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Performance reviews: do your processes stack up?

Mid-year performance review time is an important time for employees and employers. Some employees dread it, while others embrace it as an opportunity to (hopefully) be recognised for a year’s hard work.  However, if performance reviews are inadequate or produce unexpected results, businesses can be at risk of legal action from dissatisfied employees.  An employer’s failure to give honest feedback at review time, especially if an employee’s work does not meet expectations, can also cause legal issues down the track – especially if termination action is taken.

Why are performance reviews important?

Creating and implementing a satisfactory performance review process is important for employers and employees to understand how employees are performing in their particular employment role. From an employer’s perspective, planning, monitoring and conducting a continuous review process results in an authoritative ‘paper trail’ of documented evidence that it can use in relation to communicating with an employee about their effectiveness. Agreeing on clear ‘key performance indicators’ that are aligned with the business’s strategic direction and culture allows the employer to set out its expectations of the employee. Consequently, they can manage firstly, the employee’s understanding of their role and secondly, what objectives their performance will be assessed against at review time.

Providing regular feedback and keeping detailed notes is important for an employer. This will ensure that managers deal with performance problems when they arise and that there are no surprises during the performance assessment meeting. Having a ‘no surprises’ approach is important as it avoids an employee feeling ambushed and gives all parties an opportunity to discuss how the situation has been or will be addressed.  From an employee’s perspective, the performance management process provides opportunities for open communication with managers and also professional development and training. And let’s not forget that performance reviews also reinforce the positives – letting an employee know what they are doing well so they continue doing it.

A well-managed performance review process will deliver benefits for all areas of the business.

Performance Management and Performance Reviews

Having a transparent and well-communicated employee review process can avoid employee resentment, or even legal proceedings for perceived grievances. In our last blog we wrote about a Fair Work Commission case about an employee’s failure to receive a bonus which did not amount to bullying. Arguably, the employer in question in that case could have managed the employee’s expectations better during the time leading up to the review and bonus discussions.

It is also important for employers to ensure that the performance review process and outcomes are documented and consistent with any likely performance management actions (read poor performance leading to termination). Typically, where an employee is not meeting an employer’s expectations, the performance review process is followed by a ‘performance management’ process. In the event that the performance management process is unsuccessful, an employer can terminate the employee’s employment in accordance with the terms of their employment contract. Such action is not likely to amount to unfair dismissal under the Fair Work Act 2009 (Cth) if it is done properly.

Personal issues and performance

Sometimes, an employee’s poor performance is linked to personal problems. Although an employer might be reluctant to delve into an employee’s personal situation if it becomes aware that they are experiencing difficulties at work (e.g. due to emotional or mental health issues caused by a death of a family member or marital problems) it is in their best interests to manage the employee’s performance appropriately as the personal circumstances might cause prolonged poor work performance.  The importance of having honest and regular performance reviews on a ‘no surprises’ basis for employees becomes even more crucial if a performance management process is instigated in connection with a person’s personal circumstances.  An employer must keep good records and communicate honestly to make good any defence against any subsequent legal proceedings. For example, where an employee believes that they’ve had adverse action taken against them on the basis of carer responsibilities, disability etc.

However, personal circumstances can’t be ‘scheduled’ around standard six month meeting intervals that currently define a traditional performance review model. If an employee is experiencing problems mid-way through the review cycle, a lack of formal communication opportunities might hinder their performance further. This poses the question – is the traditional performance review process outdated?

Changes to the performance review process   

 A lack of transparency or communication in the performance management process can be caused by the structure of the process itself.   The traditional six month and yearly feedback and review sessions leave a lot of time – and a lot of stewing emotion – in between conversations.  At this point in the new financial year, perhaps your company should also be considering how to implement change in this area.

A recent article in Forbes has questioned whether performance appraisals should be scrapped altogether.  The article describes the key flaws with the current model of performance appraisals, including:

  • employees need and want regular feedback (daily, weekly), so a once-a-year review is not only too late but it’s often a surprise. Regular coaching is the key to alignment and performance;
  • managers cannot typically ‘judge’ an entire year of work from an individual at one time, so the annual review is awkward and uncomfortable for both manager and employee;
  • when some employees are a poor fit and are likely to be poor performers, these issues should be addressed immediately, not at the end of the year;
  • people are inspired and motivated by positive, constructive feedback – and the ‘appraisal’ process almost always works against this; and
  • the most valuable part of an appraisal is the ‘development planning’ conversation – what one can do to improve performance and engagement – and this is often left to a small box on the review form.

