Breaching industrial obligations and their consequences

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Breaching industrial obligations and their consequences  

There are many industrial requirements that parties are required to comply within the employment relationship. However, what is the consequence for a party (be it an employer or an employee) who breach their obligations? Can they be penalised in some manner?

A breach occurs when a party fails to honour the terms of an employment contract, an award or agreement provision, a legislative provision, or an express or implied duty.

If we consider the situation regarding employers, the most common situations are technical breaches of awards or agreements. For example, paying an employee an incorrect classification level or an hourly rate of pay.

In most situations where an employer has failed to pay award or agreement provisions (e.g. correct hourly rate), courts will simply order the employer to repay the unpaid entitlements, sometimes with interest calculated. However, if the employer has engaged in what is termed `serious contraventions’, additional penalties can be imposed.

A serious contravention occurs when the court finds that the person or business knew they were contravening an obligation under workplace laws, and the contravention was part of a systematic pattern of conduct affecting one or more people.

Other common examples of breaches by employers involve termination of employment. For example,

  • In Coghill v Indochine Resources, the employee was terminated due to allegations of serious misconduct relating to dishonesty. He commenced proceedings in the Federal Court and was successfully granted payment for a raft of conditions that he had not received. Further, he was able to enforce the payment of an additional five (5) years’ salary, which the company was required to pay him under his employment contract if he was terminated without proper cause.

  • In Nohra v Target Australia, an employee submitted a letter of resignation providing seven (7) months’ notice. The employer purported to accept the resignation but with immediate effect.  The court found that termination occurred at the initiative of the employer.

  • In Sharpe v MCG Group Pty Ltd, an employee notified the employer that they were unable to attend work due to a medical condition. The employer responded by terminating the employee, claiming abandonment of employment. The court held that, in fact, the employer had unlawfully terminated the employee.

Certain legislative provisions give rise to the imposition of penalties on employers for breaching obligations.

For example, s357 of the Fair Work Act 2009 (Fair Work Act) covers scenarios whereby employers misrepresent employees as independent contractors rather than employees. Courts have imposed various penalties, including:

  • In Fair Work Ombudsman v Happy Cabs Pty Ltd, the employer was penalised $18,480 each for incorrectly engaging (7) drivers;

  • In Fair Work Ombudsman v Metro North Enterprise Pty Ltd, the employer was penalised $23,100 each for incorrectly engaging four (4) promotional salespersons.

More broadly speaking, under the Fair Work Act, a breach by an employer may give rise to a `civil remedy provision’. For example, this can include contravening a provision of the National Employment Standards (NES). Under these provisions, an affected person can apply to a Court for an order for a financial penalty against the person who contravened the provision of the Fair Work Act.

An example was provided recently when BHP Coal was found to have breached the provisions of an agreement that employees could be required to work `reasonable overtime’. Construction, Forestry, Maritime, Mining and Energy Union v Hay Point Services Pty Ltd. The Federal Court found that the employer’s new roster that required employees to work 8.75 hours of rostered overtime per week, amounting to 455 hours of overtime per employee annually, was unreasonable.

With regard to employee breaches, most situations will give rise to disciplinary action, which can include termination of employment. There is generally no capacity to financially penalise an employee for failing to satisfactorily perform a task or to engage in misbehaviour.

There are certain legislative provisions applicable to employees; however, which are worth noting. For example, where an employee is found to have engaged in unlawful industrial activity, they can be subject to individual fines. For example:

  • In September 2018, 64 workers were penalised $1750 each for engaging in a mass walkout from the FV1 – Stage 2 construction project in the inner Brisbane suburb of Fortitude Valley.

C v Indochine Resources Pty Ltd (No 2) [2015] FCA 1030 (17 September 2015)

I N v Target Australia Pty Ltd (U2010/874) [2010] FWA 6857

Fair Work Ombudsman v Happy Cabby Pty Ltd & Anor [2013] FCCA 397 (26 July 2013)

Fair Work Ombudsman v Metro Northern Enterprises Pty Ltd [2013] FCCA 216 (7 May 2013)

Construction, Forestry, Maritime, Mining and Energy Union v Hay Point Services Pty Ltd (No 3) [2021] FCA 282

For queries about breaches or other employment questions, please contact Dean Cameron at Workforce Advisory Lawyers – We Know Employment Law on 1300 WAL LAW, 0417 622 178 or via email to dean.cameron@workforceadvisory.com.au

Disclaimer: This information is provided as general advice on workplace relations and employment law. It does not constitute legal advice, and it is always advisable to seek further information regarding specific workplace issues. Liability limited by a scheme approved under professional standards legislation.

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