;
7. The contractor provides its own tools and equipment;
8. The contractor pays its work related expenses;
9. The contractor is liable for all the risk of the facts or necessary corrections to services being provided;
10. The contactor is liable for its own professional indemnity insurances;
11. The contractor is paid for particular outcomes;
12. The contractor does not entitles to any paid leave benefits;
13. The contractor conducts its own business;
14. The contractor is entitled to work for other parties;
15. The contractor is liable for its own superannuation and/or other tax obligations.

The Consequences

You are at considerable risk if you enter into a contractor relationship with someone who is actually an employee.  Your risk includes:

(a)            The requirement to pay superannuation obligations;

(b)            The requirement to pay PAYG obligations;

(c)            The risk of not having appropriate WorkCover insurance in place and therefore being sued if the employee is injured;

(d)            Workplace Health and Safety issues.

Please do not hesitate to contact me should you wish to discuss this very important issue.

Australia has 10 different laws relating to Occupational Health and Safety. This will change on 1 January 2012 with the introduction of the Work Health and Safety Act.  The Federal Government has established Safe Work Australia to implement the new laws.

The Australian Institute of Company Directors, in the August 2011 edition of their magazine “Company Director” published an article by Domini Stuart summarising the changes.

The article referred to a checklist prepared by Steven Cole, chairman of Emerson Stewart for company directors to implement to ensure their businesses are ready for the new laws (this also applies to business owners of all kinds).  The list includes:

1. Engaging an occupational health and safety expert to give a high level presentation to the board (or your business) on the principles and effects of the new regime;
2. Review the existing occupational health and safety arrangements and practices and report these to the board, along with recommendations for improvements and assured compliance;
3. Use these findings as the basis for a comprehensive review of your business’ occupational health and safety policies and procedures;
4. If your business does not have a specialist occupational health and safety expert on the executive, ensure that an appropriate and suitably competent person has responsibility for the occupational health and safety function in your business;
5. Schedule regular reports and reviews of your business’ occupational health and safety practices in your calendar, including board meetings;
6. Ensure board members, or management if you are not a company, visit relevant work sites from time to time so they have a thorough understanding of the workplace environment and practices.

Directors and management of businesses throughout Australia are now in a position to influence the occupational health and safety regime of their organisation.  It is imperative to address this now so that appropriate procedures are in place come 1 January 2012.  It is very important to establish a culture now to ensure safety is taken seriously.

Please contact me if you need any assistance with your businesses implementation of its occupational health and safety practices so as to ensure compliance.