Instead of relying on the familiar, but outdated process inherited from an HR department 100 years ago, consider implementing changes to address the problems listed above.  Forbes suggests:

  • Developing a ‘feedback-rich’ culture and set of tools (often online, sometimes formal, often informal) that encourages all employees to give each other feedback;
  • Talking about performance regularly and letting employees create their own goals on a regular basis. Force managers to provide ongoing feedback and teach them how to have honest conversations;
  • Set and reset goals frequently; and
  • Force employees to self-assess more regularly to enable them to allow them to start the conversation about their progress.

An article by Deloitte provides an interesting comparative analysis of current and emerging trends in the performance management process in the ‘new world of work’. For example, the driving influences in the new world model come from the ‘bottom-up’ not ‘top-down’.  Deloitte also provides a useful article on ‘2013 Human Capital Trends which examines in more detail the challenges of managing talent.   What Deloitte’s research reinforces is that one key objective in the performance review process has not changed over time – that is, the desire from all involved to be part of a ‘fair and valid’ assessment process.

Takeaway tips

At this critical point in the ‘review season’ it’s important that employers act in accordance with their business’s human resources and performance policies and procedures which should promote:

  • objectivity;
  • transparency; and
  • fairness.

Performance measurement objectives, especially those linked to bonus schemes, should be achievable, measurable and documented. In addition to keeping top talent, having a good performance review process will also help your business ensure that FY15 is beneficial for everyone.  Is this your year to innovate and change your processes?

The Murray Inquiry Interim Report in More Detail

The Interim Report released by the Financial System Inquiry (Inquiry) on 15 July 2014 is a weighty tome (460 pages) published under the authority of the chairman of the Inquiry, former Commonwealth Bank of Australia (CBA) CEO David Murray (the ‘Report’). Due to the length of the Report, this article will not go into extensive detail into its themes and content but instead will provide a summary of its purpose and main observations. This article gives a more detailed report about the key observations of the Report.

Will the Report have a similar significant impact on the financial services system?

At this stage, the answer is likely to be no.  This is because in producing the Report, the Inquiry discusses the financial system from nine different perspectives and makes 28 observations about how the system is working.  Actual recommendations will be made in a final report due in November.  Breadth and procedural issues aside, the overall theme of the Report is that there is no real apparent push for a significant shift in policy or regulation.

Banking sector

If the banks were looking to one of their own, David Murray, to instigate a radical reform of the ‘four pillars policy’ via the Inquiry, they will be left disappointed by the views of the Inquiry so far.  Unsurprisingly, the Inquiry does not see any urgent need for an overhaul of the banking sector or the introduction of changes that would allow a merger between the big four banks.  The Report states that the banking sector is ‘competitive’, although concentrated, and that any reform to allow the big banks to merge would reduce this (healthy) competition.

The Inquiry does refer to post-GFC domination of the large banks but does not suggest changes are needed to allow smaller lenders to re-enter the market.  One area which the Inquiry observes does require feedback on is the need for the regulation of credit card and debit card payment schemes for competition to lead to more efficient outcomes.


The Inquiry recognised the work already done by the Senate Economics Committee in its report on ASIC’s performance (ASIC Report) before the Report was released. The Inquiry does not take a position in respect of any specific changes to ASIC’s enforcement powers, instead listing a number of options.  Some of the proposals regarding the ‘regulatory architecture’ in the industry include:

  • moving ASIC and Australian Prudential Regulatory Authority (APRA) to a more autonomous budget and funding process;
  • conducting periodic, legislated, independent reviews of the performance and capability of regulators;
  • improve the oversight processes of regulators; and
  • enhance the role of ASIC and APRA’s Statements of Expectations and Statements of Intent.


The Report identifies scope for greater efficiencies in the superannuation system. The Report notes that competition in the superannuation sector has led to:

  • feature rich, but more costly, superannuation products; and
  • high demand for liquidity from superannuation funds, which may be reducing after-fee returns to members.

The Inquiry is seeking views on: replacing the mandatory inter-fund portability timeframe of three days (the time period within which super funds must process a transfer request) with a longer time period, a staged transfer of member balances, or moving from the current prescription-based approach for portability of superannuation benefits to a principle-based approach. The Inquiry also seeks inputs on:

  • self managed super funds (SMSFs) and whether they should be subject to limitations on their establishment (due to a link between issues related to the quality of financial advice and the growth in SMSFs);
  • reducing barriers to entry for superannuation funds to invest in various markets including infrastructure and corporate bonds; and
  • ways to adjust the retirement income system to better assist individuals to meet their income and risk management needs (especially at the drawdown phase).


The Inquiry looked at the impact of technology on the financial services sector.  The Inquiry seeks input on the establishment of a central mechanism or body for monitoring and advising the Government on technology and innovation.

The Report also observes that the rise of e-commerce and widespread internet connectivity exposes financial institutions to increased cyber-crime.  The Inquiry seeks feedback on:

  • reviewing and updating the Government’s 2009 Cyber Security Strategy to reflect changes in the threat environment, improve cohesion in policy implementation and progress public-private sector collaboration; and
  • developing a national strategy for promoting trusted digital identities, in consultation with financial institutions and other shareholders.


The Report notes the security and privacy risks associated with the increased use and amount of customer data capable of being stored by financial institutions. Although ‘information analytics’ conducted by banks on such data has the capacity to benefit customers with the development of better products, the Inquiry is concerned that the benefits might be undermined by mis-handling of the data.  The Inquiry seeks views on:

  • conducting a review and assessment of the new privacy requirements (under the Privacy Act 1998 (Cth) (Privacy Act)) in 2016, two years after their implementation, to consider whether their impacts appropriately balance financial system efficiency and privacy protections;
  • reviewing record-keeping and privacy requirements that impact on cross-border information flows and explore options for improving cross-border mutual regulatory recognition; and
  • implementing mandatory data breach notifications to affected individuals and the relevant Australian Government agency under the Privacy Act.

What’s next?

This is not the Final Report and as such, its content is only useful as a guide as to what reforms the Inquiry might actually propose to the Government in November.  The Inquiry has four months until it produces the Final Report; perhaps by then they will have received the strong feedback they are seeking, enabling them to make forceful recommendations.

Changes to AFSL licence process and more updates

July has been a very busy month in the financial services industry, with some important updates in the Financial Services Sector to start FY15. In this update, we report on:

  • changes to the AFSL application process;
  • the Future of Financial Advice regulations that survived the senate; and
  • The Murray Inquiry Interim Report (the Financial System Inquiry Interim Report).

ASIC tightens AFSL process

The Australian Securities and Investments Commission (ASIC) has introduced changes to the lodgement process for Australian Financial Services Licence (AFSL) applications. Previously, applicants had a 20 business day ‘grace period’ between lodging their AFSL application online and sending in the core supporting proof documents.

It appears that, from 28 July 2014, the grace period will no longer exist.

Practically, this will mean that ‘promptly‘ after online lodgement of an application for an AFSL, or an application to vary an AFSL, you will need to email the core proof documents (e.g. A5 Business Description, People Proofs for each Responsible Manager, B5 Financial Statements etc) to ASIC.

When lodging a Form FS20 to change responsible managers, you will need to submit the required people proofs (eg copy of criminal history check) when you lodge the form.

If lodging by mail you will need to send the core proof documents together with the paper application or paper form.

This change will presumably benefit ASIC by ensuring that all applications are complete when lodged, rather than allowing a ‘lag-time’ for all the paperwork to be submitted by applicants.

Prospective AFSL applicants, however, might not appreciate the increased work required to prepare the AFSL paperwork upfront. Historically, some applications involved the A5 Business Description being submitted ‘up front’ with the prospective applicant then spending the next couple of weeks finalising the B1 Table of Organisational Competence and/or the B5 Financial Statement. According to ASIC, this practice will no longer be permitted, although we await for confirmation of this through updates to ASIC Regulatory Guides 2 and 3 in particular.

FoFA: Finally Final

The Senate’s passing of the Federal Government’s (Government) Future of Financial Advice (FoFA) reforms last week provided a final resolution to what was a tumultuous and uncertain legislative progression for the reforms.  Technically, the Senate did not ‘pass’ the reforms but actually voted (34-31) in favour of rejecting a ‘motion to disallow’ them i.e. the proposed regulations currently tabled with Parliament remain intact.  In our previous blogs, we have charted the uncertain path that they FoFA reforms have taken to reach their current point.

The Government’s success in the Senate resulted in the repeal of the previous FoFA provisions introduced by Labor but it was not without controversy.   Last minute negotiations with the Palmer United Party (PUP) and other smaller party Senators were required by the Government to guarantee the final votes it needed for the dis-allowance motion to be rejected.  In exchange for its support, the PUP requested that the following requirements be contained in Statements of Advice (SOAs) which must then be signed by the adviser and the client:

  • the adviser is required to act in the client’s best interests and to prioritise the client’s interests;
  • the adviser genuinely believes that the advice is in the client’s best interests given their circumstances;
  • fees must be disclosed;
  • a Fee Disclosure Statement will be provided annually for ‘new’ clients (those who enter, or entered into, an arrangement after 1 July 2013);
  • details of a 14-day cooling off period; and
  • the client has the right to change their instructions.

The Government has 90 days to table new regulations including the above requirements.

In the aftermath of the Palmer v Abbott bout, the Government also announced an initiative to demonstrate its commitment ‘to continue lifting professional, ethical and educational standards across the financial advice industry’.  In a press release the Government announced the establishment of a working group to develop an enhanced public register of financial advisers (Register). The industry working group will consider:

  • the scope and content of the Register (including a record of each adviser’s credentials and status in the industry);
  • whether reporting obligations are placed on licensees and/or advisers;
  • who is responsible for providing information and input of data; and
  • potential privacy issues.

In its press release, the Government explains that the establishment of the Register delivers on a specific commitment made by the Government with PUP and the Australian Motoring Enthusiasts Party.

The changes to SOAs and the establishment of the Register are intended to support FoFA’s underlying objectives, being to:

  • improve the quality of financial advice; and
  • increase trust and confidence in the financial advice industry.

That said, it does seem ironic that the Government needs to introduce further reforms and initiatives to ‘reform the reforms’ in order to secure those objectives – which was the intention of the amending legislation itself.  The FoFA reforms have attracted criticism from many, particularly since the CBA financial adviser scandal and the release of the Senate Economics Committee Report into ASIC’s performance which identifies ASIC’s failures as a regulator.  Consumer groups and the Opposition believe that the reforms go too far in winding-back consumer protections introduced by the original FoFA. As if to re-iterate the views of the FoFA critics, this week’s media reports in relation to the brokerage firm Ord Minett, and its fee practices, again casts light on the unscrupulous practices that seem to tarnish the reputation the Australian financial services advice industry.

Although the Government has moved to allay the public’s fears of the consequences of a deregulated financial services industry post-FoFA reforms by tacking on the SOA changes and introducing the Register, it remains to see whether these initiatives will be the ‘band-aids’ for leaking consumer confidence in the financial services industry that it hopes they’ll be.

Murray Inquiry Interim Report takes stock of the Financial System

The Interim Report released by the Financial System Inquiry (Inquiry) on 15 July 2014 is a weighty tome (460 pages) published under the authority of the chairman of the Inquiry, former Commonwealth Bank of Australia (CBA) CEO David Murray (the ‘Report’). Due to the length of the Report, this article will not go into extensive detail into its themes and content but instead will provide a summary of its purpose and main observations.  If you would like to read more about the Inquiry and the Report, please refer to this more detailed article for more information.

Will the Report have a similar significant impact on the financial services system?

At this stage, the answer is likely to be no.  This is because in producing the Report, the Inquiry discusses the financial system from nine different perspectives and makes 28 observations about how the system is working.  Actual recommendations will be made in a final report due in November.  Breadth and procedural issues aside, the overall theme of the Report is that there is no real apparent push for a significant shift in policy or regulation.

To read about the Murray Inquiry Interim Report in More Detail click here.


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This blog is a guide to keep readers updated with the latest information. It is not intended as legal advice or as advice that should be relied on by readers. The information contained in this blog may have been updated since its posting, or it may not apply in all circumstances. If you require specific or legal advice, please contact us on 1300 132 90 and we will be happy to assist.

ASX Governance Disclosure Checklist Now Available

As mentioned in our recent blog significant changes introduced by the new ASX Corporate Governance Principles and Recommendations (3rd Edition, 2014) (ASX CGPRs) will require all ASX listed entities to review their current website disclosures and the way in which the present disclosures in future Annual Reports.

To assist our clients and subscribers CompliSpace has developed the 2014 ASX Governance Disclosure Checklist which details exactly which disclosures ASX listed entities will need to make either on their public websites or in their Annual Report.  The 2014 ASX Disclosure Checklist is available for download on the CompliSpace website.  Click here to download.

An ASX podcast on the CGPRs ‘ASX Corporate Governance Council Principles and Recommendations: transitioning to the 3rd edition‘ is now available on the ASX Compliance presentations and webinar page: podcast.

As reported in our recent article, the risk management ‘juggernaut’ continues to roll on with the latest initiatives of the Federal Government clearly illustrating that risk management is not a passing fad.  Getting a head start on your disclosure obligations for 30 June 2015 will put your business in a strong position at reporting time.

Has your business started to implement the ASX CGPRs? Have you reviewed your website disclosure in light of the ASX CGPRs?

The Risk Management Juggernaut Rolls on: Commonwealth Government Embraces ISO 31000

The move to standardised risk management continues. The Federal Government (Government) has this month released the Commonwealth Risk Management Policy (Policy). This Policy attempts to make uniform the motley collection of the risk management frameworks of many Commonwealth Entities (Entities), and to align them with industry standards such as ISO AS/NZS 31000:2009 – Risk Management – principles and guidelines. Marching in under the ‘reducing red tape banner’, the Policy also supports the Public Governance, Performance and Accountability Act 2013 (Cth) (PGPA Act), and Comcover (the Government’s general insurance fund).

What is significant about this move is that it confirms what most executives have come to realise over the past five to ten years – that risk management is not a passing fad. It is now written into multiple laws and regulations and is a management discipline that is definitely here to stay.

Financial services licensees have been required to implement risk systems since the introduction of the financial services reform laws in 2002, and ASX listed entities have been required to disclose the existence (or otherwise) of their risk systems since the ASX Corporate Governance Principles and Recommendations were first introduced in 2003. The latest edition of the ASX Corporate Governance Principles (3rd Ed, 2014) (CGPRs) which commenced on 1 July 2014 has in fact further extended the risk management obligations and disclosure requirements of listed entities (see our previous blog on the CGPRs). The anti-money laundering and counter-terrorism financing (AML/CTF) laws that were introduced in 2006 were written on the presumption (and it was a big presumption) that businesses actually had risk management systems in place (see our previous blog on the AML/CTF laws).

Evidence of the momentum of the risk management juggernaut now extends beyond commercial entities. Formal risk management systems are now a requirement for many not-for-profit entities as part of their funding arrangements, including those in the community housing sector who are already subject to a governance, risk and compliance regime far more onerous than required of ASX listed entities. Risk management is now also becoming flavour of the month in other key sectors such as education and health.

So if, as an executive, you are not familiar with formal risk management principles (usually referenced in Australia to the ISO 31000 standard) you are probably missing a key implement in your management toolbox. In other words, knowledge of risk management principles is now required of executive managers as much as understanding financial statements and the basics of workplace relations and workplace health and safety (WHS) laws.

The good news is that if you are familiar with WHS, by definition you must be familiar with risk management because WHS laws are risk-based, requiring organisations to: 

  • identify safety hazards;
  • consider the likelihood of the hazard occurring;
  • consider the impact (consequence) if the hazard was to occur; and 
  • put in place controls and treatment plans to manage the hazard.

See the CompliSpace whitepaper for more information on WHS laws.

The rationale behind the Government’s embrace of risk management processes has been its desire to ‘reduce red tape’. In a speech to launch the Policy, the Parliamentary Secretary to the Minister for Finance, Michael McCormack, described the Policy and the PGPA Act as working together so that ‘agencies are obliged to be aware of risk and are accountable for developing mechanisms to manage it’. Mr McCormack describes the benefits of a more focused approach to managing risk as including:

  • a more productive, innovative and efficient public sector; and
  • the realisation of the Commonwealth’s strategic objectives.

The benefit for many in this move towards a standard risk management framework, is that there is certainty – the requirements are law. The Minister for Finance, Mathias Cormann states that the Policy seeks to strengthen the risk management practices of Entities by encouraging officials to ‘engage with risk in a positive and transparent way’. This means that the Commonwealth Entities will be able to adopt industry frameworks, software, training and compliance products for their risk management policies – a positive for businesses that will be engaging with government. As for the policy itself, it sets out nine elements of risk management varying from ‘Establishing a risk management policy’ to ‘Developing a positive risk culture’, terms that many should be familiar with. 

The implementing law – the PGPA Act, aims to modernise the Commonwealth’s current financial accountability, performance and reporting framework. It replaces the models for financial management established through the Financial Management and Accountability Act 1997 (Cth) and the Commonwealth Authorities and Companies Act 199(Cth). The Policy is a guide to achieving compliance under the PGPA Act, but in effect, mandates the industry-standard approach. Although corporate Commonwealth Entities (such as the ABC) are not (yet) required to comply, the Policy recommends that they review and align their risk management frameworks and systems with it as a matter of good practice – perhaps a sign of things to come. Comcover’s 2008 edition ‘Better Practice Guide of Risk Management‘ is being updated to reflect the elements in the Policy.

If you would like more information on risk management, CompliSpace has written a series of articles, which chronicle the emergence of the industry standard risk management in the past years.

15 July 2014: Workplace Relations Update for Executives on-the-go

Honesty at a price: cautioning employees about online activity

The rise in popularity of job review websites raises issues about privacy and defamation which all employers should be aware of – and arguably, warn their employees about. Websites like GlassDoor and JobAdvisor allow current and former employees to post anonymous reviews about an employer and give prospective employees the opportunity to access those reviews as part of their job search.

At its name suggests, JobAdvisor is the TripAdvisor for the recruitment industry. Honest (often brutally so) reviews of companies are posted online for all to see. GlassDoor offers a similar service but unfettered access is for a limited time only as subscription is eventually required. Type in any company’s name and up pops some current or former employee reviews of that company. More often than not the reviews are opportunities to air grievances. One well-know international accountancy practice has had a review entitled ‘[b]e prepared to sell your soul’ visible on JobAdvisor for the past twelve months.

Aside from being a potential public relations nightmare for employers, do negative comments on these forums provide any other issues for employers?

Strictly speaking the answer is ‘no’ unless the reviewer’s anonymity is compromised; either by authoring a review that allows them to be indirectly identified or by a breach of privacy by the websites themselves. In its ‘Terms of Use‘ JobAdvisor states that the site can’t guarantee the anonymity of reviews posted and that ‘the possibility exists that a third party, such as your Employer, may be able to determine your identity, based upon information you provide, or where JobAdvisor is legally required to disclose your information’.

So if a disgruntled employee writes something that makes it past the sites’ moderation processes and still manages to defame a person or a company or be misleading or deceptive, their identity might not remain anonymous.

If the employee is identifiable, they can be exposed to:

  • potential claims for defamation (noting that under the Defamation Act 2005 (Cth) companies can only sue for defamation if they have less than 10 employees or are a not-for-profit);
  •  internal disciplinary action or termination by their employer, if they are still an employee of the company they wrote about. See our previous article for more information on the risks of social media use for employers; or
  •  legal action under the Competition and Consumer Act 2010 (Cth) if the post contains misleading or deceptive content.

What should employers do to mitigate the risks of being negatively commented about on the internet?

While there is always the chance that individuals may be unhappy and turn outside to vent, ideally, a business’ culture should be healthy enough that employees feel comfortable to use internal processes and procedures to speak to their manager, or human resources representative, in relation to concerns they have regarding their employment. If an organisation has an internal grievance policy it should ensure that its employees are aware of it and understand how any grievance they might have will be dealt with. Employees should also understand that any stance they take on the internet may affect their status at work.

The best defence starts in the recruitment process – choosing appropriate people who understand what is expected of them, and will fit into your culture. It’s harder to control the actions of ex-employees but perhaps the old adage ‘all publicity is good publicity’ will provide some reassurance to employers – at least until they work out who to sue.


Fake CVs – how much due diligence should you be doing?

The highly publicised recent case of Myer being duped by a senior executive’s fake CV (and his subsequent firing) is a worrying reminder that even large, sophisticated companies can be taken in by dodgy operators. It is also evidence that the recruitment process is also not without risks. Acquiring and retaining high quality talent is critical to an organisation’s success yet some might say that the recruitment model is inherently flawed, given the reliance it places on honesty – a notoriously fickle human quality.

On 18 June 2014 Myer announced to the Australian Securities Exchange (ASX) that it had appointed several key new executives including a Mr Andrew Flanagan who would occupy the role of Group General Manager, Strategy and Business Development. In the ASX release Myer described Mr Flanagan as being the former ‘Managing Director and Vice President Asia Pacific of Inditex Group’ (Zara) who had ‘strong retail experience’ and would report directly to the Chief Financial Officer. The ASX release also referred to Mr Flanagan’s previous roles at large organisations including Tesco and Walmart.

Yet, less than a week later, it was widely reported that Myer had fired Mr Flanagan after it had been contacted by Zara and told that Mr Flanagan had never worked there. Apparently, after digging a little deeper into Mr Flanagan’s past, Myer began to have serious doubts about the other claims in  Mr Flanagan’s CV. The recruitment company Myer engaged, Quest Personnel, and Myer’s own due diligence process, came under public scrutiny for failing to detect some (reasonably) easily refutable falsehoods.

How far should an organisation go to verify the accuracy of a job applicant?

The corporate world knows many examples of CV fraud. A simple Google search reveals many examples of people like Mr Flanagan lying about their qualifications. What is shocking however is the apparent lack of due diligence done by recruitment firms and often, by the employers themselves. Clearly, in the Myer situation, someone had failed to adequately investigate Mr Flanagan’s job history  – an astounding error given the seniority of Mr Flanagan’s position.

Myer has moved on from the disaster and appointed a new Executive General Manager Strategic Planning and Business Development and also handed Mr Flanagan’s file to the Victorian Police for their investigations. According to media reports Myer has not been the only company fooled by Mr Flanagan, but perhaps the only company left so publicly red-faced.

The lesson of this case is that employers should take nothing for granted.

Given much of the recruitment industry works on non-refundable fees, less than scrupulous recruiters are hardly incentivised to spend too much time verifying the backgrounds of their candidates. Prospective employers should be prepared to interrogate the recruitment agency or conduct their own due diligence.  A hiccup in conducting your own investigation is the application of the Privacy Act 1988 (Cth) (Privacy Act) to information requested and collected in the recruitment process. Difficulties may arise when an applicant requests that only certain people be approached as referees and not others. This can be completely legitimate as in the case of someone who is still employed, or perhaps personality clashes (but that could be a marker in itself). However it can also be an indicator of cover-ups  – whether the person was terminated or had workplace issues or, as in this case, had never worked there at all.

Generally, the most appropriate way of dealing with obtaining further information without breaching the Privacy Act, is for a clear Privacy Statement provided to applicants advising of their right to withhold access to sources, but that the consequences may be that they will not be offered a position. Should you come across negative feedback from sources, depending on the circumstances it may also be wise to give the applicant an opportunity to comment.

Looking at social media is another source of information and universities and other institutions also allow the checking on candidate’s academic achievements and records. In this case, any of these simple steps would have raised red flags about the truthfulness of Mr Flanagan’s CV.

What is your recruitment process like? Do you conduct thorough background checks?


Mental health issues cause waves, not ripples in employment relationships

A recent decision in the Fair Work Commission (Commission) illustrates the importance that the Commission places on the appropriate treatment of mental health issues in the workplace. In the case of the termination of Mr Ronaldo Salazar’s employment, the Commission found that a failure to deal with an employee’s mental health issues in a reasonable way amounted to an unfair dismissal. As Commissioner Ryan stated, the employee’s ‘mental health issues…were more than a ripple on the surface of the employment relationship…they were significant waves!’.


Salazar worked as an aircraft mechanical engineer for John Holland Aviation Services Pty Ltd (John Holland) at Tullamarine Airport in Melbourne. John Holland terminated Salazar’s employment via a letter on 23 December 2013 (Letter) due to Salazar’s alleged serious misconduct involving:

  • his refusal to change work group as directed (the change would not have changed Salazar’s roster or pay);
  • an email 18 July 2013 to Mr Glen Palin (Managing Director of John Holland), in which Salazar made disturbing threats about airplane crashes and taking his complaints to the media or the then Prime Minister, Kevin Rudd (Email); and
  • his claims of a lack of certification to perform work on the Rolls Royce Trent 700 engine (despite John Holland having training records showing he had done the necessary training).

In addition to these reasons given by John Holland for terminating him, Salazar had a history of conflict with directions from authority during his time at the company.


In making its decision, the Commission examined the context surrounding Salazar’s events of alleged serious misconduct. The Commission referred to the fact that:

  • Salazar’s doctor considered that Salazar should only work his original roster;
  • Salazar did not believe he was appropriately trained to work on the Trent 700 engine; and
  • at or around the time the Letter was sent to Salazar, John Holland had been provided with medical certificates saying that he was suffering from depression and acute stress.

In response to the Email, John Holland withdrew Salazar’s authorisations to work ‘indefinitely’ and also notified the Civil Aviation Safety Authority.

Commissioner Ryan did not believe that John Holland had given ‘sufficient if any weight’ to the obvious mental health problems that Salazar had ‘at the relevant time.’ Further, in relation to the sending of the Email, the Commissioner stated that it was ‘totally unreasonable’ of the company to come to a conclusion of serious misconduct where an employee had an obvious mental health problem and that dismissal for the Email was ‘invalid’.


John Holland was ordered to pay Mr Salazar substantial compensation as reinstatement was not available due to organisational changes.  We’ve previously reported on the importance of addressing work place mental health issues in FY2015 and the Commission’s decision in this case demonstrates how important an employer’s appropriate treatment of an employee with mental health issues in the workplace can be.

The bottom line

Employers should treat mental health issues in the workplace seriously. In this case, an employee’s mental health should have been given proper consideration and weight. Employers must act reasonably in taking action against an employee.

Future of ACNC still uncertain

Last week’s first sitting of the new Senate in Parliament means it’s decision time for many legislative changes introduced by Federal Government. For many in the Not-For-Profit sector, any form of resolution to the confusion and uncertainty surrounding the future of the Australian Charities and Not-for-Profits Commission (ACNC) will be welcomed.

In a bid to stop the government’s de-regulation juggernaut, the Senate referred the issue of abolishing the ACNC to the Senate Economics Legislation Committee in March this year. While the majority of the submissions to the Committee supported the ACNC, it was no surprise that the Coalition-dominated Committee majority report supported the end of the ACNC.

The government is now taking two approaches. The first is to seek submissions on the shape of the proposed Charities National Centre for Excellence (Centre of Excellence) (which was the Coalition’s original plan). The second, which has a glimmer of policy softening, has seen the Department of Social Services publish an Options Paper entitled Options for Replacement Arrangements following the abolition of the Australian Charities and Not-for-profits Commission.

Notwithstanding the government’s avowed position that the ACNC ‘has significantly and unnecessarily increased red tape for many charities, creating a burden with no apparent benefit either to those they serve or the wider community’, the Options Paper appears to accept that some of those changes should be retained, albeit in a watered down format, including:

  • Annual Information Statements required by the ACNC are to be replaced by each charity being required to maintain a publicly accessible website containing information relating to the details of the responsible person, government funding received, and for the larger organisations, their financial statements. There does not appear to be any reference to monitoring or enforcement, but ‘self-regulation’ appears to be a theme;
  • The ACNC’s power to remove a charity’s responsible person and some enforcement activities, may be transferred to, possibly, the ATO or APRA or ASIC;
  • A specialist charity unit is to be created within the ATO; and
  • Some acknowledgement that the ATO may have a conflict of interest in determining charitable status, given its impact on ATO revenue-raising goals.

What is no surprise is that incorporated and unincorporated associations will return to pre-ACNC status, and will only be subject to State /Territory laws for their governance, while the ATO will have oversight for charity status and tax concessions purposes.

Similarly, ASIC’s pre-ACNC Corporations Act powers over charities will be reinstated , as will the ATO’S powers to maintain and collect information on charities.

The Not-For-Profit sector can provide feedback on the Options Paper via the Department of Social Services website until 20 August 2014.

Ultimately, the future of the ACNC is in the hands of a colourful and diverse Senate whose members have expressed a range of views on the Australian Charities and Not-for-profits Commission (Repeal) (No. 1) Bill 2014 (Bill). The dissenting reports from the Labor and Greens Senators cast some doubt on how successful the vote in the Senate to repeal the ACNC will be, once its eventually held (a date has not yet be set). And as recently reported by Pro Bono Australia News, uncertainty exists amongst other Senators who remain undecided on how to vote on the Bill. The Palmer United Party said it was undecided on how to vote and Senators John Madigan and David Leyonhjelm expressed similar views.

That said, it’s hard to ignore the growing chorus of political voices that echo the sentiments of the Report. Recently sworn-in South Australian Senator Bob Day from the Family First Party is quoted by Pro Bono Australia News as saying that he was inclined to support the repeal of the ACNC and that he also supported the alternative establishment of a National Centre of Excellence. Senator Day said that he feared that the ACNC would “essentially become a ‘regulatory capture’ vehicle” and will tend to grow overtime into a self-protection body’. He said that ‘before it evolves into this, I think it’s a good idea to stop’.

The current ACNC-based arrangements remain in place until both pieces of legislation (abolition of the ACNC and the replacement arrangements) are implemented.



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